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Cellulosic Ethanol Gets Boost

posted on December 28, 2007


Hello, I'm Mark Pearson. Orders to U.S. factories rose slightly last month —underscoring the impact of housing and credit problems on the U.S. economy.

On Thursday, the Commerce Department reported that orders for durable goods — those items expected to last at least three years — increased by just 0.1 percent last month. While economists were hoping for a larger rebound, the report marked the first increase in durable-goods orders in the last four months. But the optimism was short lived.

The government reported Friday that new-home sales tumbled by 9 percent in November to a seasonally adjusted annual rate of 647,000. That's their worst showing in more than 12 years.

And crude oil prices rose Friday after larger-than-expected declines in U.S. crude inventories, and on global jitters following the assassination of Pakistani opposition leader Benazir Bhutto.

While U.S. dependence on foreign oil has grown steadily over the past three decades, a government study reveals increased production of cellulosic ethanol could help reverse the trend.

Cellulosic Ethanol Gets Boost

A recently released study from the Commerce Department found that cellulosic ethanol would cut reliance on foreign oil by more than 4 percent once the industry reaches full capacity in 15 years. The study, based on oil at $50 per barrel, also found that consumers could see an extra $12 billion in their pockets and the creation of 20,350 jobs in the agricultural sector. But the benefits would be realized only if the cost of production can be reduced.

The National Renewable Energy Lab, or NREL, has been researching cellulosic ethanol for more than 10 years but high production costs have always held back wide-spread production until now. The scientists at NREL believe if the cost of a gallon of cellulosic ethanol can be brought down to $1.07 per gallon large-scale market penetration may be profitable.

If the process can be perfected and the price reduced the door would be open to alternative feedstocks like wood chips and switchgrass. Despite future potential corn likely will maintain its dominant role in ethanol production in the near future.

If experiments are successful, Midwest centered ethanol may become a thing of the past. New technologies could allow production to be spread out across the U.S. allowing producers to utilize the most readily available feedstock.

As it stands, the Renewable Fuels Standard contained in the Energy Bill calls for production of 36 billion gallons of renewable fuels annually by 2022. Nearly half, about 15 billion gallons, is slated to come from ethanol. The mandated increase has farmers trying to decide if staying with corn in the near term is a better deal than switching to soybeans, which this week broke the $12 barrier on the futures market.

Even if producers choose to make the maximum amount the Energy Bill demands, there is a built-in braking mechanism. Provisions in the law allow the Federal government to curb production in the event it negatively impacts the food supply. Those limits are to be determined by a mandated National Academy of Sciences study that will determine the impact of biofuels production on grains, livestock, food, forest products, and energy.

 


Tags: biofuels ethanol housing news renewable fuels