Iowa's renewable energy boom: Headed for bust?

Could we be nearing the end of the renewable energy boom in Iowa?

The Gazette reports that ethanol producers have scaled back production in recent months, and wind energy machinery manufacturers have been forced to lay off hundreds of workers across the state.

The Cedar Rapids, Iowa, newspaper points to these “headwinds:”

  • A key tax credit for wind farm developers – the Production Tax Credit -- is due to expire Dec. 31.
  • Record corn prices due to the drought and high demand mean producing more ethanol can simply mean bigger losses.
  • Biodiesel producers are being stung by high costs of soybean oil that constitutes their main ingredient due to the drought.
  •  A lawsuit challenging the Environmental Protection Agency’s decision to allow a higher blend of ethanol, E15, for 2007 and newer vehicles. And the governors of Arkansas and North Carolina have petitioned the EPA to waive the Renewable Fuel Standard that maintains high ethanol demand.

Still, Debi Durham, chief of the Iowa Economic Development Authority, told the newspaper she sees a bright future for Iowa’s renewables sector. She cited:

  • Plans to build two long-distance transmission lines across the state to move wind power to big-city markets.
  • The expansion of cellulosic ethanol, which typically uses less valuable plant material such as stalks and leaves instead of grain.
  • Factories that produce bio-based products and chemical compounds called biorationals, which she said will spring up around biofuels plants to take advantage of infrastructure that supplies ethanol plants with water, grain and finished product shipping.

Then there's this additional perspective on the future of the ethanol industry in Iowa:

Iowa Renewable Energy Association Executive Director Monte Shaw says the next year will see “attacks on ethanol like you can’t imagine,” because petroleum companies will no longer be able to obtain enough of the federal credits called RENs to meet Renewable Fuel Standard requirements with E10 ethanol. Instead, they will have to also begin offering E15, which has 50 percent more ethanol per gallon.

Despite that prospect, Shaw says the industry’s long-term prospects for the next 10 years are significantly brighter than the impressive growth of the last 10 years.

The sales that will come from the release of E15 to the mass market is one reason for Shaw’s optimism, but there are other less tangible reasons.

The ethanol industry has been in talks with the automotive industry about ways to use ethanol to meet the need for higher octane fuels that will be required to meet new federal fuel economy standards, Shaw said.

“They’re telling us, “to meet these standards you need engines that are small and powerful. You need 90 percent octane, and to get that you need to run somewhere between 20 and 30 percent ethanol.”

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