The Ups and Downs of the Ethanol Industry

Jun 14, 2013

A few years back, some people in Wisconsin banked big time on corn.

It was being converted into ethanol, and added to fuel to make it cleaner.

Despite early promises, the ethanol industry has experienced ups and downs.

The “gold rush” began in 2005, when President George W. Bush signed a law, requiring gasoline producers to blend in renewable fuels, and increase the number of gallons every year.

Corn ethanol refineries sprouted up, including the Renew Energy plant in Jefferson. By the end of the decade, Wisconsin had nine refineries, with seven more on the drawing board.

Palmyra farmer Bob Oleson says ethanol has been a boon for Wisconsin’s corn growers
Credit Ann-Elise Henzl

Bob Oleson was delighted. He farms in Palmyra, and heads the Wisconsin Corn Growers Association. Oleson says ethanol allowed farmers to grow and sell more corn. Until then, only 60 percent went toward food and livestock feed.

“We still have a big vacancy for the rest of it. We can’t export it all, we’ve known that, we need to find other products.”

Wisconsin was fertile ground for the ethanol, according to Joshua Morby of the Wisconsin Bio Industry Alliance. However, Morby says the building boom went too far.

“At its height, there was too much production of ethanol, and it killed the market.”

One plant closed, others scaled back. The seven on the drawing board, never happened. Bill Day says the economy also took a toll. He’s spokesman for Valero. The Texas-based oil company bought the Jefferson plant, after its owners filed for bankruptcy.

“The economic downturn hit in 2008 and 2009. It dried up credit, and a lot of the companies that were in the ethanol business did not have the resources to get through that economic downturn.”

Day says profits have dropped.

“Gasoline usage has declined, there’s not as much demand for ethanol beyond what the government requirement is, and corn prices are higher, so that has helped squeeze the margins of ethanol producers.”

The industry has faced other challenges. Critics question corn ethanol’s environmental benefits, because you need a lot of energy to produce it. Rising corn prices made their way into the grocery store. And there’s been a mixed reception for E85. It’s a gasoline blend containing 85 percent ethanol. The regular standard is 10.

John Greenler is with the Great Lakes Bioenergy Research Center. He says E85 is usually cheaper, but gets lower mileage and can only be used flex fuel cars and trucks.

E85 usually costs less, but using the blend results in lower gas mileage
Credit Ann-Elise Henzl

“It’s really been hard to create a lot of demand for E85 fuel. Most of the time, the consumer doesn’t see any advantage to it.”

Greenler foresees the ethanol industry evolving. He says scientists are designing engines to burn ethanol efficiently. And Greenler says teams are exploring cheaper, cleaner ways to produce ethanol, such as from grasses and forestry waste.

“The fact of the matter is that once you break down those materials, you end up with the same sugars. Once you get to those sugars, we can make ethanol, we can make biodiesel, we can make bio jet fuel.”

Joshua Morby, of the Wisconsin Bio Industry Alliance, remains convinced that ethanol will keep a place in the U.S. market.

“Ethanol burns cleaner than gasoline. There’s advantages of domestic security. If we can depend on farmers from the Midwest to provide the feedstock to power our automobiles, that’s a better place to be than depending on foreign countries in hostile places for fuel.”

While research continues on renewable fuels, the EPA is suggesting oil companies up the percentage of ethanol in gas, from 10 to 15 percent. You might see a few pumps in Wisconsin offering that blend. But groups such as the Wisconsin-Minnesota Petroleum Council are urging Congress to repeal the renewable fuel mandate altogether. Spokesman Erin Roth says it puts oil companies in a bind.

“We have a declining amount of gasoline we’re selling in this country, and we’re required to put more ethanol in every year.”

Roth says a variety of blends at the pump could confuse drivers and harm older cars, whose engines aren’t approved for use with the higher percentage of ethanol.

He says there’s another reason to end the government mandate: the ethanol industry should be able to stand on its own.