Study Shows Ethanol Energy Efficiency Is Growing

A new study by the University of Nebraska shows that current ethanol production technology is 2 to 3 times more efficient than previously thought. Earlier studies focused on older, less efficient technologies and this new study helps allay the fears that corn ethanol production uses more energy than it provides.

Here are some of the initial results from the study:

• Ethanol has a positive net energy balance: 1.5 to 1.6 units of energy for every unit of energy used to produce it.
• 13 gallons of ethanol are produced for each gallon of petroleum used in the ethanol production life cycle.

Ethanol producers continue to increase their efficiencies and over the last 5 years have been able to produce more ethanol from a bushel of corn and reduce the energy necessary in the process. Ethanol doubters who use past results to bolster their arguments are doing the industry a disservice.

I will close with a quote from Alan Tiemann, a Nebraska Corn Board member:

"We’re talking about energy security and energy diversity, and keeping more of our energy dollars in this country,” he said. “Those kinds of positives are good for the United States as a whole, and specifically for rural America, where renewable ethanol is produced.”

Comments

[Duude]

So then, let's get rid of the subsidy and see how it works.
I think I like better algae-based biofuel as an alternative fuel down the road.

[CLH]

1.5 is close to one which means ethanol is close to worthless. Oil takes very little energy to produce. Did you go to school?

And nuclear power is even better than oil. You dont need to tell me you are an al gore fan.

[Bill6]

Actually, 1.5 is 50% more. You get out 150% of the energy that you put in. Did you go to school?

[wheels14]

Duude

are you willing to get rid of all subsidies? We could start by getting rid of the subsidies oil and natural gas receive.

[john s. gordon]

big oil will never let you delete their subsidies.
> jack

[paulk8756]

So if corn ethanol is so viable, what about sugar? Sugar ethanol contains 6X (!) the energy of corn at a comparable cost. The U.S. has ample acreage to produce sufficent sugar to replace e-85 entirely.

If your goal is to promote renewable vegetable based fuels to replace our dependence on foreign oil, then, you should be touting sugar, NOT corn for this purpose. But you WON'T, which means you're all about the corn industry, NOT energy independence.

[nakedjaybird]

CLH - you need to go to school. 1.5 is still 50% greater than 1.0. AND from exploring, drilling, processing, transporting oil, much energy is used - and to do what. BURN IT. Stupid!!!!!!!!!!!!!

[Charlie Peters]

Does corn fuel ethanol policy increase gas use and Big oil profit?

Some folks think so

Clean Air Performance Professionals

[Subsidy Eye]

Um, from where does the "2 to 3 times more efficient than previously thought" come from? The article says "Compared to just five years ago, ... ethanol plants produce 15 percent more ethanol from a bushel of corn and use about 20 percent less energy in the process". It is unclear whether they mean that the plants have reduced their energy use per gallon or per bushel by 20 percent (the latter would then mean a gain of 44% more gallons for the same amount of energy inputs), but I'm not sure how that translates into "2 to 3 times more efficient".

I agree with Duude, of course, when he writes, "So then, let's get rid of the subsidy and see how it works." Wheels 14 writes, "Are you willing to get rid of all subsidies? We could start by getting rid of the subsidies oil and natural gas receive."

Of course we should. But let's compare apples with apples. According to a recent study by Friends of the Earth, "Big Oil, Bigger Giveaways",

www.foe.org/pdf/FoE_Oi...

oil companies will receive around $33 billion from the federal government over the next five years. That comes to $6.6 billion per year, divided over 75 billion gallons (1.8 billion barrels) of production, or $0.088 per gallon.

tonto.eia.doe.gov/dnav...

By contrast, the federal volumetric ethanol excise tax, starting next year, will be $0.45 per gallon (or $0.67 per gallon of gasoline equivalent). Assuming average production of 11 billion gallons a year over the next five years, that will come to a total of just under $5 billion per year, just for that one subsidy. Add in other federal subsidies (e.g., the small ethanol producer tax credit and subsidies for R&D and demonstration plants), and total federal outlays in support of ethanol will easily come up to parity with oil ... but for 1/10th the amount of energy.

Oil companies do not need federal subsidies. Some ethanol producers might "need" subsidies to survive. But why should we keep them dependent on the public teat? And why should ethanol producers have priority over other sectors for government hand-outs during these austere times?

[frflyer]

Calls to get rid of subsidies for renewable energy are rediculous when we are giving $84 billion annually in tax credits and subsidies to big oil. Nuclear and coal are also heavily subsidized.

Nuclear power is the worst choice. Please read the pdf The Lean Guide to Nuclear Energy. Please read what cleanwisconsin.org has to say about nuclear power. It as many problems than oil has. In a dangerous world with terrorists and rogue nations, the last thing we need is to build thousands of nuclear power plants all over the world, further spreading the availability of fissionable material. Look at the angst over Iran's pursuit of supposedly peaceful use of nuclear energy.
Argonne national labs says that an airliner crashing into a nuclear power plant could cause a complete meltdown, even if the containment building isn't compromised. Think the twin towers was bad?
Nuclear power plants need billions of gallons of water each to cool. Each reactor will cost over $500 billion to clean up and dismantle when it is used up. Each reactor's share of Yucca mountain storage is $200 million.
The entire process of aquiring uranium has a huge carbon footprint and is generally very dirty. Nuclear power takes much longer to get up and running than solar and wind. Nuclear plants cost three times as much to build per kilowatt than wind farms. If you read the proposals by T Boone Pickens and setamericafree.org and the proposal published in Scientific American called A Solar Grand Plan, you will see that we could easily have 80% of our grid powered by solar and wind by 2050.
We are being dis-informed about the potential of these renewable sources. Don't believe the lies.

[Subsidy Eye]

Mr. frflyer, could you please provide a source for your "$84 billion annually in tax credits and subsidies to big oil"? I provided a source for my number -- Friends of the Earth (hardly an organization that could be accused of being biased towards the oil companies).

You equate subsidies for corn ethanol with subsidies for renewable energy generally. When so much non-renewable resources (eroded soil, fossil water in the western Great Plains, phosphate, energy to produce the N fertilizer, fossil energy used in farming and processing the ethanol) are used in its production, calling it "renewable" is stretching the definition.

[Michael D.]

Cellulosic ethanol production will have values of 20-30 to 1. A few more years and it will be in production. The best materials will be the stalks of corn. Hemp works very well also, smoke the leaves and ferment the fibre to make ethanol.

[frflyer]

My source for the $84 billion in oil subsidies and tax credits comes from www.setamericafree.org...

The reason these numbers are not well known is that it takes a Sherlock Holmes to uncover all the tax credits and subsidies that oil and gas have received over so many years, often tucked into bills as earmarks.
I did make a mistake about getting rid of subsidies. I wasn't so much thinking about ethanol. It was just my reaction to the often heard complaints that say "oh but solar and wind can't survive without subsidies". So, I mispoke. I'm not a big advocate of ethanol unless it proves to be economical and environmentally makes sense.

[john s. gordon]

we can export the hemp leaves to mexico & solve the balance of payments problem
> jack

[Lucille]

Does anyone have idata on the required use of 10% ethanol in gasoline versus the resulting decreased mileage per gallon.

[Subsidy Eye]

Frflyer, I'm glad to learn that you are "not a big advocate of ethanol unless it proves to be economical and environmentally makes sense." I can agree with that.

As for the $84 billion a year estimate from the "Set America Free Foundation", I can't find in the document. The figure I find is $43 billion in lost local, state and federal tax revenues. That figure is $10 billion higher than the $33 billion reported by Freinds of the Earth, and is presumably explained by the inclusion of state and local tax breaks and subsidies.

The report also enumerates numerous other costs of oil, some of which would be hard to confirm or refute without looking at the original studies from which teh data are derived.

But back to the comparison with ethanol subsidies, the figures I referred to above were just federal subsidies for ethanol. Throw in state and local tax breaks and subsidies, and the total value comes to over $1 per gallon currently.

www.earthtrack.net/ear...

Of course, if one were to expand ethanol use on the basis of (U.S. produced) cellulosic ethanol, then you're looking at $1.01 per gallon ($1.50 per gallon of gasoline equivalent) just in federal tax credits, not to mention subsidies for related infrastructure and (at least in the near term) for plant construction. Add to that various state sales-tax and fuel-tax exemptions for ethanol (or E85) and the total cost could exceed $2.00 per gallon of gasoline equivalent in a number of states.

Of course, as the Set America Free Foundation document points out, there are indirect costs associated with oil dependency. So to are there from biofuel use, especially biofuels made from cropland. Higher prices for food and other agricultural materials is just one. Economic losses due to supply disruptions could also be high: witness the panick that preceded this year's corn crop before the floods finly subsided.

Again: the country needs to wean itself off of oil, and stop subsidizing it, but it is hardly a winning strategy to try to buy itself freedom from that dependency by creating a new industry that itself is massively dependent on subsidies.

[wheels14]

Dear Sub,

You still need to subtract the savings of farm subsidies not spent against the ethanol subsidy. If in fact you believe ethanol caused the price of grains to increase.

[wheels14]

dear lucile,

My car gets better mileage when I use 10% ethanol.

[nakedjaybird]

michael d - you're mi kind o guy - you're out-of-your-mind processing is no worse than what we're currently doing. What in the world are they smoking in DC and from Houston to Detroit? For years!!!!!!!!!!!!!!

[nakedjaybird]

Don't forget algea - a pond of algea produces much more (like 10-20x) than acres of flooded CRP subsidized land.

[Subsidy Eye]

Wheels 14, as for deducting the costs of crop subsidies, that is an interesting question. Crop subsidies depressed crop prices, some would say (in the nine years following the 1996 reforms) by 23% below average farm production costs for corn, and 15% for soybeans.

www.ase.tufts.edu/gdae...

Rather than speaking of "savings" in crop subsidies, however (which I do not think should be treated as entitlement), when we count the contribution of corn-ethanol subsidies to increases in the cost of corn, we should count only the increase above the price that would have obtained in the absence of crop subsidies -- i.e., which would at least have covered production costs. Sorry, but I can't provide that figure at the moment.

[wheels14]

Sub,
Farmers were dumping corn for $1.85 and getting reimbursed by the government to a sale price of $2.95. With 13 billion bushels of corn grown, that is $14.3 Billion dollars per year. And that is only corn, are price supports for wheat, soybeans...etc

Starting another topic. The subsidies would be better spent going to companies building infrastructure, than to the blenders.

[Subsidy Eye]

Wheels 14: that was in 2005, an a-typical year (thanks to Hurricane Katrina, which shut down the Mississippi ports for several months, thus limiting exports and depressing the domestic price).

The point about ethanol subsidies (unlike the crop payments), is that the USA has committed to reducing crop subsidies as part of the WTO's Agreement on Agriculture, whereas in the case of ethanol subsidies, the sky's the limit. And the annual expenditure is growing fast.

[wheels14]

Sub

A "Typical Year?" Corn has been under $3/bushel in 8 of 10 years prior to 1996. And the years it was up we were bailing them out of flood loses. The university of Illionis shows corn prices growing at half the rate of inflation dating back 30 years.

Corn prices going up made us compliant with the WTO wishes. I am hoping it has the effect they wanted, ie production increasing in other parts of the world..

[Subsidy Eye]

"The university of Illionis shows corn prices growing at half the rate of inflation dating back 30 years." Well, we're always hearing from the industry that they continue to improve yields and drive down costs. Given that farmers are price takers, then, why should the long-term trend (all else equal) for corn prices have been downwards?

Of course, subsidies played a role in depressing prices also. But, I maintain, 2005 was not a typical year. Marketing loan payments for crops during that year were TWICE what they were in 2004. And ad hoc and emergency payments were 10 times what they were in 2004.

All in all, federal government payments to farmers in 2005 were almost twice ($24.3 billion) what they were in 2004 ($13.0 billion). In 2008 they are expected to be $13.4 billion -- i.e., no lower than what they were in 2004, and a bit higher than what they were in 2002 ($12.4 billion).

fpc.state.gov/document...

[Subsidy Eye]

Sorry, obviously I meant to say, "then why shouldn't the long-term trend (all else equal) for corn prices have been downwards, or at least rising at less than the rate of general inflation?"

[rickh]

Sub,

What are you talking about. My point was: Farm subsidies/price supports kept corn prices below $2.95/bushel for years. (years 2000-2007) If ethanol raises corn prices, it saves us tax dollars we would have spent on farm supports.

14 billion bushels of corn per year with an average support cost of 50 cents per bushel is more than this years ethanol subsidy.

[Subsidy Eye]

Rick H,

I was refuting Wheels' specific point, which was that 2005 was not an aberrant year. S/he may not understand how the marketing-loan payments work, which depend more on how low the price dips in the year than the average price in the year. In the case of 2005, the closing of the Gulf Ports in the aftermath of Hurricane Katrina coincided with the new harvest. Prices plummeted and marketing-loan payments soared.

My larger point is that, if one is going to "credit" ethanol subsidies for reducing farm subsidies, you have to compare with a more average year, or construct a realistic counter-factual.

Point 1: Ethanol subsidies are not part of the envelope of farm payments that are limited under the USA's commitments to the WTO. Hence, as long as those payments are under the limit, Congress will find a way to keep the money flowing. When you look at total payments over the last several years, expected payments in 2008 are close to the average, assuming that 2005 was an outlier. (See my numbers, above.) Hence, it is hard to make the case that there have been any significant savings overall in farm payments.

Point 2: In saying that "14 billion bushels of corn per year with an average support cost of 50 cents per bushel is more than this years ethanol subsidy". It is more than what will be paid out in the volumetric ethanol excise tax credit (perhaps $4 billion this year ... but rising every year, and it is not the only subsidy benefiting ethanol), but 3-4 billion of those bushels are themselves due to ethanol support policies. Hence, the quantity for comparison should be the amount of corn that would have been produced in the absence of ethanol.

Looking at the trend in recent years (before ethanol production started expanding rapidly), annual U.S. production was fairly stagnant, at around 250,000 metric tonnes (around 10 billion bushels):

farm4.static.flickr.co...

With rising world demand, and therefore U.S. exports, production in the absence of ethanol would have risen to perhaps 11.5 billion bushels. But, that leads me to point 3 ...

Point 3: With that rising world demand, corn prices would have risen -- not by the same degree that they have with the additional demand for ethanol, but by at least $1.50 per bushel. Even the World Bank's Donald Mitchell, whose estimate of the contribution of ethanol to the rise in commodity prices is the highest among the major studies,

papers.ssrn.com/sol3/p...

allows that some 1/3 of the rise (between 2002 and April 2008) was due to rising energy prices and factors such as increased world demand for food and feed and the fall in the value of the dollar against other currencies.

So, to complete our counter-factual, even in the absence of support for ethanol, corn prices would have risen above the levels that would trigger price-support payments.

Conclusion: ethanol subsidies have not saved taxpayers money. They have, and will continue to be, an additional burden on top of the already existing farm payments.

[rickh]

Dear Sub,

What is the $ value of American jobs created by the ethanol industry compared to buying oil from terrorist?

[Subsidy Eye]

Dear Rick H,

I guess that means we agree that ethanol subsidies have not saved taxpayers money. Good, at least we have that settled.

Have ethanol subsidies, on balance, created more jobs than they have cost the economy? That would be quite a feat for a heavily subsidized industry. Mostly they have driven up commodity prices (affecting food prices for everybody), which in turn means increasing the price of farmland:

www.extension.iastate....

Got some figures to back up your assertion that ethanol has substantially reduced U.S. imports of petroleum from, say, Iran? (Which, in your opinion, are the "terrorist" suppliers?) Because, according to the latest figures from the Energy Information Administration, year-to-date imports of petroleum (crude plus products) are DOWN from Canada and Mexico (our No.1 and No. 3 suppliers), but UP from Saudi Arabia (our No. 2 supplier).

www.eia.doe.gov/pub/oi...

[rickh]

Mexico does not have the oil to sell.

Our oil use is down because the price went through the roof.

Ethanol replaced around 6 billion gallons of oil.

[rickh]

Wow, you oil supporters came out in forco against the fact that "ethanol efficiency is improving."

Subby, are you short ethanol or do you have a vested interest in big oil?

[Subsidy Eye]

RickH,

In short, you can't show that ethanol (which replaced more like 4.8 billion gallons of oil in 2007, not 6 billion gallons, though it may be at that higher rate today) has specifically displaced oil imports from "terrorist" suppliers. Of course not: the world oil market doesn't work that way. And, in any case, even if it did, other countries would come in to fill the gap created by reduced U.S. imports. Unless somebody organizes a naval blockade targetted at nasty oil regimes, they will keep exporting at whatever is the world price ... and keep raking in the dollars.

Does that make me an oil supporter? Hardly. And, no, I own no shares in either ethanol or oil companies.

But I do have an interest in good public policy -- which ethanol booseters seem to find quaint. By the way, nobody here challenged the fact that "ethanol efficiency is improving." What I did challenge was Tim Plaehn's twisting of the numbers from the original story to announce that studies had shown that ethanol production is "2 to 3 times more efficient" than originally thought. Tim has shown himself to shoot from the hip whenever he (somebody who DOES own ethanol stocks) defends his favorite industry, often seeming to pull numbers out of thin air.

By the way, I'm glad that you at least acknowledge that high prices induce reductions in demand. That's progress of a sort.

[wheels14]

Hey Subby,

Can I get you opinion on this.

The U.S. government's recent $700 billion bailout could help. It includes a 50 percent tax break for the building of refineries that process oil shale, as well as tar sands.
How Oil Drilling Could Power the Future
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[Subsidy Eye]

Wheels 14,

My opninion on including a 50% tax break for the building of refineries that process oil shale, as well as tar sands, in the bail-out bill?

How's, "Outrageous, stupid, but not surprising."

As the late, , Brian J. Finegan wrote in, "The Federal Subsidy Beast: The Rise of a Supreme Power in a Once Great Democracy", there is no longer a Democratic Party and a Republican Party in the U.S. federal government. There is only one party, the Subsidy Party.

www.abebooks.co.uk/pro.../

(I'm not sure, by the way, what the other stuff in your message is supposed to refer to.)

[Biofuelsimon]

@ rickh 6 million gals of gas on how much of the corn crop? 25%? If that number's right then the actual size of the crop left to eat will be down by about 16% on the harvested value... what's that going to do to food prices over the coming months. How much corn do you think will be left when you start harvesting again next year?

[Pradeep]

@Subsidy Eye,
I liked your comparison of subsidies/unit of fuel produced.

[wheels14]

Dear Sub,

The jibberish included in my quote was a highlighting error. Sorry.

Is it safe to assume that you thik the whole carrot/stick methodology of our tax system is wrong? If we don't like something,"tobacc... alcohol," we tax it. It we want to promote something, "ethanol, wind power," we give it tax breaks or credits."