Farmers plan to plant more acres of corn this year than in any year since World War II. The boom in American corn fields is largely due to the surging demand for ethanol – the popular biofuel which now accounts for nearly 4% of the nation's fuel consumption.
But corn-based ethanol is not considered to be the long-term solution to the world’s energy problems.
A big reason for this is that corn-based ethanol requires nearly as much energy to produce as it releases when burned. Moreover, corn-based subsidies are currently costing taxpayers as much as $7 billion a year. And there are powerful indications that the increased use of corn for ethanol will lessen the availability of corn for food.
In our February 2007 ChangeWave survey of the alternative energy industry, we asked industry respondents to give us their thinking on ethanol. A total of 178 Alliance members who work for companies involved in the industry participated.
First, we focused on ethanol's impact on the availability of corn for food. We asked industry members:
Some analysts believe an ethanol boom in the U.S. will limit corn's availability for food and feed use, while others think there will be sufficient supply for both. What about yourself? Which of the following views is closest to your own?
Nearly 3-in-5 (58%) industry respondents believe that the rapid growth of the ethanol industry will disrupt the availability of corn for a wide range of foods.
Already, one consequence of the sharp rise in ethanol demand is higher corn prices – which have jumped to $4 per bushel from just around $2 a couple of years ago. High corn prices not only mean more expensive foods, but also hurt livestock farmers who need grains to feed their cattle, swine, and poultry.
New Alternatives
Clearly, ethanol suppliers need to develop viable alternatives to corn as their major feedstock. Leading candidates for the next ethanol are biofuels made from trees, grasses and other sources of high cellulose. That's because scientists say the energy yielded from them could potentially be as much as 50 times greater than corn-based ethanol.
To get a better idea of the direction in which the ethanol industry is headed, we asked industry respondents to tell us which biomass technology they think will see the most growth over the next few years.
Which of the following biomass-based energy-generating processes/ technologies do you think will experience the most growth over the next three to five years?
More members (29%) chose Cellulosic Ethanol than any other process, including second choice Corn/Sugarcane (26%).
Cellulosic ethanol is made from a variety of non-food plant materials – including agricultural wastes (e.g., corn stover and cereal straws) and industrial plant waste (e.g., saw dust and paper pulp) – along with ‘energy crops’ grown specifically for fuel production such as switchgrass.
Now, let's chew on this for a minute. Each of these processes is more technically challenging than producing corn-based ethanol. For example, making ethanol from cellulosic feedstocks currently requires far more complex refining along with more expensive enzymes.
Switch to the Next-Gen
Given this situation, investors obviously need to know which non-food biomass is likely to emerge as the biggest winner. We asked industry members the following:
Which type of nonfood biomass do you think has the best chance of succeeding as an alternative resource for Biofuels (e.g., switchgrass, animal waste, vegetable oils, etc.)?
By a two-to-one margin, industry respondents consider Switchgrass (36%) to be the best candidate to replace corn in the ethanol ‘food-chain.’ Switchgrass is a resilient, high-yield grass native to North America. Most notably it's drought-resistant, friendly to the environment, and has a net energy output 20 times better than corn.
Ethanol suppliers certainly have momentum in their quest to propel the industry to the next generation of high-energy biofuels. One of many recent indicators – a DOE commitment to provide up to $385 million in six bio-refinery projects to produce cellulosic ethanol.
As one Alliance member puts it, “Ethanol projects abound, and new methods to turn switchgrass and other non-food based biomass into biofuels at lower cost will be discovered more quickly than other energy technologies.”
Bottom Line
The primary challenge for the ethanol industry is to develop a cost-effective process that turns switchgrass (or other non-food biomass material) into biofuel.
Of course, my appetite for the sector is only growing – as companies that successfully develop these new technologies are going to reward their investors very well.
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This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 10,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on the ChangeWave Alliance, or if you are interested in joining, please click here.
