I have been following the developing ethanol story for a few years now and it has certainly come back into focus with the drought and heat of 2012. In the beginning, about a decade ago, I was supportive of ethanol research and production in order to see if it made sense in the alternative energy picture. After a couple of years, it became clear to me, that ethanol (particularly grain/corn ethanol) was not worth it. Biodiesel from waste materials or algae make better sense, even if they are not perfect long term solutions.
So lately I have been discussing the increasing downsides of grain ethanol here in the U.S., which are many and growing bigger by the day (literally), but I know there are many steadfast supporters, including some friends and aquaintances who work in the industry, so here is an article discussing the ethanol debate from the economic perspective of the grain-growers and the ethanol producers. Several small ethanol producers have been forced to close down due to the high price of the feed stock. Corn growers are starting to battle animal and food producers over the ethanol mandate. One thing I cannot get my head around is how ethanol producers can go out of business when the government mandates the product. Even if the corn price goes up, the ethanol blenders still have to buy it? Right? I suppose there is still some competition between ethanol plants. Maybe the big operators produce enough to meet the mandate and the weakest players are now being weeded out.
It will only get worse in coming months and I predict the ethanol producers will lose out in the end if food prices continue to rise. If the ethanol mandate is taken away, most of them will shut down because there isn’t a large free market for their product (mainly booze, I guess, but I always figured distillers made their own). It is one of the inevitable side effects when the government tries to pick losers and winners in energy or almost any other aspect of life. Did you hear? Not only is the U.S. government NOT relaxing the ethanol mandate, they (already 16 trillion in debt) are going to start buying meat in order to help the market for livestock producers. To me, it seems they are just going to make a bad situation worse. Just like biofuel mandates (around the world) have had unintended consequences such as the destruction of a lot of forests,, buying up the meat on the market (I am worried) might lead to further disruptions in the market down the road. What ever happened to the America where people saved money for a rainy day and were resourceful enough to solve their own problems? I am not sure, but I blogged about such a time over 100 years ago.
In any case, I predict food will win out over fuel in the end – if it comes to that. It would be terrible if people end up starving because of the U.S. ethanol mandate. Some people have already been predicting unrest and riots over the rising food prices. I feel for the grain producers and the ethanol plant workers, but mother nature and rationality would seem to be against them. What do you think?
In a somewhat related matter (ethanol production takes a lot of water), the U.S. has been experiencing disruptions in electricity production due to the hot and dry weather. It makes one consider the fragility of “the grid”. The one massive energy grid of the U.S. is probably not the most robust system. It would probably be better if more regions were energy independent and if there were more off-grid businesses and domiciles. If the grid goes down for an extended period of time, we would be in a heap of trouble.
Wind energy has been making strides in recent years for off-grid and on-grid applications but growth might slow in coming years because the future of the wind energy credit is in doubt. I wouldn’t mind a slowing of wind mill projects because I am not a big fan. I would rather see more solar panels – on rooftops.
What I find strange is that the wind credit is needed while oil is still near $100 a barrel. Many years ago, one of the arguments for wind (and other alternative energy credits) was that it was more expensive than oil, so people needed an incentive to adopt it. The price of wind power hasn’t changed much in the intervening time, but the price of oil has skyrocketed from $20 a barrel back in the late 1990s. Shouldn’t wind power be more attractive now? I have often thought the the true economic and scientific test of whether an alternative energy source is viable, is if it can power its own production (with excess to spare). That is, if a solar panel manufacturing plant can produce solar panels using only power from its own solar panels AND make a profit, then it is a viable technology. So far there is no real world test of this nature for wind and solar, as far as I am aware. At least solar power has more efficiency upside in the future. Grain ethanol fails the test and there is little hope for it to get much better.
Have a swell Friday! Meteorologist Justin Loew.