Chapter 5: Ethanol

“I support the ethanol tax benefit. I support the current ethanol program and would support its extension beyond the 2007 expiration date.”

— President George W. Bush, November 2000



Chapter 5. Ethanol

Ethanol is an alternative fuel made from the sugars of plants. It is the same compound found in alcoholic beverages but has been denatured for use as a fuel. In the United States, the great majority of ethanol is made from the kernels of corn, although other sources are used such as sorghum and cane sugar. Made available in two forms as “gasohol,” a 10 percent ethanol, 90 percent gasoline blend, and E85, a 85 percent ethanol and 15 percent gasoline blend, it is the most widely used alternative fuel, roughly 3.1 billion gallons of which were consumed in 2004.
As with all alternative fuels, ethanol has its shares of advantages and disadvantages. It has the ability to reduce emissions, decrease dependence on foreign markets for petroleum, and contribute to the US economy. On the other hand, it is not widely available and is heavily subsidized. The following chapter will take an in-depth look at the general advantages and disadvantages of ethanol, its emissions, its ability to support national security, sustainability factors, its economic impact, and future potential.

General Advantages

This section will focus on general advantages that are specific to ethanol that may or may not be enjoyed by other fuels. Subsequent sections will analyze national security and emissions issues in more detail, although they too are considered advantages of this fuel. A few of the advantages that ethanol enjoys are ease of use, price comparison, job creation, and by-product generation.
The first advantage ethanol enjoys compared to most other alternative fuels is its ready usability. Ethanol is rarely sold “neat” or in pure form but is instead blended with gasoline usually in a five to ten percent blend, called gasohol, or an 85 percent blend, called E85. Gasohol offers the greatest possibilities because it is manufacturer approved for use in all automobile engines as well as all non-road motors such as chainsaws, lawn mowers and motorboats. While production capacity isn’t sufficient and widespread availability has yet to be established, ethanol has the ability to attain a ten percent reduction in gasoline consumption without major changes in technology (if all gasoline sold was a ten percent blend of ethanol with gasoline).
Gasohol, however, is not considered an alternative fuel because there is too little of the alternative in it. Also, ethanol blends greater than ten percent cannot be used in conventional engines because the corrosive nature of the fuel degrades seals and hoses and the engine must be adjusted to run at the higher octane levels ethanol provides. Luckily, most major automobile manufacturers produce flexible fuel vehicles (FFVs) that can operate on any blend of ethanol and gasoline from zero to 85 percent. The three major US manufacturers each offer at least one sedan, one pick-up, and/or one SUV that is a FFV, thus covering the majority of demand in the market.
It is estimated by the EERE that around 2 million FFVs have been sold as of 2003 to fleets and consumers and other estimates are as high as 4 million. While these numbers are high, they need to be held in the context of vehicle ownership in the US which is somewhere around 200 million vehicles. While FFVs are not widely available, it is still likely a consumer can purchase one. Also, as mentioned in nearly every report about ethanol usage, the majority of people don’t know they own a FFV which means that the capability to use E85 in these vehicles exists but the owner’s burn straight gasoline instead. With a little education, however, this statistic could be turned around, greatly improving the amount of ethanol used and gasoline displaced.
Ethanol also has the advantage of containing high amounts of oxygen. The Clean Air Act of 1990 mandated the use of oxygenating additives in gasoline to reduce emissions in air quality non-attainment areas. Industry’s initial response was to use MTBE, a methanol derived additive to comply with the mandate. By the late 1990s, it was shown that MTBE was accumulating in waterways and on the ground, proving a health hazard. Many states banned the use of MTBE, and fuel suppliers have chosen to replace it with ethanol because it is safer and burns cleaner, needing less of it to attain oxygenate standards.
The next advantage ethanol enjoys its excise tax exemption. While farmers have long had subsidies for crop production and enjoy further subsidies for growing crops to be used in ethanol production, it is the tax exemption near the end of the cycle that makes the biggest difference. Currently, ethanol receives a $0.52 per gallon tax exemption from automotive fuel excise taxes which translates into lower cost for ethanol blended gasoline. Thus, if blended with gasoline at a 10 percent level, the price per gallon would be $0.05 less than regular gasoline. The same is true for E85 which has a much higher percentage of ethanol to gasoline. In the Clean Cities Alternative Fuel Price Report for September, 2005, gasoline was report as selling at an average of $2.77 and E85 was reported at $2.41, a $0.36 difference. At other times, depending on the price of gasoline, the savings can be as high as $0.60 per gallon. Cost savings to the consumer is what makes a commodity desirable and at a time when gas prices are very high, a lower price for an alternative fuel will certainly increase its demand and therefore its usage.
The direct cost savings above is based on 87 octane gasoline, otherwise known as regular unleaded. Comparing regular unleaded and gasohol or E85 is not an apples-to- apples comparison, however. Ethanol has a very high octane rating of around 113. Higher octane results in a better performing engine because it provides lubricity and cleanses the engine reducing ping, chatter, and knock. In a 10 percent blend with gasoline, ratings of 89 to 90 octane are attained, which is the equivalent of premium grade gasoline. Therefore, for a lower price the consumer is getting a higher grade fuel. As premium unleaded tends to be about $0.10 more expensive than regular unleaded, this extra amount can also be factored into the savings to the consumer.
Another advantage of ethanol production, specifically corn based ethanol but most likely from other feedstocks as well, is by-product generation. There are two processes used to make ethanol, dry-milling and wet-milling. The majority of plants producing today use the dry milling process which uses the time honored tradition of distilling to create pure ethanol which is then blended with denaturant to avoid alcohol beverage taxes. The by-products of production are carbon dioxide and dry distillers grains.
CO2 is captured at the time of production and sold for use in carbonated beverages and for manufacturing dry ice for the meat packing industry. Dried distillers grains are the remnants once the sugars have been processed out of the corn. They contain all the protein, vitamins, minerals, and fat that wasn’t used in the fermentation process. The grains are accumulated and sold as feed for livestock providing a high-quality, protein and nutrient rich food source.
Some complaints are made about ethanol diverting valuable feed from livestock production, thus increasing the market cost of beef and poultry to the consumer due to increased costs for corn and other feeds. As production increases, however, and the distillers grains pass through the production process the price of the grains will decrease, making it less expensive for ranchers, etc. to feed their livestock. This has been the trend for the last eight years and is projected to continue as the nation gears up to double its ethanol production by the year 2012. Indeed, many new production facilities are being built near feedlots to take advantage of the situation.
Thus, ethanol production will provide many benefits like higher quality fuel, decreased feed costs, and cheaper prices, but with the advantages also come disadvantages which will be discussed next.

Disadvantages

Perhaps the major stumbling block to any alternative fuel is availability. This was discussed in Chapter 4 and won’t be in this chapter other than what is specific to ethanol. Currently, there are fewer than 500 E85 fueling stations across the US and many states don’t have any at all. Compare this to 180,000 gasoline stations around the nation and it’s easy to see why most people don’t use E85 in their FFVs. The major concentration of available stations is in the Midwest (near corn production), mostly in Minnesota which was a test market in the early days of mass ethanol production.
Part of the reason for this lies with the oil and gasoline producers that don’t own ethanol production facilities (one could also look at it the other way, that ethanol producers don’t own retail sites). It is not in the interest of a gasoline company to sell a competing commodity in their stores of which they aren’t getting a significant cut. Therefore, ethanol producers must contract with the individual store owners, a slower and more costly way to do business. Also, inelastic demand for gasoline and decreased competition due to major mergers in the oil industry means the gasoline market isn’t sensitive to price increases which could be mitigated by blending in more ethanol.
Another disadvantage of ethanol that helps explain why retail stores are concentrated in the Midwest is that it is difficult to ship via existing networks of pipelines. It is very easy to ship ethanol in a tanker truck but this method is not cost effective for long trips from the Midwest to the coastal regions. Oil producers have countered this by building pipelines to reach the furthest parts of the country. Unfortunately, ethanol and ethanol blends cannot be shipped in this manner because the pipelines contain water deposits, which the fuel absorbs causing it to separate from the gasoline it is blended with and/or causing it to resist blending. The ethanol then needs to be discarded as a hazardous material. Ethanol is also a solvent for other sediments left in the pipelines by regular gasoline and diesel products. The sediments, like rust and gum, accumulate in the ethanol, causing degradation and discoloration, necessitating a downgrade in the fuel quality that could cause it to be unfit for use in engines.
Another disadvantage of using ethanol blends is that it has less energy per gallon than gasoline. Gasoline has energy content of 110,000 to 125,000 btu per gallon whereas ethanol contains only 80,000 btu per gallon. This translates into more ethanol blended fuel needed to travel the same distance than gasoline on a per gallon basis. A study conducted by the American Coalition for Ethanol on fuel economy for various ethanol blends found that there is an inverse relation to the percentage of ethanol in a blend of fuel and the mileage it provides. In the study, a 10 percent blend of ethanol averaged a 1.5 percent reduction in mileage compared to regular unleaded. As the percentage of ethanol in the blend increased, the mileage decreased showing a 2.2 percent reduction for E20 and a 5.1 percent reduction for E30. Other studies have shown as much as a 29 percent decrease in mileage for E85.
This should be factored into the cost of ethanol blends as well. If a consumer must purchase more E85 to travel the same distance as a tank of regular gasoline, the effective cost comparison is higher for the E85. The balance needs to be worked out taking into consideration the price of ethanol and gasoline at a given time but it seems likely that gasoline would be less costly more often than E85.
Finally, ethanol is only cost effective compared to gasoline because it receives large subsidies from the US government. US farmers receive subsidies for growing corn crops of $0.28 in direct payments and $2.60 per bushel in counter-cyclical payments (when market price is below target price). This translates to over $10 billion annually paid to corn farmers for production. Add to this ethanol’s exemption from the excise tax on gasoline and one gets the picture of the actual cost of the fuel to the nation. This should be held in comparison to direct and indirect subsidies given to the petroleum industry. In comparison, it appears that ethanol isn’t costing the nation nearly as much as gasoline. After all, there are no military deployments to the Midwest, just the Middle East.
Grade for Advantages and Disadvantages: C+

Emissions

Carbon dioxide is considered a major contributor to global warming and is top of the list of greenhouse gas reduction programs. Ethanol, because it is plant derived, enjoys a relatively low level of CO2 emissions on a life-cycle basis. It is assumed that the amount of gas given off during burning is equal to the amount absorbed from the atmosphere when the feedstock was being grown. If consumers could burn corn in their gas tanks, that would be fine. There are, however, many factors involved between the field and the tank that contribute to CO2 emissions for ethanol, including the farm equipment used to grow the corn, emissions from blended gasoline, and the fermentation process.
Table 4.2 shows life-cycle emissions for ethanol compared to gasoline based on the GREET model. The life-cycle test is the best assessment for emissions because it takes into consideration all variables of production and consumption for a fuel. The table shows that E85 produces about 2/3 less CO2 than gasoline scoring a large positive for this emission.
While the EPA is concerned with CO2 emissions, it is also concerned with other emissions that have more of a direct affect on the health of the general populace. The GREET model is able to assess these emissions as well. Once again, referring to Table 4.2 in Chapter 4, there are eight emissions measured that contribute to smog, ground level ozone formation, and health effects like asthma. Of the eight compounds, E85 has lower life-cycle emissions for six of them, with two of those six being only 5 percent lower or less. The four that have significantly lower emissions levels range from CO, which is 45 percent lower to NOX which is 63 percent lower. Both nitrous oxide and particulate matter are significantly higher compared to gasoline with N2O being three times as high.
Thus, in terms of emissions, ethanol in an 85 percent blend with gasoline favors well compared to straight gasoline; five out of nine (including CO2) are around 50 percent lower or better, two are lower but not by much, and only two are higher. This makes for a score of seven-of-nine in favor of E85 or 78 percent, a passing grade on any test.
Grade for Emissions: B

National Security

National security depends on many factors including economics, military preparedness, and energy independence. Currently, the US is failing with energy independence. The parameters of our dependence on foreign sources of oil have been laid out in previous chapters and therefore won’t be rehashed here. In order for an alternative fuel to be effective at increasing our national security by decreasing our energy dependence, it will have to fit into the established networks that keep our transportation system running. Ethanol is one of the alternative fuels that can do this easily and effectively.
According to a Congressional Research Services study, ethanol accounts for 1 percent of fuel sold in the US. Most of this is in the form of gasohol, which isn’t considered an alternative fuel. Only about 22 million gge of E85 were consumed in 2004, equal to .001 percent of all fuel consumed. But for ethanol to have an impact in terms of national security, it need not be consumed as E85. If all gasoline sold in the US was gasohol, 10 percent of our consumption for transportation would be displace. This roughly corresponds to a 5 percent reduction in imported fuel, or one-third what is imported from the Middle East. Also, there would be only minor changes in infrastructure needed and no changes in automotive technology.
Consuming E85 would have a much larger impact and is within the nation’s technological capabilities. Changes in infrastructure would have to be made, new distribution networks established, and current technologies deployed on a larger scale in order for it to work but this is all within the realm of possibility. It is whether the costs will be too high that is the question. As for automobiles, the incremental costs of an FFV compared to a regular vehicle are minimal, around $150 to $200, less than what people pay for hybrids. Incremental costs for improving infrastructure are nominal as well. Distribution is another problem but as corn grows almost everywhere in the US and as ethanol from cellulose becomes commercially viable; this problem could be taken care of.
Thus, ethanol has the ability to add to national security, although it plays a minor part at the moment. The Renewable Fuels Standard passed earlier this year will help to alleviate this by mandating the doubling of ethanol use by 2012. Also, as time passes, technologies will improve, economies of scale will be realized, and ethanol will be able to play a larger role in the transportation sector.
Grade for national security: C+ for potential.

Sustainability

A fuel’s net energy balance (or net energy value) is part of the debate concerning sustainability. The net energy balance of ethanol production is quite controversial, with seemingly no definitive answers. There seem to be as many people arguing for a positive balance, i.e., it puts out more energy than it uses, as there are for a negative balance, i.e., it uses more energy than it puts out. There is a difficulty in knowing which to believe, as the sources can be wildly divergent in their conclusions. Ethanol boosters are always on the positive side, academics can fall either way, and, of course, detractors fall on the negative side.
One source that appears both neutral and balanced is a paper written by a graduate student and two professors at Washington State University, Oliveira, Vaughan, and Rykiel. The study is based on assumptions made by multiple experts in the field and therefore can take into consideration differences in assumptions, data used, and calculations. The authors provided both a worst case and best case scenario for production including crop yields per acre, ethanol production efficiency, and fertilizer production and usage. The results showed a worst case input-output ration of 1.03 and a best case ratio of 1.12.
Another balanced study was conducted by Shapouri, Duffield, and Wang for the Department of Agriculture and published in June, 2002. Both Shapouri and Wang are well known in the field of alternative fuels, having conducted many studies of their value over the years. The paper gives an overview of the differences between various scholars’ inputs when calculating net energy balance which explains why the results show such variation. The results they calculate are a ratio of 1.08 excluding credits from the sale of by-products, and 1.34 including the credits.
It appears that these two reports, well balanced and generally neutral, show that the energy balance is positive for ethanol. It has been the case that corn yields per acre have been increasing, plants have been increasing in efficiency, and competition increasing. These three factors combined will work to decrease energy inputs associated with the production of ethanol ensuring that if the net energy balance is now negative, which isn’t likely, that it will be positive in the not too distant future.
As mentioned earlier, even given a positive energy balance for ethanol, it is not likely to be sustainable as a total or even partial replacement for oil. The Maclean, et. al., article mentioned in a previous chapter is backed by the Oliveira, et. al., article mentioned earlier in this chapter. Both state that ethanol production from corn is not sustainable on a large scale because the amount of land that would need to be used for growing corn is either all the land outside of the cities (Oliveira) or more land than is available in the US (Maclean). This is obviously impossible and need not be further discussed save to mention that their techniques for calculating land use are acceptable. Thus, ethanol, on its own, will never be able to displace the US oil usage, but in combination with other alternatives, and with improvements in technology, it could be a contributing factor.
Grade for Sustainability: C

Economic Impact

With the doubling of ethanol production, an increase mandated in the Energy Policy Act of 2005 under the Renewable Fuels Standard (RFS), will come an increase in jobs. An average sized plant producing 40 million gallons per year (mgy) of ethanol costs roughly $60 million to build. Because many materials, services, and workers will be purchased and hired from the local community, the building of an ethanol plant has a multiplier effect that increases local domestic product to $142 million over the course of construction. The plant will employ about 40 people who are local or will become local. These employees will build homes, purchase goods and services, and buy cars and entertainment in the local market. The plant itself will purchase goods and services such as utilities and feedstock that will come from the local area. In all, a 40 mgy plant will increase the local economy by $110 million annually, create nearly 700 new jobs through the multiplier effect, and generate $1.2 million in tax revenues.
Industry will be building 4 billion gallons of new production capacity over the coming years. A back of the envelope calculation comes up with 100 average size plants needed to meet RFS regulations by the year 2012, a figure that will have a significant impact on the US and local economies. It is figured the new plants will cost around $6 billion and spend $27 billion in production and $43 billion on corn and other feedstocks. Over $200 billion will be added to GDP between now and 2012, $43 billion of which will go directly to worker’s income and an estimated 235,000 jobs will be added to the economy as a result of the legislation. This shows that ethanol and other types of alternative fuels can be a significant factor in growing the US economy.
Increased ethanol production also decreases the national trade imbalance. Around 35 percent of the trade deficit is attributable to imports of crude oil and other petroleum products. This figure is expected to double within the next 20 years. At current production levels of around 4 billion gallons per year, ethanol displaces nearly 500,000 barrels of oil per day, resulting in a $5 billion reduction in the trade deficit. This leaves more money in the pockets of US citizens and helps maintain the strength of the nation’s economy.
Grade for Economic Impact: B+

Future potential

The final discussion of ethanol will be future potential. The Renewable Fuels Standard has been mentioned and will lead to the doubling of ethanol production and consumption by the year 2012. A measure such as this is the best bet to reduce national use of fossil fuels. Also in the RFS is a measure to have 250 million gallons of ethanol produced from cellulose by 2012, which is an interesting development for the future.
Cellulosic ethanol in not commercially viable at this time although many test pilots have been run to show its efficiency and value. It is the same end product as corn ethanol but is made differently, and this is the real interesting part, it is made by breaking down the cell wall in plants and converting those sugars to alcohol. Breaking down cellulose is an energy intense activity, which is why it wasn’t pursued until now. New innovations in enzyme biology based on the fungus that caused “jungle rot” in the South Pacific during World War II have made the process much easier. The advantages of this method are twofold: 1) it has a much higher energy balance than current corn ethanol technology, and 2) it can use any scrap plant substance for a feedstock.
Thus, not only the kernel but the entire stalk of corn, which is essentially waste, can be used for production increasing available feedstocks as well as sustainability. All other forms of cellulose can be used as well including wood, grasses, crops and kudzu. Imagine having a cellulosic production plant outside a large city making ethanol from lawn clippings, tree trimmings, old newspapers, and construction waste that is powered by the methane emitted from the local garbage dump. Highly sustainable, clean burning, and good for the environment.
Grade for Future Potential: A

Final Grade for Ethanol: B-