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The first ethanol bubble bursts, what now?

Nathanael Greene

Posted October 3, 2007

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Over the weekend there was a spat of articles about slumping ethanol prices and the end to boom days in the ethanol industry (WSJ subscription required). As the articles point out, the slump is caused by explosive growth in production capacity that has raced ahead of federal mandates and distribution capacity. Most industry observers that I know has anticipated this for a while now. A bubble has burst, and the interesting question is what happens now.

I think we can predict consolidation. Inefficient or poorly financed plants are already "under deathwatch." A lot of the plants on the drawing board will be postponed or scrapped (e.g. see this ditty about the demise of BioTown, USA). A lot of recent arrivals to the sector will loose their shirts. But in the end the industry will probably stronger for the shakeout. After all, the Internet did not slip into obscurity after 2002.

In a worst case scenario, the losses could be large enough and broad enough to take the steam out of clean tech investing generally, at least for a while. One hopes that investors separate conventional corn ethanol from advanced biofuels as Katie Fehrenbacher argues over at Earth2Tech. To stop global warming, we need biofuels to work and for the industry to be much larger than it is today.

Another outcome we can count on is increased pressures on Congress to increase the renewable fuel standard. As I've mentioned before, the Senate has adopted a 36 billion gallon mandate that would have to be reached by 2022 but it includes anemic environmental safeguards and performance standards. We were successful in keeping the House from adopting an RFS, but it is almost inevitable that if and when the Senate and House energy bills are reconciled in conference, the final product will include an RFS. So this report from E&E New PM (subscription required) that Senator Reid wants name conferees this week should be no surprise.

My mantra these days is that biofuels can be good or bad and our policies will determine which more than technology breakthroughs (they're necessary but not sufficient). The RFS is the best opportunity to start making sure that biofuels are good for the environment. The popping noise in the ethanol sector are going to put a new fire in the politics and hopefully make the industry more willing to accept new standards and safeguards. See this fact sheet from NRDC and this community fact sheet to see what we're pushing for.

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James A.Singmaster, Ph.D.Oct 8 2007 08:27 PM

The basic point of global warming control is being missed as no proposals have been made to reduce the poisoning level of carbon dioxide already on the globe melting ice and sending walruses to follow polar bears to land homes for lack of Arctic ice floes. The SEG report to the UN by Sigma Xi said "Even if human emissions could be instantaneously stopped, the world would not escape further climatic change." We also have the problem of more kinetic energy being pushed onto the globe by power systems other than fossil fuel ones so just maintaining the overload of that gas will keep contained some of the added energy from nuclear plants to raise global temperatures and worsen weather.
So the first point for cleaner energy and getting control of global warming has to be some step to lower the level of carbon dioxide on the globe. A big first step to achieve that would be the using of pyrolysis on our massive mess of organic wastes, an unused biofuels crop that we waste in dumps and composting allowing biodegradation to be recycling carbon dioxide and energy that nature trapped for us. Pyrolysis, the heating of organic chemicals without oxygen, causes formation of charcoal and distillation of an organic-water mix that might be refined for fuel or just burned to heat the pyrolysis chamber. The exhaust gas from heating can go through a turbogenerator for electricity and the hot charcoal (at ca. 1000 degs. F) can be passed through a heat exchanger to generate steam for energy. The charcoal is buried or spread as a soil amendment with the overall result that some carbon has been removed from recycling. Getting plant waste buried to make coal is what nature did eons ago to get the globe cool enough to have ice year round: so why don't we imitate her with this fast way of making carbon.
The mega buck costs of maintaining dumps is due to the organic wastes loaded with disposable diapers, perhaps hospital wastes, sewage junk, etc.. With pyrolysis much of the money would be recovered and probably more money would accrue from energy generated while eliminating the spread of any germs in various items that might come from seriously ill people. With pyrolysis no problems with difficult cellulose or lignin wastes arise, and separated solids from sewage and farm manure can also be pyrolyzed perhaps cutting the mess they create.
With pyrolysis of our organic wastes, no land or water gets usurped from food production; such usurping is becoming a big issue now with biofuel crops. Heinz, Co. recently announced plan to get sweeter tomatoes as cost of corn syrup used to sweeten several of its products has risen considerably.
In order to get a sped-up removal of our carbon dioxide overload, we need to establish a major tree farming type of operation with regular cutting of trees to feed pyrolysis plants. Such farms with trees not too close together could have alfalfa, not needing nitrogen, grown underneath to allow animal grazing. According to that UN-SEG report wind may have increasing force so tree windbreaks on farms may need to be set up very soon to control soil erosion and dust bowl conditions.
The increasing winds represent in part extra energy emitted by the burning of fossil fuels, and we could be using many more windmills to recycle that energy without pollution or the environmental messes occurring with mining and drilling. I am leery though of off-shore installations because of added costs for corrosion resistant metals and stronger structures to handle monster waves from tsunamis or subsurface storm action.
Why is no one suggesting that all rail transportation be driven by electric power to eliminate the soot as well as the carbon dioxide emissions? The present diesel electric engines could still be used by rewiring for power pickup from third rails while still carrying some diesel oil to run with in case of power outages.
The first point mentioned here is the need to get a program that actually reduces the level of carbon dioxide on the globe, which the outlined pyrolysis program can do. NRDC should set its sights on a forward going program that the public can understand as present carbon tax and trading programs sound like bitter pills to swallow. Making money out our wastes instead of taking $100-200/year that many familes have to pay for dump maintaining fees could get the public enthused. Especially if the money accruing can remove all waste disposal charges of $300-400/year. Dr. James Singmaster, Fremont, CA

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