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It Ain’t Easy Being Green: Ethanol Hopes and Woes

June 22nd, 2006 · by Tim Minahan · 2 Comments · enviro/social sustainability

AMR’s Supply Chain Executive Conference last month gave me the opportunity to reconnect with my old pal, Julie Murphree, founder and editorial advisor at Supply and Demand Chain Executive. While AMR’s theme of environmentally and socially sustainable supply management practices renewed my focus on these issues, Julie had been embracing the “do better by doing good” mantra in her own way.

On her folksy blog dedicated to rural life, Fresh Air, Julie has examined the practicality and business impact of alternative energy sources. Her recent interview with Richard Tolman, CEO of the National Corn Growers Association (NCGA), illustrates the intersection of how increasing demand for environmentally sound fuels (in this case ethanol) is improving the economic health and long-term viability of rural agricultural communities.

However, the interview also hints that hopes for ethanol becoming a primary energy source could be dashed ironically the same forces that are driving up oil-based fuel prices: insufficient feedstock and “refinery” capacity. NCGA forecasts that the U.S. could easily produce 15 billion to 18 billion gallons of ethanol by 2015. However, Tolman says that both feedstocks and production capacity to convert corn to ethanol at a pace to make the renewable fuel a major energy source are not yet in place.

A bigger issue slowing ethanol adoption is more basic: ethanol still costs too much for widespread adoption. A 2005 study from Cornell University estimates that the total cost for a gallon of ethanol is $4.70, counting government subsidies. Even in the face of rising oil and gasoline prices, that is too steep for consumers and businesses to swallow. And big ethanol producers, like Archer Daniels Midland, will not add capacity until they forsee a significant increase in demand.

Put simply, alternative fuels and energy sources - from ethanol to solar power - are locked in an economic Catch-22. Breaking this stalemate will require a mix of innovation that lowers the cost of the production and delivery of renewable energy sources and policy that creates the right economic incentives for both producers and buyers to increase supply and demand of these alternative fuels.

 

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2 responses so far ↓

  • 1 Supply Excellence » Can a Tiny Bug Solve the Ethanol Dilemma? // Jul 17, 2006 at 1:09 pm

    [...] Last month’s posting on Julie Murphree’s interview with the CEO of the National Corn Growers Association uncovered concerns that ethanol’s growth as a primary energy source could be stunted due to insufficient feedstock and refinery capacity, and high production costs. A recent article in the Wall Street Journal suggests that these issues could be resolved within the next few years thanks to an unlikely hero: bacteria.  [...]

  • 2 Supply Excellence » Compliance Madness: RoHS Spurs Part Shortages // Jul 27, 2006 at 9:46 am

    [...] While firmly endorsing the adoption of environmentally and socially responsible supply management practices, Supply Excellence has never said going green would be easy. The latest proof: a new Purchasing magazine article reports that the European Union’s Restriction of Hazardous Substances (RoHS) has triggered shortages for both compliant and non-compliant electronic components. [...]

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