Interesting new study by the EPA: “The Impact of Combined Heat and Power on Energy Use and Carbon Emissions in the Dry Mill Ethanol Process.” (h/t The Energy Blog).
While this may seem like a wonky and arcane study, energy usage is actually an important variable in the production of ethanol. Next to the price of corn, energy costs are the second biggest variable cost component of ethanol production and account for 15-20% of cost per gallon of ethanol. As almost all plants currently use natural gas for energy, the volatility of natural gas prices has increased the economic complexity of producing ethanol.
As seen in this chart, in the past five years, the monthly industrial spot price for natural gas has ranged from $3 to $12. While much of this risk can be hedged out, the overall trend has been an increase in natural gas prices - which has not gone unnoticed in the ethanol space.
In addition, the energy source (coal, natural gas, biomass, methane, etc.) will have a significant impact on the total carbon emissions of the ethanol production facility. Therefore, if considering a future where carbon has a price per ton, the choice of energy input could significantly increase/decrease the operating costs per gallon.
For example, Richard Plevin and Steffen Mueller conducted a study comparing the ethanol production costs in five dry-grind configurations – coal, natural gas and biomass (looking at CHP and non-CHP systems). They arrived at the conclusions that once $13/ton for CO2 emissions is reached, biomass is cheaper than coal with CHP, and after $37/ton CO2 emissions, natural gas is cheaper than coal (w/o CHP), but coal with CHP is still cheaper than natural gas.
Therefore, this research from the US EPA can have a good deal of relevance and impact. [a quick refresher on CHP might be useful...was for me]. Among conclusions of the study:
By efficiently providing electricity and thermal energy from the same fuel source at the point of use, CHP significantly reduces the total fuel used by a business or industrial plant, along with the corresponding emissions of carbon dioxide (CO2) and other pollutants….A couple additional points about this study:
...The analysis examines the impact of CHP on total energy consumption, including the impact on reductions in central station power fuel use and CO2 emissions caused by displacing power purchases with CHP. The analysis shows that the use of CHP can result in reductions in total energy use of almost 55 percent...
...[Among several natural gas CHP configurations] In Case 1, CO2 emissions are reduced by 21 percent on a pound-per-gallon basis...In Case 3, CO2 emission reductions from displacing central station power exceed the CO2 emissions at the plant itself, resulting in negative net CO2 emissions for the CHP system compared with base case conditions.
CHP reduces overall fuel use by 9 percent and CO2 emissions by approximately 5.6 percent in the case of coal. CHP provides a total fuel reduction of 8 percent in the case of biomass-fueled ethanol production and results in CO2 reductions of 91 percent.
- Measuring energy use MMBtu is certainly valuable, but I wish the authors had taken this to the next level, looking at the cost/gallon of CHP. There are different variables impacting “total energy cost” between the energy sources. For example, plant maintenance cost, transportation costs and time offline all increase for coal-fired and biomass systems, and capital costs vary among each type of plant. While cost per gallon adds an additional layer of complexity, I think this is a more relevant analysis for decision-makers.
- There is little real discussion about the potential for biomass as an energy input. Although most ethanol plants run on natural gas, given the current political debate, and future environmental concerns, corn (and cellulosic) ethanol should really be produced in as sustainable a fashion as possible (ie using biomass-derived energy). In only using one potential biomass CHP system, they ignored a number of other methods to include biomass as a feedstock.