Key quotes:
From article 1: "The Brazilian and U.S. governments are meanwhile funding research and development projects to spur ethanol startups throughout Latin America, but the financial crisis will inevitably delay private sector investment, U.S. Secretary of Agriculture Ed Shafer told The Associated Press."
From article 2: "The U.S. Department of Energy
announced on Monday that it will give $200 million in grants to build refineries for such advanced biofuels as bio-butanol and cellulosic ethanol."
From article 3: " "U.S.-produced biofuel combined with fuel efficiency will allow the nation to meet growing transportation energy needs without increasing imports of oil. That is a surprising conclusion from the Energy Information Administration...";
" "There are more than 30 existing and planned cellulosic biorefineries set to begin production of advanced biofuels in the next few years."
1.
http://www.hpj.com/archives/2008/dec08/dec29/Brazilsonceboomingethanolse.cfm Brazil's once booming ethanol sector hits brakes
SAO PAULO, Brazil (AP)--Brazil's biofuel industry just months ago was being flooded with billions in new investments for vast new sugarcane plantations and gleaming distilleries that churn out the cheapest ethanol on earth.
But the global financial crisis has put the brakes on that boom, drying up foreign investment and domestic credit, stalling new projects and prompting cash-strapped ethanol producers to indefinitely postpone expansions.
"I'm still ready to play ball, but the ball disappeared," said former Brazilian Agriculture Minister Robert Rodrigues, whose plans for an ethanol startup were recently put on hold as foreign investors withdrew cash amid fears that a global recession would slow demand for fuel.
Heavily leveraged small and mid-sized ethanol operations are likely to be bought out by their larger counterparts, if emergency credit lines from state-owned banks aren't enough to stave off crushing debt obligations, participants at a biofuels conference in Sao Paulo in mid-November said.
One large ethanol maker filed for bankruptcy recently to restructure $100 million in debt it could not pay. Analysts and sugarcane growers predict others will follow, and a leading industry association says 50 percent of new equipment orders have been canceled or postponed.
"We're going to see more bankruptcies," said Eduardo Carvalho, director of the ethanol and sugar unit of conglomerate Odebrecht SA, one of Brazil's biggest companies.
Some $30 billion to $40 billion in investment that was expected in the industry over the next four years will be slashed, Marcus Jank, president of Brazil's powerful Sugar Cane Producers Association, said without giving details.
Brazil's biofuel industry, born in the 1970s and concentrated in sugarcane-rich Sao Paulo state, has long been considered a global model, and its method of producing ethanol from sugarcane is cheaper and more efficient than rivals, including the U.S., who use corn.
John Melo, chief executive of U.S.-based Amyris Biotechnologies, said Brazil's ethanol industry will survive because of strong domestic demand and because international demand for cheap renewable fuels will rebound with oil prices.
Amyris has teamed with Brazilian producers in a joint venture that could produce 1 billion gallons of sugarcane-diesel a year by 2015.
The Brazilian and U.S. governments are meanwhile funding research and development projects to spur ethanol startups throughout Latin America, but the financial crisis will inevitably delay private sector investment, U.S. Secretary of Agriculture Ed Shafer told The Associated Press.
Most new sugarcane mills cost about $200 million, and crush as much as 2 million metric tons of cane a year, producing up to 160 million liters of ethanol.
The full extent of the damage to one of Brazil's most promising export industries is still unknown: The sector is dominated by private companies owned by wealthy families who have attracted foreign partners but are not required to report their finances publicly.
But no one expects Brazil to lose its place as the world's biggest ethanol exporter and second largest producer after the U.S.--where industry losses appear even more severe.
With oil below $50 per barrel, down more than 60 percent since July, biofuels have become less competitive. But U.S.-made corn ethanol is more expensive than Brazil's sugarcane-based fuel: Oil must top $50 a barrel for it to be cheaper than gasoline. In contrast, Brazilian ethanol kingpins insist, their fuel is competitive as long as oil sells for more than $40 a barrel.
Brazil's strong domestic market will soften any blow to the industry if global demand for ethanol falls. The country started manufacturing ethanol-only cars in the 1970s, and "flex fuel" cars introduced in 2004--which run on ethanol, gasoline or any combination of the two--now make up nearly nine of every 10 cars sold.
And because state-run oil company Petroleo Brasileiro SA sets gasoline prices, ethanol in Brazil typically sells for nearly half the price of gas, making filling up a no-brainer.
"The only thing that could kill the sector would be the suspension of flex-fuel car production, and that won't happen," said Christoph Berg, managing director at German commodities research firm F.O. Licht.
Investment could rebound if long-disputed U.S. and European tariffs on Brazilian ethanol are eliminated--but that doesn't seem likely anytime soon.
European Energy Commissioner Andris Piebalgs said he anticipates no cuts to the EU's 0.19-euro-per-liter tariff, barring a breakthrough in the so-called Doha Round of trade talks by the World Trade Organization.
And U.S. President-elect Barack Obama has in the past suggested he opposed eliminating the United States' $0.53 per gallon tariff on Brazilian ethanol.
"As it relates to our country's drive toward energy independence, it does not serve our national and economic security to replace imported oil with Brazilian ethanol," Obama said on the Senate floor last year.
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Date: 12/19/08
2.
http://www.redherring.com/home/25685 Energy Dept. Pumps $200M Into Biofuels
The U.S. Department of Energy
announced on Monday that it will give $200 million in grants to build refineries for such advanced biofuels as bio-butanol and cellulosic ethanol.
The funding is intended to be used to help speed up commercialization of cleaner, alternative transportation fuels, which use renewable biomass such as fast growing grasses and trees as feedstocks.
The grants are meant to help finance construction of biorefineries in pilot or demonstration mode that could lead to commercialization in the "near term." The financing will be available over six years, beginning in 2009.
The announcement comes just weeks before the Energy Independence and Security Act of 2007 goes into effect. Beginning in 2009, the legislation mandates the increasing use of renewable biofuel, from 10.5 billion gallons in 2009 to 36 billion in 2022. The act also requires by 2022 that 21 billion gallons of that total be so-called advanced biofuels, the kind targeted in this funding.
3. http://news.thomasnet.com/companystory/553688
Annual Energy Outlook Confirms That Biofuels Will Increase U.S. Energy Independence
Biotechnology Industry Organization
Release date: December 19, 2008
WASHINGTON, D.C. (Friday, December 19, 2008) - Increasing domestic production of advanced biofuels to meet or exceed the goals of the Renewable Fuel Standard can significantly reduce U.S. reliance on petroleum. Brent Erickson, executive vice president of the Biotechnology Industry Organization's Industrial & Environmental Section, today released comments on the Energy Information Administration's 2009 Annual Energy Outlook:
"U.S.-produced biofuel combined with fuel efficiency will allow the nation to meet growing transportation energy needs without increasing imports of oil. That is a surprising conclusion from the Energy Information Administration, whose Annual Energy Outlook projections use the most conservative assumptions. The current projection demonstrates that if the United States were to meet or exceed the targets set in the Renewable Fuel Standard, we could begin to decrease our reliance on all petroleum, create jobs and boost rural economies, and significantly cut greenhouse gas emissions.
"There are more than 30 existing and planned cellulosic biorefineries set to begin production of advanced biofuels in the next few years. Many other projects and promising technologies are on the drawing board. These pioneer cellulosic biofuel facilities will prove that the technology works and that the industry can meet the goals established in the Renewable Fuel Standard. With oil prices set to rise again, per the projections, the need for domestically produced advanced biofuels should remain a priority for U.S. policymakers and consumers."
A map of these cellulosic biofuel facilities is available on the web at http://biofuelsandclimate.wordpress.com/about/.
The Advanced Biofuels & Climate Change Information Center presents the latest commentary and data on the environmental, greenhouse gas and other impacts of biofuel production. Drop in and add your comments, at http://biofuelsandclimate.wordpress.com/. [Excerpt] 4. http://www.redherring.com/home/25682 U.S. Biofuel Output to Miss Mandates
A January deadline looms for a U.S. law that will go into effect requiring the use of advanced biofuels, but producers of cellulosic biofuel are not on track to meet the Renewable Fuel Standard until 2012, and the shortfall will likely drive up the price of the fuel, according to a report.
The report published last week by investment bank ThinkEquity forecasts that in 2010 the U.S. will produce no more than 28.5 million gallons of cellulosic biofuel, or 81.5 million gallons short of the RFS mandate.
"I think the industry will be playing catch up to the RFS for a number of years," said David Woodburn, the ThinkEquity analyst who wrote the report.
The Energy Independence and Security Act of 2007 calls for the U.S. fuel market to use 100 million gallons of cellulosic biofuel in 2010, increasing rapidly to 16 billion gallons per year by 2022.
Mr. Woodburn estimates that cellulosic biofuel production will sharply increase by 2011 and be just shy of the 250 million gallons required that year. But he cautioned that his figures are best-case scenarios based on capacities of plants that are not yet built. It can take months or years before a facility reaches full capacity even after it has come online. And there are currently no cellulosic biofuel plants in commercial production.
But dozens of startups and established ethanol makers with millions of dollars in venture backing and other financing are racing to develop cellulosic biofuel. The hope is that the next-generation fuel—which is made from fast growing grass, agricultural waste and other biomass sources—eventually will be cheaper and cleaner than gasoline while not depending on food crops, like corn, as a feedstock.
Broomfield, Colorado-based Range Fuels' 10 million gallon-per-year facility, scheduled to open in late 2009 or early 2010, is likely to be the first commercial cellulosic plant, according to the report. Other large cellulosic plants that should come online by 2011: Sioux Falls, S.D.-based POET's 25 million GPY plant and Cambridge, Mass.-based Verenium's 36 million GPY plant.
But the near-term shortfall could work in the fledgling industry's favor. Because of a little-known rule adopted as part of the RFS, the Environmental Protection Agency has the authority to require fuel retailers to buy credits to make up the difference between cellulosic biofuel production and the mandated volumes. This is the government's "stick" for forcing demand for the fuel.
The credits will be sold for up to $3 per gallon, depending on the price of gasoline. The higher the price of gasoline, the cheaper the credits, and vice versa. What that means, said Mr. Woodburn, is that if there is a shortfall of cellulosic biofuel, the price of the fuel should be driven up to close to $3 per gallon—or the point at which retailers would break even between buying credits or buying the fuel on the open market.
The government, in effect, has created a minimum price for cellulosic biofuel through to 2022 as long as there is a production shortfall.
Future contracts for ethanol, the dominant biofuel in the market today, currently trade at about $1.50 per gallon. As long as cellulosic ethanol production is at or below the RFS mandates, at current prices producers could sell the fuel for nearly twice as much as their corn-based competitors.
That's good news for a young industry that could use the breathing room as it ramps up production, improves its technology, and decreases costs.
But the credits and even the RFS mandates can be changed on a yearly basis at the discretion of the EPA. Because of that lack of certainty, Jim Imbler, chief executive of biofuel startup ZeaChem in Colorado, said the $3 price isn't driving his company to move more aggressively into the market.
"If I move on an option, then I'm a gambler," Mr. Imbler said.
The company's goal is to produce cellulosic ethanol for less than $1 per gallon. ZeaChem is building a 1.5 million GPY pilot plant in Oregon to begin production in early 2009.
"We're on a path that may not meet government mandates but that does meet economic realities," Mr. Imbler said.
Industry observers believe cellulosic biofuel will need to drop below $1 per gallon to be cost competitive with gasoline, which currently sells on wholesale markets for about that price. But the cost of the fossil fuel has dramatically declined recently, dropping below $50 per barrel this month from a high of $150 in the summer.
Wes Bolsen, VP of business development for Coskata, a cellulosic biofuel startup in Illinois, said his only worry is that the shortfall could lead people to call for removing the RFS mandates.
"We cannot lose our resolve because the industry is in its infancy," he said. "Even if we're 50 million gallons short, that is one-half of a corn ethanol plant."
Corn ethanol plants have capacities as high as 250 million gallons per year, with the average being about 100 million in the United States. But if cellulosic biofuel producers are going to meet the 16 billion GPY mandate by 2022, they'll need more than just one of those corn ethanol-sized plants.
5. http://www.nilesstar.com/articles/2008/12/25/news/ndnews4.txt Governor advances state's efforts for renewable fuels
Wednesday, December 24, 2008 10:30 AM EST
LANSING - Gov. Jennifer M. Granholm has signed legislation that will advance the state's efforts to expand the production and use of renewable fuels in Michigan.
The 11 bills were part of a series of recommendations from the state's Renewable Fuels Commission, established in 2006.
The legislation includes five additional renewable energy renaissance zones, creation of a Renewable Fuels Fund to promote the production and use of alternative fuels and new tax incentives for the purchase of equipment capable of harvesting biomass and the conversion of existing gasoline pumps to pumps capable of delivering ethanol, biodiesel or other forms of renewable fuels.
"Michigan is committed to leading this nation to energy independence, and to meet that goal, we must foster renewable fuel research, production and use across our state," Granholm said.
"This legislation will make Michigan even more attractive to renewable fuel producers looking to grow their businesses and create jobs."
Public Act 329 of 2008, sponsored by Rep. Frank Accavitti, D-Eastpointe, adds five additional renewable fuels renaissance zones in Michigan, bringing the total to 15.
Renaissance zones are specific geographic areas designated as tax exempt to encourage economic development.
Additionally, the new law requires that five of the state's renewable fuels renaissance zones be designated for facilities that focus primarily on cellulosic biofuel production.
Public Acts 314, 332 and 334 of 2008 create tax incentives for the use of agricultural machinery that can harvest both grain and biomass.
These bills encourage farmers to invest in equipment that will allow them to harvest their crops while also collecting biomass residue from the crop or grain that can be used in alternative fuel production.
The bills were sponsored by Rep. Paul Condino, D-Southfield, Sen. Patty Birkholz, R-Saugatuck, and Rep. Gary McDowell, D-Rudyard, respectively.
"The next generation of alternative fuel will be produced from non-food sources like wood waste, switchgrass, algae or other waste products," said Granholm. "Creating incentives to help insure that the research and production of these next-generation fuels are done here in Michigan will help insure that the jobs created are here, too."
Public Acts 321 and 322 of 2008, sponsored by Sen. Cameron Brown, R-Fawn River Township, and Michael Switalski, D-Roseville, respectively, create a new Renewable Fuels Fund to promote the production and use of alternative fuels in Michigan.
Citizens will have the option to contribute to the fund through a new check off on the state income tax form.
Also signed by the governor were the following acts:
€ Public Act 313 of 2008, sponsored by Rep. Howard Walker, R-Traverse City, which requires the Michigan Department of Agriculture (MDA) to develop rules regulating the quality and purity of biodiesel;
€ Public Act 335 of 2008, sponsored by Rep. Joel Sheltrown, D-West Branch, which provides a Michigan Business Tax credit for gas stations that convert existing gasoline pumps to biofuels pumps
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6. http://www.desmoinesregister.com/article/20081222/BUSINESS/812220330/1001/
Plunging profits trump ethanol's previous fears
Experience is said to be a hard teacher, and the ethanol industry has learned some painful new lessons in the last half-year.
Ethanol producers now know that when corn prices fall, the prices of crude oil and ethanol decline as well. So ethanol producers' gains on the cost side will be checkmated by losses on the revenue side.
The result has been the bankruptcy and closing of three of Iowa's 32 ethanol plants. The industry's old worries of being political targets in environmental- and food-versus-fuel debates has been replaced by a more pressing issue, making a profit and staying in business.
The situation might get worse before it gets better.
"These are frustrating times for the industry, and we may see a few more plants close while the market finds equilibrium," said Monte Shaw, executive director of the Iowa Renewable Fuels Association. He acknowledged that "the industry probably overbuilt itself."
VeraSun's facilities in Albert City and Dyersville, and Pine Lake Corn Processors of Steamboat Rock have all closed in the past few months.
But Shaw adds: "The idea that ethanol is on a death spiral is ridiculous. More ethanol will be produced next year than this year (because of a 1.5-billion- gallon increase in the federal mandate) and we'll need producers to get the job done."
Ethanol's problem: The numbers don't add upThe precipitous fall in the price of feedstock corn from $8 per bushel in July to $3.60 this week should be a boon to ethanol producers. But the price of ethanol has staged a corresponding swoon, dropping from $2.90 per gallon in the summer to $1.60 per gallon at present.
Ethanol has fallen in price in tandem with crude oil's $100 per barrel plunge from its summertime high for the same reason - declining demand due to the worldwide economic contraction and the flight of speculative hedge funds from the agriculture and energy commodity markets.
"We could make money when corn was $8 and ethanol was $2.90 per gallon," Shaw said. "But what happened was that while plants contracted into forward months for their corn supply, the oil companies won't let them do similar sales into future months. So the plants are having to sell lower-priced ethanol while using more expensive corn."
Ethanol profit margins have declined from 31 cents per gallon this summer to just 3 cents per gallon in November, according to research by Don Hofstrand of Iowa State University Extension Services. The $2-per-gallon profit margin ethanol plants enjoyed in their halcyon days of mid-2006, when ethanol was the golden child of renewable biofuels, seems like a long-ago era.
At present, ethanol doesn't have the comfort of seeing demand for its bankrupt assets. A Wichita, Kan., plant that went bankrupt attracted just a single auction bidder - the bank that held its secured debt.
Another bankrupt ethanol plant in Ohio was put on the block and failed to attract a single bid. VeraSun said after its Oct. 31 bankruptcy filing that it had received an unsolicited offer for some of its assets - this after rival producer Poet said it would be interested in acquisitions - but nothing more has been said on the subject in the last month.
Ethanol industry takes its case to WashingtonThe Renewable Fuels Association, ethanol's largest trade group, has approached lawmakers and President-elect Barack Obama's transition team with several proposals for aid to the ethanol industry, including $1 billion in short-term credit to help plants stay in operation and $50 billion in loan guarantees to finance further expansion of the industry.
The RFA as well as a rival industry group, Growth Energy, want the federal government to ease restrictions on how much ethanol can be added to gasoline for conventional cars and trucks.
The current limit, set by the Environmental Protection Agency, is 10 percent. Shaw, of the Iowa Renewable Fuels Association, said the blend ratio could be raised safely to 15 percent and maybe up to 30 percent using existing car engines.
But federal officials say more study is needed of the impact of ethanol on engines before the 10-percent limit is changed. Given that ethanol producers benefit from a usage mandate (which will rise from 9 billion gallons this year to 10.5 billion gallons in 2009), tax subsidy and tariff on imported ethanol, the industry will face strong resistance from cattle and poultry interests and from environmentalists to getting additional aid.
One of the ethanol industry's most powerful allies in Congress, Sen. Charles Grassley, R-Ia., said the biofuel industry should focus on preserving its existing incentives.
Current corn prices too low for farmersThe ethanol industry thinks it has winners in Obama and Tom Vilsack, his agriculture secretary designate, both with long records supporting ethanol. But even the combined efforts of that soon-to-be-powerful duo won't solve short-term problems that Iowa ethanol plants face.
In the aftermath of its bankruptcy, VeraSun asked for, and received, permission from the Delaware bankruptcy court to void future corn purchase contracts priced above market values.
Ethanol plants now face more questions and scrutiny from farmers about their future before they can buy corn.
Beyond the credibility issue, low corn prices have made purchases difficult because most Iowa farmers need at least $4 per bushel to meet the input costs for the recently harvested crop, and are disinclined to sell corn at the prevailing Iowa cash prices of $3.50.
Bruce Rastetter, chairman of Hawkeye Renewables of Ames, says his four plants "are operating all right. But buying corn is tough."
Shaw says "every ethanol plant has had trouble contracting for corn."
Ethanol's problems might be worse were it not for distiller's grains, the protein by-product of ethanol production that plants sell as cattle feed.
The typical Iowa ethanol plant can count on distiller's grains for up to one-third of its revenues and an even larger chunk of its profits. But distiller's grain, like corn itself, has declined in value from a peak of around $180 per ton in midsummer to about $110 per ton this month.
[Ends]
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