The handwriting has been on the wall on this issue for a couple of years. In fact, I first mentioned it in March 2006 in Improving the Prospects for Grain Ethanol. Here is an excerpt of what I wrote:
This is an option that most environmentalists will abhor. However, it is the one most likely to take place in the short-term. The natural gas input into ethanol production is a serious long-term threat to economic viability. Since natural gas is a fossil fuel, and supplies are diminishing, it will put upward pressure on the price of ethanol over time. However, if the energy inputs could be produced from coal, ethanol prices would be insulated from escalating natural gas prices.
Using coal might also lessen the significance of the EROEI debate. If you take 1 BTU of (cheap) coal, and you get back 0.8 BTUs of (more valuable, liquid) ethanol, then EROEI doesn’t have the same significance as when you use natural gas to produce ethanol. You converted the BTUs into a readily usable liquid form. This argument may be valid from an economic point of view, but it ignores the fact that coal is still an inherently dirty energy source. If coal remains abundant and cheap, coal economics will beat natural gas economics, but coal will increase the rate at which we put carbon dioxide into the atmosphere. If we come up with a viable method of sequestering the carbon dioxide produced at the power plant, then we might have a temporary economic solution (although we are still using up a non-sustainable fuel in the process).
Now I am not going to tell you that I think this is a good idea. I am just telling you what I think is going to happen. And a couple of days ago a friend sent a link that says Iowa is considering a couple of new coal plants for some ethanol plants, acknowledging the superior economics of coal as fuel:
Iowa needs $2 billion in coal-fired electricity production to supply power for ethanol; critics say coal use “ungreens” ethanol
Two coal-fired electricity plants, in Marshalltown and near Waterloo, have been proposed in Iowa to provide electricity for the growing collection of Iowa ethanol plants. Critics say that ethanol’s need for coal-powered electricity makes the case that it is not a green fuel.
Alliant Energy, co-owner of the Marshalltown project, said that the needs of the ethanol plants can only be solved at this point in time by nuclear, natural gas or coal, and that natural gas is not economical while nuclear has been taken off the table due to environmental concerns. The proposed plants would cost $1 billion each.
Last week, Xethanol Corporation announced that it would invest $500,000 in Consus Ethanol for its cogeneration project that would provide power for its ethanol production process from waste coal, that would have a $0.48 per gallon cost advantage over comparable ethanol plants in the Midwest powered by natural gas. The Pittsburgh-based facility will distribute fuel to East Coast markets, which have higher prices for ethanol.
That last bit is interesting. Where is Xethanol finding any money to invest? Since I last wrote about them, they have racked up another $6 million loss, dropping their total current assets to under $15 million. They remain on the trajectory to bankruptcy, which is one of my predictions that is still unresolved.
But that’s a digression. On the subject of using coal as the source of BTUs for ethanol production, there are two things that stand out. First, the current process of using natural gas to produce ethanol makes little sense, since you can use natural gas directly in a CNG vehicle. You gain little or nothing by turning a BTU of natural gas into a BTU of ethanol (plus some animal feed). However, coal can’t be used directly as automotive fuel, so one can make the argument of upgrading the quality of the energy source by turning some of coal’s BTUs into ethanol.
Second, the cost of energy per BTU is far lower for coal. The current price of natural gas is $8 per million (MM) BTUs. However, according to the EIA coal sells for about $40/ton, or 2 cents a pound. The energy content of bituminous coal is about 12,750 BTU/lb, which calculates out to $1.57 per MMBTU. (Just double-checked my numbers, and found that the EIA reported that coal prices in September 2007 were $1.78 per MMBTU, so I was in the ballpark).
So, the economics are going to drive ethanol producers toward coal as their fuel of choice. And some have already been driven there. I predict we will see a lot more of this in the future, especially in light of my previous essay on the economics of corn ethanol. Plug in coal at $1.57/MMBTU instead of natural gas at $8, and it makes a huge difference. But for ethanol producers who do go this route, don’t pretend that what you are doing is clean or renewable.
22 thoughts on “Coal-Based Ethanol”
Coal to methanol would make more sense.
Don’t forget the extra 30-50 cents of SO2 per BTU to pay for the allowances under the EPA’s SO2 cap and trade system. (Assuming you use the Central Appalachian brand of coal – Powder River Basin coal has half the SO2, but lower heating value and higher shipping costs)
Shipping costs are escalating as well.
The math still favors coal, however.
“power for its ethanol production process from waste coal, that would have a $0.48 per gallon cost advantage over comparable ethanol plants in the Midwest powered by natural gas”…but in the post below, you had the *total* energy cost for the ethanol process at $0.33/gallon.
An econ blog reports this as a surprising surge of ethics, but it might also be heralded as a further tipping point for coal:
“Perhaps my memory is failing me, but the insistence by three major Wall Street firms, that utilities prove that their new coal-fired plants are economically viable, is at a minimum highly unusual (I’d say unprecedented).
Normal Wall Street practice is simply “disclose and sell.” Under securities laws, if the issuer presents its financial situation and risks accurately, he ought to be free and clear, even if the deal goes sour. And the lead manager and underwriters (that is, the investment banks selling the paper) have extremely limited liability. The prospectus is written by the issuer (in this case, the utilities), the only language that the managers provide is related to pricing and the mechanics of the underwriting (CDOs and other structured finance products are a completely different kettle of fish, since the Wall Street firms in many cases created the legal entities that sold the paper).”
“…but in the post below, you had the *total* energy cost for the ethanol process at $0.33/gallon.
That is supportive of what another poster said, when he commented that the energy usage in that spreadsheet was the lowest he had seen for an ethanol plant. In all likelihood, the energy usage of most plants is higher than what was reported in that spreadsheet, which is the reason for the discrepancy.
Coal to methanol would make more sense.
No doubt, and I am about to write an essay on that.
Or to reword that above ^^
Citigroup, J.P. Morgan Chase, and Morgan Stanley, just started to require that coal plants show that they can be economically viable under a cap-and-trade program, before they get any funding.
Thats not really “Ethics” at play. Thats just raw economics taking liability precautions against a changing regulatory framework.
What it does mean however is that they acknowledge that carbon regulation is inebitable.
==Coal to methanol would make more sense.==
But not by much.
Not to mention there’s that nasty “infrastructure logistics” you have to worry about.
Virtually the only realistic way to reduce transport emissions with coal is to make electricity-for-transport with it.
Aren’t these plans for coal-fired cogenereation essentially just using waste heat for the ethanol production?
My understanding is that the difference in electrical efficiency between conventional thermal power plants and CHP is very small, making the heat almost free in energy terms (though not in terms of infrastructure).
Seems pretty bright actually, assuming coal-fired power plants are to be built at all. Which is a very different question, but not directly related to ethanol.
What about solar-thermal for ethanol production? The storage problem that usually aflicts solar is here solved automatically, in the form of a tank to put the product in…
The new energy bill (passed in December) has language in it that requires all new ethanol plants (derived from corn starch) to have lifecycle GHG emissions at least 20 percent below gasoline’s lifecycle emmissions. I haven’t done the calcs, but I’m guessing that coal-fired ethanol plants wouldn’t fare well under these new guidelines. At least new investors in new ethanol plants will now have to think twice before going with coal.
Of course, this assumes that EPA will be able to figure out a reasonable methodology that determines compliance for each gallon of ethanol produced. That won’t be a simple task, given that we know corn-based ethanol’s fossil fuel inputs can vary depending on all sorts of factors.
==The new energy bill (passed in December) has language in it that requires all new ethanol plants (derived from corn starch) to have lifecycle GHG emissions at least 20 percent below gasoline’s lifecycle emmissions.==
Or was that language cut from the final bill?
It also goes without saying, that the Nuclear Industry also can’t get loans from Wall Street either.
To the point that they are demanding more loan coverage, exclusively paid for by taxpayers, than the rest of the entire electricity industry combined and multiplied.
It’s hugely expensive, has a history of catastrophic defaulting, and has a massive potential of externalized costs coming back to haunt them later.
A Bad investment from a wall street perspective.
Meanwhile, renewables are flush in private financing.
That certainly tells you something about the “market’s” real position ;D
Just to remind everyone that coal is a very finite commodity anyway…
the crazy people from MARE Initiative are looking for someone to give them 2nd opinions on saltwater algae production and transformation into cheap biomass (for heat conversion…)
Any ideas out there ?
Greyfalcon asked if 20% GHG reduction was still in final 2007 Energy Bill. It was in Final, and is now law. The EPA Administrator has option to drop it to 10% if 20% is not technically feasible, but it’s not clear to me how that process would actually work. EPA will establish a “baseline” GHG level for natural gas corn ethanol plants circa 2005. Any new corn ethanol production (started after Dec2007) has to be 20% better than that. “Advanced biofuels” are defined as anything other than corn ethanol, and must have 50% improvement to GHG baseline. Good summary at http://www.ethanolproducer.com/article.jsp?article_id=3536&q=&page=all
==Just to remind everyone that coal is a very finite commodity anyway…==
Finite, yes. Very finite, No.
More than enough to cause a tripling in the atmospheric concentration of CO2, Yes.
==the crazy people from MARE Initiative are looking for someone to give them 2nd opinions on saltwater algae production and transformation into cheap biomass (for heat conversion…)==
Coal reserves could also be in jeopardy.
We are currently consuming 6.2 billion tons of coal per year and this is set to rise – possibly as much as 25% in the next decade.
At the current consumption, we could have 150 years remaining of economic coal.
However, this could be reduced to as little as 40 years remaining economic reserves.
This is for at least 3 reasons:
1. Natural economic expansion in newly industrialising countries such as China and India.
2. Increased use of coal to displace dwindling petroleum fuels – such as coal to methanol.
3. Declining quality of coal stocks. The best grades have already been substantially depleted, there is year on year progression to grades with inferior energy value.
China is tooling up for a massive expansion into solar pV over the next few years.
Current pV manufacturing in China uses between 2 and 4 tonnes of coal for each kW peak photovoltaic array produced.
David Strahan has a good analysis here:
Algae issues for Mare
thank’s greyfalcon, interesting links indeed 🙂
I think they just should dry and burn the stuff .. fast growing kelp would do fine !
Richard Heinberg’s Museletter: The Great Coal Rush (and Why It Will Fail)
04 Feb 2008
definitively worth reading
From the article greyfalcon and odograph linked to
The banks say they don’t want to be involved with debt that goes bad as a result of government emissions caps that require the power plants they finance to buy large numbers of extra pollution allowances. Under a cap-and-trade system to limit greenhouse-gas emissions, the government would distribute a certain number of emission allowances each year. Companies whose emissions exceeded their allowances would have to buy more from companies that had more than needed. Congress is considering several cap-and-trade proposals.
So we are going to try a cap and trade system. Which from a practical standpoint is kind of entertaining given the fact that Europe’s carbon markets collapsed.
However cap and trade provides abundant opportunity for money making via rent seeking legislation so on second thought I guess it is not surprising congress wants to try it.
The new energy bill (passed in December) has language in it that requires all new ethanol plants has language in it that requires all new ethanol plants (derived from corn starch) to have lifecycle GHG emissions at least 20 percent below gasoline’s lifecycle emmissions.
Does anybody think this will last if the farm lobby decides it gets in the way of them turning corn into ethanol?
If they do they have not been paying attention.
There is one more coal issue that I am examining, waste coal.
Pennsylvania is working to create ethanol capacity and from the projects under construction or close the way it is being "done" is through the use of waste coal as an energy source. (http://pittsburgh.bizjournals.com/pittsburgh/stories/2007/05/21/daily7.html) Bionol LLC also called BioEnergy is constructing a plant in Clearfield, PA and the plant planned for Curwensville, PA is fighting public opposition. (http://switchboard.nrdc.org/blogs/ngreene/more_about_pa_coal_ethanol_pla.html)
I'm not sold one way or the other on waste coal. PA incentives promote burning to clean up the piles (http://www.depweb.state.pa.us/dep/cwp/view.asp?a=3&q=474575).
I guess your opinion depends on how you feel about carbon dioxide versus water and soil contamination.
I'm working on running the economics for waste coal using Tiffany's spreadsheet (http://www.agmrc.org/NR/rdonlyres/4C6BD4DE-8DA0-44F6-A9AE-02320DBF99F6/0/ethanolsuccess.xls). I know some factors there are out of date, but it works for comparison. I'm having a hard time with the EIA website not being up lately to vet some numbers for waste coal cost.
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