Analysis: Biotech a key to ethanol future

By HIL ANDERSON, UPI Energy Correspondent   |   Jan. 15, 2007 at 9:53 AM
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LOS ANGELES, Jan. 15 (UPI) -- After a high-profile report warned that the booming ethanol industry in the United States could lead to sharply higher grain prices and perhaps even food riots around the world, the biotechnology industry came riding over the hill with a vow that science would make it possible to fill the need for both fuel and food.

The biotech sector has been hard at work looking for the means of not only growing more corn per acre but also making it economically possible to turn other more-complex non-food plant materials into ethanol as well.

If all goes according to plan, the United States will be able to churn out enough ethanol to make it a long-term staple of the gasoline market without causing an increase in food prices that would be a burden to U.S. consumers and a potential disaster to low-income nations that rely on grain imports to feed their populations.

"Industrial biotech companies are developing new enzymes that make current ethanol processes more efficient and will soon allow the economical conversion of cellulosic crop residues to fuel," said Jim Geeenwood, president and chief executive officer of the Biotechnology Industry Organization in a statement. "With ongoing advances in biotechnology, biofuels can help America meet nearly half its transportation-fuel needs by the middle of this century."

The report proffered by the Earth Policy Institute last week posed the simple economic scenario of so much corn going into the U.S. motor-fuel mix that corn prices would not only rise, but would take on a symbiotic relationship with the price of petroleum -- moving up and down with the same world events that have pumped-up crude prices for the long term.

"This issue is going to be with us for some time," said Lester Brown, the president of Earth Policy Institute and an author on the prospects for the future, in a conference call. "The price of grain is moving toward its oil-equivalent price; oil is becoming a support price for grain."

In other words, world commodity markets have factored the value of corn as a source of energy into its supply-and-demand scenarios, which translates to not only another reliable market for farmers but competition for the annual harvest between the food and energy sectors.

Brown went so far as to call for a temporary halt in the construction of distilleries that produce ethanol before the industry's demand for corn throws the entire world food complex into the same turmoil witnessed in the energy sector in recent years.

"I think its time to ... have a moratorium on licensing new (ethanol) distilleries so we can decide how much of our corn harvest we want to turn into ethanol and how much we want to save for food, (animal) feed and exports," Brown said.

His idea likely won't gain much traction in Washington where virtually every lawmaker is a friend of the farmer. The next Farm Bill will no doubt be filled with encouragement for ethanol crops, and Sen. Tom Harkin, D-Iowa, the incoming chairman of the Senate Agriculture Committee, co-sponsored a bill just this month to increase the production and consumption of ethanol as a "matter of national security."

"I believe we must wean ourselves off our dependence on foreign oil," Harkin said. "We as a nation should be doing more to accelerate the development and use of clean, domestic renewable energy."

Brown's economic logic is basic: Tighter supplies mean higher prices, as American consumers have learned in the tightening energy markets. Corn futures have, in fact, been trading at solid $3.50 per-bushel levels that are within shouting distance of the $4 per bushel some economists peg as the ceiling price that ethanol distilleries can pay based on $60 per barrel for crude.

To some, it may sound confusing, but it well illustrates Brown's point that corn now has a symbiotic relationship with crude that cannot be broken up unless science should come through with the brass ring of an economical process for producing cellulosic ethanol -- the kind produced from non-food plant material such as wood chips and the hearty weed known as switchgrass.

Producing cellulosic ethanol, however, requires additional steps than making it from the simpler corn, which makes it more expensive.

Analysts say it will be a few more years until cellulosic ethanol is perfected, but it is not impossible. The situation is comparable to the growing number of more sophisticated electric hybrid cars being turned out by the auto industry and on display at the recent auto show in Detroit.

Meanwhile, President Bush's 2007 budget included some $150 million for research into biomass fuels such as cellulosic ethanol, and advances are being steadily being announced.

For example, the Massachusetts Institute of Technology announced in the Dec. 8 issue of Science that it was working on a new strain of yeast that can better withstand the ethanol distillation process, resulting in faster production of ethanol.

"The technology for production of ethanol from cellulose is ready today," BIO Executive Vice President Brent Erickson said in a statement. "With industrial biotech processes ready for deployment...and currently available feedstock from agricultural residues such as corn stalks, ethanol production could reach three times current levels within three-to-five years as ethanol from cellulose is added to the current biofuel technology mix."

The biotech industry smells a bonanza in ethanol and is responding accordingly, which its proponents say will lead to the breakthroughs that will make ethanol something that will keep gasoline and food plentiful and affordable in the not-too-distant future.

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