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By-Products: The Key to Ethanol’s Struggles

| December 12, 2012

Ethanol’s Struggles

Aside from the common “food vs. fuel” debate surrounding ethanol from corn, rising corn crop prices and slower rising ethanol prices has resulted in ethanol plants suffering significant net losses. Ethanol producers have to find additional revenue streams from the total product of their production process including by-products, such as CO2 which unlike CO2 from coal plants, is regarded as pure with a CO2 concentration of up to 99%.

Without a significant drop in corn crop prices or a significant rise in ethanol prices, and a rise in CO2 or other by-product prices such as distiller’s grain, producers will continue to struggle and financial losses cannot be sustained forever. In addition to ethanol and CO2 revenue streams, ethanol producers also sell dried distiller’s grain from the corn however even with this additional revenue stream ethanol plants are still suffering losses in the current market. The ethanol process also produces a stillage which has little economic value and is thus disposed of. An entirely new use of the by-products that can deliver returns directly to the plants is required in order to offset the losses and sustain the ethanol plants.

CO2 market is not enough

Ethanol producers have identified an additional revenue stream from CO2, and ethanol based CO2 by-product now makes up nearly one third of the North American supply of CO2. However, the revenue contribution of the CO2 is still small and ethanol producers cannot cover their losses even with the additional revenue from CO2.

CO2 from ethanol plants are regarded as high grade and after some minor processing to remove the small amounts of impurities, the pure CO2 stream is sold to the merchant markets for use in beverage production and certain medical uses as well as dry ice. A typical ethanol plant producing 50 million gallons of ethanol per year will also produce roughly 150,000 metric tons of CO2 per year. As large a number as this is, the price of raw CO2 sold does not add enough revenue to offset the losses being suffered by an ethanol plant. Ethanol producers sell the raw CO2 to refining companies that then sell the refined CO2 directly to the merchant markets (beverage, medical, dry ice). The value of the refined CO2 from the merchant markets does not accrue to the ethanol producer but rather to the refined CO2 supplier. Ethanol producers cannot justify the large capital expense required to refine and market the refined CO2, and are thus not deriving the full value of their CO2 production.

In addition to the beverage, medical and dry ice markets, CO2 is also used in heavy industrial processes such as enhanced oil recovery and fracturing, which are techniques for the recovery of oil from older oil wells. Again, the ethanol producer derives no value from the oil recovered and can only sell the CO2 as a commodity at low prices.

Stillage and CO2 as Valuable By-Products

One solution for ethanol producers to utilize both the CO2 and stillage by-products is Solutions4CO2 Inc.’s (S4CO2) Integrated Biogas RefineryTM (IBR). In a recent article released by the company, the company proposes a solution for both stillage and CO2 that produces algae biomass for sale in high value nutraceutical and pharmaceutical markets.

The IBR takes organic waste such as stillage and produces biogas through anaerobic digestion. The biogas, containing roughly 60% methane and 39% CO2 with small amounts of H2S, is then processed by S4CO2’s Biogas Purifier and Infusion SystemTM (BPIS) which infuses and completely dissolves over 85% of the CO2 and over 95% of the H2S from the biogas into water, resulting in an offgas containing nearly 90% methane. The purified methane is then used to generate electricity through a genset, and the CO2/H2S infused water is used to cultivate microalgae for the extraction of high value oils containing nutraceutical and pharmaceutical co-products such as Omega-3.

The BPIS can also take CO2 directly from the ethanol plant for infusion into water and use in microalgae cultivation, thus supplementing the IBR with additional CO2 supply and value added use for the by-product. The low capital and operating expenditure of the IBR and high margin value of the co-products results in payback periods under three years.

Accruing the Additional Value of the By-Products
Ethanol plants require large capital outlays up to $200 million for a 100 million gallon per year plant. The losses being suffered currently can be more than offset with a relatively low additional capital outlay for an IBR.

What allows the ethanol plant to accrue the additional value from the stillage and CO2’s utilization in the IBR is the relatively low capital outlay and high profit margins that the IBR offers. For a marginal investment, the ethanol plant can install the IBR and process the stillage and CO2 by-products on site and earn the value added from the utilization of the waste streams in the production of high value added co-products. The high margin, low capex IBR can provide ethanol plants with profit margins to offset current losses being suffered, and depending on the size of capital investment, can result in net profit gains. Unlike merely selling the CO2 to the markets described above, the utilization of the waste streams on-site and ownership of the IBR by the ethanol plant for low capex is what allows the plant to accrue the value creation and strengthen their overall financial profile.

The Reversal of Primary Products and By-Products
With a sufficient capital outlay for the IBR, an ethanol plant can reverse its current losses into net profits. In this case, the profit driver is not the primary ethanol product but rather the microalgae co-products that is produced from the ethanol operation’s CO2 and stillage production. The inputs from the ethanol operation that drive the profitable microalgae product are CO2 and stillage, thus the entire operation’s profitability, ethanol plus IBR, is dependent on the production of stillage and CO2 for use by the IBR, with the ethanol and distiller’s grain being the by-products.

The operation has now been transformed from an ethanol plant producing ethanol with CO2 by-product to an Integrated Biogas RefineryTM producing high value algae based products utilizing CO2 and power from the stillage from corn, with the ethanol being the by-product. This Integrated Biogas RefineryTM model allows for ethanol production to continue sustainably and profitably, whilst also reducing CO2 emissions and making valuable use of all the products in the value chain including the production of high value nutraceutical and pharmaceutical co-products.

Solutions such as the IBR are an example of how the model of integrating various technologies that have a common denominator such as CO2, can transform struggling industries into sustainable industries by looking at the total product of a process and utilizing each product for its most value added use. The key is enabling the producers of these by-products to earn the value from those by-products instead of simply selling the by-products as commodities and missing out on their additional value.

This column was provided to the Digest by S4CO2 . To learn more about partnering with S4CO2 to develop the value chain and deploy both Joint Venture and DBOM projects, both in North America and globally, contact Dil Vashi, Manager, Corporate Development, at 416-859-0909 or [email protected], or Randy Uens, VP, Global Sales and Marketing, at 613-661-6788 or [email protected], or visit S4CO2 ‘s website here .

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