Ethanol and Biodiesel in the United States

By Bill Siuru

In his 2007 State of the Union address, President Bush again focused on ethanol as a key renewable fuel that could help displace large volumes of gasoline. This followed his address a year earlier when he made a commitment “to replace more than 75 percent of our oil imports from the Middle East by 2025.” Further, the President said that, “We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks or switch grass.” According to the leader of the free world, the goal is no less than to make this new kind of ethanol practical and competitive within six years.

Unlike fuel cells, which still require major investments and technology breakthroughs before they’re practical and affordable, widespread use of biofuels like ethanol and biodiesel basically require investments in the production, transmission, and distribution infrastructure. Indeed, many Americans already own vehicles that can run on ethanol, and may not realize it. Since the late 1990s, Ford, GM, DaimlerChrysler and other automakers have sold millions of flexible-fuel vehicles (FFVs). These vehicles are built to operate on E85, unleaded gasoline, or any combination of the two fuels in the same tank. Thirty 2007 model year vehicles are available in many states that are capable of running on E85.

E85 is a blend of 85-percent ethanol and 15-percent unleaded gasoline. E85 should not be confused with gasohol, which uses a nominal 10 percent ethanol and 90 percent gasoline. Gasohol, or E10, is considered a cleaner-burning gasoline fuel, but not an alternative fuel like E85. In E85, pure ethanol (E100) makes up most of the fuel with gasoline blended in to improve cold starting and as a safety measure. Pure ethanol, really ethyl alcohol, burns with a colorless flame and thus presents a safety hazard without the addition of this small percentage of gasoline.

Ethanol Production And Use

Ethanol is now produced by a fermentation and distillation process that converts plant starch to sugar, and then to alcohol. In the U.S., ethanol is basically grain alcohol, produced from corn. It can be made from many other crops such as sugar cane, sugar beets, wheat, barley and vegetable wastes as well. Cellulosic ethanol, as mentioned by President Bush, is made from wood chips, switchgrass, and other natural feedstocks. Eventually, cellulosic ethanol could be produced at much lower cost than corn-derived ethanol.

Production of traditional ethanol is a very mature technology. Henry Ford was an advocate of home-grown renewable fuels and the Model T could be modified to run on pure alcohol. As a mature technology, there’s little that can be done to substantially reduce the cost of corn-based ethanol production. In contrast, there is great potential payoff for investments in research for economically producing cellulosic ethanol in large quantities. Additional feedstocks are needed to meet future large-scale demand since the use of corn and other crops for fuel has to compete with other uses, like food and adult beverages.

Modifying an engine to operate on E85 is pretty simple: add a fuel sensor to detect the ratio of ethanol to gasoline, replace fuel system components that are not compatible with the more corrosive ethanol fuel, and reprogram the engine management computer to account for the varying blend of gasoline and ethanol being burned. This can range from 100 percent gasoline to 100 percent E85, and all mixtures in between. Quantifying the amount of gasoline and E85 being supplied to the engine is easily determined by an oxygen sensor, since E85 contains more oxygen than gasoline.

While these modifications are simple, they are required to burn E85. Unlike gasohol, ethanol should not be used in engines other than those designed to operate on this fuel since more corrosive ethanol could damage engine and fuel system components. That said, if a conventional vehicle is accidentally refueled once with E85, damage is not likely. However, the “Check Engine” warning light might come on because of the higher oxygen content measured by on-board sensors.

Ethanol’s Advantages

According to the Alterative Fuel Vehicle Institute, E85 reduces oxides of nitrogen, carbon monoxide, and carbon dioxide emissions. The higher hydrocarbon emissions can be handled relatively easily by exhaust emission control systems. Ethanol advocates point out that E85 CO2 emissions are offset by the CO2 used by crops grown to produce the fuel. Ethanol is now the oxygenate used in reformulated gasoline (RFG) to reduce smog-forming and toxic pollutants now that petroleum-based MTBE (methyl tertiary butyl ether) has been phased out. Once the oxygenate of choice, MTBE has been banned for RFG use since it has been detected in groundwater across the country, the result of reformulated gasoline that’s leaked from underground storage tanks. At best, low levels of MTBE can make water undrinkable due to its offensive taste and odor. Studies are underway to determine its harm to humans.

Unlike gasoline, ethanol fuel can be produced from domestic feedstocks, rather than imported oil. Thus, while the benefits of using E85 might be small on a per-vehicle basis, if used in millions of vehicles the results could be rather dramatic in reducing our dependence on imported oil and improving balance-of-trade. For example, in 2004 ethanol usage reduced the U.S. trade deficit by $5.1 billion by eliminating the need to import 143 million barrels of oil.

FFVs could be the answer to fuel shortages and large spikes in pump prices. Rather than releasing petroleum from the nation’s Strategic Petroleum Reserve, more ethanol could be produced if adequate production facilities were in place and feedstocks immediately available. That’s another reason to pursue cellulosic ethanol, by the way. Also, gasoline producers would now have serious competition, which would make price gouging less likely. Finally, many people would likely pay more for an ethanol-capable FFV as a hedge should gasoline become unavailable or much too expensive.

Driving E85

Most drivers will not notice a difference when driving on E85 or gasoline. The specifications for FFVs compared to conventional gasoline vehicles indicate no difference in torque or horsepower ratings. In reality, FFVs may see a performance improvement since ethanol has a higher octane rating (100 to 105) than gasoline. However, since ethanol produces less energy than gasoline, there could be up to a 25 percent decrease in fuel economy, depending on operating conditions.

Today, the biggest challenge in using E85 is finding places to fill up with the alternative fuel. As of this writing, there are just over 1,000 E85 stations in the entire U.S., most of them in Midwestern corn producing states. Prices for E85 can range from slightly less than gasoline to much more, depending on where you live. This underscores the importance of developing less expensive cellulosic ethanol production technology as a long-term remedy to these price differences.

Currently, E85 is often more expensive because of the added cost to blend ethanol with gasoline, as well as the additional cost involved in shipping ethanol to areas where corn is not grown. Ethanol cannot be transported readily through existing petroleum pipelines and thus must now be transported by barge, rail, or truck. For this and other reasons, petroleum refiners have shown little interest in selling this competitor to gasoline.

Because of today’s generally higher price of ethanol and its lower fuel economy, going “green” with E85 can cost most motorists more. Adding to the cost equation is that E85 now has to compete with reformulated gasoline as a market for available ethanol.

The use of ethanol is a hot political football so its true economic benefits, or penalties, are clouded by subsidies, incentives, and tax benefits. For example, the 1988 Alternative Motor Fuels Act provided incentives for automakers to produce alternative fuel vehicles, but no companion incentive for developing a fueling infrastructure. The result is that there are now about six million E85-compatible vehicles in America, with a very small percentage that have ever had E85 in their tanks.

The Energy Policy Act of 2005 should result in much more renewable ethanol and biodiesel fuels. Plus, the Renewable Fuel Standard Program (RFSP) requires the ethanol industry to raise its production to 4 billion gallons in 2006, gradually rising to 7.5 billion gallons in 2012.

Minnesota, a corn producing state, is leading the way in mandating the use of ethanol. Its goal is to have 20 percent of the liquid fuel sold in the state derived from renewable sources by the end of 2015. Of course, the ethanol lobby played a large role in getting this legislation, which will ultimately benefit the entire nation by displacing imported oil with domestically produced fuel. This could be replicated in other states given the influence of the ethanol lobby, especially in the farm states of the Midwest. For example, the Illinois Clean Energy Infrastructure Program has increased the number of E85 stations in Illinois from 14 to over 100.

The Brazilian Experience

When it comes to ethanol and flexible-fuel vehicles, Brazil is way ahead of the U.S., and indeed the rest of the world. As the fuel crises of the 1970s hit Brazil, the government reacted with Proálcool produced from sugar cane, a major product of Brazil, to reduce dependence on imported oil. In the early 1970s, up to 25 percent alcohol was blended with gasoline. Brazil responded to the second crisis with vehicles that could run on 100 percent alcohol. By 1984, over 90 percent of Brazilian cars and light trucks ran on alcohol, in part because the fuel was available everywhere in Brazil and also because subsidies and incentives made ethanol substantially cheaper than gasoline. However, when oil prices dropped in the mid-1980s and new offshore oil fields were discovered, gasoline became cheaper than the still-subsidized alcohol fuels. This was further compounded by a drought and a poor sugar harvest that disrupted the supply of alcohol. The result? Alcohol capable cars represented less than one percent of new vehicles in 1997.

Brazil learned a lesson from these ups and downs and has since turned to flexible-fuel vehicles that can run on any fuel from pure gasoline to pure alcohol. In reality, all Brazilian gasoline is blended with at least 24 to 25 percent ethanol. Almost all fueling stations in Brazil – 29,000 out of 31,000 – also offer 100 percent ethanol for older alcohol-only vehicles still on the road. Brazil currently has between 3 and 4 million ethanol fueled vehicles. Alcohol costs on average about half that of gasoline, plus motorists receive a tax credit on alcohol cars because of cleaner tailpipe emissions. The bottom line is that Brazil is almost immune to the instabilities, and price fluctuations, in gasoline supplies. Today, Brazilian motorists can fill their tanks with any blend of gasoline or ethanol they choose, depending on which is cheaper, or more convenient.

A new wrinkle has been added to the Brazilian flex-fuel story because vehicles that also run on compressed natural gas are also available. These cars run on any combination of alcohol, gasoline, and CNG. Now, these are primarily aimed at taxi fleets with their own CNG facilities, though CNG is available at some public fueling stations. Besides the substantial savings from using CNG, they may also help reduce pollution in major cities.

Automakers Ramp Up

Automakers in this country are now becoming more engaged in the process after years of just focusing on their flexible-fuel vehicles. For instance, Ford and VeraSun Energy, a renewable energy company, have launched the “Midwest Ethanol Corridor” by expanding E85 availability by about a third throughout Illinois and Missouri this year. This same effort is planning to increase the availability of ethanol in neighboring states.

Ford has also shown a developmental E85 variant of the Escape Hybrid that can run on battery power, gasoline, or a blend of E85. According to Ford, if just five percent of U.S. vehicles were powered by E85 hybrids, oil imports could be reduced by about 140 million barrels a year. According to VeraSun, the two greatest challenges facing greater E85 use are access to convenient fueling locations and a lack of consumer awareness, both of which are being addressed by its partnership with Ford.

General Motors has also tackled the awareness problem with its high-profile “Live Green, Go Yellow” national campaign. This includes equipping all of its FFVs with yellow gasoline caps and fielding a high-profile E85 Chevrolet Silverado in the NASCAR Truck Series. GM has also been offering an E85 Chevy Police Tahoe with a full police package for first-line patrol duty.

There is some controversy about the benefits of using ethanol as a transportation fuel. Critics say it actually takes more energy to produce ethanol than the petroleum-derived energy it saves when accounted on a “field-to-wheel” basis. However, according to the Department of Energy’s Argonne National Laboratory, if 100 BTUs of energy are used to plant corn, harvest the crop, transport it, and so on, 138 BTUs of energy are available in the fuel ethanol produced – a 38 percent increase in energy availability. Future improvements in crop yields and processing technologies, and especially cellulosic ethanol, could increase this percentage substantially. Incidentally, it also takes energy to produce gasoline - about 20 percent of the total energy available.

In all probability, it will be many years before there is enough cellulosic ethanol to meet the President’s target...some experts say 10 to 20 years, about the time fuel cells will be coming into their own. Others point to the growing momentum and investment being enjoyed by ethanol and expect that timeline to be considerably shorter.

In the meantime, ethanol vehicles have every potential to become an important part of the country’s transportation mix. They can contribute to the goal of reducing petroleum use alongside other approaches like hybrids and maybe even hydrogen internal combustion engines, and fuel-saving technologies applied to conventional vehicles as well.