Ethanol is one of the best things to happen to the agriculture industry since the combine. If you're a history buff, you'll note that when agriculture is good, about three to five years later everything else is good too. Dave Vander Griend, ICM Inc.

Jump to: Ethanol Incentives | Ethanol/MTBE | Cellulosic Ethanol | Texas Ethanol Plants | Texas E85 Pumps | Crops for Fuel | Ethanol Issues | Ethanol Factoids

Ethanol is an alternative fuel produced from starch contained in grains such as corn, grain sorghum, barley and sugarcane through a fermentation and distillation process that converts starch to sugar and then to alcohol (ethanol). Most ethanol in the U.S. is made from corn, largely due to federal subsidies that encourage the production and consumption of corn-based ethanol. Ethanol can be blended with gasoline to create E85, a blend of 85 percent ethanol and 15 percent gasoline. Flex fuel vehicles are designed to run on any mixture of gasoline or ethanol with up to 85 percent ethanol.

Ethanol can also be produced from cellulosic biomass such as wheat straw, corn stalks
(called stover), sawdust, rice hulls, paper pulp, wood chips, energy cane, sorghum, miscanthus grass and switchgrass, all of which contain cellulose and hemicellulose, which can be converted into sugars and then fermented into ethanol.

According to the Renewable Fuels Association, the U.S. ethanol fuel production totaled 6.48 billion gallons in 2007, more than 34% over 2006 production and far above the 4.7 billion gallons of renewable fuel required by the Energy Policy Act of 2005. Currently there are 143 U.S. ethanol refineries with the combined capacity to produce 13.4 billion gallons per year of ethanol fuel, well above that required by the new standard. The industry is also building another 57 biorefineries and expanding seven existing biorefineries, an effort that will boost ethanol production capacity by another 5.2 billion gallons. And those capacity additions are yielding economic benefits, too, as a new report concludes that the ethanol fuel industry created nearly 240,000 new jobs in 2007 and added $47.6 billion to the nation's gross domestic product.

Ethanol production will continue its upward surge as consumers continue their demand for competitively-priced alternative fuels and vehicles, and as policy makers respond with incentives that encourage both businesses and consumers. For a review of the rapid expansion of ethanol as it affects increased corn production and higher prices, see the Ethanol Overview, in the Texas Comptroller's 2008 energy report.

For an in-depth discussion of ethanol, see the Ethanol chapter in the Texas Comptroller's 2008 energy report.

Energy Policy Act of 2005 (H.R. 6)

With the most recent mandates and incentives of the Energy Policy Act of 2005 (EPAct 2005), ethanol is claiming a major share of the alternative fuels attention. The bill created the nation's first Renewable Fuels Standard (RFS), which went into effect on September 1st, 2007, setting new reporting, registration, and compliance requirements for major refiners, fuel blenders, and fuel importers. In December 2007, the Energy Independence and Security Act of 2007 was signed into law. The Act expands the Renewable Fuels Standard (RFS), beginning with 9 billion gallons of biofuels in 2008. This will ramp up to 36 billion gallons of biofuels by 2022.

Within a year of the EPAct 2005 enactment, more than 400 E85 pumps were installed nationwide, offering a renewable fuel containing E85 (85 percent ethanol and 15 percent petroleum) to consumers and fleets with flexible-fuel vehicles. Unless the industry experiences a downturn and some production capacity goes uncompleted or unused, the ethanol fuel industry should easily exceed the RFS requirements.

2008 U.S. Farm Bill

In May, 2008, the U.S. Congress passed the Food, Conservation, and Energy Act of 2008, the new farm bill that will accelerate the commercialization of advanced biofuels, including cellulosic ethanol, encourage the production of biomass crops, and expand the current Renewable Energy and Energy Efficiency Program. Section 9003 provides for grants covering up to 30% of the cost of developing and building demonstration-scale biorefineries for producing "advanced biofuels," which essentially includes all fuels that are not produced from corn kernel starch. It also allows for loan guarantees of up to $250 million for building commercial-scale biorefineries to produce advanced biofuels. For bill details, see this DOE article.

Ethanol Issues

Corn is in the center of the country and gasoline consumers are on the coasts. So transportation costs can be quite high — roughly double the cost of shipping gasoline or about $1.20 per gallon of ethanol. Dr. Darren Hudson, a professor of agricultural economics at Mississippi State University

For ethanol to realistically compete with gasoline as a viable alternative fuel, several factors must be in place: supplies must be large and readily available; cost must remain competitive with gasoline; and transitional costs (from gasoline to ethanol) must be reduced. Though ethanol's benefits outweigh the downsides, these are some issues that challenge ethanol's immediate, widespread use:

	Transportation obstacles: like other alcohols (and unlike gasoline, natural gas and oil), ethanol absorbs water and chemicals. For that reason, ethanol cannot travel through the established pipelines and tanks that move petroleum products without picking up excess water. Furthermore, as gasoline travels through pipelines or tanks, it leaves some solids that ethanol will pick up and dissolve into itself if it flows through the same pipeline or tank. Ethanol also corrodes pipelines, making the fuel unusable. To remain uncontaminated, ethanol must be transported by land separately from gasoline and it must be blended with gasoline just before distribution. This lack of infrastructure for shipping and blending ethanol with gasoline adds cost to the end product and eats away at profits.
	Logistics: most ethanol plants are situated in the Midwest corn belt (Illinois, Iowa, Nebraska, Minnesota and Indiana) due to the close proximity of the feedstock. The further a region is from the corn belt, the higher the shipping costs and the higher the price at the pumps. This is a major reason for the push to develop technology that can economically produce ethanol from cellulosic vegetation.
	Tight market: increased demand for ethanol has created a tight ethanol market in some areas. Distribution may be temporarily limited by production capacity as well as the cost and difficulties involved in moving very large volumes of ethanol on demand.
	E85 infrastructure: only a small portion of the 168,000 service stations in the U.S. pump E85. Even with E85 incentives in place, the scarcity of E85 fueling stations means that most flexible fuel vehicle (FFV) owners end up filling their tanks with gasoline instead of ethanol.
	Lower fuel economy: while prices for E85 may currently be less per gallon than regular unleaded gasoline (due to current tax incentives), mileage also is lower. Typically vehicles consume 1.4 gallons of E85 for every gallon of regular gasoline they would otherwise use. Additionally, even with its tax incentives ethanol is often more expensive than gasoline.
	Corrosion: because the alcohol in ethanol corrodes aluminum, FFV components are made of stainless steel and E85 pumps must be modified or manufactured with stainless steel to prevent corrosion. Repeated exposure to E85 also corrodes the metal and rubber parts in older engines (pre-1988) designed primarily for gasoline.
	Cold starts: because E85 has a higher freezing temperature than gasoline, there may be cold start problems in severe cold weather. For that reason, ethanol content is lowered to a minimum of 70 percent ethanol in freezing weather conditions.
	Limited to light vehicles: due to its physical properties, ethanol is generally limited to gasoline blends for passenger vehicles and light trucks, while heavy-duty vehicles are diesel-fueled. Current researchers are experimenting with E-diesel, a blend of fuel ethanol and petroleum diesel.
	Environmental Concerns Growing corn requires a significant amount of water, fertilizer and pesticides, which can have a negative impact on the environment. On average, farmers use about 134 pounds of nitrogen fertilizer per acre of corn each year. Some potential cellulosic energy crops can be drought-tolerant and use less water than corn. Ethanol is biodegradable, so accidental spills pose few risks to the environment.
	Food Versus Fuel There is a growing “food versus fuel” debate as the cost for corn spirals upward due to high demand. High corn prices are good for farmers, but bad for livestock producers and consumers, because so many products are made from corn. Texas has a large livestock industry, and high feed prices affect it. This debate has generated increased interest in cellulosic ethanol.

—Return to Top of Page—

Ethanol Factoids

With high gas prices making alternative fuels increasingly attractive, no alternative fuel has received as much attention as ethanol, highly prized because it is renewable, domestically produced, and burns cleaner than gas with a higher octane rating. Here are a few interesting ethanol facts:

	Foreign-Produced Ethanol Tariff The import duty on ethanol, currently 54 cents per gallon, has kept the price of Brazilian and other foreign ethanol higher than domestic production. A so-called “Caribbean Loophole” to the law, however, provides an exception for ethanol imported through or from the Caribbean islands, up to a total equivalent to 7 percent of U.S. production. Lawmakers from some farm states want to close this loophole.
	Green and Clean Many areas of the country use ethanol to meet EPA clean air standards. A March 2007 DOE study found that greenhouse gas emissions from corn-based ethanol are 18 to 28 percent lower than those from gasoline, while cellulosic ethanol greenhouse gas emissions are 87 percent lower. Ethanol helps to clean up our environment by reducing tailpipe carbon monoxide emissions by up to 30%; exhaust volatile organic compounds (VOC) emissions by 12%; particulate matter (PM) emissions by at least 25%. Ethanol is biodegradable without harmful effects on the environment. E-85 has the highest oxygen content of any transportation fuel, making it burn cleaner than gasoline with as much as 39 to 46 percent fewer greenhouse gas emissions.
	Octane Rating The most important characteristic of gasoline is its octane rating; in general, the higher a fuel’s octane rating the better the engine will perform. Pure ethanol made from renewable plant sources has less energy content than gasoline, which means more trips to the pump, but it has an octane rating of 113, compared with 107 for methanol and about 86 to 94 for gasoline.
	The Stamp of Approval All cars built since the 1970s are fully compatible with up to 10% ethanol (also referred to as "gasohol") in the mixture. Every major automaker in the world approves the use of E-10 Unleaded in their vehicles.
	It's The Real Thing Ethanol (ethyl alcohol) is produced by the fermentation of biomass. It is 200-proof grain alcohol, the drinkable intoxicating kind. If you know how to ferment beer, you know how to make ethanol. So that people won't drink it, a small amount of gasoline is added in at the end of processing. On a lighter note, an ethanol byproduct, carbon dioxide, creates bubbly fizzes as the gas is pumped into beverages under pressure to create carbonation.
	How Far Will An Acre Get You? Each bushel of corn (56 lbs.) can produce up to 2.5 gallons of ethanol fuel. One acre of land planted with corn can yield enough ethanol to take a car 5,000 miles, getting 17.5 miles to the gallon. Sugarcane will take you 15,000 miles.
	Indy 500 Revs Up With Corn While ethanol’s power, acceleration and cruise speed are comparable to those of gasoline, pure ethanol has an octane rating of 113, considerably higher than gasoline, which ranges from 86 to 94. E85 fuel typically has 100-plus octane ratings. Pure ethanol is used in many racing leagues because of these high-performance qualities. For the first time in the race’s 95-year history, cars in the 2006 Indy 500 burned a fuel that is 10 percent ethanol and 90 percent methanol. In 2007, the league plans to switch permanently to 100 percent ethanol.
	Ethanol Tariffs In 1980, Congress placed an import fee (tariff) on foreign-produced ethanol. Previously, foreign producers, such as Brazil, were able to ship less expensive ethanol into the United States. Many countries have such tariffs to prevent the subsidizing of foreign-produced ethanol. At 2.5%, the U.S. tariff is the lowest of any other country. The highest tariff belongs to India, at 186%. Brazil imposes a tariff of 20%.
	Spreading the Wealth The ethanol fuel industry created nearly 240,000 new jobs in 2007 and added $47.6 billion to the nation's gross domestic product. Rural and agricultural communities greatly benefit from the increase in ethanol refineries.
	A Bigger Piece of the Pie Ethanol has company. The federal government has subsidized the energy industry for many years for research and development, extraction, production, transport and consumption, with the lion's share going to the petroleum and gas industries. The EPAct 2005 provides over $14.1 billion in tax breaks to these energy industry sectors over a 10-year period: oil, gas, nuclear, coal (for clean coal technology), energy and conservation programs, and renewable energy ($3 billion). All energy sectors receive incentives, and the EPAct 2005 gives ethanol an increased share of the energy budget.
	FFV cost Many people are surprised to learn that flexible fuel vehicles (FFV) are not necessarily more expensive than a conventional vehicle. Special materials are required for fuel lines, hoses, valves, gaskets and fuel tanks due to the corrosive properties of ethanol.  But the cost does not add a great deal to the manufacture of the FFV, and automakers do not typically pass the cost on to consumers.
	A Man Ahead of His Time Way back in 1916, Henry Ford said in a magazine interview, "Gasoline is going - alcohol is coming. It's coming to stay, too, for it's in unlimited supply. And we might as well get ready for it now. All the world is waiting for a substitute to gasoline. When that is gone, there will be no more gasoline, and long before that time, the price of gasoline will have risen to a point where it will be too expensive to burn as a motor fuel. The day is not far distant when, for every one of those barrels of gasoline, a barrel of alcohol must be substituted." Ford was definitely a man ahead of his time. He was even ahead of our time, but we're beginning to catch on.
	Alexander Graham Bell "Alcohol can be manufactured from corn stalks, and in fact from almost any vegetable matter capable of fermentation. Our growing crops and even weeds can be used. The waste products of our farms are available for this purpose and even the garbage of our cities. We need never fear the exhaustion of our present fuel supplies so long as we can produce an annual crop of alcohol to any extent desired." Alexander Graham Bell, National Geographic, 1917

—Return to Top of Page—

Send comments, questions, and suggestions to website manager.

Window on State Government | Privacy and Security Policy | Accessibility Policy