Moments of Clarity

Transportation Solves the Growth Equation

The Des Moines Register's AG Business writer Jerry Perkins hits a home run today in his piece describing a looming Ethanol industry slowdown.  Paragraph two:

Increased costs and delays in ethanol plant construction, transportation bottlenecks in moving ethanol to market, and rapidly rising corn prices all signal that the expansion of the ethanol industry might be cooling, the ISU economists said in a webcast that originated from the ISU campus.

This "slowdown" will bode well for technology solutions that can bring incremental savings on transportation and logistics.  Although plant construction will continue for quite some time, more focus will be placed on gaining efficiencies...and that's the sweet spot for Iowa Tech companies looking to make a big impact. I'm guessing now that multiple billions of dollars have flooded in to plant creation.  Has even $1million gone to technology improvements to lower transportation costs?

Look down the road at a United States with thousands of Ethanol plants instead of hundreds, tens of millions of truckloads of raw materials, by-products, and finished product being moved via an advanced logistics system matching available transport capacity immediately with those who have product to move, a vibrant biofuel technology industry where Iowa is the heart of operations, and a time when foreign oil is a supplement and not a staple. This is the Iowa of the future...I'm right in the heart of it...and loving it.

Kottke on Economic Realignment

Jason Kottke posted a piece on the changing economic forces driving reallocation of corn production.  He points out much of the corn in Mexico is brought in from the US..since it's become too expensive to grow it.  Thank American farming subsidies for that but on to the next issue.   He confronts the looming bidding war between "Americans who want to fill their gas tanks and Mexicans who want to feed their children," and states that, "Odds are the tanks stay fuller than the stomachs." Agreed.  But this is nay a temporary realignment in my opinion.  Corn prices and the massive amount of reallocation farmers are undertaking now (sacrificing soy or other crops to grow the golden money printing crop) will not sustain. 

Scientists know that corn based ethanol production is cheap, quick, and easy...but terribly inefficient.  The transition to cellulosic ethanol production (effectively the same booze made from just about any organic matter) must take over.  That way, we can develop more genetic hybrid crops that grow tall and dense...rather than trying to usurp every bit of arable land to grow a very inefficient crop.

Photo by Bob Elbert/Iowa State University

Iowa State University, among others, is working hard to develop enzymes and other chemical compounds that will facilitate the rapid breakdown of organic matter into basic sugars. On Tuesday, an article came out discussing a 40 year old breakthrough made at ISU that was just "dug up" and is being researched full steam now.  Scientists figured out back then how to cook up some compounds that, "break down the tough cellulose that forms the structure of a plant’s cell walls. Breaking down the cellulose can release the simple sugars that are fermented into ethanol. Making that happen could add some value to Iowa crops or the fibrous co-products of ethanol production."

The bottom line here is that we can genetically engineer the heck out of some grass or ultra dense, super high growing plant instead of using corn.  This will happen, it must.  For now, farmers are just happy to be getting insanely high rates for their corn.  The ethanol plants are virtually printing money by making alcohol.  And, the people of Midwest are trying understand what capturing this moment and not letting go could mean to the region.  It's the heartland's chance to shine. 

It's not nearly as glamorous as Silicon Valley or the Tech Coast...but our own little Ethanol Alley, and if the politicians don't mess it up, we'll be the epicenter of energy independence.  Be warned Mr. Chavez...we're armed with corn cobs and grain alcohol...and we mean business. To the hungry citizens of Mexico, hold on.  It's only a matter of time before we'll replenish our supply.

Ethanol Round Up

The High Plains/Midwest AG Journal published a piece called "Iowa is epicenter for renewable fuel".
Yes it is, for now, let's keep it that way by making education, technology, start up friendly business climate, and fewer political roadblocks the rule of law here in Iowa.

Interesting news from the Biopact blog that Petroleos de Venezuela is creating a joint venture to build 17 ethanol plants in Brazil.  Yes that's Mr. Chavez's country and our uber supplier of oil.  If we do our job and lead this industry and this transformation, we'll be able to license technologies and systems around the globe.  It will be nice to cancel all orders from Venezuela sometime soon.   

Here's a quick piece from the Motley Fool looking at the investment side of Ethanol's boom by examining Verasun and ADM.  The piece also discusses the economic implications of DaimlerChrysler, Honda, and GM making biodiesel and E-85 compatible cars.

Politicians are still clogging up the process of finding a home for another plant very close to our Capitol of Des Moines.  So far, this could be the closet plant to see in action as a metro resident.

I just met Simon Robinson on line who runs the Big Biofuels Blog.  He's based in the UK and his blog has more depth and breadth of bio coverage than most.  I've invited him for Chicken Fried Steak at the Iowa Machine Shed Restaurant and to stay at La Casa de Mitchell's subterranean apartment, wine cellar, library, and cigar lounge.   (That's a basement).

"It is the Chicken Fried Steak That Binds Us"  --Doug Mitchell, 2006

A Key Observation about the "Ethanol Boom"

A piece in the Des Moines Register , written by Anne Fitzgerald called:

Ethanol growth helps spur jobs in wide array of fields

really sparked my interest since I've read conflicting reports about ethanol's ability to create jobs.  In fact, I've heard that it only takes about 13 people to run a $100 million gallon ethanol plant.  Instead of lauding that "efficiency", most have decried ethanol's inability to create "more jobs".  This piece however highlights the diverse background of people that a particular plant in Nevada, Iowa employs.  (In Iowa, it's a long A vs. sin city's home state). 

Here's a quote:
Economists disagree on the ripple effects of an ethanol plant. John Urbanchuk, an economist at LECG Corp., a California-based consultant, says a 100 million-gallon ethanol plant can generate nearly 1,600 jobs across several industries.

This is a very accurate assessment in my opinion.  When you extend the reach of an ethanol plant, you really do touch on a multitude of industry segments, science disciplines, and technologies.

The key piece in the article, and the one that I'm most focused on is the following:

"Call any trucking firm in Iowa and see if they're hiring truck drivers, and the answer will be, 'Yes.' There are a lot of reasons for that, but the biofuels industry is a big part of it."

Each day, thousands of semi-trailer trucks deliver grain and other products to the plants, while tanker trucks and railcars haul fuel to market.

BINGO!!!!  The million dollar observation.  The key component in the ethanol business right now and for the foreseeable XX years is transportation.  This is about the first article I've read that touched on this point.

Getting the supplies in, the by-products and production out are a massive part of the equation.  If someone were to give production facilities the edge in this aspect of their business with a technology platform that reduced transport expense and created the kind of logistics infrastructure that automated much of the process and paperwork around it...I think that would be rather valuable....and fundable...and "growable" into "The logistics platform for the segment". 

e-85

Iowa has 3 new E85 ethanol pumps opening today that brings our state total to 51.  We're getting there.  If you're in Iowa, traveling through, or just have some good old fashioned curiosity, click this link to the news story and you'll find a listing of all pump locations in our wonderful state.

The Heartland

Two things I'd not yet experienced occurred the other day as I was driving from Des Moines to Peoria, IL.

1.  Frozen windshield washer squeegee bucket.
2.  An E-85 ethanol pump

Both are pictured below.  Life is like a cob of corn...you never know what you're gonna get.

Ethanol: Blessing or bane?

Ethanol: Blessing or bane?

That's the title of a great piece from the Chicago Tribune by Greg Burns that appears in the Sun Herald.com on line.
The article brings up the typical pitfalls and possible hiccups in the Ethanol boom...but doesn't really discuss as much of the "blessing" portion in my opinion.  Readers of this blog and Ethanol Alley (soon to be consolidated here), know that I often write about the more important mental paradigm shift from U.S. thinking that we could use biofuels to become relatively oil independent...to we must become so..and how can we become a global leader in biofuel technologies.

Here are some key quotes from the article:

On the surface, ethanol plants look simple. They're basically oversized stills, producing alcohol from corn mash. Grain is ground, mixed with water and yeast, fermented and distilled, just like the moonshine of yore. The alcohol gets blended with gasoline, and the leftover corn mash is fed to cattle.

Since ethanol plants must operate continuously, their operators will "bid whatever it takes to get the corn," Baumel notes. "It's like chickens. They've got to be fed every day."

Many of the hungry new players in the ethanol game look a lot different from the agribusiness giant that overwhelmingly dominated in the past.

More Ethanol Alley

It was an amazing few days for Ethanol news around Iowa. Here's a story of an overturned tanker clogging the roads...most notably..check out the last section about "replacing any plastic pipes underground because the seeping ethanol would corrode/degrade it.  Corrosion is a problem that if solved...will make pipelines possible.  Right now, it's tankers and rail cars.

Our friend Chuck over at Domestic Fuel posted on 89 octane gas at a Hyvee in Iowa...being LESS expensive than the 87 octane NOT blended with ethanol.  This caused me some trauma when I first moved here too.  I hope Chuck found the folks here in Iowa as friendly as I have.

Here we see that the Northern Iowa Railway company received a big chunk of change to build out some of its infrastructure to facilitate smoother operations...sparked of course by the massive ethanol/bio-diesel output increases and continued growth projections.

Of course the political candidates are spewing about how they'll do better to promote biofuels, etc. but I don't believe any of them truly grasp how important this is to our state...and our nation. 

You'll see my blog ETHANOL ALLEY soon offered as a NAV BAR link on this blog.  I will begin posting on this site only within the next few weeks.  If you visit Ethanol Alley, you'll still see all the posts from the past and all future ones there as well.  It's just too much for me to manage 2 blogs and 2 sets of this and that. 

Tom Evslin on Ethanol...and then there's Doug's Opinion

I love reading Tom Evslin's blog.  There's always a fresh perspective to twist your synapses a bit.  He posted a wonderful piece entitled:  Ethanol:  Boon or Boondoggle?  This subject is near and dear to me as I'm smack dab in the middle of Ethanol Alley.  Evslin's piece talks about the science, environmental impact, and efficiency (or lack thereof) of producing ethanol.  I propose that although this part of the discussion is valuable...that the most important piece of the ethanol discussion is the mental shift that the citizens of the United States have undergone in the last 12 months regarding our energy independence. 

The debate has shifted away from "Can we, should we" to "How can we, what technology should we use".  Over a billion dollars of venture capital has poured into my humble Midwest ( that my family and I adopted last October after executing geographic arbitrage to Des Moines, IA from SoCal) and there's no sign of slowing. 

Those that have poo poo'd the inefficiency of corn based ethanol are sitting back now and watching hundreds of millions more gallons be produced from this method.  Additionally, our beautiful and humble state of Iowa is "getting it" by helping the Universities pursue the technologies, methods, and breakthroughs that will likely spawn the next generation of cellulosic ethanol production (making fuel from any plant/vegetable matter like corn stalks, grass, or ground up trees). 

Additionally, home grown Iowa start ups will provide supporting technologies and platforms to solve the other inefficiencies in the process of creating ethanol and getting it to the market place (distribution, logistics, etc.) (Contact me via email directly if this last sentence intrigued you)

The bottom line here is that we've begun the transformation and it will only take a hero to make it happen in a respectable time line.  I had a great conversation with my dad last week (I'm so stoked that my parents live a 12-hour drive away now versus 2500 miles).  During that conversation I found myself again stumping for an icon, a Presidential candidate that will arise and cut through the BS of the political process and promise us a Kennedyesque Man On The Moon Plan (this link contains my revisions to the speech appropriate for this discussion) to become 75% independent within 8 years (if we choose to re-elect him/her).  I'm a pretty fiscally/socially conservative guy...and I find myself passionately begging for a progressive tax levy on all Americans that will create an energy Independence race fund to drive our global dominance in this category.  Every single person I've talked to is in favor of such a levy.  Is this our rallying cause?  Is this the scientific area that the U.S. will dominate in this Century? (Stem cell is too much a political football) Is this my calling to run for office? I think not.  Where's William Katt when you need him?