February 23, 2006

RFA: Ethanol Industry Outlook 2006

Released 2/16/06, the the Renewable Fuels Association (RFA) Ethanol Industry Outlook is a must read for anyone interested in the Ethanol industry. According to this document this is a milestone year because of recent legislation and the future is bright.

From Niche to Nation
Ethanol Industry Outlook 2006

February, 2006

"From Niche to Nation” seems an appropriate theme for this year's Ethanol Industry Outlook. It reflects the unprecedented growth that has occurred over the past several years. Once serving just niche markets in the Midwest, ethanol is now a ubiquitous component of the U.S. transportation fuels market, as ethanol is now sold from coast to coast, and is blended in 30% of the nation's gasoline.

We feature new technologies designed to enhance production, reduce energy inputs and lower costs. These technologies are changing the face of the U.S. ethanol industry, and we look forward to continued innovation that improves efficiencies. Perhaps most importantly, we take an in-depth look at passage of the Energy Policy Act of 2005 and the Renewable Fuels Standard (RFS), in which the U.S. has made an historic commitment to renewable biofuels as part of our nation's energy supply.

Impact of the RFS by 2012

• Reduce crude oil imports by 2 billion barrels and reduce the outflow of dollars largely to foreign oil producers by $64 billion;
• Create 234,840 new jobs in all sectors of the U.S. economy;
• Increase U.S. household income by $43 billion;
• Add $200 billion to GDP between 2005-2012;
• Create $6 billion in new investment in renewable fuel production facilities; and
• Result in the spending of $70 billion on goods and services required to produce 8 billion gallons of ethanol and biodiesel by 2012. Purchases of corn, grain sorghum, soybeans, corn stover and wheat straw alone will total $43 billion.
Source: LECG, LLC, May, 2005

Biomass Gasification

A biomass gasifier uses biomass to provide an energy source for both steam and power generation, increasing the overall efficiency of energy generation while reducing emissions. Central MN Ethanol Co-op will have an operational biomass gasifier in 2006, fueled by wood waste that will eliminate the refinery's use of natural gas. The unit will operate on a local supply of sawdust, slash, storm damage, yard waste and wood manufacturing residue. When fully operational, the refinery is expected to burn 280 tons of wood waste per day.

Chippewa Valley Ethanol Co. also plans to install a biomass gasifier designed to operate on a range of feedstocks including corn stover, distillers dried grains, corn, wheat straw and wood wastes.

Securing America's Energy Future

Ongoing violence in the Middle East, disruption of oil production in the Gulf of Mexico due to an active hurricane
season, and the growing demand for oil from countries like China and India contributed to oil prices soaring over $60 a barrel in 2005.
• 65% of the U.S. crude oil supply was imported in 2005.
• 71% of the U.S. crude oil supply is estimated to be imported by 2025.

Cleaner Fuel, Cleaner Environment

Ethanol use has been the reason that cities such as Denver, Colorado, have seen dramatic reductions in air pollution over the past two decades. The use of ethanol, consisting of 35% oxygen, is a key ingredient in reducing dangerous tailpipe emissions. Because of its high oxygen content, ethanol-blended fuel produces a cleaner, more complete combustion that reduces emissions.

According to analysis by Smog Reyes, the use of 10% ethanol blends reduces tailpipe fine particulate matter (PM)
emissions by 50%, carbon monoxide emissions up to 30%, toxics content up to 13% (mass), and toxics content up to 21% (potency). Ethanol blends also reduce secondary PM formation by diluting aromatic content in gasoline.

“Ethanol-blended fuels reduced CO2-equivalent greenhouse gas (GHG) emissions by approximately 7.8 million tons in 2005, equal to removing the annual GHG emissions of 1.18 million cars from the road. ”
~ Argonne National Laboratory, GREET 1.7 Model

As concerns over greenhouse gas emissions grow and supplies of world oil are depleted, Europe and countries like China,
India, Australia and some Southeast Asian nations are rapidly expanding their biofuels production and use.

Ethanol Programs Worldwide

Brazil - Requires 25% ethanol blends; provides preferential tax treatment
Argentina - Requires use of 5% ethanol blends over the next five years
Thailand - All gasoline sold in Bangkok must be 10% ethanol
India - Requires 5% ethanol in all gasoline
Australia - Voluntary blending of up to 10% ethanol
Great Britain - Provides incentives for ethanol production at 36 cents per liter
European Union - 2% (energy content) biofuels target by 2005, increasing to 5.75% by 2010
Canada - Tax benefits for ethanol since 1992 (provincial mandates)

More than 5 million cars in the U.S. are designed to run on E85. 650 retail gas stations across the country are pumping E85 today, more than a 300% increase from 2004.
Source: National Ethanol Vehicle Coalition, January 2006

A recent study found that the U.S. could produce the equivalent of 7.9 million barrels of oil per day by 2050, more than 50% of our current total oil use for transportation. Biofuels could:
• Virtually eliminate our demand for gasoline by 2050
• Be cheaper than gasoline and diesel, saving about $20 billion per year on fuel costs by 2050
• Increase farmers profits by more than $5 billion per year by 2025
• Reduce greenhouse gas emissions by 1.7 billion tons per year, equal to more than 80% of our transportation-related emissions in 2002
Source: 'Bringing Biofuels to the Pump: An Aggressive Plan for Ending America's Oil Dependence,” Natural Resources Defense Council, July 2005

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