Spotlight: US ethanol producers diversify to adapt to the new normal

A version of this Spotlight from S&P Global Platts Analytics(opens in a new tab) was first published March 5.

On Jan. 12, longtime ethanol producer Pacific Ethanol announced the change of its name to Alto Ingredients to reflect the expanding nature of its business. For over 15 years, the company marketed itself as a leading producer of low-carbon renewable fuels and the largest ethanol producer on the West Coast. Now its focus is on specialty alcohols and essential ingredients, including those used in health and industrial applications (such as cosmetics, pharmaceuticals, and other consumer products), feed and food, as well as renewable fuels.

Though US ethanol production is rebounding rapidly following the arctic weather conditions that disrupted the country in February, output was only 849,000 b/d during the week ended Feb. 26, down 21.3% year on year and around 23.4% below total US capacity. Alto has contributed to the decline, operating at only 51% of its aggregate capacity of 450 million gal/year as of Sept. 30, 2020 (the latest data). Alto will announce its full-year 2020 results on March 10.

Several large ethanol producers are diversifying by shifting some resources away from fuel ethanol production toward making higher-value alcohol. While the startup of high-purity alcohol production at many ethanol plants began mostly as a benevolent effort to help slow the spread of the coronavirus, the product continues to be in high demand. POET, the US's largest ethanol producer, is expanding its plant in Alexandria, Indiana to allow it to produce 30 million-35 million gal/year of purified alcohol for sanitizer and other cleaning products. The company is also making sanitizer in Ohio and South Dakota as well.

Green Plains, which operates ethanol plants with a combined capacity of around 1 billion gal/year, has upgraded its facility in York, Nebraska, to produce USP Grade (U.S. Pharmacopeia) alcohol and is modifying its Wood River, Nebraska plant to produce USP as well. The Wood River location already produces FCC Grade (Food Chemical Codex) alcohol. Green Plains has indicated that its specialty alcohol sells at around $1/gal premium to fuel ethanol.

Over the past year, several other companies have announced plans to add or scale up production of purified, USP Grade or FCC Grade ethanol, including Chief Ethanol Fuels, Homeland Energy Solutions, Didion Milling, Commonwealth Agri-Energy, Al-Corn Clean Fuels, Highwater Ethanol, Red River Refinery, Western New York Energy and Aemetis. Collectively, these facilities, along with POET and Green Plains, will have an aggregate capacity to produce over 375 million gal/year of higher-value alcohol.

Alto Ingredients is not the first ethanol producer to rebrand itself, but this time it feels different. Alto is a publicly-held company with a long track record. Ethanol manufacturing margins are poor throughout the country and dynamics are shifting. Maximizing revenues for co-products such as dried distillers grains, distillers corn oil, and carbon dioxide are more common than ever before. With ethanol production down year on year for 49 consecutive weeks and companies experimenting with different revenue streams, it appears that Alto's rebrand de-emphasizing ethanol is a sign of things to come.

Recent and Upcoming Projects for High-Grade Ethanol Production