ST. PETER -- Ethanol's growing appetite for corn has many convinced that the industry's long-term, sustainable development will require a shift toward the use of cellulose.
"We never suggested that corn and soybeans would be the final answer,'' said Gene Hugoson, commissioner of the Minnesota Department of Agriculture. Hugoson spoke at a conference last week on building a sustainable future for ethanol. Hosted by the Minnesota Environmental Institute at Gustavus Adolphus College in St. Peter, the conference looked at how market, resource and environmental factors are shaping the industry.
Minnesota ships one-third of its corn to out-of-state markets, and Hugoson said there is plenty of room yet for the growth of the corn-to-ethanol industry.
Minnesota produces 500 million gallons of ethanol annually, or more than its own 10 percent mandate requires. Nationwide, the industry is expected to reach a production capacity of 7 billion gallons a year by the start of 2008, or four years earlier than anticipated by the federal renewable energy legislation.
The nation's corn supply could probably bring U.S. ethanol production to 20 billion to 25 billion gallons, according to Bill Lee, general manager of the Chippewa Valley Ethanol Company in Benson. There isn't enough corn to lift ethanol production to the goal of 60 billion gallons by 2030. "Cellulose will have to make up the difference,'' he said.
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For some, the shift to cellulose cannot happen soon enough.
The use of ethanol made from corn in plants that are powered by natural gas and electricity from coal does not represent the reduction in greenhouse gas emissions that a shift to biomass would, speakers at the conference pointed out.
Many also would like to see changes in the corn agronomy practices that contribute to soil erosion and water quality issues.
For now, high profits and a growing national market for ethanol has attracted Wall Street investments to the corn-to-ethanol industry. Ethanol plants are being constructed both in the Corn Belt and, increasingly, in market destination areas on the coasts, according to Vernon Eidman, University of Minnesota professor in the Department of Applied Economics.
It is changing the industry. In 2003, 85 percent of the ethanol plants were financed and owned by farmers and rural investors. Today, 95 percent of the plants are being built by absentee owners, according to David Morris, vice president of the Minneapolis-based Institute for Self Reliance, and a former energy adviser to four U.S. presidents.
Rising corn prices could eventually temper the flow of outside capital, according to Eidman. He calculates that Wall Street investors would not realize the return on equity they want if corn prices reach $4 a bushel and oil prices remain at current levels.
Even as new corn-to-ethanol plants continue to sprout up, there is interest in making the conversion to cellulose. The Iogen Corporation of Ottawa, Canada, is proposing to build the world's first commercial cellulose-to-ethanol plant, according to Maurice Hladik, director of marketing. If the company can secure government loan guarantees, construction will begin one year from now in southeastern Idaho, he said.
A cellulose-to-ethanol plant requires two to three times the capital to build, according to Hladik. It will benefit by lower costs for its raw ingredients, however. The Idaho plant has contracted for wheat straw.
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Almost any type of plant residue can be turned into ethanol, he said. Crop residues such as corn stover are the most likely cellulose sources due to their widespread availability and low cost. "Minnesota is the Saudi Arabia of residue,'' said Hladik.
Many believe that "hybrid" corn and cellulose plants will be the first step in the industry's expected evolution. Cecil Massie, an engineer with Sebesta Blomberg and Associates of Minneapolis, has overseen the conversion of the Central Minnesota Ethanol Cooperative plant in Little Falls to use wood chips as the biomass energy source to power the facility.
Prices for natural gas, coal and other non-petroleum fossil fuels are steadily rising. They could eventually match the cost of oil on a British thermal unit basis, Massie predicted.
The use of biomass also reduces emissions of greenhouse gasses. The Chippewa Valley Ethanol Company plant in Benson is building a gasifier that will turn biomass into a synthetic gas to replace natural gas now powering operations there, according to Lee.
He supports a variety of innovative steps to develop the ethanol industry. He'd like to see a carbon trading policy in the U.S. to encourage renewable fuel development.
Lee also pointed out that it can be difficult to take innovative steps, such as using biomass. Regulatory requirements become far more difficult when a company looks at new fuel sources. "We're trying to do the right thing. Can't you hurry up, Myrna," he said playfully to Myrna Halbach, assistant division director, Minnesota Pollution Control Agency.
Halbach said the MPCA is working toward a uniform "template'' for considering ethanol plant development. Yet there is no doubt that the industry's environmental challenges are only beginning.
Speakers at the conference urged the industry to find ways to reduce the amount of water required to produce a gallon of ethanol. Chippewa Valley Ethanol Company is the state's leader in this respect: It uses an average of 3.6 gallons of water per gallon of ethanol. All of the other plants in the state average 4 gallons or more, with a high of 6.1 gallons of water reported by the Denco LLC plant in Morris.
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Along with water use issues, a line is being draw in the sand over the use of coal to power ethanol plants. A proposed plant in Heron Lake would be Minnesota's first to use coal as its energy source, but it faces legal challenges.
Janette Brimmer, legal director for the Minnesota Center for Environmental Advocacy, called a coal-fired ethanol plant "an environmental oxymoron.''
Chippewa Valley Ethanol Company's Lee is among those who agreed that the use of coal could erode the public support that has helped build the ethanol industry.
