Several events happened on the way to the glorious future of biofuels.
First, there has been a failure to develop cellulosic ethanol, i.e. ethanol made from non-food sources such as corn stover and switchgrass.
Next, the United States is using less gasoline, which reduces the assumed need for ethanol.
And, there has been a drought in 2012, which reduced the size of the corn crop, with corn being the primary feedstock for ethanol in the United States. The corn crop in 2012 was only 10.7 billion bushels, compared with around 12.4 billion in 2010 and 2011.
In tandem with these events, the number of gasoline stations offering E85 remains insignificant, while the number of E85 Flex Fuel vehicles is and will continue to be a small percentage of the automotive fleet. There are only 2,900 stations offering E85 out of some 157,000 gasoline stations in the United States, while only 5% of light vehicles are capable of using E85 ethanol. (E85 is a blend using 85% ethanol.)
This has resulted in several unfortunate outcomes.
The most complicated outcome involves Renewable Fuel Information Numbers (RINs) that can be used to meet the Renewable Volume Obligation (RVO) mandated by Congress.
The industry has been able to meet its RVO mandate for ethanol production of 13.6 billion gallons in 2012 by using RINs accumulated over the past few years. If there is low corn production in 2013, the RIN surplus could be eliminated, and with insufficient ethanol being produced to meet the mandate refineries could be required to pay penalties. (See below for an explanation of variables.)
By 2015, when the mandate for corn-based ethanol is capped at 15 billion gallons, the demand for corn-based ethanol will have fallen below 15 billion gallons. If corn crops return to normal, there would be a surplus of ethanol.
Cellulosic ethanol is unavailable, which creates another problem.
Current legislation requires the use of 20 billion gallons of cellulosic ethanol by 2022. The product doesn’t exist, and the EPA has refused to completely waive the requirement for cellulosic ethanol, so refineries and importers have to pay penalties for not supplying a product that doesn’t exist.
Ethanol mandates and the resulting high corn prices have hurt American families with higher food prices.
Using food, i.e. corn, to produce ethanol has been called a “crime against humanity” by the UN.
A perverse potential outcome is the destruction of the export market for U.S. farmers as other nations such as Brazil step in to grow more corn at lower prices. This hurts America.
At present, the EPA and those who support ethanol mandates are trying to force Americans to use E15, a blend with fifteen percent ethanol. Currently, gasoline sold in the United States is E10, a blend with ten percent ethanol.
E15 would increase the amount of ethanol being used.
Automobile manufacturers have spoken out against E15. The added ethanol content can damage vehicles unless they are Flex Fuel vehicles.
We now have the EPA promoting E15 that would harm vehicles and hurt Americans.
It will be a decade or two before Flex Fuel vehicles are a majority of light vehicles, where E15 could be used without harming the vehicle.
When a substantial majority of vehicles are Flex Fuel vehicles, E85 could significantly increase the amount of ethanol being used; but this would require building 50,000 or so E85 stations at great expense.
Congress and the environmental organizations insisting on the ethanol mandates have created an impossible situation for the United States.
- Eliminating ethanol mandates would harm farmers who have geared up to produce corn for the ethanol market. Farmers are likely to oppose eliminating the ethanol mandates.
- The people who produce ethanol will also oppose eliminating the ethanol mandates.
- Eliminating the mandate for cellulosic ethanol should be done immediately, but environmentalists will oppose this.
- A potential surplus of corn-based ethanol is causing the EPA to try to force Americans to use E15.
The only option available to the average American is to refuse to use E15 gasoline. This will keep their cars from being damaged and create a dynamic that may, if there is a surplus of corn-based ethanol, put pressure on Congress to address the mess it has created.
All gasoline pumps have a sign indicating whether they dispense E10 or E15 blended gasoline. Drive to the next gasoline station when you see E15 on the pump.
Meanwhile, American consumers are being hurt and will continue to be hurt until the ethanol mandates are eliminated.
Note: Comments on variables:
- If corn production increases in 2013 and 2014 to over 12.5 billion bushels, it will be possible to produce 15 billion gallons of ethanol while using 1/3 of the corn crop, the same as in 2011. More RINs will also be issued.
At the same time, if gasoline usage continues at current low levels, or continues to decline, there will be less need for ethanol, and there will be a surplus of ethanol. A surplus of RINs would also be created.
- If the drought continues and corn production doesn’t increase sufficiently in 2013 to produce 15 billion gallons of ethanol, there may not be enough RINs available for refineries and importers to meet their ethanol RVO mandate and, without the EPA forgiving refineries and importers their requirement to meet the mandate, they will be required to pay a fine for not producing sufficient corn based ethanol.
Or, alternatively without RINs, much more of the corn crop will be used to produce ethanol, further driving up the price of corn and all the food products for which corn is used.
Read more of Donn’s columns at his blog, Power For USA.
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Photo credit: tbone_sandwich (Creative Commons)