Corn, ethanol, RIN prices, and the blend wall!

As we’ve hinted at before, some interesting things are starting to happen with high corn prices, high RIN prices, the blend wall and ever compounding RFS requirements!

We all know that corn prices have been high – so high in fact that ethanol production is not economical… so alot of ethanol plants have been idling for the past year.  Interestingly, it seems POET is looking to produce ethanol from wheat as a temporary solution:

http://www.reuters.com/article/2013/03/06/ethanol-wheat-poet-idUSL1N0BYEC220130306

While maybe we haven’t been producing alot of ethanol, people are thinking ahead to next year when the RFS will require more ethanol to be produced than can be blended into gasoline at the existing 10% level (ignoring for the moment the tiny amount that would go to E85 and 15% pumps).  This is the “blend wall”, and the reason people will start buying RINs instead of producing ethanol that can’t be sold..

In more detail, Scoot Irwin & Darrel Good at Farmdoc Daily discuss the reasons behind the “exploding” RIN prices:

http://farmdocdaily.illinois.edu/2013/03/exploding-ethanol-rins-prices.html

Here is an older but still useful post on this topic:

http://www.card.iastate.edu/policy_briefs/display.aspx?id=1179

Biofuels Digest has a nice writeup of how this affects gas prices (not much): http://www.biofuelsdigest.com/bdigest/2013/03/19/operation-deathanol-rins-and-the-selling-of-the-fossil-fuels-are-fine-story/

Biofuels Digest presented an interesting alternative for ethanol plants:

instead of making ethanol from corn grain,  make ethanol from cellulosic (so D3,D4, or D5 RIN) just to capture and sell the RINs on the high priced market..

http://www.biofuelsdigest.com/bdigest/2013/01/16/sugar-rush-sweetwater-front-range-ink-100m-cellulosic-biofuels-deal/

Currently, corn ethanol RINs cost less than a nickel, advanced RINs sell for $0.45 – so a gallon of ethanol that qualifies in the “advanced pool” (that is, achieves a 50% reduction in emissions compared to fossil fuels) is worth 40 cents more per gallon than a gallon of traditional corn ethanol.

However, now that corn ethanol RIN (D6, “renewable”, “conventional”) prices have jumped to over $0.70, maybe this doesn’t sense anymore?  I can’t actually find a source that lists current RIN prices.. so I have to depend on numbers reported in these articles..

I’m also curious if they would get the PTC tax credit on top of the RIN price?

A cellulosic biofuel producer that is registered with the IRS may be eligible for a tax incentive in the amount of up to $1.01 per gallon of cellulosic biofuel that is: sold and used by the purchaser in the purchaser’s trade or business to produce a cellulosic biofuel mixture; sold and used by the purchaser as a fuel in trade or business; sold at retail for use as a motor vehicle fuel; used by the producer in a trade or business to produce a cellulosic biofuel mixture; or used by the producer as a fuel in a trade or business….
If the cellulosic biofuel also qualifies for alcohol fuel tax credits, the credit amount is reduced to $0.46 per gallon for biofuel that is ethanol and $0.41 per gallon if the biofuel is not ethanol.
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2 Responses to Corn, ethanol, RIN prices, and the blend wall!

  1. Pingback: Nice summary of the RFS (and a new blog to follow!) | Energy and the Future

  2. Pingback: revised RFS biofuels mandates proposed: “slashing” not the right word | Energy and the Future

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