If the boosters of ethanol master cellulosic conversion, they will then have to find an effective way to deliver large quantities of the new fuel to the market. Like water, it is held together by the powerful bonds between hydrogen and oxygen atoms, so ethanol cannot travel through most petroleum pipelines. If ethanol encounters water in the pipes, it will absorb the water and become unusable. It also dissolves dirty petroleum gum residues on the walls of pipes and tanks. Robert Reynolds, a consultant who has studied ethanol infrastructure for the Department of Energy, says ethanol would have to make up at least 30 percent of the gasoline supply to justify the expense of making current oil pipelines fit for sharing.
Right now ethanol is used mostly as a fuel additive; about one-third of the gasoline sold in the United States contains a shot of ethanol (about 10 percent, typically) to reduce automobile emissions. That has given energy companies a chance to explore the transportation difficulties. Ethanol from places like Corn Plus travels by barge or railroad to distribution terminals, then is combined with gasoline at the rack where tanker trucks load up. To receive ethanol, these tank farms may have to add new railroad spurs, storage tanks, and blending systems. It costs roughly three cents to send a gallon of gas from the Gulf Coast to New York. Transporting a gallon of ethanol by train from the Midwest costs at least 12 cents, and the shipments are vulnerable to delays on the tracks.
But an interesting thing happened in recent years as many large markets phased out MTBE, a competing gasoline additive, in favor of ethanol: nothing. Adding new infrastructure at the terminals did not prove daunting; railroads delivered tank cars full of ethanol on time. When there were price swings, they were limited to the season of transition. In the long run, consumers did not appear to have been greatly punished at the pump for using ethanol. Reynolds even believes that if ethanol production hits 10 billion gallons and consumers embrace E85—the 85 percent ethanol mix—a dedicated pipeline from the Midwest to the East Coast could make economic sense, although the conventional wisdom remains against him.
For now, E85 remains a distinctly boutique concern. The roster of places to buy it grows every day, but the numbers are small: just over 600 stations, about a third of them in Minnesota. Many states have no stations at all. Detroit is trumpeting its commitment to build E85-compatible flex-fuel cars and trucks—1.25 million of them this year—but those are scattered on dealers' lots around the country, so most of their owners will have no access to ethanol. Furthermore, these vehicles incorporate rudimentary conversions of gasoline engines and do not fully exploit ethanol's high octane.
Even ethanol's fans concede that building up the ethanol infrastructure depends on government support, at least for now. A report by the Natural Resources Defense Council estimates that developing competitive ethanol technology will cost $1.1 billion; deploying it could cost just as much. "It's a long-term investment, and it requires a commitment," says Purdue University bioengineer Michael Ladisch. Besides research, the commitment includes a federal 51 cent per gallon tax credit, local credits, and incentives for building E85 pumps. The raw feedstock, corn, is subsidized, too, with cash payments to farmers. In 2004 that amounted to 16 cents a gallon. (Not all the taxes are stacked in ethanol's favor; a 54 cent per gallon tariff effectively bars cheap Brazilian ethanol from the American market.)
Red Cavaney of the American Petroleum Institute cautions that "it is important that we not ask government to pick technology winners and losers before the science has caught up." Still, the Department of Energy's real problem may be not where it is placing its bets but how much it is wagering. For 2006, the Bush administration proposed just over $50 million for ethanol research, less than half what Clinton's budget requested in 2001. Originally NREL set its goal of $1.07 ethanol for 2010; by last year, the target had slipped to 2020. With the current renewed emphasis on biofuels, Foust's team is poised to get $27.5 million in 2007, a touch more than it spent in 2004. The Department of Energy would increase its total biomass spending to $150 million—a 65 percent bounce.
In the end, this is up to Congress. Over the years, it has held a middle ground between the Clinton administration's enthusiasm for bioenergy and the Bush administration's indifference. Lately, legislative munificence has come with strings: directed spending projects, the lifeblood of pork-barrel politics.
"It started about three years ago," says Bob Noun, NREL's executive director for external affairs, "but in the last year, they've doubled." In the 2006 budget, earmarks divert $61 million, two-thirds of the total biomass research budget. The earmarks are vaguely titled and have no descriptions; staffers in the Department of Energy have to confer with Congressional Appropriations Committee staffers to figure out who gets what. Although the Energy Department encourages recipients to work toward its research agenda, it can't force them—it is required by law to hand over the money.
The grants are mostly death by a thousand cuts: a hundred thousand dollars here, a half million there. One notable exception is an $11 million grant to establish a "sustainable energy center" at Mississippi State University, secured by Representative Charles Pickering. The largesse appears to have taken the school by surprise. Although the legislation passed in November, the university's PR team only heard about it in April. "There are many questions to be answered that we can all work on," says engineering professor Glenn Steele, a codirector of the new center. "We're looking at wood chips and other feedstock sources that are not necessarily in the mainstream for ethanol but are in abundance in our region. And we will be working with the national laboratories to make sure we're not duplicating research."
In an encouraging sign, the House recently voted to provide extra money to pay for its pork-barrel add-ons; the Energy Department's biomass request was fully funded. Tom Foust believes that if department scientists get all of their R&D dollars, cellulosic ethanol will be commercially competitive by 2012. "We know the tools, and we know the protein engineering," he says. "None of these breakthroughs that we're proposing are the skies parting and a tablet coming down from the heavens."
The national trade association for the U.S. ethanol industry is the Renewable Fuels Association.
For more information about ethanol as a fuel source, visit the websites of the American Coalition for Ethanol, or the National Ethanol Vehicle Coalition.
More general information on ethanol can also be found at the Governors' Ethanol Coalition.
