The Way I See It

Path of ethanol industry will take many turns
By Mike Bryan | February 01, 2006
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As a private business, we struggle with many unanswered questions about the ethanol industry. Where is the ethanol industry headed? What is the theoretical limit it can grow to? What are its limiting factors: market or feedstock? What role will cellulose play in the future expansion? If market is the limiting factor and the market can be met with corn, what is the future of cellulosic ethanol? Will the U.S. EPA allow higher blends of ethanol such as proposed by Minnesota? Will the automobile manufacturers begin producing 100 percent of their new automobiles as flexible fuel vehicles, which will allow expanded ethanol use? Who will build the plants of the future: big business or small entrepreneurs?

I'm sure that you can think of another 20 questions without any trouble at all. These are questions that are relevant to current producers, future producers, and those who provide goods and services to the ethanol industry. While there are no easy answers, I think there are some basic assumptions that we can count on:

  • Oil is not going to become less expensive, nor more plentiful.

  • Oil does not address the issue of global warming.

  • Fossil fuels consumption is contributing to global warming.

  • Corn as a feedstock has an upper limit.

  • Other grain-based feedstocks will play an expanded role in ethanol production.

  • Market demand and oil prices will eventually make cellulose ethanol a reality.

  • There is no undiscovered magic bullet that will replace gasoline or ethanol.

  • We are entering a period of consolidation in the ethanol industry. Medium-sized facilities are using their profits to buy other existing facilities or build new ones. Increased interest from Wall Street investors as industry profits rise means bigger players building bigger plants. Work continues to be done on reducing the cost of cellulosic ethanol. Ongoing research, such as higher starch corn and wheat varieties, holds great promise. At the same time, there is an increasing urgency to address the issue of global warming as our climate continues to change.

    So while the exact path the ethanol industry might take may be a bit unclear, what is abundantly clear to me is that it will continue to evolve in a very aggressive way. I believe that in the years ahead, Congress, agriculture, the oil industry, the ethanol industry and the automobile industry will come together, perhaps out of necessity, to forge a new and dynamic future for renewables.