Each year, EPM dedicates its December issue to looking back, updating and bringing perspective to the biggest stories of the past 11 months. This year's "Ethanol Industry Year In Review" includes a look back at policy, construction, process technology, energy, cellulosic ethanol advancements, grain issues, transportation, business, international developments and industry events. Taken as a whole, the year's ethanol industry developments are simply staggering.
To begin, the Energy Policy Act of 2005 kicked in with the first phase of the renewable fuels standard (RFS). Fortuitously, that was coupled with the phaseout of MTBE. As one industry source says, the industry just didn't speed up in 2006—it bolted. The implementation of the RFS spurred a hoard of new projects. There were 33 groundbreakings from January through October, representing more than 2.5 billion gallons of future ethanol production. A total of 13 ethanol plants came on line in 2006 (not including December), with a combined capacity of 606 MMgy. That's not including seven completed expansion projects.
The MTBE phaseout stimulated an estimated 25 percent increase in demand for ethanol mid-year. That kept supplies tight, prices high and all kinds of investors magnetized to the biofuel. With ethanol demand—and prices—at an all-time high this past spring and summer, a plethora of newcomers were looking to snare a piece of the ensuing profits. It brought Wall Street closer than ever to the U.S. ethanol industry.
Perhaps for the first time in its history, the U.S. ethanol industry had to seriously consider the pace of its growth, as the prospect of building too many ethanol plants in the Corn Belt and other prime locations became very real. Meanwhile, the U.S. ethanol industry surpassed the 100-plant mark. That is, for the first time, more than 100 large-scale commercial ethanol plants were simultaneously on line in the country. At the same time, the industry began to see construction "waiting lists" as America's leading design/build companies began to queue up would-be plant owners.
In the political arena, it was a potent year—not for passing federal legislation, but for implementing it and setting "predicate policy," some aimed at raising the RFS floor and schedule. President George W. Bush's "switchgrass speech," as his State of the Union address was later called, had enormous positive consequences for efforts to commercialize cellulosic ethanol. It seemed as though the race to commercialize the process of turning non-grain feedstocks into ethanol went into overdrive the moment Bush said it was the nation's goal to do so within six years. Late in the year, the formation of several strategic partnerships—and the first real signs of serious competition—reared up among the various international players simultaneously developing process technologies to make cellulose-to-ethanol commercially viable.
From a technological viewpoint, U.S. ethanol producers focused heavily on less costly, more efficient methods of making ethanol. With a new agri-energy paradigm emerging, competition is now driving the demand for novel, value-added biorefining processes. At the same time, the unpredictable, sporadically punishing cost of natural gas is now prompting a number of U.S. ethanol producers to roll out alternative heat and steam strategies.
While U.S. corn growers produced the third-largest crop on record in 2006 in the face of spotty drought conditions, its advocates in Washington D.C., didn't lose sight of key domestic and international policy objectives. Likewise, demand on U.S. transportation systems hit an all-time high at precisely the same time more pipeline-challenged ethanol moved by road and rail than ever before. Fortunately, the rail industry and its vendors have been rising to this immense challenge.
Worldwide, ethanol gained appeal in 2006. Following the lead of the United States and Brazil, other nations with equally ambitious ethanol production plans continue laying the foundations for their own biofuels industries. If there were any doubts about the international nature of the ethanol industry, they are all but erased. Ethanol is booming and global.
Tom Bryan
Editorial Director
Ethanol Producer Magazine
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