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Taking Stock In Ethanol: Risks, Challenges And Opportunities
By Mr Ethanol | May 21, 2007
The Great Ethanol Debate: Shoddy Economics all ‘Round.
Seeking Alpha:
Like many environmentalists, I’m not a big fan of the ethanol industry, especially corn ethanol. From a net energy standpoint, even advocates agree that you only get a little more energy out than the energy you put in (Energy Return on Energy Invested or EROEI of 0.9 to 1.5, depending on whom you ask… some say it’s much lower).
At this point, most environmentalists simply decide that ethanol isn’t sustainable enough for them, and go back to talking about photovoltaics (EROEI around 8, PDF) and wind (EREOI 30-70, PDF). The last two are from my calculations from numbers given as energy payback (As an aside, I think most of these measures of energy economics are crude and only give a partial picture. We should really be looking at energy net present value [NPV] or internal rate of return [IRR], analogous to economics NPV or IRR which would apply a discount rate to future energy flows, for all the same reasons we don’t look at payback or similar measures in economics.)
If we did take a net present value approach to energy return on investment, we’d find that ethanol started looking a lot better, because we can use the ethanol as soon as it is made, a process which could happen within a year of the first seed of corn being planted, in comparison to solar photovoltaics, which, if they have an energy payback of around four years and last 30 years, will end up having and “Energy IRR” of around 12% (this number is for conventional crystalline silicon: Thin film and concentrating PV have potential to be a lot better because of lower energy use in manufacture), compared to an “Energy IRR” for corn ethanol (using a median 1.2 EROEI figure and a one year lifecycle) of 20% (although the uncertainty in this number is much larger than the uncertainty in the number for PV.)
So the bigger problem for me is not Energy Payback, but the environmental damage associated with the way we raise corn. Energy isn’t everything. I feel that the “low energy return” argument does not hold a lot of water. My main problem with corn ethanol lies in the negative externalities of corn production, such as high water use, fertilizer runoff and soil mineral depletion. And then there’s always the food vs. fuel debate, where even the IMF is weighing in. Read more.
Topics: BizOp, Ethanol, Investing, Stock Market |
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