Even though sugarcane production levels are relatively minor, a great deal of research and development is dedicated to developing new varieties of the crop that are more suitable for cultivation in the U.S. Ben Legendre, a professor and department head of the Audubon Sugar Institute at Louisiana State University’s Agricultural Center, says the major emphasis of this research is to increase sugar yields and reduce crop input costs. This includes extensive breeding programs to develop sugarcane varieties that are resistant to diseases, insects and weeds, and better adapted to colder temperatures.
Sugarcane efficiently turns sunlight and chemical inputs into energy and requires a minimal amount of fertilizer, compared with other ethanol feedstocks. “Your total input costs are less [with sugarcane] than with corn or some of the other crops that are used for ethanol production,” Richard says. The energy balance is also greater. While corn generally produces about 1.5 units of energy for each unit of energy it consumes the energy balance of sugarcane is approximately eight to one, Legendre says.
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Even with all of these advantages, sugarcane ethanol projects have struggled to gain a foothold in the U.S. because the economics simply don’t make sense in most areas. Using current technology, Legendre says it takes about 14 pounds of sugar to produce 1 gallon of ethanol. The price of U.S.-produced raw sugar currently hovers at about 20 cents per pound, and has remained stable for nearly two decades. With the current economics, ethanol producers in most areas simply wouldn’t be able to afford it.
Pockets of Potential
There are, however, specific pockets of the U.S. where sugarcane ethanol production could be feasible. Pacific West Energy LLC is currently moving ahead with sugarcane ethanol production on the island of Kauai in Hawaii. According to William Maloney, the company’s president and chief executive officer, Hawaii’s unique economy holds opportunities that will allow this project to thrive.
Pacific West Energy’s ethanol production project involves converting an existing sugar mill on Kauai. To make the facility competitive, it will be capable of producing sugar and/or ethanol. This should provide the company with a safety net if the price of ethanol dramatically drops or the price of sugar sharply increases. Other elements of the project include doubling the land currently dedicated to sugarcane production, and modernizing harvesting methods.
The key to sugarcane ethanol economics today is to take advantage of the byproduct value of electrical generation, Maloney says. In addition to producing ethanol, Pacific West Energy’s proposed plant will also burn bagasse to produce electricity through a combined heat-and-power system. “Not only will we provide all of our own energy for our process, but we will also export a significant amount of energy to the utility,” Maloney says.
A variety of factors make Hawaii’s island economy uniquely suited to sugarcane ethanol production, according to Maloney. The state already has an established sugarcane industry and land suitable to grow the crop. Hawaiian sugarcane producers also receive lower payments for their sugarcane when compared with farmers in the continental U.S. because they have to ship their raw sugar to California to be refined. This means that an ethanol producer in Hawaii will be better able to afford the price paid to a farmer for their sugarcane production. “If you are a sugar producer in Hawaii, the point when it makes sense for you to switch to ethanol is at a lower price point than it would be for a producer in Louisiana or Florida,” Maloney says.
Hawaii also has some of the highest national prices for electricity and liquid fuels and is a captive home market in which to sell the fuel. In addition, it has some of the highest ethanol prices in the U.S., allowing Pacific West Energy to sell the fuel at a higher price than it could in other areas of the country. The company will also receive the highest value for the excess electrical production that it provides to the grid because of the island’s high electricity prices. “I’ve always looked at it as the perfect storm—or perfect influence—of positive factors,” Maloney says.
Additional benefits include a 30-cent-per-gallon state production incentive, which will help offset building costs. Maloney has been pursuing the project since 2005. Pacific West Energy’s plant is currently permitted at 12 MMgy of capacity, although Maloney expects that will be increased to 15 MMgy. Depending on the lending environment, he estimates the plant could be on line by 2010.
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