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New Energy Economics: Markets for Traditional Corn Ethanol Narrowing

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Cole Gustafson, NDSU Biofuels Economist Cole Gustafson, NDSU Biofuels Economist
Many traditional corn grain ethanol plants are adopting new production methods in an effort to reduce their carbon footprints.

By Cole Gustafson, Biofuels Economist

NDSU Extension Service

Last December, one of my newsletters discussed the California Air Resources Board’s adoption of a new “Scoping Plan” that was passed Dec. 11, 2008. This legislation is the state’s energy blueprint for the future and has been in development since 2006. On March 5, 2009, California defined which renewable fuels qualify for the plan and the prospects for traditional corn grain ethanol are not bright.

Several key features of the 2008 Scoping Plan are particularly interesting. First, one-third of all energy consumed in the state must come from renewable resources. This includes all energy used for transportation and electrical power.

Any new house built after 2020 must be energy self-sufficient. While new houses built after that time can buy energy from a local utility, the homeowner must replace it at some point with solar or wind renewable energy that they generate themselves or purchase elsewhere. All new commercial businesses must be energy self-sufficient after 2030.

A final element of the Scoping Plan is a new carbon footprint that will revert to 1990. While the Scoping Plan, in general, is very favorable for biofuels, the new carbon footprint will constrain the market for traditional corn ethanol.

On March 5, 2009, the California Air Resource Board released specific regulations that define which renewable fuels qualify for their Low Carbon Fuel Standard (LCFS). Determination of which fuels qualify is based on the amount of carbon released.

Gasoline has direct carbon emissions of 95.86 grams per mega-joule (g/mj) of energy used. Traditional corn grain ethanol has lower direct emissions of 68.40 g/mj. However, the LCFS adds another 30 g/mj of carbon to reflect land use change. The land use change reflects additional land that now must be farmed elsewhere to replace the land taken out of food production to produce ethanol. This aspect is quite contentious because scientific research on the subject has led to varying conclusions.

Nevertheless, the proposed LCFS regulation as it now stands would preclude traditional corn grain ethanol to be sold in California. Moreover, 13 New England states and Florida are in the process of adopting similar legislation and carbon footprints. Thus, markets for traditional corn grain ethanol appear to be narrowing.

This is not to say that all markets for corn ethanol are being closed. Many traditional corn grain ethanol plants are adopting new production methods in an effort to reduce their carbon footprints. Some of these technologies include gasification of either distillers grain coproducts or corn grain itself, and fractionation of the corn kernel into component parts that increase the efficiency of an ethanol plant. In addition, ethanol produced from corn cellulose material easily would qualify for the new LCFS.

Thus, while not all corn ethanol is the same, the message sent from California is that the state no longer welcomes corn ethanol produced from traditional dry milling technology.


NDSU Agriculture Communication

Source:Cole Gustafson, (701) 231-7096, cole.gustafson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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