Biofuels recovering as “moment of energy opportunity” arrives

The Energy Opportunity promises sunny days ahead

If July and August were the “Summer of Algae”, then September and October are surely “the Indian Summer of Ethanol” for there has been unexpectedly warm results from the sector, and focus on the long-term “energy opportunity” inherent in the climate bill should give even more seasonal cheer to an industry battered by a plentitude of critics and a shortage of working capital.

In Washington, Secretary of Energy Steven Chu focused his remarks yesterday to the Senate on the climate bill – not on the usual doom-and-gloom of the CO2 data – but on “the energy opportunity.”

“EIA found that, globally,” Ch said, “the cumulative investment in wind turbines and solar photovoltaic panels from now through 2030 could be $2.1 trillion and $1.5 trillion, respectively.  The policy decisions we make today will determine the U.S. share of this market.  And many additional dollars, jobs and opportunities are at stake in other clean technologies.

“The United States, meanwhile, has fallen behind.  The world’s largest turbine manufacturing company is headquartered in Denmark.  99 percent of the batteries that power America’s hybrid cars are made in Japan.  We manufactured more than 40 percent of the world’s solar cells as recently as the mid 1990s; today, we produce just 7 percent.

“When the starting gun sounded on the clean energy race, the United States stumbled.  But I remain confident that we can make up the ground.  When we gear up our research and production of clean energy technologies, we can still surpass any other country.

“The most important element of this bill is that it puts a cap on carbon emissions that ratchets down over time.  That critical step will drive investment decisions toward clean energy.

“Imagine, for example, that you own a power company and are considering building more generating capacity.  Building a new coal-fired power plant or a new nuclear plant is a serious, multi-billion dollar investment.  And these investments could last at least 60 years.  If you knew that carbon emissions had to decrease, would you build a coal plant without carbon capture and storage technology?  Would the nuclear plant look more attractive?  Would you consider investing in wind and solar?

“On-again, off-again incentives will not drive the level of clean energy investment we need.  A cap on carbon will give the energy industry the long-term direction and the certainty it needs to make appropriate technology and capital investment decisions.”

Rising numbers on “we’re not dead yet” ethanol industry suggest that the Secretary has a strong point. Yesterday, Valero astonished the financial markets with the unlikely announcement that it had swung into a third-quarter loss on a refinery impairment loss, but that its star investment was a $49 million profit from its seven ethanol plants. According to MarketWatch, “Valero said its retail and ethanol segments posted “outstanding” results. Its ethanol business earned $49 million of operating income in the third quarter, more than double the second-quarter results.”

In other news of note, US gasoline prices are rising again. According to AAA, U.S. retail gasoline prices were $2.67 a gallon in the past week, up from $2.50 in September. Last October, the average price was $2.66 per gallon.

According to WCFCourier.com, “Processors say several factors are working in their favor now. Crude oil prices are on the rise — a barrel that cost little more than $30 at the end of 2008 was worth more than $82 Oct. 22 — and ethanol usually follows. Corn prices are lower than last year and fairly stable. Compared to the price of oil, ethanol is cheap enough that refiners are blending ethanol, even if they aren’t required to do so. Most importantly, processors say they have learned from past mistakes. Gone are the days of extended corn contracts without a guarantee of income to cover expenses.”

According to the Jamestown (ND) Sun: “The top officials of a southwestern North Dakota ethanol plant [Red Trail Energy] say it has overcome a year of financial struggles and is heading toward a profit.”

According to the Chicago Board of Trade: “November CBOT Ethanol futures prices last week rallied sharply for the fifth consecutive week, closing up 13.7 cents (+7.4%) at $1.985 per gallon and posting a new 13-month high.  The EIA this Friday will release the monthly ethanol figures for August.  Last month’s report showed that U.S. ethanol production in July rose sharply by 8.4% m/m to a new record high of 948 million gallons.

Also, BP announced that it would enter the cellulosic ethanol industry in Brazil by 2013.

But not every sector is reporting news of great cheer. According to the JournalStar, “Nebraska has lost the last commercial operation of its infant biodiesel industry, at least temporarily. Northeast Nebraska Biodiesel LLC has stopped making biodiesel fuel from soybeans at its plant in Scribner.”

And Biodiesel Magazine reports that “A foreclosure motion begun by plant creditors was temporarily put on hold in late 2008 when Tri-City Energy announced a possible cash infusion from a new investor. That effort failed however, and last week, Maas Companies listed the court-ordered auction.”

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