The energy requirements for ethanol production have improved markedly during the past decade due to a variety of technology and plant design improvements. The energy needed to produce a gallon of ethanol has decreased nearly 50 percent over the past fifteen years and that trend is likely to continue as process technology improves. In modern grain ethanol plants, the critical energy cost is the price of natural gas. It is used in the ethanol production process and in drying the related grain co-products. Due to the significant cost of drying wet distillers grains, some plants are designed to minimize this option provided they are located in an area where this product can be marketed in wet form. A strategy to manage energy cost risks should be considered while evaluating energy options for the plant.
Natural gas may not be immediately available as a process fuel at each prospective plant site. However, the process energy cost must be carefully evaluated since it will likely represent the second largest input cost in an ethanol plant. The historic price of electricity has not varied in most states like the price of natural gas. The operating costs for electricity in a medium size grain ethanol plant may be nearly $2 million annually but this cost can be managed via contract options. Increased demand for coal may also impact the long term price of energy at facilities that opt for coal as a boiler fuel.
Energy expenses are one of the key variables in site selection that can affect profitability. In some instances, ethanol plants are able to lower energy expenses by locating near existing industrial or power generating facilities that produce excess steam. Co-location of the proposed ethanol plant with such a facility should be explored if practical. Other types of co-generated energy are also emerging in some areas of the country. Power co-generation units and integrated methane production from ethanol plants co-located with livestock or dairy production are examples.