SCREEN TIME Virtual FEW Draws Global Audience PAGE 16
How Low-Carbon Farming Pays PAGE 22
EU Biofuels Market Constraints PAGE 26
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4 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
16 NOVEMBER 2020 VOLUME 26
PUBLISHER'S NOTE Forced to Change, We Improve
GRASSROOTS VOICE Spoiler Alert: Freddy Krueger Isn’t Real Either
FEATURES 16 EVENT
Ethanol’s big show went virtual in 2020 By Lisa Gibson
GLOBAL SCENE Promise and Peril: California’s EV-Only Policy By Letica Phillips
DRIVE Just Getting Started By Emily Skor
SPOTLIGHT 30 DuPont
Another Tool In the Toolbox
XCELIS® AI helps producers make informed decisions By Matt Thompson
Low-Carbon Connections Market starts rewarding sustainable farming
By Ron Lamberty
By Tom Bryan
By Matt Thompson
SPOTLIGHT 32 IncubEx
Delivering on RINs Physically-delivered RIN contracts arrive EPM Staff Report
EU climate goals limit crop-based ethanol By Lisa Gibson
ON THE COVER Ethanol Producer Magazine: (USPS No. 023-974) November 2020, Vol. 26, Issue 11. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.
To stay safe during the pandemic, the 2020 International Fuel Ethanol Workshop & Expo was delivered as a virtual event in mid-September, drawing nearly 1,000 attendees. PHOTO: ETHANOL PRODUCER MAGAZINE
ETHANOLPRODUCER.COM | 5
Forced to Change, We Improve In early March, before the pandemic hit the Midwest, our team at Ethanol Producer Magazine was busy planning our big summer issues—May, June and July—the magazines distributed around the International Fuel Ethanol Workshop & Expo. Life was good, the industry was strong, and the FEW, returning to Minneapolis, Minnesota, was a slam dunk to be our biggest show in a decade. The novel coronavirus was a distant threat. “Maybe it won’t last,” we thought. But it did, and by late-April it was clear that Minneapolis would not be hosting the ethanol industry’s big summer event. The city’s convention center was shut down. A month later, parts of its downtown were burning. We moved the show to Omaha and changed the date—the American Coalition for Ethanol joined us—but eventually we all had to admit the obvious: It wasn’t safe to meet in person. Not in Minneapolis. Not in Omaha. Not anywhere. The 36th annual FEW wasn’t going to happen at all, unless it was 100% virtual. Today, looking back on the tumult of the last six months, I am immensely proud of our industry, its associations and people, for finding a way to come together and pull off an amazing, memorable 2020 FEW, held in conjunction with the ACE Annual Conference. As Lisa Gibson reports in our page-16 cover story, “FEW Online,” we did it together, in a safe, virtual environment, with nearly 1,000 people from all over the world gathering online to make this year’s FEW a reality. Among other silver linings to meeting virtually, delivering the FEW online allowed more international ethanol producers to participate than ever before. And because the presentations were recorded, they could be viewed both during and after the show. In her FEW keynote, Growth Energy CEO Emily Skor lauded the industry for its ingenuity and strength during the pandemic, highlighting how producers moved fast and efficiently to surmount the challenges of COVID-19. Likewise, a few months ago, we published the headline “Even When Hurt, Ethanol Producers Help” to express how ethanol plants pivoted during the pandemic to produce alcohol for sanitizer, which our nation desperately needed, and still needs. We, too, pivoted—big time—to produce the 2020 FEW as a virtual event, and not just our staff but hundreds of companies that helped us deliver content and bring the virtual expo to life. Just as ethanol producers have found good opportunities in the downturn—like USP-grade alcohol—virtual events are giving us an opportunity to diversify, think outside the box and expand the FEW’s global reach. If necessity is the mother of invention, perhaps we are most creative when forced to change. And while the normal way of doing things—actually being together, face-to-face—will come back soon, the option to virtually participate in the FEW may not go away. The pandemic has accelerated our industry’s pursuit of diversification and, in a similar vein, strengthened the way information is produced and shared at our biggest annual conference. Tom Bryan President BBI International
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Upcoming Events WK$118$/
Plant Maintenance & Safety Summit December 9-10, 2020
Featuring real-life, field-based presentations, the Plant Maintenance and Safety Summit is geared towards biofuels industry professionals focused on production efficiency, plant optimization, process control, advanced maintenance, compliance, quality control, safety and other areas of facility operations. This event will particularly appeal to plant managers, operations managers, process engineers, maintenance managers, operators and other personnel seeking the latest facility maintenance solutions.
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Int'l Biomass Conference & Expo March 15-17, 2021 VIRTUAL EVENT
Entering its 14th year, the International Biomass Conference & Expo is expected to bring together more than 900 attendees, 125 exhibitors and 100 speakers from more than 40 countries. It is the largest gathering of biomass professionals and academics in the world. The conference provides relevant content and unparalleled networking opportunities in a dynamic business-to-business environment. In addition to abundant networking opportunities, the largest biomass conference in the world is renowned for its outstanding programmingâ€”powered by Biomass Magazineâ€”that maintains a strong focus on commercial-scale biomass production, new technology, and near-term research and development. Join us at the International Biomass Conference & Expo as we enter this new and exciting era in biomass energy. (866) 746-8385 | BiomassConference.com
Int'l Fuel Ethanol Workshop & Expo June 14-16, 2021
Minneapolis Convention Center, Minneapolis, MN From its inception, the mission of this event has remained constant: The FEW delivers timely presentations with a strong focus on commercialscale ethanol productionâ€”from quality control and yield maximization to regulatory compliance and fiscal management. FEW is the ethanol industryâ€™s premier forum for unveiling new technologies and research findings. The program is primarily focused on optimizing grain ethanol operations while also covering cellulosic and advanced ethanol technologies. 866-746-8385 | FuelEthanolWorkshop.com
Please check our website for upcoming webinars www.ethanolproducer.com/pages/webinar
ETHANOLPRODUCER.COM | 7
Spoiler Alert: Freddy Krueger Isn’t Real Either
Senior Vice President American Coalition for Ethanol 605.334.3381
I did that wrong, didn’t I? You’re supposed to say “spoiler alert” so people can stop reading and not have the result ruined for them, right? Kind of defeats the purpose when you put the actual spoiler right in the headline. Come to think of it, though, I probably didn’t spoil it for anyone. Most people already know, and the rest will choose not to believe what they read—or see with their own eyes—because it doesn’t fit their view of the world. I hope you had a Happy Halloween, but the operative word in my headline is “either.” Anyone who is part of the ethanol industry, especially those in market development, has been trying to fight off imaginary ethanol Freddy Kruegers and Jasons and Godzillas for decades. By now, E10 has been used by so many people for long enough that we only occasionally have to argue its safety. But add another 5% ethanol and part of the petroleum marketer world loses its freaking marbles—and at times, some ethanol people sympathetically lose a few of theirs right along with them. Remember, E15 was submitted for EPA approval because Underwriters Laboratories (UL) listings for equipment compatible with gasoline/ethanol blends specified up to 15% alcohol. Getting equipment UL listed for E10 required testing it with 15% ethanol, which is why some fuel equipment manufacturers have warrantied their equipment for 15% ethanol for 20 years or more. Testing with 15% alcohol is also why UL said they’d support local authorities (AHJs) who permitted use of UL listed E10 gasoline dispensers for E15 all the way back in early 2009. It is a fact most existing retail fueling infrastructure is already compatible with E15, and yet I’m regularly contacted by ethanol supporters asking how we can help more small chain and single station owners who are terrified of the cost of the infrastructure they would need and unable to afford to take the risk. If the cost was as high as they’ve been told it is, it would indeed be terrifying. Fortunately, like Freddy, those E15 cost monsters aren’t real either. Station owners are terrified because they’re supposed to be terrified by the very real-appearing E15 capital expense monster created by the persistent anti-ethanol misinformation campaigns of API, AFPM, and oil companies. Their motives in stoking fear are simple—they don’t want to lose any more of “their” market. But petroleum marketer groups promote the horror stories, too. Why? Maybe it’s because their members—the frightened station owners—have required EMV credit card upgrades due next spring and many have tanks reaching the end of 30-year warranties. Elected officials might see those as “costs of doing business.” But if petroleum marketer groups can parlay E15 infrastructure cost mythology with a fictitious “government E15 mandate,” they might get legislators to provide real government dollars they can use for those expenses unrelated to ethanol. (Sound far-fetched? Florida already did it.) For our part, ACE is helping retailers reduce E15 fears with the recent addition of the Flex Check Compatibility tool to the flexfuelforward.com fuel marketer ethanol information website. Flex Check was created so curious station owners and operators can meander around the site on their own schedule and find out what they really need to be E15 compatible. Once they know the truth, some can print out documentation they’ll need, and at the very least, they’ll know what they need (and don’t need) to sell E15. It won’t be as scary as they expected. Finally, my buddy Jae Woo Sim used to remind me what was right and true by repeatedly smacking my arm and saying, “Come on, Lambo. You know. You know!” You know, too. Get out and vote.
8 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
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Promise and Peril: California’s EV-Only Policy
North American Representative Brazilian Sugarcane Industry Association, UNICA 202.506.5299
California has long been a harbinger for cultural and environmental innovations that eventually move across the nation. The trend continues with Gov. Gavin Newsome’s late-September announcement that only zero-emission electric cars can be sold in the Golden State beginning in 2035. This attention-grabbing mandate overshadows the tremendous progress California has made in reducing greenhouse gases (GHG) in its transportation sector. Much of that success is due to the state’s embrace of biofuels like ethanol. Carbon emissions from ethanol are already one of the lowest among all powertrains in use around the world, and hybrid and flex ethanol score even better than electric vehicles. While not as sexy as electric vehicles, ethanol is a proven GHG weapon and part of a broader strategy helping California meet its climate goals today, not 15 years down the road. Relying on biofuels has worked remarkably well in Brazil. Its near-complete adoption of the biofuel has significantly reduced GHG emissions and cleaned the air of pollutants. The air quality in São Paulo drives this point home. In 2019, the fourth most populated city in the world ranked 1,210th globally in pollution levels— in large part because nearly 80% of all cars and light-duty trucks in Brazil run on pure sugarcane ethanol or an ethanol-gas blend of 27% (E27). California will continue to lead the nation in reducing GHG in its transportation matrix, but its focus on electric cars will empower critics who point out that an all-electric fleet alone may not be the most effective solution. California’s electric grid is already groaning under the pressure of an ambitious mandate that 60% of electricity come from renewables by 2030 and 100% 15 years later. Even today, the grid’s reliability is tenuous as millions of Californians endure regular power outages. Without an overhaul of the grid, millions of electric cars will drain the state’s capacity even further. The appeal of electric vehicles is real and understandable, but if the goal is decarbonization, a strong case can be made that cars powered by biofuels do more to reduce GHG and they are doing it today. For electric cars to have a real impact on emissions, countries will have to undertake a complete makeover of their energy supply infrastructure. In the U.S., more than 60% of the energy comes from natural gas or coal and an increased dependency on electric cars makes weaning the country off non-renewables even more difficult. Also missing from the conversation is the fact that nearly all cars on the road today rely on internal combustion engines. The only way to power them in a low-carbon way is to use efficient and clean biofuels like ethanol. There are national security implications as well. Despite its vast natural resources, the U.S. relies on China for lithium and other elements required for electric car batteries. China is the world’s largest producer of lithium and provides more than 60% of the world’s supply. Any innovation that helps reduce GHG is welcome, but a vast deployment of electric cars will take decades or more and we must acknowledge there is no single solution to tackle the challenges currently facing the transportation sector. As usual, California is leading the way on environmental protection. It was the first U.S. state to embrace biofuels like sugarcane ethanol—a low-carbon fuel that reduces GHG emissions by at least 61% compared to gasoline—on a large scale and it is pushing the envelope on electric cars. Any solution should consider a combined approach of the available alternatives and technologies. It is important to remember that vehicles powered by ethanol are already among the best performers in the world and are helping to reduce GHG today.
10 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
Just Getting Started
CEO, Growth Energy 202.545.4000
America’s ethanol producers have been firing on all cylinders in the run-up to the historic November election. In the span of just a few weeks, more than 150 producers and supporters from across the nation virtually gathered to advocate for biofuels in the nation’s capital at the annual Growth Energy Biofuels Summit. Meanwhile, industry stakeholders worldwide took advantage of networking opportunities at the 36th annual International Fuel Ethanol Workshop & Expo. I was honored to deliver the keynote at FEW, the largest and longest-running ethanol conference in the world, where I discussed the path we’re following to move beyond the recovery and drive new growth in the months and years ahead. As I told attendees, looking back on this past year, it’s impossible to overstate the ingenuity and resilience we’ve seen on display by America’s biofuels producers. We pivot, we remain agile, we seize those opportunities that emerge—planned or unplanned—but we also stay the course. And now, we’re approaching this decade with the same singular focus: Drive demand for ethanol and propel this industry forward. Perhaps no development better showcases that grit and determination than the U.S. EPA’s longoverdue decision to reject a raft of petitions for retroactive refinery exemptions from the Renewable Fuel Standard—known as “gap year” petitions. Over a three-year period, blending exemptions have destroyed more than 4 billion gallons of biofuel demand. As if that weren’t enough, refineries then began seeking retroactive exemptions to circumvent exemption requirements set forth by the United States Court of Appeals for the 10th Circuit in Denver, which ruled against similar handouts. But we pushed back hard and rallied opposition across the heartland. In fact, just days before President Donald Trump ordered EPA to reject this latest attack on biofuels, 93 farm organizations, biofuel stakeholders, and plant managers from across the country signed on to Growth Energy’s letter urging Trump to stand up against attacks on homegrown biofuels. As a result of our united efforts, 54 pending exemption petitions were formally rejected, lifting a major cloud of uncertainty hanging over American farmers and biofuel producers. But the battle is far from over. All told, EPA must still reject at least 17 gap year petitions, along with 33 more covering 2019 and 2020, just to get us back to where we were earlier this spring. EPA is long overdue in applying the 10th Circuit’s ruling nationwide and putting an end to abuses of this program once and for all. We also must ensure that EPA upholds a promise made by the president last October to streamline labeling and remove regulatory barriers to the sale of E15. These are vital steps toward realizing the opportunities created by last year’s win on year-round E15, and Growth Energy will continue working with EPA on clear guidance allowing retailers to offer E15 from existing fuel dispensing and storage equipment. With so many headwinds facing U.S. farmers and biofuel producers, the continued expansion of higher biofuel blends offers a ray of hope that promises to drive rural growth for years to come. Now more than ever, we need to send a signal to farm families that they can focus on rebuilding the agricultural supply chain. That’s why opportunities like FEW and the Growth Energy Biofuels Summit are so important. They open a space to build new alliances, highlight industry priorities, and promote a future where policymakers embrace ethanol as a solution to climate change and where consumer confidence in ethanol exceeds all expectations. With that in mind, I’d like to thank all the farmers, producers, suppliers, investors, advocates, and other leaders who stood at our side over the last year. It’s been tough, but we will never take our foot off the gas. Not only will we demand policymakers keep their promises, we will press ahead on every opportunity to advance our vision for exponential growth and increased demand that will carry us through global pandemics and beyond.
12 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
Empower your tomorrow Your actions today define your tomorrow. Have you asked yourself, “What will I change?” You need teamwork and biological diversity to ensure you’re getting not only more, but the most from your bio-refinery – whether that’s yield, upgraded co-products, fiber conversion, or new opportunities. Tomorrow’s superheroes are made today. novozymes.com/bioenergy
ETHANOLPRODUCER.COM | 13
BUSINESS BRIEFS PEOPLE, PARTNERSHIPS & PROJECTS
Next Generation Fuels Act introduced
In September, Rep. Cheri Bustos, D-Ill., introduced the Next Generation Fuels Act, which would establish a minimum octane standard for gasoline and require sources of added octane to reduce carbon emissions by at least 30 percent when compared to baseline gasoline.
The bill would limit the use of harmful aromatics in gasoline; require the U.S. EPA to create a new 98 research octane number; and update fuel and infrastructure regulations to expand the availability of mid-level ethanol blends, including an E30 waiver. The proposal was met most-
Green Plains moves diversification quest forward
Wagner appointed to Green Plains board of directors Green Plains Inc. announced in early October that its board of directors appointed Kimberly Wagner as an independent director. Wagner is the founder of TBGD Partners, which provides operational and product development expertise to early and midstage ventures in the agribusiness, food and life sciences sectors. She is the board’s eleventh director. “Kim brings over two decades of experience working with agribusiness, food and ingredient
ly with support from the ethanol industry. The American Coalition for Ethanol, while praising elements of the bill, referred to its carbon accounting language as “flawed” and divergent with investments ethanol plants have already made to reduce their carbon intensity.
companies in the areas of strategy, technology, sustainability and innovation,” said Wayne Hoovestol, chairman of the board of Green Plains. Green Plains President and CEO Todd Becker added, “Kim’s expertise is exactly what we were looking for as we transform the company to produce and deliver sustainable proteins and novel ingredients to help meet the growing global demand in human and animal nutrition.”
Green Plains Wood River LLC, a 121 MMgy ethanol plant in south-central Nebraska, has broken ground on the installation of a high-protein production facility utilizing Fluid Quip Technologies’ patented MSC technology. It’s the second installation of the technology across Green Plains’ platform, and it’s being done while the facility pursues USP-grade alcohol. “The addition of high-
Lallemand launches new fermentation technology Lallemand Biofuels & Distilled Spirits has introduced a next-generation advanced yeast and enzyme platform called Convergence. The platform has been developed to generate increased profitability for North American biofuel producers by providing a step-change improvement in ethanol pro-
duction cost economics. Convergence combines a new yeast that generates virtually all the glucoamylase (GA) required for fermentation combined with a small amount of complementary exogenous enzyme. Convergence is the result of biotechnology that enables yeast strains to express much
14 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
higher levels of GA than was previously possible. Now, according to Lallemand, all of the enzymes required for fermentation can be delivered through two components: its TransFerm CV5 genetically modified yeast, and Alcolase 146, its high-performance glucoamylase blend.
protein production using Fluid Quip’s MSC technology was the next logical step in the transformation of Wood River to a modern, sustainable, agricultural biorefinery,” said President and CEO Todd Becker, explaining that the plant also has the ability to produce 25 MMgy of highpurity, industrial B-grade alcohol, and a goal of meeting USP specifications in early 2021.
Novozymes launches corn fiber-to-ethanol platform Novozymes recently launched Fiberex, a comprehensive platform based on novel enzymes and yeast strains to convert corn fiber into ethanol. Fiberex is specifically aimed at breaking down tough fibers in corn, providing producers with greater operational flexibility. The technology converts corn fiber into high-value, low-carbon fuel
while also enabling the production of significantly more corn oil. “Through advanced biology, biofuel producers looking to diversify can now unlock new markets and avenues of profitability,” says Brian Brazeau, Novozymes’ vice president for bioenergy. “Working with Novozymes and our expert ana-
lytics and engineering partners, producers can use Fiberex technology to transform their corn fiber, typically only used for animal feed, into low-carbon, highvalue cellulosic ethanol.”
ICM completes APP installation at Prairie Horizon ICM Inc. has completed the first installation of its proprietary Advanced Processing Package at Prairie Horizon Agri-Energy LLC in Phillipsburg, Kansas. The technology provider says APP enables ethanol plants to diversify their product offerings and boost revenue. The package includes four propri-
etary ICM technologies: Selective Milling Technology, Fiber Separation Technology, Feed Optimization Technology and Thin Stillage Solids Separation System. It will give Prairie Horizon the capability to produce yeast-enriched 50 percent protein feed while making the plant more energy efficient.
“We recognize that diversifying our product offering is key to revenue growth for our plant,” said Joe Kreutzer, general manager for Prairie Horizon. “This package efficiently enables us to add a higher-value animal feed to our product offerings and allows us the opportunity to enter new markets.”
USGC advances DDGS use in aquaculture The U.S. Grains Council is edging closer to its goal of creating over 1 million metric tons of new demand for U.S. distillers grains in Southeast Asia by targeting the aquafeed industry. Through public and private research partnerships, the USGC reported in September that ideal DDGS formulations for aquafeed are being established, clearing a path for the coproduct’s use in shrimp and tilapia diets. To support the utility of DDGS for these uses, the USGC
has partnered with Indonesia’s Ministry of Marine Affairs and Fisheries while also working with private industry partners in the region. “DDGS show very good value in least-cost formulation programs as a feed ingredient for lower crude protein feeds such as tilapia,” said Ronnie Tan, USGC aquaculture consultant in Southeast Asia. “Factors including xanthophyll and phosphorus availability also may make DDGS attractive to higher value species like shrimp.” Aquaculture is a large and
growing industry. In 2019, 6.5 million tons of tilapia and 3.8 million tons of shrimp were produced globally. “The major constraint to DDGS use in aqua is not fear of trying, but the general unsureness of maximum allowable levels,” said Caleb Wurth, USGC assistant director of Southeast Asia. “Without this data, it would be unfeasible for us to consult and promote DDGS for aquafeed.”
ETHANOLPRODUCER.COM | 15
FEW ONLINE Virtual for the ďŹ rst time, the International Fuel Ethanol Workshop & Expo pulled the industry together to deliver its trademark premier content through both pre-recorded and live discussions. By Lisa Gibson
16 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
“What a year we’ve had,” Emily Skor, CEO of Growth Energy, said in her keynote address at the 2020 International Fuel Ethanol Workshop & Expo. It’s hard to imagine life before COVID-19, she said, adding
that the goals she laid out for the industry in February at Growth Energy’s Executive Leadership Conference remain intact. “My vision for this industry hasn’t changed.” Skor, of course, focused largely on the change the pandemic has brought, saying that while the ethanol industry has never experienced such an unprecedented fall in demand, there is reason for optimism. In managing the crisis, the industry is showing ingenuity, she said. It has faced daunting challenges, but it’s moving faster and more efficiently in surmounting them. For the first time, FEW was delivered as a virtual event this year, with speakers logging in for live Q&As, sending recorded presentations, and featuring a completely virtual trade show. As the industry has been forced to evolve through COVID-19, FEW has, too. The event was held Sept. 15-17, drawing over 1,000 attendees and 85 exhibitors. Sept. 15 featured pre-conference seminars: The Low Carbon Fuel Production Workshop and the Biofuels Environmental Health & Safety Forum. Breakout sessions in three tracks followed on Sept. 16 and 17, focusing on production and operations; leadership and financial management; and coproducts and product diversification. FEW was also co-located with the Biodiesel Production Technology Summit and the 2020 American Coalition for Ethanol Conference. Feedback from speakers and attendees was largely positive, grateful for a safe, virtual platform and for the organized and efficient delivery of the content. The event seemed to be a bright spot for an industry working to get back on its feet after a pandemic.
An Industry Upended
The ethanol industry faced large battles even before the pandemic, Skor said in her FEW keynote. Trade wars, threats to the integrity of the Renewable Fuel Standard and unkept promises, are among them. “Our losses have been huge,” Skor said of the pandemic downturn. “At one point, as 'We showed much as half the industry was offline.” Growth Energy worked with Washington that plants to secure small business protecethanol is not only tion, and is still working with lawmakessential, but an ers to craft relief packages, Skor said. unsung hero in the But the pandemic also highlighteffort to eradicate ed ethanol’s many contributions to industry in its coproducts. “Keep in the virus.' mind, we are responsible for over 40% Emily Skor, Growth Energy of the nation’s industrial carbon dioxide,” Skor said. Ethanol production also provides nearly 40 million metric ETHANOLPRODUCER.COM | 17
tons of feed for livestock. “And when there was a shortage of hand sanitizer, the biofuels industry rose to the occasion. “We showed Washington that ethanol is not only essential, but an unsung hero in the effort to eradicate the virus. “No other industry is in the same position to revitalize rural America.” Skor called out President Donald Trump by name, imploring him to stand with U.S. biofuels producers, citing the small refinery exemptions that have dulled demand throughout his presidency. And in June, “Refiners tried to turn their favorite loophole into a time machine,” she said, referring to gap year waivers, which were announced to be denied Sept. 14, two days before Skor’s keynote. Skor also discussed promising exports and the ongoing work in E15 growth. As the industry and world recovers, she said, Growth Energy is still on task.
Doug Durante Executive Director at Clean Fuels Development Coalition, Clean Fuels Foundation
'I don’t believe there is a single, credible, legitimate argument against ethanol. … I’ll debate anyone on that issue.' Doug Durante, Clean Fuels Development Coalition
The FEW general session also featured the presentation of the Award of Excellence and High Octane Award, historical accolades announced each year at the event. This year’s High Octane Award 18 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
Douglas Tiffany Research Fellow, University of Minnesota
'Having EPA deny 54 of these gap year requests is not a gigantic win. The victory was the court case back in January.' Brian Jennings, American Coalition for Ethanol
winner is Clean Fuels Development Coalition founder and Executive Director Doug Durante. In addition to producing the Ethanol Across America campaign, The Ethanol Fact Book, The Ethanol Minute radio program and more, he has been involved in almost every federal ethanol policy development over the past 40 years. His full story is highlighted in the August issue of Ethanol Producer Magazine. “The people I’ve met over 40 years, I’ve developed friendships as close as family—people who follow their convictions and their beliefs,” Durante said in his acceptance speech. He focused on the benefits of ethanol he has touted for the past 40 years, and the partners he’s worked with. “I don’t believe there is a single, credible, legitimate argument against ethanol. … I’ll debate anyone on that issue. “I’m honored to have received this award,” he said. And this year’s Award of Excellence winner is University of Minnesota Department of Bioproducts and Biosystems Engineering research fellow Douglas Tiffany. As a research fellow within the University of Minnesota’s Department of Bioproducts and Biosystems Engineering, he has worked on an array of ethanol-related projects ranging from biomass power, cogeneration and coproduct innovation to feedstocks, grain shipping patterns and new products and markets. His career profile is highlighted in the October issue of Ethanol Producer Magazine. Tiffany also touted collaborators and graduate students who helped in his research. “Thank you for this award,” he said, as he concluded his speech.
General Session Discussion
FEW general session panelists dialed in live Sept. 16 for a robust discussion. Chris Bliley, senior vice president of regulatory affairs for Growth Energy; Robert White, vice president of industry relations for the Renewable Fuels Association; and Brian Jennings, CEO of the American Coalition for Ethanol, discussed the biggest industry issues with moderator Tim Portz, program developer for BBI International. Jennings said the gap waiver denial, announced two days before, is
a win, but there’s more work to do. Take a moment to rejoice, he said, but, “We’ve got to get right back to work.” The denial of the gap year waivers boosted RIN prices slightly, to about 50 cents. It’s a good price for a normal marketplace, Jennings said. “But we’re not in a normal marketplace.” Jennings also pointed out that the biggest win ethanol has seen was the U.S. 10th Circuit Court of Appeals decision earlier this year. “Having EPA deny 54 of these gap year requests is not a gigantic win. The victory was the court case back in January.” The 10th Circuit found that the U.S. EPA went above its authority in granting certain small refinery exemptions. EPA still has not applied that 10th Circuit decision nationwide, Jennings added. “So we’ve got an enormous amount of work to do with EPA.” Discussion also touched on the pandemic and the derecho that whipped through Iowa in August. Bliley said Growth Energy’s members were still recovering and dealing with the effects of that disaster. Jennings and White agreed, and White said the industry is still in dire times and has to continue to push politically and in the marketplace. As far as the pandemic, the industry is not looking to be back at full steam this year or even next year, White said. The panel addressed the political climate and the presidential candidates. White said neither is a rubber stamp for ethanol, but it’s interesting ethanol has taken a position in the election as a talking point.
Three of Ethanol Producer Magazine’s editorial board members followed up the policy panel and kicked off discussion by talking about their experiences with COVID-19. Mick Henderson, general manager of Commonwealth AgriEnergy in Hopkinsville, Kentucky, said the plant implemented temperature checks for employees and learned how to deal with infections. As a small employer, it was a bit nerve-racking, as more than one employee out sick could mean the plant can’t run, he said. “The worry was you could lose your business. Shoot, we didn’t know if those that got infected would lose their life. So, scary time to start.” ETHANOLPRODUCER.COM | 19
Event 'We were cross training maintenance and grain people to be in operations if they needed to be. And we virtually locked the doors on our admin building.' Walt Wendland, Ringneck Energy
Walt Wendland, president and CEO of Ringneck Energy in Onida, South Dakota, said once March and April passed, the plantâ€™s feet were back underneath it and had a semblance of normalcy in the industry. He called COVID a â€œcliff that we fell off.â€? â€œWe made sure that shifts didnâ€™t interact with each other,â€? Wendland said. â€œWe were cross training maintenance and grain people to be in operations if they needed to be. And we virtually locked the doors on our admin building.â€? Vendors are being careful and are back on-site with precautions, he added.
â€œSo weâ€™ve returned to normal somewhat. But we feel that weâ€™ve come through this pretty well.â€? Dan Sanders, vice president of Front Range Energy in Windsor, Colorado, talked about being a bit closer to urban areas, and early spikes. Initially, of course, the concern was for human health, and, secondarily, the business model. â€œWe were quick to get engaged on new protocols at the plant to deal with new safety and sanitization requirements.â€? Then Front Range started balancing markets.
ETHANOL PRODUCER_HALF PG AD_ESSENTIAL_FAST TRACK_AFTERMARKET_FIELD SERVICES_09-17-2020.pdf 1 9/17/2020 10:09:11 AM
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20 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
Changes to the industry are for the better in handling infectious disease at plants, Henderson said. “We’ll handle infectious disease much better than we have in the past,” Wendland said. As a new producer, Ringneck felt obligated to continue operating to maintain the relationship with suppliers, he added. “Being new, it was a totally different experience.” Ringneck was able to downsize, but still meet its obligations. Sanders agreed that the sanitization methods brought about during the pandemic will be longlasting. “Even for a 13-year-old 'We were quick to facility like ours, it was still eyeget engaged on new opening for us.” protocols at the plant As far as production levels, to deal with new Sanders said plants are back to safety and sanitization the “new normal.” It’ll take several years, he said, to even out derequirements.' mand and production. “Through Dan Sanders 2021, I think we’ll continue to see Front Range Energy a lower supply and demand balance, and we’ll see the industry adjust to that, as we’re seeing right now.” The pandemic also has made plants look at diversifying, he added. It accelerated and broadened coproduct exploration across the
industry. “I think it’s smart for the industry to have a more diversified business model.” Henderson agreed and discussed Commonwealth’s pivot to hand sanitizer production in partnership with local bourbon producers. He said the plant will dabble in other streams, like protein, but other uses for ethanol are at the top of the list. “I think it’s quite a feat that the industry was able to match demand,” Wendland said of hand sanitizer production. “I think it’s unprecedented for us to respond the way that we did.” Ringneck also converted to hand sanitizer production during the pandemic for a few months, Wendland said. “I was amazed how fast the goal post moved. At first, they would take anything,” he said, referring to how guidance changed along the way. There’s room in the industry for diversification chemically, enzymatically or mechanically, Sanders said. COVID-19 undoubtedly sped up the coproduct rush. “If you were narrowed in on one particular coproduct, now you’re looking at four or five,” he said. “Plants that are able to deploy capital are going to put it to work.” Author: Lisa Gibson Editor, Ethanol Producer Magazine 701.738.4920 email@example.com
ETHANOLPRODUCER.COM | 21
CONNECTIONS ENVIRONMENTAL AWARENESS: Ethanol producers looking to procure low-carbon corn can use tools like Gradable or Indigoâ€™s Marketplace. PHOTO: INDIGO AG
22 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
As sustainability and low-carbon commodities become increasingly sought out, several companies are working to connect grain buyers—like ethanol plants—and growers who practice sustainable farming. By Matt Thompson
When Poet approached the Farmers Business Network more than two years ago, the goal was to find a way to connect large grain buyers, such as ethanol plants, to farmers who use sustainable practices. Doing so would al-
low ethanol plants to source low-carbon corn, while offering growers a premium for their commodities. After a successful pilot program at Poet’s Chancellor, South Dakota, plant, the two companies earlier this year launched Gradable, the platform that connects grain buyers and growers. “Part of Poet’s mission is to be a good steward of the earth—and to look for all the ways we can do that—and we recognize that our agricultural inputs are a very important component of that,” says Bob Whiteman, Poet CFO. Whiteman says the partnership with FBN allows for reliable scoring of a producer’s carbon intensity (CI). “We had to make sure that it would be a verifiable data point,” Whiteman says of the carbon scoring. “Without good science and data behind that carbon intensity value, any fruit from them would be shortlived. FBN was the only entity that we found whose technology was advanced enough to allow for that data gathering to take place in a way that would be verifiable, yet convenient for the agricultural producer.” Whiteman says growers who participate in Gradable don’t risk giving confidential data to the ethanol industry, as FBN houses all the data for the growers. “Agricultural producers, very understandably, would not be keen to provide all of their agricultural data to a biofuel producer,” he says. Whiteman explains that FBN is “the data aggregator and they have the tools that allow for the farmer or the producer
to be able to see the impacts of what they do, see what other folks are doing in a similar space, and make the relevant economic decisions.” The only information Poet receives, he says, is the CI score of the grain that is delivered to Poet. And while CI scores are important for ethanol plants selling to California, Whiteman says the California Air Resources Board doesn’t allow producers to override the default value of agricultural inputs under the state’s Low Carbon Fuel Standard. “Our belief was at the time, when this project started with FBN and was validated through that first year, that there is a pretty wide array of agricultural practices and some are are significantly better than the average, and unfortunately, some are significantly worse than the average,” Whiteman says. He adds that a meeting is scheduled for mid-October for CARB to evaluate the rulemaking, which may allow for the CI score of ag inputs to be overridden. “We know they see the merits of incentivizing agricultural production,” Whiteman says. “But they want to do it in a way that provides an assurance that the changes being made are genuine and actually improving the emissions associated with the lifecycle GHGs of ethanol production or other biofuels.” Whiteman says it’s important to note that the Gradable program does not take into account soil organic carbon (SOC). “We’re not dismissing the science behind SOC changes; we believe that they’re very real. But we completely understand that regulatory bodies and environmental group concerns around the potential reversibility of some of those changes.” He uses no-till farming as an example, saying that because a farmer doesn’t till one year, doesn’t mean he or she couldn’t till again the following year. “We do believe that science will eventually get there—it will catch up to being
able to monitor those things better—but we’re only focused on the direct life cycle emissions associated with [sustainable farming],” he says.
Indigo Ag’s Marketplace is another platform connecting grain buyers and growers. Melissa Gieseke, Indigo’s director of North American grain marketing, says Indigo’s goals include improving farmer profitability and being good stewards of the environment. “Everybody focuses on sustainability, but it can be such a buzz word,” she says. “But what does sustainability really mean? So if I’m buying a bag of rice that I know is grown using 10 percent less nitrogen and 10 percent less water and 10 percent less greenhouse gas emissions, that’s something really meaningful in terms of the impact that that grower is having or not having on the environment. That was really the heartbeat of Marketplace: creating a mechanism to make those types of connections between buyers and growers.” Indigo’s Marketplace was launched two years ago, and Gieseke says that in addition to ethanol producers, other grain buyers can take advantage of the program to source commodities with specific requirements. “The interesting thing about Marketplace is there’s a little something in Marketplace for everyone,” she says. “We can improve the efficiency of any kind of grain buyer across the country by helping them get access to a wider variety of customers than they’re used to talking to.” She adds that the goal of Marketplace isn’t to compete with grain buyers, but partner with them. “It really is just us helping to digitally connect the dots between growers and buyers, and any buyer in the U.S. can take advantage of that,” Gieseke says. And, she says, there has been more of a focus on low-carbon and more sustainable commodities in recent years. That interest ETHANOLPRODUCER.COM | 23
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has come not just from the ethanol sector, but from energy companies as well, she says. “We launched our carbon program last summer and have had just such tremendous interest from customers wanting to participate in it, both farmers enrolling their acres and also companies that have partnered with us to purchase those carbon credits from farmers to neutralize that carbon footprint.” In addition to Marketplace, Indigo’s offerings include a carbon program, which allows organizations to receive CI scores, and buy and sell carbon credits. By using Marketplace, she says, companies can source low-carbon grain, but in conjunction with Indigo Carbon, companies “can also look at their carbon footprint outside of the commodities that they’re using.” She says combining both offerings creates “one holistic approach to really do what’s right for the environment.” Indigo executive Jon Hennek says the carbon program helps growers implement sustainable farming practices and then finds buyers for the carbon credits they generate. “We connect those two and pay growers to sequester that carbon and sell carbon credits to those companies,” he says. He adds that many of Indigo Carbon’s customers are large companies, and that there aren’t any ethanol plants who have yet registered for the program, although they do work with growers who sell to ethanol plants. “We’re working mostly with large corporations who are looking to offset their carbon emissions, and then working with those growers,” he says. He also says the program is active in 21 states, most of which are in the Corn Belt. Hennek says Indigo Carbon takes a threepronged approach: measuring soil samples, collecting historical data from a grower’s operation, and using remote sensing and other data sources. The data collected is then plugged into a scientific model. “It’s a well-worn, scientifically proven model that allows us to measure what their trajectory was and what the change in practice that they moved towards, what the difference is between those two so we know how much carbon they’re sequestering because of the program,” he says. Indigo Carbon was launched in June of 2019, Hennek says. “We’ve had over 21 million acres now of growers expressing interest on
DOWN AND DIRTY: Soil sampling, in conjunction with data collection, gives a better picture of how much carbon a farmer’s operation sequesters. PHOTO: INDIGO AG
our website, and 7 million of those acres are signed up for the program and contracted in carbon,” he says. “It’s been really an amazing and very fast growth of the program.” Gieseke agrees that interest in sustainability and carbon reduction has been on the rise in recent years. And, she says, Indigo expects that trend to continue. “There are so many groups that are looking into the future and saying, ‘We need to do business different. We need to think about the environment. We need to think about the things we’re doing and take a good, hard look in the mirror and say how can we do things differently.’ And that low carbon focus is the number one thing at the top of the list of things they can do to make a difference. We see that growing into a huge opportunity for agriculture and for farmers to play a leading role.” Whiteman agrees. “With the Low Carbon Fuel Standard, sustainable agriculture, we believe there is a growing demand for it out there. This is not unique to the biofuels space, but food and fiber—very applicable to them as well. But what is unique to the biofuels space is it actually has an existing standard, both for measurement and valuation, of what are most sustainable practices worth. And we believe that’s a key underpinning to the project,” he says. Author: Matt Thompson Freelance Writer firstname.lastname@example.org
ETHANOLPRODUCER.COM | 25
Climate goals in the European Union place a 7% cap on crop-based biofuels, a standard that renewables organizations, both in Europe and the U.S., say is unnecessary and not backed by science. By Lisa Gibson
In 2021, the European Union’s current emissions reduction goal of 40% by 2030 in its Green Deal is slated to be bumped up to 55% by 2030. Within the sectors regulated to achieve that goal is, of course, transport, where hardly any decarbonization has taken place, according to Emmanuel Desplechin, secretary general of ePure, the European renewables association. “I’d even go further and say it’s the only sector where emissions have actually increased. “Given the weight of the transport sector and the total EU emissions, transport really has to step up and contribute now.” The Renewable Energy Directive II outlines the regulations 26 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
for emissions reduction in EU transport. Currently, the EU draws 6% of energy in transport from renewables, with a goal to increase that to 24%, Desplechin says. Biofuels now account for 90% of the renewables in transport, he adds. “That’s the harsh reality, despite the good intentions in electromobility and hydrogen.” With goals to step up electromobility, hydrogen and secondgeneration ethanol technologies, the RED II caps crop-based biofuels at 7%. Desplechin and others say the cap is unwarranted and hinders progress toward the EU’s goals. “We can’t afford to pick one technology with innovative solutions such as hydrogen or electromobility,” Desplechin says. “We just need to build the case for renewables, and grow the biofuels share as well.
“Our view is the cap on European ethanol is not justified and should be adjusted to reflect our potential for decarbonizing transport systems.” Currently, renewable electricity in transport in the world is only 0.3% of energy consumed, he cites.
Politics at Play
The 7% cap is a political answer to concerns about the sustainability of biofuels, Desplechin says, particularly land-use exchange regarding deforestation. Land-use calculation is murky, so the EU abandoned it, says Candice Wilson, manager of ethanol trade policy and economics for the U.S. Grains Council. A corn ethanol plant in the EU will have a significantly higher greenhouse gas reduction than a plant in the U.S. because land-use is not taken into account, she adds. The cap clearly illustrates the intention to skip first-generation ethanol and jump immediately to second-generation, says Ed Hubbard, general counsel for the Renewable Fuels Association. “The focus has always been skipping the first generation, going right to the second generation and not using any sort of food-based crops.” The challenge is the second generation hasn’t taken off, he adds. “They’re hamstringing their efforts by doing that, closing the door to what’s available in the market now and creating their own obstacle to biofuel development and use,” Hubbard says. “We’ve learned that first generation begets the second generation, second generation begets the third. There are certain costs and infrastructure buildouts that you get from the first generation that benefit the second generation.” Those investments and buildouts are done over a period of time, he says. “They’re cutting themselves out of future business, not just in U.S.-based ethanol, but just biofuels in general.” Wilson agrees. “By eliminating crop-based biofuels as an option to help them meet those targets, we see that as taking a solution off the table. You should use all tools in the toolbox.
“A lot of countries, when trying to identify environmental solutions and mitigation of GHG emissions, I think that they kind of shoot for the stars and end up on the moon, so to speak,” Wilson adds. “For the longest time, many countries saw cellulosic ethanol as the solution to our transport emission problems. A lot of people are finally coming to terms with understanding that there’s a lot of technical problems with cellulosic ethanol and it’s not commercially viable because it’s not an economically sound solution. “We’re hoping we can work with members in the EU so we can all come to a consensus that there is no silver bullet, and we believe first-generation ethanol should be a part of the solution.” Desplechin says, “Our view is that we need to maximize all carbon reductions in transport, ethanol being one of them. “Most cars will remain petrol for decades to come, some hybrid. They’ll be running on liquid fuels, and ethanol is a way to lower the carbon intensity of these fuels.” In 2019, EU ethanol use resulted in a 72% GHG reduction over fossil fuels, on a steady climb since a 50% reduction in 2011, Desplechin says. EU refineries are implementing carbon capture, increasing efficiency and some are seeing up to 90% GHG reductions individually, he says. “Concretely speaking, what we need to do is roll out fully E10 across the EU 27 members states and then move towards higher blends.” Thirteen Member States have E10 directives now, he says. Desplechin adds that E10 is the current limit in petrol, but E85 is not considered petrol and is booming in France. The country saw an average of one E85 station opening every day last year.
U.S. exports to the EU in 2019 (about 134 million gallons) increased by more than 200% over 2018, Desplechin says. The 7% cap hasn’t significantly affected U.S. ethanol exports to the EU for several reasons Wilson and Hubbard cite. First, the EU has a high duty on ethanol imports, even after the antidumping duties were lifted in 2019. But during that antidumping era, many U.S.
ETHANOLPRODUCER.COM | 27
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plants let their EU export certifications expire and haven’t recertified because of the cost and the number of other promising global markets. “Producers said, ‘We can let that one go,’” Hubbard says. In the 2018-’19 marketing year, only two ethanol plants were certified for EU export, Wilson says. “Anti-dumping duty on U.S. ethanol imports in addition to the increasingly stringent regulations within the EU, has disincentivized U.S. producers from participating in this market,” she says. “At this time, the EU’s certification scheme poses the single greatest market access barrier to U.S. ethanol exports.” Hubbard says, “There was a period of time that the EU represented a third of the U.S. market. Between Brazil, Canada and the EU, that was the lions’ share of what we exported.” Antidumping led exporters to focus on other markets, he says. The EU also relies heavily on biodiesel in its renewables, Hubbard adds. “There are a lot of moving parts: RED, antidumping, overall viewpoint toward ethanol, and upheaval in EU with respect to Brexit. “We remain optimistic about the possibility of expanded European access. There’s a lot of opposition to grain-based ethanol and we’ve tried to set the record straight. And we’ll continue.” Moving forward, the cap will affect competitiveness of U.S. ethanol, but hasn’t affected exports short-term because the
EU Member States haven’t ramped up ethanol blending, Wilson says. “That 7% hasn’t necessarily been prohibitive to us, but we do see it as an issue regarding the current science that’s available surrounding first-generation biofuels.” “The 7% cap is just more trouble,” Hubbard says. “It’s kind of a signal that there’s going to be even greater challenges down the line and I think it has an impact on exporters in a way that just leads them to believe that the market is not going to be a longstanding market for the U.S. ethanol industry.” Looking ahead to promising export markets for U.S. ethanol in 2021, the EU will not be on that list, Hubbard says. “Oh, no way.” The focus on exports to Europe has moved away from the EU as a block, and instead to certain key markets, he adds. ePure, along with USGC, RFA and others, meanwhile, will continue the fight to showcase the emissions-reduction benefits of first-generation ethanol in the EU. The increase to 24% renewables in transport, in fact, will require it. “It means increasing the contribution of all renewable energy possible, including biofuels,” Desplechin says. Author: Lisa Gibson Editor, Ethanol Producer Magazine 701.738.4920 email@example.com
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Spotlight BY MATT THOMPSON
Another Tool in the Toolbox DuPont’s XCELIS® AI enhances ethanol plant operational assessment with data-driven analyses and predictive modeling.
DuPont Regional Application Development Leader Dr. Tony Schindler PHOTO: DUPONT
Dr. Tony Schindler, regional application development leader at DuPont, strongly believes that enabling ethanol plants to make more real-time decisions based on data and quantitative predictions is valuable. DuPont recently announced a new set of services from its XCELIS® Ethanol Solutions platform that will help producers do just that. The new offering, XCELIS® AI as Schindler describes, has two goals. “One of them is to help plants make the most sense of their data so they can see what will improve efficiencies and boost yield and help them achieve their goals right now. The second one is to use XCELIS® AI Virtual Plant Technology to model how future changes to the plant will impact operations.” Making the right decision is increasingly important, Schindler says, as benefits seen from plant upgrades and process improvements are incremental. “Over the years, I’ve seen yields go up, and as you get closer and closer to theoretical, I think it’s harder and harder to get that next bump in performance. Having access to tools like XCELIS® AI lets you really fine tune the plant.” Schindler says XCELIS® AI Virtual Plant Technology uses predictive models based on science and engineering fundamentals to help preview potential changes. “We’re helping them de-risk decision making in how they’re running their process right now and, in the future, when they look to optimize and maybe make some changes.” Schindler gives an example of a plant that’s considering an upgrade to increase grind capacity. “If they’re considering that upgrade, what we’re able to do with the model is say, ‘If you grind a certain percent more corn, here are different ways you could handle that corn in your process. Here are all the energy efficiencies, here’s how
30 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
it’s going to impact your economics, your Carbon Intensity (CI) score, etc.’ So now the plant has a better understanding of what the process will look like and they have actual numbers to make that decision,” he highlights. The models can also be used to create plant simulators. “We can make a DCS style interface, but what’s behind it isn’t a plant, it’s a model,” Schindler shares. “Operators can sit in front of the simulator and run the process but it’s in a nice, safe virtual environment. So, if they overfill a tank or forget to feed enzyme into a fermenter, they just hit reset on the simulator and they’re not causing any damage or yield loss.” Both the data processing and Virtual Plant Technology sides of XCELIS® AI are customizable to individual plants, Schindler says. “On the data side, we’re working with some plants where they’re sending us the typical smaller data sets that they’re used to sending vendors and we can apply our analytics tools to those,” he explains. “Then we have other producers who are more interested in having us take a more detailed look at their process, so we work with their data infrastructure provider to send us data and we implement a tailored solution, pulling process and lab data from all across the plant, doing complex analyses and then sending back custom reports geared at showing insights.” Schindler says the response from customers has been very positive. “Our customers see value in having both data-driven analytics and predictive models driven by science and engineering fundamentals. Using both, as XCELIS® AI does, is a way to help our customers get the most out of their plant now and in the future.” concludes Schindler. For more information about XCELIS® AI, please visit www.xcelis.com/xcelis-ai.
open doors to big solutions
ETHANOLPRODUCER.COM | 31
When the first POET plant opened over thirty years ago, it opened the door to endless world-changing possibilities. Beyond that threshold weâ€™ve discovered a world of innovative renewable energy solutions. Biofuels, nutrient-rich proteins and oil alternatives are just the beginning.
Spotlight BY EPM STAFF
Delivering on RINs
IncubEx and Nodal Exchange offers physically-derived RIN contracts that mitigate counterparty risk.
Companies in renewable fuels know how challenging these markets have been. One firm and its partner exchange are addressing the financial risk and adding capital efficiencies to the industry with a new tradable contract for Renewable Identification Numbers (RINs). Chicago-based IncbuEx, which develIncubEx Managing ops tradable environmental contracts with Director Nathan Clark its partner Nodal Exchange, a regulated U.S. PHOTO: INCUBEX futures exchange, is launching the first ever physically-delivered RIN futures contracts for D Codes 3, 4, 5 and 6, with complementary options. Set to launch on Nodal pending regulatory review, the RIN contracts offer renewable fuel generators, refiners and other market participants the capital efficiencies and other benefits of a futures contract. And since the contracts are offered on a regulated exchange, trades are anonymously matched and then cleared on Nodal. This virtually eliminates counterparty risk because the clearinghouse acts as the buyer to every seller and vice versa. Additionally, this structure eliminates the need to negotiate terms and conditions with your counterparty. "We spent a lot of time speaking with market participants, particu-
32 | ETHANOL PRODUCER MAGAZINE | NOVEMBER 2020
larly end-users to develop the right RIN contract," said Nathan Clark, managing director at IncubEx. "These new products offer obligated parties and renewable fuel generators a deliverable contract that helps hedge price risk in RIN markets and mitigate counterparty risk." IncubEx RIN futures offer a fully standardized way to trade RINs. All trades held to delivery will result in sellers providing RINs from predefined lists of generation facilities. At the end of the contract period, or expiry, buyers will take delivery of RINs via the Environmental Protection Agency's EMTS electronic registry. RIN futures on Nodal will be executable through existing brokerage relationships or via the trading screen. "All bids and offers for futures contracts on Nodal are live, anonymous and executable," Clark said. "We believe this provides ethanol, biodiesel, biomass, and advanced biofuels participants with an instrument that not only is more capital efficient, but one that uses proven market mechanisms. Futures have worked for every major commodity including grain and energy markets. We think it will work for RIN markets too." IncubEx and Nodal are looking to grow the suite of North American environmental products, which now totals 75 futures and options contracts on 46 distinct markets, including California Low Carbon Fuel Standard (LCFS) and Oregon Clean Fuels Program physically delivered futures and options.
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