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ASIA - ETHANOL
Asian
countries may see ethanol as a potential money-spinner or environmental saviour,
but doubts still hang over the economics of producing the trendy fuel in a
region where old-fashioned petrol rules supreme.
Agricultural powerhouses, like
Thailand or Australia, blessed with crops that could be used in ethanol
production, are making tentative steps towards building up capacity to capture a
slice of the growing world market for ethanol.
Brazil, the world's largest ethanol
producer, is expanding output to meet anticipated higher global demand. It sees
China and Japan as part of a potentially big Asian ethanol market, especially if
ethanol/petroleum blending policies are implemented.
But Asian industrial countries, such
as Taiwan and South Korea, appear hesitant about embracing the leading biofuel
amid unresolved questions over costs of the blend.
Taiwan's energy commission, facing
growing environmental concern over additive MTBE (methyl tertiary butyl ether),
told Reuters in Taipei it would conduct a feasibility study into
ethanol as a blend in petroleum.
However, South Korean industry sources
told Reuters in Seoul there were no plans to use ethanol as a fuel because of
its relatively high cost compared to regular petroleum.
"Ethanol is too expensive to be
used as a fuel," an industry source said, adding ethanol cost four to five
times more than petroleum
as a raw material.
THAILAND INITIATIVES
Thailand, a producer of ethanol raw
materials like
sugarcane, tapioca, corn and rice, is well placed to supply
regional markets, notably China with which it is establishing business links to
feed the energy-hungry giant.
The authorities have tried to boost
ethanol production by encouraging private firms to set up plants to supply the
domestic market and to fill growing demand in other countries.
Thai media
has reported that one of China's big chemical and pulp manufacturers, Shandong Jinyimen
Chemical Group, had proposed spending 500 million baht ($11.4 million) to build
an ethanol plant in Thailand for export to China.
In another initiative in Thailand,
major sugar mills group Wang Kanai plans to invest 800 million baht to build a
molasses-based ethanol plant, Boonyarit Na Wangkanai, Managing Director at Wang
N.T. Paper Co Ltd, told Reuters.
Thailand's Wang Kanai would soon apply
to the National Ethanol Development Committee for a licence to produce the
ethanol, Boonyarit said.
Construction would start soon after
approval is granted, with the plant scheduled to be completed within 18 months,
he said.
The plant, to be located next to one
of its sugar mills, would have production capacity of 150,000 litres a day,
turning out an alternative fuel for automobiles, Boonyarit said.
The plant is a breakthrough for
Thailand, where no private firms produce at significant levels for industry,
traders said.
TAIWAN PONDERING
In Taipei, an energy commission
official said the Taiwanese feasibility study had been partly triggered by
California's decision to ban MTBE and use ethanol as its oxygen-enhancing
chemical additive to make cleaner-burning gasoline.
California
banned MTBE from 31
December, 2002.
"We commissioned professional
agencies to study using ethanol as a petroleum
additive, and also on how badly
MTBE could contaminate groundwater," the official said.
Taiwan's feasibility study would
assess the economic impact and availability of ethanol, covering a wide range of
issues including the cost of a shift to ethanol fuel.
It was doubtful the government would
introduce immediate petroleum
regulations to force the use of ethanol, the energy
commission official said.
"As the United States is a major
corn-growing country, it can easily produce ethanol using surplus crops. But we
cannot. This is our problem," he said.
State-owned Taiwan Sugar Corp, the
island's sugar monopoly, produces around 20,000-30,000 kilolitres of
sugarcane-based ethanol every year, but only for food use.
KOREA IMPORTING
Korea, meanwhile, imported 77,497
tonnes of ethanol between January and October in 2003, up from 71,216 tonnes a
year earlier, Korea Trade Information Services (KOTIS) data showed.
So far this year, Korea has imported
34,833 tonnes from China, 28,029 tonnes from India and 13,664 tonnes from
Brazil.
Korea imported a total of 88,224
tonnes in 2000, almost all of it for producers of alcoholic beverages.
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Brazil
- Ethanol
The time is ripe for Brazil to relaunch its fuel
alcohol program but consumers must be assured of regular supplies at competitive
prices, government and industry leaders told a renewable energy forum.
"We now have a great opportunity to reactivate the program,"
Trade, Industry and Development Minister Sergio Amaral told the forum at the
start of an international sugar and fuel alcohol trade fair in
northern Sao Paulo state, Brazil's sugar heartland. "But this won't be
possible if we can't guarantee supplies here and abroad."
Brazil is the world's biggest producer and exporter of sugar and fuel
alcohol. Renewed tensions in the Middle East have rekindled fears about oil
supplies, pushing prices higher and renewing interest in alternative fuel
sources.
Amaral noted tremendous interest in the green fuel on recent trade visits
to India, China, Japan and Mexico.
Brazil's first Pro-Alcohol Program, conceived in the mid-1970s to combat
rocketing oil prices, slowed at the end of the 1980s when supplies of sugarcane-based fuel alcohol, also known as ethanol, dried up.
Construction of a "flex" fuel car - running on alcohol,
petroleum
or a mixture of both - in Brazil in the next 18 months will provide an extra
boost, Amaral added.
Production has been held up, however, by wrangling over tax incentives to
cover higher output costs.
Amaral noted that Brazil was harvesting a record crop of
sugarcane, from
which fuel alcohol is produced.
SPARE CAPACITY
During its peak in the 1980s, Brazil produced up to 16 billion litres
of fuel alcohol per year, but this year is expected to make
only 11 billion litres in the key centre-south region in
which Sertaozinho is strategically located.
Demand for cars with special hydrous alcohol designed engines is slowly
recovering after sinking to a trough of 0.1 percent of new car sales in 1998,
from a peak of 90 percent in the mid-1980s, according to Anfavea, the Brazilian
Automobile Manufacturers Association.
Anfavea President Ricardo Luis told the forum that Brazilian auto-makers
had installed capacity to produce 3.2 million fuel alcohol vehicles a year but
only turned out 1.8 million units in 2001. "The market commands.
Manufacturers produce to order," he said.
Several sugar producers, however, complained about a long delivery delay
for alcohol-powered vehicles.
"We have to wait up to three months," said a local producer,
while another said that automakers were giving priority to offloading huge
stocks of petroleum
cars that had accumulated as Brazilian economic growth
slowed.
But Anfavea's energy and environmental head Henry Joseph said that sales
of alcohol cars rose to 3.3 percent of total sales in the first eight months of
2001 and reaching 5 percent for full-year 2002.
Although emission controls have become stricter, the key factor is price.
"Alcohol needs to be at least 30 percent cheaper for more than six
months before buyers react," Joseph told Reuters. Fuel alcohol is sold at a
discount because it is less energy efficient than
petroleum.
Maurilio Biago Filho, who built up the Santa Elisa mill into one of
Brazil's biggest, said that fuel alcohol prices have slid to one third those of
petroleum.
The breakdown in fuel alcohol supplies at the end of the 1980s was due to
the inefficiency of the government controlled distribution system, he said,
adding that there were 280 million litres stored at
Ribeirao Preto.
The head of the Sao Paulo Cane Agro-industry Union (Unica) said that the
creation of a privately financed supply would help guarantee that fuel alcohol
prices remain stable.
"It takes out the price peaks and troughs," Carvalho told
Reuters, noting that petroleum
prices could swing by up to 50 percent during a
year.
The problem is that when international sugar prices rise, millers crush
more cane into sugar instead of alcohol in order to maximize foreign exchange
returns.
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Ethanol
- US National Scene
The ethanol industry contributes
positively to the U.S. economy, particularly rural communities where ethanol
production is based. The economy is
increased by providing direct and indirect jobs, and increasing corn prices and
rural income. The U.S. Department of Agriculture has concluded that a 100
million gallon ethanol facility could create 2,250 local jobs for a single
community.
A report by the Renewable Fuel
Association about the economic outlook of the U.S. ethanol industry over a
seven-year period, 1996 to 2002, concluded:
The production of ethanol does not
mean less corn is available for food. Instead,
ethanol production produces many valuable high protein food and feed
co-products. An acre of corn (125 bushels) produces 313 gallons of ethanol,
1,362 pounds of 21% distiller's grains, 325 pounds of 60% gluten meal, and 189
pounds of corn oil.
Distillers grain can be used for feed
in most every type of animal system and are used as a cost efficient,
nutritional, digestible, and palatable protein feed for cattle, swine, and
sheep. Approximately 1.4 billion
tons of distiller's grain is produced annually.
PRODUCTION & PRICE
Advances in technology in ethanol
production process have substantially reduced costs. A shift to larger production plants along with improved yeast
strains and enzymes have reduced cost by more than 50 percent.
These innovations have lowered production costs from $1.40 per gallon in
1980 to less than $1.00 in 2001.
Still newer plants and improved
technologies have further reduced costs to an approximate current average of
$1.09 to produce one gallon of ethanol. This
trend is expected to continue. Corn
yields; corn costs, and markets for co-products will also affect the cost of
producing ethanol.
Consumer prices at the service station
pump for E-10 ethanol blend is usually the same price per gallon as unblended
fuel. This is also true for E-85
blends. The price at the retail gas
pump reflects federal and state tax exemptions, loan guarantees, and other
government subsidies.
Offsetting the cost of these tax
incentives is a reduction in farm subsidies and the increase of tax revenues.
According to the U.S. Department of Agriculture, if ethanol use does not
continue to grow, "deficiency payments for corn and other program crops
will increase by $580 million for crop year 1998 and $740 million by the year
2000"-more than the cost of the tax incentives.
The economic activity attributable to
the ethanol industry will generate $3.5 billion in additional income tax revenue
over the next five years - $1 billion more than the cost of tax exemptions.
The U.S. ethanol industry will create a net gain to the taxpayers of
almost $4 billion over the next five years.
The oil industry began receiving
federal subsidies as early as 1916 to promote development of an energy industry.
As the oil industry became more profitable, the subsidy payments
continued.
In 1984, the oil industry received
over $8.5 billion from the federal government.
During the same time period, renewable
fuel industries - solar, wind, geothermal, hydropower, and alcohol fuels -
received only $l.7 billion.
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AUSTRALIA:
Wood-Ethanol:
Liquid fuel from trees
A
new report from the Joint Venture Agro-forestry Program (JVAP) has found
significant potential for an alcohol fuel industry based on trees harvested from
farm forestry.
Titled
'Wood for Alcohol Fuels': Status of technology and cost/benefit analysis of farm
forestry for bio-energy, the report states the potential market for these fuels
in Australia is considerable and a liquid fuels industry using biomass may be a
driver for tree planting on a massive scale.
The
report said the alcohol fuels methanol and ethanol can be obtained from trees.
Ethanol is already in use in a number of countries, both as a liquid transport
fuel in its own right and via blends of ethanol and petrol.
Currently,
there is a relatively large price gap between the cost of alcohol fuels from
biomass and the ex-refinery cost of petrol. Alcohol fuels cannot be expected to
compete on a simple economic basis (with no accounting for environmental or
other benefits) against petrol unless there is a large, and sustained, increase
in the price of crude oil.
However,
the report said it is recognised the cost of alcohol fuels from wood should come
down with technical improvements over the next few years. In addition, alcohol
fuels can provide significant benefits in terms of greenhouse gas reduction,
both over petrol and over many other renewable fuels.
The
planting of trees in selected areas is also anticipated to bring about salinity
benefits and potentially other benefits to the environment and rural Australia.
In this study, greenhouse gas benefits and on farm salinity benefits have been
assessed in terms of their ability to "close the gap" that is
identified for biomass based fuels.
The
report includes preliminary cost conversions and price estimates which allow for
initial comparisons between the cost of renewable liquid fuels and their fossil
fuel counterparts now and in the future.
It
is possible that other products could be produced in conjunction with the
manufacture of alcohol fuels from trees. Work underway in Western Australia with
integrated processing of mallee eucalypts for renewable electricity, activated
carbon and eucalyptus oil is one example of multiple products supporting
improved project economics.
Co-products
relevant to liquid fuel production include oils extracted from leaf material and
new products from the lignin. If produced in sufficient quantities or at
sufficient value, such co-products would improve the commercial viability of
alcohol fuel production.
Rural
Industries Research & Development Corporation reports can be downloaded free
of charge from the website: http://www.rirdc.gov.au,
which has more than 800 research reports on a wide range of rural industries.
Hard copies can be purchased online or by phone (02) 6272 4819. A free
publication catalogue is also available.
Source: Rural
Industries Research & Development Corporation
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