What is the Energy Independence of Ethanol? – Or, is that Even the Right Question?

The debate over ethanol is far from over and has been clouded, in some cases deliberately, to favor a pro-ethanol policy.

Barack Obama made renewable energy (with ethanol its centerpiece) a plank of his campaign.  McCain(and a good many Republicans) also touts renewable-energy, including ethanol, though emphasizing the need to drill first.  Both men operate from information that is highly disputed and subject to revision.   Politicians love the idea of ethanol because it a) taps resources directly available to us (i.e., independence), b) has the blessing of government's scientific establishment (EPA, USDA & DOE), c) satisfies a constituency demand for a quick fix to a seemingly alarming situation (gasoline price volatility), d) has the endorsement of the Luddite anti-oil faction (delighted to drive a stake through Big-Oil's heart), e) has powerful agri-business backers (grateful for government underwriting) and is f) theoretically inexhaustible. There are some things we know about the behind the scenes debate and center-stage hyperbole, however, that discount ethanol as a viable replacement fuel for gasoline any time soon.  Alan Caruba already made the point about corrosion in his article earlier this month (see my response to the article).  However, that, to me, is a minor point that re-engineering can fix.  Far more important are questions of ethanol's ultimate potential, disruption and impacts for which there are energy, fiscal, and social costs.  This article primarily addresses the ethanol net energy yield and sustainability dispute, leaving to others or to subsequent articles questions of ethanol's economic feasibility and capacity.

To understand the ethanol debate, we need to know something about the process.  Theoretically, ethanol can be made from any reducible carbon-based substance (including oil and wastes).  But the point of switching to ethanol is finding a worthy combination of resources and process that gives us the energy needed with the least disruption and at a reasonable profit.  So far, corn has been the resource most amenable to conversion.  Cellulositic ethanol is touted as having a still greater potential, but remains unproven.  The many claims made for ethanol should, each, be thoroughly and separately examined and deconstructed before acceptance.  Among these are it: a) suffices for most (if not all) of our energy needs, b) is non-polluting, c) reduces global-warming, d) is safe to handle, e) economically beneficial, f) promotes rural economic development, and g) reduces dependence.  Not all these claims are made by the same people and technical proponents limit themselves to the less dubious claims more readily defended; hence the many charges and countercharges of misrepresentation and mistakes.

Ethanol is, without question, an excellent fuel; yet, too often, we mistake solutions for needs where none yet exists; invariably resorting to government to take "necessary steps."  Government is at its absolute worst when stampeded into action by our demands to pull our fat out of a fire by the only means of which government is capable.  Government can only declare a direction, to which the rest of us are, then, irreversibly committed.  Without government intervention, we may start down wrong paths, but, because we are uncommitted by law, can reverse course or find some other path to the optimal solution.  Not so with government interventions.  Government is incapable of just letting events take their course, even when imbued with free-market sentiments.  Create an atmosphere of panic and government must respond or take flak for inaction (think Katrina).  This hyper-responsiveness invariably puts carts before horses . . . big ones.  Worse, it locks us into a one-solution reaction.  It may be ethanol is the solution or part of the solution, but government mandates do not make it so, and, more likely, create new barriers for us to overcome.

Net Energy Dispute

In 1996, Drs. Pimentel and Patzek (hereafter P&P) first challenged the net energy balance claimed for ethanol.  They have since updated and expanded their numbers, but make the same overall argument that ethanol takes more energy to make than we get back and is too costly.  They claim a) corn-ethanol net energy yield varies more than is generally reported (depends on water content in real-world conditions and accounting methods), b) corn erodes soil 18 times faster than it reforms, c) requires tremendous amounts of fertilizer, pesticide, and water, d) water, soil, harvesting, replenishment energy debits are not fully accounted in USDA net-energy values (NEV), e) USDA net energy ratios (NER) for ethanol are improperly calculated, and f) there isn't sufficient acreage to support more than a small increase in ethanol production.

Close comparison between P&P and USDA suggests the accounting of renewable energy in ethanol production is one source of disagreement, and gains in recent years both in corn and ethanol production stem from discounting renewables from the bottom line.  For example, Pimentel says it takes 75,118 Btu/gal of ethanol produced whereas USDA claims this is only 51,779 Btu/gal, the main difference in their numbers being USDA counts things like fermentation methane, wind energy, solar, and bagasse burning as part of the process rather than as energy inputs.  This is both confusing and misleading, and would be better accounted as energy credits as they do for co-products out where we can examine them for validity.

If the NEV of ethanol is and must remain negative, the argument ends there.  However, this debate is not as cut-&-dried as that.  The NEV of ethanol has shown significant improvement through new strains of corn, increased crop yield, soil management, fertilizer reductions, conversion-plant efficiencies, conversion methods, and distribution.  Where it gets confused (possibly deliberately) is when no data is given of the cost in additional fertilizer, ground contamination and, especially, water.  The ethanol lobby argues this level of process improvement is common to immature industries and we can expect further improvement of the same or greater order for several more years.  As a non-Malthusian, I am inclined to agree but, as a pragmatist I am disinclined to count chickens before they're hatched.

A related question is whether the NEV of ethanol is greater than the NEV of gasoline.  While this does not preclude ethanol as a fuel, it does undermine the timing of ethanol because, if we still get better overall yields producing oil/gasoline than ethanol, it is economic folly pushing ethanol.   It is also important when examining the possibly exaggerated claims of advocates ranking ethanol superior to gasoline.

Shapouri, Duffield, and Wang (USDA) refute some of the P&P debits (Power Point version) and add some credits for non-fuel co-products (e.g., corn oil, gluten) that P&P did not include in their estimates.  The refutation is based mainly on their claim that P&P over-counted energy debits by more than 50%, but fail to provide a sufficient level of detail for non-specialists to adequately evaluate the claim.  My own reading of both sides admits some co-product credits should be included, but not all and certainly not as much as their most conservative estimate (replacement energy, 19%) which is the only basis they give I find compelling.  The other three bases (caloric content, market-value, and weight) have nothing to do with the fuel-value of co-products.  Likewise, as thorough accounting of energy inputs as possible should be used so as to avoid undercounting debits.  Moreover, it is unclear that ethanol advocates give gasoline's non-fuel co-products a similar credit allowance (e.g., asphalt, plastics, drugs, additives, lubricants, sealants, wax, fibers, etc.) before calculating its net-energy ratio and then comparing it unfavorably to ethanol.  Realistically, we can't capture all debits any more than credits, but until we have better proof of ethanol's unsubsidized viability, the most conservative approach should be followed; and that is to include as much debit as can be identified and exclude debatable credits.  The USDA study is detailed (later studies tend to include more things), but also idealized, and until these criticisms are adequately addressed, the USDA and similar proponent studies are less conservative than P&P; making P&P the more reliable for purposes of viability.  The optimistic USDA figures are the ones most visible, widely supported, and both McCain and Obama operate from (unlikely they are aware there's a dispute).

The USDA presentation is fairly compelling, and I was close to accepting it when I came upon an Oil Drum article directing my attention to another by Robert Rapier.  Rapier is a long-time critic of grain-based ethanol, arguing a limited energy return for ethanol before the Montana Legislature (Rapier led me to Pimentel & Patzek).  Rapier's position on bio-fuels is, "I don't believe all biofuels are bad, but we need to carefully consider the tradeoffs."  Rapier is a chemical-engineer/entrepreneur in the business of rainforest damage mitigation, carbon-sequestration and energy reduction (placing him squarely in the enviro-conservationist camp).  He tells us the way our government ethanol proponents have been reporting ethanol yields and comparing them to gasoline confuses conversion efficiency with energy ratio (two entirely different metrics).  From Rapier's analysis, the USDA researchers reported the energy conversion yield of gasoline (0.8) versus the net energy ratio of ethanol (1.22) as if these are equal things; suggesting it takes more energy to produce gasoline than to produce ethanol.  In fact, it takes more energy to produce ethanol than gasoline, with or without energy credits.  As Rapier elaborates, the conversion efficiency of gasoline is the simple ratio of energy output to input.  Thus, to get 100 Btu's of gasoline you have to burn 20 gallons.  Despite involvement of our keepers-of-the-public-trust in this likely deceit, it remains theoretically possible to convert corn or another feedstock to ethanol with a positive NEV.  Assuming we do get to that point, ethanol will become the sustainable fuel proponents are hyping.

USDA (Shapouri, etc.), along with some earlier evaluators, further confuse matters by insisting the high heat value (HHV) of ethanol, rather than low heat value (LHV) is the right measure to use in calculating ethanol's NEV and NER.  HHV is the amount of heat extracted from burning a fuel in processes in which water is condensed to extract more useful energy.  HHV is typically used in large, stationary operations like electric power plants where this additional extraction can be done practically.  Using ethanol in automobile engines, however, is unlikely to capture this additional 8.5% energy as it will result in bulkier, heavier engines at an additional energy cost that outweighs the gain.  You'd also have to get rid of a lot of condensate, soaking roadways behind us (possible safety concern + increased road maintenance from undermining).  LHV is the correct measure for calculating net gain/loss where the principal use is transportation.  Assuming, then, P&P were correct and the comparison to gasoline is corrected per Rapier; then, the NEV of ethanol using USDA's numbers is still negative and all we accomplish is to burn more fossil-fuel in the making of ethanol than produced. 

If NER can be made greater than 1.6 but less than 3.2, then, eventually, we displace fossil-fuels entirely in the making of ethanol.  Only if NER is greater than 3.22, however, do we fully and rapidly displace fossil fuels by a proportional quantity of ethanol.  Regardless of NEV, it will be years before the energy distribution landscape (infrastructure) is sufficiently altered that production can be made independent of fossil-fuel as the primary source of energy.  Unless ethanol can achieve more than half of all liquid fuel availability, it is unlikely this will ever be the case as much of the energy used remains in producing feedstock (corn, fertilizer, irrigation, soil replenishment, etc.); all of which is widely dispersed beyond the economical reach of ethanol plants.  Therefore, these processes must continue to rely on fossil-fuel as their primary source.  Ethanol's better function, then, may remain that of supplanting fossil-fuel in stationary applications (e.g., power plants, generators) and as fuel additive (E10) than as principal transportation fuel.

How Clean is the Clean Alternative?

Concerns automobiles are a major contributor of global warming led car makers and policy gurus to promote ethanol as the preferred replacement because it is easily adapted to existing car technology and is, purportedly, clean burning.  But how clean is it and how safe?  P&P agree that, although ethanol burning is less polluting than gasoline, unburned ethanol is still toxic and emits significant pollutant aldehydes (carcinogens) and smog-forming VOCs (burned in gasoline mix).  With or without aldehydes, ethanol is toxic just as gasoline is toxic, and must be denatured (making it even more toxic) to prevent people from drinking it.  This substantially undermines the argument made for ethanol that it should be substituted anyway (with or without a favorable NEV) on a pollution basis.  Stanford University's Mark Jacobsen ran simulations suggesting deaths from E85 and gasoline are roughly the same.

Another part of the bio-fuel argument has been ethanol and bio-diesels emit far less CO2, which proponents regard as a pollutant on the basis of GHG potential.  Certainly, this is something your government believes also, and is the picture both Obama and McCain are now peddling.  However, an MIT study found that, pound for pound, combined crop production, bio-fuel conversion and combustion may result in slightly more atmospheric CO2 from ethanol.  Much depends on how much land conversion we see.  A counter argument runs that technology (farm and conversion) has been improving and will continue to improve such that land conversion is unnecessary.  The USDA report contends reduced fertilizer consumption and ethanol plant improvements will double effective capacity without any need for land conversion.  Nonetheless, the recent sidetracking of corn to ethanol (increased food prices and falling exports) suggest otherwise.  Obviously, these USDA scientists were depending too much on government and producers to control their passion for the "freedom-fuel."   In the real world, efficiencies are only realized later, once the dust has settled.   Even the Sierra Club is complaining of ethanol plants operating above coal-fired boiler stack-limits, illustrating the difference between theory and reality.

Following the Money

The above analysis by P&P does not include the over $10-billion corn growers receive annually in taxpayer subsidies, of whom the principal beneficiaries are mega-agriculture corporations like Archer-Daniels Midlands (ADM), Cargill, and A.E. Stanley. Ethanol subsidies and tax-breaks initially sold on the basis this is a startup industry that will become self-sustaining once the infrastructure has been created.  Whether that is true depends on whether the net energy yield exceeds 1.  If the NEV is less than 1 and incapable of exceeding this despite technology improvements, then ethanol is a bust no amount of subsidization and debit/credit games will mask.  Global Insight in conjunction with the American Petroleum Institute prepared its own analysis of the probable costs and impacts of renewable (bio) fuels on our agriculture, markets and economy based on soon to be government-mandated targets of 16-billion and 20-billion gallons of ethanol per year, respectively, by 2016.  They conclude ethanol agribusinesses like ADM will see an increase of $11.2 to $20.6-billion (45% to 82%) over 2007 revenues while highly corn dependent agribusinesses (livestock) must absorb margin losses on the order of 3% to 90%, with pork taking the biggest hit (~ 90% of swine operating margins).  20-billion gallons per year represents a 300% increase over current ethanol production (7-billion gallons per year).  For this to happen, either corn/acre yields must treble or 40% of additional arable land must convert to corn production.

USDA admits ethanol producers get $0.51/gal while selling to gasoline blenders at an average $0.45/gal, making economic viability of ethanol moot.  Pimentel further argues, producers get an additional economic advantage of $0.28/gal in the form of corn subsidies; which, when added, give ethanol an effective subsidization advantage of $0.79/gal over gasoline.  Little wonder the ethanol lobby doesn't want anyone disputing the cash cow.  Ethanol typically sells 40 to 60 cents cheaper per gallon than gasoline.  However, when subsidies are added in, ethanol is uncompetitive.  This disadvantage is compounded when you remember it takes 1.4 gallons of ethanol to equal a gallon of gasoline.

Conclusions & Observations

The debate over ethanol is far from over and has been clouded, in some cases deliberately, to favor a pro-ethanol policy.  Government and industry report positive net energy balances for ethanol (where recently NEV was strongly negative) and claim that ethanol is superior to gasoline.  This is an about face not fully explained by prima facie evidence.  A close examination of the debate reveals positive claims are weakly supported in many instances.  At the same time, it is undisputed there have been process improvements and innovations resulting in less waste; particularly in the areas of fossil-fuel consumption and high yield corn strains.  The biggest gain claimed is in the area of bio-engineered corn requiring less fuel, fertilizer and water to produce and yielding 2-4 times the yield per hectare.  Even so, these claims are poorly documented and susceptible to skepticism.

If Pimentel-Patzek is accepted as providing us a low NEV (worst case) and Shapouri the high NEV (best documented positive case), then the true net energy balance for ethanol (averaging by consumption methods) would lie somewhere between these two; with a net energy ratio nearer to 1.0.  As we have shown however, arguing for ethanol as a transportation fuel requires low heat value be used, in which case we end up consuming more energy the is produced.

Possibly the most intriguing rebuttal to ethanol comes from JD of the "Peak Oil Debunked" website.  JD argues the ethanol v. gasoline net-energy-balance question is moot because people will continue to extract and refine oil long after oil has declined and we're scraping the barrel.  This same argument is applicable to ethanol, making the NEV controversy equally moot.  People will do what they have to get energy in whatever form available.  JD argues that to maintain an advantaged lifestyle, the strong will exploit the weak as happened in past.  He gives examples how slavery might reappear such that energy production would continue in human form.  I disagree in part with his scenario in the short-term (and think he would agree), because oil is not the end all of energy.  So long as there is coal, nuclear, wind, hydro, sun and, yes, ethanol, we will get by and even continue our energy consuming ways.  Where this argument breaks down (or, rather, where it is too limited) is in the area of competing fuel sources.  Given a choice between oil/gasoline with a positive NEV and ethanol with a negative or lower NEV (or some other energy source), the fuel of choice will always be the one costing the least in energy, effort and money.

The main problem I have with ethanol is it is pushed by government rather than proved by the market.  If ethanol is economically and strategically viable, then there is no further reason to prop it up with subsidies and mandates.  If it is a superior additive for pollution purposes, then why not just set the pollution standard and leave it to blenders to achieve the optimal result.  If ethanol is a superior fuel to oil/gasoline, then, likewise, let the market decide.   Energy independence is a chimera built on a foundation of renewable forms of energy.  Setting for ourselves a goal like energy-independence essentially narrows options and limits growth; which can only make us more vulnerable outside of meeting energy needs.   Free-markets unhindered by lofty, if misguided, objectives like this one are the surest means of maintaining a competitive edge.  Real independence comes from remaining competitive.

Additional Reading

Skeptics

http://www.api.org/aboutoilgas/otherfuels/upload/Ethanol_Fact_Sheet_07_24_07.pdf

- Global Insight: Ethanol Economics 101

http://www.api.org/aboutoilgas/otherfuels/upload/ffvs_e85_backgrounder07_24_07_final.pdf – backgrounder on flex-fuel vehicles (FFV) and E85

http://www.api.org/aboutoilgas/otherfuels/upload/LowLev_EtOH_Gas_blends_07_05_07_final.pdf – backgrounder on low level ethanol-gasoline blends

http://www.sciencemag.org/cgi/content/abstract/1151861 – add'l support of P&P net greenhouse gas increase charge (land-conversion destroys carbon-sink).   Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change  "Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%. This result raises concerns about large biofuel mandates and highlights the value of using waste products."

http://www.pirinc.org/pdf/ETHANOLUPDATEOGJ.pdf – limits to future ethanol growth

http://www.pirinc.org/pdf/70010-257e.pdf – US Fuel Demand for Next Decade

http://www.pirinc.org/pdf/HomeGrownFuelUSEnergySecurity.pdf

http://petroleum.berkeley.edu/patzek/ce24/fall2003/unitcoversions.htm

http://petroleum.berkeley.edu/patzek/ce24/Spring2003/Materials/USFertilizerUse.pdf

http://petroleum.berkeley.edu/patzek/ce24/Spring2003/Materials/USCornYield.pdf

http://petroleum.berkeley.edu/patzek/ce24/Spring2003/Materials/EnergyforCorn1.pdf

http://petroleum.berkeley.edu/patzek/ce24/Spring2003/Materials/%20EnergyforCorn2.pdf

Ethanol proponents & government policy

http://www.e85fuel.com/news/2005/072005_pimentel.php – ethanol lobby counter-charge

http://www.usda.gov/oce/reports/energy/aer-814.pdf – most recent Wang (USDA) rebuttal; Is Wang a shill for ethanol lobby?

http://www.ncga.com/ethanol/pdfs/MichaelWang1.pdf

http://www.ethanol.org/pdf/contentmgmt/Issue_Brief_Ethanols_Energy_Balance.pdf – 2004 pro-ethanol rebuttal

http://www.ncga.com/ethanol/pdfs/2007/HowMuchEthanolCanComeFromCorn0207.pdf

http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html

http://www.eia.doe.gov/oiaf/aeo/excel/aeotab_11.xls – liquid fuels supply/disposition projection 2005-2030

http://www.khoslaventures.com/presentations/KhoslaEthanolControversyJuly2006v1_2.doc – a proponent

http://www.agecon.ksu.edu/renewableenergy/pdfs/Econ%20Issues%20with%20Ethanol%20_2_.pdf

Neutral, Background and Related

http://www.cges.co.uk/pub/LDrollasVienna0508.pdf – an oil demand/supply outlook

http://www.fao.org/DOCREP/005/Y4137E/y4137e02b.htm – agricultural component of atmospheric CO2

http://www.tehrantimes.com/index_View.asp?code=163017 – Tehran Times article suggesting land use conversion to corn/ethanol production will significantly add to atmospheric CO2, no numbers though

http://www.fao.org/newsroom/en/news/2008/1000928/index.html – FAO admits some of P&P criticisms are valid after all (net CO2 increase, food diversion, also see

http://www.fao.org/docrep/011/i0100e/i0100e00.htm