Fuel Production:

Ethanol and Butanol

In the United States, 2011 revenues from the sale of ethanol reached $38.3 billion and are expected to grow to $40.6 billion in 2012.

Global ethanol sales totaled 23.4 billion gallons in 2011 and are estimated to reach 24.4 billion gallons in 2012, with associated revenues of $65.9 billion and $77.5 billion, respectively. Annual capacity additions to ethanol refineries totaled 678 million gallons per year (MGY), representing $2.2 billion in capital investment in 2011. New capacity additions in 2012 are estimated to total 2,051 MGY, resulting in an estimated $6.8 billion of investment in ethanol refineries in 2012.

Although the conventional ethanol market – defined as ethanol fuel produced from food-based resources like corn starch and sugarcane – is expected to continue growing over the next decade, the next wave of technologies, which includes cellulosic ethanol conversion processes and biobutanol production, are expected to gain traction in the market. Numerous macroeconomic trends are driving demand for cellulosic ethanol – including concerns over energy security, food versus fuel, and the environment – but commercial competitiveness of cellulosic ethanol in the short-term remains limited. Although not yet in commercial production, biobutanol has drop-in compatibility with existing infrastructure and greater energy density than ethanol. With these advantages, biobutanol is expected to capture an increasing share of investment worldwide.

In the United States, 2011 revenues from the sale of ethanol reached $38.3 billion and are expected to grow to $40.6 billion in 2012. Production growth in 2012 has been limited by severe drought and higher corn prices. Driven by strong policy support, an expansion in corn production, tax credits, and the Federal Renewable Fuel Standard (RFS), U.S. ethanol production saw a rapid expansion in the 2000s, growing at a nearly 21% compound annual growth rate (CAGR) between 2000 and 2009. Ethanol production has since plateaued, with just a 1% CAGR between 2010 and 2012. This slowdown corresponds with a general downward trend in biofuels investment, which is attributable to uncertainties around market demand resulting from an impending “blend wall” – the point at which ethanol production exceeds the legally permissible blend ratio for ethanol and gasoline – and a limited risk appetite among investors for first-of-kind advanced biorefineries. Efforts to expand E85 (85% ethanol, 15% gasoline) fuel in the market have also stalled, contributing to persistent uncertainty around future ethanol demand in the United States. As a result, future growth in cornstarch-based ethanol production in the United States is likely to occur at the margins through higher corn yields and improved conversion efficiency, rather than through construction of new ethanol biorefineries.

Economic Impact

gross domestic product

The Ethanol and Butanol subsegment contributed $38.9 billion in increased U.S. GDP in 2011.

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