A renewable energy boom that’s been a pillar of Iowa’s recession-resistant economy seems to be running out of fuel in shark-infested waters.
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 as production stalled.
On any scale, Iowa’s renewable energy boom was one of biggest economic development success stories of any state in the past decade. Iowa’s ethanol production increased 733 percent from 2000 to 2011, to 3.6 billion gallons per year. The industry supports about 83,000 jobs, according to the Iowa Renewable Fuels Association.
The emerging wind industry created close to 7,000 jobs in the state, according to the American Wind Energy Association. The state’s wind power capacity of 4,322 megawatts allows it to produce 23 percent of all the power generated in the state, ranking second among the states.
These mainstays of the renewable energy industry are all facing headwinds.
Wind power equipment manufacturers have stumbled as business dried up over the last year because a key tax credit for wind farm developers is due to expire Dec. 31. The Production Tax Credit has been renewed repeatedly, but kept on a short expiration cycle that’s made long-term planning for wind developers and utilities difficult.
“It’s forced a lot of people (wind developers) to look outside the United States,” said Peter Gray, a spokesman for ACCIONA North America in West Branch, which is now building huge 3 megawatt wind turbines for a project in Canada.
Potential plant closings loom over Iowa’s ethanol industry. With corn prices in record territory due to the drought and high demand, producing more ethanol can simply mean bigger losses.
Biodiesel producers, too, are trimming production, stung by high costs of soybean oil that constitutes their main ingredient due to the drought.
Amid it all, the renewables industry faces the strongest attack yet from its opponents in the petroleum, grocery and food manufacturing industries.
A lawsuit challenging the Environmental Protection Agency’s decision to allow a higher blend of ethanol, E15, for 2007 and newer vehicles has been filed by trade associations representing snack food manufacturers, grocery manufacturers, oil companies, and meat suppliers.
Governors from Arkansas and North Carolina have petitioned the U.S. EPA to waive the Renewable Fuel Standard that maintains high ethanol demand. The governors of Virginia, Texas, Georgia, New Mexico, Delaware and Maryland have all lent their support.
All this adversity generates much less anxiety than you might expect from renewable energy supporters.
Iowa Economic Development Authority chief Debi Durham sees a bright future for Iowa’s renewables sector. She sees the greatest potential for growth in cellulosic ethanol, which typically uses less valuable plant material such as stalks and leaves instead of grain, and in factories that produce bio-based products and chemical compounds called biorationals.
Durham said low natural gas prices are making it more economical to make the biorationals than to make similar products from petroleum. She expects biorational plants to spring up around biofuels plants to take advantage of infrastructure that supplies ethanol plants with water, grain and finished product shipping.
Valent Biosciences is building a $146 million plant in Osage that the Iowa Economic Development Authority calls the “first-ever facility designed and dedicated to manufacturing biorationals.”
Its output will include microbial products and plant growth regulators.
Durham points to new cellulosic ethanol plants set to open in Emmetsburg (POET/Royal DSM) Nevada (du Pont) and Blairstown (Fiberight Blairstown LLC). The Emmetsburg and du Pont plants will make ethanol from cornstalks and leaves, while the Blairstown plant will use municipal and industrial paper waste.
The legislative attacks on the wind energy Production Tax Credit and ethanol’s Renewable Fuel Standard are a concern to Durham, but not one that keeps her awake nights. Both presidential contenders have platforms supporting the Renewable Fuel Standard.
“These are not partisan issues,” Durham said. “They are more geographic issues — where do you come from?”
Besides increasing the nation’s energy independence and environmental benefits, Durham said a lot of jobs are riding on the renewable energy industry.
“I don’t think public policy leaders in Washington can completely write off these industries,” she said.
Even Hunter Lovins, a widely respected sustainability author and consultant, isn’t predicting the end of the ethanol boom.
On a recent trip to Iowa, Lovins told The Gazette that demand for ethanol will surge partly due to the move for energy security in national defense. For instance, the entire Navy/Marines operational platform is scheduled to be using 50 percent alternative energy by 2020.
“Is using 150-year-old distillation technology and putting into it a lot of chemicals sustainable? No,” said Lovins, the head of Natural Capitalism Solutions. “Is it better than importing oil from the Middle East? Yes.”
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.”
Walt Wendland is CEO of Golden Grain Ethanol in Mason City and Homeland Energy Solutions in Lawler. He sees hopeful signs for ethanol’s future even though it’s a mature industry.
Ethanol plants are getting more efficient, Wendland said, requiring less corn and less of ingredients such as urea to make each gallon of ethanol. They are also producing more co-products, such as corn oil.
The delayed arrival of cellulosic ethanol plants has provided fodder to ethanol critics, some of whom say the technology will not prove feasible.
“They (critics) think cellulose ethanol has to compete with corn ethanol,” Shaw said. “It doesn’t. It has to compete with petroleum, which is trading at $100 a barrel in the middle of a recession. A lot of things are possible with $100 a barrel crude oil.”
Durham’s high hopes for Iowa’s wind power industry are supported partly by plans to build two long-distance transmission lines across the state to move wind power to big-city markets.
“We could very easily see our installed capacity developing in the next five years to 10,000 megawatts,” said Harold Prior, executive director of the Iowa Wind Energy Association.
Prior said the efficiency of wind turbines is improving with larger blades and turbines that require less wind speed to operate. He cites legislative initiatives to improve wind turbine land lease payments to Iowa farmers.
In addition, Prior said there’s a large untapped marketplace for what’s called “distributed wind,” smaller turbines installed on or near the site where the power will be consumed, such as colleges or businesses. As electric power and transmission costs rise, he said distributed power will become more attractive.
The growth in core renewable energy industries is fueling more growth in related industries, such as construction.
Three solar panels were being installed last week at the union hall of International Brotherhood of Electrical Workers Local 405 in Cedar Rapids. The union already has a solar array and wind turbine at its training facility on Johnson Avenue.
With solar panel prices coming down, “it’s going to become a large part of what we do, along with LED (light-emitting diode) lighting,” said Rich Good, IBEW Local 405 business agent.
A decision on waiving the Renewable Fuel Standard is expected from the EPA early next month. Congress isn’t expected to act on extending the Production Tax Credit for wind energy until after the presidential election.