Ethanol is a Growth Chemical, but not from Corn
I never thought I’d see the day – untaxed moonshine is worth as much as the drinkable stuff. But a few anecdotes:
Brazil, the largest ethanol consumerism the world, with the lowest cost process, is short, and getting shorter. High sugar prices are forcing ethanol economics well above gasoline, forcing refiners to choose sugar. And a major brokerage firm forecasts 70% increase in ethanol needs by 2020. US producers/refiners have been exporting ethanol from the Gulf Coast.
Brazilian producers also plan to substitute a special ethanol formulation for biodiesel and jet fuel over the next few years.
Meanwhile, a variety of startups aim to find a way to economically convert a third of the sugar plant, the bagasse, to ethanol, and to capture/convert another third, the leaves. The process could also convert natural gas to ethanol, without subsidies, at economics that look like $4 corn (today’s corn price over $7/bushel).
Chinese ethanol demand is forecast to grow at 8-10% CAGR, mostly for industrial use (solvents, additives). Celanese plans up to three facilities to produce product from coal, using its very low cost acetic acid technology. The Celanese process could also convert natural gas to ethanol, without subsidies, at economics that look like $4 corn (today’s corn price over $7/bushel).
Sadly, the US renewable fuels mandate may prohibit the use of lower cost ethanol if it is not manufactured from ‘renewable sources,’ even though the carbon footprint of CE’s natural gas-based fuel is lower than the corn-ethanol process. If Celanese is successful, between its offering and Brazilian sugar, the most expensive ethanol in the world by 2015 will be produced in the US Midwest.
Several private companies are nearing the demonstration phase (one-third to one-tenth of commercial scale) for wood to ethanol and biomass to gasoline. However, the business models seem to require $4+ gasoline and double-triple the capital intensity of existing processes. There is an arbitrage between low cost BTUs and fuels, but a competitive unsubsidized economic model at production scale is still a few years off.