Biofuel Energy Trends and Opportunities

1. Biofuel Energy Trendsand Opportunities Dr. Cole R. Gustafson Dept. of Agribusiness North Dakota State University cole.gustafson@ndsu.edu

2. The Challenge of Raising Corn in New Areas

10. Reasons for Gasoline Price Increase • Reduced refining capacity

11. Minn pipeline

12. U.S. Oil Supplied by 34” Enbridge Pipeline? • 3% • 5% • 10% • 15%

13. Reasons for Gasoline Price Increase • Reduced refining capacity • Rising prices have not curbed demand • Boutique fuel blends • Exchange Rates

16. Rapid Historical Investment • Renewable Fuel Standard motivated industry expansion (Tax credits, import tariffs, blend mandate) • Favorable gasoline/corn price ratio provided high returns on investment • High investment returns enabled plants to pay high prices for corn • $3 billion of investment capital flowed into agriculture sector • External investment has rural development implications

17. Energy Independence and Security Act of 2007 • 36 billion gals. ethanol by 2022 • Of this, 21 billion from cellulosic

19. Imported Sugar/Ethanol • ApexBrasil/Unica, $10 million promotion campaign • Grupo Santos, $12 billion, 60 sugarcane plants • BP, $60 million sugar to ethanol, Gaois, Brazil • NAFTA, Jan. 2008, Mexican Sugar Tariff Removed EP Overview 3/3/08

23. Ethanol Plant Ownership • Current Plants • 47 percent of plants are farmer owned • 39 percent of production from farmer owned • Plants under Construction • 12 percent of plants are farmer owned • 11 percent of production farmer owned • (1 percent ownership loss => 1 less local job)

25. Estimated Ethanol Production Costs for New Construction Vern Eidman, 2007

26. What an Average Ethanol Plant Can Pay for Corn… Source: Keith Collins, USDA

27. Investment Climate Has Cooled • Rising price of corn and supply uncertainty • Construction costs have risen • Tax credits are not certain • New concerns about environmental impact, resource demands (water), and product quality • Investment portfolios of lenders becoming saturated • Federal loan programs do not align with scale of new plants • New biomass technology may render existing corn plant technologies less profitable

28. New Biomass Plants Abengoa Energy, Chesterfield, MO - $76m - corn, wheat, milo ALICO, LaBelle, FL - $33m - yard, wood, energycane BlueFire Ethanol, Irvine, CA - $40m - green/wood waste Poet, Sioux Falls, SD - $80m - corn fiber Iogen, Shelley, ID - $80m - wheat, barley straw Range Fuels, Soperton, CA - $76m – wood ICM, Colwich, KS - $30m – agri. waste Lignol Innovations, Berwyn, PA - $30m – wood residues Pacific Ethanol, Sacramento, CA - $24m – agri./forest Stora Enso, Wisconsin Rapids, WI - $30m – wood waste Aebiofuels, Butte, MT

30. New Ethanol Technology • Fractionation • Endosperm, 82% of kernel, 86% starch • Germ, 10% of kernel, 80% oil • Pericarp, 8% of kernel, gasify • Gasification of distillers grains • Fluid Bed Technology

31. Energy Balance and Greenhouse Gas Impacts of Ethanol and Biodiesel

32. Ethanol’s Impact onGreenhouse Gases • Gov. Schwarzenegger (1/9/07) signed "low-carbon fuel standard” to reduce the carbon intensity of transportation fuels by at least 10 percent by 2020.

33. Plevin, 2007

34. Questions?