Ethanol

Use as a renewable fuel

Ethanol, also known as ethyl alcohol and beverage alcohol, is a renewable fuel produced by the fermentation of starches and sugars such as those found in grains and other crops. Ethanol contains approximately 35% oxygen by weight and, when combined with gasoline, it acts as an oxygenate, artificially introducing oxygen into gasoline. As a result of the higher concentration of oxygen, the gasoline burns more completely and fewer hydrocarbons, carbon monoxide and other harmful exhaust emissions are released (which would, with lower concentrations of oxygen, not be burnt) into the atmosphere.

 

The use of ethanol as an automotive fuel is viewed as a way of reducing harmful automobile exhaust emissions. Ethanol can also be blended with regular unleaded gasoline as an octane booster to provide a mid-grade octane product which is commonly distributed as a premium unleaded gasoline.  Oxygenates were first introduced into the US gasoline pool in the 1990s as octane enhancers to replace toxic additives like tetra-ethyl lead, benzene and other aromatic hydrocarbons which are believed to be environmentally harmful and in some cases carcinogenic.

 

Whilst ethanol market growth has to date been influenced by its oxygenate properties, fuel grade ethanol demand is increasingly driven by a growth in ethanol replacing crude oil based gasoline.  The Directors believe that the renewable nature of corn based ethanol, combined with the support it gives to mid-west farmers, plus the substitution for imported oil, are all significant factors in influencing political opinion in favour of ethanol.  The mandatory renewable fuel standard requiring use of a billion gallons of renewable fuels in 2008 growing to 36 billion gallons by 2022. This represents nearly a five fold increase vs usage at the time of passing the bill in December 2007.

 

Ethanol is a commercially proven and widely accepted renewable bio-fuel that can be blended with gasoline for use in motor vehicles to reduce exhaust emissions and as an alternative to gasoline. In the US ethanol is typically sold in gasoline blends of E10 (ethanol 10%, gasoline 90%) and E20 (ethanol 20%, gasoline 80%) for which no engine modifications should be required. 

 

The production process

The IRE plant is a dry-milling facility, where ethanol is produced by the yeast fermentation of corn feedstock and subsequent distillation and dehydration to remove water and by-products to produce pure (200 proof) ethanol. The corn feedstock is milled to a flour, mixed with water and dosed with enzymes to convert the starches to sugars. The conversion of starch to sugar is completed in the cooking process and the resulting “beer mash” is cooled before being passed to batch fermentation vessels. Yeast is then added to the fermentation vessels and, with the temperature of the beer mash being maintained at approximately 90°F. The resulting “beer” is then passed to the distillation stage, which is a reflux distillation column, in which the column vapours are condensed to form 190 proof ethanol. The 190 proof ethanol is vaporised and passed through molecular sieves which contain a silica gel material which absorbs water molecules during the process.

 

The absorbed water is removed under vacuum. The ethanol vapour from the molecular sieves is condensed to 200 proof ethanol.

 

The residue liquids and unconverted corn mass are separated in a centrifuge and ultimately sold for cattle feed as distillers grains. The residue liquids are then passed through the evaporating process to leave a corn concentrate which is also sold as cattle feed. These by-products form a high protein cattle feed which provides a valuable revenue stream to the overall production economics.

 

 

The US ethanol industry

According to the RFA, over the past twenty five years the US fuel ethanol industry has grown from almost nothing to an estimated 5.8 billion gallons of ethanol production per annum as of April 2007. According to a consultant retained for the 2007 debt raising/financing exercise, as of April 2007, there were approximately 115 operating ethanol production facilities located throughout the United States. Most of these facilities are based in the midwest because of the nearby access to the corn and grain feedstocks necessary to produce ethanol.

The consultant states that more than 100 new or expanded plants have been announced, which if built would add an additional 7.9 billion gallons of annual production capacity by mid-2009. Similar reports have led to some concern about a possible oversupply of ethanol in the near term. However, the consultant concluded in its report that it would be unlikely that all of these announced new or expanded plants would be constructed or commence operations on schedule due to a variety of factors. Among these factors are the ability of the construction industry to maintain pace and the increasing project development costs that could render some of the announced projects uneconomic. As a result of these factors, the consultant expects new projects and expansions at existing facilities to add roughly 4.2 billion gallons per annum of new capacity to the US market by the end of 2009, bringing total capacity to about 10 billion gallons by the end of 2009.

Supply could also be influenced in future by the volume of imports. The consultant has also concluded that Brazil’s ethanol export growth is likely to remain strong with its current trading partners and modest with countries with onerous import tariffs, such as the US. Furthermore, the consultant also expected that imports from Caribbean Basin Initiative countries would not exceed 5.5 per cent. as a percentage of total US supply by 2012.

Plants using new technologies for ethanol production, of which cellulosic ethanol is probably currently the most discussed and supported, could also affect the supply of ethanol in the future. Cellulosic ethanol production is regarded by the Group as a technology which has significant technical, commercial and logistical hurdles to be overcome before it can be brought to significant commercial production, and that even when this happens it is likely to be complementary rather than a substitute for corn based ethanol. The consultant’s view, based in part upon Department of Energy 2007 projections, was that cellulosic biomass-based ethanol production will not achieve significant market penetration before 2015. The recent US Senate decision approving RFS increases, foresees growth beyond 2015 coming from cellulosic and other advanced technologies.