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GreenField Ethanol, Canada’s largest ethanol producer, and Enerkem, a leading gasification and catalysis technology company, have signed a Binding Term Sheet outlining their plan to produce cellulosic ethanol on a commercial scale.

“We are excited to work with Enerkem to make cellulosic ethanol a commercial reality in Canada,” said Bob Gallant, President and CEO of GreenField Ethanol. “Canadian consumers are looking for a greener, affordable alternative to fossil fuels and GreenField is delivering by expanding its corn ethanol business to include new bio-based fuels,” added Frank Dottori, Managing Director of the company’s Cellulosic Ethanol division.

The companies agreed to terms that will see them collaborate 50/50 on joint projects to design, build and operate commercial cellulosic ethanol plants using Enerkem technology in specified geographic areas. The first plant location has been secured within Canada and will be announced in the coming weeks. A second plant is also in development.

Enerkem’s technology converts biomass such as sorted municipal solid waste and urban wood residues into cellulosic ethanol and other biofuels.  It eliminates more than two tonnes of greenhouse gases (GHGs) per tonne of residues used as feedstock.  The company’s founders have been active in gasification for many years.  Enerkem’s pilot plant, which has run more than 3,000 hours since 2003, produces syngas, methanol and cellulosic ethanol. The company is currently building a commercial scale cellulosic ethanol demonstration plant in Westbury, Quebec.

As high corn prices continue to pressure U.S. ethanol companies, Brazilian competitors see a window of opportunity this summer for their home-grown ethanol made from less-expensive sugarcane.

“Demand from oil companies for Brazilian ethanol is very high right now,” said Eduardo Correa, a trade manager at Brazilian ethanol exporter Equipav Milling Group. “There’s going to be plenty of opportunities for us to export this summer, either directly or through the Caribbean,” Correa said.

There are a number of reasons for this possibility, according to a number of ethanol buyers and sellers in the U.S. and Brazil. First, Brazil is currently harvesting a record-breaking sugarcane crop, easily over 500 million metric tons, according to industry analysts at Datagro in Sao Paulo. The sheer volume of cane alone, and the estimated 20 billion liters or more of ethanol that’s going to be made from it, is going to push Brazilian ethanol prices lower.

Current wholesale prices are around $1.64 a gallon, according to the University of Sao Paulo’s rural economy think tank Cepea/Esalq. Even with a 54-cent tariff imposed on Brazilian ethanol exports, Brazil wholesale hydrous ethanol prices comes out to be around $2.18 per gallon compared to around $2.55 per gallon on average for U.S. ethanol today.

“I think we are going to see record ethanol production this year in Brazil, while the U.S. ethanol producers are struggling to make a profit,” said Antonio Augusto Duva, a soft commodities manager at BNP Paribas bank in Sao Paulo. “The (Brazilian) industry’s hope, and this might be wishful thinking on their part, is that lower prices here and high gas prices there could result in big ethanol exports to the U.S.,” he said.

Another reason is that high corn prices — hovering near $6 per bushel on the Chicago Board of Trade — means U.S. corn ethanol producers are facing very tight profit margins, if they have any profit margin to speak of. Corn prices shot up last week when the U.S. Department of Agriculture reported an 8% expected drop in U.S. corn plantings to 86 million acres this season. “At these prices, a lot of ethanol producers are on the edge. You get bad weather this summer and the crop looks bad, and suddenly prices go to $7.

That would be impossible for U.S. ethanol companies,” said Joseph Petrowski, chief executive of Gulf Oil in Boston. Nevertheless, the U.S. has mandated ethanol use. So ethanol isn’t just going to vanish if corn prices stay at these levels and ethanol companies start to go bankrupt as did Kansas-based Ethanex Energy Inc. (EHTE) on March 25.

Gulf Oil alone is opening up 10 new E10 gas stations in New York and an E85 ethanol service station in Massachusetts next month. E10 is a 10% mix of ethanol with traditional gasoline and E85 is an 85% blend. Gulf Oil blends ethanol with around 20,000 barrels of oil per day in the Northeast.

Given the current pricing scenario for corn futures, corn ethanol prices will likely rise to around $2.80 per gallon, Petrowski estimated. With the 50-cent U.S. tax credit on ethanol, that still makes ethanol much cheaper than gasoline, but it is not going to be make it cheaper than Brazilian ethanol.

“If you take the tax break away from ethanol, it becomes a complete money-losing operation,” said Marty Magida, managing director of Trenwith Securities LLC, a middle market investment bank specializing in renewable energy.

“The jury seems to be out on corn ethanol, and it’s not a good verdict,” Magida said. Brazil is the world’s only ethanol exporter and No. 2 producer behind the U.S. Last year, it exported around 3.4 billion liters of fuel-grade ethanol to Europe and the U.S. Both the U.S. and Brazil have joined forces under the auspices of the Inter-American Development Bank to create a quasi-joint lobbying effort to convince other nations to produce or buy ethanol. The argument was that it was good for the environment and provided a relief to high oil prices, currently around $108 a barrel.

High Prices Also Draw Out Ethanol Critics

As corn prices rise in the U.S., ethanol faces an onslaught of attacks from critics. Even Brazil has not been exempt from the anti-ethanol movement, with European and American public opinion leaders saying Brazil deforests to grow sugarcane.

Over 90% of Brazil’s sugarcane crop is grown in the center-south, thousands of miles away from any tropical forests, according to the Sao Paulo Sugarcane Industries Union, or Unica. However, as much of a beating ethanol has taken lately, the U.S. mandate guarantees a steady supply of ethanol to fill U.S. gas tanks. The 2007 Energy Bill calls for 15 billion gallons of corn ethanol, with another 15 billion or so coming from other sources, including Brazil’s sugarcane ethanol. Unless those mandates are canceled, Brazil’s ethanol might have a bright future in the U.S. with or without high corn prices.

“The U.S. (renewable fuels standard) wants a lot of ethanol and we are not going to be able to produce it all here, not now anyway,” said Karl Doenges, vice president and general manager, of CleanFUELS USA, a turnkey ethanol company working with distributors in Texas. “The RFS is really Brazil’s big opportunity. We are not going to have enough ethanol to meet the RFS mandates, so we are going to have to get it from corn, sugarcane in Brazil, cellulosic ethanol. Whatever we can get our hands on.

Plus the tariff on Brazil ends next year,” he said. “I’d be very bullish on long-term ethanol prospects.” If ethanol wasn’t in the market, Petrowski estimates the U.S. would have to find about 600,000 barrels of oil a day to replace it. “If you have to go into the market and look for 600,000 barrels of equivalent oil to replace ethanol, imagine what that would do to the price of gasoline,” Petrowski said. “It won’t be a food crisis and it’ll be much more than just ethanol producers who are having a problem; we’ll have a bonafide gasoline crisis on our hands.” Brazil ethanol producers, in that case, would like to come to the rescue.

“If the U.S. doesn’t go into a really bad recession, gas and ethanol prices will rise, at least that’s what we are hoping,” said Joao Val, chief financial officer at Sao Martinho SA (SMTO3.BR), one of Brazil’s leading ethanol producers. “But whether that scenario plays itself out in the U.S., nobody really knows.” Correa has his own take on the matter. “Brazil is going to be much more aggressive this summer in trying to sell ethanol because of higher prices in the U.S.,” he said.

Only four years ago, producers were celebrating a 20-per-cent increase that lifted the 2004 contract price for a tonne of steelmaking coal to $51. UBS Investment Research reported on Tuesday that the Australian coal giant had reached a deal with the world’s largest steelmaker, Arcelor Mittal, at $305 US a tonne, for the contract year that began April 1.

“I think the only thing we can say, and certainly not in regard to the negotiations side, is that we are seeing the market come to terms with the flooding in Australia and the tightness of the demand that existed even before the supply disruptions,” said Colin Petryk, investor relations director for Fording Coal Canadian Trust, in a telephone interview.

The Fording Canadian Coal Trust, which operates five major steelmaking coal mines in southeast B.C., is a price-taker rather than price-maker, and is staying tight-lipped while it awaits the official outcome of Australian negotiations before settling with its own buyers.

But a company spokesman suggested that new prices reflect a number of supply-related issues in the market, including flooding of Australian coal mines in January coupled with a tightening world supply of the commodity.

Coal prices could begin to push up the price of electricity, food, imports and other products that directly or indirectly rely on coal-burning power plants. (Coal supplies 40 percent of the world’s electricity and roughly 50 percent of the U.S.’s electricity.) Demand is growing so fast that China in fact imported more than it exported in the first half of 2007 last year. Oil has already contributed to rising prices.

Thermal coal prices at Australia’s Newcastle port, where much of the coal from that nation gets shipped, rose to $125 a metric ton in January, a 143 percent increase from a year ago, according figures from globalCOAL cited by the WSJ. Central Appalachian coal futures on the New York Mercantile Exchange have doubled in the same period.

The situation has been exacerbated by cold winters in some areas, mine floods, mine shut down and other non-recurring events. But there’s no doubt demand is rising. Last week, we interviewed Greg Boyce, CEO of Peabody Energy, the world’s largest coal mining company.

“Coal demand has just been extremely strong. The globe is short of energy and we serve every coal market in the world through our trading platform or producing platform,” Boyce said. “Demand is far outstripping supply, prices have gone up over the last year in most major markets and it looks like it’s going to be here for a while.”

What are some of the other impacts? Profits will rise for coal miners, and clean coal companies like GreatPoint Energy and CoalTek will see increased attention.

Long considered an abundant, reliable and relatively cheap source of energy, coal is suddenly in short supply and high demand worldwide.

An untimely confluence of bad weather, flawed energy policies, low stockpiles and voracious growth in Asia‘s appetite has driven international spot prices of coal up by 50 percent or more in the past five months, surpassing the escalation in oil prices.

The signs of a coal crisis have been showing up from mine mouths to factory gates and living rooms: As many as 45 ships were stacked up in Australian ports waiting for coal deliveries slowed by torrential rains. China and Vietnam, which have thrived by sending goods abroad, abruptly banned coal exports, while India‘s import demands are up. Factory hours have been shortened in parts of China, and blackouts have rippled across South Africa and Indonesia‘s most populous island, Java.

Meanwhile mining companies are enjoying a windfall. Freight cars in Appalachia are brimming with coal for export, and old coal mines in Japan have been reopened or expanded. European and Japanese coal buyers, worried about future supplies, have begun locking in long-term contracts at high prices, and world steel and concrete prices have risen already, fueling inflation.

In the United States, the boom in coal exports and prices has helped lower the trade deficit, which declined last year for the first time since 2001. The value of coal exports, which account for 2.5 percent of all U.S. exports, grew by 19 percent last year, to $4.1 billion, the National Mining Association said. An even bigger increase is expected this year.

That means that, in a small way, higher revenues for U.S. coal exports indirectly helped the U.S. economy cover the cost of iPods from China, flat-screen TVs from Japan and machinery from Germany. The still-gaping trade deficit of the world’s largest industrial power at the dawn of the 21st century was slightly eased by a fuel from the era and pages of Charles Dickens.

Big swings in the prices of coal and other commodities are common. But while the price of coal has slipped slightly in recent weeks, many analysts and companies are wondering whether high prices are here to stay. As increasing numbers of the world’s poor join the middle classes, hooking up to electricity grids and buying up more manufactured goods, demand for coal grows. World consumption of coal has grown 30 percent in the past six years, twice as much as any other energy source. About two-thirds of the fuel supplies electricity plants, and just under a third heads to industrial users, mostly steel and concrete makers. Click here to read the rest of the article

Profitable Use of Biomass at Ethanol Plants

Our initial evaluation indicates that the biomass co-products from the dry-grind ethanol
production process, particularly DDGS, are good sources for the electrical and thermal energy
needed to operate the plant, and even contain sufficient energy to produce excess power that can
be sold. However, the number of subsequent process steps required to reduce emissions to
compliance levels, particularly NOx, will be important in determining the economic viability of
using biomass co-products from dry grind ethanol plants for energy production.
The alkali metal content (potassium and sodium) of the ash is high (22 to 34 %) for co-products
and corn stover. Such high levels of alkali metals can lead to ash fouling in combustion and
steam generation units, and to potential agglomeration of bed material in fluidized bed systems.
We have developed a detailed analytical program to provide a good data set for completion of
other project elements, and for subsequent quantification of the financial impact of using the coproducts for energy production at the ethanol plant.

I find it very hard to believe that the executives from the largest oil companies in the world are trying to link higher food prices on the production of ethanol from corn. Come on the reality is our food system in this country relyies on a fossil fuels delivery system and that has the biggest impact on food prices and not the scapegoat of ethanol production.

Every fall, Eric

Woodford makes dozens of house calls to

deliver bundles of joy throughout southwest

Minnesota. In Woodford’s case, the bundles

come wrapped in nylon net and weigh in at a

cool 1,250 pounds.

For 10 years, Eric has operated Woodford

Custom, Inc., a custom baling business,

from his rural Redwood Falls farm. His crew

harvested 14,000 corn-stalk bales last year,

primarily for cattle feedlot bedding. They also

produce thousands of hay bales each season.

The biomass harvesting has been profitable.

But Woodford sees more potential in “corn

stalks for other uses like bio-energy, ethanol

and paper.”

Woodford says there is an abundance

of unused crop residue that could be an

inexpensive energy source.

Most corn stalks are plowed back into the soil

for their nutritive value and to enhance soil

tilth. However, there is often more residue

than the soil requires, Woodford says. This

residue could be harvested like a second crop.

For example, it takes roughly 150 pounds

of corn stover to generate one million Btu

— equal to the Btu-value of 11 gallons of

propane, Woodford says. With propane selling

for around $1.15 per gallon, a $25 bale of

corn stalks weighing 1,250 pounds has an

equivalent Btu value of more than $100.

The value increases as the cost of propane

and other fuels goes up.

Click here to see powerpoint

High energy costs continue to be a challenge facing many agricultural processing plants in Minnesota. For the biofuels industry, higher input costs are also squeezing margins. Biomass from our fields and forests, along with co-products from our agricultural processing and bioenergy plants, have the potential to provide a lower-cost alternative to petroleum-based fuels. This forum was designed to help participants to learn together how to manage higher energy costs.
 

The Renewable Energy landscape is changing rapidly — new developments, new technologies, new players, new economics, new energy sources, new tax credits and carbon programs.

This forum was developed to follow up on the very successful conference held in May, 2006. It targeted large users of energy in the agricultural processing and bioenergy arena. Topics covered included: Where and how might biomass fit into your plant operation? How do lower-cost fuels and new energy-saving technologies fit in? Is there a way to take advantage of the recent changes in the tax code and various state requirements?
 

Click on the links below for the presentations (in PDF format)

Cellulosic Ethanol – Doug Tiffany

Biomass Gasification – Dr. Lanny Schmidt

Methanol How and Why – Cecil Massie

Woodland Custom, Inc. – Eric Woodland

Rural Energy Marketing Gasifier – Loren Forrest

Keith Air Dryer – Lyle Olson

Densification of Biomass – Alan Doering and Dr. Vance Morey

DDG for Power – Dr. Vance Morey

Working Together to Solve Biomass Issues

Action Now