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Ethanol 'blend wall', other concerns to affect US market through 2015

Written June 17, 2011

Study researches ethanol industry predictions for next five years

The challenges facing the U.S. ethanol industry have been presented in a new study from Informa Economics, "Renewable Ethanol: Navigating the Rapids, 2011-2015," which focuses on the 10% "blend wall"  U.S. ethanol production is approaching, as well as other economic effects on ethanol's market.

According to the report, the adoption of higher E15 blends is likely to occur slowly. The main federal incentive for ethanol expires at the end of the year, along with the tariff on foreign ethanol, and extensions of both are likely to be at far lower rates than the government provided in the past. California has implemented a statewide Low Carbon Fuel Standard, which will be progressively harder
for U.S. corn-based ethanol to meet. Additionally, said the report, supplies of advanced biofuels are likely to remain constrained, calling into question whether this component of the U.S. Renewable Fuel Standard can be met. Added to these overarching issues is the fact that crude oil and agricultural feedstock prices remain high and are volatile.

Other findings of the study include:

  • Elevated energy prices will continue over the forecast period for crude oil and refined products.
  • E85 markets will remain slow to materialize.
  • Little, if any, new investment will occur in the U.S. corn-based ethanol industry without a reallocation of RFS volumes.
  • Cellulosic ethanol and other advanced biofuel technologies will continue to fall short of RFS targets in terms of commercial viability, but supplies that are available will gravitate toward California due to the Low Carbon Fuel Standard after the first two years.
  • Renewable Identification Number prices will remain low for corn-based ethanol unless U.S. ethanol exports run high, or high corn prices limit 2011 ethanol production. RIN prices will remain elevated for biodiesel and other advanced biofuels for at least the next couple of years. 
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