Ethanol Market
Fuel Ethanol Terminal Market Price
According to London-based research firm New Carbon Finance, public and private investment in the global renewable-energy sector will top $90B in 2007, a 27% increase over the year before. The U.N. Environment Program (UNEP) says Europe remains the top spot for investment, receiving $27.1B in 2006, while the U.S. came in second, with $22.5B. An estimated $27.9B was set aside last year for financing renewable energy projects around the world, and $18B in 180 investment funds is now focused on sustainable energy.
Behind much of the growing interest in alternative energy is European Commission policy. The EC outlined plans early this year to produce 20% of the EU’s energy from renewable sources by 2020. (Source: Business Week, August 3, 2007 “Europe: No. 1 in Sustainable Energy)
On the other side of the Atlantic, U.S. President George Bush announced a proposed mandate for 35 billion gallons of ethanol by 2017. Studies, however, say the maximum US production of ethanol from corn starch is 15 billion gallons per year. This implies a mandated production of some 20 billion gallons per year of cellulosic ethanol by 2017. Bush’s plan includes $2B funding for cellulosic ethanol plants, with an additional $1.6B announced by the USDA on January 27, 2007. In 2017, this would displace 15% of projected annual gasoline use. (Source: whitehouse.gov).
Data Source: OXY-FUEL News Price Report 1995-2005 Hart Publications Inc.
Demand for Ethanol
The demand for ethanol in the United States has been growing at an average rate of 17% per year since 1998 and exceeded 7.0 billion gallons in 2007. U.S. demand will continue to grow based on the following factors:
MTBE phase-out: Ethanol is direct replacement for MTBE additives in gasoline. 17 states have banned MTBE and more continue to follow.
State Mandates: More than 20 states mandate the use of ethanol in transportation fuel for environmental benefits.
Federal Mandates: The Energy Policy Act mandates the use of 8 billion gallons of ethanol by 2012.
Responses to Global Warming: Use of ethanol reduces greenhouse gas emissions specifically CO2 generation.
Flexible Fuel Vehicles: There are 4 million flex-fuel vehicles in the U.S. today with 2 million being added each year. These vehicles can burn any blend of ethanol and gasoline up to 85% ethanol (E85).
Other uses: Blending 10% ethanol with diesel and bio-diesel is a growing trend to improve diesel fuel performance.
Most fuel ethanol is produced from corn based plants operating almost exclusively in the Midwest near their sources for corn. There are currently no production facilities in the eastern United States where Raven will be forming a joint venture operation giving what we believe will be a significant transportation cost advantage.
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