Fun with Numbers: The New USDA Report on Corn Ethanol

Robert Rapier invests a lot of effort in an attempt to discover what is going on with USDA reports of improving ethanol EROEI. The USDA is obviously being hammered by congress to make their giveaways to corn growers look less stupid. My bottom line is this:

1. USDA is obviously under pressure to fiddle their accounting to make subsidized corn ethanol look as good as possible.

2. Some of the tricks are just laughable, like subtracting byproducts from the inputs to form a new “input” definition that obviously inflates the “return” = output/”input”. Wouldn’t it be nice if our investment returns were done the same way, sigh:-)

3. Even after all the finagling the returns are weak and do not come close to justifying the enormous tax transfers subsidizing the corn growers.

4. The US obviously has extremely limited public resources to allocate for the “public good”. How could such transfer payments for average taxpayers to corn farmers make sense? And by erecting big trade barriers to efficient cane ethanol producers like Brazil, this is good for the American taxpayer? The one place where ethanol production may make ecological and economic sense if Brazil – but the Congress keeps their product out of the US market. Go figure.

(…) EROEI is calculated by taking the value of the energy outputs and dividing them by the energy inputs.

However, in reality it is somewhat more complex than that. The way the energy inputs and outputs are allocated can have a very big influence on the answer. Just by changing the nature of the allocation – as I will show below – you can sharply change the EROEI value.

There are caveats one should apply when using EROEI. First, EROEI is most useful when fungible energy types are involved. One wouldn’t typically use 1 BTU of gasoline to make 1 BTU of ethanol, but it might be economically attractive to turn 2 BTUs of coal into 1 BTU of ethanol (EROEI = 0.5). Second, there is no time factor involved in EROEI calculations, so it is possible for a lower EROEI process to be more attractive than a higher EROEI process if the former returns the energy over a shorter time interval.


One final word about energy allocations for byproducts. If the idea is to find a scalable replacement for gasoline, consideration must be given to the amount of byproducts that result as the scale of fuel production is increased. At some point, the byproducts can saturate the market, which can cause other unintended consequences. This is the case with biodiesel and the glycerin byproduct that results; biodiesel producers often have a hard time getting rid of the byproduct.

For that reason, when I consider ethanol as a replacement contender for gasoline, I am more interested in the expenditure of energy to produce ethanol, and less interested in how creative we can get with allocating energy inputs to byproducts. In any case, what was approximately one BTU of ethanol output for one BTU of fossil fuel input in 2002 is now 1.4 BTUs of ethanol out for 1 BTU in, with the caveat that secondary inputs have not been considered.

Read the whole thing »

Update on Jan 2011 points on the corn ethanol accounting: What are the problems with using corn ethanol for fuel?

Update on June 24 2011 The Great Corn Con.

Even in a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply.

But rather than ameliorate the problem, the government has exacerbated it, reducing food supply to a hungry world. Thanks to Washington, 4 of every 10 ears of corn grown in America — the source of 40 percent of the world’s production — are shunted into ethanol, a gasoline substitute that imperceptibly nicks our energy problem. Larded onto that are $11 billion a year of government subsidies to the corn complex.