by Nancy S. GrantEvents this past October show just how difficult it is to make accurate predictions about the future of biofuels in the United States.
On Oct. 9, officials from around the Midwest gathered for a media event in Jeffersonville showcasing the grand opening of the I-65 Biofuels Corridor. The designation means drivers now can travel from Lake Michigan in northern Indiana to the Gulf of Mexico solely on E85 — the highest percentage ethanol/petroleum blend of motor fuel — and never have to worry about running on fumes.
Just three weeks later, though, on the last day of October, came a bone-jarring bump in the road for Indiana’s biofuels industry. The owner and operator of a 1-year-old ethanol plant in Linden, Ind., announced that the entire company had filed for bankruptcy.
The push forward and step back continues the biofuels industry’s complicated and convoluted path toward maturity. Here’s a look at the industry now, and how some of Indiana’s electric cooperatives are being affected by an industry in transition.
Paving the way for E85The grand opening of the I-65 Biofuels Corridor Oct. 9, marked a key rite of passage for biofuels — availability.
This first project of its kind means it’s now possible to travel the 886 miles on the interstate highway — from Lake Michigan to the Gulf of Mexico — and never be more than a quarter of tank away from one of 31 public refueling spots selling E85. The route also includes seven retail stations that provide B20, a fuel that’s 20 percent soy-based diesel blended with conventional petroleum diesel.
Kellie Walsh, executive director of the Central Indiana Clean Cities Alliance, moderated a lively indoor panel discussion about the benefits of biofuels.
Jeff Gallic, vice president of petroleum supply and distribution for Thorntons Inc. (an independent Midwest retailer), said, “We’ve been blending ethanol into gasoline for a long time in many states, and in Illinois we also blend biodiesel. Blending equipment is very expensive, but we believe it’s important for three reasons — using biofuels reduces our nation’s dependence on foreign crude oil supplies, improves air quality and supports local agriculture.”
The U.S. Department of Energy’s Mike Scarpino, regional Clean Cities Project manager with responsibilities throughout nine states, said although America has about 170,000 gas stations, only about 1,500 offer biofuels to the public. Scarpino said, “Industry and government must work together to help provide the alternative fuel infrastructure our country needs for energy security and independence.”
Later during the corridor’s grand opening, the celebration moved outdoors to a nearby Thortons station in Clarksville with its new E85 pumps. General Motors was the star of the day, bringing along a wide assortment of cars and SUVs, even a pick-up truck, sporting green and yellow artwork and slogans advertising biofuels. GM manufactures 18 flex-fuel vehicle (FFV) models, each one capable of operating on any sort of ethanol blend up to E85.
Brian Hazen, biofuels program manager for General Motors, and an expert on environmental and energy policy, said, “GM determined years ago that there is no single solution to our energy needs, so we’ve been actively developing several options, including plug-in electric cars, hybrids, hydrogen fuel cells, and biofuels. But we see biofuels as offering the greatest opportunity in both the short- and long-term, with ethanol displacing 20 to 30 percent of the petroleum used today.”
Hazen also noted two big advantages to biofuels. Modifications to existing infrastructure to make this fuel available to the public can be done at a fraction of the cost of the other technologies. Plus, using biofuels requires the fewest behavioral changes for drivers who are already accustomed to refueling by pumping a liquid into their tank.
Developing the infrastructure to produce biofuels, however, is a bit more complex.
Construction zone ahead On the last day of October, VeraSun Energy, the owner and operator of an ethanol plant in Linden, Ind., announced from its headquarters in Sioux Falls, S.D., that the entire company had filed for protection under Chapter 11 bankruptcy laws. The dry-mill ethanol plant in Linden began operations in August 2007 and is capable of producing 110 million gallons of ethanol per year.
Although the Indiana plant continues to process corn as this article goes to press, the company’s financial problems are making plenty of folks re-think biofuels production.
The original owners of the Linden plant agreed to assume the cost of building a new substation and short segment of transmission line to bring electricity to the plant, plus the underground distribution lines on the plant’s site.
Tipmont REMC’s general manager Ken Ritchey said, “That meant our co-op didn’t have to make a big capital expenditure for the infrastructure build-up for this new ethanol plant. As soon as the plant opened the original owners sold it to VeraSun, and the Linden plant continues as an industrial member of our co-op.”
Following normal business procedures, Tipmont had asked VeraSun for a reasonable deposit against future electricity charges when service began at the new plant. Ritchey said that VeraSun’s bankruptcy proceedings are creating “a bit of a hassle” for the electric co-op now, but he remains hopeful the plant will continue to operate and pay its bills on time.
Farmers with grain crops under contract to VeraSun face uncertainty. Farmers in other states where two VeraSun plants are idle have been given permission by the bankruptcy court to withdraw from their contracts so they can try to sell their grain elsewhere. Changes in production schedules at some other VeraSun plants make it likely that the company will attempt to renegotiate existing contracts to reduce the company’s expenses. But that would reduce farmers’ incomes, too.
On-ramps, roundabouts and detoursElsewhere in Indiana, biofuels production, delivery, and consumption continues its on-again, off-again, on-again lurch forward.
Kosciusko REMC supplies electricity to the Louis Dreyfus biodiesel plant and office building in Claypool. Doris Lemert, Kosciusko’s marketing and communications manager, said, “They’re our largest co-op member and we wanted to support them, so in 2008 we began buying biodiesel fuel for our on-site tank. We now use biodiesel in 11 trucks and three trenchers. We’ve even added ‘powered by the bean’ slogans to these vehicles to show our community what we’re doing.”
POET, another energy company headquartered in South Dakota, operates a network of 26 plants in seven states that produce more than 1 billion gallons of ethanol. Adding infrastructure to supply electricity to the POET Biorefining plant in Portland involved a large capital expenditure by several utilities.
An investor-owned utility rebuilt about 22 miles of existing transmission lines. Then Wabash Valley Power, the generation and transmission cooperative serving REMCs in the northern half of Indiana, added a new substation and three quarters of a mile of new transmission line.
Jay County REMC’s CEO John Nill noted that POET’s Portland plant, the co-op’s largest industrial member, added 5 megawatts to the co-op’s load and also increased its annual income.
The plant, which brought in about 35 to 40 new jobs to this rural area, consumes 22 million bushels of corn during a year to produce 68 million gallons of ethanol.
Indiana’s quest to encourage the biofuels industry — with its likelihood of adding jobs, increasing incomes for existing businesses, and providing markets and income for Indiana farmers’ crops — includes enticements for companies to locate within the state. Under Indiana’s tax abatement program, a new biofuels plant pays no property taxes during its first year of operation. But Indiana’s tax abatement program is structured to phase out over a 10-year period.
For each year that the POET’s Portland ethanol plant continues to operate (it began production in September 2007) 10 percent of the plant’s taxable valuation is added back to the county’s tax rolls. At the end of the tax abatement period, this ethanol plant will add $120 million of assessed valuation to the Jay County tax base, resulting in more tax dollars flowing into the local community.
But uncertain economic conditions that extend far beyond Indiana’s border have affected plans to build more ethanol plants. In November, Aventine Renewable Energy Holdings announced it would slow down construction of a Mount Vernon plant and delay the opening until at least nine months later than scheduled in 2009. When that plant does begin operations, it will produce 220 million gallons of ethanol a year.
Corn producers typically sell their crop directly to ethanol plants. In 2007, Indiana farmers produced about 1 billion bushels of corn — about one third of the sate’s corn crop went to ethanol production.
Although the Louis Dreyfus biodiesel plant (with a capacity to crush 50 million bushels of soybeans annually) does buy directly from soybean farmers, most soybeans go to an intermediate crusher who then sells the oil to others for many different purposes, not just as a biofuel. The impact of biodiesel production for the state’s farmers is much more difficult to calculate.
There is still a mismatch between farmers with grain to sell and biofuels companies ready to process those grains. The U.S. Energy Information Administration reported that during the month of September 2008, the United States imported 107 million gallons of ethanol.
There’s also a mismatch among many drivers and biofuels supplies. Although Tipmont REMC owns two flex-fuel service trucks, they’ve never been filled up with E85, only normal ethanol blends. Jay County REMC’s fleet includes two derrick digger trucks and three bucket trucks that run on soy diesel. But they don’t fill up at a public gas station, and instead must rely on an on-site pump and storage tank that’s replenished with deliveries from Country Mark tanker trucks from the Harvest Land Co-op headquartered in Richmond.
In the meantime, “he said, she said” style arguments continue to erupt in the national and international media about whether using crops like corn and soybeans for fuel affects the supply and cost of food for humans and feed for animals, whether the amount of energy used to make ethanol or biodiesel reduces or adds to greenhouses gases, and so forth.
In October 2008, the U.S. Department of Agriculture and the U.S. Department of Energy released a new National Biofuels Action Plan, 24 pages of assorted goals, dealing with everything from farmers’ fields to technology to infrastructure. With input from at least 11 separate government agencies, two key statements stand out:
• Expanding biofuels usage to 36 billion gallons a year over 15 years on a sustainable basis will be a key component to America’s movement toward clean, affordable, and secure energy solutions.
• Success will require a coordinated approach between the public and private sectors to advance biofuel technologies and create market conditions that will enable their use. As the new president and members of Congress gather in Washington this month to begin their terms, they‘re going to have quite a job figuring out how to accomplish these goals in tough economic times.
Nancy Grant is a freelance writer from the Louisville area who writes extensively about energy issues. She is a regular contributor to Kentucky Living, Kentucky’s electric cooperative magazine. Here’s a link to her Web site.
The Biofuels Mobile Learning Center is offered as a free interactive display.
Goin’ mobile with biofuels learning center on wheels
The Biofuels Mobile Learning Center is an exciting new traveling exhibit designed to explain and promote the use of biofuels, such as ethanol and biodiesel.
The exhibit is offered as a free interactive display courtesy of Indiana corn and soybean farmers.
If your organization would like to schedule the exhibit for your event, contact either:
• Indiana Corn Marketing Council
5730 W. 74th St.
Indianapolis, IN 46278-1755
Telephone: 317-347-3620
Fax: 317-347-3626
Web site: http://incorn.org• Indiana Soybean Alliance
5730 W. 74th St.
Indianapolis, IN 46278-1755
Telephone: 800-735-0195
Fax: 317-347-3626
Web site: http://www.indianasoybean.com Biofuel glossaryE85 — is the alternative fuel made from corn. E85 is the term for motor fuel blends of up to 85 percent ethanol and just 15 percent gasoline. E85 is an alternative fuel as defined by the U.S. Department of Energy.
Flex-fuel vehicle — is specially designed to run on any ethanol blend up to E85. Special onboard diagnostics “read” the fuel blend, enabling drivers to fuel with E85 or gasoline in any combination from a single tank. There are no switches to flip, no mixing or blending. The computer adjusts the FFV’s fuel injection and ignition timing for the different mixtures
B20 (Biodiesel) — is the name of a clean burning alternative fuel, produced from domestic, renewable resources. B20 is a 20 percent soy-based oil blend with conventional petroleum diesel. Other common blends are B2 and B100. B100 contains no petroleum, is simple to use, biodegradable, nontoxic and essentially free of sulfur and aromatics.
Source: Indiana Office of Energy and Defense Development
Down the Biofuels CorridorInterstate 65 was dubbed a “Biofuel Corridor” in October. Thirty-one fuel stations along the 886 miles of highway, from Hammond, Ind., to Mobile, Ala., now offer E85 blend of ethanol.
Indiana, Kentucky, Tennessee and Alabama are partners in the project.
Indiana now has 121 E85 stations all around the state, and 13 offering B20 biodiesel at pumps.
Here’s a link to a where you’ll find the fuel and more information about the project.