Farm Industry News Blog

Ethanol: Seeing the Forest for the Trees

This week at the 14th annual National Ethanol Conference in San Antonio, TX, Bob Dinneen, president and CEO, Renewable Fuels Association (RFA), put the ethanol industry in a proper perspective.

“In the effort to navigate the trees of falling ethanol values, rising input costs and credit woes, we miss the ever growing forest that is the U.S. ethanol industry today. Some see a crisis. I see an industry with the perseverance and determination to succeed,” Dinneen said.

In the face of a flagging economy and unprecedented commodity price volatility, the U.S. ethanol industry produced and sold a record nine billion gallons of renewable fuel in 2008, Dinneen said. Moreover, in these difficult economic times, the U.S. ethanol industry grew by 34%, adding $65 billion to the GDP; $20 billion to household incomes and 256,000 more jobs to the U.S. economy.

While 23 ethanol plants were idled in 2008, 171 plants were in operation, including 31 new plants. Even with recently announced plant closures, the U.S. ethanol industry is operating at about 85% capacity, compared to the U.S. manufacturing sector (as a whole), operating at 68% capacity.

With 171 plants in operation and 21 more under construction, Dinneen says the ethanol industry is still an industry “in ascension.”

“I see an industry that is constantly remaking itself,” Dinneen told ethanol producers. The ethanol industry is finding new technologies and developing new feedstocks to “put it on a more sustainable path that will chart a new course for our nation’s energy future.”

An RFA survey, compiled by the Argonne National Laboratory, indicated how ethanol production plants are more efficient than just a few years ago. They consume 20% less electricity, 26% less water, and require 15% less overall energy inputs.

Low heat fermentation and corn fractionization are among the new technologies that have helped ethanol production facilities become more energy efficient.

Taxpayer ROI

The ethanol tax incentive that refiners receive for blending ethanol continues to be a cost effective mechanism for growing domestic renewable fuels, Dinneen said. Last year, the combined cost of the volumetric ethanol excise tax credit and the small ethanol producer tax credit totaled approximately $4.7 billion, but the benefit to the federal treasury from increased tax revenues attributable to ethanol production was greater than $11.9 billion, resulting in a savings to consumers of $7.2 billion. That is roughly a 2.5:1 direct return of the taxpayers’ renewable energy investment, the RFA president stressed.

“Add to that the indirect savings from reduced farm program costs, improved balance of trade and increased employment, and the taxpayers’ return on investment improves exponentially,” Dinneen said.

The benefits of ethanol go beyond cost effectiveness, Dinneen said, adding that ethanol displaced 321 million barrels of oil in the U.S. last year. The production and consumption of nine billion gallons of ethanol last year also reduced CO2 equivalent greenhouse gas emissions by about 14 million tons.

“These statistics reflect this industry is facing these economic times with resolute commitment to address the economic, environmental, energy and national security crises facing the world today,” Dinneen said.

To listen to Dinneen’s “State of the Industry Report,” visit http://www.ethanolrfa.org/ethanolreport/audio/nec09-dinneen-open.mp3

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