Making History: Solazyme, United Airlines and Biofuels

It was like any other flight. Window or aisle, peanuts or pretzels, wheels up then wheels down. But it wasn’t just any other flight.

Just last week United Airlines made aviation history with a Houston to Chicago trip: the first domestic commercial flight to utilize fuel derived from biofuels that were created by American company Solazyme.

That particular flight alone saved 10-12 tons of CO2. United Airlines sees the fuel as a step for them to reduce not only emission, but also to improve their bottom line.

Check out United Airlines and Solazyme’s spokesmen discuss their revolutionary partnership and why this flight is one for the history books.

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US Navy’s “Green Strike Force”: A Blossoming Initiative

We hear talk about biofuels within political debates and media specials.  Now, about how often you hear about sustainable fuels in the context of our ruggad, die-hard military and defense departments? If you ask me, they don’t exactly seem like the most ecologically-minded bunch.

Looking to lower their ecological footprint, the US Navy is creating a “Green Task Force” through purchasing half a million gallons of biofuel. They plan to meet a portion of the energy demandwithin their jet and carrier fleet. As an added and noteworthy bonus, this move also supports American jobs and economic vitatlity on our home soil. Most of the ordered fuels are made from re-processed cooking oil while many are algae-based.

Their over-arching hope is to meet their goal of 50% alternative, homegrown fuels by 2020.

The implications of this partnership could be various and extensive. Partnering with American clean fuel producers could help our nation secure energy security. The Navy relies on unstable, rogue nations for fuel and this provides perverse implications to our national secity. Moreover, these fossil fuels are subject to extreme price volatility, putting the Navy’s budget at risk. Biofuels, however, are produced domestically and do not exhibit that price volatility. Adding these renewable fuels into their diversified portfolio acts as a hedge against price risk.

Now this is blossoming relationship in which I want to keep up to date!

Making the Case for Clean Fuels with Economic Principles.

So I thought I might run through a brief lesson of what I have learned in higher education and how those principles apply to our everyday world. I graduated with a B.S. in Renewable Energy Economics and Policy, and I’m currently pursing a masters in Environmental Policy at the University of Michigan.

But this post is not about me. It’s about markets and how they function.

To set the tone, here’s some background etymology. Economics’ root word, eco, is derived from the Greek word Oikos–meaning household or family. Economics literally translates into “management of the household.”

In order for any family unit to properly function, certain rules are established in a home. Example: dirty dishes must be placed in the dishwasher or cleaned properly when used so the next user doesn’t have to do so.  If not, extra chores might be assigned.  Although this analogy might be a stretch similar protocol applies to markets.

Markets typically act as a mechanism to facilitate transactions between buyers and sellers while offering perfect information.  Not all markets are created equally (some have many producers and are more perfectly competitive, while others act as monopolies with one buyer that exhibits significant market share).  All markets, however, can generate costs or benefits that are not taken into account within the routine transactions.  These costs and benefits can be placed on others not directly involved, making them pay or succeed just by being a by-stander.  These costs and benefits I’m referring to are called externalities.

There are two types of externalities–positive and negative. The typical example of a positive externality is clean air (e.g. someone that cleans up the air can make society and ecosystems better off); the typical example of a negative externality is pollution (e.g. a firm placing the cost of clean-up or health-care onto society as a result of their manufacturing).

Economics informs us that the presence of negative externalities merits government intervention because that particular market has failed to function properly.  These intervention mechanisms can include anything from a tax to thorough monitoring to other policies.

Most people would cringe at the thought of more government. I happen to agree. As a firm believer in the free market, I would also like to see less government intervention. How do we enable that? The answer is fairly intuitive–use fuels that inherently don’t require firms to internalize the cost for cleanup because the pollution is not an issue in the first place.

Fuels grown here in America such as ethanol and bio-diesel do not contribute to smog or air pollution. Therefore, they do not result in externalities that must be internalized.

It’s about time we start getting back to the academic principles to point us in a better direction of where we need to head as a society.

Isolated Hard Times: Ethanol’s Job and Economic Outlook Remain Strong

We are reminded of it everytime we turn on the media. It’s a ubiquitous reminder that jobs are scarce, budgets strained, and spending frugal.

Yet the question remains – are all sectors truely created equal in terms of our recent macroeconomic trough? I was curious to see the impact within the renewable fuels arena, a major employer and source of American fuel, so I tracked down some statistics and facts to paint a clearer picture.

According to the Minnesota Department of Agriculture’s 2010 Minnesota Annual Report, “Minnesota’s ethanol industry generated more than $2.5 billion in economic activity in 2009 and supported more than 6,800 jobs … Ethanol production in the state increased to 862 million gallons in 2009 from 550 million gallons five years ago.  The MDA report estimates the industry is on tap to increase production to 1.1 billion gallons this year with a projected economic impact of $3.1 billion and approximately 1,500 additional jobs.”

Minnesota also boasts 21 ethanol plants across the state, all providing economic opportunities for suffering rural economies.

In order to determine the significance of that figure and ethanol’s efficacy in providing employment opportunities, I thought it imperative to compare it to the unemployment data for Minnesota. As of October, Minnesota’s unemployment rate fell to 6.4% while the national unemployment fell to 9%, according to the Minnesota Department of Employment and Economic Development.

All other factors aside, it seems no coincidence that Minnesota is much better off than most of the country in this recession. A state-wide statute has set the goal for increasing the ethanol blend in fuel to 20% by 2013, and they also offer  more E85 pump stations than any other state in the nation.

These regulatory initiatives in addition to renewable fuel industry proliferation have proved to be the successful dual pillars that continue to drive Minnesota’s economic development agenda.

 

 

Research Award: Corn Ethanol’s Positive Role in Health and Medical Arenas

Dr. Munir Cheryan will be lauded this Tuesday with an ethanol award for his modern advances in the arena of ethanol production.  Research professor at University of Illinois’ Agriculture Bioprocess Laboratory, he continues to license more patents and works alongside Prairie Gold, Inc. since 2006 toward the commercialization of high-value ethanol by-products.

I called Dr. Cheryan earlier today to garner a further insight into his accomplishments and breakthroughs. Although I will not delve into every shared detail, the main takeaways hold enough magnitude to stand on their own.

Dr. Cheryan’s research ramped up in the 1980s because he wanted to be a part of solution to clean air, reduce pipe emissions and enable a farm support program. Until this time, ethanol production was a costly, time-intensive process that, in his words, relied on “moonshine technology.”  His research and breakthroughs helped augment the time efficacy of ethanol production and brought it from 100 hours down to 24 hours or less by improving the separation process.

In the ‘90s he helped improve the energy ratio for ethanol production by the application of membrane technology in several areas of corn processing. A key driver for efficiency improvement was to drive costs down for ethanol production; Dr. Cheryan saw this market signal’s solution was to seek out higher valued co-products from corn that can co-exist with ethanol. Zein, one of four proteins found in maize, touts a whole suite of applications and can be extracted from the corn without reducing yield of the ethanol end-product; this protein is natural, biodegradable and can be used in agriculture (hay baling), in the manufacturing of plastics, food products (a non-stick, biodegradable chewing gum) and in biomedical markets (for medical sutures that safely dissolve in the body).

An accidental co-product discovered from zein extraction demonstrated corn’s ability, after ethanol production, to offer additional benefits to, this time, the health market. Dr. Cheryan explained to me that the compounds, lutein and zeaxanthin, which make corn yellow in color (same for Marigold flowers!) also contribute significantly to retina and cardiovascular health while preventing age-related macular degeneration, or AMD. He envisions a future opportunity to sell the crude material to vitamin companies.

Another coproduct from his technology is a “healthy” corn oil containing much higher levels of health-promoting compounds than conventional corn oil. A unique feature of all Dr. Cheryan’s processes is that corn-based ethanol is used instead of petroleum-based solvents.

Key takeaway: Dr. Cheryan’s devotion will help ethanol stand on its own in a competitive market saturated with petroleum-based products while improving the quality of our air and health.

Free Trade Agreements – A Vital Constituent to Ethanol’s Success.

In Congress this week, there is buzz regarding a vote on free trade agreements with several latin American countries such as Panama and Colombia in addition to Korea.

So why do these free trade agreements matter when ethanol is concerned? Well, the United States is the world’s leader in corn exports. Stemming from that foundation, much of ethanol’s success depends on the steady supply and fair access to other countries.

As Congress stalls, this ambivalence is costing rural America jobs and hurting our local and national economies. For example, over the past two years when corn exports decreased dramatically to Colombia, it resulted in a half a billion dollars in lost revenue to our economy.

It is also important that we recognized the emerging alliances between the European Union and Korea Fair Trade Agreement that was implemented the middle of this summer. In order to maintain our competitive edge in an ever prevailing global market, we need to stake our seat at the table.

I hope Congress recognizes this potential importance to the health of our local and national economies.

Good for National Defense – Good for Civilians.

When I think national defense, several images emerge: the war in Iraq, drug cartels and shanty-towns along the Mexican border and

The Secretary of Navy, Roy Mabus, recently spoke at a Mississippi State University biofuel conference. He lauded their MSU Energy Institute’s conference and research on emerging biofuel technologies.

The navy and our National Defense is extremely interested in biofuels. Why? Our military branch budget takes a brutal hit whenever a barrel of oil rises. Given the volatile nature that surrounds foreign sources of energy and fossil fuels, it makes sense that they are more attracted to stable, reliable and local fuel sources.

So why biofuels? It’s pretty simple, actually. Given that the majority of our petroleum comes from rogue, unpredictable nations, the price of oil is extremely sensitive to geo-politics, causing price unpredictability as a result of supply shocks.

 (Photo: MSU)

Therefore, that’s why the Secretary of Navy is touting biofuels — to protect the military’s budget against price volatility. Moreover, diversifying the navy’s fuel portfolio will also be another way to support our local, national economy.

Since the national defense feels so strongly about American biofuels, a lot of people think that mainstream society should, too (including myself!). And although as individuals we don’t provide the national defense that the Navy performs on a daily basis, each purchase and fill-up at the pump does, and can, make an aggregate difference to our National Security.