Gas prices that spilled over $3 per gallon this summer drew complaints at the pump. But the ensuing quest for renewable energy put ethanol production in overdrive — and that’s having a big impact on the biofuels industry.

A study released in April showed national ethanol production had already hit a record 5 billion gallons for 2006. “By the year’s end, we’re going to reach 8 billion gallons,” says Dennis Timmerman, AURI project director. “We’re on a very rapid production increase,” as crude oil prices have neared record highs.

Ethanol’s success is the highlight of “The Emerging Biobased Economy,” a study commissioned by AURI, the Minnesota Department of Agriculture and Minnesota Corn Growers. Conducted by Informa Economics, Inc. of Memphis, Tenn., the study looked at trends in ethanol, biodiesel, feedstocks, industrial biotechnology, biopolymers and other bioproducts.

Ethanol reigns

Ethanol is the star player in the emerging bioeconomy. Currently, it enjoys a highly favorable political as well as economic environment. The federal ethanol tax credit was extended to 2010 and the Energy Policy Act of 2005 set minimum requirements for renewable energy use through at least 2012. “Ethanol enjoys strong support from the agricultural community and increasingly from politicians that see it as a means toward enhancing the energy security of the U.S.,” the Informa report states.

With efficiencies gained in ethanol production and high corn yields, “the economics of ethanol production are expected to remain favorable.”

“Minnesota now has 16 ethanol plants and new plants are coming on line” in Fergus Falls and Heron Lake, Timmerman says. Other plants are being proposed in Chokio, Lamberton, Madison, Granite Falls and the Moorhead area. “A lot of people are excited about ethanol,” Timmerman says.

“The most significant finding in this report is the price of grain has the potential to be significantly impacted as a result of increased biofuels production.” With more ethanol production, the supply of a coproduct, distiller’s dried grains, used primarily in cattle feed, could glut the market. So AURI is working to expand uses for the coproduct, such as hog rations, and is working with the Minnesota Pork Producers on assessing and increasing the use of DDGs.

Biodiesel pumping up

With oil prices expected to be at $50 a barrel for the next 25 years, according to federal energy experts, ethanol isn’t the only renewable fuel gaining momentum.

Biodiesel capacity is forecast to be at 688 million gallons by 2008, 711 million gallons by 2010, then rise to 860 million gallons by 2015, Informa projects. However, the current $1 per gallon tax incentive will have to be extended beyond 2008 for biodiesel to be profitable — unless crude oil prices soar to above $70 a barrel, the report says. At current diesel and soybean prices, the gross profit per gallon is about 77 cents.

About 82 percent of biodiesel feedstock will come from soybean oil, the rest from animal fats and other vegetable oils. The demand for soy oil will add crushing capacity and put more meal on the market. “Soybean meal use to be the main product of soybean production,” Timmerman says. Now it could become a coproduct.

“There are processes that can increase protein concentrations in meal from 40 to 60 percent, which would greatly benefit the livestock industry.” However, concentrating protein also increases the level of oligosaccharides, “which has some detrimental effects — it causes flatulence in poultry,” Timmerman says.

AURI is looking at ways to extract oligosaccharides from meal and improve its quality. Better soy meal could be an alternative to bone-meal rations restricted by BSE (mad cow disease) concerns.

More bioproducts emerging

Growing interest in renewables extends to a variety of consumer and industrial products. For example, researchers are attempting to process fine, cellulose fibers from straw and corn stover into resin that could be a low-cost replacement for glass fibers.

Biobased products are replacing petroleum in feedstocks, polymers, lubricants and adhesives. And biotechnology is likely to drive growth in the chemical industry, Informa predicts.

New biopolymers on the market that are substituting biobased resins for petrochemical products could reach 33 percent of total polymer production if economic conditions remain favorable, the report states. The global production of biobased plastics is expected to top 1.3 billion pounds by 2008.

Some of these bioproducts, which use corn stove and other crop residues, could be manufactured in biorefineries connected to ethanol plants — a full-circle bioproduction facility.

“The current energy crisis and development of renewable energy sources,” Timmerman says, “has a huge potential to impact the overall economy of rural Minnesota.”