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Is the bioethanol market reaching its limit?

Biofuels are more and more in demand with increasing oil prices and policies promoting emission reductions, but can the biofuels market source enough feedstocks to meet demand?

By Renewable Energy Focus staff

This is the question raised by the Czarnikow Group in its look at the bioethanol market.

In 2010 US bioethanol consumption increased by a 20% to a total of 49 billion litres, up from 41bn in 2009. However, demand is now unlikely to increase significantly having hit the E10 blend wall – the effective saturation point for ethanol use at 10% of petrol, Czarnikow says.

Over the past 18 months, the US has swung from a net-importer to exporter of bioethanol, and the most viable point of supply for many countries around the world. This looks set to continue in 2011 as US production now exceeds implied E10 demand by around 5%.

US bioethanol prices are at 33-month-highs, but they have not rallied to the same extent as corn due to current over-supply in the market, and producer’s margins are being squeezed. Coupled with further demand later in the year as US citizens take their vacations, pressure is being added on buyers of US ethanol abroad.

Brazil

Brazilian supply has been unable to match the rise in bioethanol demand resulting in a shortfall in availability. Lack of new investment in cane production, rising sugar prices and production and underlying weaknesses in the earnings structure resulted in ethanol production falling short of 2010/11 forecasts, reaching only 25.3bn litres, just 3% higher than 2009/10.

During Q1 of 2011 pump prices of bioethanol in many Brazilian states have traded at a large premium to gasohol, and are currently being sold at record highs, forcing consumers to switch to gasohol.

Higher returns from sugar has meant that ethanol producers are not encouraged to reallocate cane to bioethanol. This raises a number of issues for the Brazilian Government given the competing objectives of containing inflation, maintaining growth in the economy and ensuring energy needs are met.

Europe

Given European Commission targets, European bioethanol demand has surpassed 5bn litres in 2010, driven by growth in demand in the UK, Germany and Spain. However, local production has been insufficient to meet demand, providing a good reflection of the difficult operating environment facing EU processors as high feedstock prices have dented operating margins.

EU member states face similar problems to the US with the implementation of higher blend rates as the EU targets to source 20% of energy from renewable sources by 2020. Consumer resistance is a further headache for European producers, who are fighting high grain prices and lower cost US bioethanol imports.

Toby Cohen, Head of Analysis at Czarnikow, says: “Market conditions may swing Brazilian ethanol production away from sugar without the need for government involvement. With the sugar market expected to return to surplus in the 2011/12 season, the fundamental outlook is changing and in this context a change in focus within Brazil may at some stage become economically desirable.”

Henry Toller, analyst at Czarnikow, adds: “As always, it seems the bioethanol market faces challenges to expand, but the history of the market since 2003 tells us that growth is always achievable.”

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Comments

Colm McGinn said

25 May 2011
It has been apparent for at least 3- 4 years that biofuels of any kind (for existing motor vehicles) are a flawed concept. They are so because, fundamentally, being dependant on incoming solar energy for their creation, and converting that at a necessarily lower efficiency than the first input of solar heat and light, and then using the fuel produced at an efficiency of only 25 – 30% (petrol/ ethanol engines) or 50% (diesel engines), gives an overall very poor efficiency which cannot hope to overcome the energy inputs in their creation. Net effect, total screw-up.

There is (just about) a possible value in conversion of non food cellulose (wood scrap, grass cuttings) to diesel type oil, but that might be marginal.
There is some value, because of the directness of its energy paths, in anaerobic digesters and production of methane gas, preferably for direct use as heat. (Cooking, space heating/ cooling, refrigeration)

The route to take is to move to a largely solar based energy economy, using heat stored, and heat engines (e.g. of the Stirling type).

Land that can grow food is too valuable for that purpose; we will need all the food we can make.

Any serious study concludes that, in terms of society's need for adequate efficiency (not power performance), ethanol 'works' in Brazil, where loads of sun and a high energy crop / feedstock like sugar cane can (just about) overcome the limitations of trying to compete with fossil fuels. The fossil stuff is so energy dense that we have become lazy in our expectations. We cannot afford the kind of waste we have engaged in since 1945. I was looking recently at internal combustion engines; they are an absolute triumph of human ingenuity and engineering skill, but they're rubbish if you need serious efficiency. Which we do, now, need.

We can't afford the flapping around that we (rich people) do now. The Chinese are straining to produce food for their population, at the same time they are losing ~ 150,000 hectares per year to desertification. (And the same amount to roads/ buildings) As they buy global food, both the economics of food production change (in the direction of higher prices for producer), and the economics of ethanol disimprove. At least for production other than Brazil, though probably there as well.

We humans are going to be at 9.5 billion persons within 40 years; we are now 6.9 billion, and our food production & food distribution is showing signs of strain. The food industry is very dependent on fossil energy inputs, both of fertiliser chemicals, and for transport. We cannot continue with our current profligacy. The riots in Mexico, attached to rise in corn price, itself attached to US farmers supplying their production for ethanol rather than for food, shows the background risk. Those people protested (& rioted) because their very existence is threatened. They were quite right to do so.

Anumakonda said

24 May 2011
There is Agave(Americana),Sisal Agave which is a care free growth plant and it regenerates. Biofuel can be extracted from this plant. It is a multiple use plant which can be grown in waste lands. The fibre can be used for rope making, pulp in paper making, a steroid HECOGENIN can be obtained from it, the plant when fermented leads to methane and as such can be used in Biogas generation, the plant cut into pieces and dried is used in concrete as it has strong fibers, in Philippines fabrics made from the fibre of Agave are sold under the brand name DIP DRY.

In Mexico Biofuel from Agave is extracted in a big way.

Dr.A.Jagadeesh
Wind Energy Expert
E-mail: anumakonda.jagadeesh@gmail.com

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