WASHINGTON, Feb. 14, 2017 – President Donald Trump doubled down on his climate change skepticism by picking Oklahoma Attorney General Scott Pruitt to head the Environmental Protection Agency, former Texas Gov. Rick Perry as the new Energy Secretary, and Rep. Ryan Zinke, R-Mont., as Interior Secretary.
With former ExxonMobil CEO Rex Tillerson already confirmed as Secretary of State, these Trump choices are a guarantee that fossil fuels will be well represented in Cabinet discussions about energy and environmental policies.
Yet other forces favoring renewable energy are also in play. In the case of biofuels, U.S. ethanol production is increasing, with 78 countries importing 1.05 billion gallons of the fuel in 2016, led by Brazil (26 percent), Canada (25 percent), and China (17 percent). Exports are up 25 percent from 2015 and are the second-highest annual total. The one dark cloud is that this key component of U.S. ethanol industry profitability is threatened by China’s recent decisions imposing protectionist trade barriers that target U.S. ethanol and distillers dried grains with solubles (DDGS).
Although China has virtually closed its market to U.S. ethanol, Omaha-based ethanol producer Green Plains forecasts that the U.S. industry will export at least 1.1 billion gallons in 2017. Green Plains expects those exports to include about 25 percent of its production from its 17 ethanol plants.
The U.S. Energy Information Administration’s Short-Term Energy Outlook is also delivering good news for ethanol and for renewable energy overall.
Last week’s EIA report forecasts that non-hydropower renewable sources led by wind and solar power will grow from 2016’s 8.5 percent of electricity generation to 9 percent in 2017 and 9.7 percent in 2018. Hydropower generation is forecast to be relatively unchanged around 6.5 percent for 2016 through 2018. The nuclear share is expected to drop from 19.7 percent for 2016 to 19.4 percent for 2017 and 18.8 percent for 2018. The greatest expected growth will be in wind energy capacity, rising from 81 gigawatts (GW) in 2016, providing a 5.5 percent share of generation, to 94 GW with a 6.4 percent share, by the end of 2018.
A key point from the EIA report is that coal and natural gas are expected to fight for market share, with the determining factor being relative fuel costs. EIA forecasts that “the share of U.S. total utility-scale electricity generation from natural gas” will fall from 34 percent last year to 32.4 percent in 2017 “as a result of higher expected natural gas prices” and then climb to 32.7 percent in 2018. EIA sees coal’s generation share rising from 30.4 percent in 2016 to 31.3 percent in 2017, and then declining slightly to 31 percent in 2018.
The ongoing price-driven battle between coal and natural gas highlights the contrast between often volatile fossil fuel costs and zero-fuel-cost wind and solar power. For companies like electric utilities planning decades into the future, not having to deal with unpredictable fuel-cost increases offers significant bottom-line advantages from transitioning to wind and solar.
In a joint letter to President Trump last week, Growth Energy, the Renewable Fuels Association, and the U.S. Grains Council asked for “your administration’s assistance in urgently addressing China’s recent implementation of protectionist trade barriers that are shutting out U.S. exports of ethanol and distillers dried grains (DDGS).”
The letter points out that China imported 6.5 million metric tons of U.S. DDGS in 2015 worth $1.6 billion, accounting for 51 percent of total U.S. DDGS exports. China also began importing U.S. ethanol in 2015 “as part of an effort to increase the use of cleaner-burning renewable fuels and reduce smog formation in major cities like Beijing.” In a quick ramp-up, China became the third-largest market for U.S. ethanol by the end of 2016, accounting for 200 million gallons worth over $300 million and 17 percent of total ethanol exports. The letter concluded that “prospects appeared bright for continued growth.”
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The letter predicts that by imposing new duties and tariffs, China will reduce its U.S. DDGS imports dramatically and that “it is widely believed that raising these tariffs will put an immediate end to ethanol exports to China.” The letter warns that “China’s recent actions are contributing to sharply lower prices for both ethanol and DDGS in recent weeks” and therefore the administration should put effective countermeasures “near the top (of) your China trade agenda.”
USDA’s World Agricultural Supply and Demand Estimates report last week included the good news that corn use for U.S. ethanol production is expected to continue to increase this year. Revising last month’s projections, the report raises corn used to produce ethanol by 25 million bushels to 5.35 billion bushels. That’s the main reason the report lowers ending stocks by 35 million bushels, narrowing the projected season-average corn price by 10 cents on each end to $3.20 to $3.60 per bushel. The report’s brighter prospects are based on the latest Grain Crushings and Co-Products Production report and January’s accelerated weekly ethanol production as tracked by the Energy Information Administration.
(Photo courtesy of Iowa Renewable Fuels Association)
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