Cellulosic Ethanol? Not so Fast, my Friends.

Over at Instapundit, I saw this little blurb about Poet LLC, the largest producer of ethanol in our country. Once again, the claim is that we're "just a couple of years" away from the magical cellulosic ethanol (ethanol from cellulose sources like wood chips, corn residue, and switchgrass rather than from corn or another sugar-rich source like sugarcane or sugarbeets), and that their Iowa plant will be online and producing 25 million gallons per year in 2013.

Just for a moment, let's assume that ethanol is a good idea. Let's also assume that the heavy subsidies that these new plants are asking for are not going to prop up a non-viable business model. I've got three problems with cellulosic ethanol. Actually, it's probably more than three, but let's focus on the first three for now, shall we?

1. Infrastructure:

Making ethanol from corn doesn't require any new technology. You divert corn that is already being harvested & transported to processing plants, and use that corn to make ethanol and distillers grains (leftovers that can be fed to livestock) at refineries. With cellulosic ethanol, the three sources that you usually hear mentioned are wood chips, corn stover (crop residue leftover when you harvest the corn), and switchgrass.

I'll address wood chips & switchgrass later, but first I'd like to analyze corn stover as a source of ethanol. There is currently NO technology or infrastructure in widespread use to collect, compact and transport corn stover from the field to the refinery. Current combines are configured to spread out the corn stover on the ground behind the combine as the corn plants are processed & the corn is collected. Farm Equipment manufacturers will have to design collection systems that will retrofit harvesting equipment so that corn stover can be collected, and those changes will cost big bucks. Let's say that a corn stover collection system will cost $100,000 to purchase. Who's going to front the money for this equipment? And how much will maintaining the equipment cost? So much for "free energy" from a waste product.

After you design systems to collect corn stover, you're still faced with the problem of trucking this material to the refinery. Because this material is not as dense as corn, trucking this material will not be as cost-effective as trucking corn itself, unless you compact the material between collection and transportation. That means another piece of expensive equipment will need to be figured into the farmer's costs. Unlike the corn stover collection systems, these would be rededicated vehicles with existing technology (garbage trucks with hydraulic compactors?), but they're still going to cost money to add them to the farmer's fleet. Let's assume that we're talking about $200,000 per unit for these machines. Just in the two machines/systems listed so far, we've got enough money to damn near buy another new combine. For what? A byproduct that is being touted as "free for the taking" by the cellulosic ethanol boosters? That's a funny way to define "free".

And then, after you've solved the collection & compaction problems? You've still got to transport it to the refinery. The refinery being touted will only produce 25 million gallons per year (a drop in the bucket nationwide), so we're not talking about very much land needed to keep it running, but what happens when you scale up the refineries to the size needed to make production more cost-effective? How far can you truck corn stover & still make money after you pay for the new collection & compaction equipment needed to even HAVE the material in the first place? And are you going to pay the farmers for the material? I don't see how you could talk farmers into giving it away for free. I don't think any of these questions have been answered yet, at least not to my satisfaction.

2. Sustainability:

Corn Stover already has a useful purpose. It is incorporated back into the soil by the farmer to help replace soil lost to erosion. No matter how many erosion control measures you take in your farming operations, you will lose soil to erosion. Wind and water will always carry away soil from open ground; hell, even fallow land will erode at rates of around 4 to 5 tons per acre per year. If you don't use the corn stover or other material to replace the lost soil, eventually you will run out of fertile soil and your yields will go into the crapper.

Offsite material could be brought in to these fields to replace the material being used to make ethanol, but why? Why spend money to move material from one site to another when you can use what is produced right there on-site? That's just stupid. And even if a farmer was willing to sacrifice his corn stover (let's say that you reincorporate the material for two years, and then sell the material the third year), why should he give it away at fire-sale prices? If the material has value, then he will want to make a profit on producing it. That's just fair.

3. Scale:

This is where I want to address switchgrass and wood chips. I actually think that these sources could produce ethanol at a comparable cost to corn, but only on a limited scale. Wood chips are readily available near plants that make wood products and/or paper products, so why not build small-scale plants adjacent to these existing industries? Trucking wood chips or pellets to large regional refineries will quickly become unsustainable as the distances to the refineries increase.

And switchgrass? One of the arguments FOR cellulosic ethanol is that switchgrass can be produced on land where corn production is not cost-effective. Fair enough. Let's see a map comparing total acreage of viable corn producing land vs. the total acreage of non-viable land. I'm willing to bet you that the land that would be best used for switchgrass is probably not being used for corn anyway. You might be able to convert much of the irrigated corn acreage in Western Nebraska, Kansas or Colorado to switchgrass production, but the problem there is that with corn & wheat already in short supply on the world market, do we want to convert land from food to non-food crops? At the very least, we should try to offset the new switchgrass acreage with new acreage converted from pasture or other crops to keep the demand for corn satisfied.

Like wood chips, I could see a limited area where switchgrass production becomes a viable source for ethanol. It will never be a crop that is viable on a nationwide scale, but local production could be feasible depending on what oil prices do in the near future.

SUMMARY:

Cellulosic ethanol may have a role in our future, but I believe that it will never be as widespread as corn ethanol, due to the reasons listed above. In addition, you need to remember that much of the infrastructure for corn ethanol production was put into place at a time when corn prices were so low that corn was allowed to rot in enormous piles because it was cheaper to lose part of it to spoilage than it was to ship additional material to processing plants in a timely manner. The costs of developing this infrastructure will most likely not be borne by public entities.

The cost of developing the infrastructure to harvest, transport & refine these raw materials into ethanol combined with the risk of lower corn yields from ignoring the reincorporation of crop residue makes cellulosic ethanol a non-starter on a large scale basis.

posted by Russ from Winterset at 10:20 AM

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