Ethanol Demand Provided a Solid Foundation for the Industry

RFA's Bob Dinneen says VEETC did its job. It built the ethanol industry. It was time for it to go away so the industry could stand on its own.

Published on: Feb 23, 2012

At last year's National Ethanol Conference, the legislative unknown seemed to permeate the air. This year, things are different.

Within the first few minutes of Bob Dinneen's State of the Industry Address, it became clear this industry was forever changed with the Jan. 1 expiration of the Volumetric Ethanol Excise Tax Credit.

"(VEETC) did the job it needed to do," says Dinneen, CEO and president of the Renewable Fuels Association. "It built an industry. The proof of its success is that we did not fight to keep it."

As the industry enters a period of renewed independence, Dinneen reminds folks what was accomplished during the VEETC years. In 2000, the U.S. imported 55% of its oil. A measly 1% of fuel needs were met by ethanol. Today, imported oil only accounts for 45% of our fuel supply. This is the first time imported oil has fallen to less than 50% since 1997, Dinneen points out. Ethanol's share has risen to 10%.

Bob Dineen sums it up: "(VEETC) did the job it needed to do," says Dinneen, CEO and president of the Renewable Fuels Association. "It built an industry. The proof of its success is that we did not fight to keep it."
Bob Dineen sums it up: "(VEETC) did the job it needed to do," says Dinneen, CEO and president of the Renewable Fuels Association. "It built an industry. The proof of its success is that we did not fight to keep it."

Last year, the U.S. notched a record 13.9 billion gallons of ethanol. The industry set another record last year when it exported 1.19 billion gallons of ethanol. Dinneen enjoys pointing out that the United Arab Emirates, an OPEC country, was the fifth largest export destination for U.S. ethanol.

One good thing about the death of VEETC: it can now be removed from associations' lists of challenges. Still, trials abound.

James Canton, Institute for Global Fuels, says scientists and economists have identified 2035 as the year energy demand will potentially outpace production.
James Canton, Institute for Global Fuels, says scientists and economists have identified 2035 as the year energy demand will potentially outpace production.

As outlined by Dinneen, RFA's first challenge continues to be pushing past the blend wall. With recent EPA approvals for E15 labels, this is a step closer to reality. There is still a lot of work to be done though.

Last year was a banner year for exports. A healthy export market is key to expanding ethanol production in the U.S., Dinneen adds.

There is one more challenge that continues to gnaw at the ethanol industry: cellulosic ethanol. Dinneen and other panel members spoke in depth about the need to post some sort of commercial cellulosic ethanol production numbers. This stumbling block continues to give detractors ammunition to use against the industry as the battle wages in Washington.

Global Demand

Continuing with Dinneen's theme of "biofuels are here to stay," James Canton, CEO and chairman of the Institute for Global Fuels, expounds on how much energy the world will need in the future.

Canton notes scientists and economists have identified 2035 as the year energy demand will potentially outpace production. The world population currently consumes 14 terawatts (a terawatt = 1 million megawatts, or 1x1012 watts). By 2035, models put consumption at 40 terawatts.

Working with these numbers, Canton says this is not a fossil vs. renewable fuels debate. This is a question of how will energy production of any sort keep up with demand.

As energy becomes scarcer, tensions will ratchet up. He expects a line will be drawn pitting the U.S., Europe and other long-developed nations against those growing exponentially (China and India). To accommodate population growth, China alone expects to build 10 to 12 new mega cities. That's another 10-12 urban areas the size of New York City and Los Angeles.

Biofuels must play a part in accommodating the world's increased demand. In the U.S., ethanol is the only industry that has the ability to significantly ramp up demand, Canton notes.