http://www.startribune.com/stories/541/4797330.html For many years I labored under the impression -- correct, in part -- that the economics of the ethanol industry simply didn't work. I was compelled by the reasoning that it takes as much energy to make ethanol as it ends up producing. So what if it's renewable? With a background in business development and investment banking, I should have had a greater appreciation for the infancy of the industry and the time required to build a rational business model around it.
It's clear now that the ethanol industry is coming into its own. New technologies that add valuable products to the ethanol production process need not be dependant on subsidies. And because of that, the ethanol industry - offering more than just fuel - is beginning to make a lot more sense economically.
With gasoline prices above $2 a gallon, this is none too soon. New dynamics are influencing the industry with better engine technology and ethanol production facilities, and co-products that add considerable value to the ethanol production process have made the industry viable and deserving. It is time to stop complaining and start acknowledging the facts.
Back in the early 1970s, Brazil embraced ethanol to the point that 94 percent of the nation's automobiles were running on it. Brazil was and still is ahead of the curve. The unfortunate problem in the '70s was that automobile technology was not in sync with ethanol, and eventually that country went back almost entirely to gasoline. In the past decade, with engine technology having addressed early combustion problems, more than 40 percent of the cars in Brazil are running on ethanol; moreover, Brazil is exporting ethanol to 17 other countries.
About 80 production facilities in the United States produce nearly 3 billion gallons of ethanol annually. The early plants were built to produce 5 million to 20 million gallons a year. Plants built today can produce more than 100 million gallons each a year. We once estimated that the United States would reach 5 billion gallons by 2012; it's conceivable we'll reach that goal within three years, given the fact that an additional 25 to 30 plants are being built or being planned. A recent study published by the Renewable Fuels Association found that increasing ethanol production to 5 billion gallons annually will create 214,000 jobs, $5.3 billion in new investment in renewable-fuel production facilities, and increases in household income of $51.7 billion. And it will replace 200 million barrels of imported oil.
But the news here is that ethanol is only one of many renewable products available from biomass, such as corn, soybeans, wheat and barley. These products are slowly invading our food, nutraceutical, pharmaceutical and multiple other industries. Renewable resources are a key component of America's future and ability to compete.
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