Tag Archives: alternative
Rising Ethanol Prices Another Blow to Viability of Biofuels
April 15, 2013 By Robert Potts Ongoing drought in Midwest America is driving up the price of ethanol and threatening the long term sustainability of the biofuels industry. Heavy water shortages across the “corn belt,” the major maize producing region of the United States, have damaged the supply of corn bushels, driving up the price of ethanol fuel. This is another blow to the biofuels industry at a time when it is facing sustained criticism from politicians and environmental groups worldwide. Many people claim that ethanol is not a long term alternative to fossil fuels due to associated rises in global food prices and changes in land use. This latest blow, however, even casts doubt over ethanol’s ability to provide a short term fuel solution. According to the USDA , record-high corn prices are likely to continue throughout 2013, rising up to 19 per cent higher than the last two years; in some cases, farmers in Missouri have seen their annual crops fall to up to 5.5 percent of their normal yield. Nearly 10 per cent of the US’s ethanol plants have ceased production in the past year, unable to cope with rising resource costs and shrinking demand. Government intervention and bloated supply Only five years ago, ethanol was hoped to be the savior to the long term depletion of fossil fuels. As a wholly renewable source of energy, the fuel can be blended with traditional gasoline and sold at gas stations across America. For the last 10 years the US government has mandated that gasoline must contain at least 10 per cent biofuel. Ethanol production was subsequently supported with a tax credit of 45 cents per gallon, although this deal expired at the end of 2011, making it a lucrative trade for farmers and producers. As a result, the number of ethanol plants has grown to hundreds in US states like Missouri, bringing huge economic gains to small towns. Farmers have been able to find a new market for their corn crops, while ethanol producers reacted by building new plants and creating thousands of new jobs. However, recent economic conditions have since exposed weaknesses in the government’s biofuel policy. The original 10 per cent ethanol mandate assumed that overall demand for gasoline would grow over time. However, the current recession has seen overall demand for gasoline, and ethanol, shrink, exposing a bloated ethanol industry overly reliant on state subsidies. Over supply of ethanol has now created thousands of barrels of ethanol which are sitting in storage plants across the Midwest unused; these barrels will remain idle until there is enough gasoline available to blend with them. The current supply side crisis has therefore served to compound pre-existing structural issues within the industry. “It’s a more sombre mood,” said Todd Sneller, the administrator of the Nebraska Ethanol Board. “The growth opportunity that existed some years ago is still out there in theory, but the reality is that it’s going to take an awful lot of time, money and political battles to realise that opportunity.” “Blend wall” creating demand side difficulties With most cars and service stations only able to cope with a fuel blend of 10 per cent ethanol, known as the “blend wall”, demand restrictions clearly exist; the hope that demand will rise for higher percentage ethanol blends has not yet materialised. “Flex-fuel” vehicles, which can operate on 85 per cent ethanol, are also yet to be taken up by the mass market, and technological advancement in electric vehicles will only add further pressure to the industry’s long term competitiveness. In the EU, discussions are currently under way to limit the production of first generation biofuels, like ethanol, to half of Europe’s renewable fuel target, as a result of concerns over their long term environmental sustainability. Underdeveloped second generation fuels With ethanol under pressure, many hope that in the longer term, developments in second generation biofuels, synthesised from non-food sources, will provide a more viable alternative. Although cost advances are being achieved in these ‘cellulosic’ biofuels, productive capacity is still very small in comparison to ethanol. Whether these crops can be commercialized without requiring similarly high levels of water and changes in land use is open to much debate. Whether the biofuels industry can dust off this recent blow also remains unknown. Idle plants and unused barrels could clearly be short term side effects of changes in the economic cycle, but could also be a sign of longer term decline: “Is that going to be temporary or permanent? It’s hard to say,” said Eric Lee, Citibank commodities expert. However, with producers hoping to produce an extra three-tenths of a gallon of ethanol per bushel of corn, technological development could yet save an industry merely bruised from a particularly tough year. Robert Potts is owner of RPM Fuels, providers of tanks and pumps to the fuel industry. RPM Fuels supply oil tanks as well as specific equipment for biofuels and bio diesel. Continue reading
JCB Notes High Profits On Demand In Africa And The Middle East
Aubrey Chang | Apr 15, 2013 | Comments 0 JCB Ltd While constructing sector is not in the best shape, UK-based giant JCB Ltd informed that it noted record annuals earnings in 2012. It is not surprising at all that the company trots out its outstanding profits as the global construction sector is indeed going through tough times. The JCB’s results were mainly driven by increased demand in regions such as Africa and the Middle East. 2012- Good year for JCB The figures released by JCB Ltd showed that the British company saw its earnings increase approximately 2.8 percent to as much as £365 million in 2012 from £355 million it made a year earlier. More important, the 2012 earnings of the company mirrored its best performance in almost 70-year history. In addition, the company informed that its sales amounted to around £27 billion in 2012, compared to roughly £27.5 billion recorded in 2011. Despite the fact that the global market shrank by staggering 10 percent, UK-based JCB Ltd informed that its machine sales vaguely jumped to about 69,250 in 2012, compared to sales of 69,100 noted in the previous year. In addition, the figures indicated that demand slumped nearly 40 percent in China, 7 percent in India and around 6 in the home market. On the other hand, demand surprisingly climbed as much as 28 percent in Brazil, Russia and North America. JCB Ltd, which in fact depends on foreign markets as they amount to approximately four-fifth of its business, underlined that its performance was driven mainly by regions such as Africa and the Middle East. The figures released by the company indicated that the UK-based manufacturer witnessed an outstanding doubling of its business in the region of Africa, while the business in the Middle East climbed approximately 12 percent. But the fact is that JBC Ltd also enjoyed a 20 percent uptick in its business in the Americas. Sir Anthony Bamford, chairman of JCB Ltd underscored: “In view of the continued fragility of the global economy, which has led to renewed slowdowns in emerging and developed markets, JCB’s results in 2012 are extremely encouraging,” adding that the results were clear evidence that all investments finally started bearing fruits. Furthermore, he underlined that the performance was mainly driven by demand for agricultural products which at the same time visibly balanced weak demand for construction equipment. Citations for JBC’s performance The results, which were released by JCB Ltd, were indeed a pleasant surprise taking into account that the UK-based manufacturer suffered from low demand in European countries. While the company is carefully optimistic when it comes to projecting 2013 results, Sir Anthony Bamford underlined that the beginning of the year was satisfactory. Analysts praise the strong results of JCB and note that the company opened a new factory in Sao Paolo, Brazil, in 2012. And that is not all as the UK-based manufacturer will also launch a new facility in Jaipur, India, in 2014. Indeed, when it comes to investment, the company plays hard but at the same time it does not forget about its factories located in the UK. Also the government of the UK appreciates all achievements of JCB Ltd and underlines that the family-owned company is one of the top contributors of the country’s manufacturing sector, which has been undeniably suffering since the beginning of the global financial crisis, as the company created almost 25,000 positions, including the supply chain. Therefore the strong performance in 2012 augurs well for the future of JCB Ltd. Continue reading
€10bn A Year: The Cost Of Keeping EU Biofuel Policy Alive
April 17, 2013 Biofuels cost cash-strapped EU member states €10bn in 2011-the same as the bailout of Cyprus-and a figure that is projected to get bigger as Europe increases its use of the fuel. A new report from the International Institute for Sustainable Development (IISD) reveals that increasing biofuel volumes from a current requirement for 5 per cent in transport fuel to 8.6 per cent by 2020 would require between €28.8bn and €33.1bn of additional cumulative public support between 2014 and 2020. Economic and environmental cost It’s not just the cost of the EU biofuel policy that is under fire-earlier research has revealed that the policy is doing nothing to reduce greenhouse gas emissions from transport and in some cases is actually emitting higher emissions than diesel fuel, when indirect land-use changes (ILUC) are accounted for. T&E’s programme manager for fuels, Nusa Urbancic, said: “We already know that the EU’s biofuels policy does not help the climate, and this study demonstrates that it does not help our economy either. “The annual €10bn of support Europe gives to biofuels equals a Cyprus bailout every year. This amount may double if countries insist on meeting the 10% target. Member States should realise that freezing biofuels at current levels, as the Commission proposes, will not only save emissions, but a lot of money to,” she adds. ISSD’s study, entitled ‘Biofuels – At What Cost? A review of costs and benefits of EU biofuels policies’, evaluates the amount of support that the biofuel industry receives compared to its turnover, and analyses what the financial impacts of meeting the EU’s 10 per cent Renewable Energy Directive (RED) target would be between 2014 and 2020. Support outstripping investment The study, co-funded by IISD and environmental organisations BirdLife Europe, the European Environmental Bureau (EEB) and Transport & Environment (T&E), shows that the support rate is well over half of the turnover of the European biofuels sector, which was around €13bn to €16bn in 2011. The annual support is also higher than the total investment in biofuel production facilities from 2004 till now, which stands at about €6.5 billion. This suggests that the current support is particularly inefficient in protecting these investments. EEB’s Agriculture and Bioenergy Senior Policy Officer, Faustine Defossez, said: “The industry clamours that biofuels investment must be protected at all costs, yet yearly support to keep biofuels afloat is greater than the total initial investment in production facilities. We are paying to keep this inefficient machine running despite the fact that it does not deliver the environmental and economic goods initially sought!” The study also suggests that tighter CO2 standards for cars are a more cost-effective and environmentally sound way to reduce GHG emissions from transport. If invested in low carbon cars, €10.7bn spent annually in support of the industry could save 40MT of CO2 and pay for itself through reduced oil imports. €10.7bn is roughly the cost of imposing a 80g of CO2/km average for new cars, instead of 95 g/km of CO2 by 2020 as currently proposed, and would allow the EU to cut emissions by this impressive figure. “This policy is just too expensive for what it delivers, as governments are already struggling to financially support an import dependent policy that does not even distinguish between biofuels,” concluded Trees Robijns, EU Agriculture and Bioenergy Policy Officer at BirdLife Europe. . Continue reading
