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Ethanol, Imports, and the MTBE Effect

I am traveling later this week, and will be on the road for nine days (Colorado, New York, Massachusetts). I was trying to wrap up the loose ends from my previous post with a much more comprehensive look at the ethanol/import issue before I travel. However, there are a couple of questions I had for the EIA before I finish up. As soon as I hear back from them, I will post a number of graphs and I will put my spreadsheet up so everyone can pick through it. But if I don’t hear back within a couple of days, it may be a while before I can put up the final installment.

But so far, it still looks like my initial observation was correct: Ethanol has not reduced our oil imports. Our oil imports have fallen over the past couple of years, but here is why:

Net Crude Imports Versus Total Demand. Source: EIA

I will clean that graph up in the final posting. It should be obvious, but the import scale is on the left. Bear in mind that the ethanol production numbers do show up in the demand numbers. Thus, whether petroleum demand was impacted by ethanol displacement is irrelevant in that demand number, since whatever is no longer counted as petroleum is counted as ethanol.

If you notice, “Imports” track “Demand” very closely, except demand fell faster in 2008 than did imports. If ethanol was actually impacting imports, what I would expect to see is the import line negatively trending away from the demand line. For instance, since ethanol began to really ramp up in 2002, we are producing an incremental 7 billion gallons per year with an energy content of over 250,000 bbl/day of finished petroleum products. The change in demand through 2002 was down slightly. Yet imports actually rose slightly. If ethanol was impacting imports this is where I would expect to see it; with imports falling faster than demand fell (or rising more slowly than demand rises as ethanol makes a contribution).

The MTBE Effect

One reader asked a great question – just the kind of question I like to get following these essays. The blending of the oxygenate methyl tertiary butyl ether (MTBE) was phased out in 2006. In order to meet the oxygenate requirements for specific areas of the country, ethanol replaced MTBE in the gasoline blending pool. So is it possible that the reason petroleum imports didn’t fall as ethanol ramped up was that ethanol was being used to replace MTBE? If MTBE was being made with domestic products that are not captured in the liquid demand summary, then it would be theoretically possible for ethanol to replace MTBE with no impact on imports. That sent me on a mission into the EIA archives digging through historical MTBE data.

The MTBE picture is complicated, and thus I expect there to be many opinions on how to handle it. Until 2008, the EIA published a monthly supply/demand picture on MTBE. The report is called Monthly Oxygenate Report, and the historical data are still all there. Figure 29 of this USGS report confirms that MTBE production had plateaued in the years 1999-2002 at just over 3 billion gallons per year. During 2002, production dropped sharply as it started to be phased out. If you look at this year end 2003 report, they show historical production separated into merchant plants and captive plants. (See Table D-4). The EIA defines a merchant plant as one that isomerizes normal butane to isobutane, dehydrogenates isobutane to isobutylene, and then reacts the isobutylene with methanol to produce MTBE. The definition of a captive plant is one that takes isobutylene, produced as a byproduct of refinery operations, and reacts it with methanol to produce MTBE.

The previous definitions are important for understanding how the MTBE phase-out should have impacted the import picture. Because butane is captured both in the import numbers and in the petroleum demand numbers, any ethanol that displaced MTBE should have backed out butane imports – thus lowering total imports. But, MTBE is partially produced from methanol, which is generally produced from domestic natural gas. Natural gas is not captured in the petroleum imports number, nor is it captured in the demand number. Thus, ethanol that backed out MTBE would not have impacted the natural gas piece that went into MTBE. So what we have then is that some of the ethanol ramp-up would have been diverted into MTBE replacement without being expected to have impacted demand.

How much? The portion that came from the natural gas. The MTBE reaction as stated above requires isobutylene and methanol. One molecule of MTBE has one molecule of embedded methane (via methanol). Let’s make the best case assumption that all MTBE production was replaced by ethanol. In 2002, ethanol production was really ramping up and MTBE was falling off the plateau. So let’s take the last year of strong production, 2001, and assume that must be replaced by ethanol. In 2001, MTBE production averaged 212,000 bbl/day for the year (per the previous historical report). The EIA did a comprehensive study of the MTBE replacement issue in 2006, and they concluded that from the oxygenate perspective, it takes 9 barrels of ethanol to replace 10 barrels of MTBE.

So to replace 212,000 bbl/day of MTBE was going to require 191,000 bbl/day of ethanol, which is 2.9 billion gallons per year. 191,000 bbl/day of ethanol production has the energy content of about 115,000 bbl/day of oil. In the absence of the MTBE issue, this is how much petroleum product imports I would expect to be backed out as ethanol displaced MTBE. But we need to prorate it by the isobutylene content, which is 64% of the mass of MTBEs. Thus, I would still expect the ethanol that backs out MTBE to displace imports equal to 64% of the 115,000 barrels, which would be 74,000 bbls.

There are two other factors that complicate matters even more. Since ethanol has a lower energy content, when ethanol displaces MTBE other components need to be added to compensate for the loss of energy. That may result in addition imports to keep the BTU content of the gasoline pool constant. Further, because the vapor pressure of ethanol is higher, certain components like butane and pentane must be backed out of the gasoline and replaced with other components that may need to imported. However, the latter shouldn’t have much impact on imports, because butane and pentane are already captured in both the import number and in the product supplied number.

Bottom line? We should still expect to see imports backing out even as MTBE is replaced by ethanol. Further, the MTBE phase-out was completed in the first half of 2006, so there is no longer any complication from that. And 2007 and 2008 also show no compelling case that ethanol is backing out imports.

Conclusion

It still appears to me that ethanol has had no impact on oil imports. However, it is not yet clear to me why this would be the case, so I am digging to better understand. It may be that we are just trying to see a change that amounts to noise in the overall demand picture. In that case, the ethanol contribution is really put into perspective and readers may understand why I am focused on other solutions; solutions that I think can ultimately make a bigger impact.

It may be that something is still missing from the picture, which is one of the reasons I have contacted the EIA for some additional clarifications. I think the conclusion in any case is that ethanol backs out approximately zero imports, plus or minus some very small number.

So those like the RFA who make claims like thisFACT: The production and use of 9 billion gallons of ethanol in 2008 displaced the need for 321.4 million barrels of oil – are simply promoting misinformation.

September 30, 2009 Posted by | EIA, Energy Information Administration, ethanol, mtbe, oil imports, Renewable Fuels Association | 75 Comments

Food Riots

As I have been arguing for years, this is not going to have a happy ending. Some day we will look back on this ethanol mandate fiasco as one of the greatest mistakes ever in American energy policy:

Riots, instability spread as food prices skyrocket

(CNN) — Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods have brought the issue to a boiling point and catapulted it to the forefront of the world’s attention, the head of an agency focused on global development said Monday.

“This is the world’s big story,” said Jeffrey Sachs, director of Columbia University’s Earth Institute.

“The finance ministers were in shock, almost in panic this weekend,” he said on CNN’s “American Morning,” in a reference to top economic officials who gathered in Washington. “There are riots all over the world in the poor countries … and, of course, our own poor are feeling it in the United States.”

What could be behind this? Of course higher energy prices are partially responsible. But I think there’s more to it:

In the United States and other Western nations, more and more poor families are feeling the pinch. In recent days, presidential candidates have paid increasing attention to the cost of food, often citing it on the stump.

The issue is also fueling a rising debate over how much the rising prices can be blamed on ethanol production. The basic argument is that because ethanol comes from corn, the push to replace some traditional fuels with ethanol has created a new demand for corn that has thrown off world food prices.

Jean Ziegler, U.N. special rapporteur on the right to food, has called using food crops to create ethanol “a crime against humanity.”

“We’ve been putting our food into the gas tank — this corn-to-ethanol subsidy which our government is doing really makes little sense,” said Columbia University’s Sachs.

Former President Clinton, at a campaign stop for his wife in Pennsylvania over the weekend, said, “Corn is the single most inefficient way to produce ethanol because it uses a lot of energy and because it drives up the price of food.”

Not everyone is buying that, though:

Some environmental groups reject the focus on ethanol in examining food prices.

“The contrived food vs. fuel debate has reared its ugly head once again,” the Renewable Fuels Association says on its Web site, adding that “numerous statistical analyses have demonstrated that the price of oil — not corn prices or ethanol production — has the greatest impact on consumer food prices because it is integral to virtually every phase of food production, from processing to packaging to transportation.”

Couple of things. First, the RFA is not an environmental group. It is the ethanol lobby. Might as well say the National Mining Association is an environmental group. Second, how does the rate of food inflation compare to other items that depend on oil for every phase of manufacture and distribution? How about plastics, for instance? The RFA and other ethanol apologists should stop trying to deflect blame and own up to the issue.

Again, I don’t deny that fuel prices are fueling inflation. But that is due to tightening supplies. This food inflation problem is partially self-inflicted by our misguided energy policies.

April 14, 2008 Posted by | ethanol, food prices, inflation, Renewable Fuels Association | 38 Comments

Sugar Producers Want a Piece

The whiff of ethanol dollars floating around Capitol Hill hasn’t escaped the notice of sugar producers in the U.S. The New York Times reports:

Seeing Sugar’s Future in Fuel

LOREAUVILLE, La. — Todd Landry, a farmer who conjures big stands of sugar cane from the muddy fields of southern Louisiana, has been struggling lately against droughts and freezes and hurricanes. Come January he will confront another peril: expanded sugar imports from Mexico.

Mr. Landry and other sugar producers think they have spotted a life raft, and its name is ethanol. Taking a cue from Midwestern farmers who have improved their lot by selling corn to ethanol distilleries, sugar cane and sugar beet farmers want an ethanol deal of their own, paid for by American taxpayers.

I don’t have nearly the problem subsidizing corn growers that I do subsidizing sugar producers. I don’t want to see farmers of a staple crop like corn put out of business by cheap imports. But I don’t think it would hurt us a bit to do with less sugar. We would probably save money on health care costs in the long run.

But the farm bill that is currently being debated contains a juicy piece of pork designed to keep the hands of sugar producers in the taxpayers’ pockets:

A little-noticed provision in the new farm bill working its way through Congress would oblige the Agriculture Department to buy surplus domestic sugar caused by the expected influx of Mexican sugar next year. Then the government would sell it, most likely at a steep discount, to ethanol producers to add to their fermentation tanks. The Bush administration is fighting the measure.

The Congressional Budget Office calculates the cost at $660 million over five years, relatively cheap as farm programs go. But that is an estimate based on assumptions about how much sugar will come across the border. In truth, no one is sure.

“The U.S. Department of Agriculture would be taking on a limitless commitment,” said Robert L. Thompson, a University of Illinois professor of agricultural policy, “to buy any quantity of sugar offered at a guaranteed price, and that would get very expensive, very quickly.”

Why would such a program even be considered? Why else?

The system has been subjected to withering criticism for decades, but the sugar lobby has clout on Capitol Hill. Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group.

The USDA isn’t keen on the idea:

Mark E. Keenum, the Bush administration’s under secretary of agriculture for farm and foreign agricultural services, said administering the ethanol program would be “very cumbersome.” Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,” he said.

Nor are ethanol producers:

Ethanol producers, who could be forced to invest in new equipment to process sugar, say they do not have much use for the idea. “In today’s grain-based biorefineries, the amount of sugar you could introduce into the process would be fairly small,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

Hmm. They would be forced to invest in new equipment that primarily benefits a 3rd party. One wonders then why the RFA thinks it is a good idea to force gas station owners to invest in new E85 pumps, when the amount of E85 that can be supplied is very small. I guess it just depends on whether you are doing the giving or the getting.

October 20, 2007 Posted by | E85, ethanol, Renewable Fuels Association, sugar subsidies | Comments Off on Sugar Producers Want a Piece

Sugar Producers Want a Piece

The whiff of ethanol dollars floating around Capitol Hill hasn’t escaped the notice of sugar producers in the U.S. The New York Times reports:

Seeing Sugar’s Future in Fuel

LOREAUVILLE, La. — Todd Landry, a farmer who conjures big stands of sugar cane from the muddy fields of southern Louisiana, has been struggling lately against droughts and freezes and hurricanes. Come January he will confront another peril: expanded sugar imports from Mexico.

Mr. Landry and other sugar producers think they have spotted a life raft, and its name is ethanol. Taking a cue from Midwestern farmers who have improved their lot by selling corn to ethanol distilleries, sugar cane and sugar beet farmers want an ethanol deal of their own, paid for by American taxpayers.

I don’t have nearly the problem subsidizing corn growers that I do subsidizing sugar producers. I don’t want to see farmers of a staple crop like corn put out of business by cheap imports. But I don’t think it would hurt us a bit to do with less sugar. We would probably save money on health care costs in the long run.

But the farm bill that is currently being debated contains a juicy piece of pork designed to keep the hands of sugar producers in the taxpayers’ pockets:

A little-noticed provision in the new farm bill working its way through Congress would oblige the Agriculture Department to buy surplus domestic sugar caused by the expected influx of Mexican sugar next year. Then the government would sell it, most likely at a steep discount, to ethanol producers to add to their fermentation tanks. The Bush administration is fighting the measure.

The Congressional Budget Office calculates the cost at $660 million over five years, relatively cheap as farm programs go. But that is an estimate based on assumptions about how much sugar will come across the border. In truth, no one is sure.

“The U.S. Department of Agriculture would be taking on a limitless commitment,” said Robert L. Thompson, a University of Illinois professor of agricultural policy, “to buy any quantity of sugar offered at a guaranteed price, and that would get very expensive, very quickly.”

Why would such a program even be considered? Why else?

The system has been subjected to withering criticism for decades, but the sugar lobby has clout on Capitol Hill. Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group.

The USDA isn’t keen on the idea:

Mark E. Keenum, the Bush administration’s under secretary of agriculture for farm and foreign agricultural services, said administering the ethanol program would be “very cumbersome.” Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,” he said.

Nor are ethanol producers:

Ethanol producers, who could be forced to invest in new equipment to process sugar, say they do not have much use for the idea. “In today’s grain-based biorefineries, the amount of sugar you could introduce into the process would be fairly small,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

Hmm. They would be forced to invest in new equipment that primarily benefits a 3rd party. One wonders then why the RFA thinks it is a good idea to force gas station owners to invest in new E85 pumps, when the amount of E85 that can be supplied is very small. I guess it just depends on whether you are doing the giving or the getting.

October 20, 2007 Posted by | E85, ethanol, Renewable Fuels Association, sugar subsidies | 10 Comments

Bob Dinneen Responds to Rolling Stone

I know it’s been a bit heavy on ethanol lately, but I continue to get quite a bit of activity over the recent Rolling Stone article. That’s the whole reason for writing a FAQ. I have in the queue a half-finished essay on solar thermal, and would really like to delve into that topic a bit more. I don’t want to become “The Ethanol Blog”, but it seems like that recently.

Bob Dinneen, President of the Renewable Fuels Association (the same association that claims displacement of 170 million barrels of oil with the energy equivalent of 64 million barrels of ethanol) wrote to Rolling Stone and addressed Jeff Goodell’s recent story:

Letter To The Editor: Response to “The Ethanol Scam”

In the letter, Dinneen took a shot at me, writing “As is to be expected, Mr. Goodell relied on the figures of an energy blogger for his facts.” Goodell defended me:

For a thorough clarification, check out oil industry engineer Robert Rapier’s analysis. I know that Dinneen finds bloggers unsavory, but Rapier is among the most fair-minded and insightful critics of the energy industry I’ve come across.

And he pointed Dinneen here. So, Bob Dinneen, this one’s for you. Let’s deconstruct his letter. Jumping past the all too predictable ad hominems:

Wow, I am having to jump pretty far. Farther than I thought, as the letter is laced with ad hominems. Four paragraphs into the letter, Dinneen is waving the flag and talking about “Mr. Goodell’s Hugo Chavez.” Was this the best the RFA could come up with? Actually, I want to jump down and address the most egregious error, and the claim that I was most certain would be made by ethanol proponents:

Yet another common misconception offered by ethanol novices is that ethanol is at best energy neutral, meaning it takes as much energy to produce as it yields. As is to be expected, Mr. Goodell relied on the figures of an energy blogger for his facts. Inconveniently for his arguments, the federal government has different figures. According to the Argonne National Laboratories, ethanol yields nearly 70% more energy that it took to produce. Conversely, refined gasoline contains 20% LESS energy that it took to produce.

Can you count the errors and misleading statements? First, “ethanol yields nearly 70% more energy that it took to produce”. Then “gasoline contains 20% LESS energy that it took to produce.” Are you comparing like to like, Mr. Dinneen? Of course you aren’t. By your gasoline metric, ethanol also contains less energy than it took to produce. Why? Because you are counting the crude oil feed as an “input” to the gasoline process, but you are not counting the crude ethanol feed as an input to the ethanol process. You are not comparing like to like; you are comparing an efficiency to an energy return. So, here’s a question. If I give you some quantity of energy to invest in energy production, will you end up with more energy if you invest that into gasoline production, or into ethanol production? The answer is gasoline production, by a wide margin. And I have demonstrated that numerous times, using the pro-ethanol USDA’s own numbers. I repeat: I am using pro-ethanol sources for my analyses. So accuse me of bias if you wish, but that doesn’t change the numbers.

Which brings us to the claim of a yield of nearly 70% more energy than it took to produce. I wonder if Dinneen knows (or cares?) how the USDA paper arrived at this number. I am going to show you how they did, and cite the reports so you can check for yourself. I analyzed the reports in detail here, using their own numbers to show what they did. You can read the analysis for yourself, but here’s the executive summary.

In 2002, the USDA reported on the energy balance of corn ethanol, stating that the energy balance was 1.34 units of energy out for every unit in. As I showed, they did a little accounting trick to get that, as the real number – when full BTU credit was taken for the animal feed by-products – was 1.27. Minor quibble, but it made me alert for more accounting tricks. And we got them in a report released 2 years later.

In their 2004 report, the USDA acknowledged that they had grossly underestimated a number of energy inputs in the 2002 report. So, they corrected those numbers. But some energy inputs had gone down, and at the end of the day, the energy inputs/outputs in the 2004 report were about the same as in the 2002 report. Yet in the 2004 report, they reported that the energy ratio for ethanol was 1.67, which is where Mr. Dinneen got his number.

Now, what was it really? Look at Table 3 in the 2004 USDA report. I will just produce it for you so you can see for yourself:

Table 1. 2004 USDA Report Showing the Energy Return for Corn Ethanol at 1.06.

I know that’s kind of hard to read, but here’s what it says. (You can always check out the original if you think I am pulling any funny business). The energy produced in a wet mill process is only 2% greater than the energy it took to produce the ethanol. And I would point out that things like topsoil and aquifer depletion, energy to build the ethanol plant, etc. were not part of the analysis. (They said they didn’t have good information, so they just omitted any attempt to account for it). For a dry mill process, they reported that the energy return is 1.10, 10% energy produced, and the weighted average of the two is 1.06. Those are the raw, unmanipulated numbers. In other words, input 1 BTU of fossil fuels, output 1.06 BTUs of ethanol. And given the subsidy for ethanol, it should be clear that this is actually a subsidy for fossil fuels, which is responsible for nearly all of ethanol’s BTUs.

In Table 4, to the right, you can see the manipulated numbers, and the energy return of 1.67. So, how did they do that?

What they have done, is they have lowered the energy inputs into the ethanol process by a great deal. And the way they did that was to change their methodology. Instead of taking a credit for by-products, what they did was increase the energy alloted to the by-product. By doing this, they subtracted the energy inputs allocated to ethanol, and therefore manipulated the answer.

There is no reason that they couldn’t have boosted the energy return to any number they wanted, just by allocating more and more of the energy inputs to the by-products. I could boost the energy return to infinity by allocating all of the energy inputs to the by-product. It makes the by-product energy return look horrible, but it artificially boosts the ethanol energy return. And they aren’t reporting the by-product energy return, so you have to pay close attention to see exactly what they did.

Dried distillers grain (DDGS) has become a good dumping ground for the ethanol industry’s claims. When you point out that the energy balance is poor, they take a BTU credit for DDGS, just as if you could put in in your car and drive. But they have now figured out that they place more of the “blame” of energy of production into the DDGS and exaggerate the energy return for ethanol. But you can’t have it both ways. If the energy of production gets dumped into DDGS, it suddenly becomes a by-product with an incredibly high energy cost to produce.

Bottom line: Playing with the numbers doesn’t change the fact that ethanol production is marginally above energy neutral. Despite Mr. Dinneen’s claim that this is a “misconception offered by ethanol novices“, it is in fact true, based on the USDA’s own numbers. Mr. Dinneen and those who repeat the 1.67 number are either misinformed, or purposely misleading the public.

Mr. Dinneen concludes with:

It is entirely appropriate to have a debate about our energy policy in this country.

I agree. Here’s my proposal. Three rounds, 2,000 word limit per round, with the debate hosted here, at your site, and at The Oil Drum. I suggest the debate resolution: “Corn Ethanol is Responsible Energy Policy.” I will take the negative. If you have an alternate proposal, I would be glad to entertain it.

References

1. Shapouri, H., J.A. Duffield, and M. Wang. 2002. The Energy Balance of Corn Ethanol: An Update. AER-814. Washington, D.C.: USDA Office of the Chief Economist.

2. Shapouri, H., J.A. Duffield, and M. Wang. 2004. The 2001 Net Energy Balance of Corn Ethanol. Washington, D.C.: USDA Office of the Chief Economist.

August 9, 2007 Posted by | Bob Dinneen, energy balance, ethanol, ethanol subsidies, Jeff Goodell, Renewable Fuels Association, Rolling Stone | Comments Off on Bob Dinneen Responds to Rolling Stone

Bob Dinneen Responds to Rolling Stone

I know it’s been a bit heavy on ethanol lately, but I continue to get quite a bit of activity over the recent Rolling Stone article. That’s the whole reason for writing a FAQ. I have in the queue a half-finished essay on solar thermal, and would really like to delve into that topic a bit more. I don’t want to become “The Ethanol Blog”, but it seems like that recently.

Bob Dinneen, President of the Renewable Fuels Association (the same association that claims displacement of 170 million barrels of oil with the energy equivalent of 64 million barrels of ethanol) wrote to Rolling Stone and addressed Jeff Goodell’s recent story:

Letter To The Editor: Response to “The Ethanol Scam”

In the letter, Dinneen took a shot at me, writing “As is to be expected, Mr. Goodell relied on the figures of an energy blogger for his facts.” Goodell defended me:

For a thorough clarification, check out oil industry engineer Robert Rapier’s analysis. I know that Dinneen finds bloggers unsavory, but Rapier is among the most fair-minded and insightful critics of the energy industry I’ve come across.

And he pointed Dinneen here. So, Bob Dinneen, this one’s for you. Let’s deconstruct his letter. Jumping past the all too predictable ad hominems:

Wow, I am having to jump pretty far. Farther than I thought, as the letter is laced with ad hominems. Four paragraphs into the letter, Dinneen is waving the flag and talking about “Mr. Goodell’s Hugo Chavez.” Was this the best the RFA could come up with? Actually, I want to jump down and address the most egregious error, and the claim that I was most certain would be made by ethanol proponents:

Yet another common misconception offered by ethanol novices is that ethanol is at best energy neutral, meaning it takes as much energy to produce as it yields. As is to be expected, Mr. Goodell relied on the figures of an energy blogger for his facts. Inconveniently for his arguments, the federal government has different figures. According to the Argonne National Laboratories, ethanol yields nearly 70% more energy that it took to produce. Conversely, refined gasoline contains 20% LESS energy that it took to produce.

Can you count the errors and misleading statements? First, “ethanol yields nearly 70% more energy that it took to produce”. Then “gasoline contains 20% LESS energy that it took to produce.” Are you comparing like to like, Mr. Dinneen? Of course you aren’t. By your gasoline metric, ethanol also contains less energy than it took to produce. Why? Because you are counting the crude oil feed as an “input” to the gasoline process, but you are not counting the crude ethanol feed as an input to the ethanol process. You are not comparing like to like; you are comparing an efficiency to an energy return. So, here’s a question. If I give you some quantity of energy to invest in energy production, will you end up with more energy if you invest that into gasoline production, or into ethanol production? The answer is gasoline production, by a wide margin. And I have demonstrated that numerous times, using the pro-ethanol USDA’s own numbers. I repeat: I am using pro-ethanol sources for my analyses. So accuse me of bias if you wish, but that doesn’t change the numbers.

Which brings us to the claim of a yield of nearly 70% more energy than it took to produce. I wonder if Dinneen knows (or cares?) how the USDA paper arrived at this number. I am going to show you how they did, and cite the reports so you can check for yourself. I analyzed the reports in detail here, using their own numbers to show what they did. You can read the analysis for yourself, but here’s the executive summary.

In 2002, the USDA reported on the energy balance of corn ethanol, stating that the energy balance was 1.34 units of energy out for every unit in. As I showed, they did a little accounting trick to get that, as the real number – when full BTU credit was taken for the animal feed by-products – was 1.27. Minor quibble, but it made me alert for more accounting tricks. And we got them in a report released 2 years later.

In their 2004 report, the USDA acknowledged that they had grossly underestimated a number of energy inputs in the 2002 report. So, they corrected those numbers. But some energy inputs had gone down, and at the end of the day, the energy inputs/outputs in the 2004 report were about the same as in the 2002 report. Yet in the 2004 report, they reported that the energy ratio for ethanol was 1.67, which is where Mr. Dinneen got his number.

Now, what was it really? Look at Table 3 in the 2004 USDA report. I will just produce it for you so you can see for yourself:

Table 1. 2004 USDA Report Showing the Energy Return for Corn Ethanol at 1.06.

I know that’s kind of hard to read, but here’s what it says. (You can always check out the original if you think I am pulling any funny business). The energy produced in a wet mill process is only 2% greater than the energy it took to produce the ethanol. And I would point out that things like topsoil and aquifer depletion, energy to build the ethanol plant, etc. were not part of the analysis. (They said they didn’t have good information, so they just omitted any attempt to account for it). For a dry mill process, they reported that the energy return is 1.10, 10% energy produced, and the weighted average of the two is 1.06. Those are the raw, unmanipulated numbers. In other words, input 1 BTU of fossil fuels, output 1.06 BTUs of ethanol. And given the subsidy for ethanol, it should be clear that this is actually a subsidy for fossil fuels, which is responsible for nearly all of ethanol’s BTUs.

In Table 4, to the right, you can see the manipulated numbers, and the energy return of 1.67. So, how did they do that?

What they have done, is they have lowered the energy inputs into the ethanol process by a great deal. And the way they did that was to change their methodology. Instead of taking a credit for by-products, what they did was increase the energy alloted to the by-product. By doing this, they subtracted the energy inputs allocated to ethanol, and therefore manipulated the answer.

There is no reason that they couldn’t have boosted the energy return to any number they wanted, just by allocating more and more of the energy inputs to the by-products. I could boost the energy return to infinity by allocating all of the energy inputs to the by-product. It makes the by-product energy return look horrible, but it artificially boosts the ethanol energy return. And they aren’t reporting the by-product energy return, so you have to pay close attention to see exactly what they did.

Dried distillers grain (DDGS) has become a good dumping ground for the ethanol industry’s claims. When you point out that the energy balance is poor, they take a BTU credit for DDGS, just as if you could put in in your car and drive. But they have now figured out that they place more of the “blame” of energy of production into the DDGS and exaggerate the energy return for ethanol. But you can’t have it both ways. If the energy of production gets dumped into DDGS, it suddenly becomes a by-product with an incredibly high energy cost to produce.

Bottom line: Playing with the numbers doesn’t change the fact that ethanol production is marginally above energy neutral. Despite Mr. Dinneen’s claim that this is a “misconception offered by ethanol novices“, it is in fact true, based on the USDA’s own numbers. Mr. Dinneen and those who repeat the 1.67 number are either misinformed, or purposely misleading the public.

Mr. Dinneen concludes with:

It is entirely appropriate to have a debate about our energy policy in this country.

I agree. Here’s my proposal. Three rounds, 2,000 word limit per round, with the debate hosted here, at your site, and at The Oil Drum. I suggest the debate resolution: “Corn Ethanol is Responsible Energy Policy.” I will take the negative. If you have an alternate proposal, I would be glad to entertain it.

References

1. Shapouri, H., J.A. Duffield, and M. Wang. 2002. The Energy Balance of Corn Ethanol: An Update. AER-814. Washington, D.C.: USDA Office of the Chief Economist.

2. Shapouri, H., J.A. Duffield, and M. Wang. 2004. The 2001 Net Energy Balance of Corn Ethanol. Washington, D.C.: USDA Office of the Chief Economist.

August 9, 2007 Posted by | Bob Dinneen, energy balance, ethanol, ethanol subsidies, Jeff Goodell, Renewable Fuels Association, Rolling Stone | 85 Comments

Bob Dinneen Responds to Rolling Stone

I know it’s been a bit heavy on ethanol lately, but I continue to get quite a bit of activity over the recent Rolling Stone article. That’s the whole reason for writing a FAQ. I have in the queue a half-finished essay on solar thermal, and would really like to delve into that topic a bit more. I don’t want to become “The Ethanol Blog”, but it seems like that recently.

Bob Dinneen, President of the Renewable Fuels Association (the same association that claims displacement of 170 million barrels of oil with the energy equivalent of 64 million barrels of ethanol) wrote to Rolling Stone and addressed Jeff Goodell’s recent story:

Letter To The Editor: Response to “The Ethanol Scam”

In the letter, Dinneen took a shot at me, writing “As is to be expected, Mr. Goodell relied on the figures of an energy blogger for his facts.” Goodell defended me:

For a thorough clarification, check out oil industry engineer Robert Rapier’s analysis. I know that Dinneen finds bloggers unsavory, but Rapier is among the most fair-minded and insightful critics of the energy industry I’ve come across.

And he pointed Dinneen here. So, Bob Dinneen, this one’s for you. Let’s deconstruct his letter. Jumping past the all too predictable ad hominems:

Wow, I am having to jump pretty far. Farther than I thought, as the letter is laced with ad hominems. Four paragraphs into the letter, Dinneen is waving the flag and talking about “Mr. Goodell’s Hugo Chavez.” Was this the best the RFA could come up with? Actually, I want to jump down and address the most egregious error, and the claim that I was most certain would be made by ethanol proponents:

Yet another common misconception offered by ethanol novices is that ethanol is at best energy neutral, meaning it takes as much energy to produce as it yields. As is to be expected, Mr. Goodell relied on the figures of an energy blogger for his facts. Inconveniently for his arguments, the federal government has different figures. According to the Argonne National Laboratories, ethanol yields nearly 70% more energy that it took to produce. Conversely, refined gasoline contains 20% LESS energy that it took to produce.

Can you count the errors and misleading statements? First, “ethanol yields nearly 70% more energy that it took to produce”. Then “gasoline contains 20% LESS energy that it took to produce.” Are you comparing like to like, Mr. Dinneen? Of course you aren’t. By your gasoline metric, ethanol also contains less energy than it took to produce. Why? Because you are counting the crude oil feed as an “input” to the gasoline process, but you are not counting the crude ethanol feed as an input to the ethanol process. You are not comparing like to like; you are comparing an efficiency to an energy return. So, here’s a question. If I give you some quantity of energy to invest in energy production, will you end up with more energy if you invest that into gasoline production, or into ethanol production? The answer is gasoline production, by a wide margin. And I have demonstrated that numerous times, using the pro-ethanol USDA’s own numbers. I repeat: I am using pro-ethanol sources for my analyses. So accuse me of bias if you wish, but that doesn’t change the numbers.

Which brings us to the claim of a yield of nearly 70% more energy than it took to produce. I wonder if Dinneen knows (or cares?) how the USDA paper arrived at this number. I am going to show you how they did, and cite the reports so you can check for yourself. I analyzed the reports in detail here, using their own numbers to show what they did. You can read the analysis for yourself, but here’s the executive summary.

In 2002, the USDA reported on the energy balance of corn ethanol, stating that the energy balance was 1.34 units of energy out for every unit in. As I showed, they did a little accounting trick to get that, as the real number – when full BTU credit was taken for the animal feed by-products – was 1.27. Minor quibble, but it made me alert for more accounting tricks. And we got them in a report released 2 years later.

In their 2004 report, the USDA acknowledged that they had grossly underestimated a number of energy inputs in the 2002 report. So, they corrected those numbers. But some energy inputs had gone down, and at the end of the day, the energy inputs/outputs in the 2004 report were about the same as in the 2002 report. Yet in the 2004 report, they reported that the energy ratio for ethanol was 1.67, which is where Mr. Dinneen got his number.

Now, what was it really? Look at Table 3 in the 2004 USDA report. I will just produce it for you so you can see for yourself:

Table 1. 2004 USDA Report Showing the Energy Return for Corn Ethanol at 1.06.

I know that’s kind of hard to read, but here’s what it says. (You can always check out the original if you think I am pulling any funny business). The energy produced in a wet mill process is only 2% greater than the energy it took to produce the ethanol. And I would point out that things like topsoil and aquifer depletion, energy to build the ethanol plant, etc. were not part of the analysis. (They said they didn’t have good information, so they just omitted any attempt to account for it). For a dry mill process, they reported that the energy return is 1.10, 10% energy produced, and the weighted average of the two is 1.06. Those are the raw, unmanipulated numbers. In other words, input 1 BTU of fossil fuels, output 1.06 BTUs of ethanol. And given the subsidy for ethanol, it should be clear that this is actually a subsidy for fossil fuels, which is responsible for nearly all of ethanol’s BTUs.

In Table 4, to the right, you can see the manipulated numbers, and the energy return of 1.67. So, how did they do that?

What they have done, is they have lowered the energy inputs into the ethanol process by a great deal. And the way they did that was to change their methodology. Instead of taking a credit for by-products, what they did was increase the energy alloted to the by-product. By doing this, they subtracted the energy inputs allocated to ethanol, and therefore manipulated the answer.

There is no reason that they couldn’t have boosted the energy return to any number they wanted, just by allocating more and more of the energy inputs to the by-products. I could boost the energy return to infinity by allocating all of the energy inputs to the by-product. It makes the by-product energy return look horrible, but it artificially boosts the ethanol energy return. And they aren’t reporting the by-product energy return, so you have to pay close attention to see exactly what they did.

Dried distillers grain (DDGS) has become a good dumping ground for the ethanol industry’s claims. When you point out that the energy balance is poor, they take a BTU credit for DDGS, just as if you could put in in your car and drive. But they have now figured out that they place more of the “blame” of energy of production into the DDGS and exaggerate the energy return for ethanol. But you can’t have it both ways. If the energy of production gets dumped into DDGS, it suddenly becomes a by-product with an incredibly high energy cost to produce.

Bottom line: Playing with the numbers doesn’t change the fact that ethanol production is marginally above energy neutral. Despite Mr. Dinneen’s claim that this is a “misconception offered by ethanol novices“, it is in fact true, based on the USDA’s own numbers. Mr. Dinneen and those who repeat the 1.67 number are either misinformed, or purposely misleading the public.

Mr. Dinneen concludes with:

It is entirely appropriate to have a debate about our energy policy in this country.

I agree. Here’s my proposal. Three rounds, 2,000 word limit per round, with the debate hosted here, at your site, and at The Oil Drum. I suggest the debate resolution: “Corn Ethanol is Responsible Energy Policy.” I will take the negative. If you have an alternate proposal, I would be glad to entertain it.

References

1. Shapouri, H., J.A. Duffield, and M. Wang. 2002. The Energy Balance of Corn Ethanol: An Update. AER-814. Washington, D.C.: USDA Office of the Chief Economist.

2. Shapouri, H., J.A. Duffield, and M. Wang. 2004. The 2001 Net Energy Balance of Corn Ethanol. Washington, D.C.: USDA Office of the Chief Economist.

August 9, 2007 Posted by | Bob Dinneen, energy balance, ethanol, ethanol subsidies, Jeff Goodell, Renewable Fuels Association, Rolling Stone | 85 Comments