New prospect for US: glut of ethanol plants
Like at least four others building new ethanol plants in Illinois, Mike Smith expects his new biorefinery to begin pumping out fuel from corn by summer.
Unlike the other plants, Mr. Smith's Canton, Ill., facility is nowhere to be found on a key industry tally, which the US government and Wall Street analysts use to track ethanol plants under construction. A study released Thursday reports that at least 14 new biorefineries – representing nearly 1 billion gallons of extra fuel – are not on that tally. That oversight could mean problems ahead for the food supply and the "green fuel" industry, some analysts say.
•Ethanol production could pull so much corn out of the food supply by 2008 that US corn exports could plummet.
•The food-fuel competition could push corn prices so high that some ethanol producers in the fledgling industry, which many deem vital to US energy security, would merely break even – or, if corn gets pricey enough, actually lose money.
Even before Thursday's report, some analysts had warned of a future glut of ethanol production capacity.
The immediate concern of the Earth Policy Institute (EPI), which released the new report, is the impact on the global food supply.
"We're worried there will be less to feed the world if we're using too much corn to make fuel," says Lester Brown, EPI's president. "The US ... supplies 70 percent of the world's corn exports. These previously unidentified distilleries could have a big negative impact."
Wall Street investment banks and farm cooperatives continue to pour billions of dollars into building ethanol plants, basing their decisions in part on predictions of future capacity by the Renewable Fuels Association. The RFA lists 65 plants under construction. But EPI, which put together its own tally using several industry lists, has found 79 such plants.
That extra capacity has major implications for agriculture and the ethanol industry. Using the RFA's lower estimate, the US Department of Agriculture has forecast that ethanol biorefineries – also called distilleries – will need about 60 million tons of corn from the 2008 harvest. But if EPI's higher estimate for plants is correct, then up to 139 million tons of corn will be needed.
For its part, the RFA defends its more conservative estimate. "Our list is a pretty accurate snapshot – about the best you can get in an industry that changes as quickly as this one," says spokesman Matt Hartwig. "If we were to do our list based on announcements, it would be much longer. But that would be misleading because not all those come to fruition. Those on our list we believe will be built and up and running."
Last month, the RFA added about a dozen new facilities to its list, which suggests about 11.4 billion gallons in capacity by 2008, which is still lower than the EPI's range of 12 billion to 15 billion gallons.
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