Improvement Hot Spots

Tight margins make efficiency improvements key to ethanol plant profitability
By Kris Bevill | April 15, 2011

In the ethanol industry, efficiency equals money. As producers struggle with tight margins and shrinking market growth opportunities, every bushel of high-priced corn that enters the facility needs to be used to its maximum potential. Likewise, every piece of equipment, every step of the production process, should be optimized for producers to realize their maximum profits. In some cases, efficiency improvements make the difference between a successful plant and one that’s barely breaking even.

“My customers have the mindset that for sustainability they need to become low-cost producers, because we have reached the blend wall,” says John Kwik, principal of Dominion Energy LLC, an engineering firm specializing in energy recycling and other process improvements for biofuels facilities. “Making additional ethanol at this point doesn’t really make sense because it’s going to be hard to sell. What makes sense is to become a low-cost producer. One way to do that is to reduce your energy costs.”

Reducing those costs through energy efficiency improvement projects ranges wildly depending on the scope of the project, starting anywhere from around $30,000 and running all the way into the millions for some of the major technological changes. Greg Loest, principal and co-owner of South Dakota-based engineering firm IntegroEnergy Group Inc., finds that his customers are most willing to explore projects with price tags of $1 million or less, as long as the return on investment is reasonable, because they understand the long-term benefit of making those improvements. “[Plant managers] are becoming very aware that they have to continue to improve their process in order to remain competitive,” he says.

Areas for Improvement

Loest and his partner, IntegroEnergy co-owner and principal Daniel Sonnek, pay special attention to the water balance of an ethanol facility when they conduct energy audits because it is often a source of excess energy use—energy that would otherwise not be needed. Loest points out that some of the smallest fixes, such as replacing pump seals, can make a noticeable impact on the plant’s bottom line. “Every pound of water that we bring into the facility is a pound that we have to remove,” he says. “Every plant we’ve gone into has had multiple blown pump seals which can leak anywhere from a half a gallon a minute to more than a gallon a minute of water into the process,” he says. That excess water can quickly rack up an energy bill that could fairly simply be avoided.

Kwik is currently advising eight plants on ways to improve their efficiency and yields, he says. The going concern at these plants is their cooling systems. “All of the plants are running above their nameplate capacity and have taxed their cooling systems,” he says. “Also, a lot of plants have reached the capacity of their boilers, so they can no longer get any additional steam.” One way around this issue is to implement projects to remove steam usage from the plant. Kwik says there are various means for reducing cooling demands and steam usage but they can be costly, ranging from $200,000 to around $300,000. “They’re not cheap projects by any means, but they’re good projects to do at the plant,” he says. He declined to divulge details of the projects in order to protect the firm’s intellectual property.

Likewise, Loest says IntegroEnergy possesses several proprietary, patent-pending processes that can significantly improve a plant’s operations. His firm has rolled out a few of these changes at two mid-size ethanol plants and has proven that the modifications are successful at recovering energy and increasing yields. He declined to provide details but says the plants are 40 to 50 MMgy facilities and have been recovering an extra 1,300 to 1,500 gallons of 200-proof ethanol per day since installing IntegroEnergy’s improvements.

There are various other target areas for improvement within an ethanol plant’s process, from heat exchangers to distillers grains drying methods, and nearly all are focused on reducing energy input. “Thermal energy is approximately 19 percent of your operating costs,” Kwik says. “So if you can take a chunk out of your energy costs, you can see a nice return on your profit. If you can save a penny a gallon on energy, that’s a penny-per-gallon profit.”

Some of Kwik’s current projects include transitioning 14 percent of the energy load away from a plant’s cooling tower by increasing the cooling capabilities of the fermenters. Additional cooling capabilities to fermenters at another plant are designed to reduce the amount of overheating during the summer months, he says. Another project involves improving the cooling system for distillers dried grains (DDGs), which reduces energy as well as increases yield. “Some plants have a problem with cooling the DDGs,” Kwik explains. “So what they do is overdry the DDGs. When you overdry it, you reduce the yield. If you can properly cool it, you can dry it to a higher moisture and therefore sell more product and have additional yield.”

Modifications to the beer mash heat exchangers are a well-known energy recovery improvement, Loest says. Pushing up the temperature of the beer mash will result in a significant savings on the cooling tower as well as energy within the plant.

Big Changes, Big Price Tags

The most feasible efficiency projects have payback periods of no longer than three years. “No one’s interested in a 10-year payback,” Kwik says. “At some point, you get to a level of diminishing returns where it doesn’t make sense to go any further. Then what you need to look for is a technology shift.”

Back-end fractionation is probably the most talked about technology shift for increased efficiency, but its cost makes it an unlikely candidate for widespread use in the near future. Kwik says he’s currently working with one plant that is able to afford the approximately $20 million price tag.

Airless drying is another huge technology shift, with a corresponding huge price tag. For about $20 million, plants can install a system that uses super-heated steam to dry the product and excess steam energy to run the rest of the plant. “You literally cut the energy costs of the plant almost in half,” Kwik says. “It’s very expensive and not a short payback, but it’s a big technology shift.”

It’s possible that these technologies will become more commonplace in the next decade when, as Kwik says, plants have tackled all of the “low-hanging fruit” projects and need to evaluate more long-term, expensive upgrades. One thing Kwik, Loest and a growing number of industry members agree on is that ethanol plants will need to diversify and produce a greater number of products in order to remain profitable. “That’s the direction these plants need to be looking at—making coproducts that are worth more than the corn,” Kwik says. “That way you build a natural hedge against corn pricing. With DDGs, as corn moves, you get a negative impact because DDGs don’t move as much as corn and you’re being hurt.” Loest sees advanced chemical production being incorporated into more ethanol plants as a future revenue source simply because the starch is more valuable as a feedstock for advanced chemical production than it is for ethanol.

Benefits of Outsiders

Third-party engineering firms such as IntegroEnergy and Dominion Energy have developed their proprietary improvement processes through years of experience gained in the corn wet milling and biofuels industries. Unlike in-house engineers, who may have intimate knowledge of only their particular plant’s design, third-party consultants are familiar with all styles of plants. “By using an outside source that has experience in multiple industries, multiple ethanol facilities and technologies, you bring a more diverse look and probably can identify opportunities that maybe someone who’s only worked at the plant cannot see or doesn’t have the experience to identify,” Kwik says.

Third-party engineering services aren’t cheap, but their costs are minimal in the big picture and their experience enables them to offer solutions that could very well lead to a significant savings for the plant. For example, Loest tells of an experience his firm had with an ethanol plant that was “headed down the path of making a $6 million mistake.” The plant’s management had determined, through a conversation with an equipment vendor, that certain equipment should be installed in order to improve the plant’s efficiency. Prior to following through with the project, however, IntegroEnergy was consulted as an independent reviewer to evaluate the plan. “In reviewing the data and the information, while the system made sense, the plant could have made $50,000 in changes and saved the same amount of money instead of blowing $6 million,” Loest says, adding that he’s not shy about telling plant owners what needs to be done to improve their facility. “We don’t mince words,” he says. “Our best interests are for the plant and the industry.”

The wet milling industry serves as an example for many of the current suggested improvements at ethanol dry mills and both Kwik and Loest have extensive backgrounds in that industry. Kwik points out that airless drying is a technique that was first used in the wet milling industry. Loest says the wet mill strategy of producing as many products as possible, with ethanol not necessarily as the main product, is one that will likely be adapted to ethanol dry mills in the future. He foresees joint ventures becoming more commonplace, where various chemical or cellulosic facilities co-locate with dry mills in order to utilize their existing infrastructure and feedstock supply.

Finding Money to Make Money

Financial constraints continue to be an issue for many producers seeking to make improvements to their facilities, but there are plants finding ways around this hurdle and many believe that efficiency improvements are on the list of “must-haves” if they wish to continue to operate profitably. Loest says many of the older paid-off ethanol plants have more access to cash flow, and therefore, can more easily afford improvement projects. Facilities that were finished during the 2007-’08 timeframe are hampered by the cost of efficiency improvement projects because they need to finance the bill. Regardless of the financial situation, efficiency will only become more critical to profit margin as time goes on. “Coming from the wet milling world, we chased the tenth of a cent per bushel type items,” Loest says. Ethanol producers didn’t have to worry about those tiny measures when margins were good, but that’s no longer the case. “It’s a mentality shift for the dry milling industry because it is very young,” he says. “The ethanol industry will get there, it’s just going to take a little bit of time.”

Author: Kris Bevill
Associate Editor, Ethanol Producer Magazine
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