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NAICS: 32-5193 Ethyl Alcohol Manufacturing

SIC: 2869 Industrial Organic Chemicals, not elsewhere classified

NAICS-Based Product Codes: 32-51930111 and 32-519303


Ethanol is ethyl alcohol, also referred to as common alcohol, the intoxicating component of alcoholic beverages. Structurally it has two carbon atoms as its spine. The first carbon atom (C) is bonded to three atoms of hydrogen (H), the second carbon atom is bonded to two atoms of hydrogen plus a hydroxide (OH). A hydroxide is a single oxygen-hydrogen pair. The chemical description, reflecting these components, is rendered as C2H5OH or as CH3CH2OH. In chemistry the front part of the chemical, thus without the hydroxide, is known as an ethyl group. The terms used for this chemical reflect the presence of that group, hence names like ethyl alcohol, ethyl hydroxide, or ethanol. Ethanol is colorless, occurs as a liquid, is soluble in water, and is highly flammable, making it an excellent fuel. In the presence of excess oxygen its combustion will produce water and carbon dioxide, the gas that we breathe out. Ethanol's most commonly used cousin is methanol alcohol, wood alcohol, commonly known as rubbing alcohol. Methanol lacks the second carbon and its two hydrogen atoms. Methyl alcohol is toxic to humans if ingested but competes with ethanol as a gasoline modifier.

A Glance at History

Those who think that the use of ethanol as fuel is a recent innovation may be surprised to learn that the first engines made used ethanol as their fuel, and that ethanol was available for such experimentation because it had already been used as a fuel to power indoor lamps. Nicholas Otto, the German inventor of the 4-cycle internal combustion engine (1861) used ethanol for fuel—as did the father of the American auto industry, Henry Ford (in 1896), to fuel his first vehicle, the quadricycle). Ford designed the Model-T (1908) to run on ethanol, gasoline, or a mixture of the two.

Spurred by demand during World War I (1917–1918), ethanol production was at 50 million gallons per year as the war ended. In the 1920s Standard Oil began to add ethanol to gasoline to increase octane levels and to reduce engine knock. Ethanol use increased until the end of World War II (1945). It was used as an additive to gasoline, the product used in the Midwest and referred to as gasohol. War time demand caused its production to spike in various uses. Between 1945 and 1978, however, very low petroleum prices essentially brought fuel-ethanol production to a halt.

Interest began to revive for environmental reasons. Ethanol could be used to replace lead used in gasoline as an anti-knock agent. The energy crisis in 1979 put ethanol back on the front burner. Amoco Oil Company, soon followed by others (Ashland, Chevron, Beacon, and Texaco), began to sell gasoline-ethanol blends. In 1980 Congress passed the Energy Security Act in which incentives for ethanol production appeared. Other actions followed, including tariffs against relatively cheap Brazilian ethanol (made from cane) and subsidies for ethanol. In 1983 these subsidies had reached 50 cents per gallon. Interest in ethanol, since the 1980s, has grown or waned depending on the price of oil.

The international conflicts of the new century have caused oil prices to rise and uncertainties concerning future supplies have fueled interest in this substitute for oil. In the latter part of the first decade of the twenty-first century ethanol had once more become a prominent issue in planning the United State's energy future. This interest was unlikely to wane again soon as world supplies of petroleum were beginning to peak, with a gradual decline, thereafter, reasonably certain.

Sources and Production

Ethanol is produced by the fermentation of sugar contained in grains, sugar cane, or sugar beets—anything with adequate sugar content can be used to make alcohol. All carbohydrates in plants are sugars, starch being a very common form of it, used by biological systems to store glucose for future use. Grains are made up of three major components: the outer bran, the inner mass called endosperm, and the innermost germ which holds the genetic code. The endosperm or kernel is largely carbohydrate or starch, approximately 66 percent. It is structurally very similar to hydrocarbons, but with the hydroxide (OH) added.

In the United States the principal raw material for ethanol is corn. Based on data from the Economic Research Service of the U.S. Department of Agriculture (USDA), approximately 18 percent of all corn was used for ethanol in 2006. Other than the corn used in the production of ethanol, the largest use of corn in that year was for animal feed (50.8%), exports (19.1%), corn syrup (4.4%), and all other uses (7.3%). All other uses included starch, sweeteners, alcohol other than ethanol, cereals, corn sold for direct consumption, and seed. A portion of the corn converted to fuel alcohol, approximately 34 percent of inputs by weight, ends up as animal feed. This is the residue after the starch-rich endosperm has been separated and fermented. Viewed from a broad perspective, people mainly consume corn as meat, as dairy food produced by cattle fed the corn, as corn sugar and sweeteners, and as a fuel additive. Very little corn reaches us as corn. When it does, it generally comes to us as breakfast cereals, tortillas, and as corn chips in a bag.

Ethanol is made by wet or dry milling of corn. Dry milling is rapidly becoming the standard production method because it is simpler and cheaper than wet milling. The wet milling process is fundamentally the same as that used for making food grade corn products. It consists of cooking the corn in water laced with sulfuric acid; this causes the thin hull around each kernel to separate. The product is ground and screened to separate the three major grain components. The germ is used to extract corn oil, the bran to produce proteinaceous feeds, and the starchy kernel is fermented and made into alcohol. The residues are also sold as feed. The fermentation process begins by adding enzymes that convert starch to dextrose. Ammonia is added to feed yeast used in the actual fermentation process. The fermented liquid, similar to beer, is passed through a distillation tower to cause the alcohol to separate from the water. Ethanol boils at 173° Fahrenheit (F), water at 212° F, making this process straight-forward. The distilled ethanol still contains water and must be dried. Producers use molecular sieves to accomplish this last task. The sieves are towers filled with hard and very porous materials, of which the pores are uniform, tiny, and powerful enough to absorb molecules of small size. The sieves fill with the tiny molecules; the alcohol, which is more massive, passes through. Sieves are then restored by using heat to remove the water. The alcohol is denatured, meaning rendered unfit for human consumption, by adding a small amount of gasoline. Ethanol is then ready to ship. The wet residue left over by distillation is centrifuged to remove the water; the solids are sold as animal feeds. Wet milling produces four kinds of outputs: oil, protein feed, carbohydrate residues, and ethanol; thus requiring sales of these products to be competitive.

Dry milling emerged as a simplification of the wet milling process. The corn is simply ground into a meal. Mixed with water it produces a mash. The mash is brought to a high temperature to kill off bacteria and after cooling, is fermented with yeast. The rest of the process is the same as in wet milling. The residual solids, however, contain germ and bran as well as residual carbohydrates. The wet residue is handled somewhat differently. Solids are separated first and the remaining liquor is rich in sugar. It is concentrated further into a syrup known as condensed distillers soluble (CDS). CDS is then mixed with the solids producing dried distillers grains with solubles, known as DDGS or simply as DDG. DDG is sold as a substitute for soybean feed but has a lower protein content (27% versus soybean feed's 49%). New ethanol plants are predominantly dry mills. They are technically simpler, require less capital, and products only two things, ethanol and DDG.

Ethanol as a Fuel or Additive

Data on the energy content of ethanol are somewhat variable, ranging from a low of 76,000 British Thermal Units (Btu) per gallon to a high of 83,000 Btu. (A British Thermal Unit is equivalent to the energy required to heat one pound of water by 1 degree Fahrenheit.) Using information provided by the Energy Information Administration (EIA), part of the U.S. Department of Energy, ethanol has 76,330 Btu com-pared with the 116,090 Btu of regular unleaded gasoline. Ethanol's lower heating value, which translates into less actual work done by the fuel (to use the terminology of physics), means that to get the same mileage using ethanol that we get using gasoline, we have to burn 1.52 gallons of ethanol. This result comes about because ethanol's carbon content is 52.2 percent by weight (gasoline's carbon ranges from 85% to 88%). Ethanol and gasoline have similar hydrogen content (ethanol 13.7% and gasoline between 12% and 15%). A substantial part of ethanol (34.7% by weight) is oxygen. There is, consequently, less fuel to burn in the alcohol, but ethanol carries some of the oxygen needed for combustion in the fuel itself. For this reason it burns cleaner than gasoline.

Since 1995, under authority passed by Congress in that year, the Environmental Protection Agency (EPA) mandated the use of reformulated gasoline (RFG) in urban areas with poor air quality. RFG is required to contain at least 2 percent oxygen, supplied by an oxygenating agent. It represents approximately 31 percent of all gas sold. In the latter years of the first decade of the 2000s most of this oxygen was provided by methyl tertiary-butyl-ether (MTBE), a product based on methanol and manufactured by the petroleum industry. Its presence in gasoline reduces carbon monoxide in exhausts. In 1999 environmental sampling began to show that MTBE, which has carcinogenic characteristics at sufficient concentrations, was showing up at high levels in wells and ground water. Announcements of these findings by the EPA caused a stir of legislative activity in Congress, its aim to eliminate this type of oxygenation agent. Legislative activity spurred rapid expansion of ethanol capacity. Ethanol is the logical MTBE replacement and was already in use for about 15 percent of RFG shipped.

In 2001 when George H. W. Bush took office, the policy on MTBE changed as pressure to eliminate this oxygenating agent declined. State legislatures filled in where the federal government had stepped back from legislating the replacement of MTBE. Seventeen states participated in this movement, banning the MTBE using a number of different phase out timelines. In response the petroleum industry, at its own initiative, began a process of replacing MTBE voluntarily even in areas where it was not banned. The industrial deadline for eliminating MTBE was informally set for 2006. When that year came, very little MTBE remained in routine use.

Approximately 31 percent of gasoline is sold as RFG—in 2005 the total was nearly 43.5 billion gallons. To achieve a 2 percent oxygen content in such a quantity of gasoline, a straightforward way to get there is to produce gasoline with at least 7 to 10 percent ethanol content. MBTE replacement, therefore, represented a potential new ethanol market of approximately 3 to 4 billion gallons—at the high end a doubling of the 3.9 billion gallons already produced in 2005 and sold as blended gasoline. Demand for ethanol was high and growing in the late years of the first decade of the twenty-first century and imports were growing.

Ethanol cannot be shipped in pipelines economically because it has a great affinity for water and water is often present in pipelines. In taking up the water, the ethanol or gas-ethanol blend loses energy and incorporates particles of rust and dirt. For this reason producers ship the alcohol in rail cars, trucks, or barges and blend it with gasoline at distribution centers for truck-based delivery to filling stations. Summer heat also causes ethanol to volatilize more easily than gasoline. Special blending efforts, involving extra processing and additives, are necessary to prevent this in formulations where a fixed oxygen content is mandated by law at all times, not just on cool days. Another way to achieve this end is to use more than the minimum amount of ethanol to reach the 2 percent oxygen-by-weight level.

In addition to its most recent deployment as an oxygenation agent, ethanol is sold blended into gasoline and designated by the letter E followed by a number. E10 is a blend containing 10 percent; E15, 15 percent alcohol, and so on. E10 is widely used in the United States. The highest ethanol-content gasoline available in the country is E85. E100 is used in Brazil and contains approximately 4 percent water.


The last published Economic Census, for 2002, reported shipments of ethyl alcohol was $2.79 billion. Of this total fuel ethanol was $2.17 billion (77.7%). Wet milling plants produced the bulk, $1.35 billion, dry milling plants the rest, $810 million. The EIA reported ethanol production to have been 2.13 billion gallons in 2002; thus shipments were worth $1.02 per gallon to the wholesaler. The year was not representative however because prices were at record lows. Anticipating rapid transition from MTBE to ethanol as a oxygenating agent, the industry had added too much capacity. The recession that began in early 2001, and reduced travel due to the 9/11 terrorist attack, influenced total gasoline consumption. Prices of ethanol crashed from levels in 2001 of $1.35 at the low and $1.80 per gallon at the high end.

By 2006 production had increased to 4.86 billion gallons. As reported by the Chicago Board of Trade, ethanol briefly reached historic highs in excess of $4 per gallon in June 2006, although prices dropped again later that year. For most of the year they were between $2.00 and $2.70 per gallon. If we assume an average price of $2.35 that year, ignoring the peak at $4 and the valley at $1.70 per gallon, the market in 2006 was approximately $11.4 bil-lion. Between 2002 and 2006 production increased at the rate of 22.9 percent per year.

Figure 89 illustrates energy production from three types of renewable energy technologies: alcohol, solar, and wind power. The data are shown in quadrillions (1,000 trillions) of Btus, a measure used by government to track energy production from all sources using a common denominator. A single quad of energy is equivalent to 250 million barrels of gasoline and 380 million barrels of ethanol. These equivalencies reflect the differences in energy content delivered by the two kinds of fuel; therefore the chart is indexed by fractions of a quad of energy.

Although the slope of the curves shown does not make this obvious, wind power showed the most rapid growth from 1989 to 2004. It increased from 0.022 quads to 0.143 quads, a 6.5-fold increase and an annual growth rate of 13.3 percent. Ethanol was second. It grew from 0.071 quads to 0.296 quads, a 4-fold increase and a growth rate of 10 percent per year. Solar power was flat; growing at less than 1 percent (0.9%) annually. These new forms of energy represented inconsequential portions of total power in 2004. All three technologies together produced 0.5 percent of all power, thus 0.5 quads out of a total of 100.4 quadrillion Btus consumed in the United States. Of that total, petroleum-based energy represented 86.2 quadrillion Btus.

Issues and Controversies

The ethanol fuel industry is unusual and beset with controversy. Ethanol represents the only major initiative in the United States to turn a food crop into transportation fuel and has passionate opponents and promoters. Opponents include environmentalists, some energy economists, and free market supporters. Proponents are, generally speaking, agricultural interests and those seeking energy independence, both in the private and the public sector. Two issues divide these camps.

The first is ethanol's energy balance. Opponents wonder if ethanol actually produces a net surplus of energy, or if it consumes more energy than it yields. Competing studies produce contrary results. The second issue is subsidy. Ethanol is subsidized at fairly high levels by the federal and by selected state governments. Promoters favor subsidies, arguing that such subsidies help to speed up the development of an industry that has the potential of reducing the United States' energy-independence. Opponents question subsidies to an industry already up and running profitably in the nineteenth century. They argue further that if ethanol is viable as an alternate to petroleum based energy, that rising oil prices will naturally favor it without a subsidy—if it has a positive energy balance. If not, increasing fossil fuel costs will simply make ethanol uneconomical to produce. Subsidies and energy balance are thus closely linked issues.

Apart from these major issues, others are rooted in broader philosophical considerations. Environmentalists favor conservation and drastically reduced energy consumption to cope with diminishing oil supplies. Food crops should feed people, not move people about in cars. They fear that massive corn-based alcohol production will lead to irreversible soil erosion. They see solar and wind power as the technologies of choice. Free marketeers favor market solutions to the energy challenge. They see ethanol production as government intervention. Many promote using nuclear power to create hydrogen fuel by electrolytic splitting of water. Nuclear power is hampered by excessive government regulation. A closer look at the two major issues follows.

Energy Balance

Energy balance is based on the results of a measure of energy returned by (on) energy invested, abbreviated EROEI. This equation is also referred to as energy return on investment (EROI). The basic question becomes, is any particular fuel worthwhile if its production uses more energy than the fuel generated?

Even in the Stone Age, people had to expend some effort to get heat; they had to gather the firewood. No fuel used is free. The general rule is that substances with the highest energy density or Btu value, have the highest EROI. Modern agriculture is very energy-intensive: it requires fertilizers, pesticides, herbicides, machinery, and fuel to make it work; heaters to dry the grains; cars and trucks to ferry labor to and from the fields; trucks and trains to transport the crops; metal and cement to hold up the silos that store them—each process requires the expenditure of energy. To make ethanol, additional energy is required, both in the agricultural processes and in manufacturing the vessels and grinders used at the plants to convert corn into fuel.

EROI is usually rendered as a ratio to one, one indicating energy in, the other number the yield produced. Where the product is energy itself, a ratio of 1: 1 means that the energy you made took as much as you consumed, not a worthwhile endeavor. Data published by Cutler J. Cleveland of Boston University in Energy shows that crude oil had an EROI of 100 in 1930, but this ratio had declined to 20 by 2000; depleted oil fields required more energy to get the crude out by that year. Similarly, coal had an EROI of 100 in 1950 but only 80 in 2000. Cleveland's calculations indicated current EROI for gasoline as ranging between 6 and 10, a way of saying that energy equivalent to a gallon had to be expended to get six gallons minimally and ten gallons maximally. His calculations produced a negative ratio for corn ethanol, thus less than 1, suggesting that it required more energy to make than it delivered. If energy is equivalent to money, a product with a negative EROI requires subsidy.

Two prominent academicians who have studied ethanol in depth are David Pimentel at Cornell and Tad Patzek at University of California, Berkley. Both have reached the same conclusions as Cutler Cleveland. Opposing views are held by Hosein Shapouri, a leading analyst of this issue at the U.S. Department of Agriculture, Michael S. Graboski of the Colorado School of Mines, John McClelland of the National Corn Growers Association, and Michael Wang of the U.S. Department of Energy. Many others also participate in what was an ongoing debate in the first decade of the 2000s.

Those concluding that ethanol manufacturing has a negative EROI have tended to include more elements in their analysis, thus energy consumption associated with making the machinery and the equipment used as well as fuels used in farming or production. In a 2003 study, for example, Pimentel concluded that it took 99,119 Btu to make one gallon of ethanol with 77,000 Btu, a deficit of 22,119. In a rebuttal, Graboski and McClelland concluded that it took 58,942 Btu to produce ethanol at 76,000 Btu, a surplus of 17,058. Pimentel included energy used in manufacturing machinery and equipment for the agricultural and production activities and assigned all energy consumed to the ethanol output. Graboski and McClelland excluded energy associated with machinery and equipment and gave a credit of 12,351 Btu to account for by-product shipments of the hypothetical plant studied. They also assumed a higher corn yield per acre based on a 9-state study and a higher output of ethanol per bushel of corn (2.68 versus Pimentel's 2.5 gallons).

In the early twenty-first century the debate was just beginning. Both studies cited above produce an EROI very close to 1—Pimentel's results yielding 0.8 and Graboski/McClelland's 1.3—both derived by dividing output by energy used. In comparison with the EROI of gasoline, which is between 6 and 10, or even wind power's EROI of 4 to 5, ethanol's result is nothing to write home about. EROI is not an absolute economic indicator but is an indicator of energy sufficiency. All systems close to an EROI of 1 indicate very high expense. An EROI below 1 means that no net energy can be produced for use outside the system. If ethanol turns out to be such a technology, it will always depend on some other form of energy to sustain it. It may, however, even then, be a viable way to produce liquid fuel for transportation.

Subsidies and Costs

Since 1979 federal subsidies for ethanol have been available in the form of partial exemptions for the excise tax and income tax credits. Excise taxes are imposed on the sale of certain goods, including fuels. The U.S. General Accounting Office (GAO) conducted a study of such incentives for the 1980–2000 period. The GAO reported the result in constant year 2000 dollars. Based on that study the industry benefited by receiving $11.7 billion in subsidies. The same study also noted that the petroleum industry received, in the 1968–2000 period, subsidies equivalent to $149.6 billion. Promoters of ethanol point to the more massive subsidies for petroleum as justification. Both are fuels, both get subsidies.

A closer examination of the GAO data is required to understand that the ethanol subsidies are substantially larger than those available for gasoline and related petroleum products because much less ethanol is produced than gasoline. GAO data for the 1989–2000 period are used here because consistent ethanol energy data are available from 1989 forward. From 1989 to 2000, total subsidies available for gas were 0.3 cents per gallon. For ethanol the actual disbursement was 54 cents per gallon, nearly 200 times higher. Subsidies were continued beyond 2000 as well and in 2004, Congress enacted legislation establishing the Volumetric Ethanol Excise Tax Credit (VEETC). It provides a 51 cent per gallon subsidy for ethanol through 2010. The VEETC is collected by the blenders of ethanol, thus the gasoline producers, not the producers of ethanol.

In addition to the federal subsidies, 19 states provided tax incentives for alcohol fuels. All told 41 states had some kind of incentive program related to ethanol in the form of inducements to convert to alternative fuel vehicles or to purchase them; mandating biofuel use in state-owned fleets; and incentives offered distributors and retailers.

Ethanol costs more to make than gasoline. Pimentel presented detailed data on cost of production indicating $1.48 per gallon. To produce sufficient ethanol to equal the Btu content of gasoline would thus cost $2.25 (1.48 × 1.52, 1.52 being the Btu difference between ethanol and gasoline). According to EIA data, the average wholesale price of gasoline from 1989 to 2005 was 82 cents per gallon, with a low of 53 cents in 1998 and a high of $1.68 in 2005; the differences reflect the changing price of crude. Figure 90 illustrates the differential between ethanol and gas prices over the 2003 to 2007 period, expressed in price per million Btus using Ethanol 85 as the ethanol grade (85% ethanol, 15% gasoline). The cost differentials in this period favored gasoline. It cost $3.40 less in 2003 at the low end and $4.90 less per million Btu in 2004. Calculating the effect of the subsidy on ethanol makes the cost difference less alarming.

E85 is 85 percent ethanol. Therefore 850,000 Btus of one million come from pure ethanol. This number, divided by 76,300 Btu per gallon (the energy content of ethanol discussed above), produces 11.14 gallons of ethanol. Multiplying the 11.14 gallons by 51 cents (the prevailing subsidy means that a million Btu of E85 received $5.68 in subsidy each year. The subsidy was more than sufficient to erase E85's higher price, it provided additional funds used to make the fuel more competitive. Without the subsidy ethanol would still be purchased as a replacement for MTBE in order to oxygenate gasoline in high-pollution urban areas. To achieve greater sales, however, alcohol may very well depend on the presence of the government subsidy.

Ethanol as an Alternative to Gasoline

Ignoring the marginal energy balance of ethanol, its subsidy, and its inherent reliance on petroleum fuels to produce its fertil-izers and to power its agricultural machinery, the question arises: Can ethanol entirely replace gasoline as the primary transportation fuel in the United States? The answer, not likely.

Assuming a high yield of corn per acre (140 bushels), one acre will yield 375 gallons of ethanol, equivalent to 247 gallons of gasoline in energy content, thus 5.9 barrels per acre of gas-equivalent fuel. Gasoline consumption in 2005 stood at 3.34 billion barrels. If all of this fuel had been replaced by ethanol, it would have required 566 million acres planted with corn. According to USDA's Natural Resources and Conservation Service, all cropland in the United States was 368 million acres in 2002, down from 420 million in 1982 and 381 million in 1992. The answer to the question posed above is therefore no. Current acreage devoted to corn for all purposes was approximately 80 million acres in 2005. If all of this acreage had been used to produce ethanol, it would yield 470 million barrels of gasoline-equivalent fuel—14 percent of U.S. consumption, up from current levels of around 1.6 percent. Even that usage would have cut into food production. Using all corn for ethanol, however, does indicate an upper boundary. At best, ethanol can displace only 14 percent of gasoline usage if the nation gives up most food, but not all animal feed, uses of corn.

To illustrate boundaries, we may examine the goals set by President George W. Bush in his 2007 State of the Union address. The President called for cutting gasoline consumption by 20 percent by 2017 to be achieved in part by producing 35 billion gallons of alternative fuels. The president's object would translate into using 93 million acres of corn for ethanol, well in excess of all corn acreage planted in 2005. A production of 35 billion gallons would replace approximately 16 percent of gasoline usage in 2005 (much less in 2017 unless natural growth in consumption was artificially constrained). An additional 4 percent would have to come from more fuel-efficient vehicles, electric cars, or straight-forward curtailment of travel.

The ethanol industry is very complex. The industry could see growth stimulated by mandated use of alcohol for fuel oxygenation specifically driven by the need to replace MTBE in gasoline production because it pollutes water. Ethanol production is also supported by a generous subsidy without which it would probably be used strictly as an oxygenation agent. Rising crude oil prices causes gasoline to be more expensive. This will favor using ethanol even though ethanol costs will also rise because its production demands substantial amount of fossil fuel. Natural limits to growth, however, are set by shrinking crop acreage and an unfavorable energy balance. Ethanol has the characteristics of an industry strongly supported by national and state government policies. The industry rests on environmental regulations, agricultural support, and national security considerations, not an innate market force, favorable economics, or popular demand.


Based on data provided by the Renewable Fuels Association, 74 companies participated in ethanol manufacturing in 2004. They operated 87 plants. Of these plants 77 used corn as the input raw material. Nine plants produced ethanol from such products as cheese whey, wheat starch, brewery wastes, and sugar-starch combinations.

The major producers are Archer Daniels Midland (ADM), Cargill Corporation, Aventine Renewable Energy, VeraSun Energy, Pacific Ethanol, Inc., AE Staley Manufacturing, U.S. BioEnergy Corporation, and Hawkeye Holdings LLC.

In the middle of the first decade of the twenty-first century then producing sector was in substantial flux. Capacity was being added rapidly in response to the change-over from MTBE to ethanol oxidants in gasoline and the major publicity provided by the Bush Administration's plans to transform the nation's use of fuels. In efforts to obtain capital for expansion, a number of companies had gone public in 2006, including VeraSun, Aventine, and Hawkeye. Some of these, and others, were adding to their sales by developing relationships with smaller producers to act as their exclusive distributors, thus boosting their own volume but limiting their risks. Aventine for example, had production capacity of 696 million gallons in 2006 but also sold an additional 493 million gallons as a distributor on behalf of other producers. Cargill had capacity of 230 million gallons but expected to be able to distribute 750 million gallons all told. Archer Daniels Midland (ADM), which at one time had enjoyed a 60 percent share of the market continued to be a dominant factor, but with its market share reduced to 24-25 percent. ADM was also boosting capacity. ADM and Cargill are major, diversified corporations with low exposure, to the uncertainties associated with ethanol. AE Staley is also diversified and is part of Tate & Lyle, PLC, a global company based in the United Kingdom. Ethanol plays a major role in the operations of the other leaders.

Archer Daniels Midland

Based in Decatur, Illinois, ADM had sales in 2006 of $36.6 billion divided among oil seed operations (32.5%), corn (13.3%), agricultural services (42.2%), and all other activities including food and feed ingredients (12%). ADM's ethanol operations were part of its corn activities producing 7.4 percent of total ADM sales.

Cargill Corporation

This company is privately held and, for that reason, is not as well known as ADM. Cargill, however, is one of the largest companies in the United States and is the largest privately held firm, with sales of $75.2 billion in 2006. The company is a global trader in agricultural and food products, provides pharmaceutical, offers financing products, and produces industrial goods from agricultural commodities. Of these ethanol is one product, estimated to represent a little over 2 percent of Cargill's business, a sufficient level of participation to make Cargill one of the top three participants in the business based on its distribution, not on its production activities. Cargill is based in Minneapolis, Minnesota.

Aventine Renewable Energy

Aventine ranks with Cargill in second or third place. The company has its headquarters in Perkin, Illinois, and had sales in 2006 of $1.59 billion, largely from ethanol manufacturing and its by-products. of ethanol manufacture. Aventine operates its own plant and is partial owner of Nebraska Energy LLC, jointly owned with the Nebraska Energy Cooperative. The company also sells the products of ten other producers under partnership agreements. The partners are located in Illinois, Kansas, Minnesota, Iowa, South Dakota, and Wisconsin—the very heartland of ethanol production. The company went public in 2006.

VeraSun Energy

Located in Brookings, South Dakota, VeraSun Energy was a $558 million company in 2006. It operated three plants producing 226 million gallons of ethanol. VeraSun was also building three others, two in Iowa and one in South Dakota. Pacific Ethanol, Inc., located in Sacramento, California, is the leading producer of ethanol in the western United States. The company operated four plants with a capacity of 101 million gallons. Pacific had sales in 2005 of $226 million.

AE Staley Manufacturing

Located in Decatur, Illinois, AE Staley is part of Tate & Lyle, PLC. The company is best known for its participation in corn sweetener and other food ingredients. The company's total sales are estimated at approximately $1 billion—of this total ethanol is merely a fraction. In 2004 the company had installed capacity to produce 65 million gallons at a plant in Loudon, Tennessee.

US Bio Energy Corporation

This company is headquartered in St. Paul, Minnesota. US Bio Energy Corporation was operating three plants in 2007 with total capacity of 250 million gallons. It was engaged in building five other facilities expected to lift its capacity to 650 million gallons. The company reported sales of $125 million for 2006.

Hawkeye Renewables

This company, operating as Hawkeye Holdings LLC, went public in 2006. The com-pany reported capacity of 215 million gallons and sales of $89 million for that year.


Corn prices have a strong bearing on the cost of ethanol, not on its price. Gasoline prices are set by crude oil prices and by demand. Ethanol prices are pegged to gasoline's and to the level of subsidy that fuel-alcohol enjoys. Ethanol producers have little leverage in the market, and some producers make this point bluntly in their communications with stockholders when discussing risk. If corn prices shoot up, producers cannot pass on this increased cost to the oil companies. Gas prices, however, were moving upward as a consequence of international uncertainties arising from unrest in the Middle East, and of shrinking reserves.

Corn prices are set by demand and by factors that still influence agriculture: soil quality, the seasons, and the weather, not least the winter's length and precipitation. The later the planting, the lower the yield; but if the farmer plants too early, frost can hurt the crop. Other factors are the cost of fuels and fertilizers, both influenced by oil prices. In the early 2000s corn prices were rising in response to the prospect of selling substantially more corn for ethanol. Farmers were also planting more corn, thus increasing supplies.

Most ethanol production in the United States is done in the Midwest, near the source of its agricultural raw material. Four states have more than 10 plants. They are Iowa (16), Minnesota (14), and South Dakota and Nebraska (11 each). Illinois, Kansas, and Wisconsin, with 7, 6, and 5 plants respectively, make the second tier. All told these states have 83 percent of production plants, and also the dominant share of corn production. The region has three major population centers—Minneapolis/St. Paul in Minnesota, Kansas City, Kansas on either side of the Missouri/Kansas border, and Chicago in Illinois. To service most of the population across the country, however, especially urban areas where RFG is mandated, the product must move substantial distances. Ethanol cannot be transported through pipeline so truck, rail, and barge transportation is used to get it to blending or distribution locations. Such movement typically involves the intermediation of distributors.


Ethanol is delivered under direct contractual arrangements between large producers and the principal buyers of ethanol—the major gasoline producers. Producers also act as distributors for others, aggregating production from multiple plants. Independent distributors are also active. All parties involved seek as much predictability as possible aiming to obtain long term contracts that guarantee sales in the future at adequate prices matching their projected costs without leaving too much on the table, especially in a market where gas prices are generally rising. Ethanol buyers have the balance of power. There are many ethanol suppliers. Alcohol is but a fraction of total fuels reaching the consumer at the pump. Mandated product use, such as the use of oxygenation agents, depend on legislative action which may be rapidly reversed. The same holds for subsidies. These factors influence the details and timing factors integrated into distribution contracts.

In the context of distribution, and in relation to contracts and pricing particularly, the substantial risks of ethanol become visible. The cautious investor is provided the straight talk in producers' filings with the Securities and Exchange Commission, such as 10-K reports. In the middle of the first decade of the 2000s, and by contrast, exaggeration and hyperbole frequently accompany discussions of ethanol as a solution to the U.S. dependence on imported fossil fuel.


The ultimate users of ethanol are people at the pump, but the public at large is not actively participating in buying ethanol. The demand is rooted in institutional mandates rather than in consumer demand. A small segment of the public, in fact, views ethanol as an inferior fuel, a view that ethanol producers feel obliged to correct. Other key users are the petroleum companies. To satisfy public mandates for oxygenated gasoline, they buy ethanol because a more technically and economically superior product, MTBE, is in process of being banned for potential health risks. Gasoline refiners buy ethanol because, with the excise tax credit they can obtain a product at lower cost than gasoline.


When ethanol is viewed as a renewable source of energy, adjacent markets are other renewable technologies, such as biomass, hydroelectric, geothermal, wind, and solar power. Biomass represents 47 percent of renewable energy, the bulk of which is provided by burning wastes—primarily industrial and agricultural wastes combusted to produce heat. Ethanol is classed with biomass but is just 4.8 percent of all renewable energy. Hydroelectric represents 45 percent of total renewable energy and more than 80 percent of the renewable energy used for electrical generation. Wind energy, 2.3 percent of renewable energy, is the most rapidly growing category. Wind energy is also generously subsidized but has a much more favorable energy balance.

If ethanol is viewed as corn, its adjacent markets in the 2000s were also its principal markets: animal feeds, sugar and sweeteners, exports, and human food products.


R&D related to this market actually encompasses activities far beyond ethanol. Research extends into the use of ethanol, methods of blending ethanol, control of ethanol's volatility in hot weather, and its potential replacement in oxygenation applications by another hydrocarbon are all under study in the context of gasoline production. Within the ethanol industry itself, process improvement is an important research and development goal. That effort, in turn, is supported by agricultural research to improve corn cultivation at lower rates of fertilizer, herbicide, and pesticide use. R&D efforts also extend into territories far removed from fuels use such as genetic modification of corn varieties. At the point of ethanol utilization, development work and engineering adaptations by the automobile industry round out the rather complex R&D picture.

An important area of research is the replacement of corn itself with agricultural and wood waste as the principal source of sugar. Switch grass, common on the North American prairies, is an often-touted candidate crop as a source for ethanol to be used to keep our transportation systems running as petroleum based fuel become scarce. Switch grass is, however, somewhat limited because it requires more acreage than corn to produce equivalent quantities of ethanol and therefore requires capital investments nearly 3.5 times greater for the same output, based on the present state of the technology. Similar problems limit other raw materials.


The major trend in the first decade of the twenty-first century was expansion. Ethanol had been singled out by President Bush as an important candidate to reduce domestic use of gasoline. The switch from methyl-tertiary-butyl-ether (MTBE) to ethanol was well underway. Consolidation among producers had not yet begun but was in prospect once it became clear that this new emphasis on ethanol was here to stay. In an industry very much subject to disruption, changes in the price of crude oil and therefore gasoline prices, a strong undercurrent of anxiety also registered in the reports filed by producers with the SEC. Quite conceivably a settling of international disputes, resolution of the conflict in Iraq, and tensions with Iran could produce at least a temporary fall of fuel prices. Such a price drop, even if relatively temporary, could expose ethanol producers to difficulties—too much capacity and falling prices.


Ethanol has two established markets and one still in process of development. One of the established markets is as a replacement for MTBE. The other established market is as a supplement fuel used as an additive to gasoline. The MTBE and blending markets are of roughly the same size, once all MTBE has been removed. The industry's long term objective, and the market that is still under development, is increasing use of ethanol as pure ethanol for transportation fuel—something already a reality in Brazil. This last objective is naturally limited by available crop land and by ethanol's marginal energy balance. That balance, however, may improve over time.


American Coalition for Ethanol,

American Corn Growers Association,

Corn Refiners Association,

National Corn Growers Association,

Renewable Fuels Association,


"CBOT® Ethanol Futures Contract." Chicago Board of Trade. March 2007.

Cleveland, Cutler J. "Net Energy from the Extraction of Oil and Gas in the United States." Energy 2005, 30.

"Ethanol Timeline." U.S. Department of Energy, Energy Information Administration. Available from 〈〉.

"Full Text of 2007 State of the Union Speech." MSNBC. 23 January 2007. Available from 〈〉.

Graboski, Michael S. and John McClelland. "A Rebuttal to 'Ethanol Fuels: Energy, Economics and Environmental Impacts.'" National Corn Growers Association. Available from 〈〉.

Griscom Little, Amanda. "Mikey Likes It." Grist. 9 December 2004. Available from 〈〉.

"How Ethanol is Made." Renewable Fuels Association. Available from 〈〉.

Patzek, Tad W. "Thermodynamics of the Corn-Ethanol Biofuel Cycle." Critical Reviews in Plant Sciences. CRC Journals, Taylor & Francis. 2004, 519-567.

Pimentel, David. "Ethanol Fuel: Energy Balance, Economics, and Environmental Impacts are Negative." Natural Resources Research. June 2003. Available from 〈〉.

"Prices." Ethanol & Biodiesel News. 16 April 2007.

Shapouri, Hosein. "The 2001 Net Energy Balance of Corn-Ethanol." U.S. Department of Agriculture. Available from 〈〉.

"Synergy in Energy: Ethanol Industry Outlook 2004." Renewable Fuels Association. February 2004.

"Tax Incentives for Petroleum and Ethanol Fluids." U.S. General Accounting Office (GAO). GAO/RCED-00-301R, 25 September 2000.

Whims, John. "Pipeline Considerations for Ethanol." Kansas City University, Department of Agricultural Economics. August 2002.

see also Gasoline


views updated May 29 2018



Ethanol—also known as drinking, ethyl, or grain alcohol—is a compound of carbon, hydrogen, and oxygen (C2H5OH) that can be burned as a fuel. Ethanol can be refined from petroleum, but its interest as an alternative energy source depends on the fact that it can be produced biologically. Yeast cells ingest sugars and excrete ethanol. The sugars can be extracted from kernels of grain, grapes, sugarcane, or other plant materials. Ethanol can be added to gasoline to substitute for some of it or to raise its octane or make it burn more cleanly.

Ethanol can also be burned by itself in specially designed engines. In the United States and Brazil, ethanol production is subsidized by the government in an effort to reduce national reliance on imported oil. The U.S. ethanol program, which relies on corn, is particularly controversial. There is a wide scientific consensus that little more energy, if any, is extracted from burning corn ethanol than is required to produce it. Defenders of corn ethanol argue that ethanol's energy balance is at least positive, and will be much better when methods are perfected for producing ethanol from cellulose, a more abundant plant material. There is also disagreement about whether ethanol contributes less to climate change than do equal amounts of fossil fuel.

Historical Background and Scientific Foundations

The use of ethanol as a fuel goes back to the early days of the internal combustion engine. Henry Ford (1863– 1947), the first person to apply assembly-line techniques to manufacturing cars, stated that ethanol was “the fuel of the future.” Ford even had the Model T, the first car to be marketed to millions of middle-class consumers, designed so that it could run either on gasoline or ethanol. Germany and France had few oil wells and hoped to increase their energy independence by promoting ethanol as a motor fuel. There was debate about which fuel was superior, gasoline or ethanol. In Europe in the late 1890s and early 1900s, a number of road races were held between vehicles burning pure gasoline, pure ethanol, or various blends of the two. In 1906, a third of the heavy locomotives built by the Deutz Gas works in Germany burned pure ethanol and a tenth of the automobile engines built by Otto Gas Engine Works in Philadelphia, Pennsylvania, burned pure ethanol.

Ethanol was eclipsed, however, by gasoline. One reason was that gasoline has 1.5 times as much energy per gallon as ethanol, so a gasoline-powered car can go farther on a tank of fuel. Efforts were made to revive ethanol in the 1920s and 1930s, with a blend of 90% gasoline and 10% ethanol being offered at many gas stations. At that time, ethanol was proposed not primarily as a substitute for gasoline, but as an antiknock additive. Knocking is the annoying sound caused by premature ignition of fuel in an engine's cylinders, which lowers efficiency.

However, the use of a highly toxic (but profitable) lead compound, tetraethyl lead, was successfully promoted by the companies Du Pont and General Motors starting in the early 1920s. About 7 million tons (6.3 million metric tons) of lead were added to the environment in the United States in the twentieth century as the result of using tetraethyl lead instead of ethanol as an antiknock additive. Lead was phased out by law in the United States from 1973 to 1996. Phaseout was completed in Japan in 1980 and in most European countries by the late 1990s. Leaded gasoline is still used in much of the developing world.

The Arab oil embargo of 1973 created awareness in many countries of their dependence on imported oil, and ethanol was advocated as a solution. The U.S. Energy Tax Act of 1978 lifted the $.04/gallon federal excise tax on gasoline blends containing at least 10% ethanol, and in the following decades other tax incentives were created to encourage the U.S. ethanol industry, including a $.54/ gallon tariff on imported ethanol, still in effect as of late 2007. By 2005, 1.6 billion bushels of corn, about 14% of

the U.S. crop, was being used to produce some 3 billion gallons (11.3 billion liters) of ethanol per year.

The U.S. ethanol industry began especially rapid growth after the Energy Policy Act of 2005, which mandated that 7.5 billion gallons (28.4 billion liters) of U.S. gasoline consumption, about 5%, come from renewable sources by 2012. This refers primarily to ethanol, with comparatively tiny contributions from biodiesel.

Brazil began an ambitious ethanol program in 1975 in response to the oil shock of 1973. By 2007, most automotive fuel sold in Brazil contained 70% gasoline and 30% ethanol; about 4 million cars were burning pure ethanol; and most new vehicles contained “flexible-fuel” engines that could burn pure gasoline, pure ethanol, or any blend. Brazil's ethanol is produced not from corn but from sugarcane, which contains more sugar per ton and is therefore a more efficient feedstock for ethanol production. Large volumes of sugarcane are not grown in the United States.

One of the most commonly voiced criticisms of the U.S. corn-ethanol program is that as much, or almost as much, fossil-fuel energy is needed to produce a gallon of ethanol as can be obtained by burning it. Most recent scientific studies support this view. One reason for the poor energy balance of corn ethanol is that only a tiny fraction of the corn plant—the sugar in the kernels—is turned into alcohol. The rest consists of the woody material lignocellulose (cellulose bound with lignin), which cannot be digested by yeast to produce ethanol.

Research on ways to ferment cellulose to produce ethanol has been conducted for decades. Methods proposed include genetically engineered yeast or bacteria, enzymes, or chemicals to liberate sugars from cellulose so that yeast can digest them. As of 2007, very little ethanol was produced from cellulosic fermentation (also called lignocellulosic fermentation), as no process yet affordable compared to either fossil fuels or sugar ethanol. Many experts state that if the process is perfected, it will significantly improve the energy balance of ethanol. Others disagree, claiming that the energy balance even of cellulosic fermentation is negative. The different claims are based on different listings or accountings of all the energy inputs required for the process.

Impacts and Issues

Brazilian Program

Brazil's large ethanol program has been deemed a success by many observers. But it also has its critics, who argue that it has depended on cheap labor, in some cases even slave labor, and that the conversion of large areas of land to single-crop agriculture to support ethanol production is damaging society. For example, in 2007, more than a thousand workers kept as virtual slaves by Para Pastoril e Agricola SA, one of Brazil's largest ethanol producers, were liberated by a Brazilian government raid. Many Brazilian cane workers, harvesting with 8-14 tons (7.2-12.7 metric tons) of sugarcane apiece each day with machetes, are kept in permanent debt and are not free to leave. As some harvesting machines are introduced, supervisors demand even larger harvests from the hand laborers. Seasonal jobs, concentration of land ownership in the hands of large corporations, deforestation to make room for plantations, and other problems are also cited.

Corn Ethanol

As mentioned earlier, corn ethanol has been accused of producing no significant energy. The U.S. Department of Agriculture claims an energy ratio of 1.34, that is, it says that for 1 unit of fossil-fuel energy invested, corn ethanol yields 1.34 units of energy. Most studies, however, agree that the gain is smaller, or that energy is actually lost. Although any plant, when burned, simply returns carbon to the atmosphere that it extracted from the atmosphere, and so makes no net contribution to climate change, in practice the use of fossil fuels to raise and process corn does add carbon dioxide to the atmosphere. Corn ethanol, gallon for gallon, presently contributes about as much to climate change as gasoline.

Critics also point to the fact that modern agribusiness is a destructive industry, leading to the rapid erosion of irreplaceable soil. Even if ethanol yielded an energy profit, these critics say, it would only be a means of mining the soil, which is a non-renewable resource. Some agricultural scientists have also argued that the removal of roots, husks, and stalks from fields to make cellulosic ethanol would accelerate erosion and bleed soil fertility. Such materials slow erosion and aid the penetration of the soil by rainwater.

Critics of ethanol also claim that it puts arable land at the service of the automobile, against which the poor and hungry of the world must then compete for food. In 2007 the New York Times reported that soaring food prices, driven partly by sharply rising demand for corn ethanol, had caused U.S. foreign food-aid dollars to buy less than half the food they bought in 2000.

The official government position is that ethanol will help U.S. farmers, produce cleaner air, and reduce U.S. dependence on foreign oil. As of 2007, this position is supported by leaders of both the Republican and Democratic parties.

Primary Source Connection

The following journal article outlines biomass ethanol's potential to aid in reduction of greenhouse gas emissions, but does not discuss many of the potential drawbacks and limitations of ethanol use. While supporters of ethanol note its clean-burning potential and renewable source, critics assert that current production methods (including those of industrialized farming) require large amounts of petroleum, reducing biomass ethanol's “green” potential. The author here notes that researchers are working to develop greener ethanol production technologies, and that biomass ethanol faces several challenges before becoming a significant petroleum alternative.


No other sustainable option for production osf transportation fuels can match ethanol made from lignocellulosic biomass with respect to its dramatic environmental, economic, strategic, and infrastructure advantages. Substantial progress has been made in advancing biomass ethanol (bioethanol) production technology to the point that it now has commercial potential, and several firms are engaged in the demanding task of introducing first-of-a-kind technology into the marketplace to make bioethanol a reality in existing fuel-blending markets. Opportunities have also been defined to further reduce the cost of bioethanol production so it is competitive without tax incentives.


BIODIESEL: A fuel made from a combination of plant and animal fat. It can be safely mixed with petro diesel.

CELLULOSIC FERMENTATION: Digestion of high-cellulose plant materials (e.g., wood chips, grasses) by bacteria that have been bred or genetically engineered for that purpose. The useful product is ethanol, which can be burned as a fuel. Cellulosic fermentation is one way of producing cellulosic ethanol.

ENERGY POLICY ACT OF 2005: U.S. federal law passed in 2005 that offers tens of billions of dollars of subsidies and loan guarantees for energy technologies it categorizes as “clean,” including renewables, some forms of coal-burning, and nuclear power. Most commentators believed that the majority of the loan guarantees authorized by the act would go to the nuclear industry.

FOSSIL FUEL: Fuel formed by biological processes and transformed into solid or fluid minerals over geological time. Fossil fuels include coal, petroleum, and natural gas. Fossil fuels are non-renewable on the timescale of human civilization, because their natural replenishment would take many millions of years.

LIGNOCELLULOSE: Any of several substances making up woody cell walls in plants, consisting of cellulose mixed with lignin (both organic polymers). Digestion of lignocellulose to produce ethanol is a sought-after technology for producing biofuel.

This chapter provides a brief review of the key factors that drive interest in producing ethanol from biomass sources such as agricultural (e.g., sugar cane bagasse) and forestry (e.g., wood trimmings) residues, significant fractions of municipal solid waste (e.g., waste paper and yard waste), and herbaceous (e.g., switchgrass) and woody (e.g., poplar) crops. Next, a state-of-the-art bioethanol process is outlined, followed by an economic pro forma analysis to provide a sense of the important cost drivers. Against this backdrop, progress made in advancing bioethanol technology is reviewed to define the key accomplishments made possible through sustained research and development. Then two important areas meriting much greater emphasis are outlined. The first is in developing a solid technical foundation built on fundamental principles to help overcome the barriers that impede introduction of first-of-a-kind technology into the marketplace. The second is in aggressively funding research to advance bioethanol technology to the point at which it can be competitive as a pure fuel in the open marketplace. Hopefully, this chapter will provide a better appreciation of how bioethanol production technology has been improved and the vast potential it has for continued advancements and large-scale benefits…

Greenhouse Gas Reductions

Perhaps the most unique attribute of bioethanol is very low greenhouse gas emissions, particularly when compared with the emissions from other liquid transportation fuel options. Because nonfermentable and unconverted solids left after making ethanol can be burned or gasified to provide all of the heat and power to run the process, no fossil fuel is projected to be required to operate the conversion plant for mature technology. In addition, many lignocellulosic crops require low levels of fertilizer and cultivation, thereby minimizing energy inputs for biomass production. The result is that most of the carbon dioxide released for ethanol production and use in a cradle-to-grave (often called a full-fuel-cycle) analysis is recaptured to grow new biomass to replace that harvested, and the net release of carbon dioxide is low. If credit is taken for export of excess electricity produced by the bioethanol plant and that electricity is assumed to displace generation by fossil fuels such as coal, it can be shown that more carbon dioxide can be taken up than is produced.

The impact of bioethanol on greenhouse gas emissions can be particularly significant because the transportation sector is a major contributor to greenhouse gas emissions, accounting for about one-third of the total. As part of a Presidential Advisory Committee on reducing greenhouse gas emissions from personal vehicles, a survey of experts in the field clearly showed that most alternatives to petroleum (e.g., hydrogen production from solar energy) required significant changes in the transportation infrastructure to be implemented, whereas others that could be more readily used (e.g., methanol production from coal or natural gas) would have little impact on reduction of greenhouse gas emissions. On the other hand, ethanol is a versatile liquid fuel, currently produced from corn and other starch crops, that is blended with ~10% of the gasoline in the United States and is widely accepted by vehicle manufacturers and users. Vehicles that use high-level ethanol blends (e.g., in E85, a blend of 85% ethanol in gasoline) are now being introduced throughout the United States. In addition, bioethanol production technology could be commercialized in a few years and would not require extended time frames to be applied. Overall, the evidence suggests that the best choice from the coupled perspectives of greenhouse gas reduction, integration into the existing infrastructure, and rapid implementation is the production of ethanol from lignocellulosic biomass.

Although surveys show that Americans are concerned about the prospects of global climate change, the issue has not received broad political support, perhaps owing to the influence of special-interest groups. On the other hand, much of Europe, Canada, and other countries are actively seeking to reduce greenhouse gas emissions. Ironically, much more attention has been focused on developing bioethanol technology in the United States, whereas other countries have only recently shown interest in the area. Thus, there is tremendous potential for application of U.S. technology in many other regions of the world, benefiting all concerned…


Biomass ethanol is a versatile fuel and fuel additive that can provide exceptional environmental, economic, and strategic benefits of global proportions. Bioethanol can play a particularly powerful role in the quest to reduce greenhouse gas emissions that will be difficult for any other transportation fuel options to match. Because of the widespread abundance of biomass, bioethanol can also be invaluable for meeting the growing international demand for fuels by developing nations as well as enhancing the energy security of developed countries. Furthermore, conversion of waste materials to ethanol provides an important disposal option as new regulations restrict historical approaches. It also is important to note that bioethanol is among the few options available for sustainable production of liquid fuels. Finally, although gasoline is continually being reformulated to reduce its environmental impact, ethanol has favorable properties that can provide air and water quality attributes comparable, if not superior, to gasoline and can provide particular benefits when used as a pure fuel in properly optimized engines and ultimately fuel cells.

Tremendous progress has been made in reducing the cost of enzymatic-based technology for bioethanol production, with current estimated costs showing the technology to be potentially competitive now, particularly for niche markets. A key to these advances has been in achieving higher yields, faster rates, and greater concentrations of ethanol through improved pretreatment technology, development of better cellulase enzymes, and synergistic combination of cellulose hydrolysis and

fermentation steps that make progress in overcoming the natural recalcitrance of biomass. Genetic engineering of bacteria so that they ferment the diverse range of sugars in lignocellulosic materials to ethanol with high yields is a milestone achievement essential to economic success.

Although progress has been impressive, the cost of bioethanol production must be reduced further if it is to be competitive without special tax incentives on a large scale for the fuel market. Because enzyme-based systems can build off the emerging achievements of biotechnology, they show particular promise for further cost reductions, and sensitivity studies, process modeling, and macroscopic economic analyses reveal that there are no fundamental barriers to advancing the technology. Cost estimates reveal that pretreatment is a particularly expensive step, both directly and indirectly. From a technology perspective, the sensitivity studies clearly show that ethanol yield is a strong economic driver, and there are significant gains from improving the yields of all process steps. It is important that even greater cost reductions can result from improving pretreatment and biological-conversion process configurations. In fact, specific advanced pretreatment and bioprocessing configurations based on continued progress in overcoming the recalcitrance of biomass have been identified that would reduce the cost of bioethanol production to levels that it can compete in a nonsubsidized market. However, even though the advanced pretreatment configuration chosen significantly reduces cost, it would represent about two-thirds of an overall advanced design scenario, suggesting that further improvements beyond those envisioned should be sought, with tremendous impact. This result also implies that emphasis on novel pretreatment technology with extremely low-cost potential is badly needed instead of pursuing relatively minor improvements over dilute sulfuric-acid approaches, and such advances will probably best come through improving our knowledge of how pretreatment works. Interestingly, although feedstock cost reductions are constrained to levels that will have moderate impact for large-scale bioethanol production, more productive and less expensive biomass would make it feasible to feed larger plants that realize significant economies of scale.

It is just as important to take the next step and commercialize bioethanol technology so that its tremendous benefits can be realized. However, because bioethanol plants must typically be large to be profitable, substantial capital outlay is required, and risk management is essential to attract investors to finance the introduction of first-of-a-kind technology. Although large pilot and perhaps even semi-works demonstration projects may be required to provide an adequate level of comfort, significantly more emphasis on developing solid fundamental principles for design of biomass processing operations would greatly reduce the tremendous costs and delays associated with technology scale-up. Building expert teams to work cooperatively to understand key bioethanol-processing steps in the context of applying and advancing the technology is the most effective approach to realize the low-cost potential of bioethanol and realize its benefits on a large scale. In the final analysis, researchers, research managers, program leaders, and funding authorities who have had the vision and courage to advance bioethanol technology to the point that it now has commercial potential need to facilitate advancing and applying the technology in the face of even greater challenges to achieve widespread impact. In addition, entrepreneurs, financiers, engineers, and contractors with equal vision and courage are needed to take the technology to its first commercial applications.

Charles E. Wyman

wyman, charles e. “biomass ethanol: technical progress, opportunities, and commercial challenges,” annual review of energy and the environment24 (1999):

See Also Biofuel Impacts.



Worldwatch Institute. Biofuels for Transport: Global otential and Implications for Energy and Agriculture. London: Earthscan Publications, Ltd., 2007.


Dugger, Celia. “As Prices Soar, U.S. Food Aid Buys Less.” The New York Times (September 29, 2007).

Farrell, Alexander et al. “Ethanol Can Contribute to Energy and Environmental Goals.” Science 311 (2006): 506-508.

Krauss, Clifford. “Sudden Surplus Arises as Threat to Ethanol Boom.” The New York Times (September 30, 2007).

Pimentel, David. “Ethanol Fuels: Energy Balance, Economics, and Environmental Impacts Are Negative.” Natural Resources Research 12 (2007): 127-134.

Rosner, Hillary. “Cooking Up More Uses for the Leftovers of Biofuel Production.” The New York Times (August 8, 2007).

Sanderson, Katharine. “A Field in Ferment.” Nature 444 (2007).

Wald, Matthew L. “Is Ethanol for the Long Haul?” Scientific American (January 2007): 42-49.

Wyman, Charles E. “Biomass Ethanol: Technical Progress, Opportunities, and Commercial Challenges.” Annual Review of Energy and the Environment 24 (1999): 189-226.

Web Sites

Al-Kais, Mahdi, and Jose Guzman. “‘How Residue Removal Affects Nutrient Cycling.” Department of Agronomy, Iowa State University, May 22, 2007. <> (accessed October 26, 2007).

Friedemann, Alice. “Peak Soil: Why Cellulosic Ethanol, Biofuels are Unsustainable and a Threat to America.”, April 10, 2007. <> (accessed October 26, 2007).

Kenfield, Isabella. “Brazil's Ethanol Plan Breeds Rural Poverty, Environmental Degradation.” Americas Program, Center for International Policy, March 6, 2007. <> (accessed October 26, 2007).

“‘Slave’ Labourers Freed in Brazil.” BBC News, July 3, 2007. <> (accessed October 26, 2007).

Larry Gilman


views updated May 17 2018


Ethanol is an alcohol fuel that is manufactured by fermenting and distilling crops with a high starch or sugar content, such as grains, sugarcane , or corn. In the energy sector, ethanol can be used for space and water heating, to generate electricity , and as an alternative vehicle fuel, which has been its major use to date. Worldwide, ethanol is the mostly widely used alternative liquid fuel. Ethanol is also known as ethyl alcohol, drinking alcohol, and grain alcohol.

The United States produced 780 million gallons (3 billion l) of ethanol in 1986 and plans to increase this to 1.8 billion gal (7 billion l). This ethanol is mostly blended with conventional gasoline to make gasohol (90% gasoline and 10% ethanol). Gasohol accounts for 8% of national gasoline sales and 25-35% of sales in the farming states of Illinois, Iowa, Kentucky, and Nebraska, where much ethanol is manufactured from maize. Brazil, the world's largest producer and consumer of ethanol, uses a gasohol blend of 85-95% gasoline and 15-5% ethanol. Brazil produces 3 billion gal (12 billion l) of ethanol yearly, almost all of which is manufactured from sugar cane.


Interest in alternative fuels began with the realization that the supply of non-renewable fossil fuel is not infinite, a fact which has important economic and environmental consequences. For example, national dependence on foreign petroleum reserves creates economic vulnerabilities. In the United States, approximately 40% of the national trade deficit is a result of petroleum imports.

Environmentally, fossil fuel burning has negative consequences for local and global air quality. Locally, it causes high concentrations of ground-level ozone , sulfur dioxide , carbon monoxide , and particulates. Globally, fossil-fuel use increases concentrations of carbon dioxide , an important greenhouse gas.

Advantages of ethanol as an alternative fuel

Ethanol has many positive features as an alternative liquid fuel. First, ethanol is a renewable, relatively safe fuel that can be used with few engine modifications. Second, its energy density is higher than some other alternative fuels, such as methanol, which means less volume is required to go the same distance . The third benefit of ethanol is that it can improve agricultural economies by providing farmers with a stable market for certain crops, such as maize and sugar beets. Fourth, using ethanol increases national energy security because some use of foreign petroleum is averted.

Another benefit, though controversial, is that using ethanol might decrease emissions of certain emissions. Toxic, ozone-forming compounds are emitted during the combustion of gasoline, such as aromatics, olefins, and hydrocarbons, would be eliminated with the use of ethanol. The concentration of particulates, produced in especially large amounts by diesel engines, would also decrease. However, emissions of carbon monoxide and nitrogen oxides are expected to be similar to those associated with newer, reformulated gasolines. Carbon dioxide emissions might be improved (-100%) or worsened (+100%), depending the choice of material for the ethanol production and the energy source used in its production.

Disadvantages of ethanol as an alternative fuel

However, there are several problems with the use of ethanol as an alternative fuel. First, it is costly to produce and use. At 1987 prices, it cost 2.5-3.75 times as much as gasoline. The United States Department of the Environment (DOE) is funding a research program aimed at decreasing the cost to $0.60/gallon by the year 2000; in the last decade or so, the cost has dropped from $3.60/gallon to $1.27/gallon. There are also costs associated with modifying vehicles to use methanol or gasohol, but these costs vary, depending on the number of vehicles produced.

Another problem is that ethanol has a smaller energy density than gasoline. It takes about 1.5 times more ethanol than gasoline to travel the same distance. However, with new technologies and dedicated ethanol-engines, this is expected to drop to 1.25 times.

An important consideration with ethanol is that it requires vast amounts of land to grow the crops needed to generate fuel. The process for conversion of crops to ethanol is relatively inefficient because of the large water content of the plant material. There is legitimate concern, especially in developing countries, that using land for ethanol production will compete directly with food production.

Another problem is that ethanol burning may increase emission of certain types of pollutants. Like any combustion process, some of the ethanol fuel would come out the tailpipe unburned. This is not a major problem since ethanol emissions are relatively non-toxic. However, some of the ethanol will be only partially oxidized and emitted as acetylaldehyde, which reacts in air to eventually contribute to the formation of ozone. Current research is investigating means to reduce acetylaldehyde emissions by decreasing the engine warm-up period.

Finally, ethanol production, like all processes, generates waste products that must be disposed. The waste product from ethanol production, called swill, can be used as a soil conditioner on land, but is extremely toxic to aquatic life.

Current research and outlook

Current research is investigating ways to reduce the cost of ethanol production. DOE's research partners are developing a process, called enzymatic hydrolysis , that uses special strains of yeast to manufacture ethanol in an inexpensive, high-yield procedure. This project is also developing the use of waste products as a fuel for ethanol production.

Other researchers are investigating the problems of ethanol-fueled vehicles in prototype and demonstration projects. These projects are helping engineers to increase fuel efficiency and starting reliability. However, until the economic and technical problems are solved, ethanol will mostly be used in countries or areas that have limited access to oil reserves or have an excess of biomass for use in the ethanol production process.

See also Alternative energy sources.



Miller, G.T., Jr. Environmental Science: Sustaining the Earth. 3rd ed. Belmont, CA: Wadsworth, 1991.

Poulton, M.L. Alternative Fuels for Road Vehicles. Boston: Computational Mechanics, 1994.

Jennifer LeBlanc


. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy density

—The relative energy in a specific amount of fuel.

Enzymatic hydrolysis

—A low-cost, high-yield process of converting plant material into ethanol fuel using yeast.

Ethyl alcohol/drinking alcohol/grain alcohol

—Alternative terms for ethanol.


—A fuel mixture of gasoline and ethanol.


—Waste generated when ethanol fuel is produced.


views updated May 11 2018



Advantages of ethanol as an alternative fuel

Current research and outlook


Ethanol is an alcohol fuel that is manufactured by fermenting and distilling crops with a high starch or sugar content, such as grains, sugarcane, or corn. In the energy sector, ethanol can be used for space and water heating, to generate electricity, and as analternative vehicle fuel, which has been its major use to date. Worldwide, ethanol is the mostly widely used alternative liquid fuel. Ethanol is also known as ethyl alcohol, drinking alcohol, and grain alcohol.

The United States had more than 100 ethanol producing plants in operation by 2006 (producing almost 5 billion gallons per year). This ethanol is mostly blended with conventional gasoline. Ethanol is blended into approximately 40 percent of the gasoline consumed in the United States. Some blends such as E85 can contain up to 85% ethanol.


Interest in alternative fuels began with the realization that the supply of nonrenewable fossil fuel is not infinite, a fact which has important economic and environmental consequences. For example, national dependence on foreign petroleum reserves creates economic vulnerabilities.


Energy density The relative energy in a specific amount of fuel.

Enzymatic hydrolysis A low-cost, high-yield process of converting plant material into ethanol fuel using yeast.

Ethyl alcohol/drinking alcohol/grain alcohol Alternative terms for ethanol.

Gasohol A fuel mixture of gasoline and ethanol.

Swill Waste generated when ethanol fuel is produced.

Environmentally, fossil fuel burning has negative consequences for local and global air quality. Locally, it causes high concentrations of ground-level ozone, sulfur dioxide, carbon monoxide, and particulates. Globally, fossil-fuel use increases concentrations of carbon dioxide, an important greenhouse gas.

Advantages of ethanol as an alternative fuel

Ethanol has many positive features as an alternative liquid fuel. First, ethanol is arenewable, relatively safe fuel that can be used with few engine modifications. Second, its energy density is higher than some other alternative fuels, such as methanol, which means less volume is required to go the same distance. The third benefit of ethanol is that it can improve agricultural economies by providing farmers with a stable market for certain crops, such as maize and sugar beets. Fourth, using ethanol increases national energy security because some use of foreign petroleum is reduced.

Another benefit, though controversial, is that using ethanol might decrease emissions of certain emissions. Toxic, ozone-forming compounds are emitted during the combustion of gasoline, such as aromatics, olefins, and hydrocarbons, would be eliminated with the use of ethanol. The concentration of particulates, produced in especially large amounts by diesel engines, would also decrease. However, emissions of carbon monoxide and nitrogen oxides are expected to be similar to those associated with newer, reformulated gasolines. Carbon dioxide emissions might be improved or worsened depending the choice of material for the ethanol production and the energy source used in its production.

Ethanol production, like all processes however, generates waste products, called swill; this can be used as a soil conditioner on land, but is extremely toxic to aquatic life.

Current research and outlook

Current research is investigating ways to reduce the cost of ethanol production. DOEs research partners are developing a process, called enzymatic hydrolysis, that uses special strains of yeast to manufacture ethanol in an inexpensive, high-yield procedure. This project is also developing the use of waste products as a fuel for ethanol production.

See also Alternative energy sources.



Miller, G.T., Jr. Environmental Science: Sustaining the Earth. 3rd ed. Belmont, CA: Wadsworth, 1991.

Poulton, M.L. Alternative Fuels for Road Vehicles. Boston:Computational Mechanics, 1994.

Jennifer LeBlanc


views updated May 23 2018

ethanol (ethyl alcohol) A colourless water-soluble alcohol, C2H5OH. It is the active principle in intoxicating drinks, in which it is produced by fermentation of sugar using yeast: C6H12O6 → 2C2H5OH + 2CO2

The ethanol produced kills the yeast and fermentation alone cannot produce ethanol solutions containing more than 15% ethanol by volume. See also brewing.


views updated May 18 2018


Ethanol is an organic compound with the chemical formula C2H5OH. Its common names include ethyl alcohol and grain alcohol. The latter term reflects one method by which the compound can be produced: the distillation of corn, sugar cane, wheat and other grains. Ethanol is the primary component in many alcoholic drinks such as beer, wine, vodka, gin, and whiskey. Many scientists believe that ethanol can and should be more widely used in automotive fuels. When mixed in a one to nine ratio with gasoline , it is sold as gasohol . The reduced costs of producing gasohol have only recently made it a viable economic alternative to other automotive fuels.

See also Alternative fuels


views updated May 29 2018

ethanol (ethyl alcohol) Colourless, volatile alcohol (C2H5OH), produced by the fermentation of sugars, molasses and grains, or by the catalytic hydration of ethylene. Also known as grain alcohol, its uses include alcoholic beverages, cleaning solutions, antifreeze, rocket fuels, cosmetics and pharmaceuticals. Properties: r.d. 0.789; b.p. 78.5°C (173.3°F).


views updated Jun 11 2018

eth·a·nol / ˈe[unvoicedth]əˌnôl; -ˌnäl/ • n. systematic chemical name for ethyl alcohol.


views updated May 23 2018

ethanol (ethyl alcohol) (eth-ă-nol) n. see alcohol.


views updated May 23 2018

ethanol Systematic chemical name for ethyl alcohol.