extension and outreach/department of economics economics of ethanol production: iowa’s strengths...

Extension and Outreach/Department of Economics

Economics of Ethanol Production:Iowa’s Strengths and Weaknesses

Deerfield Retirement CenterUrbandale, IowaAug. 30, 2011

Chad HartAssistant Professor/Grain Markets Specialist

[email protected]


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Oil Prices

Source: EIA for history, NYMEX for future


Population2011 2030 2050

(billion) (billion) (billion)World 6.946 World 8.323 World 9.441

China 1.337

India 1.461

India 1.657

India 1.189

China 1.391

China 1.304

U.S. 0.311 U.S. 0.366 U.S. 0.423Indonesia 0.246

Indonesia 0.289

Nigeria 0.402

Brazil 0.203 Nigeria 0.264

Indonesia 0.313

Pakistan 0.187

Pakistan 0.243 Pakistan 0.291

Nigeria 0.166

Brazil 0.240 Ethiopia 0.278

Bangladesh 0.159

Bangladesh 0.211

Brazil 0.261

Russia 0.139

Ethiopia 0.162 Bangladesh 0.250

Japan 0.127

Philippines 0.138 Philippines 0.172

Source: U.S. Bureau of the Census, International Data Base


Liquid Fuel Usage2007 2015 2020 2025 2030 2035

(Million Barrels Oil Equivalent per

Day) (Percent of 2007 Value)

United States 20.6 98% 100% 102% 104% 107%

Canada 2.3 96% 96% 96% 100% 104%

Mexico 2.1 105% 110% 114% 129% 138%

Europe 15.3 92% 88% 88% 89% 90%

Japan 5.0 84% 86% 86% 84% 82%

China 7.6 132% 153% 178% 201% 222%

India 2.8 114% 129% 139% 154% 168%

Africa 3.1 113% 116% 126% 135% 148%

Central and South America 6.0 110% 112% 117% 125% 133%

World 86.1 103% 107% 113% 121% 128%

Source: Energy Information Administration


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Ethanol Production

Source: EIA, 2011 Projection by Hart


Ethanol Plant Locations

Source: Ethanol Producer Magazine


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Production Consumption Net Imports

Monthly Ethanol Data

Source: EIA


Ethanol Penetration

20%

30%

40%

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100%5

/7/0

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Nearby Futures (Jan. 3, 2011 = 1)

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Corn Ethanol Gasoline


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Ethanol Gasoline

Fuel Prices


Ethanol Margin

Source: CARD


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$ p

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nEthanol Blending Advantage


Ethanol Stocks

650

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900

Sep-10

Oct-10

Nov-10

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Source: DOE, EIA


Location and Products


Tapping into Many MarketsBiorefinery

Process Corn DST™

ProcessBiofuels

Germ Bran Wet Cake

Syrup

Starch

Animal Feed

Animal Feed

Solvent ExtractSolvent Extract

Corn Oil

Corn Meal

Burn CHPBurn CHP

Animal Feed

Animal Feed

WCGFWCGF

Cellulose Ethanol

Cellulose Ethanol

Cellulose Ethanol

Cellulose Ethanol

A.D.A.D.

Combine all – DDGSCombine

all – DDGSProtein IsolatesProtein Isolates

Burn CHPBurn CHP

Animal Feed

Animal Feed

Zein Protein

Zein Protein

Other Fermentation

Other Fermentation

FoodFood

Source: 2009 FEW Conference presentation by Neal Jakel (Delta-T)


Fuel Comparison

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140,000

Gasoline Ethanol Diesel Biodiesel LiquidNatural

Gas

Butanol

BT

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Gasoline Consumption

Source: EIA, Annual Energy Outlook


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2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Bill

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E10 E12 E15

Ethanol Blends


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Conventional Biofuels Cellulosic Biofuels

Biodiesel Additional Advanced Biofuels

Renewable Fuels Standard (RFS)

60% GHG Emission Reduction

50% GHG Emission Reduction

20% GHG Emission ReductionIf construction started after Dec. 2007


Countries Pursuing BiofuelsUSBrazilArgentinaColombiaParaguayCanadaUruguayMexico

ThailandNew ZealandSouth AfricaSouth KoreaPhilippinesIndonesiaPakistanChina

IndiaMalaysiaAustraliaJapanEURussia

Not a complete list


Renewable Fuels Standard (RFS)

11.75

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12.25

12.5

12.75

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2010 2010 Adj.

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Conventional Biofuels Cellulosic Biofuels

Biodiesel Additional Advanced Biofuels


RFS Coverage

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2009 2012 2015 2018 2021

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Conventional Biofuels Cellulosic BiofuelsBiodiesel Additional Advanced BiofuelsE10 E12E15


Government Policies for BiofuelsEthanolAd valorem tariff of 2.5%Import duty of $0.54 per gallonVolumetric Ethanol Excise Tax Credit (VEETC)

$0.45 per gallon

BiodieselBiodiesel Mixture Excise Tax Credit

$1.00/0.50 per gallon

CellulosicCellulosic Biofuel Producer Tax Credit

$1.01 per gallon


Biomass Crop Assistance Program

To support production of crops for bioenergy and assist with collection, harvest, storage, and transportation of biomass to conversion facilities

Excluded materialsFarm program crops, animal byproducts, food

waste, yard waste, algae


BCAPResources Contracts PaymentsBark 1,418 $46,696,187Fuelwood 744 $34,403,825Hardwood chips 805 $32,521,203Forest harvest slash 386 $30,012,559Forest thinnings materials 399 $27,220,001Softwood chips 491 $17,661,305Orchard wood waste 123 $15,000,377Sawdust 357 $12,400,919Pellets 70 $ 5,367,939Non-edible, non Title 1 56 $ 3,226,417plant processing waste and scraps Corn cobs 15 $ 61,612

Source: USDA-FSA


Currently Available Biomass

Source: NREL, 2005


Spectrum of Biofuels

Source: NREL, 2006

Grain/Sugar EthanolBiodieselGreen Gasoline/DieselCellulosic EthanolButanolPyrolysis LiquidsSyngas Liquids

Most Mature

Least Mature


Biofuel ChallengesProduction costs

Conversion, ag. production, etc.Infrastructure barriers

Developing supply chain for biomassContinued development of biofuel

distribution systemGrowth in biofuel-compatible vehicles


Biofuel ChallengesInvestment risks

Higher capital costs, emerging technology

Biomass production shiftsInducing farmers to produce new crops

Consumer understandingAbout the fuelsAbout the tradeoffs


Thank you for your time!

Any questions?

My web site:http://www.econ.iastate.edu/~chart/

Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/

extension and outreach/department of economics economics of ethanol production: iowa’s strengths...

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