Market Update: PRX took a look back at cellulosic ethanol production to see what kind of volumes were actually produced and what the future holds. PRX has preached over the years that EPA's statutory volumes of Cellulosic biofuel are waivable and unrealistic for cellulosic ethanol. EPA's EMTS data first recorded cellulosic ethanol production in 2012 generating 20,069 D3 RINs, while that year's RFS2 statutory volume for Cellulosic biofuel was 500 million ethanol-equivalent gallons, lowered by EPA rulings to 10.45 mil gals and after lawsuits eventually set to zero by EPA.
2013 was not much better, as no cellulosic ethanol RINs were generated, despite a 1 billion ethanol-equivalent gallon statutory requirement for Cellulosic biofuel that was lowered by EPA to 6 million gallons. After petitions for reconsideration, this volume was set to 810,185 ethanol-equivalent gallons, the actual volume of cellulosic renewable gasoline and diesel RINs generated.
In 2014, cellulosic ethanol only generated 728,509 D3 RINs, while the Cellulosic biofuel statutory volume was 1.75 billion ethanol-equivalent gallons and lowered by EPA to match actual production of 33 million ethanol-equivalent gallons. The majority of this cellulosic biofuel production came from renewable compressed and liquidifed natural gas, which EPA classified as a Cellulosic biofuel on August 18th, 2014.
Cellulosic ethanol production in 2015 generated 2.181 million D3 RINs that can be used to help fill the 123 million ethanol-equivalent gallon 2015 RVO for Cellulosic biofuel that EPA lowered from the statutory requirement of 3 bil gals. The majority of this RVO was again filled by renewable compressed natural gas (72.77 mil RINs) and renewable liquidifed natural gas (53.16 mil RINs).
For the first two months of 2016, cellulosic ethanol generated 556,953 D3 RINs. If this pace continues, some 3.3 million cellulosic ethanol RINs will be produced in 2016. EPA projected 20 million gallons of cellulosic ethanol to be produced when they lowered the statutory Cellulosic biofuel requirement from 4.25 billion ethanol-equivalent gallons to 230 million gallons.
As the data shows, the cellulosic ethanol industry continues to struggle to provide significant volumes of ethanol to the marketplace. However, new plants have come online last year (Abengoa, Dupont, & POET) and more are planned to come online in 2017, so we may see production reach 100 million gallons within the next few years.
EIA Petroleum Supply Monthly Data: For 2015, ethanol production was 14.806 billion gallons with a residual error of 254 mil gals. Refiner input was 13.686 bil gals and the calculated inclusion rate for the 136.187 bil gals of mogas receiving ethanol was 10.05%. About 97% of all mogas (with 140.432 bil gals) did indeed receive ethanol. Ethanol ending stock were 900 mil gals (pg 2).
In January 2016, 1.273 bil gals of ethanol was produced and 1.104 bil gals was blended domestically into motor gasoline, building stocks to 973 mil gals (pg 2).
EIA Short Term Energy Outlook Data: Using the March forecasts, the STEO is forecasting slightly higher 2016 & 2017 ethanol production at 14.996 & 14.853 bil gals. The EIA is forecasting mogas consumption higher at 142.222 & 141.607 bil gals in 2016 & 2017, while increasing ethanol domestic use in 2016 & 2017 to 14.258 & 14.162 bil gals. Thus, implying ethanol net exports in 2016 & 2017 are 737 & 691 mil gals (pg 4). EIA's WTI crude oil price forecast continues to fall, averaging $34/bbl in 2016 & $40.08/bbl in 2017 (pg 4 & 5). The Mar-STEO has forecasted wholesale mogas prices below ethanol futures prices for the farmbelt through 2016, only counting a small portion of D6 RINs that are priced into spot ethanol (pg 6).
DOC US Census Foreign Trade Data: For 2016 through February, fuel and industrial ethanol exports were 154 mil gals, of which 150 mil gals was used for fuel. For 2016 YTD, China for the first time is leading the way receiving 38.3 mil gals, Brazil 28.7, Canada 28.3, Middle East & North Africa 12.3, & South Korea 11 mil gals to name a few. If this pace continues, 900 mil gals of fuel and 25 mil gals of industrial ethanol will be exported this year (pg 8). For 2016 through February, fuel ethanol imports were a mere 39,685 gals (pg 9).
DOC vs EPA Ethanol Exports & Imports: For 2016 through February, the DOC has denatured for fuel use ethanol exports at 99 mil gals. If we assume all D6 RINs exported were ethanol, which was likely the case. This can be compared to EPA's EMTS data of 80 million D6 exports through February (pg 8).
Looking at 2016 through February fuel ethanol imports, EPA's 2016 importer generated D5 RINs were nonexistent for both January and February, so DOC's 39,685 gallons of ethanol likely generated D6 RINs and was not Brazilian sugarcane ethanol.
USDA Grain Crushings and Co-products Production Data: In February, dry mill plants used 377 million bushels of corn to make fuel ethanol, while wet mill plants used 43 mil bu. For crop year 15-16 through February corn use for ethanol production was 2.617 billion bushels. If this pace continues, 5.235 billion bushels will be used in 15-16. PRX estimates 15-16 corn to ethanol use at 5.278 billion bushels, USDA is estimating 5.225 billion bushels (pg 13).
