Coproducts Energy Value is Rising

The use of distillers grains as a biomass power source could impact more than just the feed and energy markets. The ultimate deciding factor may be its effect on ethanol producers' bottom lines.
By Nicholas Zeman | October 03, 2007
Fuel isn't valuable unless it contains more energy than it takes to produce. Ethanol critics have long accused the renewable fuel of being a net-energy loser. However, distillers grains has always been a factor in studies that have proven otherwise. Such studies show that ethanol's livestock-palatable coproduct contributes to the fuel's positive energy balance.

Ethanol production has some intense inputs, and because the volatile long-term upward trend in natural gas prices makes many other forms of power competitive, it may be more efficient to burn distillers grains than to cultivate a stable of buyers. Ethanol producers don't have to transport the product if they use it as an on-site biomass power source, and some companies already tout equipment that can convert stillage into methane.

Edina, Minn.-based NewBio E Systems Inc. makes a strong case for ethanol plants to convert thin stillage to methane and use the biogas to power the processing and distillation needs of the facility. The linchpin here, NewBio says, is this: processing thin stillage into distillers dried grains with solubles (DDGS) consumes energy, while processing thin stillage into methane produces energy.

If a trend surfaces among refineries to burn distillers grains, however, there is concern that the ethanol industry could further squeeze the corn market and draw more fire from livestock producers. While the energy markets are making it more appealing to consider distillers grains as a power source, the ethanol coproduct is still making its mark in the animal feed market.

Energy or Feed Product?
Ultimately, economics will be the deciding factor in whether ethanol producers seek the feed or energy market for distillers grains. The pivotal issue is whether distillers grains will begin tracking energy products like natural gas instead of feed market products like soybean meal and corn meal. A detailed business case from NewBio, which advocates the conversion of thin stillage to methane gas, says that since 1999 the market for DDGS has varied between $55 per ton and $130 per ton, averaging $83 per ton. It's a lot easier to hedge on natural gas, because without clearing services and established pricing, marketing distillers grains is a relative free-for-all. NewBio says its conversion process "can uncouple the risks that are associated with volatile DDGS sales and steadily rising natural gas pricing from the operating profitability that is associated with processing the thin stillage." This is an example of how new technologies and industrial design efficiencies have diverse effects across several economic sectors, including energy and agriculture.

So-called closed-loop plants like E3 BioFuels LLC in Mead, Neb., use anaerobic digesters to process cattle waste from adjacent feedlots into heat and electricity to operate the ethanol plant. NewBio's technology doesn't handle this stream. NewBio President Mike Gratz says an ethanol plant doesn't have to feature a feedlot to benefit from some of the amenities of anaerobic digestion.

"There are so many different designs and varying energy balances out there," he says. "Process engineers will have to make independent decisions based on their internal energy budgets as to if they will incorporate anaerobic digestion into their schemes."

Producers will have to calculate what percentage of distillers grain they will market into the feed sector and how much they might use to ease the cost of heat and electricity inputs. An ethanol plant equipped with a NewBio system would use methane gas made on-site rather than purchase coal or natural gas for its power needs.

Distillers grains driers and evaporators can cost millions of dollars, capital costs new plants may be able to lessen by integrating a power system. At the same time, modified wet cake would still be available as a feed for cattle producers in close proximity to the ethanol plant.

"We see expansion projects at plants as a major opportunity for us," says NewBio's Steve Hansen. "We're in negotiations with several producers, but we have not yet installed a system." NewBio has designed and built several demonstration models that have operated at plants. Hansen says he feels confident that within a year they will be installing units at ethanol plants.

Thin stillage is also a highly digestible material that can be fed directly into an anaerobic digester where bacteria convert carbon into methane and carbon dioxide. NewBio officials say that a 100 MMgy plant can produce 1.82 million British Thermal units (MMBtu) per year of methane, which would amount to a savings of nearly $14 million when gas is selling for $7.50 per MMBtu. "Of course, the economics of bioconversion get better as the price of natural gas goes up," Hansen says.

Cross-Sector Impact
Corn prices and competition for food and feedthe food versus fuel debatehave received continuous coverage over the past year. In addition, dozens of studies on distillers grains have been performed by agricultural scientists at universities. EPM asked Doug Landblom, cattle nutrition expert at the North Dakota State University extension center in Dickinson, N.D., what the impact would be on the cattle industry if ethanol plants start burning considerable portions of their DDGS. "That's a simple question, but not a simple answer," Landblom says. "First, these plants are not going to be retrofitted with these new technologies overnight, so it could be quite some time before a considerable amount of DDGS comes off the market because of energy demand."

This issue might be a concern for livestock producers, who have been growing more comfortable with the nutritional ingredient. The National Cattleman's Association released a statement in June that said it is officially opposed to increased biofuels mandates, largely because increased ethanol demand means increased corn demand. "The interesting thing about the cattlemen and other livestock producing organizations is that many of their members are grain producers as well," Landblom says.

Historically, the price of corn has not been all that volatile. This stability has been somewhat compromised as ethanol production reaches record levels. However, the producers are not always the ones hurt most by higher demand and prices. "People in agriculture are pretty resourceful, and they will make it work," Landblom says. "But that means too bad for the consumer. Meat, corn flakes and any other products that are milled with corn will become more expensive."

In the meantime, the export market for DDGS is growing at an aggressive pace, Landblom says. "China is buying a lot of DDGS," he says. "If you look at Red Trail Energy [in Richardton, N.D.] a lot of their coproduct is going to the Pacific Northwest and shipped on boats across the ocean."

If the market is there, and the price is right, distillers grains will still be available as a feed product, but the continuing uncertainty over natural gas prices will make it hard for some plants to decide how to utilize their coproduct.

Nicholas Zeman is an Ethanol Producer Magazine staff writer. Reach him at nzeman@bbibiofuels.com or (701) 746-8385.