Alcohol-Fuels for Transport

(Originally published Jan 21, 2012)

When evaluating the production of biofuels, it’s important to distinguish between fuel sources. Biofuels can be divided into two groups, biodiesels and alcohols. Biodiesels are fuels derived from vegetable oils such as soybean, sunflower, peanut, coconut, or palm-oils; while alcohols are derived from the fermentation of sugars or starches, most commonly found in corn, sugarcane, switchgrass, or wood. These alcohol fuels are most commonly in the form of ethanol, methanol, or less commonly propanol or butanol. This review will look at transport fuels derived from alcohols, as currently they make up the majority of biofuel production today. Based on a recent IEA (2010 p.356) report: “ethanol account[s] for about 75% of global production of biofuels for transport”.

The production of alcohol as a fuel source is the most heavily subsidised form or renewable energy; and as the IEA (2010) report indicates, ethanol alone received USD $13 billion of subsidies in 2009. According to the IEA (2011) Biofuels Technology Roadmap, the use of alcohol as a transport fuel first started as a derivative of corn in the late 19^th century; but as the price of fossil fuels dropped, development of alcohol production for transport fuels also plummeted. After the oil shocks of the 1970’s interest in alcohol as a transport fuel returned, prompted by the desire to increase fuel security; and in recent times, interest and funding has been driven by efforts to reduce CO₂emissions. However, investment in these technologies dropped by more than 60% in response to the financial crisis of 2008; as the IEA (2010 p.356) report indicates:“Investment in biofuels was severely affected by the economic and financial crisis in 2008-2009, falling by over 60% compared with 2008 as a result of lower oil prices and a drop in demand for transport fuels”.

Despite the downturn in investment, it seems that the industry has made a recovery. A recent REN 21 (2011 p. 13) report indicates that:“The global ethanol industry [has] recovered in response to rising oil prices, with production increasing 17% in 2010, and some previously bankrupt firms return[ing] to the market”.

The United States and Brazil are currently the global leaders in the production of alcohol for transportation fuels (see Figures 1 & 2). Production in the United States uses corn as a feedstock, while in Brazil production is based on sugarcane crops. The recent Renewables 2011 Global Status Report by REN 21 (2011 p. 31) indicates that:“In 2010, global production of fuel ethanol reached an estimated 86 billion liters, an increase of 17% over 2009. The United States and Brazil accounted for 88% of ethanol production in 2010, with the United States alone producing 57% of the world’s total”.

Figure 1. Global ethanol production between 2000 and 2010. Adapted from REN 21 (2011).

Figure 2. Global ethanol production (including US and Brazil contributions), between 2000 and 2010. Adapted from IEA (2011).

Despite these trends of seemingly substantial growth in production, the fraction of total transportation fuel use from alcohol remains low.  According to the REN 21 (2011 p.31) report, although alcohol production contributed about 41.5% of total supply in Brazil, it only comprised about 4% in the United States and around 2.7% of global land transport supply in 2010. Currently alcohol fuels are used primarily for road transport, as biodiesels are currently better suited for marine transport and aviation uses.

Energy Input:

As with any discussion of the viability of a fuel source, a life-cycle analysis of the balance of energy must be assessed. This can be difficult for alcohol fuels as the full cost accounting must include the energy spent to grow the crops (including fertilizers, pesticides, liquid fuels and lubricants, natural gas, electricity, etc.). While proponents of this technology suggest that it can yield a positive return on the energy invested, opponents advocate that the amount of non-renewable fossil-fuel energy required to grow and process the crops outweigh the energy returned as ethanol, negating it as a renewable fuel source. The work of Aden (2007) shows how the energy balance of the technology has changed over time (see Figure 3). This work illustrates the progression of the technology and suggests that it’s becoming a viable alternative in strictly energy terms; but it also works to establish the inconsistency of the estimates and the importance of the assumptions and methods employed.

This review will contrast the findings from two published papers: the work of Shapouri et al. (2003) find that a positive energy balance can be achieved with regard to corn ethanol, while that of Pimentel & Patzek (2005) support the opposite conclusion. To account for discrepancies in these studies, Ghosh & Prelas (2011 p.460), note:“[d]ifferences among studies are related to various assumptions about corn yields, ethanol conversion technologies, fertilizer manufacturing efficiency, fertilizer application rates, co-product evaluation, and the number of energy inputs included in the calculations”.

However, the largest difference between these studies involves the quantification of primary and secondary inputs. Primary inputs include the fossil-fuel energy spent to grow and convert the crops into the final product; while secondary inputs include the energy used to build and maintain the implements and infrastructure, and the energy to transport the final fuel as well. The work of Shapouri et al. only uses the primary inputs, while Pimentel & Patzek include both primary and secondary inputs.  Shapouri et al. (2003 p.961) justify their exclusion of secondary inputs by explaining the difficulty in quantifying these variables. They argue that the Pimentel group wrongly include the embodied energy of building an ethanol plant and equipment because:“…the energy embodied in fixed inputs, such as the cement used to build the plant, would have to be distributed over total production (including co-products) during the life of the plant…[and] the energy embodied in farm equipment would have to be distributed over all crops (including crops not used for ethanol production) for which the equipment was used over the life of the equipment”. Regardless of this difficulty, it is important to include a quantification of these variables as they can account for a significant part of the energy input of the resource.

Another variable in the equation is the ‘co-products’ associated with ethanol production. When sugarcane is grown for transport fuels, bagasse is produced, which is the material that remains after the sugars and starches have been extracted. These products can be used as high-protein animal feed, so the argument is made that if the feed is created as a co-product of ethanol production, traditional animal feed producers will have to produce less and this can be credited to a net-energy savings. Ethanol production should therefore be able to subtract the energy required for traditional feed production from their energy balance. However, Pimentel et al. (2007 p.30) note that, despite the fact that this co-product may be suitable for feeding ruminants such as cattle, it has limited value for hog or poultry feed. They maintain that bagasse is more effective as a substitute for soybean feed which has a protein content of about 49% as opposed to 27% from the bagasse. Further, they state that: “…soybean production for livestock feed is more energy efficient than corn production because little or no nitrogen fertilizer is needed for the production of this legume”.

Shapouri et al. (2003) found that a positive energy balance can be achieved regardless of co-product crediting. They calculated a 34% increase in energy without crediting for co-products and 53% if co-products are credited. On the other hand, Pimentel & Patzek (2005) found a negative energy balance regardless of co-product crediting. They found a 29% loss of energy, which means that 29% more energy was consumed than was produced.  When co-products were accounted for, the energy loss was reduced to 20%.

The work of Ferguson (2003) infers that only about 5 parts per 10,000 (0.05%) of the total solar energy is converted to ethanol. The paper demonstrates that if 50 million ha (about 1/3 of US cropland) were allocated to grow corn for ethanol production, it would correspond to about 29 x 10⁶kW of net energy capture. If this value is divided by the population of the United States (312 million in 2011), it yields about 0.093 kW per person, which Ferguson indicates as satisfying only about 11% of the US liquid fuel demand, or 10 years of population growth.

Despite the discrepancies between calculation methods and chosen assumptions, the fact remains that the production of these fuels requires land area previously set aside for food production to be used for creating transport fuels; a factor which further entrenches social debates over the ethics of alcohol production for transport fuels. Pimentel & Patzek (2005) argue that, regardless of alternative land use constraints, the production of alcohol (namely ethanol) as a transport fuel comes at a substantially higher cost than it is worth. They maintain that without the government subsidies (above mentioned USD $13 billion in 2009), production of transport alcohol would plummet. An indication which they suggest is evidence that ethanol production is uneconomical.

Figure 3. Energy balance as reported by various researchers for corn ethanol. Source: Aden (2007).

Case Study 1 – United States:

According to Koplow & Steenblik (2008), the alcohol industry in the United States (primarily ethanol) began in 1978 with the introduction of the Energy Tax Act. This act initiated the subsidisation of the fuel, creating a federal subsidy of 4 cents per gallon on gasohol (10 % ethanol, 90% gasoline). During the 1980’s domestic production increased five-fold, slowed through the 1990’s, and has picked up again. Koplow & Steenblik (2008) suggest that subsidisation for alcohol based fuels in the United States has been driven by several factors, of which include; a reduction of dependence on foreign fuel; environmental targets aimed at reducing carbon emissions; and the encouragement of domestic rural development.

The IEA (2010) report confirms that the above mentioned United States legislation allows blending of gasoline with ethanol up to 10%; and as the REN 21 (2011) report shows, in 2010 over 90% of all gasoline was blended with ethanol. As mentioned earlier, about 4% of transport fuel demand in the United States was supplied by ethanol in 2010, but the ‘blend wall’ of 10% was considered by many to be a deterrent to further development of the resource in the country. As a result, in 2010 the limit was raised to 15%. As stated earlier, much of the funding for alcohol transport fuels comes from subsidies, and as the REN 21 (2011 p. 61) report indicates, in 2010 the existing tax credit policies in the United States were extended to ethanol blended fuels, providing a 45 cent/gallon (13 cent/litre) subsidy.

A current policy used in the United States to support alcohol based fuels is the Volumetric Ethanol Excise Tax Credit (VEETC), which Koplow & Steenblik (2008 p.87-88) summarise as follows: “The federal Volumetric Ethanol Excise Tax Credit (VEETC), enacted in 2004 by the Jumpstart Our Business Strength (JOBS) Act, constitutes the single largest subsidy to ethanol. It provides a credit against income tax of 51 cents per gallon of ethanol blended into motor fuel. It is awarded without limit, and regardless of the price of gasoline, to every gallon of ethanol — domestic or imported — blended in the marketplace. Moreover, it is not subject to corporate income tax, which means its value to recipients is greater than if it were a simple grant, or a price benefit provide through an exception from an excise tax.

According to the REN 21 (2011 p.31) report, in 2010 the United States was the world leader in alcohol production for transport fuel, producing 49 billion litres of fuel (57% of the world total); an increase of 8.4 billion litres from 2009. Further, the report also notes that:“[a]fter several years as a net importer, the United States became a net exporter in 2010, sending a record 1.3 billion litres of fuel ethanol overseas, mainly to Canada, Jamaica, the Netherlands, the United Arab Emirates, and Brazil”.

The REN 21 (2011 p.45) report also indicates that the production of ethanol within the United States was manufactured in 204 plants in 29 of the 50 states, and that these plants had a combined capacity of 51 billion litres. Further, 10 of the plants were in the process of expanding to accommodate an increased capacity of 2 billion litres.

Case Study 2 – Brazil:

According to the EIA (2011 p.131) report, the production of alcohol based transport fuels in Brazil was initiated in 1975 with the launch of the National Alcohol Program. The program was created to encourage the production and use of ethanol, and as a result of the program, domestic ethanol consumption has increased from 0.1 billion gallons in 1975 to 5.7 billion gallons in 2010. The EIA (2011 p. 131) report also notes that:“[t]he increase in ethanol consumption was supported by the launch of flexible-fuel vehicle (FFV) production in 2003. In 2009, FFVs accounted for 95 percent of all new vehicle sales in Brazil. With a continuous increase in FFV sales, the ethanol share of Brazil’s transportation fuel market is likely to expand”.

The REN 21 (2011 p.32) report examines the export market of alcohol production and indicates that, although Brazil has traditionally been the global leader in ethanol exports, in 2010 they lost a substantial share of the market to the United States. This is partially explained by an increase of trade between the United States and Europe, but the report also notes that adverse weather conditions in Brazil led to a lower than expected harvest of sugarcane (the main fuel source of Brazil) which increased its price. As a result, ethanol produced in the United States (with a corn based feed stock) became comparatively cheaper. However, the REN 21 (2011) report attributes part of this price difference to subsidisation, as the ethanol market in the United States is heavily subsidised while in Brazil it is less so.

Despite the decrease in Brazilian export, the REN 21 (2011) report indicates that production in Brazil increased to 28 billion liters in 2010, an increase of over 7% from 2009 making it the second largest producer of ethanol in the world. Production of ethanol in Brazil accounted for almost one third (about 31%) of global production, and about 41.5% of light duty transport in Brazil was fuelled by ethanol in 2010.

Further, according to REN 21 (2011 p. 37) data, the second largest development bank for finance of renewables was Brazil’s BNDES, financing a total of USD $3.1 billion. According to the report:“BNDES’s activity in 2010 was double its 2007 level, but the bank’s contribution actually peaked at $6.2 billion in 2008, when Brazil’s ethanol investment boom was at its height”.

As Brazilian sugarcane prices rose above the level that was economical for export to the United States, there was increasing internal pressure to invest in the industry. The REN 21 (2011 p.45) notes that in 2010 the government approved a plan to allocate more than $400 billion toward increasing production to both satisfy growing domestic demand, and to prepare for a planned tripling of the countries ethanol export (to 9.9 billion litres per year). The EIA (2011 p.32) report states that sugarcane is the most economical and highest yield feed stock for producing ethanol fuels. Further, they note that the country has a large land mass with a large amount of underutilized land available for sugarcane production. The report projects that the domestic demand will not rise as fast as production which will result in a rise in net export of ethanol in the future.

Literature Cited:

Aden, A. (2007). Biomass and Biofuels: Technology and Economic Overview. Presented at the 2007 Global Energy Technology Strategy Project (GTSP) technical workshop. College Park, Maryland.

 EIA (2011). International Energy Outlook  2011. U.S. Energy Information Administration, 0484(2011).

Ferguson, A. (2003). Implications of the USDA 2002 Update of Ethanol from Corn. Optimum Population Trust, 3(1), 11-15.

Ghosh, T., & Prelas, M. (2011). Energy Resources and Systems. Volume 2: Renewable Resources. New York, Springer-Dordrecht Publishing.

IEA (International Energy Agency) (2010). World Energy Outlook 2010, Paris, OECD/IEA.

IEA (International Energy Agency) (2011). Technology Roadmap: Biofuels for Transport, Paris, OECD/IEA.

Koplow, D., & Steenblik, R. (2008) Subsidies to Ethanol in the United States. In: Pimentel, D. (ed.) Biofuels, Solar and Wind as Renewable Energy Systems. New York, Springer Publishing, 79-108.

Pimentel, D., Patzek, T., & Cecil, G. (2007). Ethanol Production: Energy, Economic, and Environmental Losses. Rev Environ Contam Toxicol 189, 25-41.

Pimentel, D, & Patzek, T. (2005). Ethanol Production Using Corn, Switchgrass, and Wood;

Biodiesel Production Using Soybean and Sunflower. Natural Resources Research 14(1), 65-76.

REN 21. (2011). Renewables 2011 Global Status Report, Paris, REN 21 Secretariat.

Shapouri, H., Duffield, J., & Wang, M. (2003). The Energy Balance of Corn Ethanol Revisited.

American Society of Agricultural Engineers 46(4), 959-968.