The Renewable Fuels Association National Ethanol Conference (NEC) concluded on February 13. During the last few quarters, ethanol margins have been at the lowest levels in many years resulting in reduced production and the permanent closure of some plants. A number of plants are seeking buyers. In this climate, the focus of the NEC was on the future of the industry. Here are some key points gleaned from multiple conference presentations.

• Given low margins for ethanol, the industry is giving ever more focus to new and differentiated co-products (such as high protein and species-specific animal feeds), energy efficiency and better productivity of existing plant assets.
• With mixed signals with respect to federal support for ethanol in the U.S., the rest of the world is increasing support for cleaner air and lower carbon transportation fuels. During 2018, one of every 10 gallons produced by U.S. ethanol plants was exported — even with punitive tariffs in some key markets and the virtually complete closure of the China market for a significant portion of the year. Assuming China re-opens to U.S. producers, exports will play an even larger role in market share this year; substantial increases in exports to Mexico are also possible. Speakers noted that U.S. ethanol now accounts for one percent of the world’s transportation fuel.
• Many speakers provided statistics on the role of ethanol in clean air and greenhouse gas reductions. For the first time ever, the head of the California Air Resources Board (CARB) spoke at the NEC. Long perceived as being negative on corn-based ethanol, the head of CARB acknowledged the key role of ethanol in the remarkable clean-up of California air in recent decades.

The future of ethanol, as well as biodiesel and other renewable energy sources, will be based on the interplay of several forces:

• The Renewable Fuels Standard (RFS). The U.S. RFS will continue in some form for decades to come, and will be one part of the foundation for biofuels. It appears that, if not this year, next year, year-round sales of E15 will be permitted for federal purposes, and E15 may be allowed in some currently closed states. This will have a significant impact and provide the opportunity for customer demand, rather than an Renewable Fuels Association-mandated 10% blend, to support industry growth and a return to profitability.
• High Octane Fuels. In order to meet regulatory and consumer pressures for cleaner emissions and lower mileage, the auto industry is promoting new high octane requirements for vehicle fuel, to be based on 95 octane for all vehicles, with an option for 98 octane as an option for high performance vehicles. In the view of some speakers, this can only be achieved with higher levels of ethanol inclusion in the fuel supply. The auto makers are supporting this concept which will they have concluded will produce a 3% improvement in fuel economy and substantially lower emissions. The increased commercial demand for ethanol to meet new high octane standards would then become the key driver of ethanol production.
• Low Carbon Mandates. In those parts of the world, including the U.S., whrfaere there have been substantial reductions in coal fired power plants, transportation fuels have become the largest source of carbon emissions. Thus new and enhanced low carbon incentive programs in the US and internationally will be required to drive carbon emission reductions; these programs will thus be key for the growth for ethanol and other biofuels.
• While electric vehicles, largely in the auto market, will become an increasing portion of the vehicle fleet, electric vehicles will be only one aspect of a portfolio of solutions for air quality improvement and mitigating climate change. Liquid fuels will continue to dominate for the long term especially for light and heavy cargo vehicles and air transit.