THE ETHANOL ISSUE

February is the month for ethanol. If you don’t believe us, consult the February 12 edition of U.S. News and World Report. Ethanol is the cover girl.

There’s an okay article inside about how everyone is rejoicing in the corn belt, and how the prospects of running the nation’s transportation system on corn squeezings are actually pretty dim. All true, but also pretty obvious, we think. There are a couple of allusions to cellulosic ethanol, but little analysis nor any mention of the fact that a multitude of technologies exist for converting cellulose into hooch, none proven within a commercial setting, unfortunately.

If you want to know a whole lot about ethanol fuel, go to Visant Strategies, an industry analyst firm at www.visantstrategies.com, and buy the report I prepared for them. It will be out before the end of this month. Some though certainly not all of my conclusions are reprised in the premium content section of this issue. I’m also including some material that was not included in the report.

In this same section we’ll include detailed descriptions of some of the newer technologies for producing ethanol and assess their potentials. We’ll also have something to say about various alcoholic rivals including methanol, butanol, and mixed alcohols. Richard Branson, the green billionaire who founded Virgin Airlines, is a big proponent of butanol as are Dow Chemical and British Petroleum. It’s actually got a lot more going for it than ethanol as a fuel, but no one has been able to make it inexpensively, though some people think they can.

We’ll also look at the much vaunted and much misunderstood Brazilian ethanol industry and show why it’s not really such a good model for the U.S. to follow. In other words, we’re not going to turn Puerto Rico into an oil emirate by growing more sugar cane there. We’ll have some things to say about sweet sorghum as well, a low maintenance sugar crop that is currently subject to considerable promotion not to say hype.

Finally, we’ll touch upon co-products, the stuff that’s left when you’ve piped away the alcohol. You can’t get anywhere near a 100% conversion of any feedstock into ethanol, so you’re left with a lot of residues, which vary according to both the feedstock and the production method. The trick is to make money off what would otherwise be a waste disposal problem, in other words, find someone who wants to buy the gunk, or, failing that, cheaply transform it into something more presentable.

It all comes under the sexy nomenclature of bio-refinery. The idea is to do like the oil guys do. With them nothing goes to waste. They get lubricants, heating oil, diesel, aircraft fuel, and gasoline from the crude, plus about 500,000 useful petrochemicals along with petroleum coke.

Currently, ethanol producers have a few markets for a few co-products, but they’re looking to develop many more, and they’re also looking to use the basic co-products as feedstocks for a whole host of bio-chemicals that could substitute for some of the petroleum products—stuff like bio-based paints, solvents, lubricants, plastics, resins, and so on. There’s been some progress along those lines, but the bio-synthesis chemical industry is in its infancy and poses a far less serious challenge to petro-chemicals as a whole than bio-fuels do to petroleum based fuels. In any case, we’ll be looking at this area which we think will be crucially important to the survival of many bio-fuel manufacturers.

Summing up, I would note that the hype cycle for ethanol already seems to have run its course. A bunch of mainstream news publications that bought into the hydrogen hype without asking too many questions have been much more critical toward ethanol despite the fact that a real and rapidly growing market exists for ethanol fuel whereas hydrogen is almost pure conjecture. Maybe it’s the subsidies that put the conservative business press off.

By the way, Visant Stratagies also has a report of mine on hydrogen which examines all markets for the gas and not just fuel. It’s for sale now and contains the most comprehensive market data available.