CO2 Increasingly Important to Ethanol

Carbon dioxide must be properly developed economically in order to yield the greatest return, while the implications for an ever-warming globe and the ultimate reduction of greenhouse gas emissions must also be considered.
By Sam Rushing | August 27, 2010
CO2 is a friend and foe of the ethanol industry. The friend, of course, is the increasingly important byproduct providing a revenue stream. As an environmental foe, the greenhouse gas is somewhat of a Pandora's box and a daunting challenge to reduce and control. By some estimates, more than 75 million metric tons of CO2 are emitted globally each day; with perhaps one-third absorbed by natural oceanic activity and photosynthesis. This leaves more than 50 million tons of CO2 being emitted each day, with a negligible global effort to stem the tide. While an increase in average world temperatures of 2 degrees Fahrenheit may seem modest, it may well result in a major loss of species, habitats—both human and animal—and a change in the world as we know it.

Markets, Old and New
CO2 markets are often referred to as captive, niche, merchant and sequestration. A captive market would be an enhanced oil recovery project (EOR), or series of projects served by one or more sources, typically via pipeline due to size. One such project is the Dakota Gasification project in Beulah, N.D., which supplies the Encana and Apache EOR projects in Saskatchewan with up to 10,000 tons of crude CO2 daily from coal gasification. Other examples would be carbon dioxide for chemical production of sodium bicarbonate, methanol or urea. An example of a niche market is a group of large poultry processors that use hundreds of tons of CO2 daily for cryogenic freezing and refrigeration.

About 40 percent of the North American merchant market for CO2 is sourced from ethanol plants. This sector includes all forms of CO2 sold to industry—liquid being the primary form, followed by dry ice. These markets include the manufacturing of soft drinks, beer and frozen foods, and multiple industrial uses such as grain fumigation, pH reduction of municipal water and effluent, welding, metallurgy, rubber manufacturing and chemical production, to name a few. Food and beverage uses require high purity, driven by the standards of the International Society of Beverage Technologists.

Ethanol's CO2 market share is likely to grow, despite the recent ethanol industry upset and lingering recession. The lion's share of recent source agreements involve ethanol, primarily due to the cost effectiveness of ethanol-sourced CO2. Other major sources include natural wells and anhydrous ammonia production. Anhydrous ammonia sources almost disappeared when natural gas prices approached $10 per million Btu. Natural well sources also have their problems, with a potential for contamination with radon gas, sulfur compounds and other organics. Other sources include flue gas and various energy and chemical projects.

In addition to the grain-based ethanol industry, second-generation biofuels promise to become a new carbon dioxide source. A key consideration for the many technologies for cellulosic ethanol under the microscope today, and those that have reached pilot and demonstration phases, is making them competitive with grain-based ethanol. Subsidies will help, as will implementation of energy and/or climate legislation that gives CO2 recovery and sequestration an economic value. We are still some distance away from significant volumes of ethanol and CO2 from cellulosic sources being produced, but in the future, the market will likely be driven by cellulosic, algae and syngas sources for renewable fuels.

Pricing Factors
A full understanding of market factors is key in realizing the best possible price for carbon dioxide, with strategic location being top on the list. Many of the strong markets in the U.S. sell for more than $100 per ton to the consuming plant. Since the direct-to-customer market yields the best selling price, it is entirely possible to consider the direct market as the actual customer base for marketing CO2 from a biofuels venture. Should a full evaluation of the markets, requirements, margins, competitors and options show promise compared to selling raw gas to the refiners, then the direct approach would be a fine moneymaking choice for the biofuels producer. In some cases, however, selling it to the industrial gas companies as a raw gas can be best. Other options can be agreements with distributors of CO2 to the liquid (or dry ice) markets, or joint ventures or other arrangements outside of a long-term raw gas contract. Utilizing CO2 expertise for the evaluation of markets, process requirements, costs and allied information, can help identify the best available options to the ethanol project to maximize revenues and reduce risk.

The Midwest is currently well supplied with merchant CO2, although there still may be profitable niche markets in this rather large geographical region. Other regions requiring strategically located new CO2 sources include the Northeast, mid-Atlantic, Florida, Northwest, and certain areas of the Southeast, Midsouth, West Coast and Southwest. Canadian regional markets have their own source requirements, along with different merchant gas operating philosophies.

Gas companies contracting for raw CO2 have traditionally been considered the base market for ethanol plants capturing and selling the gas, yet the negotiated prices are often fully inadequate in these raw-CO2 sales arrangements. An industry expert can often negotiate the best arrangement on behalf of the ethanol producer, and in some specific situations CO2 can be sold directly to a niche customer at a greater value. While only some ethanol plants supply the direct merchant markets, there are good opportunities in select regional markets and markets with the right combination of price, market content and competition. Proper investigation, evaluation and development of CO2 markets are crucial to the long term health of the ethanol producer. A dollar or two more per ton from the CO2 revenue stream can represent millions of dollars of revenue lost over the years if due diligence and the proper evaluation and development of the markets were not achieved.

Environmental Incentives
Overshadowing the sale of carbon dioxide are the environmental factors and the prospect for regulation. The final structure of policy incentives to deal with the environmental impact of CO2 is still unknown at this time. Environmental and energy bills are not moving along through the U.S. Senate, but have, at least, made progress in the House of Representatives. It is inevitable that greenhouse gas (GHG) legislation in some form will be passed. The how and when of serious GHG reduction efforts won't be solely driven by politics—big business will have a role, too. The electric power sector is the worst GHG offender, for example, with CO2 comprising the largest volume in emissions followed by methane.

Ultimately, sequestration will take a greater role in reducing GHG emissions. Several promising technologies are being investigated, including growing algae with CO2, sunlight, water and nutrients with a goal of creating biofuels from the algae oil and biomass. Another means of sequestering carbon is to inject CO2 into aquifers or other geological formations. Other technologies under development incorporate CO2 into new products, such as fuels or plastics. These processes convert CO2 into a form that cannot enter the atmosphere again, unless the manufactured product decomposes or is changed significantly.
In the end, carbon dioxide is a friend and a foe, and it must be properly developed in economic terms in order to yield the greatest bang for the buck as a friend. As a foe, we need to consider all of the implications with respect to an ever-warming globe, and ultimately a reduction of carbon dioxide emissions.

Sam A. Rushing is president of Advanced Cryogenics, Ltd., a chemist and a CO2 consultant. Reach him at 305-852-2597 or [email protected];