Producers, industry veterans describe opportunities in ethanol

By Susanne Retka Schill | June 10, 2014

Applying lessons from the past, ethanol industry veterans shared their outlook for the future at the opening morning sessions of the International Fuel Ethanol Workshop & Expo, Tuesday, June 10, at Indianapolis, Indiana.

Ethanol has gone through many cycles, said Lucy Norton, managing director of Iowa Renewable Fuels. It became popular in the fuel shortages around the oil embargoes in the industry’s early years, and then as a replacement for lead in gasoline. Looking back, she said, the mistake was “we let oil industry and retailers say what to call it. We let them label it, brand, it and market it. We should have had a national brand for ethanol.” The industry needs to be more aggressive in telling ethanol’s positive story as the highest octane, cleanest, lowest cost fuel, she said, and more effective at explaining the problem with oil. Norton called for states to consider developing regional policies, particularly to address such issues as E15 and the summer RVP issue. “Retailers don’t want to offer E15, if they can’t offer it year around.”   

Larry Johnson, president of LLJ Consulting, described the early days in Minnesota model when ethanol supporters worked to get a state incentive for producers that helped jumpstart the industry. “We learned we had to be proactive and anticipate the opposition and agree upon a strategy,” he said. The model is now being adapted for the next generation. “We’ve created a new group, to get a producer payment in place for biochemical, so we can put steel in the ground for biomass-based chemical production.”  

Farmers will continue to be involved in ethanol, said David Kolsrud, president of DAK Renewable Energy and a farmer, in his remarks. Farmers will be involved not only in growing the feedstock but continuing as investors because of the economic development rewards that ethanol has brought to rural communities. “Cornfields are among the best solar collectors,” he said, adding that agriculture is transitioning to sustainable agriculture. “We’ve come a long way. Ethanol is not subsidized, and is the cleanest, greenest, cheapest renewable molecule in the U.S. We can produce and outproduce anybody. Farmers will be significantly involved. And, we have the political clout, because we’re involved in many states.”

Dave Vander Griend, CEO of ICM, noted that ethanol’s main customer and competitor are the same, resulting in such contradictions as refiners changing their formulations to make fuel more cheaply, relying upon ethanol to provide the needed octane, but then blaming ethanol for the poor fuel caused by the reformulation. “Brilliant strategy,” he said. Looking ahead, he asked, “How do we as industry come together and make sure that we have access to the consumer?” On the plant level, Vander Griend said the opportunities will be in finding higher value uses for coproducts after the starch is removed such as high protein and new oil coproducts.

Phil Madsen, president of Katzen International, offered a global outlook. While industry growth in Europe is likely done, he said, “eastern Europe has seen its corn production grow dramatically. We will see quite a bit of noncorn activity in China, Thailand, Vietnam, and South America will have a lot of activity in grain growing areas.” Others  are looking towards using the carbohydrate grown in abundance, he added, such as cassava in Southeast Asia. He also advocated that the ethanol industry needs to develop a common global strategy.  “We must work with Australia, China, the EU, South America, to communalize the policy so the ethanol industry can stand up to the worldwide oil industry.”

A second panel in the general session at FEW featured several ethanol producers talking about taking ethanol to the next stage which, for those looking at the California market, means driving carbon intensity down. “We’re all about low carbon,” said Paul Koehler, vice president corporate development at Pacific Ethanol Inc. “We’re constantly looking at our production and how we can be more efficient, what technologies we can install to incrementally improve our carbon intensity.” 

As a destination plant in Arizona, Pinal Energy LLC needs to get its carbon score down to access the California market, said Keith Kor, general manager. “We’re looking at a combined heat and power plant and a biomass boiler,” he said. “Our electrical cost is a little over nine cents a Kilowatt, so that is a driving force as well.”

Neal Jakel, former manager of Illinois River Energy, described the process as finding incremental improvements that, over time, add up to big numbers. “The key thing is to have a plan, both long term and short term,” he said. In the poor margin environment of 2012, there was no extra cash to return to investor, “but you need to plan ahead and be ready.” At IRE, the engineers had multiple projects in various stages, looking to increase yield, reduce energy use, develop more product differentiation. “That’s what shareholders want, they want assets to return profits year in and year out, regardless the margins.”    

The future will be a continuous evolution, said James Moe, president of Poet Plant Management and Poet Design and Construction, “looking at the entire landscape of technology and identifying the opportunities. It may be hardware technology, maybe chemical or cellulosic. It might be market opportunities in our specific locations. It should be an exciting time in the industry.”