Interest in energy independence tends to go up and down with price postings at the gas stations.
“When fuel prices went way up, we started to see a lot more interest in people saying, isn’t there a way I can make my own ethanol?” says Doug Root, AURI renewable fuels scientist in Marshall.
That was when gas was $4 a gallon and ethanol plants’ profits were up. AURI received calls from farmers, processing plants and entrepreneurs seeking technical advice on building smaller plants that could produce enough gas for their own use, plus some.
“People would ask AURI’s opinion on smallscale ethanol. We didn’t have the documents to back up our sentiments, but we thought it would be tough to make it go,” says Jen Wagner-Lahr, AURI project director. “
She decided to do some homework and, last year, AURI commissioned a study on the financial viability of plants that produce up to 2 million gallons of ethanol annually — small compared to commercial plants that average 50 million gallons per year.
Results of the study, conducted by BBI International Engineering and Consulting of Lakewood, Colo., were released this spring. BBI analyzed small-scale facilities’ ethanol yields and revenues, and the costs of feedstock, shipping, labor, energy, project development, financing, engineering, construction, start-up and working capital.
The firm produced 10-year financial forecasts for 100,000-gallon, 1-million and 2-million gallon per-year ethanol facilities. “All three of the small-scale ethanol scenarios yield negative financial results,” the study stated. “This is due to the current and forecasted low ethanol prices that make profits challenging for existing large-scale plants with no debt.”
“Even if corn prices were lower and ethanol prices were higher, it is still clear that these small-scale plants would be troubled to weather any economic downturns,” the study said.
“Mostly, it’s not positive given commodity prices, but there is a chance that things will change — people predict that oil prices are going to go up,” Wagner-Lahr says. “But it’s a matter of whether or not you would want to bank on that.”
“If you can maneuver and have a means to get capital costs down or use feedstock that’s free, it might work. But you have to make sure you’re at least covering all your bases — like transportation and safety of employees.”
Red tape barriers
Home-grown ethanol enthusiasts may see the possibilities while overlooking technicalities, Root says. “There are fairly serious regulations that producers have to be aware of,” Root says, and recommends every prospective fuelmaker read BBI’s section on regulations, safety provisions and training — “what you’d have to do to run any size ethanol plant,” Root says.
Permits are required by the Clean Air and Clean Water Acts, the Alcohol and Tobacco Tax and Trade Bureau (because ethanol is alcohol), Comprehensive Environmental Response Compensation and Liability Act and the Community Right to Know Act. A Minnesota air permit is also required. “Sometimes those requirements are ignored in initial planning,” Root says.
“There has always been concern about people making their own beverage ethanol.” But the bigger issue Root says is “concern about anyone making their own fuel and not paying gas tax,” which is required for road-use gasoline blends. However, fuels for on-farm operations are not taxed.
Fueling up at home
Several companies across the country have started marketing small systems, although there are no visible success stories yet.
A California company is marketing a home ethanol distiller that’s “about the same size as a gas pump at the station,” Root says. “It produces enough fuel for one or two vehicles.”
EFuel100 sells pre-packaged feedstock, a sugar and yeast blend, to feed into a fermentation/distiller unit and, in a week, 30 gallons of ethanol are ready for pumping into vehicles. The MicroFueler converts 10 to 14 pounds of sugar to one gallon of ethanol and can also use discarded beer, wine and distilled liquor for feedstock.
The company recently started offering systems for presale on its web site: efuel100.com, and it announced that Sierra Nevada Brewing Company in California will use the MicroFuelers to turn brewing waste into ethanol. Each unit costs almost $10,000 — although buyers may claim a federal tax credit of about $3,000. Pre-packaged feedstock cost-per-gallon isn’t clear.
The E100 ethanol has to be blended with gasoline as even flex-fuel vehicles use E85, not 100 percent ethanol. Standard vehicles run on E10 and, some claim, can run efficiently on E20 to E30. “You have to fill up your car with a quarter tank of gasoline and the rest of the way with ethanol to get an E75 blend,” Root says.
“That’s really aimed at home use. It’s expensive and not a great return on investment but it’s ‘green.’ You can have control of your fuel source.” To keep costs low, “there is a way to get control of feedstock. Then you aren’t buying a blended feedstock from the supplier but making your own,” Root says.
A southern Minnesota company, Easy Energy Systems, introduced three modular ethanol systems in December 2007 that are portable. “Rather than hauling feedstock hundreds of miles to an ethanol facility, you take the system to the feedstock,” says Tom Gallagher, Easy Energy sales manager.
The smallest system, with eight modules, produces 500,000 gallons of ethanol per year and the largest produces 2 million gallons. “Our intention is to build the modules in our factory and ship them to customers anywhere in the world,” Gallagher says.
Easy Energy, founded three years ago, is an affiliate of Easy Automation Inc, the largest U.S. provider of software and automation systems to the feedmill industry. “We are just now promoting commercial (ethanol) units … As we’ve developed, we intentionally stayed under the radar,” Gallagher says.
Most interest has come from “private individuals, large farmers and farm cooperatives with convenience stores that have gasoline pumps. If they produce their own ethanol, and if they are blending for the convenience store, they get the national blenders credit.”
Easy Energy is trying dozens of prospective feedstocks, such as sugar cane, sweet sorghum and waste paper, as well as corn. “There is interest from people in the refuse business — like a grower with watermelons that don’t meet his specs; he would love to make ethanol out of them.” The company is also working on efficiencies to decrease operating costs. “Right now we’re upgrading the continuous distillation to utilize even more heat recovery”, Gallagher says.
“Obviously $7 corn doesn’t work; you can only make corn work right now if you have afeedlot next door and can feed the distiller’s grains (ethanol byproduct) to cows. If you’re using a feedstock that you’re paying for and then paying to get rid of the byproduct, that’s tough. The idea is to take it to the location of the feedstock.”
The right economics
Not long ago, the ethanol industry was booming and new plants came online as quickly as they could be constructed. But when oil prices plunged in late 2008, it also lowered ethanol prices while corn prices rose and ethanol supplies exceeded demand. Nationwide, 20 plants are bankrupt or mothballed. Two of Minnesota’s 17 ethanol plants have closed, although they may reopen if economics improve.
Ethanol blends for regular gas are capped at 10 percent but industry and policy leaders, including the U.S. Secretary of Agriculture, want to increase the cap to 15 percent, which would again increase the demand for ethanol. Ethanol supporters argue that the industry has to be economically viable so more investment can be made in improving cellulosic ethanol technology. Currently, the enzymes required to break down cellulose for fermentaion are expensive and heat/pressure techniques are energy-intensive.
“It is possible to make cellulosic ethanol with a very bad carbon footprint” with current technologies, Root says. Other potential nonfood feedstocks, such as native prairie grass, is only harvested in the fall and is expensive to store and transport.
Some small-scale biofuels entrepreneurs “are thinking there are niches in ethanol production where small-scale plants may be profitable … and gambling that feedstock prices will go down.”
“Small-scale plants are often built without reserves on hand to weather a financial storm, but they also lose less if the ethanol plant has to shut down,” Root says.
For ethanol entrepreneurs, the AURIsponsored study is “a very useful tool … just to make sure they have covered everything they need to think about,” Wagner-Lahr says.
“Maybe it will stop the investment. But maybe, in the end, they decide to do it and it works.”
The feasibility study on small-scale ethanol production is available on AURI’s web site: www.auri.org