Current Rating:
Article RatingArticle RatingArticle RatingArticle RatingArticle Rating (12 votes)
Rate this Article Views: 1637
printer friendly Font Size: Small | Medium | Large

Biofuel Energy

Why There May Still Be A Future In Biofuel Investing

By Jeff Siegel
Friday, May 30th, 2008

I'll be the first to admit it.

I'm not a huge fan of corn-based ethanol. 

There are just too many better solutions out there.  Things like Plug-In Hybrid Electric Vehicles (PHEVs) or, dare I say it - mass transit systems like those which are operating successfully and profitably throughout Europe.

That being said, if biofuels can help replace just 5 to 10 percent of our oil imports - and do it in a safe and sustainable way - then we probably shouldn't be so quick to write them off.

But that's the key.  Biofuel energy must be produced in a safe and sustainable way.  Otherwise, we're just trading one problem for another.

Biofuel Energy: Food vs. Fuel

A couple of years ago, the food vs. fuel debate really started to pick up steam.  After all, as ethanol momentum kicked into overdrive, so did the price of corn.  Certainly there's a correlation there that cannot be denied. 

But making biofuels the scapegoat for high food prices isn't completely justified either.

What about...

·        The skyrocketing price of oil

·        Surging global demand for grain and meat from China and India

·        Hedge fund speculation on commodity markets

·        Severe drought conditions like those we've recently seen in Australia

·        A weak dollar

I'm not saying biofuels don't play a role.  But how big of a role is questionable, as biofuel opponents have certainly been known to inflate the numbers in an effort to muddy the waters.  These tend to be the same folks who blame biofuels for higher prices at the pump.

Is it true?

Depends who you ask, and who you want to believe.

While the Heritage Foundation (an organization that has received about a half million dollars from Exxon Mobil) has accused ethanol of contributing to the high cost of gas, Merrill Lynch (a U.S. securities firm that launched 2 biofuel indices in 2007) has stated that U.S. gas prices would be 15 percent higher without the effect of biofuels. 

That would put today's average price close to $4.60 a gallon.

The Necessity of Sustainability

Even if biofuels do lower gas prices and can eventually help displace up to 10% of our oil imports... many of the environmental impacts of biofuel production must be accounted for.

After all, much of our agricultural system today is based on very dangerous, unsustainable practices.  And don't brush this off as some kind of environmental propaganda either.  There are many historical examples of how large civilizations have risen on the strength of their agriculture, but also crumbled because of unsustainable farming methods that destroyed the natural resource base.

The industrial agriculture system, for the most part, does not operate in a way that supports the long-term health of farmland.  And this goes for both food crops and fuel crops.

In an effort to feed growing populations, the demand for chemical fertilizer production has grown dramatically.  Unfortunately, most of the fertilizers used today are primarily derived from oil, natural gas and mined minerals.  And not only do these fertilizers add to the fossil-fuel bill, they can also gradually increase the acidity of the soil until it begins to impede plant growth. 

Chemically-fertilized land plots have also shown less biologic activity in the soil food web (the microscopic organisms that make up the soil ecosystem) than do plots that have been fertilized organically with manure or other biologic sources of fertility.

There's also the issue of water usage.

It's been estimated that it can take around 1,750 gallons of water to produce only one bushel of corn.  That stings!  Of course, we rarely blink an eye when we water our lawns.  On average, a homeowner uses 21,600 gallons to water his lawn every year.

Still, while the production of one gallon of ethanol requires three gallons of water, it takes roughly 2.5 gallons of water to produce one gallon of gasoline. 

Estimations for cellulosic ethanol do bring water consumption down to between one and 2.5 gallons.

Detour to Profitability

Now listen, I'm not writing this because I'm a huge believer in biofuels.  As I've already indicated, their contribution to getting us off foreign oil is modest at best.  And let's face it: we wouldn't even be discussing biofuels if it weren't for a lot of very convincing lobbyists and a handful of Midwestern Senators with dollar signs in their eyes.

But I do think it's important that we don't jump on the biofuel bashing bus without taking everything into consideration.

Is the biofuel industry operating in a sustainable manner, taking into consideration the long-term affects on agriculture and the environment?  They're not there yet.  But we believe they will get there.  Simply because they have no other option. 

The true test will be the next-generation technologies they deliver.  More efficient production processes and the introduction of better feed stocks, like cellulosic materials, jatropha and algae.

These are the advances that will not only allow the biofuel industry to counter its critics, but they are also the advances that will enable investors like you to profit from a solution that is not only environmentally sustainable...but economically sustainable as well.

For more on alternative transportation technologies, click here.

To a new way of life, and a new generation of wealth...

jeff signature

Jeff

 


"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

Follow the money trail. Sign up for Energy and Capital now.

Enter Your E-mail Address Below:


By signing up, you'll also get our latest report, The Truth About Oil.





Rate this article:
 
     Current Rating:  
Article RatingArticle RatingArticle RatingArticle RatingArticle Rating (12 votes)

Comment on this Article  |   Digg this | Post to del.icio.us | Reddit


Comments:

Comment by Lane Burgess on 2008-06-02
Dear Sirs:

If it wasn't for the American Farmer and Rancher and the Independent oil and gas producer as well as the Major Domestic oil companies continuous investment in their respective industry the United States and the world would still be walking.

YOU complain about the profits and prices of food and fuel however you never ask questions about the amount of investment that the Agriculture and Energy Industry has and continues to invest to feed you every day.
Sincerely,
Lane Burgess



Comment by Robert on 2008-06-01
It is amazing how many experts there are on misinformation. Maybe a visit to an ethanol production plant first hand would give us the background to learn the real details of this industry, and we might, just might, come away with a more accurate understanding of this developing movement to reducing the volume of gasoline used.

Comment by Warren Pugh on 2008-06-01
Question(s) rather than comment(s),
Is cane sugar the only sugar that can be used in flex cars? What about beet sugar? There are thousands and thousands of fallow fields in the intermountain west
begging to be planted. It would be better than having the idiotic and heartless developers dotting the environment with monopoly $$$$.

Comment by theodore malnick on 2008-05-31
BACK IN 1950 ,I USED TO DRIVE TAXI'S ON PROPANE PRESS.FUEL TANKS LOTS OF POWER ,GREAT MILEAGE TOO !LNG IS NOT NEW FOR MOTOR USE ! NOW # 2 = GET RID OF THE "CORN-BASED FUEL 85 & PLEASE USE SUGAR LIKE BRAZIL DOES AND SAVE A BUNDLE FOLKS ,MAYBE THE DISTILLERY CO'S COULD HELP YOU WITH A MORE POTENT FUEL {VODKA WORKS WONDERS}

Comment by Phil Feigel on 2008-05-31
The author and his readers may benefit from a review of the state of
the art in sewage supported algae
production for diesel fuel.

Check out the facitlities in New Hampshire, New Zealand, Colorado
and more.

Phil
859-608-6472

Comment by Ivan Hills on 2008-05-31
When discussing ethanol you should mention that it has a lower calorific value than gasoline. It has about 25% less energy by volume. Based on energy content gasohol should be cheaper than gasoline. A good fuel is 50/50 benzene/ethanol (or methanol). I ran a motorcycle on it just after WW-2 (illegally) in Britain when "petrol" was strictly rationed. Bio-diesel fuel is a much better idea than ethanol

Comment by Gerald Sutliff on 2008-05-31
There are a lot more options out there. Hemp seed oil will diesel very well with little distillation. The shells make excellent food and fodder. Hemps requires water but grows in poor soil; besides fuel it has many other uses.
Here in California we spend billions in supporting cotton growing including subsidizing of water supplies when we really don't need all the much cotton.
The whole thing is nuts.

Comment by Steve Dolyniuk on 2008-05-31
Any one who thinks Ethanol is the answer is completely out of touch. Subsidising farmers to grow corn for fuel is crazy. Automobiles get poorer milage with even an 85% & 15% blend, so you will still be using just as much petroleum. More water is used in refining,& I could go on. Our Politicians need to allow more drilling,& the EPA needs people with common sense.

Comment by Bane Tyler on 2008-05-31
You continue to miss the point on the cost of ethanol, it take more energy to produce and is heavely subsidized,and that it is 25% less energy efficient than gasoline.Furthermore,ethanol-E-85 gas emissions are carcenogenic emitting formaldehyde and acetealhyde-per Stanford U. Besides a BMW diesel beat a Toyoto Prius in a 500 mile test run by 5mpg.Check it out. Europe diesels have low emissions.

Comment by Steve Gruhn on 2008-05-30
There is a lot of talk of making Iowa farms energy self-sufficient using biomass feedstock these days. Doing this would pretty much have to cut into food production. And in todays world doing this is going to be a very tough sell. The energy returned on energy invested (EROEI) of corn ethanol (1.3) means that a farm can never reach the factor of 2x EROEI if it only produces corn for ethanol. A method with an EROEI of 4 would require half the land to be used for energy, cutting the food supply in half. On the other hand, wind farms or solar collectors can use land more efficiently for energy production and would not cut into food production nearly as much. In the case of Freedom Fertilizer's goals and plans not at all.

One further way to look at this: Iowa is devoting about a quarter of its corn crop to making around 2 billion gallons of ethanol or about 160 billion MJ of energy a year. The installed wind capacity in Iowa is about 1.3 GW and this represents about 0.6% of Iowa's wind potential. But, already, wind is producing 12 billion MJ/yr in Iowa (30% capacity factor). So, if Iowa used just 10% of its wind potential, it would produce as much useful energy as using all of its corn for ethanol since ethanol is burned at about 30% efficiency.

Not all of Iowa has class 3 or better wind, yet in terms of energy production, the state would do much better promoting wind production rather than with ethanol. But we must make good with what we now have. That is an already installed corn/ethanol production capacity that requires fossil fuel to operate from seed to harvest and harvest to fuel tank. Or does it? Adopting the ideas and goals of Freedom Fertilizer would mean being capable of harvesting a larger percentage of the entire states wind capacity. 50% of Iowa's estimated wind production that would be 1 trillion MJ/yr. 6.5 times the energy of ethanol produced. Subtract the energy (Fossil fuel) used to produce ethanol, 120 billion MJ/yr leaving only 40 million green MJ/yr net gain from 25% of the states corn harvest that is converted to ethanol. While meeting a Freedom Fertilizer goal would mean 25X the green energy harvested using only 1/2 of the states wind resources.

Freedom Fertilizer's concepts and goals of making green fertilizer and fuel can make this even better. By converting this states wind energy into storable NH3 we can replace the corn's nitrogen fertilizer made from fossil fuel and the fossil diesel fuel used to plant, cultivate, harvest and ship this crop to the ethanol plant. Completing a full circle of production using 100% renewable, sustainable, locally made and reliable green fertilizer and fuel. This is only a part of the full Freedom Fertilizer concept, Making all of ethanols 160 MJ of energy content produced in Iowa green MJ
.

How much would this NH3 cost on a per ton or per equivalent gallon basis? Our estimates are quite surprising. Using newly developed technology (Solid State Ammonia Synthesis) created by our associates NHthree. Ammonia can be produced from wind power or any other renewable resource (hydro solar, geothermal, ocean current or off peak grid electricity). This process is particularly appealing to stranded resources that could not be developed or connected to the grid. NH3 produced with the SSAS process would cost approximatively $100 per ton per 1cent KW cost of electricity. In other words 4-cent KW power would equal $400 per ton NH3.
For a equivalent fuel basis. $400 per ton NH3 would be equal to $2.60 a gallon diesel. And how do we use NH3 as fuel. Actually very simply. Ammonia has a high auto ignition temperature (high octane rating) and a low flame speed. It has a critical temperature of 132.4°C which means that above this temperature it is a gas no matter what pressure it is under. The high auto-ignition temperature allows us to use very high compression ratios that boost efficiency. The slow flame speed means the fuel is thus better suited for compression ignition (as in diesel engines). The low critical temperature from the compression of NH3 makes it impractical for it be directly injected into the cylinders as a liquid. So ammonia must be introduced into the induction manifold behind a turbocharger where it vaporizes. The key to simple operation is dual fuel. Starting a diesel engine on diesel fuel and then introducing the vaporized gas into the manifold on a computer controlled basis. Running an engine on a blend of NH3 and biodiesel of up to 95%. The roll of the biodiesel is to act as an igniter and lubricator.

Freedom Fertilizer may not have all of the answers to making Iowa farms totally energy self-sufficient but we challenge anyone else to come up with a better plan that is greener or easier to implement. If we are to prosper in this state and make the best use of the resources available to us we must do it quickly and wisely.

Steve Gruhn
Freedom Fertilizer
3006 Hwy 71
Spirit Lake, IA 51360
712-330-3114

Comment by diane munkirs on 2008-05-30
From the outset...if it takes government subsidy to support biofuels...it is a mistake. Let alone ALL the other reasons...not to mention the energy it takes to make the stuff..and the low gas mileage you get. I hope they all go broke. Bad investment.