Ethanol—Energy Waster or Booster?

The debate over whether or not producing ethanol from corn as a fuel wastes more energy than it produces continues over at the Wall Street Journal. WSJ numbersguy, Carl Bialik, cites an analysis done by Michael Wang, a vehicle fuel-system analyst at Argonne National Laboratories in which Wang calculates that "it takes 0.74 BTU of fossil fuel to create 1 BTU of ethanol fuel, compared with a ratio of 1.23 BTUs to 1 BTU for gasoline -- that's 66% more than ethanol." More details of Wang's analysis are available here.

If Wang is correct, that's good news. But even so, ethanol "energy independence" from imported oil will remain a mirage. And, I ask again, if ethanol is such a profitable idea, why do producers need federal subsidies?

Comments

[R C Dean]

Anyone have a ratio of acres plowed to grow corn for ethanol for every barrel of oil replaced?

[ed]

why do producers need federal subsidies?

And how much do those subsidies -- essentially a hidden tax -- add to the actual price of a gallon of ethanol? Where does that money come from? I don't use ethanol but I'll assume I'm paying for it anyway.

[Clean Hands]

I hate to break it to you, ed, but if you buy gasoline in a major metro during the summer, you use ethanol.

[ed]

I do? Next you're going to tell me there's fluoride in my water.

[Clean Hands]

I'm guessing that the energy input for ethanol needn't be fossil fuels -- which suggests to me that a program of nuclear power plants to provide energy for the production of ethanol might actually be an approach to overcome the energy independence objection to ethanol.

Of course, I still detest ethanol as a mandated fuel with a burning hatred, after being stranded for several days in the midwest by a vapor-locked (which ultimately suffered a total fuel pump failure) U-Haul that was not designed for the ethanol blend required in that part of the country.

Since ethanol vaporizes at a lower temperature than most other gasoline components, an ethanol blend in ambient summertime temps of over 100 degrees Fahrenheit is just asking for trouble...

[scape]

Clean Hands,

Are you sure about that? I thought all ethanol was clearly marked at the pump.

Also, I noticed the last few times I've filled up that ethanol (E15) which has been running about 10 cents below regular per gallon was 2 to 10 cents above regular.

[Pi Guy]

One day the Heartland will be the home to the new oil barons. So, by subsidizing now, the politicos are already lining up future voters.

Perhaps the next Kennedy 'dynasty' will be Republicans from Iowa.

[Clean Hands]

scape, have a look at page 31 of this study.

The next time you fill up with "regular," look for a notice on the pump in relatively small type that discloses that in certain seasons, your fuel may include ethanol additives.

There's your "clearly marked."

Too, it's not as if you have a choice in the matter -- the gas station down the road is required to dump the same amount of ethanol into your "gasoline."

[mac]

About those government subsidies.

Not all ethanol producers need them. Brazil uses sugar cane, which can be converted directly to ethanol with essentially zero additional energy, and the mass fraction converted is very high. The US producers (ADM and friends) can't compete, so of course there's a huge import duty on ethanol...

US ethanol won't be economically viable until they can get it from celulose. There's just not enough sugar in corn to be really worthwhile.

[R C Dean]

I'm guessing that the energy input for ethanol needn't be fossil fuels

It will be until we get rid of diesel powered tractors, eighteen wheelers, and trains.

Not to mention oil-derived fertilizers.

[Pro Libertate]

Clean Hands, I don't know where ethanol is available, but I thought it was mostly limited to the Midwest. I've never noticed any ethanol notices down here, though I did see them all over in Minnesota and Chicago (well, I think Chicago--I'm suddenly not sure). Maybe in Columbus, too.

As for the energy costs of ethanol, see the Popular Mechanics article on alternative fuels (with a nice PDF chart comparing many alternatives). I don't doubt using biomass is in our future if we don't get to something else first (e.g., Mr. Fusion), but I have a feeling that corn ain't goin' to be it. Maybe sugar, or even more likely, a variety of different biological sources will be the answer.

I'm certainly sympathetic to a diversified energy economy. That's one reason that electric cars are appealing--they run on electricity, but the electricity can be produced by any number of methods.

[Bob Dobalina]

I'm guessing that the energy input for ethanol needn't be fossil fuels -- which suggests to me that a program of nuclear power plants to provide energy for the production of ethanol might actually be an approach to overcome the energy independence objection to ethanol.

As soon as Mr. Fusion gets out of the DeLorean business and unveils his tractor line, you'll be totally right.

[Clean Hands]

Good point about tractors needing something other than nuclear power -- but aren't a lot of them diesels? (I'm honestly asking -- I have not worked on a farm, though I've lived in a couple of farming communities.) Corn oil makes a pretty decent biodiesel, no?

The point I'm trying to make is that it doesn't seem to me that we need any gov't subsidies or mandates -- when fossil fuels become too expensive, our oil economy needn't simply stop -- there seem to be alternatives that can keep us going without stop, putting an end to the chicken little proclamations of the Peak Oil nuts and other envirocommies.

[Football 2006]

Isn't the usual rationale given for making a program universal is economy of scale? In the case of the California public education system, huge scale hasn't led to economy. Perhaps, to have economy of scale you have to have scale and competition.

[scape]

Clean Hands, that chart tells me only certain parts of the country have regulations that require gasoline to contain a certain percentage of ethanol and are, apparently, not marked very well. If you don't live in one of those areas then your gas won't have an ethanol mix unless it's marked with the shiny yellow E10 or E15 sticker on the pump, right?

[ChicagoTom]

though I did see them all over in Minnesota and Chicago (well, I think Chicago--I'm suddenly not sure)

In the Chicago metro area, our fuel contains up to 10 percent ethanol. Or so it says in big stickers on the pump.

On a side note -- what is this new E85 (I think thats what its called) stufg that I have seen BP/Amoco adverstising lately? Is it fuel with a very high ethanol content???

[Thomas]

ChiTom --E85 is 85% bio-based and 15% petro-based.

I thought ethanol had been mandated nationwide recently as the replacement for MTBE, which was one of the reasons given for the bump in fuel price --the refineries and stations had to empty and clean all of their processing equipment and holding tanks. Of course, the amount of ethanol required may be miniscule.

[Ken Shultz]

And, I ask again, if ethanol is such a profitable idea, why do producers need federal subsidies?

Just because one process doesn't have the same return on equity or profit margin as another process, that doesn't mean it isn't profitable. (Please note, I'm not saying you said it wasn't profitable.)

Why does the government need to subsidize a profitable business? You got me. ...but then I don't understand why the government should subsidize unprofitable businesses either.

[unnecessary unit spotter]

it takes 0.74 BTU of fossil fuel to create 1 BTU of ethanol fuel, compared with a ratio of 1.23 BTUs to 1 BTU for gasoline

It probably also takes 0.74 joules of fossil fuel to create 1 joule of ethanol fuel. And 1.23 calories of fossil to create 1 calorie of gasoline.

[downstater]

It will be until we get rid of diesel powered tractors, eighteen wheelers, and trains.

or until that diesel is bio-based - which honestly shouldn't be that hard to do.

some alcohol, some lye, some vegetable oil, does it take much more than that?

[carrick]

I lived in Phoenix from the mid-Eighties to early-Nineties. Air pollution control regulations mandated the addition of "oxidizers" to gasoline to reduce carbon monoxide emissions. The two solutions for that were MTBE (a petroleum product) and ethanol. Talk about a clash of titans -- the oil industry versus the farm industry -- for control of that state-mandated market.

I lost track of the whole issue since moving back to the midwest. But apparently there are environmental consequences to the use of MTBE. So now ethanol is the only means of meeting the air pollution control regulations.

And yes, the switch-over to ethanol in pollution control regions did disrupt gasoline deliveries throughout the entire US.

[Eric II]

The US producers (ADM and friends) can't compete, so of course there's a huge import duty on ethanol...

Not to mention those monstrous sugar import quotas that are still in place. All of which goes to show just how serious most of those guys on Capitol Hill really are when they bray about the need to reduce foreign oil consumption.

[mike in ftw]

What about the water it takes to grow corn? At least in Texas, farmers are free to pump all the water they can capture from the aquifer to irrigate corn, and corn does need a bunch of irrigation. The aquifers are draining pretty damn fast, how are we going to grow all the extra corn?

[coolrobc]

The original subsidies in the early 70's were for ethanol producers. The intent was to lessen the demand for foreign oil, by developing better methods for producing ethanol. Unfortunately most of the research for producing ethanol in the early days was focused on corn based ethanol rather than cellulose. If we planted every square inch of plantable land with corn we'd only replace about 30% of the current oil demand.

The current subsidies are geared toward the farmers, to grow more corn for production of ethanol.

Over the last 10 years, they've seen that ethanol is less efficient than gas but produces less greenhouse gasses and other particulate emissions.

While I'm not a big fan of subsidies, they'd be better placed on cellulosic ethanol than the current corn based ethanol subsidies. The net energy gain is higher than corn because it uses entire plants rather than just the kernel from corn. The main prohibition to cellulosic ethanol is the high cost of the enzymes required for production.

Aside from that, bio-diesel could/can replace the diesel used in farm equipment.

[mediageek]

"or until that diesel is bio-based - which honestly shouldn't be that hard to do."

Google up "Bio-Willy."

Also, there's at least one company in Colorado working on developing plants that will grow on currently nutrient-poor arid land for development into biodiesel.

On top of that, there's also a lot of interesting work going into developing Thermal Depolymerization into a profitable model. This method refines carbon-based waste into oil/diesel/kerosene.

I would be interested to know what Ron Bailey thinks of it.

[mediageek]

But I am lukewarm about ethanol developed from corn for all of the above-mentioned reasons. I don't think it will be the first bio-fuel to hit it big. Or if it does, it'll only be as a result of the feds being so blind that they mandate that we all use an inferior product on their say-so.

[Sam]

The notion of subsidies for ethanol and ohter alternative energies is complicated by two things.

One. Fossil fuel industries in just the U.S. receives IIRC around $15 billion per year (or more depending) in the form of direct subsidies, tax breaks, price controls, legal protections, and guaranteed loans. Many other nations subisdise conventional fuels even more.

Two. Carbon offsets, ala http://www.carbonfund.org) are a non-governmental/tax base method of providing subsidies for alternative energies...this obfuscates just how much subsidies are forced out of our pockets by the Man (which is the usual implication but not necessarily the fact).

[Clean Hands]

mediageek, I've also been following Thermal Depolymerization with interest for some time. However, the latest I've read (in Forbes, recently) it seems as though it was probably oversold and the guy who came up with it seems to be fishing more for Federal subsidies than for real breakthroughs.

[Big Dark Willy]

The beauty of bio-fuels -- as presented on PBS's "News Hour" last night -- is that the CO2 it releases when burned was already in the air the year before. Oil and coal release CO2 that was removed from the atmosphere millions of years ago. It's a pretty strong argument for burning bio-fuels instead of fossil fuels.

[joe]

"And, I ask again, if ethanol is such a profitable idea, why do producers need federal subsidies?"

Perhaps because gasoline has a multi-billion dollar infrastructure already established which gives it a competitive advantage unrelated to its performance on a level playing field.

I don't know enough about ethanol to know how it would compete on a level playing field, btw, just pointing out a conceptual failure in this analysis. If a cart is pushed downhill with its wheels in a set of ruts, it will tend to stay in those ruts, even if a path with a steeper grade branches off the well-worn route.

I've found that libertarians, with their antipathy towards activism, are prone to assume that the rutted path must be the fastest one, simply because the cart stays in the ruts.

[Ray Lopez]

Hi--test post here; I like the fact no registration req'd. Calculating the energy in gallons of gasoline from US corn (ethanol). A bushel of corn produces 3 gallons of gasoline. The US produced 10 billion bushels of corn in 2001, which is 30 bil gallons of gas (equivalent). The US consumes 307 billion gallons of oil a year (42 gal/barrel). Not all of this oil is gasoline (it's hard to figure out how much oil is refined into gasoline). So converting all the corn produced by the US into ethanol will only give 10% (30/307) of the oil consummed a year. Importing Brazilian sugarcane produced ethanol and planting other types of ethanol-producing plants will help of course. --RL

[Ken Shultz]

Perhaps because gasoline has a multi-billion dollar infrastructure already established which gives it a competitive advantage unrelated to its performance on a level playing field.

That's sort of what I said above except the part about competitive advantage not being realted to performance on a level playing field, which I don't get.

[mediageek]

Joe, you're overstating the difficulty of getting ethanol to the local Gas 'n' Munch.

The biggest problem with ethanol is that in its more pure forms, it's somewhat more corrosive than gasoline, requiring adjustments to be made to pumps and vehicle fuel systems. As I understand it, these aren't that much of a challenge to overcome, but it's one of the reasons I'm kind of blah on ethanol.

Biodiesel, on the other hand, would require no changes to the infrastructure as it is now. You can store biodiesel in the same underground tanks as the regular stuff, and you can put it into a diesel-powered vehicle with no modifications at all.

[Ken Shultz]

I'm with you mediageek, but I think joe's talking about more than that; I think he's talking about the difficulty in competing with someone who can get it out of the ground rather than having to grow it.

Right now the oil companies' infrastructure is set up to pump fossil fuel out of the ground as efficiently as possible. Getting raw biofuel--unprocessed that is--as competitive as fossil fuels (if that's even possible) will require enormous investments in infrastructure. As I suggested above, if an oil company can get crude to the refinery more efficiently than they can with biofuels because of all the infrastructure already in place, then why would they switch to a less efficient alternative?

...the answer is: they probably won't.

If biofuels become competitive, it'll almost certainly be by new entrants into the market, entrepreneurs willing to settle for a thinner profit margin and a lower return on equity.

That doesn't mean the oil companies didn't establish scale advantages by competing on a level playing field. I don't think my bias against government intervention would change even if the oil companies' advantages weren't a function of competition, but surely they've had to compete with each other in the past.

[joe]

Right, Ken. It's not a question of getting finished ethanol to the retailer from the refinery, but of the people turning crude into gasoline having a 100 year head start on those turning corn into ethanol.

[MikeP]

I've found that libertarians, with their antipathy towards activism, are prone to assume that the rutted path must be the fastest one, simply because the cart stays in the ruts.

The cart stays in the ruts because there are real costs to getting the cart out of the ruts and over to the steeper slope. The fact that a better per-unit solution exists does not negate the fact that switching to that solution may have costs which utterly dominate the rational calculation of whether to make the switch.

A libertarian would say that as long as the government isn't subsidizing one side or the other or choosing one technology or the other, the most likely solution will be the one with the lowest total cost.

Furthermore, even if the other path is steeper, the entire market does not need to dig new ruts down that other slope just because it's steeper. Someone will figure out a way to get the interested marginal consumer out of the current ruts and onto the roughly graded steeper slope. Not only will the new users spur investment and innovation in the new technology, but they will reduce demand on the old technology, allowing it renewed life even with weaker supply.

No giant switchover to the new technology needed. No giant switchover to the new technology wanted!

[joe]

Mike P,

"The fact that a better per-unit solution exists does not negate the fact that switching to that solution may have costs which utterly dominate the rational calculation of whether to make the switch."

Agreed. But by the same token, the fact that there is a cost to switching over does not necessarily make the switchover unwise. Nor does it make the funding of that switch necessarily unwise, especially if there are public goods beyond the lower unit costs that don't accrue to the private entities that would otherwise be responsible for funding the switchover.

[joe]

Correction: the second sentence should say, "...make the public funding of that switch..."

[Ken Shultz]

That doesn't mean the oil companies didn't establish scale advantages by competing on a level playing field. I don't think my bias against government intervention would change even if the oil companies' advantages weren't a function of competition, but surely they've had to compete with each other in the past.

To elaborate, one of the worst things that could happen is that some process government chooses to favor arbitrarily could squash other processes, processes that might have scaled without government sponsored competition for investment, customers, etc. Isn't it possible that a process could be good enough to compete given government protection and subsidies but not good enough to scale?

How much liquid hydrogen do I need to go the same absolute distance as a car running on gasoline, ethanol or diesel? Compared to biofuels, are hybrids a better long term solution for foreign oil dependence and greenhouse gas emissions? I don't know how we're going to get around some of our problems exactly, but whatever the government tries to do about them will probably be counterproductive.

Why should biofuels be any different?

[SmokingPenguin]

It's not a question of getting finished ethanol to the retailer from the refinery, but of the people turning crude into gasoline having a 100 year head start on those turning corn into ethanol.

Which explains why those little start-ups Microsoft and Apple computers were ground into the dust by IBM, which had a 30 year head start.

[Bob Smith]

I lived in Phoenix from the mid-Eighties to early-Nineties. Air pollution control regulations mandated the addition of "oxidizers" to gasoline to reduce carbon monoxide emissions.

Too bad the oxidizers are useless on a fuel-injected car (pretty much anything within the last 15 years). They don't help a bit, because FI cars don't need them. It's only worthwhile for carbureted cars, who produce substantially all auto-related emissions (new cars produce essentially zero emissions once warm). Yet, our lords and masters in DC want everybody to subsidize owners of these cars by mandating more expensive fuels, when it would be better for the states that want to lower auto emissions to have buy and scrap programs. They would be far more cost effective than mandating even better emissions equipment on new cars, which costs billions and will have no measurable effect on atomspheric emissions levels. The auto emissions war has been won, let's fire the bureaucrats involved and spend the money on something worthwhile.

[Eric II]

Which explains why those little start-ups Microsoft and Apple computers were ground into the dust by IBM, which had a 30 year head start.

Well, actually, Microsoft piggybacked on IBM's dominant position in corporate IT, which it then leveraged to reduce Apple to niche status in the braoder PC industry. And IBM was too stupid to recognize the big picture until the bug-filled, frequently-crashing bird had flown the coop.

An appropriate energy-industry parallel wouldn't involve the ethanol producers successfully taking on the oil producers, but of the oil producers failing to notice that the real money in the future lies in gas station squeegee services, which they outsourced to a third party that wound up obtaining a monopoly on the market.

[M. Simon]

Biodiesel only makes economic sense if the feed stocks are low cost - such as used cooking fats.

Supersize them fries.

It still won't be enough.

When comparing ethanol to gasoline don't forget that they are not equal on a per gallon basis.

E85 has less energy per gallon than E15 which has less than E10. To be economically competitive the E fuels should cost less the higher the E content.

[MainstreamMan]

It probably also takes 0.74 joules of fossil fuel to create 1 joule of ethanol fuel. And 1.23 calories of fossil to create 1 calorie of gasoline.

The link is quite clear. BTU's are the unit of choice.

[Adriana]

"If ethanol is such a profitable idea, why do producers need Federal subsidies"

Because the rule is that good profitable ideas run at a loss at the beginning. Re-read Jane Jacobs, how many new inventions survived only because they found a niche as toys or inconsequential items until they caught somebody's attention, because otherwise they would not survive the hostile environment.

There are a lot of sunk costs in any new technology. For example, I do not know how much money can be made out of genetics these days, but I can tell you that long before the first bio-tech company was founded, there were a lot of dollars going to pay studies of the eye color of fruit flies and the such, money for which there was no return.

By the way, Brazil makes ethanol with a more efficient process, without corn, ethanol that it could sell to the US if there were no trade barriers. But the reason Brazil has that ethanol is because at some time earlier the Government there decided to put money into it. (The same way the Irish Governemtn at some time decide to put money into developing technology to burn peat...)