When the Global Renewable Fuels Alliance was formed, biofuel&rsquo;s public and political fortunes had started to shift. Suddenly, the renewable fuels industry was getting bombarded with biased and negative reports. &ldquo;We got a lot of bad press and the vast majority was ill-informed,&rdquo; says Bliss Baker, spokesperson for GRFA. &ldquo;That was very new for us because we had always been the darling issue for politicians.&rdquo;
That was the genesis for the creation of a global association. The existing associations were doing a good job of representing their members and responding to misinformation in their backyards, so to speak, but a united front was needed on the international stage. Baker gives Bob Dinneen, president and CEO of the Renewable Fuels Association, a large part of the credit for moving the idea forward. By February 2009, the GRFA and its mission were formally announced at the National Ethanol Conference. Its members are biofuel associations, such as some of the founding members, RFA, the Canadian Renewable Fuels Association, and eBIO, today known as ePURE, the European Producers Union of Renewable Ethanol. &ldquo;The fact of the matter is, all of us advocating for renewable fuels are facing many of the same issues, many of the same arguments&mdash;there&rsquo;s nothing really that&rsquo;s unique,&rdquo; Dinneen tells Ethanol Producer Magazine. &ldquo;It helps to be able to share experiences with those in other countries.&rdquo;
When it was first formed, GRFA represented more than 60 percent of the world&rsquo;s renewable fuels production from 30 different countries. Today, that has grown to 65 percent representation in 44 countries, Baker says. Some of the newer member associations represent Australia, Argentina and southern African countries.
Since day one, Baker has been at the helm of GRFA, as the face of the organization. Baker operates consulting business Maple Leaf Strategies, formerly Bentham &amp; Associates, out of Toronto. Although the company does have other clients, the majority of his work is for GRFA. He&rsquo;s a past CRFA board chairman and president and also worked as vice president of Greenfield Ethanol for a number of years. His well-rounded background made him a good fit for the position, Dinneen says, describing Baker as a trustworthy and effective advocate for the global biofuels industry.&nbsp; &ldquo;He&rsquo;s someone that I think is knowledgeable, articulate and passionate on these issues,&rdquo; he says.
Daily, Baker and analyst Giancarlo Drennan monitor the biofuels-related activities of more than two dozen international organizations. That means keeping an eye on what is said publically about biofuels in media interviews as well as studies or reports on the subject. In fact, GRFA sometimes gets involved with commenting on or peer reviewing biofuels research. &ldquo;We monitor what they are saying and, ideally, impact and influence what they do,&rdquo; he says.
And, Baker believes they have had some success in developing relationships and even changing attitudes about biofuels. For example, in the early days of the GRFA quite a bit of time was spent monitoring and responding to statements made by the World Bank. &ldquo;We shot back pretty hard and challenged everything that they were saying, because 80 percent of it was based on information that was either wrong or it was completely biased,&rdquo; he says, adding that today, the World Bank isn&rsquo;t really saying a lot on the subject of biofuels.
It&rsquo;s a similar situation with the Organization for Economic Cooperation and Development, a group with which GRFA now has a good working relationship. &ldquo;They are taking a different tone now on biofuels and looking at this much more scientifically than they used to, and the GRFA had a lot to do with that,&rdquo; he says. Still, that doesn&rsquo;t mean every person in the organization is on board. In mid-September, a representative of OECD went on record suggesting that biofuel mandates have a role in food price inflation.&nbsp; GRFA quickly responded with a press release, saying the real factors for rising food prices include volatile oil prices, financial speculation in commodities markets and more. In addition, it pointed to a recently released OECD agency report that stated biofuels could make up 27 percent of the world&rsquo;s transportation fuel supply by 2050 without jeopardizing food security and that current global biofuels production takes up only 2 percent of arable land, not significant enough to have any impact on food prices. &ldquo;Our job is to keep them honest and when they say things that are wrong or ill-informed, we challenge them instantly,&rdquo; Baker says.
He&rsquo;s not the only one who thinks the organization has had an impact this way. &ldquo;The GRFA has, in a very short time frame, become a strong voice for the industry within the international community,&rdquo; W. Scott Thurlow, president of CRFA says.
Next on the agenda is a targeted public relations or advocacy campaign. The group is actively seeking funding from corporate sponsors. &ldquo;We&rsquo;re at a very critical point right now in our future, and if we were to cede any kind of ground to the antibiofuels folks it could be very damaging to our industry,&rdquo; he says. Rate of Return So, what do the association members of GRFA get out of membership? For one, from a communications standpoint, the GRFA is able to echo some of the same key messages put forth by its members, Baker says. For example, when the RFA challenges the flawed science of indirect land use change in the U.S., GRFA echoes those arguments in the international community. The old food versus fuel argument is another battle the organization pushes back against repeatedly.
CRFA&rsquo;s membership in GRFA allows the association to focus on what&rsquo;s going on domestically, knowing that the global group is monitoring and dealing with international issues, Thurlow says. Considering the increasingly important role international organizations are playing in developing biofuels policies, that&rsquo;s key. &ldquo;We need to be heard within these organizations and we need a seat at the table when policy and research is being developed,&rdquo; he says. &ldquo;The GRFA gives us that opportunity.&rdquo;
Dinneen echoed that by saying when he and other association members can&rsquo;t attend an overseas biofuels event, GRFA can. &ldquo;What we really wanted to make sure that we had with the GRFA is the opportunity to interact with the international forums more consistently,&rdquo; he says.
ePURE considers the GRFA a very important vehicle in keeping the organization aware of and able to respond to emerging global developments that affect the biofuels industry, a spokesperson told EPM via email. After all, many issues affecting the EU biofuels industry are also global issues, such as agriculture systems as well as the need to reduce emissions and fossil fuel consumptions. &ldquo;[Being a part of GRFA] allows the global biofuels industry to speak with a unified voice to international institutions,&rdquo; the spokesperson says.
GRFA also puts about a lot of biofuel-related data. The organization works with research or consulting companies to release several annual global biofuels reports. In September GRFA put out its annual greenhouse gas reduction report, which forecast global ethanol production would reduce greenhouse gas emissions by 10 million metric tons in 2012. The organization also reported in June that predicted global ethanol production would reach 82.2 billion liters in 2012, a 1 percent growth from the previous year. A third report, which was new this year, outlined the substantial impact biofuels has on the global economy&mdash;including supporting nearly 1.4 million jobs in 2010.
Interacting with other associations is a perk of membership that might not be as obvious to outsiders, Baker says. GRFA hosts monthly calls that association leaders from Europe, Canada, the U.S. and Argentina participate in on a regular basis. Any of the other association members are welcome to call in, and sometimes they do, he says, but due to time zone constraints some communicate primarily via email instead. In addition, two or three times a year, GRFA members have a chance to get together in person, typically at the National Ethanol Conference and sometimes at the Canadian Renewable Fuels Summit or the World Ethanol &amp; Biofuels event. Whether a meeting is on the phone or face-to-face, it provides a valuable platform for dialogue on policy ideas and trade issues, he says.
Staying connected with CRFA&rsquo;s industry partners and keeping the lines of communications open is very important, Thurlow says. &ldquo;While we do not always agree on issues&mdash;particularly trade issues&mdash;the GRFA platform allows us to have continued communications, share ideas and share messaging.&rdquo; Author: Holly Jessen Features Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

A chart displaying global crude prices (per barrel) overlaid with data from the United Nations monthly food price index illustrates the true cause of food price inflation. 

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Bliss Baker, left, and analyst Giancarlo Drennan operate GRFA out of Toronto, Canada. It represents biofuels associations from 44 countries.

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An international federation of biofuels associations has been fighting biofuel's opponents for the past three years.

Defending Biofuels on a Global Stage

1. Syngenta in North America has signed a commercial agreement with Merrill, Iowa-based Plymouth Energy LLC to use grain featuring Enogen trait technology next year. Enogen trait technology eliminates the need to utilize liquid alpha amylase enzyme in dry grind ethanol production, allowing for reduced energy, gas and water usage.&nbsp; Syngenta is currently working with the plant to contract with local growers to produce Enogen corn for the 2013 crop. Growers under contract will begin delivering the specialty grain following next year&rsquo;s harvest. Syngenta has also recently formed trial agreements with Siouxland Ethanol LLC and Golden Grain Energy LLC. 2. The McGraw-Hill Companies have announced that Platts, a McGraw-Hill division and global provider of energy, petrochemical and metals information, has signed a definitive agreement to acquire Switzerland-based Kingsman SA, a privately-held provider of price information and analytics for the global sugar and biofuel markets. Kingsman employs analysts, researchers and report writers in key markets, including London, Montreal, New Delhi and Sao Paulo, Brazil. It serves a global clientele of producers, traders, refiners, financial institutions and end-users, offering a variety of subscription publications covering sugar, ethanol and biodiesel. The company&rsquo;s prime focus is on market analysis, supply and demand fundamentals and trade flows. 3. Jeff Lautt, Poet LLC CEO, and Kelly Manning, Growth Energy vice president of development, presented Sen. Tim Johnson, D-S.D., with the Fueling Growth award for his exceptional support of the ethanol industry. The award is given annually to the ethanol industry&rsquo;s outstanding champions with an exceptional voting record in support of the biofuels industry, and recognizes Johnson&rsquo;s contributions to helping the biofuel industry create jobs and economic development to South Dakota communities.&nbsp; Johnson visited Poet headquarters in Sioux Falls, S.D., to discuss the importance of renewable fuels. He also received a tour of the facility, where much of Poet&rsquo;s research and development activities take place. 4. The Andersons Inc. has signed a definitive agreement to purchase substantially all of the assets of Mt. Pulaski Products LLC. The transaction is subject to certain conditions, and is anticipated to close by the end of the year. Mt. Pulaski Products is a corn cob processor that operates two facilities in central Illinois. The company produces several products, including absorbents and abrasives. The acquisition aligns with The Andersons growth strategies for its cob products businesses. If acquired, the assets of Mt. Pulaski Products will operate within The Andersons Turf and Specialty Group, Cob Division. 5. General Motors and Ford Motor Co. have announced that new model vehicles are ready to run on E15. The owner's manuals for GM&rsquo;s 2012 and 2013 model year vehicles state that those vehicles can run on fuels containing up to 15 percent ethanol. Ford has approved E15 for use in all model year 2013 vehicles, including hybrids and Ecoboost.
6. Neill McKinstray has been named chairman of the Renewable Fuels Association board of directors. He is president of the ethanol group at The Andersons Inc. McKinstray previously served as vice chairman for two years, and will be succeeding Chuck Woodside, general manager of Minden, Neb.-based KAPPA Ethanol LLC. Woodside served as chairman for two one-year terms. Randall Doyal, CEO of Al-Corn Clean Fuel, is serving as the new vice chairman. Walter Wendland, CEO of Golden Grain Energy LLC, was named treasurer. Mick Henderson, general manager of Commonwealth Agri-Energy LLC, will serve as secretary.
7. Clariant Corp. has joined the Advanced Ethanol Council. S&uuml;d-Chemie, now a part of Clariant, has been developing its proprietary sunliquid process since 2009. The technology has been operating at the pilot scale since 2009. Clariant began operation of a cellulosic ethanol demonstration facility in Straubing, Germany, in July. The demonstration plant will produce up to 330,000 gallons of ethanol per year from wheat straw, corn stover and sugarcane bagasse feedstocks. The sunliquid process can produce cellulsoic ethanol from a wide variety of agricutlural residues and dedicated energy crops. Clariant has started plans to commercialize the sunliquid process in the U.S., and has opened an office in Des Moines, Iowa. 8. Verenium Corp., a company focused on the development and commercialization of high-performance enzymes, has entered into an agreement with Comerica Bank for a two-year, $10 million revolving credit facility. The credit allows Verenium to borrow up to $8.4 million against eligible foreign and domestic receivables and will cover an existing $1.6 million letter of credit commitment to Verenium&rsquo;s landlord. The credit facility also immediately frees up $1.6 million in restricted cash, which had previously secured the letter of credit. 9. Advanced Bioenergy LLC has announced plans to sell its Fairmont, Neb., ethanol plant to Wichita, Kan.-based Flint Hills Resources LP, a wholly owned subsidiary of Koch Industries Inc. The transaction is expected to close later this year, subject to regulatory approval. The Fairmont ethanol plant began production in 2007, and has an annual production capacity of more than 115 million gallons. The facility also produces more than 320,000 tons of dried distillers grains each year, along with more than 18 million pounds of nonfood grade corn oil. Advanced Bioenergy will continue to operate its ethanol plants in Huron, S.D., and Aberdeen, S.D.
&nbsp;
------------------------------
Share your industry briefs To be included in Business Briefs, send information (including photos and logos if available) to: Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to 701-746-8385, or email it to evoegele@bbiinternational.com. Please include your name and telephone number in all correspondence.

Randall Doyal is a 30-year veteran of the fuel ethanol industry.

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Sen. Tim Johnson is a long-time advocate of renewable fuel. 

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Neill McKinstray begame president of the Ethanol Group at The Andersonâ€™s in 2011, and served as vice president of the grain and ethanol groups since 2005.

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Business Briefs

There has been significant controversy concerning expenditures on tangible property between taxpayers and the Internal Revenue Service. Taxpayers tend to see business expenditures as deductions for repairs and maintenance, while the IRS argues for capitalization and recovery over a period of years. This conflict has produced a number of court cases with decisions made in both directions.
On Dec. 23, 2011, the IRS issued temporary regulations that provide guidance for the deduction or capitalization of amounts paid to acquire, produce or improve tangible property. In developing these regulations, the IRS amalgamated case law and prior IRS guidance. The goal is to reduce controversies while both sides continue to address the issue. Even though temporary, taxpayers are expected to comply with the regulations, which are effective for taxable years ending on or after Jan. 1, 2012. As a result, businesses need to know how these regulations apply to insure compliance. Failure to comply with the regulations could cause the IRS to assess a deficiency during examinations.
To comply with these regulations and minimize examination risk, ethanol plant operators need to determine if they have the appropriate policies and procedures in place, as well as applicable tax elections. All of which may require changes to accounting methods. &nbsp; Deducting Materials, Supplies The regulations define materials and supplies as tangible property used or consumed in the taxpayer&rsquo;s business operations (not inventory), and specifically defined as:
&bull; A component acquired to maintain, repair or improve a unit of tangible property owned, leased or serviced by the taxpayer and that is not acquired as part of any single unit of tangible property.
&bull; Fuel, lubricants, water or similar items that are reasonably expected to be consumed in 12 months or less, beginning when used in taxpayers operations.&nbsp;
&bull; A unit of property with an economic useful life of 12 months or less, beginning when the property is used or consumed in the taxpayer&rsquo;s operation.
&bull; A unit of property with an acquisition cost or production cost of $100 or less, or an item identified in published IRS guidance as materials and supplies.
The regulations allow a taxpayer to deduct nonincidental materials and supplies when used or consumed. If a taxpayer has no record of use, or an inventory is not maintained for the nonincidental materials and supplies, a taxpayer may deduct these expenditures when purchased, if taxable income is not distorted. These rules are consistent with prior law.&nbsp; A taxpayer, with certain exceptions, has the right, however, to elect to capitalize the cost and depreciate any material and supply item. In general terms, capitalization of these items will provide an increase in taxable income for the year capitalized, and a deduction in future years based on the applicable taxable life.
While the regulations modify the &lsquo;de minimis&rsquo; (minimal expense) rule from the prior proposed regulations, ethanol plants generally have material and supply costs that exceed the de minimus rule threshold. Spare Parts Treatment There is a new optional method of handling rotating and temporary spare parts, which allows quicker deductions on these parts, rather than the general rule to deduct as the part is disposed. Although the optional method requires more record keeping, the cash flow improvement may be worth the effort. Factors that help in the determination of electing capitalization would include a comparison of the number of turns in spare parts inventory versus the depreciation period of the capitalized cost. Building Changes One of the more important changes in the regulations is the definition of a unit of property, which now has two main categories: buildings and everything else. The smaller the unit of property, the more likely costs incurred in relation to that unit of property will be capitalized.
For repair purposes, the building category is divided into a building structure and nine designated building systems: HVAC, plumbing, electrical, all escalators, all elevators, fire and alarm, security, gas distribution and others, as designated by the IRS. Separating designated building systems into these new components is a significant change to prior rules.&nbsp; It will require ethanol facilities to analyze the impact of the repair and determine the breakdown into the designated building systems. Facilities may also need to file a request for a change of accounting method to come into compliance, or to elect the flexibility provided under the General Asset Account rules.
To understand the potential effect of the designated building system concept, consider the following: If an improvement cost to an electrical system is measured against a total building under prior proposed regulations, the improvement cost may not rise to the level required for capitalization. But, when the same improvement cost to an electrical system is measured against the electrical system as the unit of property under the new regulations, required capitalization is more likely.
The regulations now allow, however, a current deduction for the remaining undepreciated cost of a building component that is replaced, where the related repair was required to be capitalized. This creates a current tax benefit, as well as an opportunity of reviewing past depreciation schedules to determine if deductions should have been claimed for building components that had been previously replaced.
The determination of costs in the &ldquo;everything else&rdquo; category is broken down as the following:
&bull; Network&mdash;based on facts and circumstances and through specific industry programs.
&bull; Plant&mdash;based on discrete major functions.
&bull; General&mdash;based on a &ldquo;functionally interdependent&rdquo; test.
Most ethanol plants will find the most benefit by applying the safe harbor for routine maintenance. Under the safe harbor, capitalization is not required if maintenance does not improve the property, but rather keeps the property in its ordinary efficient operating condition and the maintenance is expected to be performed more than once during the class life of the property. Unfortunately, there is no &ldquo;bright-line&rdquo; test for the determination of a repair versus improvement, and each situation is dependent on the facts and circumstances of the expenditure. The regulations include many examples that help determine whether the expenditure has to be capitalized, including whether it results in a betterment to the unit of property, is a restoration to the unit of property or adapts the unit of property to a new use. Next Steps Talk to your accountant to learn more about how these regulations may apply to your production facility. Together, you can take steps to:
&bull; Discuss questions and the implementation of the regulations.
&bull; Develop written accounting procedures as required or suggested to provide support for safe harbor or other positions.
&bull;&nbsp; Determine if a change of accounting will be required to comply with the regulations and when it should be filed, or if an alternative treatment is more advantageous. Authors: Jim Schmidt, CPA Director of Renewable Energy, Eide Bailly 612-253-6599 jschmidt@eidebailly.com Beth Feuchtenberger, CPA Partner, Eide Bailly 605-977-2728 bfeuchtenberger@eidebailly.com
&nbsp;
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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New property definitions will change tax treatment of certain repairs

Changes in IRS Tax Regulations  Affect Ethanol Plants

Corn quality, mashing, fermentation, distillation, coproducts&mdash;each year The Alcohol School provides a comprehensive course on making ethanol efficiently. In September, 90 participants flew into Montreal for the 32nd annual school, which digs into the science behind the process as well as new developments under way for both the fuel ethanol and beverage alcohol industries. The cross fertilization is deliberate, not only between the beverage and fuel alcohol producers, but also for related companies that send employees to get a broader understanding of the industries served. Ethanol Producer Magazine attended this year and gives a taste of what was learned, with a focus on areas with a big impact on the bottom line in the initial steps of the process. A Closer Look at Corn &ldquo;If you want to save money, improve your bottom line in the biggest cost&mdash;feedstock,&rdquo; said Robert Piggot, technical consultant with Lallemand Ethanol Technology, a co-sponsor of the event with the Ethanol Technology Institute. When buying corn, ethanol producers are most interested in the starch. Nonetheless, a survey of ethanol producers once asked if they would pay more for corn if they could get 3 percent more starch. &ldquo;Most ethanol plants said no,&rdquo; he said. For a 100 MMgy plant, that 3 percent would add up to $13 million more revenue, if ethanol were selling at $2.50 per gallon, he pointed out.
There can actually be a conflict in the goals between the purchasing department, which is looking for low cost, large quantities and flexible payment terms, and operations, which needs easy-to-process, high yielding corn to be delivered on a timely basis. Operations is looking for high starch content, low moisture, high ratios of amylopectin-to-amylose and floury-endosperm-to-horny-endosperm, and no molds or mycotoxins, which means the standard grade of No. 2 yellow dent corn isn&rsquo;t all that helpful. &ldquo;We are stuck with the specifications that were meant for the baking and feed industries, and they actually don&rsquo;t mean anything to us,&rdquo; Piggot said. Broken kernels, for instance, could be considered beneficial for the ethanol industry, while foreign material wouldn&rsquo;t. Thus the maximum 3 percent BKFM is not specific enough. No. 2 specs also call for a 5 percent maximum in damaged kernels, with no more than 0.2 percent heat damaged. &ldquo;If the grain is heat damaged, you lose sugars,&rdquo; he explained. &ldquo;Other types of damage are not a problem.&rdquo; The moisture spec of 14.5 percent is well-understood, but the test weight spec of 54 or 56 pounds per bushel is meaningless, he said. &ldquo;You often get better yields out of low test weight corn.&rdquo;
Piggot recommends plants make their expectations clear when explaining their quality needs and setting discounts. &ldquo;You&rsquo;re better off to discount the grain,&rdquo; he added. &ldquo;Try not to get into the loop of getting a rejected load returned to you, just blended up.&rdquo; Discounts need to consider hidden and indirect costs. High moisture corn, just 1 percent over the 14.5 percent spec, would translate into a direct cost of 50 gallons of ethanol lost from the load, which at $2.50 per gallon ethanol, would call for a discount of 16 cents per bushel. He recommends that number be doubled to account for other increased costs. For example, the electrical power needed to grind wet corn will be significantly higher than for properly dried corn.
Attention to details in grinding corn is the next area that can have a direct impact on yield. The ideal grind size is very much plant-dependent, Piggot said. While there are advantages to smaller grind sizes that increase the surface area exposed to enzyme action, problems can arise. Factors to consider include how well the slurry mixes and temperature parameters. Coarser grinds need slightly higher temperatures while finer grinds are needed if jet cooking is not used. Finer grinds will keep suspended longer in the fermentor, but will contribute to quicker fouling in the stripper and heat exchangers, plus impact centrifuge separation. The goal is to get the best compromise of particle size for maximum yield and good separation&mdash;too large and yields are lost, too small can increase solids in the stillage and backset.
Most ethanol plants use hammermills to grind, and many never take a close look at the configuration, Piggot added. A number of things can be adjusted to improve performance, including the speed and number of hammers as well as spacing, plus the open area on the screen, feed rate, air flow and hammer-to-screen distance.
The next step in the process, mashing, is also a key area for maximizing yields, said Garth Whiddon, technical service manager for Lallemand Ethanol Technology. In mashing, water is combined with the crushed or ground grain, adjusted for pH and temperature to match the chosen enzymes used to break the starches down into dextrins. &ldquo;Having the optimal conditions for enzymatic efficiency leads to lower usage rates and higher yields,&rdquo; he said. Fine tuning this step is important. If 4.5 percent residual starch is left after fermentation, it adds up, amounting to $2.6 million lost for a 50 MMgy plant.
The industry has gone through some major process changes, Whiddon added. At one time, nearly every plant used a separate saccharification tank, where the mash was cooled before adding glucoamylase. While it may have been optimal for the ideal enzyme dose, it also created a perfect environment for bacteria. Most plants have now moved to simultaneous saccharification and fermentation.
A more recent process change has been a move towards dropping the jet cooking step. In addition to decreasing enzyme use by nearly 25 percent, eliminating jet cooking prevents a possible 3 to 5 percent yield loss from a Maillard reaction&mdash;a chemical reaction that makes some sugars unfermentable and also reduces the free amino acids needed for yeast health. If jet cooking is eliminated, however, the grind requirements are more stringent, he adds, to ensure proper starch conversion. Understanding the Workhorse More than one Alcohol School instructor spoke about the importance of yeast and pointed out that proper management would enhance yield and therefore profit. The longtime scientific director of the Ethanol Technology Institute, Mike Ingledew, and the new director, Graeme Walker, both dug into the details of keeping yeast working at peak efficiency. Ingledew is professor emeritus at the University of Saskatchewan and Walker is a professor and director of the Abertay University Yeast Research Group in Scotland.
&ldquo;Saccharomyces cerevisiae is the number one industrial organism, making more money than any other microbe,&rdquo; Walker said. Keeping yeast cells viable and actively growing is essential for consistent fermentations. &ldquo;Growing yeast cells produce alcohol 33 times faster than nongrowing cells,&rdquo; he explained, adding that the rate of budding parallels ethanol production. An expert on yeast physiology, he described the micro-organism&rsquo;s needs in detail, including factors such as oxygen, pH, temperature, moisture, nutrients, physical factors such as agitation and pressure as well as stress factors that include inhibitors and contaminants. While glycerol plays a role in yeast metabolism, overproduction reduces ethanol yield and is a key indicator of stress. &ldquo;The theoretical maximum yield of ethanol from 100 parts of glucose is 51.1 percent,&rdquo; he adds. &ldquo;You&rsquo;d never get 100 percent&mdash;a living organism needs to use sugar to grow&mdash;but industrial alcohol producers should aim for greater than 90 percent of this theoretical yield.&rdquo;
Very high gravity fermentations lead to higher concentrations of alcohol than what was previously considered possible, Ingledew explained. Some plants are getting 15 to 16 percent ethanol volume to volume (v/v), and many are achieving up to 20 percent, compared to the traditional expectation of 7 to 12 percent.
Paying close attention to yeast nutrition is a major part of achieving these high alcohol levels&mdash;beginning with water. Attention must be paid to water quality when recycling various process flows and even with well water, he cautioned. &ldquo;They can contain significant amounts of ions, solvents and organic acids that are harmful to yeast viability.&rdquo; Proper aeration is important and the timing of oxygen supply can be more critical than the amount. &ldquo;Many plants overaerate,&rdquo; he added, &ldquo;and many poorly aerate.&rdquo;
&ldquo;Useable nitrogen is the most critical limiting nutrient,&rdquo; he said. &ldquo;It makes the most difference of all nutrients added to fermentors with regard to yeast growth.&rdquo; Nitrogen in yeast cells is normally found at concentrations of 6 to 8 percent weight to weight (w/w) and phosphorus is around 1.4 to 2 percent. The amounts of useable nutrients needed, therefore, relate to the overall biomass weight that will be made in the fermentor, which can amount to over 5 tons of yeast biomass in a 250,000 gallon fermentor. &ldquo;If your mash is purified, deficient, or you don&rsquo;t know what&rsquo;s in the mash, add nutrients,&rdquo; he said. If using urea, he recommended using 0.48 grams per liter (g/L) for normal gravity mashes and doubling that for very high gravity mashes. Ammonia&rsquo;s higher nitrogen content calls for 0.134 g/L for normal mashes and double that for very high gravity mashes, which will require a pH adjustment. Phytases may be useful to liberate useable phosphorus in grain mashes, he added, and most of the other minerals and vitamins are generally supplied by the mash, although yeast foods provide insurance and lead to consistency. &ldquo;Nutrients will vary from crop to crop, from farm to farm and day by day,&rdquo; he explained. Author: Susanne Retka Schill Contributions Editor, Ethanol Producer Magazine 701-738-4922<a style="margin: 0px; border: currentColor; left: 0px; top: 0px; width: 16px; height: 16px; right: 0px; bottom: 0px; overflow: hidden; vertical-align: middle; float: none; display: inline; white-space: nowrap; position: static !important;" title="Call: 701-738-4922" href="#"><img style="margin: 0px; border: currentColor; left: 0px; top: 0px; width: 16px; height: 16px; right: 0px; bottom: 0px; overflow: hidden; vertical-align: middle; float: none; display: inline; white-space: nowrap; position: static !important;" title="Call: 701-738-4922" src="data:image/png;base64,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" alt="" /></a> <a href="mailto:sretkaschill@bbiinternational.com">sretkaschill@bbiinternational.com</a>
_______________________________________________________________________________________________
More on Fermentation 
A 2 or 3 percent yield increase would help any plant. Walker gave Alcohol School attendees a checklist of important points for optimal yeast management:
*Minimize microbial contaminants, especially lactic bacteria.
*Optimize yeast nutrition, especially nitrogen and minerals.
*Minimize yeast stress and remove inhibitors.
*Precondition yeast and use nonflocculent strains. Flocculation is appropriate for some brewers because near the end of fermentation, the single yeast cells begin clumping and drop to the bottom of the fermentor, leaving clear beer.
*Reduce glycerol and other secondary yeast metabolites.
*Use correct process parameters, including temperature, pH, pressure and oxygen.
*Use efficient distillation and correct downstream technologies to eliminate known losses of ethanol.
*Consider very high gravity fermentations.
Switching to high gravity fermentation requires both time and some re-engineering, Ingledew said. He listed key differences and adjustments required:
<ul>
*Prepare mashes with increasingly high solids and less water.
*Remove solids with a rinse prior to fermentation, if possible, as is done in brewing.
*Supply sterile oxygen to fermentation when the yeast are actively growing, with a goal of 5 parts per million per liter per hour for strong yeast cell membranes.
*Supply enough useable nitrogen as it stimulates fermentation rate, increases yeast cell numbers and improves consistency.
*Supply other nutrients as needed.
*Gelatinize and liquefy but don&rsquo;t saccharify starch in mash before fermentation.
*Ensure that pumps can handle the higher viscosity.
*Use a yeast strain which tolerates alcohol well and thrives in high sugar media.
*Use simultaneous saccharification and fermentation.
*Work up slowly in mash specific gravity to ensure that problems don&rsquo;t occur.
*Condition yeast by preparing it in lower gravity mashes before inoculating the very high gravity mash.
*Do not reuse yeast.
*Keep the fermentor temperature down or use temperature staging.
*Keep the mash free of bacterial contamination and minimize stresses.
</ul>

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Yeast expert Graeme Walker, left, of Scotland, has taken over the reins of scientific director of Ethanol Technology Institute from long-time director Mike Ingledew of Canada.

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The Alcohol School reviews key focus areas for ethanol producers.

Lessons on Bottom Line Basics

As we prepare for 2013, the American Coalition for Ethanol will build upon the success we had this year in mobilizing grassroots support for ethanol, developing the E15 market and collaborating with automakers to pave the way for higher ethanol blends to provide the octane they need in the future.
Without a doubt, the market challenges facing ethanol producers are real. The short corn crop will force rationing and pain on all end-use sectors in 2013. We need outlets to relieve the ethanol market imbalance, but the overall pool is getting smaller as fuel efficiency standards reduce U.S. gasoline use. While Ford and General Motors have okayed the use of E15 in their owner&rsquo;s manuals for newer vehicles, E15 market penetration has a long way to go. Fortunately, the savings E15 offers compared to gasoline is a factor that helps motivate retailers to offer this new fuel to customers, and ACE is taking full advantage of this as we work to develop the E15 market.
The demand driver, which ensures E15 a place in the market and higher ethanol blends market certainty over the long run, is the renewable fuel standard (RFS). In many ways, the war over the fate of the RFS has just begun. Big Oil and other ethanol opponents are spending millions of dollars to reduce or repeal it in Congress and the courts.
That&rsquo;s why ACE has been vigilant about drawing attention to the success of the RFS. It&rsquo;s also why we&rsquo;ve joined organizations and companies committed to protecting the RFS to help launch a counteroffensive called the Fuels America campaign. By uniting our resources in the Fuels America campaign, we aim to reset the national conversation about ethanol and show the strength and diversity of the biofuels industry. ACE is proud to join this advertising and public relations campaign, which is already making a positive difference.
Supporting the Fuels America campaign is just one of many steps ACE is taking to help secure the future of the RFS and mobilize grassroots support for ethanol. During the RFS waiver comment period, ACE launched a digital RFS Action Center, which coordinated more than 130 unique, grassroots comments from 15 states in opposition to the waiver. We also specifically drove livestock producers to write EPA about how they benefit from the availability of distillers grains. And prior to the election, ACE led a Twitter-based targeting of political candidates in support of the RFS.
We&rsquo;ve also announced a public letter-writing campaign to isolate media outlets that have published or broadcast inaccuracies about ethanol, and to tell them we won't stand by while our industry is unjustly attacked. Our campaign slogan is provocative&mdash;Give Ethanol Critics the Finger&mdash; but before you get offended, please know that by &ldquo;finger&rdquo; we mean your typing finger. You can help set the record straight when you hit the &ldquo;enter&rdquo; key on your computer to send a letter to misinformed newspapers and other media. While the primary focus of the letter-writing campaign, which runs through the end of the year, will be the RFS, other topics will be covered, including consumer fuel choice, E15 and midlevel blends, job creation, energy security and food and fuel.
Grassroots supporters are in a unique position to tell personal stories that humanize the benefits of our industry. That means real people like you can effectively help convey from the ground up what is at stake if opponents succeed in repealing the RFS. We encourage readers to take part in ACE&rsquo;s effort to tell stories about how the RFS and ethanol benefits your communities and economies. The letter-writing campaign and our overall war to protect the RFS will succeed only if people get involved and take action. Author: Brian Jennings Executive Vice President, American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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Conveying  What's at Stake, From the Ground Up

Despite challenges and tight margins, recent months demonstrate that ethanol plants have diversified and stabilized since the earlier days of the industry, according to the Biofuels Benchmarking Industry Report produced by Christianson &amp; Associates PLLP. The Midwest accounting and consulting firm has been collecting data from its ethanol benchmarking program participants since 2003. The industry report profiled here focuses on the 18-month period from January 2011 to June 2012, and includes data from about a quarter of all ethanol plants in the U.S. and Canada.
Looking at the numbers, three key factors at work in recent years provide indicators of a future of increased stability and higher levels of synergy with local economies. First, and perhaps most importantly, more plants are producing different types of coproducts, and they&rsquo;re making more money from those coproducts, both in real numbers and as a percentage of total revenue. Over 25 percent of plants now recapture and sell CO2, for instance, and over half have begun extracting corn oil. Distillers grains prices have also risen in correlation with corn prices, which hasn&rsquo;t always been the case with ethanol prices. The result of this diversification is that coproduct revenue accounted for 23 percent of average grind revenue in the first half of 2012, up from just 16 percent in 2008.
Multiple revenue streams mean less dependence on the price of ethanol to determine profitability, and coproduct prices overall have been less volatile. Although ethanol netbacks fluctuated from a high in the third quarter of 2011 of $2.66 per gallon, on average, to a low of $2.04 in Q2 of 2012, coproduct netbacks rose steadily. Measured in revenue-dollars-per-gallon-of-ethanol sold, coproducts brought in an average of 62 cents per gallon in Q2 of 2012, which is a steady increase of 59 percent since the last quarter of 2010, when coproduct revenue was just 39 cents per sales gallon of ethanol.
Not only does the increase in coproduct profitability indicate better ability to withstand low ethanol prices, it also reflects close integration with other local industries to get the best return on coproduct technology investments. This type of geographical targeting, to maximize profit and minimize transportation costs, is a key component of successful coproduct strategy. Obviously, plants have always used their regional market to make decisions about how much to dry their distillers grains, but plants now have increasingly diverse markets to consider for other types of coproducts.
For example, plants may find it profitable to sell CO2 when they&rsquo;re near another business that makes use of it, such as a bottling plant. They may also determine that it&rsquo;s more profitable for them to refine CO2 themselves, or to simply sell the raw product, illustrating an area where it&rsquo;s important for plant leadership to carefully review markets and evaluate payback on technology investments. A look at netbacks from CO2 sales makes this clear when one compares the group of leaders, which is the average of the top 25 percent, and a laggard group, the average of the lowest 25 percent. Leaders in CO2 sales can expect netbacks about 10 times higher than laggards in this category, so clearly a careful evaluation of local markets is critical.
Similarly, plants may determine that corn oil is profitable for them if they&rsquo;re near a big consumer of the oil such as a biodiesel refinery. Although the benchmarking program does not collect specific information about the industries to which corn oil is marketed, higher profits are earned by the plants in the eastern third of the country, as shown in a regional comparison of corn oil net sales. This is indicative of a correlation between higher corn oil profits and proximity to biodiesel producers, which are concentrated east of the Mississippi River. &nbsp; Financial Progress The second factor pointing to increased stability is a financial one and can be observed by looking at historical earnings and working capital numbers over the past five years.
Consistently favorable revenue and profitability throughout 2010 and most of 2011 allowed plants to position themselves more securely than ever before, by reducing debt and increasing working capital (the difference between current assets and current liabilities). Working capital has decreased slightly over the most recent two quarters, and currently averages about 17 cents per production gallon. Overall liquidity remains well above the low levels seen during the industry recovery period of 2009 to early 2010. Average working capital bottomed out at an average of just 5 cents per production gallon in Q2 of 2009. This improvement should, in turn, help maintain some degree of overall industry stability during the remainder of 2012 and into 2013, as plants cope with continued tight grind margins and the effects of this year&rsquo;s Midwest drought season. Optimizing Success Ethanol production spurs better science, encouraging creation of the engineering and technology jobs that accompany applying theoretical science into production. Indicators of ongoing efforts to optimize production technology are the third contributing factor in the industry data that point to ethanol&rsquo;s lasting significance in the domestic economy as we head into 2013.
One such indicator of technological advancement is, of course, improved yield. Although overall average ethanol yields have remained fairly constant, leaders have shown average yields of about 2.80 gallons per bushel, while the overall industry average hovers at around 2.73 gallons per bushel. The laggards group isn&rsquo;t far behind, averaging about 2.65 gallons per bushel. However, extracting just a bit more ethanol per bushel, as leader plants do, can make a difference of millions of dollars to a plant&rsquo;s bottom line.
Moving from the laggard average ethanol yield of 2.66 gallons per bushel to the yields achieved by the average leader yield of 2.8 gallons may not seem like a big difference. But multiply those numbers by the average plant feedstock use of 6 million bushels per quarter, and that change can mean an increase in revenue per quarter of over $1.7 million, the difference between a profitable year and an unprofitable one, particularly in today&rsquo;s tight-margin environment.
Corn oil yields have jumped even more due to better extraction technologies&mdash;they&rsquo;re up an average of 40 percent since the first quarter of 2011. Leader plants in this category can expect even higher yields, averaging 0.72 pounds per bushel in the most recent quarter.
Based on the trends emerging from the data in the report, the outlook is good that plants will continue to find ways to become increasingly stable and self-sustaining, largely by making savvy technology investments that help them diversify into new coproduct markets, which in turn result in ever-better integration with the surrounding agricultural and economic environments. Author: Paula Emberland Benchmarking Business Analyst Christianson &amp; Associates PLLP pemberland@christiansoncpa.com 320-441-5544
&nbsp;
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

2012/11/13521436010892.jpg

The chart shows the average return from the leaders (the top 25 percent) and the laggards (the lowest 25 percent) compared to the overall average of the plants participating in the benchmarking project at Christianson & Associates.

2012/11/13521436019248.jpg

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Multiple revenue streams lessen impact of ethanol prices

Industry Improves as Indicators Stabilize, Diversification Expands

The U.S. Food and Drug Administration has historically left regulation of animal feed facilities, including ethanol facilities producing feed as coproducts, to the states. But with the passage of the Food Safety Modernization Act and other changes within FDA, the agency is beginning to assert its authority. The FDA is showing a newfound interest in ethanol facilities, including registration requirements, antimicrobial usage and aflatoxin testing.
There are several key points for the industry to remember. First, all facilities producing or storing biofuels coproducts used for animal feed must register with FDA.&nbsp; Although this has been a requirement since the end of 2003, FDA had no way of enforcing the requirement until the passage of the FSMA in January 2011 gave teeth to the registration requirement by allowing FDA to suspend a facility&rsquo;s registration. FSMA also prohibits the shipment of any goods from the facility if its registration is suspended or if it is not registered. Under FSMA, facilities are supposed to renew their registration every two years. That renewal period was set to begin in October, but FDA&rsquo;s website was not yet ready for the renewals. Biofuel facilities that have already registered with FDA should sign up for FDA&rsquo;s FSMA alert emails and be prepared to register once the website is active again. Facilities that are not yet registered should register immediately at https://www.access.fda.gov/oaa/. Registration is relatively simple, with just a few questions regarding the facility, its products and the responsible party for the facility.
FDA has also significantly increased its focus on the use of antimicrobials in the ethanol production process over the past few years. FDA has been sampling and testing DDGS and other coproducts. In 2010, it conducted a significant study that showed antimicrobial residues in four of 46 samples tested. Earlier this year a consumer interest group, focused on what it calls sustainable food, farm and trade systems, released a report entitled &ldquo;Bugs in the System: How the FDA Fails to Regulate Antibiotics in Ethanol Production.&rdquo; That report spurred some members of Congress to write a letter to FDA seeking FDA action on antimicrobials. With FDA&rsquo;s increased focus on antibiotic resistance and the subtherapeutic use of antibiotics in food animals, we expect FDA to begin more testing for antimicrobial residues in ethanol coproducts and potentially start issuing warning letters or other enforcement actions when residues are found.
With the severe drought that affected the Midwest and Great Plains this year, aflatoxin levels in corn and wheat feedstock have become a significant concern. FDA&rsquo;s Compliance Policy Guide 638.100, first issued in 1979, provides action levels&mdash; levels at which FDA will consider taking enforcement action&mdash;with respect to aflatoxin in animal feed. This CPG applies to ethanol coproducts fed to animals. It generally prohibits companies from mixing grain with high aflatoxin levels with clean grain in order to dilute the amount of aflatoxin in the finished product below the action level. With the significant grain shortages and high aflatoxin levels this year, FDA approved several states&rsquo; requests to allow blending. However, that blending must be done under very strict conditions. The blend must be sold for use with appropriate species, must be analyzed for aflatoxin content and be accompanied by certification by the seller, the seller must obtain a certification from the buyer regarding the buyer&rsquo;s use of the product, and the product must be clearly labeled as for animal feed use only.&nbsp;
The new reality in the feed and biofuels world is that FDA is here to stay. We believe the actions outlined here are just the beginning of greater FDA involvement in the industry. Ethanol companies are well-advised to get ahead of the curve by understanding FDA&rsquo;s involvement in the industry and putting in place the necessary FDA compliance systems and other policies to ensure compliance. Authors: Andrew Anderson Partner, Faegre Baker Daniels andrew.anderson@faegrebd.com 515-447-4703 Steve Toeniskoetter Associate, Faegre Baker Daniels steve.toeniskoetter@faegrebd.com 612-766-7353

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The New Sheriff:  FDA's Increased Focus

After almost three years of study, debate, hours of meetings, many reports, public and nonpublic consultations, the European Commission has released its legislative proposal on how to address the indirect land use change effects of the European biofuels policy.
Everyone was expecting the introduction of an indirect land-use (ILUC) factor into the law, but strangely enough this didn&rsquo;t happen: the ILUC factor has been put in the fridge. The Commission, out of the blue, said more study is needed and will submit yet another report, this time by the end of 2017.
That doesn&rsquo;t mean that what has been put on the table is good. The use of biofuel from food/feed crops is limited to 5 percent&mdash;the current level. After 2020, it&rsquo;s game over. Instead of instant death, it is now death by stages.
This season&rsquo;s lower crop yields must have come as a godsend for the European Commission. No more worries whether the ILUC science is right or wrong. Blame biofuels for the increase in commodity prices and limit its production. Less biofuel means more land for growing crops for food. ILUC problem solved.
Capping the use of first-generation biofuels is not only simplistic, it is also na&iuml;ve and irresponsible policymaking. Does the Commission really believe that such an approach will reduce the hunger problem in the world? In the EU, we use 9 million tons of grains for fuel ethanol production from about 1.5 million hectares of land. With today&rsquo;s global grain production of 2.2 billion tons, this is next to nothing (0.004 percent). But Europe, by abandoning its biofuel policy is going to make the difference in feeding the world! That in the future we will need to find 3 million more tons of animal feed outside EU is just a minor detail, as is using more fossil fuel.
The oversimplification doesn&rsquo;t stop there.
The 10 percent target for 2020 has not changed, and to fill the gap created by limiting first generation to 5 percent, the following accounting trick is being proposed: On top of double counting some biofuels from preferred feedstocks, we should quadruple count biofuels from 14 raw materials such as algae, crude glycerine, straw, manure, husks, cobs, etc.
So, imagine. You have a cow you feed cereals and make biofuels from the manure&mdash;modern technology brought back to its essentials. Every liter of manure biofuel will count four times. Three virtual liters of biofuel means the equivalent amount of additional fossil fuel. So, there is no additional greenhouse gas emission savings, no increase in energy security, no diversification of energy sources. The oil companies love this approach to promote advanced biofuels&mdash;or this clever way of promoting more fossil fuels through the back door.&nbsp;
Investments going down the drain is not a mathematical trick, it is reality. For ethanol alone, the investments already reach 9 billion euros, supporting 100,000 jobs. The proposal is shockingly bad for the European biofuels industry. It is a slap in the face of those committed entrepreneurs and investors who have spent time and money creating a new promising industrial sector and who drove it to the highest environmental sustainability standard you can imagine. What should have become a precursor of the much praised and heralded bio-economy will fade away, as will the bio-economy.
Instead of incentivizing better biofuels and recognizing the benefits of high-protein coproducts, the Commission has surrendered to the imaginary concerns and unproven scenarios of NGOs. Instead of boosting the economy, recognizing the contribution of biofuel to increased agricultural yields and more sustainable agriculture, the Commission is sending another sector to the grave. The economic crisis seems to have paralyzed the forces that counterbalance excessive environmentalism. Surely, with this kind of erroneous industrial policy, we will not save Europe&rsquo;s industrial competitiveness.&nbsp;
We will not yield that easily.
The EU bioethanol industry will do everything in its power in the next year to obtain support from the more sensible and responsible decision makers to safeguard investments, jobs and an industry with enormous potential for moving towards a bio-economy. Consistency in policy is vital to maintain a stable investment climate. By changing the rules of the game even before half-time, the Commission is giving the wrong signal to investors: be aware, we can change the rules any time. Don&rsquo;t put any trust in us.
Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

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Mathematical Tricks, Backdoor Policies

Recognizing that the arguments for advanced ethanol as well as the challenges facing producers are unique from those of first-generation producers, Brooke Coleman and the Advanced Ethanol Council have been charged with educating policy makers on the importance of maintaining the commitment to commercialize next-generation biofuels. AEC member companies face an uphill battle to develop economically viable production strategies amidst a constrained capital market. Add to that a contentious policy battleground featuring open calls to waive the vital production waypoints established in the renewable fuel standard (RFS). Your biography points to time spent predominantly on the coasts, yet you&rsquo;ve been working in renewable fuels for nearly 15 years. How did you get involved in an industry that was classified as regional and championed largely by advocates and policy makers from the Midwest? Four letters. MTBE (methyl tertiary butyl ether). One second, I was leading an effort in California to ban MTBE to protect drinking water resources; the next second, I found myself in the middle of a national debate about ethanol versus MTBE. I did not realize at the outset that I was wading into a 100-year battle between ethanol, methanol and petroleum. But I realized very quickly, both from an environmental and economic perspective, that we are better off making biofuels from plentiful domestic resources than buying petroleum from dwindling foreign ones. But I get the insinuation, and it is largely true, people on the coasts generally have no clue when it comes to agriculture and land use (even while they seem to have all the answers when it comes to saving these valuable resources). The drought certainly brought out the opposition to the industry and the RFS in full force this summer. What is the industry&rsquo;s strongest counter to claims that ethanol production should be curtailed in times of tight supply? It really comes down to a simple tradeoff. If we use less ethanol, we probably get a very small reduction in grain prices, but we take high-octane fuel out of a highly constrained liquid fuel marketplace, which will raise gas prices and send a terrible signal to investors in advanced biofuels. At some point, though, we need to stop refuting and start going on the offensive. The livestock industry is not getting its $2 corn back with oil prices at the new equilibrium. What a waste it would be to backslide on biofuels in pursuit of the fantasy that $2 corn might come back. Parties obligated to buy gallons of advanced ethanol like cellulosic ethanol are quick to point out that the industry hasn&rsquo;t yet delivered the volumes they are required to purchase. With a handful of cellulosic facilities under construction, how soon will this change, and why are these volume requirements so important to continue defending? First of all, let&rsquo;s frame the emergence of this industry properly. RFS2 was signed just five years ago. Going from the laboratory to commercial deployment is difficult enough in five years without a historic global recession to completely paralyze lending markets. But, to be sure, the first wave of plants is expected to come online this year. So 2013 should be the year that we produce commercial gallons. And that&rsquo;s a heck of an accomplishment given the circumstances. As for the second question, the issue is off-take. Preserving the targets sends a signal to the industry that they should plan on using the fuel, which ultimately translates into off-take agreements with cellulosic biofuel producers and private sector investment to produce those gallons. In the ideal world, we do not need blending targets to bring our fuel to market. But in that world, fuel markets are competitive, price-driven and reward innovation. It&rsquo;s a wonderful ideal, but it&rsquo;s not reality. If we are going to fix the OPEC/foreign oil dependence problem, it&rsquo;s going to take market-forcing mechanisms like the RFS. Being passive is not going to change anything. Is there a historic precedent for the rise of a replacement for such a well-entrenched energy incumbent like petroleum-based fuels? If so, what are the lessons to be learned from it? Ethanol is arguably the most disruptive alternative fuel in the world. But what ethanol has accomplished to date is totally different from what we aim to accomplish. Ethanol use exploded because there was a massive void in the marketplace (MTBE) in combination with federal policy (the Clean Air Act, and later, RFS1) that basically ensured ethanol would replace MTBE. In addition, the regulatory and market barriers for 10 percent ethanol blends were small in comparison to those we face today. It was a good choice, but it is also true that incumbents ultimately decided to cede the MTBE markets to ethanol, because MTBE was deemed by U.S. courts to be a defective product and blenders needed the octane. So lesson No. 1 is when the political, market and regulatory stars align, energy portfolios can be overhauled in a very short period of time. Now, ramping up to 20 to 30 percent ethanol market share is a different animal. In the immediate term, we need to protect the RFS and take the bias for incumbents out of the U.S. tax code. Without that, we are not going to get where we want to go. But more broadly, we need to accept as an industry that we are battling with our customers for market share, and act accordingly. Act accordingly? Can you expand on that? While the oil industry continues to be our primary customer base and frequent business partner, their trade associations and affiliated third parties are trying to bury us alive. If the oil industry has no problem compartmentalizing everyday business propositions and the territorial realities of protecting and expanding market share, neither should we. Why was it important for advanced ethanol producers to have an industry voice that was unique from the associations already advocating for ethanol producers? The formation of AEC had more to do with concerns about the discussion about second-generation biofuels than first-generation biofuels. Not all advanced biofuels are created equal, and different types need different things to excel in the marketplace. I think the AEC founding companies felt like our story was not getting properly amplified and, in some cases, was getting distorted to serve the interests of other advanced biofuels. Advocating for the entire advanced biofuels industry, for example, is easy when policy makers are asking only general questions. But when someone asks how to reform a $2 billion biofuels program, you better have someone at the table who cares about your stuff and is not weakened by a conflict of interest. That&rsquo;s the gist of it. When you are speaking with policymakers who aren&rsquo;t supportive of the industry, what reasons do they use to support their positions? Not surprisingly, it&rsquo;s the issues our adversaries work so hard to put at the center of the political discussion about biofuels. Grain and food prices, livestock interests, and in some cases, ecological concerns like land use. The problem is, it&rsquo;s not good enough to have good answers for each of these questions because in politics, perception is reality. The livestock industry may be barking up the wrong tree when it comes to the cause of higher feed prices, but if they are convinced and vocal, we have a political problem. You once noted that the first lesson you learned in law school is never allow your opponent to control the narrative of any argument. What is the narrative you most often see industry opponents trying to establish about biofuels? It&rsquo;s a long list. Oil prices are the primary cause of higher food and grain prices, yet they set the parameters of the debate with food versus fuel. Unconventional sources of fossil fuels are the primary threat to the future health of this planet, yet it is biofuels (via indirect land use change) that need to be avoided. You have to give them credit. Incumbents protect their market share well and use third parties to do it. But the biofuels industry needs to learn from it, stick together and start playing some offense, because we are on the right side of every issue involved, from food prices to land to subsidies.

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Advanced Ethanol Council Executive Director Brooke Coleman talks controlling the industry's narrative and the delicate challenge of battling ethanol's only customer for market share.

Defending Tomorrow's Ethanol Today - Q&A

It&rsquo;s time to get real about this talk of waiving the renewable fuels standard (RFS). So we have had one year of drought and as a result only produced the eighth largest corn crop in history and because of that we should abandon a program that has contributed to economic growth of America for the past 30 years?
Then perhaps we should stop oil subsidies, because of the Exon Valdez or the BP Gulf oil spill. Why not stop federal and state funding of education because there is a shortage of qualified teachers? One could list dozens of examples of continuing commitments made by government that transcend the high and low cycles of life.
The transparency of those proposing the RFS waiver is so blatantly obvious that it allows anyone with an ounce of perception to see right through it. There are three things driving this nonsense: money, political gain and perhaps a bit of editorial notoriety, in some perverse way.
Those writing about this issue aren&rsquo;t actually doing any research, they simply are regurgitating things that other people, who have done no research, have written or said. When you examine those in Congress who are railing against the RFS, there is either money or political capital to be gained. It&rsquo;s time Washington wakes up and examines who and what is driving this ridiculous effort to abandon one of the most successful energy programs ever undertaken in American history.
We should not even be having this discussion. The jobs, the economic contribution, the energy security and environmental benefits ethanol provides are deeply woven into the American economy.
USDA breaks down the uses of corn for the 2010 year as follows: of the roughly 13 billion bushels of field corn produced, 36 percent was used as feed for domestic livestock (beef, pork, poultry), 31 percent was used for ethanol (also resulting in 1.5 billion bushels of distillers grains, a coproduct of ethanol production that is used as livestock feed), 14 percent was exported to other countries (Japan, Mexico, South Korea, Taiwan and Egypt are the top recipients), 9 percent was used for human food, seed and industrial use, and 11 percent was carried over as a surplus. Little has changed since that analysis was made, except for a smaller corn crop in 2012. So stop the nonsense! Ethanol is not causing world hunger, it is not devastating the livestock industry or decimating the rain forests, and it is not having any significant impact on the price of food. What the RFS is doing is helping keep a domestic renewable energy industry strong and growing and in doing so, we set an example to the world of the power of agriculture.
That&rsquo;s the way I see it.
Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com

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Stop the Nonsense

This past year was a challenging one for the ethanol industry, but due to the resilience of the family farmer and the producers and supporters of ethanol, our industry remains strong. We are poised to continue to deliver measurable results, producing renewable fuels to help meet our nation&rsquo;s energy needs. Our work is far from over.
This fall, Growth Energy joined the Fuels America coalition to defend the RFS and promote the benefits of renewable fuels. The facts cannot be denied&mdash;the RFS is the most successful energy policy of the past 40 years, sharply decreasing our dependence on foreign oil and creating more than 400,000 well-paying jobs that cannot be outsourced. Not to mention it is better for our environment, drives investment in next-generation biofuels and provides consumers choice and savings at the pump.
With Fuels America, Growth Energy has expanded its efforts to educate policy-makers to ensure biofuel benefits are understood and the misinformation that our critics use is discredited. This is not an easy task, but we have made significant progress with the number of groups participating. We need everyone&mdash;producers, farmers, stakeholders and every supporter of ethanol&mdash;to join in this effort to defend and protect the RFS.
One of the most important facts to point out is that only 17 percent of corn acres are used to produce ethanol. Yes, 40 percent is delivered to ethanol plants, but that is a gross number, not a net number&mdash;similar to salary versus actual take home pay. The 17 percent is the net usage, as only the starch is converted, while all the protein, fiber and oils are left to produce a high-value, less-expensive and protein-rich animal feed. We must aggressively respond to these false claims as a united industry while also proactively work to educate not only the media, but the lawmakers that represent you and your facilities.
Similarly, our critics&rsquo; continue to use the same old and disproven argument of food versus fuel. Unfortunately, family farmers suffered the most severe drought in the past 50 years and ethanol critics immediately put the blame on ethanol for increased global hunger and rising food prices. The simple fact is that ethanol production did not cause a rise in commodity prices, Mother Nature did. There is no government solution to this problem. American famers and the ethanol industry have answered the call of global grain demand by increasing corn plantings. If it were not for the demand from ethanol, farmers would not have planted the record number of acres as they did. The best solution to end world hunger is increased production, and ethanol is a major driving force behind that.
Educating policymakers is a top priority for Growth Energy and Fuels America, and our relentless fight to defend the RFS is far from over. Additionally, we will continue to work to open the marketplace to higher blends of ethanol, allowing drivers to &ldquo;put a little more America,&rdquo; in their tanks with homegrown, renewable American Ethanol. In particular, Growth Energy will continue to advocate for increased infrastructure through incentivizing flex pumps through the alternative Fuel Vehicle Refueling Property Tax Incentive.
E15 and higher blends have a promising future. Just this fall, NASCAR and American Ethanol reached a milestone, running three million miles on E15, showing only increased horsepower and extreme durability in demanding driving conditions&mdash;3 million miles and not a single engine problem. Critics of E15 have absolutely no ground to stand on. American Ethanol&rsquo;s partnership has educated consumers on the importance, reliability and benefits of E15.
As we enter 2013, Growth Energy looks forward to working with returning and new policymakers to ensure that our industry is accurately represented to lawmakers and continue our unwavering commitment to the RFS and bringing higher blends of ethanol to the consumer&mdash;providing choice and savings, creating jobs here in America that cannot be outsourced and reducing our dependence on foreign oil from the most unstable regions of the world, all while improving our environment. Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

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Looking to 2013

In the midst of a sluggish national economy, the American ethanol industry continues to generate jobs, revive rural economies and build businesses in many sectors of the economy, from energy to construction. The industry&rsquo;s future includes more growth and new technologies, including cellulosic (nongrain) feedstocks.
That success is being realized in a growing number of states and communities across the country. That&rsquo;s the clear message of three recent studies of the industry&rsquo;s economic benefits including Minnesota, the nation&rsquo;s fifth-largest ethanol producer, as well as two states where the industry is only beginning to grow, Ohio and Georgia.
In a study released in October, the Minnesota Department of Agriculture reports that the ethanol industry supported more than 12,600 jobs and generated more than $5 billion in economic activity during 2011. With 21 plants&mdash;10 of them farmer-owned &mdash;and 11,000 farmers supplying feedstocks, the ethanol industry offers an economic lifeline to Minnesota&rsquo;s farmers and rural communities. By processing corn into feed and fuel rather than simply selling corn as a raw commodity, the state&rsquo;s ethanol industry added $912 million to the value of corn last year alone. Moreover, the report continues, &ldquo;Minnesota&rsquo;s ethanol industry has a &lsquo;multiplier effect&rsquo; that benefits many economic sectors across the state, including agriculture, manufacturing, transportation, services, construction, and trade.&rdquo;
Assessing the biofuels industries in Ohio and Georgia, two other studies found similar current and potential economic benefits.
In its study, the Ohio State University Extension Community Development concludes that ethanol production has brought economic and employment benefits to the Buckeye State. With Ohio&rsquo;s ethanol industry continuing to grow, new construction and additional upgrades of Ohio&rsquo;s six ethanol plants have attracted $825 million in capital investment. Just operating these plants supports 273 fulltime jobs, with an annual payroll of $9.36 million. When the total impact of plant construction&mdash;as the economists put it, &ldquo;direct, indirect, and induced&rdquo;&mdash;is taken into account, the industry contributes $1.1 billion in economic activity in Ohio, supporting 12,975 jobs and generating $607 million in income.
Meanwhile, in Georgia, a recent study by the University of Georgia&rsquo;s Selig Center for Economic Growth, takes a new look at biofuels as part of the state&rsquo;s fast-growing life sciences industry, also including agriculture, pharmaceuticals, biotech and bioenergy. Jobs in this industry increased by 1.5 percent from 2007-&rsquo;10 in Georgia, while statewide employment dropped by 7.9 percent during the same period. Wages paid by companies in this sector also increased at a faster rate (4.4 percent) than wages paid by other companies within the state (4.2 percent).
While ethanol production has yet to reach its full potential in the state, the report identifies eight biofuel companies active within Georgia, with six having been in business for 10 years or less and seven of the eight employing between one and 10 workers, while one employs a staff of 51 to 100. Currently, ethanol production accounts for 206 jobs within Georgia, generating $105.32 million in direct economic activity and indirectly supporting a total of 1,026 jobs.
Because of the RFS, the U.S. biofuels industry continues to expand and evolve.&nbsp; As a result, the future is bright in rural communities, and America is stronger and more secure, from our economy to our energy sources.
Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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New Studies Tell Ethanol's Statewide Success Stories

Ethanol Producer Magazine wraps each year with the views and forecasts of those who produce, sell, defend and think about ethanol full-time. We&rsquo;ve done it again in this issue, collecting the year-end contemplations of industry leaders from Texas to Toronto.&nbsp;&nbsp;&nbsp;&nbsp;
This issue of EPM is being distributed at the 9th annual Canadian Renewable Fuels Summit in Ottawa. Fittingly, we&rsquo;ve included a profile of the Toronto-based Global Renewable Fuels Alliance, which indirectly represents 65 percent of the world&rsquo;s biofuels production. Turning their young organization into a sort of hip Interpol of global biofuels messaging, the GRFA&rsquo;s Bliss Baker and Giancarlo Drennen monitor and respond to international headlines daily to help association leaders from the U.S., Canada, Europe and South America counter a seemingly endless stream of biofuels misinformation. As we discover in this month&rsquo;s page-32 feature, &ldquo;Defending Biofuels on a Global Stage,&rdquo; Baker and Drennen are making a real difference, effectively quieting the OECD and the World Bank on ethanol over the past few years. The story reminds us that the world&rsquo;s various biofuels associations, despite differences over trade policy, can and do work together.
Back in the U.S., industry leaders are entering 2013 with a collective focus on overcoming the barriers of E15 implementation, drawing down the costs of cellulosic ethanol and, above all, protecting the RFS. As Jeff Roskam, CEO of the Kansas Alliance for Biorefining and Bioenergy, points out in this month&rsquo;s page-39 cover story, &ldquo;Perspectives on 2013,&rdquo; losing or modifying the RFS would renew the petroleum industry&rsquo;s monopoly on U.S. transportation fuels. That real and present danger has Brooke Coleman on the offensive, defending advanced biofuels blending targets even before they are attacked. In our page-49 Q&amp;A, &ldquo;Defending Tomorrow&rsquo;s Ethanol Today,&rdquo; the Advanced Ethanol Council executive director says, &ldquo;If the oil industry has no problem compartmentalizing everyday business propositions and the territorial realities of protecting and expanding market share, neither should we.&rdquo;
In the aftermath of the election, Poet CEO Jeff Lautt and others featured in this month&rsquo;s issue are sticking with the industry&rsquo;s proven talking points. Lautt says it&rsquo;s a priority to impress upon the new Congress what biofuels means for farm income, gas prices and the overall economy. In response to the 2012 drought, Neil McKinstray, president of The Andersons Ethanol Group and current chairman of the Renewable Fuels Association, offers an &ldquo;adjust and deal with it&rdquo; attitude. He tells us there is nothing the industry can do to expand the supply of corn in 2013 following the worst U.S. drought in 56 years. Acknowledging that some plants will, and have, shut down, McKinstray reminds us that other facilities are running at full throttle and gaining new efficiencies. While some of those plants may not be making much right now, &ldquo;they did a few years ago and they will have a war chest,&rdquo; McKinstray says, before pragmatically adding, &ldquo;others may simply be trying to survive.&rdquo;&nbsp;&nbsp;&nbsp;&nbsp;
Tom Bryan, PRESIDENT &amp; EDITOR IN CHIEF tbryan@bbiinternational.com

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An Industry on the Offensive

Looking into the future, Jeff Roskam, CEO of the Kansas Alliance for Biorefining and Bioenergy, fears any modification of the renewable fuel standard (RFS). &ldquo;Period,&rdquo; he says. &ldquo;Not only would this be detrimental to the existing industry, it would take us back to a petroleum monopoly on liquid fuels.&nbsp; Monopolies generally are not market justified.&rdquo;
Roskam is one of four industry insiders Ethanol Producer Magazine spoke to for the December issue. The executives, two presidents and two CEOs, shared their hopes and fears about the coming year, while looking back on how 2012 will shape ethanol&rsquo;s future. Each has a slightly different angle on the industry, from the helm of corn-ethanol companies, one of which is aiming for cellulosic ethanol, from the biomass business and from a brokerage firm embedded in the financial and physical marketplace. As one year turns into another, here&rsquo;s what they had to say.
Overall, Roskam believes there needs to be a much greater recognition for the value of biomass. To that end, he believes higher corn prices will drive innovation, as ethanol producers realize the raw input costs for biomass are actually lower than recent high corn prices. &ldquo;That hasn&rsquo;t really existed too much in history of bioenergy,&rdquo; he says.
Of course, more needs to be done to scale up biomass harvesting capacity and draw down the cost of harvesting and transporting biomass from field to plant gate. And that&rsquo;s exactly what KABB is working on, through its subsidiary Feedstox. After assembling its fleet of advanced biomass harvesting equipment this spring, the equipment was put into use for the first time. The fleet, which is mostly for producing or moving square bales, has a combined capacity of 80,000 tons of harvested biomass. &ldquo;We call it baling, road-siding and hauling [equipment,]&rdquo; he says, adding that the nonprofit harvests biomass through partnerships or leasing agreements. &ldquo;Our equipment is pretty darn close to fully utilized during this corn harvest.&rdquo;
In the next year, KABB plans to add to its fleet and increase the amount of biomass harvested. The goal is to set up contracts with the cellulosic ethanol facilities that are currently under construction, following the harvest season from the Southern High Plains to the Northern High Plains for maximum utilization of equipment. &ldquo;We&rsquo;re still working on next year&rsquo;s contracts with those facilities, to see what kind of equipment they might need,&rdquo; he says.
Infrastructure to harvest and bale biomass is already in place, yet even the largest operators don&rsquo;t have sufficient capacity to supply biorefineries. Roughly speaking, one 20 MMgy plant would need nearly 300,000 dry tons of feedstock yearly and the largest biomass aggregator has the equipment capacity to harvest only about one-third of that amount. In addition, existing markets, including for animal feed and bedding, may compete for supply. &ldquo;That&rsquo;s why scaling is such a big issue for the proposed refiners,&rdquo; he says.
As a general rule, it costs about $50 a ton to get biomass to the plant gate, not counting the price paid to the farmer. In order to cut the cost of harvesting and delivering biomass, two factors are key: increasing crop density and cutting back on the number of passes or touches during harvest, he says. Dedicated energy crops naturally have higher crop density than agricultural residues such as wheat straw and corn stover. KABB estimates that corn stover yields 2.5 tons of biomass per acre compared to 7 tons per acre for grasses and 10-plus tons per acre for miscanthus. The greater the crop density, the more biomass can be harvested in less time, as well as offer substantial fuel savings and greenhouse gas emission reductions. Successfully cutting back on the number of passes and increasing crop density could decrease the cost by $15 a ton. &ldquo;The annual savings to that plant, from us being able to reduce our cost from $50 to $35, would be $4.285 million, or 21 cents a gallon,&rdquo; he says. &ldquo;[That&rsquo;s] a big incentive.&rdquo;&nbsp;
Still, Roskam believes agricultural residues will be the first cellulosic feedstocks, partially because farmers assume less risk for greater utilization of crops they&rsquo;re already planting. Feedstox&rsquo;s combination combine balers, which harvest corn or wheat and bale stover or straw at the same time, have worked particularly well, he says. Depending on the agreement, Feedstox may harvest the grain and take the bales in barter or split the revenue with the producer. &ldquo;They generally find that very attractive,&rdquo; he says.
After spending 15 years working in the corn-ethanol industry and the past two years in biomass, Roskam feels strongly that there are opportunities to take the sucrose molecule to fuel ethanol, yes, but other chemical directions as well. &ldquo;I think the opportunity is not exclusive for cellulosic ethanol,&rdquo; he says. &ldquo;I think it&rsquo;s for organic chemicals from renewable sources, and that&rsquo;s where I guess I get more optimism.&rdquo;
 Author: Holly Jessen Features Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com
______________________________________________________________________________________________
Aiming for Multiple Feedstocks, Products Jeff Lautt, CEO of Poet LLC
Poet&rsquo;s new CEO strikes a note of optimism for the industry, even in the face of a tough year ahead. &ldquo;The biorefining industry is much more resilient than in previous years,&rdquo; says Jeff Lautt. &ldquo;Producers have worked to be more efficient and many have integrated new technologies to increase revenue and income. Despite the challenging business climate, we are not seeing the kind of shakeup we saw when things got tough in previous years.&rdquo; Lautt took on the job at Poet in April, succeeding Jeff Broin who has stepped aside from the day-to-day operations, though he still leads the company&rsquo;s board as executive chairman.
The blend wall will continue to be an issue for the industry, Lautt says. &ldquo;It will be important for the entire industry to work hard to implement E15 into more stations across the country.&rdquo; He also stresses the industry &ldquo;must remain vigilant in addressing any misguided criticism or attempts to weaken the U.S. plans for energy independence, including changes to the renewable fuel standard. That&rsquo;s important for our industry&rsquo;s sake, but also for consumers&rsquo; sakes and for farmers&rsquo; sakes. With a new Congress coming in, it is crucial that we impress upon them what biofuels means for farm income, gas prices and the overall economy.&rdquo;
As efforts to educate the public about the benefits of ethanol are stepped up, Lautt addresses the strategies that appear to work best. &ldquo;I&rsquo;ve found that the most effective points are those related to jobs and the economy,&rdquo; he says. &ldquo;We&rsquo;re making a real impact by providing an additional market to farmers, new jobs in rural areas and new revenue circulating in local communities. Also, we have an important story to tell about distillers grains. Finally, we need to keep stressing that biofuels are keeping overall fuel prices lower for consumers." He adds that the ethanol industry must not get complacent when criticism dies down. &ldquo;We have active opponents working every day to derail our efforts to expand domestic renewable fuel production. We have to work every day to get our message out as well.&rdquo;
In looking ahead, Lautt sees the growing adoption of the biorefinery concept as the biggest shift coming for the ethanol industry. &ldquo;I think that change is being felt across the industry,&rdquo; he says. &ldquo;We&rsquo;re seeing the value of having a diverse range of products, and in the future we&rsquo;ll be producing even more products from each kernel of corn.&rdquo; For Poet, the product list will soon include cellulosic ethanol, as construction continues on its first facility at Emmetsburg, Iowa, in partnership with DSM. &ldquo;Cellulosic ethanol provides opportunities for more feedstock and product diversity,&rdquo; he says. &ldquo;I see biorefineries in the future with multiple feedstocks coming in and multiple products&mdash;fuel, renewable power, food, feed, biochemicals and more&mdash;coming out.&rdquo;
Author: Susanne Retka Schill Contributions Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com
__________________________________________________________________________________________
Dealing with a Tough Reality Neill McKinstray, president of The Andersons Ethanol Group
It&rsquo;s impossible to look ahead to 2013 without considering the dry and crispy corn fields that withered in the drought and heat of 2012. &ldquo;We&rsquo;ve just experienced the most significant drought in 56 years, and there&rsquo;s absolutely nothing we can do to expand the supply of corn in the next 12 months,&rdquo; says Neill McKinstray, the current chairman of the Renewable Fuels Association. &ldquo;That is a fact, and the market is going to have to adjust and deal with it.&rdquo;
He points to the coming together of several factors that will create a dynamic and challenging situation. &ldquo;The outlook will be for very tight margins in the industry and forced restrictions on some production in expectation that we&rsquo;re going to have to fight for what corn is available. It will be high-priced corn.&rdquo; he says. &ldquo;On top of that, with the continued slow pace of gasoline consumption, the need for ethanol is not as great as it once was. And the development of E15 and E85 fuel distribution has not moved at the pace we might have anticipated at one point.&rdquo; In early October, &ldquo;somewhere north of 15 percent of capacity is shut down,&rdquo; McKinstray says, with some producers temporarily idled while others operate at less than 100 percent of capacity.
With the uncertainty created by the attacks on the RFS and energy policy in general, &ldquo;the industry will gravitate toward action and opportunities that are less uncertain,&rdquo; he says. Such things as operating efficiency and systems improvements, better cost controls and well-tested new technology will be tried, he says, &ldquo;as opposed to looking at some grand scheme involving huge acquisitions, new plants or untried technology.&rdquo; While some plants may not be making much money right now, he notes, &ldquo;they did a few years ago and they will have a war chest. Others may simply be trying to survive.&rdquo;
Product diversification has become a key strategy for ethanol producers to mitigate tight margins, but The Andersons have taken it to another level. Ethanol production is only the latest of several diversifications. In 1947, when Harold and Margaret Anderson decided to capitalize on the truck traffic delivering grain to a single grain elevator in Maumee, Ohio, by adding a retail store.
Now a publicly traded company, The Andersons conducts business across North America in the grain and plant nutrient sectors, railcar leasing, turf and cob products, consumer retailing and ethanol.
McKinstray doesn&rsquo;t think it is very productive to spend much time confronting or correcting corn ethanol critics. &ldquo;You&rsquo;re either one side or the other and typically you don&rsquo;t see a lot of switching. Everyone&rsquo;s got their view of the facts.&rdquo; Instead, he likes to remind people what the industry&rsquo;s early objectives were, including a new market for agricultural production, remediating air pollution, rural economic development and employment. &ldquo;All those objectives have been addressed and clearly impacted in a positive way by the ethanol industry. Ag income has never been higher.&rdquo; He points to the contrast between a recent trip to The Anderson&rsquo;s ethanol plant in Iowa and his hometown in Illinois. &ldquo;There&rsquo;s nothing going on,&rdquo; he says of his hometown. &ldquo;Main Street is boarded up, and by the way, there&rsquo;s no ethanol plant there. &ldquo;I drive through small towns in Iowa that have really not much else going for them except there&rsquo;s an ethanol plant nearby and there&rsquo;s crop production. They&rsquo;re thriving, and the unemployment rate in Iowa is half of what it is in the rest of the nation.&rdquo; The industry should celebrate those successes, McKinstray says. Author: Susanne Retka Schill Contributions Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com
________________________________________________________________________________________________
Utilizing Marketplace Tools to the Best Advantage Bob Shults, president and founding partner of Atlas Commodity Markets
Bob Shults has a hopeful outlook on 2013. The Texas-based commodity brokerage firm matches buyers and sellers at the best price, in the physical and financial markets for ethanol but also in agricultural products, feed ingredients, grains, crude oil and more. He&rsquo;s excited about the future following the resolution of current regulatory and policy uncertainty surrounding the RFS and, in the financial world, the Dodd&ndash;Frank Wall Street Reform and Consumer Protection Act. &ldquo;We&rsquo;re going to have a much clearer picture of the political and regulatory environment, more certainty,&rdquo; he says.
Looking into the future, Atlas believes 2013 will bring better alignment of the ethanol supply and demand equation and improved producer margins. Shults is encouraged by the fact that General Motors and Ford Motor Co. officially announced their newer vehicles can run on E15 and hopes to see continued acceptance of higher blends. He&rsquo;d like to see other opportunities for increased ethanol demand, such as new engine technologies to take advantage of the fuels higher octane content. &ldquo;If nothing else, we&rsquo;ve got to see a closer alignment of the supply and demand,&rdquo; he says.&nbsp;&nbsp;
Overall, the company is seeing improved liquidity in the financial ethanol markets as well as new participants, allowing for better commodity risk management. This could play a significant role in the ethanol and corn markets as it comes out of a rough year. The distillers grains market continues to become more efficient with time. &ldquo;The financial tool in the DDG markets may become a more important piece of the picture, allowing better risk management on that side of things as well,&rdquo; he says, adding that the feed ingredient brokerage team at Atlas continues to see strong demand for the product.
Calling the ethanol industry &ldquo;extremely resilient in the face of a lot of obstacles,&rdquo; Shults points out that it has continued to evolve in the ways it manages risk. That&rsquo;s impressive, considering the industry's relative newcomer status in a multicommodity business world. The company is seeing an increase in industry participation in the financial markets, using tools such as swaps, options and block futures to manage commodity exposures. &ldquo;They continually try to find new ways to increase their profitably through finding any kind of edge they can,&rdquo; he says.
 Author: Holly Jessen Features Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

Roskam stands next to a Feedstox vehicle and a Case IH 275 Magnum tractor used to pull a square baler, part of the nonprofitâ€™s fleet of biomass harvesting equipment.

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The message that ethanol helps keep fuel prices lower can have a real impact on public opinion, Lautt says.

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The Andersons owns and operates four ethanol plants located in Michigan, Indiana, Iowa and Ohio. Here, McKinstray stands in front of a grain elevator near the companyâ€™s corporate headquarters. 

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Shults considers the ethanol industry extremely resilient. 

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Ethanol Industry executives approach 2013 with optimism and concern. 

Perspectives on 2013

At the risk of diminishing President Obama&rsquo;s successful bid for a second term, it can nevertheless be argued that the personal decisions we all made in the polling booths were merely a prologue to the looming decisions our elected officials face as we move into 2013. Our government is racing headlong toward the euphemistic fiscal cliff that received surprisingly little attention in the presidential debates, but re-emerged as the most pressing national issue almost before the race&rsquo;s outcome was certain. The newly-elected and re-elected senators, representatives, and president may soon find themselves wishing for the stress and demands of a campaign trail as they face not only the fiscal cliff, but also an unresolved Farm Bill and an American public growing tired of watching their government kick the can down the road.
 This month&rsquo;s issue of Biomass Magazine seeks to lay out what is at stake for the industry as our government returns to the hard work of running a country attempting to pull itself out of recession. Luke Geiver&rsquo;s feature &ldquo;Navigating the Political Scene&rdquo; offers a snapshot of legislation that impacts various sectors of the biomass industry, paired with industry insider commentary describing the importance of particular policy segments. In his monthly column for Biomass Magazine, Bob Cleaves, president and CEO of the Biomass Power Association, echoes this theme, but takes the conversation a step further by questioning whether climate change policy, or at least a return to a national conversation about our energy future within the context of climate, is likely.
 As policymakers in Washington, D.C., take on these and other issues that will arise, the bioenergy sector continues to drive forward. Despite calls for a waiver of the renewable fuels standard, the industry&rsquo;s first commercial-scale volumes of advanced biofuels are scheduled to come online in the coming year, utilizing different feedstocks while leveraging varied conversion pathways. In this issue we also report that US pellet capacity continues to rise as producers here serve customers in Western Europe, where, for now, the government has for now, made a stronger commitment than the U.S. to find and utilize energy sources with lower carbon profiles.
 Our industry&rsquo;s best argument for future policy support will always be the successful outcomes that we argued would arise from legislation we worked for in the past. In this regard, the achievements we&rsquo;re poised to make in 2013 may be the best case we&rsquo;ve made in years.

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Making Our Case

In the coming days, each of us will be treated to countless webinars and seminars on the Election Day post-mortem as it relates to renewable energy. Aside from the obvious winners&mdash;the president, Senate Democrats and House Republicans&mdash;and losers&mdash;Mitt Romney, Scott Brown, and the so-called &ldquo;Mad Men&rdquo; wing of the Republican Party&mdash;the following is what we know.
 The fire alarm caused by an assault on existing policies supporting renewable energy is less likely to happen now that we have a divided Congress and a president on record as supporting renewables. Whatever we think may happen on broader tax reform, be on the lookout for proposals to phase out tax benefits for certain renewables such as wind. In the context of that debate will come an opportunity for the biomass industry to educate Congress about the importance of tax benefits for our industry&mdash;which have long been inadequate to foster significant growth and less than benefits received by other renewables&mdash;and ways that Section 45 can continue to support an industry that is so vital to rural economies, sustainable forest management and agriculture.
 Next, it may be an overstatement to interpret the president&rsquo;s win as a clear mandate for renewable energy. However, the voters appeared unmoved by U.S. DOE loan guarantees to failed solar panel manufacturers or electric car companies. Barely a word was spoken on climate during the campaign, at least until half of the nation&rsquo;s largest city and huge swaths of the Mid-Atlantic Coast were underwater because of a storm surge that was only made worse by documented rising seas levels. Will climate re-emerge on the congressional or White House agenda? While not immediately, the billions needed to shore up New York&rsquo;s seawalls needs to be funded somehow. Did somebody say carbon tax?
 We see strong possibilities that climate will be the central environmental issue, even if it doesn&rsquo;t poll well. For that reason, the role of biomass in combatting climate change through healthy forests, fire prevention and carbon dioxide avoidance will be important. Watch for the U.S. EPA to play a prominent role in that debate, and for BPA to make sure that the agency applies sound science and responsible public policy. Watch also for USDA to play a larger role in supporting the industry as a means of preventing forest fires and the promotion of energy crops like willow.
 Finally, it goes without saying that regulatory reform in a Romney administration would look very different from the president&rsquo;s. Yet, with a divided Congress and an economy not yet emerged from a deep recession, we are optimistic that EPA will encourage the use of biomass and not regulate certain fuels as wastes. What remains to be seen is whether the Boiler MACT rulemaking, when completed by the EPA in the coming months, will be affordable and achievable.
 One thing is certain, however: we are all safe from political ads for at least a couple months.
&nbsp;
Author: Bob Cleaves President and CEO, Biomass Power Association www.USABiomass.org <a href="mailto:bob@biomasspowerassociation.com">bob@biomasspowerassociation.com</a>

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What the Election Results  Mean for Biomass

When observing U.S. alternative energy during years to come, the real question that must be asked is, &ldquo;Is agricultural biomass going to be a significant contributor, or just another good idea?&rdquo; According to the U.S. DOE's Billion Ton Study, agriculture-derived biomass has to be part of the picture if we are going to achieve our goals as a country. That is the one point that is fairly easy to agree upon. Beyond that, however, there are many questions surrounding agricultural fibers.
 Agricultural biomass encompasses a wide range of plant fibers. These plants can have drastically different physical and chemical properties when compared to each other, and even more so when compared to wood fiber. One of the most significant lessons we learned when we began processing native warm season grasses was that just because it is ground up and looks similar to sawdust, does not mean that it will behave in the same manner as sawdust. Simply put, agricultural biomass is not wood.
 While discussing agricultural biomass, let&rsquo;s take a moment and discuss agriculture itself. It must be observed and appreciated that the challenges and realities of agriculture in our country can vary greatly from region to region. Sometimes even 20 miles can make a stark difference in the appearance and resource availability of the countryside. For example, here in northwest Pennsylvania, our average field size is relatively small, at approximately 15 acres. Driving just 30 minutes to the west puts you in another world, with larger fields, changed weather, different drainage and flatter land.
 Utilization provides another contrast with woody biomass, as there seems to be several concepts of how best to collect and process a certain agricultural biomass for each unique source. One thing that must be kept in mind is that the utilization concept must recognize and allow for any current uses of the fiber and its coproducts. One great example is a project planner proposing to use corn stover, collecting the fiber before it hits the ground and expecting the harvester to slow the ground speed in order to allow for this. This is not an acceptable scenario to the vast majority of grain producers.
 Currently, the thermal conversion of agricultural biomassâ€•whether in baled, ground, or densified formâ€•is best suited for consumption in commercial and more rural residential applications. This is where most of the earliest adoption has occurred. These markets have a vested interest in supporting agricultural products, which results in relatively more patience and willingness to work through the associated challenges of warranty issues, more ash, and different ash chemistry.&nbsp; While a few leaders in the biomass and pellet appliance industry have openly embraced agricultural biomass fuel and have started working with it, there is still a lot of work to be done. Understandably, a large portion of these appliance manufacturers have not invested the significant resources necessary to test and adapt appliances to agricultural fields.
 One of the most effective steps that can be taken to encourage the growth and development of agricultural biomass, both as a concept and as a crop, is to promote the growth of a profitable market for it. This can be achieved by dedicating resources to increase the number of people purchasing and using both small- and large-scale combustion&nbsp; appliances that are capable of utilizing the fiber. Is ag biomass here to stay? Yes. Will we use it in the most effective and efficient manner we are capable? We shall see.
Author: Dan Arnett Biomass Coordinator, Ernst Conservation Seeds Vice Chair, BTEC Board of Directors <a href="mailto:dan@ernstseed.com">dan@ernstseed.com</a>

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Is Ag Biomass Here to Stay?

A recent workshop on water and energy confirmed my understanding of the dynamic relationship water and energy share. Although the fossil power industry is becoming less reliant on large water resources because of the advent of more efficient, lower cost, air cooled and hybrid air/water&ndash;cooled condensers used in cooling boiler intake water, the need for large volumes of water still exists for the foreseeable future. For biomass power systems, the same cooling and other peripheral requirements for water still exist, but in many cases&mdash;especially for energy crops and agricultural residues&mdash;there is the added water balance requirement of agricultural water used in growing the green, renewable fuel. Though the low cost of natural gas seems to be the greatest challenge for biomass power development right now, water adds another challenge.
 The power industry is second only to agriculture as the largest domestic user of water, accounting for 39 percent of all freshwater withdrawals in the nation, 71 percent of which is used in fossil fuel-based electrical generation. The same technologies used to produce electricity from fossil-based fuels are, and will continue to be, used for a significant amount of biomass-based power production. Therefore, biopower systems are going to be challenged in obtaining site permits for new biomass power plant construction. The availability of water for use in biomass electric power generation may be limited in many parts of the U.S., and biomass power plants must compete with other industrial customers, agricultural interests and households for this limited commodity. Difficulty in obtaining necessary water permits can lead to delayed or abandoned projects.
 Infrastructure needs may also create a challenge with respect to water and biopower. A system for sustainable water supply can take years to develop with today&rsquo;s entanglement of water rights and laws. Usually, these types of water rights issues are settled in court&mdash;over 90 percent&mdash;as opposed to the conference room. In areas that do not have an adequate water source, biomass power plant construction is often not even considered, even though these locations are ideal in other respects. Additionally, potential regulations curtailing carbon dioxide emissions will impact water use. Because of the corrosive nature of carbonic acid, water will need to be removed to very low levels prior to the carbon dioxide being pipelined to its final destination.
 In lieu of these challenges, all hope is certainly not lost, as demonstrated by many biopower projects that are moving forward. Along the lines of water savings and efficiency, the Energy &amp; Environmental Research Center, in conjunction with several commercial partners, is investigating several water-saving technologies. Tremendous new strides are being made in air-cooled condensers, hybrid air-cooled systems, water capture/recycle, and novel heat exchange media for hybrid cooling tower systems.
 One example is a hybrid wet/dry cooling system that utilizes a direct-contact, jet spray condensing cycle that is air-cooled in conjunction with a conventional wet cooling loop. This system can dramatically reduce water use and also has the potential to be retrofitted into existing plants. Retrofits in existing systems can be particularly difficult for conventional dry or hybrid systems because of space limitations required for modifications at the condensing site after the turbine and the required footprint needed for air-cooled systems on the grounds, as well as all of the requisite ducting. Another example currently under development at the EERC is a novel dry cooling technology. The system uses a nonvolatile heat-transfer fluid that takes advantage of primarily sensible heat rejection and only minimally relies on the latent heat of evaporation. The end result is a great reduction in water input.
 These are just a few examples of how solutions are being found to reduce the overall water footprint of heat and power production utilizing biomass. The biomass industry can play a part in reducing the water footprint of biomass utilization systems, whether it is in power production or in the production of bioproducts or biofuels, and the EERC is working with industry to do so. Author: Bruce C. Folkedahl Senior Research Manager, EERC (701) 777-5243 <a href="mailto:bfolkedahl@undeerc.org">bfolkedahl@undeerc.org</a>

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The Water Energy Nexus and  Biopower Production 

Just a few weeks ago, the National Research Council released its report on the sustainability of biofuels derived from algae, affirming the potential of our industry to meet global fuel challenges in a sustainable manner.
 The 240-plus page report identified the key areas of sustainability and noted potential concerns with each, yet concluded that none of these barriers were insurmountable with continued innovation. They rightly identified energy returns; greenhouse gas (GHG) emissions; water use; supplies of nitrogen, phosphorus, and carbon dioxide, and appropriate land resources as the issues that could most impact long-term sustainability.
 The report concludes, however, that the committee &ldquo;does not consider any one of these sustainability concerns a definitive barrier to sustainable development of algal biofuels because mitigation strategies for each of those concerns have been proposed and are being developed.&rdquo;
 The fact that algae companies are already developing strategies and approaches to scale production, with a focus on reducing environmental impact, should not come as a surprise to anyone. It is the defining reason for being for every algae company CEO with whom I&rsquo;ve ever talked&mdash;it&rsquo;s in our DNA. Today&rsquo;s algae companies don&rsquo;t simply want to replace petroleum, they want to invent an alternative that performs as well or better, at a cost that is competitive&nbsp; and can be produced all across America. But that&rsquo;s only half the story. The other real driver for algae sustainability is economics. Simply put, the economic sustainability of algae-derived fuels is inextricably linked to the environmental sustainability. No sustainability, no return on investment (ROI).
 There is one reason why we need not worry about algae competing for fresh water resources: it&rsquo;s too expensive. Every major algae producer today is using brackish, saline or wastewater for the growing medium. This eliminates one key sustainability concern identified by the report.
 This is why you won&rsquo;t see any large algae ponds being placed in large population areas or on lands otherwise suitable for traditional agriculture, or producers flushing costly nutrients and fertilizers downstream, or using significantly more energy than that provided for free by the sun: it would be cost prohibitive. It&rsquo;s also why you saw algae fuel producers among the first to recognize the value of being able to utilize waste carbon dioxide (CO2) emissions as a key nutrient, low-cost inputs help achieve low-cost outputs.
 In addition to competing on cost, algae-derived biofuels have another metric to hit, which is life-cycle reduction in GHG emissions. If producers want their fuels to benefit from the targets for advanced biofuels as stated in the renewable fuel standard, algae-based fuels must reduce CO2 emissions by more than 50 percent compared to traditional fuel. Every algae fuel company in the world will make darn sure its fuel complies with this mandate.
 Perhaps the most important sustainability variable is algae&rsquo;s energy output. The NRC pointed out that algae&rsquo;s energy return on investment will have to be around three units of energy produced per unit of energy input. Industry leaders are already achieving this by focusing their efforts on improving technology and engineering, reducing water impacts, recycling their nutrients and enhancing other sustainability metrics.
 If there&rsquo;s one thing this report illustrates, it&rsquo;s the importance of continued information sharing and inclusion among and between academics, and between the private sector and academia.&nbsp; For instance, a comprehensive report from researchers at the Pacific Northwest National Laboratory in 2011 showed that algae grown in water from existing saline aquifers and recycling nutrients would be able to provide up to twice the goal for advanced biofuels set under the Energy Independence and Security Act goal (roughly 40 billion gallons, or 20 percent of annual transportation fuel demand).&nbsp; This information contradicts the conclusions drawn by the NRC report about water use.
 As our industry continues to evolve, and as pre-commercial and demonstration facilities continue to come online, we will have even more information about the true techno-economic and sustainability measures of algae-derived fuels.
 We welcome the evaluation and scrutiny regarding the sustainability of our industry, and move confidently forward knowing that sustainability is not just part of our industry&rsquo;s DNA&mdash;it&rsquo;s key to the ROI. Author: Mary Rosenthal Executive Director, Algae Biomass Organization <a href="mailto:mrosenthal@algaebiomass.org">mrosenthal@algaebiomass.org </a> 763-458-0068

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Driving Algae Sustainability 

Viessmann hires technical sales manager Viessmann Ltd. has appointed John Brain as technical sales manager of its products division. In his new position, Brain will provide support for the commercial sales team across the U.K. and develop Viessmann&rsquo;s product offering in biomass and combined-heat-and-power modules. He reports to Nigel Jefferson, sales director of commercial and renewable products. Prior to joining Viessman, Brain was employed by boiler manufacturer Hartley and Sugden. He has 20 years of experience in commercial and industrial boilers, including steam projects. Viessmann manufactures a variety of heating systems that range in size from 1.5 to 116,000 kW, including biomass boilers, CHP systems, oil and gas-fired boilers, solar and photovoltaic systems, and ground and air and water heat pumps.
 Glycos Biotechnologies adds board member Glycos Biotechnologies Inc. has appointed Wan Abdul Rahaman bin WanYaacob to its Asia board of directors. WanYaacob has 40 years of experience working in the biotechnology and rubber industries, in both research and executive level positions. He currently serves as the advisor of biotechnology initiatives for the Northern Corridor Implementation Authority in Malaysia. He is also an adjunct professor in the department of biochemistry, biotechnology and biomolecular science at the University of Putra Malaysia. WanYaacob also formerly served as executive vice president of Eco System for the Innovation Agency of Malaysia. As a member of Glycos Biotechnologies&rsquo; board, his knowledge of rubber and experience in the industry will be an asset to the company as it completes construction of its Malaysian facility and begins production of biobased isoprene, trademarked Bio-SIM.
 Amyris appoints vice president of global manufacturing, process development Charles Kraft is joining Amyris Inc. as the company&rsquo;s new vice president of global manufacturing and process development. Kraft is a veteran of the specialty fermentation industry. As a member of the Amyris team, he will help the company take its industrial manufacturing capabilities to the next phase. Prior to joining Amyris, he served as vice president of operations and vice president of engineering at DuPont Tate &amp; Lyle BioProducts, a joint venture producing 1,3 propanediol via the fermentation of sugars. He also spent nearly 20 years with Tate &amp; Lyle&rsquo;s citric acid production facility, where he held a number of operational positions.
 Fenz joins Virent&rsquo;s board of directors Virent Inc. has added R. Krug Fenz to its board of directors. Fenz currently serves as senior manager of mergers and acquisitions and commercial finance in the Americas for Shell Oil Co. Prior to joining Shell in 1996, Fenz worked at a variety of international consulting firms and Fortune 500 companies, including Ross Corp., Ecolab, Lone Star Technologies, Pennzoil, Diamond Shamrock and Gulf Oil. He has 30 years of management experience and has spearheaded corporate growth and diversification through mergers, acquisitions and joint ventures, commercial product introduction, financing new business ventures and strategic planning.
 M-E-C adds vice president of sales M-E-C Co. has hired Stephen Rice to serve as its vice president of sales. M-E-C is a worldwide supplier of industrial dryer systems. Rice has extensive experience in the wood products industry. Prior to joining M-E-C, he served as president of Kilntek Inc., where he was responsible for establishing a business for manufacturing and installation of equipment for drying lumber and various combustions systems. Rice has also served as managing director of four engineering divisions throughout the U.S. and Canada for Moore International. In his new position with M-E-C, Rice will report to John Quick, the company&rsquo;s president. His responsibilities will include the management and supervision of domestic and international sales teams.

Brain's experience includes managing large-scale projects. 

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Rice brings valuable sales management experience and industry knowledge to his new position. 

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European Bioplastics projects that the global bioplastic industry will experience a fivefold increase in production volumes between 2011 and 2016, from approximately 1.2 million metric tons to 5.8 million metric tons.
 The most significant growth is expected to be in nonbiodegradable plastics, such as biobased polyethylene (PE) and polyethylene terephthalate (PET). The market forecast published by European Bioplastics estimates that PET will represent 4.6 million, or 80 percent of total bioplastic production capacity, by 2016.
 Asia had the most bioplastic production capacity online in 2011, with 34.6 percent. The relative capacity percentages for South America, Europe, North America and Australia were 32.8 percent, 18.5 percent, 13.7 percent and 0.4 percent. By 2016, Asia is expected to be home to 46.3 percent of capacity, with South America close behind at 45.1 percent. Europe, North America and Australia are expected to represent a relative 4.9 percent, 3.5 percent and 0.2 percent of production capacity.

*Data sourced from European Bioplastics 


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Booming growth expected in bioplastic production capacity 

Novi Energy has opened a large-scale community digester project in southeastern Michigan. Construction of the $22 million Fremont Community Digester plant began in 2010. The facility is expected to be completed during the fourth quarter of 2012.
 The plant utilizes a complete-mix anaerobic digestion technology and is capable of taking in 100,000 tons of food waste on an annual basis. Feedstock will be sourced from a variety of regional food processors and agricultural operations. The resulting biogas will be fed to two reciprocating internal combustion engines to produce 3 MW of electricity, which is being sold to Consumers Energy under a long-term contract.
 Debt financing for the project came from Comerica Bank and was supported by a $12.8 million USDA 9003 loan guarantee. INDUS Energy LLC is the majority owner of the project.

Community digester opens in Michigan

A report published by Wood Resources International found that the U.S. exported more wood pellets than Canada during the first six months of 2012. Although Canada was formerly the world leader in pellet exports, U.S. production has expanded rapidly. Exports from the southern region of the U.S. increased by 13 percent during the second quarter alone.
 According to the report the U.S. has exported more than 1.5 million tons of pellets this year, and is on track to export 5.7 million tons per year by 2015.
 Several U.S.-based pellet producers, namely, U.S. American Wood Fibers, Curran Renewable Energy and Marth Wood Shavings &amp; Supply, have entered into an agreement to certify their pellets. The group will participate in a testing protocol and standards verification process developed by the Pellet Fuels Institute and American Lumber Standard Committee. Some of the characteristics analyzed include ash content and fuel density. Once verification is complete, participating mills will be able to label each bag of pellets with a certification sticker to indicate the grade of the fuel.

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US pellet industry progresses

The USDA announced loan guarantees to support three biomass power plants in October. The funding was awarded under USDA Rural Development&rsquo;s Rural Utilities Service. The program aims to help electric utilities upgrade, expand, maintain and replace rural energy infrastructure. It also funds renewable energy and energy conservation projects.
 Colorado-based Eagle Valley Clean Energy LLC was awarded a $40 million loan guarantee to partially finance an 11.5 MW biomass power plant. Green Energy Team LLC in Hawaii was awarded a $72.88 million loan guarantee to support the development of a 7.5 MW biomass power plant. Finally, East Texas Electric Cooperative Inc. was awarded a $151 million loan guarantee to develop a 50 MW biomass power plant. All awards are contingent on the recipients meeting the terms of their loan agreements.

USDA awards loan guarantees for biomass power projects 

The National Research Council has published a report, noting that algae-based biofuel production could place unstable demands on energy, water and nutrients if capacity reaches 39 billion liters (10.3 billion gallons), or approximately 5 percent of the U.S. transportation fuel market.
 The report, titled &ldquo;Sustainable Development of Algal Biofuels in the United States,&rdquo; named five specific areas that the NRC considers to be concerns of high importance. They include water usage and requirements, nutrient supply, land area requirements, energy return on investment, and life-cycle greenhouse gas emissions.
 The Algae Biomass Organization has applauded the reports finding that these sustainability concerns are not a barrier to future growth of the algae industry. The organization also said that the five areas highlighted as primary concerns in the report are already being addressed by researchers and algal biofuel producers. For example, companies are already recycling nutrients, producing biobased methane from residual organics and using production designs to minimize energy use.

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Report: Algae industry can improve sustainability 

Agrisoma Biosciences Inc. and the National Research Council of Canada have successfully completed a civil jet flight using 100 percent biobased jet fuel. The fuel was manufactured from Resonance Energy Feedstock. Agrisoma contributed feedstock to the project. The company is commercializing the oilseed crop Brassica carinata, commonly known as Ethiopian mustard. The resulting oil was refined into biobased jet fuel using Applied Research Associates&rsquo; Isoconverson Process. The biojet was then used to fuel NRC&rsquo;s Falcon 20 jet.
 As part of the test flight, a second aircraft, the T-33, tailed the Falcon in flight to collect emissions data. Researchers at the NRC will analyze the data to better understand the emission profile of the fuel and the environmental impacts of biofuels. Preliminary results are expected to be released later this year.

Canadian flight operates on 100 percent biofuel

A report, titled &ldquo;The Promise of Biomass,&rdquo; published by the Union of Concerned Scientists demonstrates that the U.S. has the potential to dramatically increase our renewable energy supply though the use of biomass feedstock. Overall, the analysis determined that 680 million tons of biomass could be made available by 2030. That is enough biomass to produce either 54 billion gallons of cellulosic biofuels or generate enough electricity to meet one-fifth of nationwide demand.
 According to the study, the largest long-term opportunity to expand bioenergy production in the U.S. is from dedicated energy crops such as switchgrass and miscanthus as well as fast-growing trees like hybrid poplar and willow.
 The report provides detailed maps for each of the different biomass sources it has identified. The maps describe where the UCS expects certain types of feedstock to be abundant. In addition to energy crops, the study addresses agricultural residues, waste materials, and forest biomass.

*Data sourced from Union of Concerned Scientists

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UCS: 680 million tons of biomass by 2030

Researchers at Iowa State University are working to optimize microbes capable of converting bio-oil produced from fast pyrolysis into biofuels. The work focuses on the bacteria E. coli and the microalgae C. reinhardtii.
 Certain contaminants in the bio-oil have traditionally limited the ability of these microbes to convert pyrolysis oil into fuels and chemicals. The team is experimenting with pretreatments of this bio-oil that could reduce toxicity. They are also developing microbes that can tolerate the contaminants.
 The team is using a technique called directed evolution to produce microbes that are more tolerant of bio-oil contaminants. To do this the microbes are grown with higher and higher concentrations of bio-oils. As they divide they replicate their DNA. Sometimes mutations arise during the replication process. Some of these DNA &ldquo;mistakes&rdquo; help make the microbe more tolerant of the contaminants. The work is led by Laura Jarboe, an assistant professor of chemical and biological engineering.

Scientists use directed evolution to improve microbes 

The European Commission has released a proposal that aims to make significant changes to the EU&rsquo;s biofuel policy. Specifically, the proposal seeks to limit the use of crop-based feedstock and include indirect land use change (ILUC) associated emissions in the greenhouse gas (GHG) profile of fuels.&nbsp;
 The proposal sets a 60 percent minimum GHG saving threshold for new biofuel production facilities, which the commission said aims to discourage additional investments in production facilities with low GHG performance. In addition, the proposal maintains the 10 percent renewable content goal for transportation fuels contained within the current Renewable Energy Directive, but caps crop-based fuels at 5 percent. The updated program would also establish incentives for biofuels that result in little or no ILUC emission, such as those manufactured from algae, straw or waste feedstocks.
 Representatives of the European biofuel industry have spoken out against the proposal, noting that it will decimate Europe&rsquo;s biofuel industry in the midst of the European economic crisis.

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European Commission proposes new biofuel policy 

Neste Oil recently celebrated the grand opening of its microbial oil pilot plant in Porvoo, Finland. The facility converts waste and residue material into microbial oil feedstock, which can be converted into renewable diesel and other products via Neste Oil&rsquo;s NExBTL process.
 The first phase of the pilot plant was completed in August. As of late October, the facility had already produced microbial-rich biomass. The aim of the research is to develop a technology that can be deployed on the industrial scale. The process is based on a bioreactor technology where residues from the agricultural and pulp and paper industries are fractionated into sugars and converted into oil by microbes.
 Neste Oil also announced that it is commercially supplying biobased naphtha to its customers. The substance is created as a coproduct of the NExBTL refining process. Naphtha can be used as a gasoline additive and as a feedstock for bioplastic production. Neste Oil is considering the commercialization of another NExBTL coproduct, biobased propane.

Neste Oil brings pilot plant online, sells naphtha coproduct 

Two new websites have launched with the goal of spurring development in the biogas sector. The North East Biosolids and Residuals Association launched a website that houses data on anaerobic digestion and biogas production at U.S. wastewater treatment facilities. Visitors to the website can run a search for a wastewater treatment facility or browse plants in alphabetical order. The online tool offers satellite images of the plants as well as data related to plant location, flow design and average, whether outside waste is fed into the digester, type of digestion used, and how the biogas is used.
 Baker Tilly Virchow Krause LLP and the Wisconsin State Energy Office have partnered to develop an online mapping tool that aims to help project developers assess the potential for anaerobic digestion project development within Wisconsin. The tool allows users to assess potential feedstock source providers, utility infrastructure, service territories and nearby publicly-owned treatment works and waterways, highway and other criteria.

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New tools offer biogas developers an abundance of data

INEOS New Planet BioEnergy, a joint venture of INEOS Bio, has commenced production of renewable power that will be used to power the biorefinery in addition to supplying the grid. Once fully operational, the cellulosic ethanol plant is expected to have the capacity to produce 8 million gallons of fuel along with 6 MW of renewable power from renewable biomass feedstock. Initially, the facility will take in yard, vegetative and agricultural wastes. There are also plans to run municipal solid waste through the plant.
 INEOS Bio&rsquo;s BioEnergy technology enables the production of both fuel and power. The biomass feedstock goes through a gasification process to produce synthesis gas. The heat recovered from the hot syngas is fed into a steam turbine, creating electrical power. The syngas itself is processed into ethanol.

INEOS New Planet BioEnergy begins power production 

The German Federal Environmental Ministry has released an environmental technology atlas produced by Roland Gerger Strategy Consultants that projects the total share of environmental technologies in Germany&rsquo;s gross domestic product will increase from 11 percent in 2011 to more than 20 percent by 2025. The report, titled &ldquo;GreenTech made in Germany 3.0,&rdquo; is the third such atlas produced by the consulting organization for the German government.
 According to the report, renewable energy, in general, is expected to increase by more than &euro;151.2 billion ($195.61 billion) by 2025, an 8 percent annual increase. Biogas plants are of particular importance to the German bioenergy sector. According to the report, 3,700 biogas plants were in operation in Germany in 2007, with a combined output of 1,270 MW. By 2010, the number of biogas plants had increased to 5,900 with a total output of 2,300 MW.
 In 2010, biomass was used to produce 33.5 billion kilowatt hours of power, a 10 percent increase over the prior year. In addition, biomass accounted for 92 percent of heat produced from renewable resources, providing approximately 127 billion kWh of thermal energy in 2010.

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German government expects increased biopower development 

Ontario, Canada-based Anergia Inc. recently brought a 2.8 MW biogas-powered fuel cell online at a California waste water treatment plant. The San Bernardino County, Calif., municipal waste district Inland Empire Utility Agency&rsquo;s RP-1 Water Recycling Facility can treat up to 44 million gallons of wastewater per day. Anergia, which owns and operates the fuel cell, is selling the resulting power and heat to IEUA under a 20-year power purchase agreement. The electricity produced through the project will be enough to offset approximately 60 percent of the water treatment plant&rsquo;s grid-derived power.
 Danbury, Conn.-based FuelCell Energy Inc. supplied the technology for the project. The process requires only minimal cleaning of the biogas, including humidity and sulfur removal. The project at IEUA hosts FuelCell Energy&rsquo;s largest size system, the DFC3000, which can also be deployed at hospitals, universities, large complexes and utility grid support applications.

California gets 2.8 MW biogas fuel cell

Valerie Reed, acting manager for the U.S. DOE Biomass Program, is leading a federal government initiative of nearly $200 million to expedite the commercialization of next-generation, biomass-based fuels and chemicals. With investments being made in pilot-scale demonstrations to commercial-scale facilities, Reed and the DOE Biomass Program coordinate the efforts of national laboratories, universities and private companies as they all work to prove out commercially viable conversion pathways and begin meeting the volumes set forth by the renewable fuels standard (RFS). As the industry anxiously awaits the commissioning of the biofuel and biochemical facilities of the future in places like Emmetsburg, Iowa, or Lake Providence, La., Reed looks toward 2013 with growing anticipation. You have a doctorate in biochemistry. What is your earliest memory of your interest in science?
 Science seems to have been with me since the beginning of time. My mom was the head of a science department for a high school, teaching chemistry, physics and technology. My dad was a chemical engineer for the pharmaceutical industry. My brother has a physics degree and my sister a medical degree, add to that my biochemistry degree and Thanksgiving dinner is a lot of fun! But I really knew I would follow a science career path when I took high school chemistry. I had the coolest teacher and was just in awe of the fun things we got to do in lab. One of your program&rsquo;s recurring talking points is the notion of replacing all of the product streams that come from a barrel of oil. Why is this so critical?&nbsp; In the United States, we spend about $1 billion a day to import oil.&nbsp; Domestically produced biofuels can improve this situation by decreasing imports. For example, ethanol already displaces about $20.9 billion worth of imported gasoline annually. But in order to fully reduce dependence on foreign oil we are pursuing a portfolio approach to develop additional technologies to replace gasoline, diesel, jet fuel, heavy distillates as well as a range of biobased chemicals and products. You&rsquo;ve led efforts in biomass utilization that have resulted in significant reductions to the price of cellulosic ethanol production. How exactly does research accomplish this, and, where are the savings found?&nbsp; Over the past decade, the DOE&rsquo;s Biomass Program has supported a range of research and development projects focused on reducing the cost of cellulosic ethanol. These include a biochemical conversion case (fermentation to ethanol) and a thermochemical conversion case (gasification to ethanol) that have both shown the potential to be viable in the near term.
 In the biochemical case, the process scenario was based on dilute acid pretreatment of corn stover followed by enzymatic saccharification (which depolymerizes cellulose into glucose and hemicellulose into xylose, both fermentation sugars) and cofermentation of the five and six carbon sugars to yield ethanol, which is then distilled and purified. We worked with our partners at national laboratories, universities and industry to use this as a roadmap for the research needed to target the cost-reduction goals. From 2001 through 2012, production cost improvements across this process helped decrease the price of cellulosic ethanol from about $9 per gallon to around $2 per gallon.
 In the thermochemical case, the process scenario was based on the gasification of woody biomass followed by syngas cleanup, tar reforming, and catalytic mixed alcohol synthesis followed by the separation and purification of ethanol from the mixed alcohol stream. Thanks to technology and engineering improvements, we&rsquo;ve seen the production costs of this process come down about $2.70 per gallon over the last five years. A handful of advanced biofuels facilities have received DOE funding and are expected to begin commercial production in 2013. Is there a sense of anticipation for you as you wait for these facilities to come online? I most definitely feel a growing excitement as we get closer to meeting goals set within this program over 20 years ago. I started my career in the Biomass Program straight out of graduate school. At that time, we were talking about possible sources of enzymes and what it would be like if fermentation organisms could utilize multiple sugars. When I would tell people what I was working on, there was a great deal of skepticism. Even within the DOE, I would hear people say that I would probably not see these goals met in my lifetime. Yet, here we are validating multiple technical pathways capable of meeting the modeled costs for cellulosic ethanol and seeing not just one, but several commercial facilities being built. It was not always a smooth trip, but the&nbsp; research and development of the past couple decades is clearly paying dividends and will continue to advance better production processes and more efficient conversion technologies in the future. Clearly the DOE is interested in working toward conversion strategies for a geographically diverse mix of biomass. Why is it so critical that advanced biofuels become plausible in all regions? While the current U.S. biofuel industry is centered primarily in the Midwest, we are committed to deploying every available feedstock and are investing in technologies that utilize biomass feedstocks from every region of the country. We are looking at woody feedstocks in Maine, Michigan and Oregon as well as energy crops, like switchgrass and sorghum, throughout the Southeast and in California and Colorado. Additionally, we are supporting technologies that can develop fuel from municipal solid waste in urban areas throughout the country and algae in states like Florida and in the deserts of the Southwest.
 This is important for several reasons. First, in order to significantly reduce our dependence on imported oil we need to maximize the potential of biomass. Our recently updated billion ton study shows that across the U.S., there is potential to displace about one-third of our current transportation petroleum use with biomass in a sustainable manner. It&rsquo;s also important because we recognize that seasonal variability, weather and other factors could sometimes inhibit production in one area of the country or another, and we want to be able to maintain a consistent supply of biomass feedstocks. In the end, we believe that every region has characteristics that make it advantageous to produce certain types of biomass and every part of the country has an important role to play in securing America&rsquo;s energy future.&nbsp; &nbsp;&nbsp; The RFS calls for 22 billion gallons of advanced biofuels to be in the marketplace by 2022. So far, the industry has been unable to meet the modest targets. Is 2013 the year real production matches RFS mandate requirements?&nbsp; Over the past several years, we have invested significantly in a variety of projects focused on bringing down technology costs, enhancing the yield of different biomass strains and increasing the efficiency and sustainability of production processes. We are committed to helping the industry achieve the targets set by Congress in 2007.
 We are certainly optimistic for 2013. We expect several of our integrated biorefinery projects will be coming online in the next few years. As you may know, Ineos Bio, Poet LLC and Abengoa BioEnergy have major commercial-scale plants under construction, and we are on track with several other of our demonstration-scale projects as well. As these projects are completed, the lessons learned from their scale up will help reduce market and technology challenges across the industry, driving private industry financing and helping meet the ambitious RFS goals.

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Valerie Reed faces the challenges of driving down the cost of biomass conversion, replacing the whole barrel and holding her own at Thanksgiving amongst a family full of scientists.

The Beltway Biochemist

The renewable energy industry may be labeled a pipedream by fossil fuel tycoons and stakeholders, but expert analysis is making it difficult to deny its potential, and not just in the U.S. On a global scale, the wind, solar and hydro industries are worth more than $1 billion annually, and developing countries continue to embrace the waste-based technologies of biogas and biomass power. While cost has typically been the biggest development hindrance, that is slowly starting to change. The International Renewable Energy Agency points out that recent years have seen dramatic cost reductions as a result of research and development and accelerated deployment, but unfortunately, policymakers are often exposed to outdated information. Since most are unaware of the latest cost data, progress is not where it could be.
 In order to disperse and make available current renewable energy market data, IRENA has published a five-part renewable energy cost analysis series, with the hopes that it will assist in policymaking, especially in its 102 member countries. Michael Taylor, IRENA renewable energy cost status and outlook analyst, explains that the organization has a mandate from its members to accelerate the deployment of all types of renewable energy, and as part of this mandate, IRENA&rsquo;s Innovation and Technology Centre has a specific program that focuses on the costs and performance of renewable technologies.
 &nbsp;&ldquo;The rapid growth in installed capacity of renewable energy technologies, coupled with technology improvements and associated cost reductions, means that even data from one or two years ago can significantly overestimate the cost of electricity from these technologies,&rdquo; Taylor says. &ldquo;The lack of accurate, reliable data on the cost and performance of renewable technologies is a significant barrier to their uptake.&rdquo; Simply stated, renewable energy data becomes outdated in a hurry, and that isn&rsquo;t widely known.
 IRENA data collection for the cost analysis series included acquiring information from industry associations, project developers, development banks, consultancies, market research data, government reports and auction data. Additionally, IRENA worked with GIZ, a German-based sustainable development corporation, to collect detailed, real-world project data for 79 projects from 11 developing countries. And, data collection is still an ongoing effort.
 One of the core conclusions of IRENA's research so far shows that the total installed costs of biomass power generation technologies vary significantly by technology and country, according to Taylor.
 Technology and Feedstock Costs 
 &nbsp;&ldquo;The challenge when talking about biomass power generation is to convey the idea that we are actually talking about a series of technologies,&rdquo; Taylor says. &ldquo;The simple combustion of biomass to generate steam requires a very different technology than that required to gasify wood chips and then burn that gas to provide steam to&nbsp; power a turbine, and these technologies vary substantially in technology terms and cost. The situation is also complicated by the fact that some technologies are more mature than others.&rdquo;
 For example, the total installed costs of stoker boilers ranged between $1,880 and $4,260 per kilowatt (kW) in 2010, while those of circulating fluidized bed boilers were between $2,170 and $4,500 per kW. Anaerobic digester power systems had a significantly wide range of capital costs from $2,570 up to $6,100 per kW, and gasification technologies had total installed capital costs of between $2,140 and $5,700 per kW.
 While IRENA&rsquo;s report recognizes that there are many possible influences on cost, its modeling is based off of three key drivers: equipment cost from factory gate to site delivery; total installed project cost, including fixed financing costs; and the levelized cost of electricity (LCOE), a calculation of the cost of generating electricity at the point of connection to a load or electricity grid.
 The LCOE of biomass-fired power plants range from 6 to 29 cents per kWh based on capital costs and feedstock costs. Where low-cost feedstocks are available and capital costs are modest, biomass can be a very competitive power generation option, according to the analysis, and where low-cost agricultural or forestry residues and wastes are available, biomass can often compete with conventional power sources. Even where feedstocks are more expensive, the LCOE range for biomass is still more competitive than for diesel-fired generation, making biomass an ideal solution for off-grid or minigrid electricity supply.
 There are four major components that largely determine the LCOE for biomass-fired power generation technologies, according to Taylor: feedstock cost and quality, equipment cost and performance, the balance of project costs and the cost of capital. &ldquo;The feedstock costs and capital costs, including the cost of finance, primarily determine the LCOE for biomass-fired power generation,&rdquo; he says. &ldquo;Feedstock costs typically account for between 20 percent and 50 percent of the LCOE, but they can be even higher.&rdquo;&nbsp;
 Operations and maintenance (OM) costs can make a significant contribution to the levelized cost of electricity as well, accounting for 9 to 20 percent of the LCOE for biomass power plants. IRENA&rsquo;s data indicates that it can be lower than this in the case of cofiring, but greater for plants with extensive fuel preparation or handling and conversion needs. Fixed OM costs typically range from 2 to 7 percent of installed costs per year for most biomass technologies, with variable OM costs of around one-half a cent per kW hour (kWh). Landfill gas systems have much higher fixed OM costs, which can be 10 to 20 percent of initial capital costs per year.
 To bring down the cost of biomass power technologies over time, Taylor has some insight. &ldquo;Part of the answer to this question lies in the fact that different technologies are at different stages of maturity,&rdquo; he says. &ldquo;Although we don&rsquo;t expect significant cost reductions for mature technologies like stoker boilers, the opportunities for cost reductions from many of the gasification technologies are much better.&rdquo;
 On feedstock, Taylor says the use of agricultural or forestry residues at the site where they are processed often results in the lowest electricity costs, given the noted importance of feedstock costs relative to overall electricity generation costs from bioenergy. Current data shows that the most competitive projects using these feedstocks produce electricity for as low as 6 cents per kWh. Technology and cost specifics aside, some countries are clearly trailblazing the renewable energy path, and there are a few stand-outs and up-and-comers.
 Market Trends and Growth
 Currently, Europe and North America account for around two-thirds of total installed renewable energy capacity, a result of a combination of supportive policies and low-cost feedstocks, notably agricultural and forestry residues, according to Taylor. A specific example of that is in Germany, which in 2011 had 7,090 digesters, and was the leading country for both the quantity of plants and the amount of installed capacity at 2,394 MW of electricity. Virtually all of this capacity is located in the agricultural sector where corn silage, other crops and animal slurry are used, according to IRENA, and this is driven by a feed-in tariff in Germany that supports electricity generation from biogas.
 Outside of Europe and North America, Brazil stands out as an important market for renewable energy, with 9 percent of global installed capacity in 2011, Taylor says. &ldquo;What we found particularly interesting [when collecting data] were some of the plans that smaller countries have for the future,&rdquo; he remarks. &ldquo;Uruguay, for instance, plans to add only renewable capacity over the next 10 years, including a mix of predominantly bioenergy and wind, with some solar. They project that by 2015 biomass will provide 18 percent of their electricity needs and will help reduce average electricity generation costs and reduce variability in those costs.&rdquo;
 Overall, data shows that between 2010 and 2030, global biomass and waste power generation could grow from 62 to 270 gigawatts, with investments totaling between $21 billion and $35 billion. China and Brazil appear to have the largest potential, but growth in Brazil is hinged on the continuing development of the biofuel industry and the possibilities for using waste bagasse for electricity generation. The amount of bagasse available, however, depends on the ethanol and sugar markets, which makes it difficult to negotiate long-term contracts that are designed to reduce price risk and guarantee security of feedstock supply, both of which will be required to allow access to financing. In China, growth potential depends on better utilization of the large quantities of agricultural residues and waste produced.
 Now that the cost analysis series is complete and available, IRENA plans to supplement them over time with new project cost data collected from member countries, and will also add the costs of renewables in end-use sectors, such as transportation. While up-to-date data now confirms that power generation technologies are becoming increasingly competitive&mdash;it accounts for half of all new power generation capacity additions worldwide&mdash;building on existing biomass industry segments will be essential for continued growth, as well as nurturing the new and lesser-deployed technologies. "Further deployment, commercial experience, learning-by-doing and large scale production could all help bring down costs for these less mature technologies," Taylor adds. Author: Anna Simet Contributions Editor, Biomass Magazine <a href="mailto:asimet@bbiinternational.com">asimet@bbiinternational.com</a> 701-751-2756

SIGNING ON: IRENA, which was founded in 2009 to promote the widespread and increased adoption of sustainable, renewable energy, has 102 member countries and 57 signatories.

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OPERATIONAL COSTS: Typical capital costs and the levelized cost of electricity of biomass power technologies.

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REGIONAL OUTPUT: Global grid-connected biomass capacity in 2010 by feedstock and country/region.


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Outdated renewable energy cost data may be stymieing growth, but experts are working to collect and present the truth to policymakers. 

Global Costs of  Biomass Power 

The financial success and growth potential of the biomass industry in 2013 may not be determined by a single day in November, but the long-term health of the industry will be transformed by the 2012 election results. Although President Barack Obama secured his role for the next four years as the country&rsquo;s ultimate decision maker, the political landscape appears to be littered with many of the same divisive issues that, for the biomass industry, have muddled progress and blurred the view of how renewable energy can positively alter the country&rsquo;s energy practices and rural economies. The renewable fuel standard (RFS) is still under attack and successful programs are in limbo, yet the combination of a president who many in the industry supported, and the potential for new legislation means the industry will excel in 2013.
 A looming fiscal cliff, tax reform, immigration or even potential climate change legislation will earn the attention of the country at large, but in the 2013 biomass industry, several issues, programs or general strategies centered on biomass utilization will garner attention. The following is a compilation of industry perspectives, policy factors and political situations that could illuminate the best biomass-based strategies and provide a glimpse of what will matter in 2013.
 Obama&rsquo;s Impact
 Obama is in, the Democrats retained control of the Senate, and the Republicans did the same in the House of Representatives. What all of that means is anyone&rsquo;s guess.
 Regarding the president&rsquo;s impact on fossil fuel development, James Coan, an energy forum research associate from a think tank at the James A. Baker Institute for Public Policy at Rice University, says that although most oil companies in Houston would have preferred it if Mitt Romney had won, those same companies have also done very well under Obama.
 For bioenergy, Phil Fraas, a partner at the Washington, D.C.-based office of Stinson Morrison Hecker LLP, says that Obama&rsquo;s second term will mean continued efforts to commercialize biofuels. Fraas has worked in agriculture and renewable energy law for over 20 years, and believes that the collaboration between the U.S. Navy, the U.S. DOE and USDA will gain ground in 2013 because of Obama&rsquo;s re-election. Jim Bowe, a partner in the global transactions group for another D.C.-based firm, King &amp; Spalding, also believes Obama's term will mean continued development in biofuels, a situation both Fraas and Bowe say may not have happened under Romney. &ldquo;I&rsquo;m not expecting massive benefits to be showered upon the renewable fuels or renewable generating industries,&rdquo; says the long-time renewable power veteran. &ldquo;Although, I think there is more lip service likely to be paid to them [biofuels].&rdquo;
 Michael McAdams, president of the Advanced Biofuels Association, is optimistic about Obama&rsquo;s re-election, pointing towards his consistent support of the industry. &ldquo;Over the last four years he has worked to create a broader renewable fuels industry across the board,&rdquo; he says, &ldquo;I think that bodes for a bright future for the advanced biofuel industry in the U.S.&rdquo;
 Bob Cleaves, president of the Biomass Power Association, offered a less clear opinion of Obama&rsquo;s re-election immediately following the results, saying that the BPA is still evaluating what election results mean for biomass. &ldquo;We hope to work with the Obama administration over the next four years,&rdquo; Cleaves says.
 Although position changes have not been announced for either the USDA&rsquo;s secretary role currently filled by former Iowa Governor Tom Vilsack, or the DOE&rsquo;s Secretary of Energy position occupied by Steven Chu, the biomass industry will not have to deal with the perceived difficulties linked to Romney&rsquo;s potential staff choices. Political analysts indicated that Romney&rsquo;s team would have included several members from the fossil fuels industry, including the American Petroleum Institute&rsquo;s President and CEO, Jack Gerard.
 An energy debate held between an Obama and Romney representative in October at Massachusetts Institute of Technology, may however, provide the best example of what Obama&rsquo;s impact will be on bioenergy. During the debate, Joseph Aldy, a faculty member at the Harvard Kennedy School, told the crowd that, on the subject of energy policy, the president&rsquo;s approach &ldquo;has focused on an all of the above strategy.&rdquo; That strategy, he added, &ldquo;has supported the development of all energy resources, oil and gas, coal, nuclear, wind, solar and biofuels.&rdquo;
 Policy Uncertainty
 Bowe could be right about Obama&rsquo;s support of bioenergy. In the next four years, that support may only amount to more lip service during a State of the Union address or a visit to a pilot plant by the president, but the political scene in Washington will have a large impact on several programs that support biomass. In fact, some industry experts believe other issues that are determined by Congress are of far greater importance than who lives in the White House.
 Cindy Thyfault, CEO of Westar Trade Resources, a renewable energy consulting firm based in Texas, seems to speak for everyone in the industry involved in a project with government ties. &ldquo;The two main issues of utmost importance are the debate and discussions underway of modifying the renewable fuel standard and the concurrent debate concerning the 2012 Farm Bill Energy Title,&rdquo; Thyfault says.
 Fraas agrees. &ldquo;I will be watching whether the energy title of the farm bill will be renewed with adequate funding,&rdquo; he says. &ldquo;Right now, budget restraints are weighing heavily on the drafters of the new farm bill,&rdquo; adding that it is an open question of whether they will find the money needed to match the amount given to the energy title in 2008. USDA dollars invested in renewable biomass has seen a dramatic rise since 2003, when it hovered around $10 million. In 2012, that total will exceed $510 million.
 Earlier this year the Senate Agricultural Committee passed a version of the 2012 Farm Bill that included an amended Energy Title section that would mandate energy program funding. The program would allocate roughly $800 million over five years. The vote to pass the Energy Title was strong, passing with a bipartisan, 16-5 vote. But, the current belief on passage of the Farm Bill shows a vote will not happen until the spring of 2013 because of a lame duck Congress that will be debating a way to stop automatic spending cuts or risk another U.S. credit downgrade, all before Congress leaves for January recess.
 The 2012 Farm Bill Energy Title has specific programs to watch in 2013. &ldquo;For second-generation biofuels,&rdquo; Coan says, &ldquo;the most important are the loan guarantees that are allowing the construction of first-of-a-kind commercial production facilities.&rdquo; For advanced biofuels, Thyfault agrees with Coan about the important role loan guarantees have played. She points to the USDA 9003 program that has totaled roughly $1.08 billion. &ldquo;This program has been instrumental in bridging the technology risk gap for financing,&rdquo; she says. Along with the 9003 program, she also advocates for another loan option, the USDA Business and Industry Loan Program. Although the program has lowered the amount of funding available per project from $25 million to $10 million, she does note the program has mandatory appropriations each year, equal to $1 billion in 2013.
 The biomass-based power generation industry needs to keep an eye on state-level renewable portfolio standards (RPS), Coan says, and Bowe agrees. &ldquo;One thing I will be watching is whether there continues to be erosion for the support of RPS&rsquo;s,&rdquo; he says, &ldquo;you don&rsquo;t hear as much about those as you did years ago.&rdquo; In the southern U.S. markets, an RPS can drive utilities to think of alternative generation sources, a huge benefit to biomass because the wind source is meager and the ability to grow fuel is well-established, he says. For Fraas, a Biomass Crop Assistance Program expert with several clients who have utilized the program, BCAP is another program that merits attention. Funding for BCAP has not been extended for 2013.
 Outside of the programs linked to the 2012 Farm Bill, there are those offered by the DOE. All of the programs in the DOE are subject to congressional appropriations, Thyfault says. &ldquo;So, the 2013 appropriations budget will also be a key indicator of future plans and programs,&rdquo; she says for loan guarantees sponsored by the DOE.
 The Potential in Policy
 The political landscape in 2013 shouldn&rsquo;t be entirely classified as a place where biomass-based energy programs could remain in limbo or ultimately begin to change forever. Kathy Halvorsen, professor of natural resource policy at Michigan Technological University, says that although the November elections have left us all with a divided Congress, positive change could be coming. &ldquo;I think something is going to shake loose in Congress on carbon and climate in 2013,&rdquo; she says. &ldquo;Look for something on climate change or carbon credits to come along, especially in light of Superstorm Sandy.&rdquo;
 Don&rsquo;t discount her sentiments on the divisive topic either. Bowe also implies that there is a push in the power industries to diversify their fuel mix and to lower their carbon footprint. Bowe points to a recently commissioned biomass power facility at Colby College in Maine. According to Bowe, the college is indicative of many institutions across the country that are spending money to lower their carbon footprint.
 It&rsquo;s not just institutions concerned with carbon or a renewed government push towards climate legislation that could provide opportunity in 2013. According to Bowe, the Obama administration&rsquo;s commitment to retire coal-based power generation facilities would open the door for biomass, and, although it may sound unlikely, the surplus of natural gas could actually help biomass power as coal facilities will also have to compete with natural gas and may choose to cease operations or look to other cofiring options to compete on price.
 In the end, trying to predict if or when climate legislation happens, how natural gas prices will affect project development or when a Farm Bill will pass, all based on any of those issues&rsquo; relative to a divided Congress or the return of Obama may be a futile effort. Both Thyfault and Bowe insinuate that may be true. With all of the issues to watch for in 2013, Bowe says he wouldn&rsquo;t trust the work of Washington to any business in bioenergy just yet. And although Thyfault will stay abreast of the Farm Bill and other topics, she believes in this simple policy of her own: &ldquo;The most successful companies will be making changes now, and not waiting until after the RFS and the Farm Bill debates are finalized.&rdquo; &nbsp; Author: Luke Geiver Features Editor, Biomass Magazine <a href="mailto:lgeiver@bbiinternational.com">lgeiver@bbiinternational.com</a> 701-738-4944

FUELING THE FUTURE: The support of the USDA and the U.S. DOE has helped the U.S. Navy begin to fuel its fleet with advanced biofuels, a policy that many believe will help the bioenergy industry expand. 

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POLICY MATTERS: The chart shows the legislation vehicle for each bioenergy-based policy that industry experts believe have had an impact. 


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How election results, under-fire programs and agendas will impact 2013.

Navigating The Political Scene

At the turn of the 20th century, U.S. President Theodore Roosevelt warned Congress, with subsequent hyperbole appearing in New York Times headlines, that &ldquo;a timber famine is inevitable.&rdquo; Gifford Pinchot, the first chief of the U.S. Forest Service, echoed the sentiment by proclaiming, &ldquo;In 20 years, the timber supply in the United States on government reserves and private holdings, at the present rate of cutting, will be exhausted.&rdquo;&nbsp; The timber famine or scarcity never happened, despite the increased consumer demand placed on our nation&rsquo;s timber resources through the Roaring Twenties, post-World War II boom and other high-growth periods.&nbsp;
 The complete opposite of timber scarcity has occurred over the past century. To exemplify the purest definition of sustainability, the amount of forestland in the U.S. has remained stable around 750 million acres from 1907 to 2007.&nbsp; Additionally, over the past two decades, forestland has increased by 20 million acres.&nbsp; As of 2006, the volume of annual net growth exceeded the volume of annual removals by 38 percent. The U.S. is growing more timber volume than it is harvesting, by a fairly wide margin.&nbsp;
 If a timber famine occurred, stumpage prices&mdash;the amount paid for standing timber&mdash; would have reflected the inherent scarcity. According to the revealing economic study by Johnson and Libecap, the annualized rate of change in stumpage prices during the perceived timber famine era remained a constant 6 percent.&nbsp; Supply and demand stayed in relative balance, never approaching a supply shortage that could be termed a &ldquo;famine.&rdquo;&nbsp;
 Why has the timber resource remained abundant in the face of growing demand?&nbsp; Simply put, markets existed that created demand. A major factor aiding in the expansion of forestland is the presence of deep, well-established markets for wood products. A nation of consumers required wood for prosperity, thereby fostering development of private sector innovation in the form of technological improvements in milling and tree-felling technology, advances in silviculture, tree-seedling genetics and tree-farming practices, and the conversion of degraded agricultural lands to timberland plantations aided by federal government programs. In the wake of appreciating timber commodity prices, the consumer side of the equation responded with advances in wood conservation measures (e.g., utility pole treatment) and product substitution.
 Burgeoning Biomass Markets
 Differentiating from the aforementioned traditional timber markets, the woody biomass market, defined as supply for energy demand, emerged vigorously over the past decade.&nbsp; Ironically, wood has been used as a source of fuel in the U.S. since the Colonial Era. Seen through the prism of contributing to cellulosic ethanol, heat generation and electrical power generation, the growth of this emerging market has largely been precipitated by government subsidies, legislative initiatives/mandates, increasing oil prices, negative pressure on utilization of food resources and environmental solutions for alternative energy sources. The pressures for the woody biomass market
to flourish present a dichotomy of optimism and pause for concern over the actual market formation. Forisk Consulting LLC estimates there are a total of 452 announced or operating woody biomass projects in the U.S. with a projected operating capacity of 124.8 million green tons of wood annually by 2022. Of the projects that actually pass the Forisk screening criteria of successful project financing, proven technology, permitting, supply agreements, etc., Forisk projects that only 77 million green tons of wood annually will be needed, a decrease of 38 percent from the total capacity of all 452 projects. As a data point, the forest products industry currently consumes more than 500 million green tons of wood annually.
 Anecdotally, Forest Investment Associates has directly met with dozens of potential biomass participants who have expressed interest in securing biomass supply to support potential bioenergy projects. While FIA has had the opportunity to fully evaluate the potential for adding value to timberlands through working with some of these participants, the exercises were largely in vain. Substantiating the screening process conducted by Forisk, most of these potential biomass participants are no longer in existence for a myriad of reasons.&nbsp;
 Stalled Biomass Markets
 What has hampered the development of the woody biomass market?&nbsp; There is no doubt the financial crisis of 2008-&rsquo;09 took a toll. Largely, project financing, technological capability and environmental resistance have squeezed out potential market participants. In the first instance, a number of enterprises tried to put the cart before the horse by attempting to secure long-term biomass feedstock supply agreements, in order to secure debt financing, in order to build a biomass-using facility.&nbsp; It seems clich&eacute;, but FIA is a firm adherent of the &ldquo;Field of Dreams&rdquo; mantra, &ldquo;Build it and they will come,&rdquo; i.e., if new bioenergy facilities that consume biomass are developed, forest landowners will respond to meet the new demand by growing more wood.&nbsp;&nbsp;&nbsp;&nbsp;
 In technological capabilities, FIA's interest in the market was piqued in 2006 by an announcement of the Range Fuels&rsquo; cellulosic ethanol facility in Soperton, Ga. At full production, the facility was projected to consume 1.6 million green tons of woody biomass feedstock, in an economically depressed area that could have benefited greatly from the related jobs. Sadly, the commercial-scale feasibility of the two-step, thermochemical conversion process was lacking, at least in profitability. With cautious optimism, FIA turns to KiOR Inc. as it prepares for the start-up of the newly constructed cellulosic biofuel blend stock facility in Columbus, Miss. While liquid fuel production from biomass has struggled, pellet production is a proven, long-established technology that provides a reliable market in certain locales, albeit dependent upon European policy models.&nbsp;
 Much of the interest in woody biomass as an alternative fuel feedstock originated from the idea of American energy independence and environmental opposition to fossil fuel sources. Ironically, the same environmental community has condemned the use of woody biomass, petitioning for an equal carbon emissions footprint as coal. In the same vein, the final U.S. EPA Tailoring Rule announced in 2010 treated the regulation of greenhouse gas emissions from biomass-sourced and fossil fuel-sourced electricity in an identical fashion. The EPA has deferred the permitting requirements until 2014 in order to gather more data, in the meantime injecting a fair amount of uncertainty into the market.&nbsp;
 Despite the setbacks in the woody biomass market, one thing has remained constant: the continual and sustainable management of the timber (and woody biomass) resource.&nbsp;
 Biomass Keeps Growing 
 As an open free-market participant, foresters are poised to participate in supplying the emerging demand. In order to generate the highest returns for our clients, timberlands are managed for the highest and best product, which is presently sawtimber.
 &nbsp;If the net present value shifts such that a pulpwood or energy rotation provides a better proposition, management strategies will be adapted, as demonstrated in competitive pulpwood markets in the Southeast. Once upon a time, the southern forest products industrial landowners planted 1,000 to 1,200 trees per acre for the primary purpose of supplying feedstock for their pulp facilities. The mantra was, &ldquo;plant them thick, cut them quick.&rdquo; Since then, the sawtimber market has grown in the South, and the forest industry as a whole has practiced more intensive silviculture coupled with advanced gains in genetics. The optimum economic sawtimber rotation is satisfied by planting 500 to 600 trees per acre (with current mortality around plus or minus 5 percent in first year).&nbsp; This planting density allows for a first thinning between ages 13 and 16 to remove pulpwood and a small amount of chip-n-saw.&nbsp; The increased residual spacing allows for sawtimber growth optimization over the next 10 years or so, until final harvest.&nbsp;
 In order to stay diversified in timberland management options, research and operational endeavors have been deployed to couple the pulpwood regime with the sawtimber regime in the form of so-called flex plantations. This method provides for the interplanting of lower-value and higher-value genetic seedling stock. Whatever direction the traditionally deep timber markets or emerging biomass markets may take, land managers and foresters will be poised to provide forest products to both markets in order to meet demand. Author: Joshua Kane Harrell, Certified Forester Regional Investment Forester, Forest Investment Associates <a href="mailto:jharrell@forestinvest.com">jharrell@forestinvest.com</a> 404-261-9575

Source:  USDA Forest Service, Forest Inventory Analysis Program

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Foresters and timberland managers have stabilized woody biomass in the U.S. for the last century, meeting consumer demand without exhausting supply.

December 2012

Business Briefs

Business Briefs

Business Briefs

Columns

Conveying What's at Stake, From the Ground Up

The New Sheriff: FDA's Increased Focus

Mathematical Tricks, Backdoor Policies

Stop the Nonsense

Looking to 2013

New Studies Tell Ethanol's Statewide Success Stories

An Industry on the Offensive

Making Our Case

What the Election Results Mean for Biomass

Is Ag Biomass Here to Stay?

The Water Energy Nexus and Biopower Production

Driving Algae Sustainability

Featured

Defending Biofuels on a Global Stage

Lessons on Bottom Line Basics

Defending Tomorrow's Ethanol Today - Q&A

Perspectives on 2013

The Beltway Biochemist

Global Costs of Biomass Power

Navigating The Political Scene

Contributions

Changes in IRS Tax Regulations Affect Ethanol Plants

Industry Improves as Indicators Stabilize, Diversification Expands

Managing Woody Biomass: The Past Century in Review

December 2012.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

Business Briefs

Business Briefs

Columns

Conveying What's at Stake, From the Ground Up

The New Sheriff: FDA's Increased Focus

Mathematical Tricks, Backdoor Policies

Stop the Nonsense

Looking to 2013

New Studies Tell Ethanol's Statewide Success Stories

An Industry on the Offensive

Making Our Case

What the Election Results Mean for Biomass

Is Ag Biomass Here to Stay?

The Water Energy Nexus and Biopower Production

Driving Algae Sustainability

Featured

Defending Biofuels on a Global Stage

Lessons on Bottom Line Basics

Defending Tomorrow's Ethanol Today - Q&A

Perspectives on 2013

The Beltway Biochemist

Global Costs of Biomass Power

Navigating The Political Scene

Contributions

Changes in IRS Tax Regulations Affect Ethanol Plants

Industry Improves as Indicators Stabilize, Diversification Expands

Managing Woody Biomass: The Past Century in Review

December 2012