12 April 2009

A Little On Ethanol and Biodiesel

In Australia, it was reported by the Sydney Morning Herald that the Australian government's target that fuel companies should have at least 2% ethanol blended with their petrols by the end of 2008, was not met. (Ref: The Sydney Morning Herald, 23rd March 2009. Companies Miss Ethanol Target. URL: http://www.smh.com.au/environment/energy-smart/companies-miss-ethanol-target-20090322-95mu.html) From the same report:

The revelations cast doubt on the likelihood of achieving the Rees Government's mandatory target of 6 per cent by 2010, with plans to give motorists the choice in 2011 of only E10 (which contains 10 per cent ethanol) or premium unleaded.

Gasoline (a.k.a. petrol) containing a 10 percent blend of ethanol is known as E10 or "gasohol". (Source: US Energy Information Administration, February 2007. Biofuels in the US Transportation Sector. URL: http://www.eia.doe.gov/oiaf/analysispaper/biomass.html)

Is ethanol really the solution to the problem of peak oil? Some people say that ethanol is not the solution. Watch the following video and see if you agree.

The main controversy revolving around ethanol in fuels, at least for the USA, is that consumers' stomachs will be in direct competition with the auto industry for corn, and other organic sources of ethanol. From the US Energy Information Administration website (ibid), it is clear that the US relies primarily on corn for its ethanol needs:

The U.S. ethanol industry relies almost exclusively on corn, consuming 20 percent of the available corn supply in 2006. At current production levels, corn— which is produced domestically in large volumes—is the most attractive feedstock for ethanol. As ethanol production increases, competition for corn supplies among the fuel, food, and export markets, along with a decline in the marginal value of ethanol co-products, is expected to make production more expensive.

But the expected increase of human population and the non-increase of farming land would mean that in the long run corn is not viable. The same report also mentions switching to more energy efficient crops.

Cellulosic biomass from switchgrass, hybrid willow and poplar trees, agricultural residues, and other sources has significant supply potential, possibly up to 4 times the potential of corn. Switchgrass and poplars could be grown on CRP lands, where corn cannot be grown economically, but they would not be competitive with corn until corn prices rose or the capital and non-feedstock production costs of cellulosic ethanol were significantly reduced. To expand beyond a production level of 15 to 20 billion gallons per year without seriously affecting food crop production and prices, the industry must make a transition to crops with higher yields per acre and grow crops in an environmentally permissible manner on CRP lands, while continuing to provide profits for producers.

Ethanol based fuels do not generate as much energy as petrol. (Ref: How Stuff Works, Is Ethanol Really More Eco-Friendly Than Gas? URL: http://auto.howstuffworks.com/ethanol-facts1.htm) The EIA report says:

E10 (10 percent ethanol) has 3.3 percent less energy content per gallon than conventional gasoline. E85 (which currently averages 74 percent ethanol by volume) has 24.7 percent less energy per gallon than conventional gasoline.

Producing ethanol requires more energy than the ethanol itself contains: "... ethanol could end up containing less energy than the gasoline consumed to produce it." (Ref: How Stuff Works, Ibid.) This is further confirmed in a report at The Oil Drum (Ref: The Oil Drum, 13th January 2009, The Effect of Natural Gradients on the Net Energy Profits from Corn Ethanol, URL: http://netenergy.theoildrum.com/node/4910):

... large amounts of corn must be grown and harvested to equal even a small portion of our gasoline consumption on an energy equivalent level, which will undoubtedly expand the land area that is impacted by the production process of corn-based ethanol.

Ethanol producers of course encourage petroleum marketers to blend their fuels with ethanol. They promise higher margins of profit to petroleum marketers. (Ref: American Coalition for Ethanol, Blending Economics. URL: http://www.ethanol.org/index.php?id=53&parentid=29)  Lobbyists also claim that food price increases are not caused by the production of ethanol, but are caused by higher energy prices. (Ref: American Coalition for Ethanol, Food & Fuel. URL: http://www.ethanol.org/index.php?id=83&parentid=25) 

The argument that food prices have gone up due to factors other than ethanol, are supported by a recent report by the "nonpartisan" US Congressional Budget Office.

The budget office estimates that ethanol was responsible for 10 percent to 15 percent of the increase in food prices between April 2007 and April 2008. Put another way, ethanol contributed 0.5 to 0.8 points of the 5.1 percent increase in food inflation during that period. By comparison, higher energy prices, which raised transportation and electricity costs, were responsible for as much as 36 percent of the food price inflation, the study says.

Find the study, and the budget office director's blog note, here: www.cbo.gov/doc.cfm?index=10057

Source: Des Moines Register, 12th April 2009. Study: Other Factors, Not Ethanol, Chief Culprit in Food Price Jumps. By Brasher, P. URL: http://www.desmoinesregister.com/article/20090412/BUSINESS03/904120322/-1/BUSINESS04

Presently independent ethanol producers in USA are suffering and a number are in trouble or have closed down:

The situation is neatly summed up by an article from Herald & Review, an Illinois newspaper.

Of course, the larger ethanol companies are not the only ones having difficulty. Many smaller one and two plant operations have also sought bankruptcy protection in the past year following the plummet in crude oil futures in the latter part of 2008. No, they were not all caught speculating on the long side of the crude oil market, but caught in a cost-price squeeze. With ethanol prices linked at the hip to unleaded gasoline, what goes up must come down and ethanol prices fell below cost of production. At least the cost of production that had been booked by the plant’s corn buyers.

The ethanol industry that had been flying high in 2008 with $140 crude oil, and market analysts predicting $200 prices, ethanol refiners were locking in corn prices at higher prices to help push that commodity well past $7. When the crude oil balloon popped, and prices deflated with the rest of the global economy, ethanol prices had to fall as well and that destroyed any hope of profits, for companies that are solely dependent upon ethanol sales. The result has been the closure of many ethanol plants, because there is no future in keeping open a plant that is losing money. That is something that cannot be made up on volume, no matter how large.

(Source: Herald & Review Blogs, Farm Blog by STU ELLIS. 12th April 2009. Ethanol Industry Burning Through Equity. URL: http://www.herald-review.com/blogs/stuellis/?p=159

This article now turns its eyes to Malaysian shores. What about the Malaysian scenario? A 2006 report indicates that the same difficulties plague our biofuel efforts. The report, Biofuels For The Malaysian Transport Sector, was prepared under the Malaysian-Danish Environmental Co-operation Program and is worth reading. It can be found at http://eib.ptm.org.my/upload/files/Bio-fuels%20for%20the%20Malaysian%20Transport%20Sector.doc

Among others, the salient points in the article are:

  • Road transport is expected to double its energy consumption between 2004 to 2020.
  • Without change of energy strategy, Malaysia will turn from its present status as oil supplier to a future (2014) status as an importer of oil.
  • The potential Malaysian raw materials for biodiesel production were identified as Crude Palm Oil (CPO), used cooking oil, animal fat or oils that in future may be produced by new oil crops such as e.g. Jatropha oil. CPO is used as raw material for biodiesel in several plants worldwide, but also in Malaysia. CPO has the highest potential ... In 2005, the production of CPO was nearly 15 mio. tons, and it is forecasted to rise to nearly 18 mio. tons in 2020.
  • Available raw materials for production of cellulose-ethanol were identified as EFB, trunks, and fronds from the palm industry. EFB is assessed to have the highest commercial potential for bioethanol production, in that the supply chain can be extended from the palm-oil mill to the ethanol production plant. The EFB production is 6.1 mio. tons dry EFB and forecasted to be at 7.6 mio. tons dry EFB in 2025. 
  • With the existing production techniques and market conditions (raw material prices at 1,400 RM / t and raw oil prices of 60 US$ / barrel), the production price of biodiesel exceeds the production prices of fossil fuel. That picture also fits the production of bioethanol.
  • For Malaysia, the existing price structures for fuels are also influenced by the fossil fuel-subsidising policy, which makes biofuels even less competitive. Therefore, utilisation of biofuels is highly depending on political decisions.
  • Technically, it is realistic to introduce 10% - 20% biodiesel (B10) and 5% bioethanol (E5) to fuels, without any major changes in the existing engine technology. 

The push in Malaysia seems to veer towards biodiesel without much news about bioethanol. In Malaysia the push is towards B5 biodiesel (palm methyl ester) which utilizes crude palm oil. It was launched as Envo Diesel. These are seen as follows:

  • August 2005: The Malaysian government launches the "Five fuel diversification policy". It comprises three main strategies: (1) production and utilisation of biofuel for transportation, (2) production of biofuel for export, especially to the European market, and (3) commercialisation of biofuel technology as a local technology. (Source: Department of Environment newsletter, IMPAK issue #4 of 2008. Palm Oil Based Diesel: An Inconvenient Opportune? URL: http://www.doe.gov.my/files/multimedia141/Impak08-4.pdf)
  • January 2006: The Plantation Industries and Commodities Ministry announced that B5 biodiesel would be supplied free for one (1) year to ministries and government agencies that volunteer to try it out. (Source: The Star, Nation section, 2nd January 2006. One year trial of B5 fuel. URL: http://thestar.com.my/news/story.asp?file=/2006/1/2/nation/13002911&sec=nation)
  • May 2006: The Plantation Industries and Commodities Ministry announced that petrol stations must supply B5 Envo Diesel by 2007. (Source: National Economic Action Council, quoting Business Times report dated 5th May 2006. Oil Firms In Malaysia Must Supply Envo Diesel Next Year. URL: http://www.neac.gov.my/index.php?ch=66&pg=186&ac=2018)
  • October 2006: Shell announces that it will undertake research with the Malaysian Palm Oil Board into the B5 biodiesel. (Source: The Star, 6th October 2006. Shell in joint biodiesel study. URL: http://biz.thestar.com.my/news/story.asp?file=/2006/10/6/business/15642935&sec=business)
  • October 2008 : The Plantation Industries and Commodities Ministry announced that it would push for a mandatory B5 biodiesel policy to help reduce the overstock of crude palm oil by 500,000 tonnes per month. (Source: The Star, Business Section, 14th October 2008. Ministry to push for mandatory use of biofuel. URL: http://biz.thestar.com.my/news/story.asp?file=/2008/10/14/business/2263373&sec=business)
  • As at 31st October 2008, 91 palm-based biofuel manufacturing licences with a total capacity of 10.2 million tonnes annually have been approved. (Source: The Star, 24th January 2009. Further hiccups ahead. URL: http://biz.thestar.com.my/news/story.asp?file=/2009/1/24/business/3097732)
  • December 2008: The mandatory B5 biodiesel policy is to take effect by 2010, i.e. all diesel vehicles in the country must use B5 biodiesel by 2010. (Source: Biofuels Digest, 11th December 2008. Malaysia to impose B5 palm oil biodiesel mandate in 2010. URL: http://biofuelsdigest.com/blog2/2008/12/11/malaysia-to-impose-b5-palm-oil-biodiesel-mandate-in-2010/)
  • March 2009 : The Plantation Industries and Commodities Ministry announced that mandatory B5 biodiesel policy will not be deferred. It has been in operation since 1st February 2009 and is being implemented in stages. (Source: The Star, Business Section, 25th March 2009. Deferment of blend biofuel implementation unlikely. URL: http://biz.thestar.com.my/news/story.asp?file=/2009/3/25/business/3547743&sec=business)
  • B5 biodiesel currently retails about RM2.80 per liter compared to RM1.70 per liter fordiesel. Malaysia will utilize the MPOB RM250 million fund to stabilize the oil palm price until end of 2009. (Source: The Star, Business Section. 24th March 2009. Challenges await Asian biodiesel producers. By Hanim Adnan. URL: http://biz.thestar.com.my/news/story.asp?file=/2009/3/24/business/3539878&sec=business)

The future of the B5 biodiesel would, according to an April 2009 report, hinge on whether Saudi Arabia can maintain the price of crude oil. If crude oil prices slide to USD35 per barrel, CPO prices could come down to RM1,500 per tonne by the end of the year. (Source: The Star, 10th April 2009. Saudi Arabia holds the key to CPO price. URL: http://biz.thestar.com.my/news/story.asp?file=/2009/4/10/business/3668005&sec=business)

Finally, in July 2007 the Secretary General of the Plantation Industries and Commodities Ministry, Datu Dr Michael Dosim Lunjew presented a talk at an ICS-MPOB workshop on "Status of biofuels development in Malaysia". (URL: http://www.ics.trieste.it/Portal/ActivityDocument.aspx?id=4710) The contents of the talk are quite relevant. Some points are as follows:

  • The biodiesel industry takes the following paths: Palm oil blended with methanol is marketed for the export market. Methyl ester blended with glycerol will be made available locally only if necessary. Finally, 5% palm olein is blended with 95% petroleum to form B5 biodiesel for local consumption.
  • The government has planned three stages for palm oil biodiesel: short term, medium term, and long term. Various measures would be implemented depending on the stage. The most important of these would appear to be: establishing a standard for methyl ester biofuels; establishing the Biofuel Industry Act 2006; increasing the blend from B5 to B20; and (most importantly) stabilising crude palm oil price at higher levels.

Is this the end of it? Not likely. Since peak oil is a recognised concept, the search for biofuels and alternative fuels is likely to continue. Curious readers may like to further their reading with the following:

  • Isobutanol as an alternative to ethanol biofuel. (Source: Forbes, 20th March 2008. Beyond Ethanol. URL: http://www.forbes.com/2008/03/19/innovation-ethanol-fuel-tech-innovation08-cx_wp_0319innovation.html)
  • Algae as a source of gasoline. (Source: Forbes, 28th May 2008. Turning Algae Into Gasoline. URL: http://www.forbes.com/2008/05/28/alternative-fuels-biofuels-tech_sciences_cz_kad_0528fuels.html)
  • Utilizing microbes and enzymes to break down cellulosic material and quicken ethanol production. (Source: Forbes, 19th March 2008. Superbugs May Save Biofuels. URL: http://www.forbes.com/2008/03/19/superbugs-biofuels-innovation_leadership_clayton_jw_innovation08_0319innovation.html)

Thanks for reading.


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