Questions about Ethanol

It was almost inevitable that after the over blown enthusiasm about ethanol that there would be questions raised about its long term place in the economy. There is no doubt it will play an important role into the future but quite possibly it wont be such a huge part of the fuel industry as first imagined and mandated by President Bush.

The food-fuel debate may not be as defining a factor as some suggest but certainly there is a lot of adjusting in much of the grain and grain dependent industries that were not predicted in the early stages. As corn supplies were drained off for fermentation into ethanol the prices increased and acres were diverted from wheat and soy beans. The market spike in grain prices may or may not be sustainable if the building of ethanol plants slows. But in the meantime the beef and pork feeding industries are drowning.

One of my associates predicts that ethanol will continue to be competitive as a gasoline additive, but not as a gasoline replacement. A comment that bears some thought. Another scientist proposed to me that a serious debate is required on the efficiency of growing crops in the temperate zone for fermentation as opposed to being a source of high quality starches and proteins for food and other industrial processes.

As suggested, it is not surprising that many questions would be raised about the simplistic approach of substituting ethanol for gasoline. On the other hand, researchers are busy making improvements in producing ethanol, and also converting it to other energy materials. In the short term ethanol plants will be built, although more slowly than before, and the industry as a whole will take its place as a key value-adding opportunity.

C.M. (Red) Williams, President

Saskatchewan Agrivision Corporation Inc.

 

Link – http://www.canada.com/edmontonjournal/news/business 

Thursday » August 9 » 2007

The serious money says biofuel

Watch for investment opportunities to come in the government-encouraged crop-based energy industry

Saturday, August 04, 2007

CREDIT: Brian Gavriloff, the Journal Freshly pressed oil drips from canola seeds.

As any pro stock trader will tell you, only a fool fights the tape.

Whether the market is gripped by irrational exuberance and zooming to new highs, or enduring one of its periodic meltdowns, it’s risky to bet against the tide — no matter what your personal views.

Apparently, that lesson isn’t lost on Alberta Energy Minister Mel Knight. He unveiled details of a $209-million program earlier this week to help Alberta biofuel producers ramp up output.

As Knight candidly admitted, Canada’s energy powerhouse has been slow to embrace ethanol and biodiesel. Ontario and Saskatchewan, among others, have been far more aggressive in building capacity.

But Knight knows which way the wind is blowing. Better to jump aboard now than miss this train entirely.

With Ottawa committing billions toward renewables — while targeting five per cent ethanol in gasoline by 2010, and two per cent biodiesel in diesel fuel by 2012 — new plants are sprouting like weeds.

As The Journal’s Dave Finlayson reported Wednesday, more than 30 firms have already shown interest in building new biofuel plants in Alberta since the province unveiled its plan in October.

Currently, Alberta has only one ethanol plant — Permolex’s Red Deer plant, which plans to triple output to 120 million litres annually. A $400-million plant in Innisfail with more than three times that capacity is planned by Dominion Energy and its partners. Startup is slated for 2008.

Nationwide, more than 20 corn and wheat-fed ethanol plants — up from eight in 2006 — with annual capacity of almost 2.3 billion litres will be pumping out fuel by 2010, according to the Canadian Renewable Fuels Association (CRFA).

On the biodiesel side, at least three new plants are in the pipeline, with five already in production. Dozens more are on the drawing board.

Virtually all of them are being financed by private firms or investment consortia, although traditional oil giants like Suncor and Husky Energy are also big players.

In the United States — which last year topped Brazil as the world’s largest biofuel producer — well over 100 ethanol plants have sprung up thus far, and that list is expected to top 200 in the next few years.

Ethanol output in the U.S. is expected to jump by 12.4 billion litres or roughly 67 per cent over the next year to some 30.7 billion litres, the U.S. Renewable Fuels Association (RFA) estimates.

That would outstrip the previous 2012 target of 28.4 billion litres, says FirstEnergy Capital analyst Steven Paget, and the U.S. is now considering tripling its annual target to 100 billion litres by 2022.

Indeed, so much new ethanol capacity is coming onstream so quickly that spot prices for ethanol have dropped below those of gasoline in the U.S., reducing producer profit margins to razor thin levels.

Still, most observers see the current softness as a temporary blip, as ethanol producers, consumers and traditional petroleum refiners adjust to a brave new world in which biofuels are a permanent fixture.

Looking out a decade, Kory Teneycke, exec director of the CRFA, says he expects ethanol to account for well over 10 per cent of the retail fuel market in Canada and the U.S.

“I think it will be a permanent part of the energy mix,” he says. “For the first time in recent history, since the age of oil began, we’ll have diversification away from traditional crude to meet our energy needs.”

So does that spell bad news for Big Oil? FirstEnergy’s Steven Paget doesn’t think so. The robust growth in demand for fuel will easily accommodate the new ethanol supply, he figures.

By his estimates, fuel demand in Canada will jump by some three billion litres a year by 2010, with ethanol accounting for 75 per cent of that. At that level, it would account for five per cent of the national fuel market.

Of course, biofuels have a big potential downside. Corn prices have jumped as ethanol plants have sprung up, triggering alarm bells among cattle producers and food processors, and raising concerns about rising food prices in developing countries.

But a bumper U.S. corn crop in 2007 has lessened those fears somewhat, at least temporarily.

As for attractive investment opportunites in the burgeoning biofuels sector, there are very few of them in Canada. Most plants are privately owned, or subsidiaries of large firms such as Suncor and Husky.

In the U.S., it’s a different story. Several major independent ethanol producers are publicly traded and closely followed by Wall Street, including companies like VeraSun Energy, Aventine, and BioFuel Energy.

Most are currently trading well below their 52-week highs. Ian Horowitz, an analyst at New York’s Soleil Securities, says he thinks the stocks will face more “tough sledding” for a quarter or two before a rebound begins, and industry consolidation ensues.

His current favourite is Aventine. He rates the stock a “buy” with a 12-month target price of $24.75 US.

glamphier@thejournal.canwest.com

© The Edmonton Journal 2007

“There has been a great deal of interest shown in this project and we were pleased with the number of people who participated in the official opening,” said Tanya McDonald, BioEnergy Research Associate at Olds College School of Innovation. “We showed our guests the Centre’s integrated storage, blending and dispensing system, which is designed to address some of the cold-flow challenges associated with biodiesel. This system makes it possible to store and blend biodiesel with petro-diesel year round for use in fleet vehicles and buses in our local community, reducing engine wear and harmful exhaust emissions.”

Dr. Abimbola Abiola, Director of Research at Olds College School of Innovation, indicated the BioFuel Technology Centre will join other facilities on campus to focus on the entire value chain for biodiesel.

“Feedstock production, process optimization, quality control and product quality analysis, biodiesel storage and blending systems, product use and impacts, by-product utilization, and feasibility studies and economic analysis. We are researching impact and possibilities all along the way,” said Dr. Abiola. “Our partnerships will continue to blaze the trail in the realization of Canada’s national research and technology goals in the areas of sustainable agriculture and environment.”

As one of six schools in the Academic Division, the Olds College School of Innovation links faculty, students and research projects together.

“Olds College is a leader in providing opportunities for our students to become involved in an innovative research environment, because we believe this is an indispensable part of an exceptional and integrated learning centre of excellence,” said Olds College President and CEO, H.J. (Tom) Thompson.

For more information please contact:

Sandy Bexon
Communications Coordinator
Office of Advancement
Olds College
4500-50th Street
Olds, Alberta T4H 1R6
Phone (403) 507-7714
Fax (403) 556-4704

sbexon@oldscollege.ca

    OLDS, AB, May 25 /CNW/ - A project to evaluate barley's potential in
Canada's rapidly evolving biofuels industry has received funding of $262,000
from the Biofuels Opportunities for Producers Initiative (BOPI). The funding
has been made available through the Agriculture and Food Council that
administers Agriculture and Agri-Food Canada's Advancing Canadian Agriculture
and Agri-Food Program.
    The three-phase Barley and Bioproducts Opportunities Project (BBOP) is
jointly funded and managed by the Western Barley Growers Association and the
Alberta Barley Commission. BBOP is supported by industry partners Syngenta
($45,000), Ceapro ($10,000), Wilbur-Ellis Canada ($2,000) and Parkland Agri
Services ($1,000). In all, BBOP will invest $380,000 in examining barley's
feasibility in a number of emerging applications; specifically, researchers
will study the opportunities and challenges growers would face to establish
regional, barley-based ethanol production facilities. The project will also
look at removing valuable fractions from barley prior to ethanol production
and using a byproduct of barley ethanol production - distilled grains - in
commercial applications, including cattle feed.
    "Barley is already one of Western Canada's most important crops due to
its role in Canada's beef industry, domestic and international malting and
brewing, and agronomic rotational management," said Doug McBain, past
president of the WBGA. "Our goal is to determine if Western Canada's barley
producers can capitalize on the crop in new, profitable and sustainable ways."
    "This project will give our members and their customers a good base of
regional technical and business information to assess their options for
investing in barley," said Terry Young, chair of the Alberta Barley
Commission.
    The project's first task will be to determine the relative
competitiveness of barley versus other major crops, by analysing ethanol yield
and the amounts of starch and sugar that can and can't be extracted. The
project will report in its initial findings in September 2007 and its final
findings in March 2008.

    The Western Barley Growers Association (www.wbga.org) and the Alberta
Barley Commission (www.albertabarley.com) are not-for-profit, member-driven
organizations that represent the interests and viability of barley growers in
Western Canada and Alberta, respectively.

    A backgrounder is posted at www.albertabarley.com and www.wbga.org.

For further information: Doug McBain, Past President, Western Barley
Growers Association, (403) 816-0645; Terry Young, Chair, Alberta Barley
Commission, (403) 391-2408