“Ethanol can contribute to increased energy
independence, but is indeed only one part of
the renewable energy solution.”
Jim Kleinschmit, director, Rural Communities Program, Institute for
Agriculture and Trade Policy, Minneapolis, Minn.
Renewable fuels
Silver “buckshot”
approach is key
to realizing future
potential
BY LYNN GROOMS
4 NAEDA EQUIPMENT DEALER July/August 2007
T
HE International Fuel Ethanol Workshop (FEW), one of
the ethanol industry’s premier annual events, set a new
record this June, attracting more than 5,300 attendees,
up from 3,400 last year. What’s more, it boasted more than 550
exhibitors (representing companies selling products and services
from A to Z), up from just 350 last year.
If all of the media coverage and political discussions over the
last several months have not already pointed to a rapidly growing
industry, the FEW numbers speak volumes about the potential for
renewable fuels – and not just starch-based ethanol either. One
conference session, for example, included an update on cellulosic
ethanol biorefinery demonstration projects.
Earlier this year, the U.S. Department of Energy (DOE) announced it would invest up to $385 million in six cellulosic ethanol
biorefineries over the next four years. Between the DOE funding
and industry cost share, more than $1.2 billion will be invested
in these biorefineries.
Also this year, the DOE announced it would fund another $23
million for five projects that are developing efficient fermentation
organisms to convert biomass to ethanol.
Increasing focus on cellulosic ethanol and renewable fuels
other than starch-based ethanol is important, suggests David
Morris, vice president, Institute for Local Self-Reliance (ILSR),
Minneapolis, Minn., in a report entitled, “Making Cellulosic Ethanol Happen: Good and Not So Good Public Policy.” (www.newrules.
org/agri/cellulosicethanol.pdf)
“At the current rate of expansion, within five years the capacity
of starch crops to meet growing ethanol demand could be exhausted,” says Morris. ILSR is a nonprofit research and educational
organization providing technical assistance and information on
environmentally sound economic development strategies.
Morris and other industry experts featured in this article
agree that when it comes to meeting initiatives for energy
independence, a silver “buckshot” rather than a silver bullet
approach is necessary.
Renewable fuels
“Ethanol can contribute to increased energy independence,
but is indeed only one part of the renewable energy solution,”
says Jim Kleinschmit, director, Rural Communities Program,
Institute for Agriculture and Trade Policy (IATP), Minneapolis,
Minn. Biodiesel, wind, solar and biomass energy, as well as improvements in energy efficiency and reduced consumption, are
all needed, he says.
No panacea
“There is no panacea. We must consider using renewables where
people live and use them,” says Morris.
One problem the United States faces is that it keeps looking
for one solution, says John Urbanchuk, director, LECG, LLC,
Wayne, Pa. Urbanchuk provides economic, planning, marketing and policy analysis consulting services to several industries,
including agriculture. He has provided studies to the Renewable
Fuels Association and the National Corn Growers Association,
to name a few.
The Energy Policy Act of 2005, however, was a good step
toward looking at additional solutions, says Urbanchuk, noting
it provides incentives for the production and demand of various
renewable energies. “People complain about subsidies. But, it
is difficult for any technology to compete against the fossil fuel
industry, which has been around for 100 years. New technologies need new incentives and subsidies to increase efficiencies,”
says Urbanchuk.
Consequences of dependence
In part because the United States has historically looked for one solution to meet its fuel needs, it imports 60 percent of its oil today.
Reliance on oil imports has translated to billions of dollars
in lost revenues and the loss of millions of American jobs. In
“Biodiesel America: How to Achieve Energy Security, Free America
from Middle-East Oil Dependence and Make Money Growing Fuel”
(www.biodieselamerica.org), author Josh Tickell reports how the
trade deficit stood at $617.1 billion in 2005, with oil imports accounting for about $100 billion.
“Since the Department of Energy estimates that every $1 billion
in trade deficit is equivalent to the loss of approximately 27,000
jobs, the $100 billion-worth of oil imported into the United States
each year is equivalent to the loss of approximately 2.7 million
jobs,” writes Tickell.
Reliance on fossil fuel, essentially a nonrenewable resource, also
puts society at risk, suggests Tickell, noting, “The media is only
now beginning to cover the pivotal news that geologists around
the world have known since the mid-1980s – that 90 percent of all
conventional oil on the planet has already been discovered.”
U.S. – much to learn about efficiency
“Biodiesel America” addresses how energy efficiency has largely
fallen by the wayside since the oil shocks of the early 1970s and
recounts how in the early 1900s engine inventor Rudolf Diesel
predicted America would be slow to adopt the diesel engine
because it had much to learn about efficiency.
“We do need to look at diversification,” says Vern Pierce, agricultural economist, University of Missouri, adding renewable
fuel price points are becoming increasingly important as traditional fossil fuels get more expensive. “Renewables that may have
been dismissed before may now be more economically feasible
to produce. Ethanol is more efficient because of a lot of research
has been done on corn. Now there is more research being done
in other areas as well.”
In part because the United States has historically looked for one solution to meet its fuel
needs, it imports 60 percent of its oil today.
Ethanol from cobs
In addition to the FEW conference session on cellulosic ethanol,
Poet (formerly the Broin Companies), Sioux Falls, S.D., held
a press conference announcing it had just produced cellulosic
ethanol from corncobs. America’s largest dry mill corn ethanol
producer, Poet plans to make ethanol from cobs and corn fiber.
The fiber that comes from the company’s corn fractionation
process will provide 40 percent of the cellulosic feedstock from
corn kernels that Poet already processes in its Emmetsburg, Iowa,
facility. “That means that nearly half of our cellulosic feedstock
comes with no additional planting, harvest, storage or transportation needs,” said Jeff Broin, CEO, Poet. The rest of the feedstock
will come from cobs, said Broin.
Poet’s Iowa facility is being converted from an existing 50
million gallon per year (mgpy) dry mill ethanol plant to a comContinued on page 18
NAEDA EQUIPMENT DEALER July/August 2007 5
Renewable fuels
Continued from page 5
Boosting local economies
John Urbanchuk, director, LECG, LLC, says future opportunites for
the equipment industry could increase with the development of
cellulosic ethanol, and with new biodiesel projects on the horizon,
Urbanchuk predicts continued strong demand for construction
equipment as well.
mercial cellulosic biorefinery. Once conversion is complete, the
plant will produce 125 mgpy, 25 percent of which will be from
cellulosic feedstock.
Also at the conference, Mark Stowers, vice president, research
and development, Poet, discussed corncob collection and processing options. One collection option is to mechanically separate corn
kernels from the cobs in the field. The system would feature a “cob
caddy,” essentially a wagon that would trail the combine.
Another option would be to commingle the corn and cob
mixture, which then would be unloaded into common hopper
bottom trailers and hauled to the farm, ethanol plant or separation area.
Potential for equipment
The development of cellulosic ethanol could provide future opportunities for the equipment business, says LECG’s Urbanchuk,
noting that dedicated energy grasses, e.g., switchgrass, miscanthus,
wood chips and algae, will have specific requirements for harvesting, baling, transporting and storing. “Volumes will transcend the
ability of existing equipment,” he adds.
With several new and retrofitted ethanol and biodiesel projects
planned for the next 20 years, Urbanchuk forecasts continued
strong demand for construction equipment as well.
18 NAEDA EQUIPMENT DEALER July/August 2007
Randall Fortenbery, Extension agricultural economist, University
of Wisconsin, observes that renewable fuel plants generally have a
positive price impact on local commodity prices. The more stable
a local economy is, the more regularly equipment is replaced and
the more farmers spend on equipment maintenance.
In the future, cellulosic ethanol feedstocks may require entirely
new pieces of equipment or retrofitting of existing equipment,
adds Fortenbery.
The growth of the renewable fuel industry offers industries,
including the retail equipment business, new opportunities.
But this will depend on the extent to which they will help solve
problems (efficiently harvesting or handling cellulosic feedstocks, for example), says the University of Missouri’s Pierce.
Businesses looking for quick gains may not enjoy long-term
success, he explains.
If he were an equipment manufacturer or dealer, Pierce says he
would be in contact with growers to know what type of feedstock
research is going on and how equipment will fit into the picture.
The equipment industry, including dealers at the local level, can
lend their expertise in important ways, he says.
AUTHOR’S NOTE: Iowa State University has published the first two
entries in a series of fact sheets on biomass crops. The first publications focus on switchgrass and miscanthus. Visit www.agron.iastate.
edu/research/biorenewables.aspx.
Community development – pros & cons
No doubt some equipment dealers have been part of local economic development groups that have worked to bring a renewable
fuel plant to their areas.
The development of renewable energy projects has “revitalized
rural communities, created jobs and expanded other economic
activities,” says Urbanchuk. In western Pennsylvania, for example,
the state’s investment in wind energy has attracted investment
from the world’s largest wind turbine producer and various support industries.
IATP’s Kleinschmit points to Benson, Minn., as just one
community that has benefited from a locally-owned renewable
energy business. Benson’s Chippewa Valley Ethanol Company
and associated businesses have helped return more than $60
million to Minnesota corn growers. Bill Lee, general manager,
CVEC, was quoted in The New York Times (Feb. 11, 2007), as
saying Benson has experienced a housing boom, a downtown
Continued on page 20
Renewable fuels
Continued from page 18
“The growth of the renewable fuel industry offers…
the retail equipment business new opportunities.
But this will depend on the
extent to which they will
help solve problems.”
Vern Pierce, agricultural economist,
University of Missouri
makeover and the authorization of a new public swimming pool
in the last 10 years.
Local ownership
According to Urbanchuk, nearly half of today’s ethanol plants are
owned by local cooperatives and account for about 38 percent of
total production. At the same time, the renewable fuels industry
is hearing more about corporate or absentee ownership. This is
where local communities must determine what makes the most
sense for them.
At the USDA Ag Outlook Conference last March, Urbanchuk
presented “Economic Impact on the Farm Community of Cooperative Ownership of Ethanol Production,” a study which quantifies
the impact of a farmer-owned ethanol plant on the returns to the
individual farmer-owner and to the local community compared to
a similar-sized plant owned and operated by an absentee investor
or corporation. (The report is available upon request from the
author – phone 610/254-4021; e-mail: [email protected]).
In many respects, the economic impact of either a farmerowned and absentee-owned ethanol plant on a local community
is similar. But, the share of expenditures for operating a farmerowned plant in a community is likely to be larger because accounting, administrative and marketing functions are more likely to be
provided locally for a farmer-owned plant. Financing also is more
likely to be provided by a local entity.
Since a farmer-owned plant is “literally a member of the community, the full contribution to the local economy is likely to be as
much as 40 percent larger than the impact of an absentee-owned
corporate plant,” says Urbanchuk.
But, having 100 percent interest in a project also means local
investors assume 100 percent of the risk, says Fortenbery, add20 NAEDA EQUIPMENT DEALER July/August 2007
ing that if conventional oil dropped to $40 per barrel or less, the
ethanol or biodiesel plant would likely see a dramatic drop in
demand and sales. For this reason, local investors might want to
seek deeper pockets or venture capitalists to help them weather
an economic downturn.
Economic analysis
Communities interested in making decisions about the development of a local plant need an objective, independent analysis of
the community impacts associated with biofuels production, says
Fortenbery. For this reason, he and Steven Deller, agricultural
economist and community development specialist, University
of Wisconsin, have developed a computer program for use by
Extension educators and local decision makers.
This program is based on empirical input/output analysis developed using IMPLAN®, a PC-based economic analysis system.
The program incorporates the economic multipliers identified
with IMPLAN, and allows users to evaluate expected community
impacts based on: 1) total plant employment, 2) total plant sales;
and 3) total income earned by plant employees. More information
is available at www.aae.wisc.edu/renk/research/energy.htm.
Communities often have many human and natural resources
upon which they can build renewable energy businesses, but
these need to be evaluated, says IATP’s Kleinschmit. “A first step
that communities can take is assessing their energy needs and
resources to determine what scale and type of facility would be
most appropriate for their region.”
Communities also should let their legislators know public
financing for new developments needs to be based on local
ownership and sustainable rural development goals to assure
that rural communities receive the greatest benefit from these
developments, says Kleinschmit. Minnesota, for example, has
approved policy language that would require 60 percent local
ownership of cellulosic biofuel facilities to receive state funded
producer payments.
“If we want a truly sustainable system, we need to direct public
dollars and investment to all appropriate renewable energy sources,” says Kleinschmit. “And we must do it in a way that assures we
don’t miss out on the additional environmental and development
benefits that local energy production can provide.” 
LYNN GROOMS is an independent agricultural journalist living in Mt. Horeb, Wis.