Archive for the ‘Biorefinery’ Category

Ethanol market saturated – No need for 2nd Gen?

Friday, September 9th, 2011
Geoff Cooper from the Renewable Fuel Association reports about the increasing export of ethanol from the US.
 
With all my appreciation for ethanol and the corn-ethanol industry, we need not forget that there are significant state and federal subsidies going into corn-growing and ethanol production as well as protective price subsidies. Further, the lay argument for ethanol was a “domestic” renewable supply for “domestic needs”.
 
If we now discover, that essentially four ethanol plants purely worked for export in 2010 and around nine large-scale ethanol plants produced purely for export in 2011, why should there be any need for cellulosic ethanol from a market demand perspective? Especially if it is so much more expensive in terms of CapEx? Why would any investor (or government) invest in cellulosic ethanol if the domestic market is so saturated with first generation ethanol that the surplus goes into export???
 
The RFA and the entire ethanol industry certainly has some explaining to do, especially if both ethanol as well as the side product DDGS both are being heavily exported, as the domestic market does not absorb all. It also raises questions about the seriousness of the use of tax payer subsidies for growers or tax subsidies for investors. The system is seriously broken.
 
What needs to happen is that the internal market demand for ethanol is raised to a level that the “low-cost” ethanol is actually being used internally as long as there are tax or other subsidies involved, or remove those. Further, the fermenting ethanol industry may need to look for higher value added, different products to ferment and produce that will allow removal of subsidies and take out ethanol capacity to bring capacity and market in balance. Gevo comes to mind but there are other options as well.

It’s all about the spread: Why CNG, LPG do not work for the US

Friday, August 26th, 2011
Case CA-LPG CA-CNG CA-Gas EU-LPG EU-CNG EU-Gas
Region United States United States United States Germany Germany Germany
Feed Propane CNG Gasoline Propane CNG Gasoline
Trade Unit  1 gallon   1 GGE   1 gallon  1 liter 1 kg  1 liter 
Trade Unit [SI]  1 liter   1 kg   1 liter  1 liter 1 GGE  1 liter 
Trade Unit Conversion 0.2642 0.3906 0.2642 1.0000 2.5600 1.0000
Cost [Currency]  $           2.39  $           2.10  $           3.75  €         0.764  €         1.000  €         1.515
1/$ 1.0000 1.0000 1.0000 1.4402 1.4402 1.4402
Cost [$/SI Unit]  $           0.63  $           0.82  $           0.99  $           1.10  $           3.69  $           2.18
Cost [$/GGE]  $           2.63  $           2.10  $           3.75  $           4.58  $           3.69  $           8.26
Spread to Gasoline [$/GGE]  $           1.12  $           1.65  $              -    $           3.68  $           4.57  $              -  
Spread to Gasoline [$/l]  $           0.36  $           0.17  $              -    $           0.97  $           1.21  $              -  
Conversion CapEx  $         5,900  $         8,900  $              -    €    2,400.00  €    3,500.00  €              -  
Conversion CapEx [$]  $         5,900  $         8,900  $              -    $         3,456  $         5,041  $              -  
MPG 20.0 20.0 20.0 20.0 20.0 20.0
l/100 km 11.8 11.8 11.8 11.8 11.8 11.8
HV Penalty 10% 0% 0% 10% 0% 0%
Break Even [km]         186,345         173,614             33,276           35,483  
Break Even [miles]         115,789         107,879             20,676           22,048  

It’s not that I was bored, rather bothered, finding out why CNG or LPG is such a no-brainer in Europe and seemingly not working well in the US. Above spreadsheet, current as of August 26, 2011, depicts the sorry state for CNG and LPG conversions. The bright spot is that energy, even gasoline, still is dirt cheap in the US. Imagine, if the gallon of gasoline would run you $8.25, how would America look like then (I mean outside the riots on the streets)? So, at a third of that price, the GGE margin to even cheaper energy for cars, such as CNG or LPG, becomes so irrelevant that you may have to drive more than 100,000 miles to recover a single installation or conversion. That break even point is well beyond the horizon of individual consumers, which may drive 20,000 miles per year or less on average. Don’t get me wrong, I am all in favor of CNG because it can be made from renewable resources to 100% and because it creates less GHG per energy output, but the numbers don’t work here in the US, whereas they work in Europe.

To resolve the situation, the importers need to lower the price of the conversion to European levels and the providers of CNG should consider how much more they could sell if the price would actually be pegged to natural gas (the resource) instead of gasoline (the competitor). Of course it would be nice if the EPA would get behind the CARB mission and try to facilitate with DOT the implementation by reducing the regulatory hurdles. But at this time it seems it is between the conversion installer and the vendor of the fuel there is an opportunity missed here.

Greed killing green fuel options again

Thursday, August 25th, 2011

I just got back from a visit in Germany and they do LPG conversion all over, because it lowers the cost of driving a car to at least a third (not by a third). Enthused I looked at the chance of doing same, using Prins’ technology that is available for a large range of cars and conversion costs around 2000EUR in Germany for a 6 cyl or 8 cyl car. LPG is  tax relieved (tax is what makes the price difference for fuels in Germany, not the actual fuel cost).

The economics are compelling: 1 MMBTU (and in the end we burn any fuel for BTU and nothing else) in Nat Gas goes bulk for $5, in gasoline or diesel for around $28 to $30, crude oil for $15, LPG $16, but get this: compressed Nat Gas $18 (in CA). The mere compressing of Nat Gas to 3600 psi increases the value by approx. 4.5X, conversely running a refinery and trucking the whole stuff only results in a markup on the energy price of 2x.

What we have is a near monopoly on CNG sales that allows the vendor to set a price that makes things economically barely attractive for the consumer, but very profitable given the captive audience, as CA’s CARB does not allow bi-fuel cars, and hence as CNG vehicle owner you are exposed to those prices set.

Further, the market seems to be dominated by the lone importer(s) of Prins LPG or CNG conversion, who charges $8,900 for a car conversion to CNG and $5,800 for an LPG conversion. Making the conversion further unattractive, compared to the $4,000 for CNG and $2,800 for CNG in Europe. Admittingly the conversion in Europe is mostly to LPG and here to CNG, which increases the cost by way of a need for a high-pressure CNG gas tank as opposed to a low pressure, low profile LPG tank.

To be fair I should not let the EPA of the hook either, as they require a certification on the individual car model, which runs you $15,000 to $50,000 per model and year. So that is presumably factored in the price of the install.

In sum the EPA and CARB make their political cut, and the CNG provider its margin, and the Prins importer its profit, what gets killed on the way is the feasibility (you may need to drive more than 40,000 miles per year) for the introduction of inherently attractive different fuel economics, that are renewable possible. CNG could be generated from biogas (alas the latter also having a rough time getting of the ground but with huge potential).

What should be is a competitive field of CNG providers that orient their price on the NG price and not on what the market can bear, a CARB & EPA that aggressively puts market forces to play to foster LPG and CNG adoption, an importer and distributor that would be allowed in all states to have conversions take place at qualified garages, and a capturing of LPG from refining processes so it would be available at near refinery locations in CA, TX, LA, NJ etc.

The mere margin between NG and liquid fuel would drive people to conversion like crazy until the arbitrage opportunity is absorbed. That not happening is the proof for an imperfect, hence manipulated, market.

And yes, LPG or CNG would be 25-50% lower on GHG emissions – just as an aside.

US sells low value corn to China, buys iPhones, ethanol from them

Wednesday, August 17th, 2011

China recently bought an additional 21 million bushel of corn, per the WSJ more than what their traditional annual purchase is. That prompted a story in the WSJ of corn shortage fear mongering for the US, suggesting increasing meat demand in China as well as a need to supply such corn. Here is what is missing:

China has a current capacity of producing ethanol in 5 large-scale (120 mgy) plants for a total of 600+ Million Gallons per year. Feedstock is cassava or corn. CORN! To feed those on corn only, takes 222 million bushel corn per year. The one time order of 21 million bushel cited is merely 60% of one plants annual intake, or a mere ten percent of what those plants digest annually. In addition, the COFCO in China announced plans to ramp up production of ethanol in to the equivalent of 25% US production or 50 large-scale plants by 2020, meaning ten times capacity in less than ten years or an annual increase by 222 bushel of corn (if all would be feed corn).

Conversely (or perversely) China exports ethanol via the Caribbean (for dehydration) to the US as fuel ethanol (do a Google on that).

If you take this together, China is buying US corn, produces Ethanol, and sells it back to the US while keeping the DDGS, the feed byproduct which replaces corn in hog and cattle rations locally. This business makes even more sense for China as they can build cheaper plants, run them better energetically integrated and profit from increasing ethanol prices in the US. What you have in sum is an outsourcing of the corn to ethanol production to China, which also makes sense, because all the empty containers that delivered the iPhones, computers, iPads and TVs to the ports in Long Beach and Oakland can be filled with comparatively cheaper corn to go back and get more goods to further increase the US trade deficit (which  BTW will also be worsened by importing higher value ethanol from China).

Here is now, where you actually do have an iLUC issue: China uses US soil to grow corn for ethanol, which now does not end up anymore in food/feed in China. This is different from the US situation, because in China you do need more calories per person, whereas in the US we have too much (to be precise we consume 4,000 cal/day/capita in the US, or twice as much as we should per USDA).

What should happen is, that China should shut down their own ethanol facilities if they do not have enough domestically grown feedstock to run them. Further, China should not be allowed to purchase corn as long as they produce ethanol from corn they do not grow or have. Obviously one now runs into WTO and free trade issues, but on the upside the perversion in the rhetoric around corn-to-ethanol and iLUC is now blatantly obvious with the new twist, that the exploiting (highly industrialized) country is China and the exploited farmers are American, while the American ethanol industry, beat up and bashed looses out, and we again become dependent on foreign imports.

What irony, and how fast did we get here?