Domestic Fuel

Ethanol production probably had less impact on global commodity prices in 2008 than many were saying at the time.

A newly released working paper, entitled “Placing the 2006/08 Commodity Price Boom into Perspective,” from the Development Prospects Group at the World Bank, concludes that “…the effect of biofuels on food prices has not been as large as originally thought.”

Authors of the report, John Baffes and Tassos Haniotis, argue that energy prices, as well as speculation, played significant roles in the non-energy commodity price spikes seen in the recent past. “We conclude that a stronger link between energy and non‐energy commodity prices is likely to have been the dominant influence on developments in commodity, and especially food, markets,” says the report. “Demand by developing countries is unlikely to have put additional pressure on the prices of food commodities, although it may have created such pressure indirectly through energy prices.”

Another point they make is that biofuels only represent 1.5 percent of worldwide grain and oilseed use. “This raises serious doubts about claims that biofuels account for a big shift in global demand. Even though widespread perceptions about such a shift played a big role during the recent commodity price boom, it is striking that maize prices hardly moved during the first period of increase in US ethanol production, and oilseed prices dropped when the EU increased impressively its use of biodiesel. On the other hand, prices spiked while ethanol use was slowing down in the US and biodiesel use was stabilizing in the EU.”

In a 2008 Policy Research Working Paper, authored by Donald Mitchell, lead economist for the World Bank’s Development Prospects Group, which claimed 70-75 percent of the increase in food prices that year was due to biofuels and the related consequences of low grain stocks, large land use shifts, speculative activity and export bans.

So, this new paper is a big about-face from the 2008 view and actually says what most biofuels advocates were saying all along, according to Renewable Fuels Association president Bob Dinneen. “In reversing course, this World Bank report reaffirms the marginal role biofuels play in world commodity and food prices,” said Dinneen. “The RFA has long noted that ethanol production has continued to increase while corn prices have now returned to normal levels. Volatile oil prices, speculation, and adverse weather conditions all played far more significant roles in driving commodity prices to record and near record prices.”

Growth Energy CEO Tom Buis praised the World Bank for setting the record straight. “This study clearly shows that the notion of food-versus-fuel was simply wrong,” said Buis. “Food-versus-fuel has always been and will always be nothing more than a myth. We hope that this report will encourage others who have relentlessly perpetuated this untruth to admit their mistakes and put an end to this false debate.”

It is interesting to note that these “working papers,” although released by the World Bank, done by World Bank economists and posted on the World Bank website, come with a disclaimer that says they represent “work in progress” and that the findings “are entirely those of the authors” and do not necessarily represent the views of the World Bank.

Link to July 2008 working paper.
Link to July 2010 Working Paper.

A partnership between the Renewable Fuels Association and the U.S. Grains Council will help bring producers of the ethanol co-product distillers dried grains with solubles (DDGS) together with interested international buyers to get answers, make connections, and build business.

Export Exchange 2010 will bring together more than 150 international buyers of U.S. DDGS and coarse grains with more than 300 U.S. producers and agribusinesses. The conference will be held on Oct. 6-8, 2010, at the Hyatt Regency McCormick Place Hotel in Chicago, Ill.

“The opportunity to educate foreign buyers about high quality, U.S.-produced DDGS could not come at a better time,” said RFA President Bob Dinneen. “At current dietary inclusion levels, distillers grains consumption is nearing saturation in the United States. Increasing U.S. exports of distillers grains will be instrumental in helping the industry avoid running into a ‘feed wall.’ Fortunately, markets around the world are rapidly opening, creating demand for approximately 15 to 20 percent of all distillers grains produced today.”

“We are excited to have the Renewable Fuels Association co-sponsor the Export Exchange 2010,” said USGC President and CEO Thomas C. Dorr. “The burgeoning world population is demanding more meat, milk and eggs. U.S. DDGS and coarse grains continue to play an important role in livestock and poultry feed rations globally. We have to educate and connect our buyers and sellers to continue to grow vital markets for the United States.”

The Council is providing sponsorship for the attendance of targeted international trade teams from more than 25 countries. These participants represent nearly 80 percent of the global export market for DDGS and coarse grains. The conference will address critical issues facing U.S. exports and seek to educate and build awareness of U.S. DDGS and coarse grains among international buyers.

I know the name of this blog is Domestic Fuel, but I wanted to point out a story I found that makes the case how biodiesel might just help the U.S. win the war in Afghanistan.

A new white paper from Wayne Arden, an expert in the financial technology field, and John Fox, a former CEO of a biodiesel company, makes the case that if biodiesel was produced in the landlocked country, U.S. and allied forces fighting the Taliban and Al Qaeda would gain certain advantages:

The first insight is that it is very expensive for the military to import fuel into Afghanistan. In October 2009 DOD officials reported to Congress that the average cost of importing fuel into Afghanistan, or the Fully Burdened Cost of Fuel (FBCF), approaches $400 per gallon when all direct and indirect costs are accounted for, and even sometimes exceeds $400. A 2008 Defense Science Board study, “More Fight Less Fuel,” described the FBCF as “several hundred dollars per gallon.”

The third insight is that a high percentage of U.S. casualties in Afghanistan stem from protecting convoys of fuel, water, and other military supplies. The Army calculated in a 2009 study that one casualty occurs for every 24 fuel resupply convoys in Afghanistan.

In addition, the paper points out that growing feedstocks for biodiesel would give Afghan farmers a cash crop other than opium, which fuels the bad guys’ efforts to kill our good guys. Safflower, which already grows in Afghanistan and is highly drought-resistant, seems like a good possibility. Throw in the fact that biodiesel’s higher ignition temperature makes it safer in a war zone and it’s a better lubricant, it appears the green fuel would be a good fit for our war fighters.

The paper also goes on to point out that a 12 million-gallon-a-year plant in Kandahar would cost as little as $90 million to build and get running. Considering the potential that the military could save $3.7 billion in its first year of operation, the plant would pay for itself in just a month. Now there’s an investment in all of our futures.

You can read more about the project on this website and on the white paper’s authors’ Facebook page, Biodiesel in Afghanistan.

Brazil’s ethanol pipeline is getting closer to reality as a preliminary environmental license for the project was issued this week.

The $1.1 billion project, which is a partnership between Petroleo Brasileiro SA (Petrobras), Mitsui & Co. and Camargo Correa SA, is designed to transport ethanol in a 337 mile pipeline from the producing regions in the Mid-West, Minas Gerais and São Paulo to the large consuming centers of São Paulo and Rio de Janeiro.

The project has been under development since early 2006 and is now scheduled to begin late next year.

A new cellulosic ethanol plant in Denmark is claiming to be the largest producer of “New Ethanol” in the world, turning wheat straw into 1.4 million gallons per year.

According to Inbicon CEO Niels Henriksen, the biorefinery in Kalundborg is producing both cellulosic ethanol and a clean lignin biofuel to replace coal. “But our renewable energy process is as important as our renewable energy products,” Henricksen says. “The Inbicon Biomass Refinery can demonstrate dramatically improved efficiencies when integrated with a coal-fired power station, grain-ethanol plant, or any CHP operation. Symbiotic energy exchange helps our customers build sustainable, carbon-neutral businesses.”

The Kalundborg refinery will be integrated with the Denmark’s largest power station. Waste steam from the power station will run the biomass refinery, increasing the refinery’s total energy efficiency to 71%. Inbicon says a variety of feedstocks can be used by the plant, including straw, corn stalks and cobs, sugar bagasse, and grasses.

According to the company, three U.S. companies have cellulosic projects in development that will each include a scaled-up Inbicon Biomass Refinery.

Sandra Broekema, manager of business development for Great River Energy, a Minnesota electric cooperative, spoke about Dakota Spirit AgEnergy, a commercial-scale Inbicon Biomass Refinery processing North Dakota wheat straw to be co-located with their new 64 megawatt Spiritwood Station.

Peter Bendorf, PE, Integro Services Group, developing engineer for SWI Energy, plans a new 59MMgy corn-to-ethanol plant in Alton, Illinois integrated with a 20MMgy Inbicon Biomass Refinery. Utilizing the synergies of each will produce fossil-free ethanol.

Just yesterday, I told you how International Fuel Technology had just recently finished testing on a couple of its fuel additives that make biodiesel run better with more miles per gallon.

Now, the St. Louis-based company has announced that East Midlands Trains in the United Kingdom, which were the test trains for DiesoLiFT 10 in its light rail, diesel multiple unit (DMU) operations, will continue to use the additive and could save about 92,000 gallons of diesel fuel a year:

“The fuel economy improvement realized by East Midlands Trains in the recently completed in-service field demonstration is consistent with fuel economy improvements we have achieved in numerous other in-service and test bed rail engine demonstrations,” said Gary Kirk, IFT’s Director and Sales and Marketing. “Use of DiesoLiFT 10 will reduce fuel consumption and harmful emissions. We are excited to work with a company committed to cost effective green technologies.”

Matt Browne, East Midlands Trains’ Environmental Manager, said, “We are extremely pleased to be the first train operator taking part in this in-service field demonstration with IFT. The results are already demonstrating that by using the fuel additive, DiesoLiFT 10, we are improving our fuel efficiency and cutting our carbon emissions. Trains are already one of the most environmentally friendly forms of transport, and use of DiesoLiFT 10 is helping us make our trains even greener.”

Trains in the UK use around 317 million gallons of diesel a year. DiesoLiFT 10 could save 16 million gallons of fuel annually.

A colleague of mine, Will Thurmond, who is the CEO of markets research firm Emerging Markets Online, sent me this great article about why companies are spending billions of dollars investing in advanced biofuels in Brazil while companies are hesitant to invest in any biofuels projects here in the states. I thought that it was so insightful that I wanted to share it with you here.

“US Biofuels Investors, Technologies Migrate to Brazil”

As we enter a new decade in 2010, why are Shell, Bunge, LS9, Dow, BP, Amyris and Cobalt collectively investing more than $20 billion dollars into advanced, sustainable biofuels in Brazil? The big dance between Brazil, US and EU public and industries kicks off a new era in international biofuels investment.

Bossa Nova – The New Wave
Bossa Nova (translation: the new wave, mixing old traditions with new trends) is an evolutionary art form. In the case of the agri-fuels business, Brazil’s new wave of advanced, sustainable biofuels investments represents a heady mixture of sugars and cellulosic carbohydrates into ethanol and hydrocarbon fuels, renewable diesel, biochemicals, biobutanol, biopolymers, and advanced, low-carbon drop-in replacement fuels.

Enter Brazil. For more than 30 years, Brazil has lead the world in sustainable biofuels production. At the dawn of a new decade, Brazil is  emerging as a world leader in advanced, sustainable biofuels investments, along with new technologies from private sector partners in the US and EU. In 2010, Brazil’s progress in private sector biofuels investment is charging ahead, while EU and US government policies are effectively reducing ethanol biofuels targets due to political uncertainty and slower growth related to cellulosic biofuel feedstock production economics.
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The American soybean industry is crying foul over Argentina’s practice of taxing its whole soybeans for export at a higher rate than it taxes its soybean meal, oil and biodiesel destined for foreign markets. And this article from Feedstuffs.com says the United Soybean Board (USB) believes that is costing the U.S. soybean industry up to $500 million each year:

The soybean checkoff-funded study found that the lower tax burden on Argentina’s soybean meal, oil and biodiesel creates a strong economic incentive for processing soybeans in Argentina. The country then exports these value-added products rather than whole soybeans. Argentina represents the third-largest soybean-producing country behind the United States and Brazil, but is now the biggest exporter of processed soybean products such as soybean meal, oil and biodiesel. Figures from the study show Argentina exports 99% of its soybean meal and 93% of its soybean oil in an average year.

LMC International, an independent economic and business consultancy serving agriculture, conducted the study for USB. It concluded that if the different tax schemes never existed, the United States would have invested more heavily in soybean crushing capacity with an eye on export markets, which would have boosted U.S. soybean prices.

Americans representing U.S. oilseeds interests point to Brazil’s elimination of its differential export taxes in the mid-1990s and the corresponding dramatic drop in that country’s share of value-added soybean meal and oil exports as proof of that the Argentinian lower tax burden is having an impact on world soybean oil markets.

In light of the dramatic American soccer victory at the World Cup in South Africa (and moving on to the next round), I thought you’d be interested in knowing that the power of the sun could help run some of the venues at one country’s bid to host the event in the future.

While seems a long way off, inhabitat.com reports the Middle Eastern country of Qatar is already putting together its bid to host the 2022 World Cup, and solar-powered stadiums will play a big role:

Three new eco stadiums and sports complexes will be built close within the city limits allowing fans as well as teams to easily access the arenas. The Al-Wakrah stadium will be able to host over 45,000 spectators and be located in a mixed-use complex along with an aquatic center, spa, sports facilities and a mall, which will continue to be utilized all year long even after the competition ends. Then the Al-Khor and Al-Shamal Stadiums will also be constructed with seating capacity greater than 45,000. Qatar plans on using solar technology to power carbon-neutral technology in order to cool the stadiums and keep the temperature inside less than 27 degrees celsius.

The stadiums are planned to be built by German architectural firm AS & P – Albert Speer & Partner.

The Brazilian Sugarcane Industry Association (UNICA) is refuting a claim made by Growth Energy co-chairman Gen. Wesley Clark that they have agreed to sell ethanol to Iran. Clark made that statement in an address at the 2010 Fuel Ethanol Workshop this week and in an interview with Domestic Fuel.

In that interview Clark said, “Brazilian ethanol comes with a lot of, let’s call them, external costs – like child labor and environmental problems down there and we don’t need to be contributing to those. But beyond that, I think Brazil just kind of stepped over the line when they agreed to sell to Iran.”

“Brazilian producers have no interest in exporting ethanol to Iran. Gen. Clark’s suggestion to the contrary is far from reality and rather surprising,” said UNICA’s Joel Velasco in a comment on the post about Clark’s address. “Brazil has never sent a drop of ethanol to Iran and there is nothing to indicate that any Brazilian ethanol will be sent to Iran in the future. History here is a good indicator, as confirmed by government trade statistics.”

Velasco says that UNICA recognizes “the promise of building a global market for renewable fuels. We’ve chosen to focus our efforts on the largest transportation markets like the United States and Europe, which together consume about two-thirds of the world’s gasoline output.”

UNICA is a private, non-governmental group, representing about two-thirds of all ethanol produced in Brazil.

Earlier today, the Global Renewable Fuels Alliance (GRFA) issued its top 10 list of offshore oils sites that they consider “at risk.” The list is an attempt to highlight the world’s choice between moving forward with the addition of more offshore oil rigs or building more sustainable biofuels plants.

“The choice is clear,” said Global Renewable Fuels Alliance spokesperson, Bliss Baker. “We can continue to put our precious resources at risk by drilling deeper and further out to sea or we can build new biofuels plants that can reduce the need for this dangerous practice. We can choose clean-ups or clean fuel.”

Worldwide ethanol production is estimated to exceed 22.6 billion gallons by the end of of 2010. This is nearly 1 million barrels per day (equal to about two days worth of oil leaching into the Gulf of Mexico) and will displace the need for more than 370 million barrels of oil. This is equivalent to replacing 100 offshore rigs that produce 10,000 barrels per day.

It is estimated that the current oil leak will be the largest oil disaster in American history and one of the worst global disasters once capped. Experts are predicting that the clean-up bill will exceed $1.43 billion not including lawsuits, fines, etc. While BP is said to have $80 billion is cash, many are anticipating that BP will go bankrupt compelling some legislators and environmental groups to call for a separate fund to use to pay out damages.
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A new plant is in the works that will produce synthetic oil from biomass that can in turn be made into transportation fuel.

The process is called “fast pyrolysis” and two companies, Ensyn Technologies Inc. and Tolko Industries, have announced that they will build the world’s largest fast commercial pyrolysis plant in High Level, Alberta. When completed, the new plant will be capable of processing 400 bone dry tonnes of biomass per day into 85,000,000 litres (22.5 million U.S. gallons) of pyrolysis oil annually.

Gordon Quaiattini, president of the Canadian Renewable Fuels Association called the announcement a breakthrough in more ways than one. “It is a landmark partnership between the renewable fuels and forestry sectors. It highlights yet another commercial breakthrough for next generation technologies. And it marks the first and most impressive plant of its kind anywhere in the world,” said Quaiattini.

The announcement also brings together the bio-energy and forestry sectors in a new and exciting fashion with the formal partnership between Ensyn and Tolko. Increasingly, cellulosic and other advanced technologies present new value-added opportunities for the forestry sector leveraging waste wood and by-products.

Underwriters Laboratories (UL), a US-based provider of safety testing and certification services, has just launched its latest UL-Europe (UL-EU) mark for the European photovoltaics market. The mark is based on the applicable EN safety standards for photovoltaic products. In the U.S. and among the biofuels industry, UL is most well known as the organization that has yet to approve an E85 dispenser - a necessity as our country moves forward with achieving the goals set out in the Renewable Fuels Standard.

For companies operating in the photovoltaics markets based in both North America as well as other countries, UL now offers the ability to obtain the UL-EU mark in combination with UL certificates for the U.S. and Canada, as well as the IEC certificates from a single source. According to UL, the advantage of obtaining the certification is an easier entry to market due to lower administrative and logistics costs, and ultimately, certification expenses. Once certification is achieved, it is valid for 10 years as long as the product does not change or safety requirements are not altered.

In support of the new safety certification, UL is offering companies who are interested in obtaining UL and IEC certificates for global market access the new UL-EU mark for free. This offer also applies to companies that only require the IEC certificate. In addition, for any project started before the end of 2010, UL will not charge for inspection, administration or annual costs for the first year.

In March of this year, UL opened its largest global photovoltaic testing and certification facility in Frankfurt, Germany.

The Brazilian Innovation Agency, FINEP (Research and Projects Financing), and Brazil’s National Development Bank have entered into a new partnership to promote bioethanol development, providing up to $540 million in financing to the country’s biofuels sector to promote innovation in the field of bioethanol.

The funding will be invested in technology projects over the next three to four years, which would advance the use of sugarcane bagasse and straw, to produce second generation ethanol and new products such as polymers, special oils and biodiesel. This is an initial step toward the development of an industrial complex for ethanol in Brazil, following a similar model to that of Brazil’s petrochemical industry. The goal is to double Brazil’s ethanol production capacity in the country without increasing the area necessary to plant sugarcane.

Indy car drivers from several countries extolled the virtues of sugarcane ethanol from Brazil in ads that aired during the telecast of the 2010 Indianapolis 500 on Sunday.

The parade of Indy spokesdrivers in two 30-second Brazilian Sugarcane Industry Association (UNICA) television ads that debuted on Sunday include Ryan Hunter-Reay, who briefly served as spokesman for the U.S. ethanol industry and drove the #17 Team Ethanol car to victory for the first time in 2008. Takuma Sato of Japan, Davey Hamilton of the U.S., E.J. Viso of Venezuela, join Brazilians Ana Beatriz, Vitor Meira and three-time Indy 500 winner Helio Castroneves in proudly proclaiming “I compete with sugarcane ethanol.” Castroneves, who was the 2007 Dancing with the Stars winner, even croons a sweet tune to sugarcane ethanol. “Fast and Sweet and Clean and Lovely, the fuel from sugarcane goes racing,” he sings to the tune of “The Girl from Ipenema,” then says he can dance but he can’t sing. The winner of Sunday’s race, Dario Franchitti of Scotland, was not featured in the spots.

“For the first time ever, we are taking our message about sugarcane ethanol to national network television during one of the most prestigious sporting events in the world,” said Joel Velasco, UNICA’s Chief Representative in North America. “These commercials seek to educate American consumers about sugarcane ethanol and how it can benefit their pockets, the environment and the market, by promoting competition on and off the track.”

The ads are well done and definitely worth watching – see them here on UNICA’s sweeteralternative.com website.