What Can Ethanol Plant Owners Do to Thrive in the Ethanol Business Today?

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December 16, 2022

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by Mike Sticklen and Doug Rivers (Lee Enterprises Consulting/Biofuels Digest) The US ethanol industry is faced with flat volume (Fig. 1) and mediocre returns on capital (Fig. 2). There are several strategic opportunities available to return to revenue growth and improve returns to shareholders. The strategies can be grouped into three categories.

Fuel Ethanol carbon intensity reduction,
Product and market diversification
Feedstock diversification

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1. Fuel Ethanol Carbon Intensity Reduction

Despite the push for transportation electrification, the US Energy Information Agency (IEA) forecasts that market demand for liquid fuels will grow globally, especially demand for lower carbon intensity (CI, gCO2/MJ) liquid fuels such as ethanol, renewable diesel, renewable gasoline, and sustainable aviation fuel (see Fig. 3). Liquid fuel growth will predominate in Asia with the Americas and Europe remaining flat. This will create an opportunity for low cost, low carbon intensity ethanol producers in the US to continue increasing exports and grow domestically with higher ethanol blends such as E-15. Both favorable CI and high-octane rating value should result in demand growth for bio-based fuels.

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The recent confirmation by US-EPA regarding RVO blending obligations under the Renewable Fuel Standard (RFS) for the next 3-years, is basically flat for US corn ethanol at 15.25 billion gallons per year.

The US ethanol industry is capable of producing more than 17 billion gallons per year. The RFS has outlived its benefit to US society and should be abandoned and replaced by low-carbon fuel standards in multiple states. The recently passed Inflation Reduction Act has added production tax credit incentives of 2 cents per gallon for each CI point below 50 gCO2/MJ.

US and Brazil ethanol producers are well positioned to capitalize on the global growth provided their ethanol carbon intensity is reduced from the mid-50’s gCO2/MJ to low 10’s gCO2/MJ (see Fig. 4). More than 50% of the US ethanol industry has committed to achieve this via CO2 geological sequestration which generates value through 45Q tax credits and LCFS carbon credits.

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Co-Product Diversification
a) Protein Feed Ingredients and Corn Oil

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Ethanol to Sustainable Aviation Fuel.

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Renewable Methanol

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d) Renewable Natural Gas

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e) Bio-based Plastics

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Feedstock Diversification READ MORE

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