O' Ethanol

With Canada's renewable fuels standard mandating E5 starting in September, EPM takes a look at the Canadian ethanol industry.
By Anna Austin | July 15, 2010
In stark contrast to its neighbor to the south, the Canadian ethanol industry didn't experience the sweet boom years that the U.S. industry did, but it also hasn't suffered sour effects from a declining economy. In fact, it has likely learned a few lessons from its neighbors to mitigate such effects. Significantly smaller than its U.S. counterpart, the Canadian industry hosts 15 commercial-scale fuel ethanol plants in operation or under construction, ranging from 12.5 million to 225 million liters per year to total nearly 1.8 billion liters (about 476 million gallons). That's a small fraction of that of the U.S., which has an installed capacity of more than 13 billion gallons. Canadian producers also enjoy fewer incentives and less federal assistance than U.S. producers historically have. Canada's slow but steady progress, however, seems to be cementing a solid foundation for continued growth.

Canadian ethanol plants are concentrated in Ontario and Saskatchewan, with a scattering in other provinces. Corn is the prevalent feedstock in eastern Canada, most of which is grown domestically with roughly 40 percent imported into eastern Ontario and Quebec, according to a recently completed biofuel economic impact assessment report commissioned by the Canadian Renewable Fuel Association.
Western Canadian plants typically use wheat, of which Canada is a net exporter, ranking sixth in the world among wheat growing countries. In 2008, Canada produced more than 29 million metric tons, and according to the Western Canadian Wheat Growers Association, the seven commercial plants in that region annually require about 1.4 million metric tons of wheat or about 7 percent of the wheat grown in Western Canada.

Aside from corn and wheat, municipal solid waste (MSW) is being targeted as the feedstock for a planned facility in Edmonton, Alberta. Canadian ethanol pioneer Greenfield Ethanol Inc. has teamed up with native cellulosic ethanol developer Enerkem Inc. to build a facility that will gasify 100,000 metric tons of MSW from the city into 40 million liters (10 MMgy) of ethanol.

While new projects such as these continue to build and strengthen the Canadian ethanol industry, the positive economic impact of the biofuel industy is influencing the way government and the public view ethanol and renewable fuels.

Many Angles of Support
It doesn't seem as though Canada is experiencing the aggressive ethanol smear tactics that the U.S. has, and recent polls show significant public support for ethanol and renewable fuels in general. Marie-Helene Labrie, Vice-President of Government Affairs and Communications for Enerkem, points out that support seems to be increasing with each year, and companies such as Enerkem that are developing both ethanol and next generation fuels are poised to benefit from the increasing public and government support. According to a national poll conducted last year by Praxicus Public Strategies, 69 percent of Canadians support replacing some of the country's fossil fuels with renewable fuels—specifically ethanol and biodiesel—and 87 percent of Canadians support federal policies that would encourage the development of next generation biofuels. The study also found 74 percent of Canadians support the E5 mandate taking effect this summer, an 8 percent increase from a poll conducted in April 2008.

Canada's renewable fuels standard (RFS) takes effect Sept. 1, mandating E5 blends, though the Canadian Renewable Fuels Association and other groups are pushing for an increase to 10 percent. Until that happens, Canada may have difficulty positioning itself as one of the global leaders in the biofuel industry, according to Labrie. "We will need additional programs and incentives, as well as a higher RFS mandate of 10 percent, in order to build the next phase of development in the biofuels sector and to commercialize next generation technologies," she says.

Meanwhile, federal financial support continues, the most recent being the ecoENERGY for Biofuels Program launched in April 2008 by Natural Resources Canada, which will provide up to $1.5 billion over nine years to boost Canada's production of renewable fuels. So far, NRC has signed contribution agreements with 21 projects, earmarking $765 million for the majority that are ethanol. The program provides operating incentives to producers of renewable alternatives to gasoline and diesel, based on production levels and other factors. It seeks to make investment in biofuels more attractive by partially offsetting the risk associated with fluctuating feedstock and fuel prices. Recipients receive production incentives for up to seven consecutive years. This includes existing producers, requests for volume increases from existing agreements and new producers that clearly demonstrated an advanced state of readiness of their project before March 31. Financial incentives are provided for the number of liters of ethanol produced in Canada, based on fixed declining incentive rates established by the program and as agreed upon in each contribution agreement. In 2010, the incentive payments start at 10 cents per liter for ethanol, and decline by one cent each year until 2017.

Other mandates and incentives vary from province to province. The Ontario government has a provincial mandate of 5 percent renewable fuels, while Manitoba hosts an 8.5 percent ethanol mandate and Saskatchewan a 7.5 percent ethanol mandate. Alberta has recently extended its support for ethanol and biodiesel by prolonging its BioEnergy Producer Credit Program by five years to 2016, presenting opportunities to build additional capacity in Alberta with a focus on the great potential for second generation renewable fuels that use MSW and forestry and agricultural biomass feedstock.

Additionally, the governments of Saskatchewan and Manitoba offer exemptions from road taxes for fuel ethanol produced and consumed in each province, and the governments of British Columbia and Quebec have committed to exempt the ethanol portion of low-level ethanol blends from their road taxes, though there are no ethanol plants in B.C. yet. As a result of federal and provincial producer incentives, actual wholesale prices of ethanol have averaged just over 60 cents per liter so far in 2010. For comparison, in mid-June the national average price of gasoline in Canada was $1.03 per liter.

Ethanol's Economic Impact
As is the case across the globe, next generation biofuels are eagerly anticipated. From Enerkem's point of view, however, traditional ethanol isn't going away. In fact, they will likely grow alongside one another. "From a feedstock perspective, first and second generation ethanol are complementary and they will both play a role in Canada's energy future," Helene says, adding that Enerkem will build community-based plants in both urban and rural areas in Canada. "The flexibility of our technology will allow us to not only produce advanced biofuels from non-recyclable MSW but also from forest residues, which are abundant in Canada."

The communities fortunate enough to become homes of future ethanol or advanced biofuel projects built by Enerkem and others may reap significant benefits. According to the recent CRFA Biofuels Impact Report, the Canadian ethanol industry has stimulated growth in new industry sectors as well as exports.

One significant change in the Canadian ethanol industry in recent years is the increasing proportion of capital equipment that Canadian firms supply to the country's ethanol and biodiesel plants. Displacing imported equipment has provided a major benefit to the Canadian economy, according to the report. It also finds that dried distillers grains is becoming a notable Canadian export; as much 50 percent is exported in western Canada, primarily as animal feed for nearby regional U.S livestock. Even making allowance for the opportunity costs of alternate investments, and the opportunity costs of alternate feedstock sales, renewable fuels plants in Canada represent a positive net economic benefit. Together with the operating biodiesel plants in the country, the 28 renewable fuels plants provide a total of 2.25 billion liters of renewable fuels annually, generating annual economic benefits of more than $2 billion to the Canadian economy. This includes more than 1,000 direct and indirect jobs, the report finds.
While first generation ethanol production continues to build out, cellulosic ethanol companies and new projects have begun to spring up in Canada as well. Potentially, they will add greatly to the newly realized economic benefits of biofuel production in Canada.

Glance at Producers
On a much smaller scale, Greenfield Ethanol is to Canada what Poet LLC or Archer Daniels Midland Co. are to the U.S. Initially known as Commercial Alcohols, the company made its first deal for a commercial-scale fuel ethanol plant in 1996. It opened two years later in Chatham, Ontario, and is in full operation today. Greenfield now has four operating corn ethanol plants, and is planning two additional ones—a corn ethanol plant in Hensall, Ontario, and the joint project with Enerkem to produce cellulosic ethanol in Alberta.

Husky Energy, one of Canada's largest integrated oil and gas companies and Western Canada's largest ethanol producer, has been manufacturing ethanol since 1981. The company has two plants, located in Lloydminster, Saskatchewan, and Minnedosa, Manitoba, that collectively produce 260 million of liters of grain ethanol per year.

Oil sands company Suncor Energy operates Canada's largest ethanol facility, the St. Clair Ethanol Plant in the Sarnia-Lambton region of Ontario. The plant opened in June 2006, and has an annual production capacity of 200 million liters per year, with a $120 million expansion project underway to double its capacity. According to the company, the plant currently uses 20 million bushels of corn annually, or approximately 10 percent of Ontario's annual corn crop.

On the cellulosic side, Iogen Corp. has been around for the better part of a decade. Its demonstration facility in Ottawa, Ontario, opened in 2004, and is designed to process about 20 to 30 metric tons per day of ethanol from wheat straw. With an approximate daily capacity of 5,000 to 6,000 liters of cellulosic ethanol, the fuel produced at the demonstration facility is currently being purchased by Royal Dutch Shell, and together the companies have formed joint venture Iogen Energy.

Aside from its project with Greenfield, Enerkem began operations in January 2009 at its commercial-scale syngas-to-ethanol/methanol plant in Westbury, Quebec, and is developing a U.S. DOE-backed waste-to-biofuels plant in Pontotoc, Miss. The $250 million project will recycle and convert approximately 60 percent, or 189,000 tons, of the MSW from the Three Rivers Landfill where the 20 MMgy facility will be built.

There several other ethanol plants are scattered across the country. Some of them are working on expansions, some are partnering for additional projects, and others are simply focusing on optimizing current operations. Keeping the ethanol industry ball rolling, Canada just may demonstrate that its slower and steadier technique wins the race. EP

Anna Austin is a Biomass Magazine associate editor. Reach her at 701-738-4968 or aaustin@bbiinternational.com