Ethanol CO2 by-product is critically important to merchant CO2 industry

By Sam A. Rushing, President, Advanced Cryogenics, Ltd.
Special to The Digest

A Significant Source Type Which Endures

CO2 by-product sources from ethanol dominate the source – map v. other source types, where next in line include sources from ammonia and natural /pipeline facilities. I am pleased to see that new sources continue to arise from existing corn and grain-based fermentation sources; given the almost absolute absence of other available CO2 industry feedstocks. For example, over the last year or two, new merchant CO2 sources from ethanol have developed in the U.S west / northwest.

CO2 from fermentation, is felt will thrive, despite politics. That being the case, it is felt since the lion’s share of CO2 plants are in the Midwest, the industry and political clout is in favor of legislation favoring the RFS. Many of the nation’s ethanol plants, which tally over 200 such operations, are supporting the RFS; and most of the possible CO2 sources from ethanol are untapped, however highly concentrated in a super-saturated Midwestern region. The US ethanol – based sources number over approximately 40 locations now.

Other source types, such as ammonia, reformer, natural, other chemical, are highly unavailable to the gas companies, since most of the existing locations have already been tapped for the CO2 by-product or product (the latter from natural and pipeline operations, not by-product).

Ethanol Provides Assurance of Supply to the Overall CO2 Supply Network

Ethanol is the only source type which has a long way to go, before it is highly commercialized for CO2 by-product usage v. other source types. As a product of cheap natural gas made available from fracking and horizontal drilling, several proposed and planned new ammonia and ethylene oxide operations were announced over the last few years. From these announcements and plans, only a few viable projects have been consummated. Thus, the challenge to bring more world class ammonia plants online and more successful ethylene oxide projects forward has not occurred, as the developers hoped.

The relatively recent northern California and Oregon CO2 source additions are logical, in terms of regions which need the product, and have CO2 market growth opportunities. Other ethanol sources have considered selling their CO2 product to the markets in other regions, and in some cases, where existing sources are a considerable distance away, and merchant market prices are high, the interest by most of the gas companies has been rather impressive. Ethanol is well thought of as a secure, long term source of product. Most of this discussion surrounds grain – based fermentation, where much of growth in the future we hope will come from cellulosic ethanol and advanced biofuels projects. What few cellulosic ethanol plants have been built are in the heart of the Midwest and are not to offer a specific strategic CO2 sourcing advantage; and these are very few. I feel the lack of significant cellulosic capacity since the significant run during the development of traditional grain-based projects some years ago, was a function of the need for tax credits, economic incentives, and a predominance of unwilling investors. Further there has been the need to develop and refine technologies; and further integrate and prove various technologies which are planned to perform well when scaled up. Perhaps this lag in cellulosic projects has now gained traction with respect to more plants being scaled up and constructed. I feel the small California project announced last year is significant, which will supplement this specific market which could perhaps host a small CO2 plant, and readily blend the ethanol into the large gasoline demand in California. To take materials such as switchgrass and produce a renewable fuel, is one of the long-term goals of advanced biofuels; and truly represents goals behind renewable fuels.

Within the recent term, several new CO2 sources have been sought, including from the refining sector; and by-product from gas processing, and ethanol. As to the other by-product or natural product sources outside of ethanol, there are very few, if any such source opportunities available in most markets which the gas companies commercialize. Further, in some cases, to make sources viable in economic terms from possible alternative source types, this has become ever more difficult. Although, there are a few exceptions where viable sources have developed from non-ethanol by-product. As often perceived by the gas companies, there are few to no source opportunities available domestically, beyond ethanol, as function of the almost sheer lack of new or existing, strategically viable alternate by-product opportunities. Historically, many of the new CO2 plants have been derived from either new projects as new construction of by-product sources, or when an existing source is lost to a competitor.

In the end, assuming the RFS remains in place, thus protecting the use of a renewable fuel in gasoline, the industry will remain a reliable source type, and even flourish, with more E-15 ethanol blends into gasoline. When other non – ethanol sources become unavailable, and the need for further capacity becomes essential, more ethanol plants will become opportunities for the merchant market network. Even though the industry always is seeking the lowest cost of production associated with their source, where reliability and quality are a given; ethanol will fulfill this need, should other sources become unavailable, or exhausted. Of course, the down side to this equation is added freight; however, the industry has become a master at managing distribution and reducing the cost of freight, even when options are challenged.

Evolving CO2 Applications and Market Growth

As I have written many times in the past, the industry is constantly evolving, via the use of new and improved applications for the product. For example, the applications which have a ‘green’ take, including photosynthesis enhancement, blast cleaning, supercritical extraction, concrete sequestration; and those which are not fully scaled up, such as developing platforms whereby CO2 is said to become the basis of future biofuel production opportunities; and replacement material for hydrocarbons in the plastics industry; both cases require a carbon rich base, where perhaps someday this will be rather common place, and a truly substantial means of sequestering and recycling carbon.

Beyond organic market growth, the addition of new and improved applications can lead to a significant amount of growth. I have witnessed very significant boons in the CO2 industry over the years, for example, when CO2 usage in frac work, as an ‘energized fluid’, the demand exploded, during an oil and gas boon of the past (of course this market has become very small since the explosion of hydraulic fracturing). Also, when the poultry industry became more familiar with all the applications for the commodity, this market grew almost geometrically over a pervious term, as the demand for a cheaper form of protein became very popular.

Other applications can also become as popular as these over time, where the key to such success if for numerous processors or customers to experience the benefits of the application. Within most industries, what is taking place among colleagues and often competitors, becomes well known, and expands rapidly, as I have found.

Ethanol based Carbon Dioxide Opportunities Expand

In the not too distant past, there was a shortage of corn which was used for fermentation, caused in part by the drought. This caused some of the gas companies to scramble for replacement sources, which they handled well. This is not unlike some years earlier, when natural gas spiked, and numerous ammonia plants were idled; which in turn precipitated some bankruptcies and subsequent acquisitions in the ammonia industry. The dislocation of CO2 plants was much more severe with the ammonia crisis v. that of the more recent ethanol incident. As with most of the gas companies today, their forte is to diversify source types as much as possible, thus reduce the risk when an industry experiences problems. However, ethanol has been the means to an end for most of the new sources domestically.

Ethanol plants should evaluate CO2 revenue and tax credit opportunities as a means of both monetizing the product, and in some cases, turn a greenhouse gas into a usable product in industry, or even reduce emissions via various sequestration schemes which offer tax credits for the ethanol producer. There are various means of making the most of the CO2 product from fermentation, which can supply a very diverse market, via monetizing the product. The other possibility, once again, is the potential for various sequestration markets which would receive a tax credit. Further on the state of the merchant CO2 industry today, the industry has changed radically, thus reducing the number of suppliers in the market today, where these companies have merged and acquisitions have occurred, thus creating new opportunities for new CO2 players. There could be direct of JV opportunities available, or sequestration targets subsidized with tax credits.

CO2 is an opportunity for more of the ethanol producers today, and all options should be considered.

About the author:

Sam A. Rushing, is president of Advanced Cryogenics, Ltd., a domestic and international CO2 and cryogenic consulting firm with decades of expertise and experience available to support your projects. Rushing can be contacted at Tel: 305 852 2597, email: [email protected], web: www.carbondioxideconsultants.com