Ludlow Energy Ventures has a vested interest in identifying companies within the ethanol industry whom are on the cutting edge of technology and are able to withstand the small profit margins and fluctuating commodity prices taking place.

One of the key elements contributing to the growth of the ethanol industry in the United States is the economies of scale in production and the growing concern about the environment. Boosts in production will consequently yield increased capital in the industry and will produce improvements in technologies and therefore decreases production costs.  However, although increased production has taken place; fluctuating commodity prices are having a gradually larger effect on growth. This a major issue, in that a majority of ethanol production is made from corn, which accounts for more than half the input cost associated with production. 

Having corn as one of the major inputs in making ethanol has simulated major debate on whether or not there is enough excess corn to meet growing demand for ethanol fuel. According to the American Coalition for Ethanol, approx. 1.6 billion bushels or corn went to production in 2005 – about 12% of the nation’s total corn crops. In 2006, however, the amount of U.S corn processed into ethanol was projected to hit 2.5 billion bushels, a 36% jump. With these growth patterns in mind, the United States will likely start reaching limitations on growth within the next 7-10 years.

Due to the unpredictability of commodity prices, there is extensive research being done to move beyond feedstock’s such as corn to inputs such as forestry waste and wood residues to produce cellulose based ethanol. This shift from food crops to waste residue offers unique opportunities for a range of stakeholder groups including: farmers, biotech firm’s investors and food producers. In addition to this, current feedstock’s being used in mainstream ethanol production is putting a strain on the global food market – as they are now being converted into fuel. With development of technology and increased investment, cellulose based ethanol should hit as much as 150 billion gallons of ethanol by 2050, according to a report by the National Resources Defense Council (NRDC), which equates to more than 2/3 of the current gasoline consumption in the entire United States.

Furthermore, ethanol (mainstream or cellulous based) is beneficial in helping to reduce GHG emissions in the United States and beyond. According to a research study conducted by the Argonne National Laboratory, it was found that a 10% ethanol blend into conventional gasoline could reduce global GHG emissions, by ~12% to 19%. In addition to these reductions, the Renewable Fuels Association has stated that ethanol could reduce tailpipe carbon monoxide (CO) emissions by as much as 20% and tailpipe particulate matter (PM) emissions by 50%.

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