Will They Power Our Equipment?

The future for biofuels is promising, but concerns have been raised.

Are biofuels losing their spark? Surging crop prices may be boosting farm revenues and increasing the sales of farm equipment throughout the heartland, but there's also a lot of angst in agricultural communities as they encounter the benefits and pitfalls of ethanol and biodiesel. Even as corn and soybean prices increase, support among economists, environmentalists and livestock farmers is falling.

Thanks to government mandates and its use in gasoline, ethanol has always been the poster child of farm-based fuels. More than 100 ethanol plants in some 20 states have pumped out an estimated 5 billion gallons of corn-based ethanol in 2006, up from 1.6 billion gallons in 2000. Biodiesel refineries, by comparison, pumped out 250 million gallons of soybean-based biodiesel.

Both fuels consume an increasing share of American crops. In 2006, ethanol consumed an estimated 20% of the nation's corn crop and biodiesel consumed roughly 13% of the nation's soybean oil. This increased domestic consumption has created shortages in developing countries that rely on American crop exports. This, in turn, has drawn the ire of relief organizations, who are concerned that the American lifestyle is causing other people to go hungry. According to the World Bank, the corn needed to fill the tank of a sports utility vehicle with ethanol just one time could feed a person for an entire year.

Even so, U.S. commitment to farm-based fuels continues to grow. Eager to secure votes and help rural economies that have endured decades of stagnant crop prices, elected officials want to make sure demand continues. As this article was being written, Congress was putting the finishing touches on legislation that would both encourage biofuel production and mandate its use.

Growing resistance

But resistance is growing. With corn prices hitting record highs, hog, cattle, dairy and poultry producers are struggling with high feed costs. They've aligned with the Grocery Manufacturers Assoc. and other trade groups to lobby against ethanol subsidies and to limit the amount of corn that can be used to create the fuel.

Environmentalists are also concerned. Some estimates indicate that farmers will have to plant another 3 million acres of corn to meet the additional demand, which could strain soil and water resources. There is also growing concern about the costs needed to produce ethanol. It turns out that producing ethanol is very energy intensive and the resulting fuel has lower gas mileage than gasoline. One recent study by the Organization for Economic Cooperation and Development concluded that biofuels "offer a cure that is worse than the disease."

Even investors are taking a second look at ethanol refineries. Several projects have been shelved as rising crop prices and glut of ethanol pinch profits at refineries. According to U.S. Department of Agriculture, the cost of producing ethanol jumped 10 to 15 cents per gallon between 2000 and 2006 primarily due to increases in the cost of corn and energy. Meanwhile, the profit margin on ethanol has plummeted from $2.30 a gallon in 2006 to 25 cents this year, according to the Wall Street Journal.

What about biodiesel?

Biodiesel is facing similar concerns. "There are definitely challenges with costs and profit margins," says Jenna Higgins, a spokesperson for the National Biodiesel Board, the trade organization for the biodiesel industry. "There was a big boom in the last year and now we are seeing some adjustments."

And while ethanol remains the fuel of choice in America, biodiesel continues to be much more popular on the other side of the Atlantic, mirroring Europe's greater use of diesel-powered passenger vehicles. While 90% of ethanol is produced in the United States and Brazil, the European Union produces 75% of the world's biodiesel.

That, however, may be about to change. Biodiesel consumption in the U.S. has grown 10-fold in the last two years. Production will jump from an estimated 250 million gallons in 2006 to 450 million gallons in 2007. In August, Imperium Renewables opened the largest biodiesel refinery in the world at Grays Harbor, WA, a facility capable of producing 100 million gallons per year.

Biodiesel is expected to enjoy even greater acceptance in 2008 if the American Society for Testing Materials (ASTM) adopts, as expected, specifications for B20, a diesel fuel containing 20% biodiesel. The standards, which have been in the formulation stage for six years, passed out of committee in December and are expected to gain final approval next summer. Once that happens, many engine manufacturers are expected to embrace the blend. Currently, most engine manufacturers will only warranty their engines with fuels containing no more than 5% biodiesel due to concerns in variations in with the quality of fuel blends. The ASTM standard should change that.

"This is a huge step forward for the biodiesel industry," says Steve Howell, chairman of the ASTM Biodiesel Task Force. "We have known for years that B20 made with in-spec biodiesel is a good quality, reliable fuel, but OEMs, regulators and customers have demanded formal ASTM passage of a B20 blend spec in order to broaden their support for biodiesel blends."

Biodiesel is not just an American phenomenon. Brazil is expected to surpass U.S. and European biodiesel production by 2015 and could represent as much as 20% of all the on-road diesel fuel used in Brazil, Europe, China and India by 2020.

Biodiesel vs. ethanol

This dramatic growth in biodiesel's popularity will intensify the debate over which fuel is better for the environment, energy independence and the economy. While the answer depends in large part on a person's perspective, most people currently give biodiesel the nod. That's because, from an energy perspective, the production of biodiesel is much more efficient.

Biodiesel generates more than twice as much energy as is needed to produce it, while ethanol generates a net energy gain of just 30%. Because ethanol has a lower energy content than gasoline, vehicles using fuel containing 85% ethanol typically get about 25% lower gas mileage than vehicles using standard gasoline, which is another 20 to 25% lower than gas mileage of a diesel-powered engine.

Biodiesel is also more environmentally friendly. Diesel-powered engines emit less carbon dioxide than gasoline, while a B20 blend can lower carbon dioxide emissions 15% compared to standard diesel fuel. Pure biodiesel would reduce carbon dioxide emissions by 75%.

Ethanol, however, has a considerable advantage from a land-usage standpoint. Corn yields about 230 gallons of ethanol per acre, more than three times the 70 gallons of biodiesel gleaned per acre of soybeans.

And while both fuels can go a long way to bolstering the income of rural communities and the equipment manufacturers that keep farms running, they can't do much more than dent our reliance on foreign oil. Even if all of the nation's farmland was converted to biofuel production, it would only generate a fraction of the fuel America would need. Researchers are looking for cheaper ways to generate biofuels from algae and switchgrass, while planners are considering turning brownfields and other industrial wastelands into acreage for biofuel crops.

The future for biofuels and the farm community is promising, but not certain.

Dave Jensen in a contributing editor from Milwaukee, WI.