Lower Your Carbon Footprint
All ethanol production is no longer created equal. Several states have rules on the books to require a lower carbon fuel standard (LCFS) than the national renewable fuels standard. California going from E5.7 to E10 on Jan. 1, represents a market of 1.2 billion gallons of ethanol that requires a lower carbon fuel standard than other states.
California won’t be alone in setting tougher limits, and like so many trends in emissions and sustainable business practices, what starts in California inevitably washes east to the rest of us. Nor is the U.S. alone; Canada is seeing similar moves with British Columbia working on lower carbon fuel legislation with updates expected in the next few months. All this indicates the door is wide open to new markets for plants that can produce to a more carbon efficient standard.
To move with that market, in 2010 we’ll see more plants:
>Move from distillers dried grains to wet distillers grains (saving one-third of the cost)
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>Replace natural gas with renewable biomass. (Biomass is carbon neutral—natural gas is not.)
Overall, this will produce greater energy per Btu consumed, and result in a reduced carbon footprint.
Farmer-owned Siouxland Energy and Livestock Cooperative in Sioux Center, Iowa, is a case in point. What started out as a 15 MMgy plant grew, and now produces at 70 MMgy. The plant never included a dryer, which from a carbon footprint position, means sustainable plant production that will see value either from qualifying for more renewable identification numbers (RINs) or selling at a premium into LCFS markets, or perhaps both.
“A lot of Midwestern farmers resorted to drying beans last harvest because it was so wet in the Midwest,” says Bernie Punt, general manager of SELC. To take grain moisture down for a dry distillery, Midwest farmers saw costs hover around 70 cents per bushel. Punt’s facility has a bunker about the size of three football fields and processes corn from local farmers at high moisture, which saves almost one-third the processing cost, he says.
Cleaner Fuel Facilities Cash In
Destilmex S.A. de C.V., a Mexican ethanol facility owned and operated by Zucarmex S.A. de C.V., in Navolato, Sinaloa, is among the trend-setting businesses positioning themselves to be clean fuel facilities.
Normal fuel facilities get one RIN per gallon of ethanol. But reducing a company’s dependence on fossil fuels, will facilitate generating more than one RIN per gallon of ethanol, thanks to its “clean fuel facility” status with the EPA. To achieve this standard, last fall Destilmex tore out its fossil fuel boiler and put in a fluid bed boiler.
“If you are certified by the EPA as a clean fuel plant, the payback can be fast and furious at two RINs per gallon,” says Jon Bjornstad, president of C&N, Ethanol Marketing Corp. marketer representing more than 15 plants and 650 MMgy of ethanol and biodiesel production. To illustrate his point, in 2009, RINs averaged 10 cents per gallon. Forty million gallons times 10 cents per gallon times 2, equals $8 million in value that will be reflected in the premium price the product receives in the market.
Deepen Ties to Local Community
Becoming more local means more money for most plants, which immediately saves in a host of significant costs, including transportation.
This strategy has paid big dividends for the SELC. According to Punt, “We’re a very local plant. We have higher grain yields, have livestock close by and use livestock waste for fertilizer—it all works together and we extract maximum value for everyone.”
According to Bjornstad, “If you can develop the local market for your distillers grains, haul them to the feedlot and feed the animals, and not have to dry them, then your plant can sell the largest coproduct for significantly more margin. If you can also integrate that with a nearby market for manure as a boiler feedstock, even better. Auditors are going to look at the whole picture for each plant, and see how each facility fits into its landscape to figure out the total carbon picture.”
Smart producers, he says, are localizing and thus improving their carbon balance, an equation that depends on all inputs as well as outputs for a plant.
Increased Coproduction
Extracting maximum value from co-products is another trend that will reach new heights in 2010, especially with the pending implementation of the second stage of the renewable fuel standard (RFS2), that creates a carve-out for biodiesel. This should generate a more stable market for this fuel product, which can be produced from corn oil extracted at ethanol plants.
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