Inducing More Efficient Ethanol Production

Inducing More Efficient Ethanol Production

Thomas R. Casten, Chairman, Recycled Energy Development LLC

May 7, 2007

As Congress encourages the local production of clean fuels in order to displace petroleum-based gasoline, it also should ensure that the energy islands serving ethanol production facilities – the steam and electricity production facilities – achieve optimal fossil efficiency to meet the nation’s long-term fossil energy and environmental goals. Inducing the industry to optimize the energy island can increase the net fossil savings per gallon of ethanol by 25 percent to 310 percent versus the lowest first cost approach. Furthermore, the more efficient approaches make it easier to convert the ethanol plant in future to a cellulosic feedstock. Maximizing the efficiency and recycling the waste heat of these bio-fuel production plants will enhance energy independence goals, increase base load production of clean electricity, improve ethanol’s net fossil energy savings and reduce the emissions of pollutants and greenhouse gases.

Energy options are numerous for bio-fuel facilities. Unfortunately the default case, which minimizes initial capital costs, is also the least efficient and fails to capture other benefits. This note explains the energy choices and suggests ways that policy could induce increased fossil efficiency of clean fuel production.

Energy Supply Choices

A typical ethanol plant producing 55 million gallons per year will require roughly 130,000 pounds of steam, (38 megawatts of steam power) plus about 5 megawatts of electricity. Energy supply options differ in capital cost and energy efficiency as noted below:

1)  A Conventional Ethanol Plant, which does not dry the resulting distiller grains but sells them for local livestock feed, will cost roughly $85 million, plus an additional $5 million for natural gas boilers to produce the required steam. The conventional plant purchases the entire five MW of needed electricity from the grid, which has an average delivered fossil efficiency of only 33 percent. Supplying heat and power to the conventional ethanol plant requires about 35,000 British thermal units (Btus) of fossil energy per gallon of ethanol. Experts estimate the corn crop will require 25,000 Btu’s of fossil energy per gallon of ethanol, which results in total fossil fuel use of 60,000 Btus per gallon of ethanol. Since the ethanol has 76,000 Btu’s of energy value (lower heating value or LHV), the conventional ethanol plant saves 16,000 Btu’s of fossil energy per gallon of ethanol or 21 percent of the ethanol energy content. If all 4.6 billion gallons of ethanol produced in the U.S. in 2006 came from Conventional Ethanol Plants, the country would have saved 17.4 million barrels of oil equivalent, or about 1.3 days of average petroleum imports. The following graphic depicts the energy balance of a Conventional Ethanol Plant.

2)  A Self-Generation Ethanol Plant combines the generation of heat and power by installing higher-pressure boilers and a backpressure steam turbine to generate the ethanol plant’s electric requirements. The Self-Generation Ethanol Plant costs an added $2.0 million versus conventional and achieves incremental electric efficiencies of over 80 percent, versus the 33 percent for grid power. This approach reduces the ethanol plant’s fossil use by 4,000 Btu’s per gallon of ethanol, raising net fossil savings by 25 percent from 16,000 to 20,000 Btus per gallon of ethanol. If all 4.6 billion gallons of ethanol produced in the U.S. in 2006 came from Self-Generation Ethanol Plants, the country would have saved 21.7 million barrels of oil equivalent, or about 1.6 days of average petroleum imports.

3)  An Optimally Efficient Ethanol Plant achieves more than a 300 percent increase in fossil savings per gallon of ethanol by providing all steam from byproduct heat of electrical generation. In this example 55-million-gallon per year ethanol plant, the power plant is a 50-megawatt combined-cycle gas turbine facility, perfectly matched to the ethanol plant’s steam requirements. This Optimally Efficient Ethanol Plant costs an added $50 million of capital versus the conventional plant, but produces 50 megawatts of electric power at 85-percent net efficiency. This plant exports 45 megawatts of electricity to the grid, displacing as much fossil fuel as it consumes, thus reducing the net fossil consumption of the ethanol plant to zero. The annual savings to the ethanol producers will be $2.5 million to $5 million, and the cost of producing ethanol will fall by 5 to 10 cents per gallon.

This approach increases the net plant fossil savings per gallon of ethanol to 51,000 Btus, a 310-percent improvement over the fossil energy efficiency of the Conventional Ethanol Plant. If all 4.6 billion gallons of ethanol produced in the U.S. in 2006 came from Optimally Efficient Ethanol Plants, the country would have saved 55.4 million barrels of oil equivalent, or about 4.1 days of average petroleum imports.

The ethanol energy plant could burn biomass or some other form of non-fossil fuel, also with a combined-heat-and-power plant. This case is but all biomass fuel options would reduce the burning of fossil fuels and would further benefit from combining heat and power generation. Each biomass option requires significant added capital and would not typically be funded by ethanol plant developers.

The conversion of existing ethanol plants to Optimally Efficient Ethanol Plants would result in numerous 25 to 100-megawatt CHP plants sited all over the Midwest and in California, which would help meet the nation’s growing electricity needs with highly efficient power. Because these new CHP facilities will be located near the power demand, they also avoid the need to build costly new transmission lines and reduce line losses, cut emissions of criteria pollutants and greenhouse gases, and reduce the grid’s vulnerability to extreme weather and terrorism.

How Congress Can Induce More Efficiency at Ethanol Production Facilities

Lawmakers can induce the building of high-efficiency Self-Generation Ethanol Plants and Optimally Efficient Ethanol Plants by offering a production credit of 1.5 cents per kilowatt-hour (kWh) for the electricity these efficient facilities generate. We suggest the following language:

Each kilowatt-hour produced sequentially with the ethanol plant’s thermal energy is eligible for this production credit if it meets one of the two tests below:

1)  In the case of high-pressure steam boilers, all net kilowatt-hours produced by a backpressure steam turbine powered strictly from the reduction of the boiler pressure to the steam pressure required by the ethanol plant will be eligible for the production credit. No electric power produced by condensing the steam shall qualify. In the event that a combination extraction-and-condensing turbine serves the ethanol power plant, a third-party licensed engineer must certify the power eligible for the production credit from the backpressure portion of the turbine, excluding the electricity created by condensing steam or other vapor. This credit shall be available regardless of the fuel burned by the boiler to produce the high-pressure steam. The NET ELECTRIC OUTPUT, as defined in (2 a iv) below is eligible for this production credit.

2)  In the case of prime movers – such as combustion turbines, reciprocating engines, or fuel cells – that produce electricity and then recycle byproduct heat to provide useful thermal energy to the ethanol plant and to neighboring thermal users, the NET ELECTRIC OUTPUT shall be eligible for the credit, providing that the NET ELECTRIC FOSSIL EFFICIENCY is at least 70% on an annual basis, using terms defined below:

a)  NET ELECTRIC FOSSIL EFFICIENCY is the NET FOSSIL FUEL divided by NET ELECTRIC OUTPUT, where the following definitions apply:

i)  NET FOSSIL FUEL is the total fossil fuel consumed by the ethanol power plant in each calendar year minus the CONVENTIONAL BOILER FUEL that would have been burned to produce the useful steam and hot water supplied to the ethanol plant and to nearby thermal users, with both terms reflecting the lower heating value (LHV) of the fuel.

ii)  CONVENTIONAL BOILER FUEL shall equal the net energy content of the useful thermal energy supplied by the ethanol power plant divided by 0.8, reflecting an assumed 80% seasonal efficiency of conventional boilers.

iii)  NET FOSSIL FUEL includes the energy content of all input fossil fuel to the combined heat and power plant in LHV, excluding energy content of non-fossil fuel such as biomass or other renewable energy.

iv)  NET ELECTRIC OUTPUT is the power plant’s gross production of electricity, minus the parasitic electric use of the power plant to produce useful energy services.

3)  It is the specific intent of this definition to encourage ethanol power plants to decrease their use of fossil fuel and associated pollutant emissions by maximizing the conversion efficiency of fuel to useful energy services and by maximizing the use of non-fossil fuels. It is the intent of the above definitions to assure that electricity eligible for this production tax credit has at least 70% net fossil efficiency. This compares with U.S. average delivered electric efficiency of 33%.

Thomas R. Casten

Chair, Recycled Energy Development, LLC

May 7, 2007

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