Just a few weeks ago, the media was focused on there not being enough ethanol to meet the demand with the phase out of MTBE. Now we’re seeing articles questioning if we might be heading toward producing too much ethanol.
Forbes’ Dirk Lammers writes “some analysts say the burgeoning industry faces risks of oversupply, volatile commodity prices and a dependence on government subsidies.”
A Bloomberg News piece by Joe Carroll says “Within two years, planned expansion by ethanol producers will push U.S. supplies past demand, according to Standard & Poor’s.”
The dire predictions come on the heels of VeraSun’s shining initial public stock offering last week raised $419.8 million. The stock skyrocketed to $30 by market close on Wednesday. The company‘s shares fell in the days afterward to close at $25.25 Friday. Shares of Bill Gates’ investment Pacific Ethanol have fallen 43 percent in the past month. Meanwhile, two other ethanol companies, Hawkeye Holdings Inc. and Aventine Renewable Energy Holdings Inc., are planning their own initial share sales later this year.
“Investors poured $14.3 billion into U.S. ethanol stocks in the past 12 months, according to data compiled by Bloomberg.”
Like anything else, the key is moderation – too much expansion too fast could ultimately wind up hurting the inudstry. But, also like anything else, there’s a rush to cash in while it’s hot.
Chippewa Valley Ethanol Company in Benson, Minnesota is celebrating a decade in the ethanol industry. The plant opened in 1996 and today is a 45 million gallon per year ethanol biorefinery. In addition to producing fuel ethanol and marketing E85, CVEC also produces a top-shelf vodka under the Shakers brand. According to a Renewable Fuels Association press release, CVEC also recently broke ground on a new biomass gasification system that will significantly reduce the biorefinery’s natural gas use by converting biomass material, such as corn stover, distillers dried grains, corn, wheat straw and wood wastes, into energy.
The Engine Manufacturers Association has released a test specification for biodiesel fuel to facilitate testing and evaluation of how blended biodiesel fuels perform in today’s clean-burning diesel engines. According to a release, the EMA specifications establish technical requirements for blends of petroleum fuel and biodiesel fuel that can be used to assess the effects of such biodiesel fuels on engine performance, durability and emissions.
The National Biodiesel Board has been working cooperatively with EMA on test specifications since last October.
“By approving these specifications, EMA is acknowledging the growing demand and use of B20 by customers all over the country,” said Joe Jobe, CEO of NBB. “While many original equipment manufacturers, or OEMs, have taken positive steps toward B20 approval, EMA’s actions are a huge step toward national biodiesel blend fuel standards that will enhance fuel quality measures and increase acceptance of B20.”
Intrepid Technology and Resources, Inc., an Idaho-based renewable alternate energy company, has received a $50,000 grant from the Idaho Department of Water Resources to install anaerobic digestion technology to produce useable energy from dairy biogas. According to a company release, the grant will be used to purchase energy measurement equipment at the Whitesides Dairy biogas plant. The equipment will monitor the heating values of the gas, determine its energy content, contaminate levels and flow rates either onsite or offsite locations and will assist in the expansion and remote operation of the Whitesides biogas plant.
Kansas Governor Kathleen Sebelius will be the keynote speaker at the 19th annual American Coalition for Ethanol Conference & Trade Show, August 8-10 in Kansas City, Missouri at the Crown Center. Governor Sebelius, who currently serves as chair of the Governors’ Ethanol Coalition, will address the conference on Wednesday afternoon. Topics of interest to be discussed at the conference include: grassroots efforts for ethanol at the state level, petroleum marketing basics, cellulosic ethanol, distillers grain, and many more. Also, an Ethanol 101 session “From Ground Breaking to Profit Making” will be featured again this year in a longer, more interactive format. Registration information and agenda for the conference are available on the ACE website.
Indy Car drivers seem pretty pumped about ethanol, according to this Dallas Business Journal article, which quotes Bombardier Learjet 500 winner and two-time Indianapolis 500 winnner Helio Castroneves and 2004 IndyCar Series Champion Tony Kanaan – both Brazilians. The article says the IRL switch to ten percent ethanol this year has been “problem-free” and Dan Layton, spokesman for Honda Performance Development, makers of the sole engine used in the IRL, says that improved fuel mileage may require the fuel tanks in Indy cars to be reduced next year in order to keep drivers from out-running their tire-life.
Here’s an interview Chuck did at the Indy 500 with Ethanol Promotion and Information Council executive director Tom Slunecka, who is also quoted in the article. Tom discusses a number of the points in the article, including Brazilian support of ethanol, the fuel’s environmental benefits and performance aspects, and the expectations for next year when IRL goes to a full 100 percent ethanol. Tom Slunecka Interview (7 min MP3)
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Front Range Energy LLC and Pacific Ethanol Inc. today announced the completion of Front Range Energy’s ethanol plant in Windsor, Colo.
According to a Pacific Ethanol release, the ICM-designed facility has a nameplate capacity of 40 million gallons per year of fuel ethanol. The plant produced its first ethanol on June 9, 2006, and expects to ship its first loads of ethanol and wet distillers grains later this week.
Pacific Ethanol, in addition to marketing all of the fuel ethanol and WDG output of the Windsor plant, has a contract to procure corn, manage plant operations and market products for Front Range Energy. Pacific Ethanol will market all the ethanol through its Kinergy Marketing subsidiary and will market all the WDG through its Pacific Ag Products subsidiary.
Front Range Ethanol is counted by the Renewable Fuels Association as the 101st ethanol plant in the country.
Archer Daniels Midland CEO Patricia Woertz is expecting big profits from biofuels for her company in the next few years. According to an AP article, Woertz said profits from the renewable fuel plants “will be quite robust at something less than that.” Speaking by webcast from a conference in Paris Tuesday, Woertz also said that while there are a number of new competitors in the business, ADM’s advantage is “around experience, network capabilities and cost advantages.” ADM is the largest producer of ethanol, with a 25 percent market share.
Incidentally, there was a little piece of financial advice in USA Today this week about whether now would be a good time to invest in ADM to take part in the growth of alternative fuels. Financial writer Matt Krantz says, “It sounds corny, but you are late to this party.”
Meanwhile, VeraSun’s party is just getting started.
Financial services are buzzing this morning with the red-hot debut of VeraSun’s IPO. In the most recent Bloomberg report, the story is that shares of VeraSun Energy Corp., the second-largest U.S. ethanol producer, jumped as much as 34 percent on the first day after an initial public offering that tapped rising interest in alternatives to $3-a-gallon gasoline. The shares rose as high as $30.75 after the company and stockholders yesterday sold 18.25 million at $23 each to raise $419.8 million.
ICM Inc. of Colwich, Kan., has received the 2006 Governor’s Award of Excellence presented by Kansas Gov. Kathleen Sebelius this week, according to a Kansas City Star report. The awards are the top honors a Kansas business can receive. ICM is an industry leader in the engineering and design of ethanol processing facilities
America is not the only country addicted to oil. China is now considering a change in energy policy to encourage the wider use of ethanol in order to improve air quality. According to China Knowledge, Beijing could set a target by the end of this year to include ethanol in the nation’s energy mix, the newspaper said, citing Fabrizio Zichichi, head of ethanol at Noble Group.
Such a move would indicate crucial political support for investment in the production, import and distribution of biofuel in China and could have an impact on world ethanol prices, which experts say will soon peak on current consumption patterns.
Ethanol, a clean fuel made from agricultural products, could reduce China’s excessive reliance on oil and coal, and also help spread wealth to the rural poor should a larger ethanol market in China be created, Zichichi was quoted as saying.
Louisiana Governor Kathleen Blanco has signed into law a bill requiring refineries to mix ethanol with some of the gasoline they produce.
The governor issued a statement about the bill, saying she was “proud to join President Bush, the federal government and dozens of other states in promoting a biofuels market. As the President has said on many occasions, America is addicted to oil and the best way to break through this addiction is through technology. Louisiana has a long history of helping to meet this nation’s energy needs through its exploration and production of oil and natural gas and will continue to do so. It is only fitting that we position ourselves to be a leader in the rapidly developing biofuels industry as well. By promoting the use of homegrown, environmentally friendly energy, we have a real opportunity to help the nation through its energy crisis and greatly assist Louisiana farmers.”
Granite Falls Energy, LLC is opening it’s state-of-the-art biorefinery in Minnesota today. Granite Falls will produce more than 45 million gallons of ethanol and 130,000 tons of distillers grains annually from more than 17 billion bushels of Minnesota corn. “Minnesota has long been a leader in expanding the production and use of ethanol and today’s grand opening celebration is continued evidence of that commitment,” said Renewable Fuels Association President Bob Dinneen.
Sixteen members of Michigan’s congressional delegation, including Senators Carl Levin and Debbie Stabenow, are calling on President Bush to pressure oil companies into setting a target for installing more ethanol filling stations by 2010. According to the Detroit Free Press, the Michigan lawmakers say the domestic auto industry has already done its part to increase ethanol use by committing to build up to 1 million E85-capable vehicles a year by 2008 and that the onus should now be on oil companies.
Engineering students from Virginia Tech University, utilizing E85/hybrid technology, beat out teams from 16 other universities in the U.S. and Canada to win the second annual Challenge X: Crossover to Sustainable Mobility competition, sponsored by the Department of Energy and General Motors last week in Mesa, Arizona. The Virginia Tech team redesigned a 2005 Chevy Equinox to utilize a split parallel hybrid that runs on E85 to edge out second-place Mississippi State University.