Investigating the Ethanol Innovation Myth
Some ‘Improvements’ Demand Serious Questions
by Robert F. Brands
Next time you fill up at the pump, check for a new sticker: “Contains up to 10% Ethanol.”
It represents “innovative” efforts by Big Oil, Big Agriculture and Big Government to make a dent in America’s consumption of greenhouse-gas producing fossil fuels – and foster a move toward renewable, green energy.
Transforming corn into ethanol for use our vehicles was sold as a win-win. We boost business for farmers and create energy independence (at up to 10% of each fill-up at a time) – both concepts Americans can rally around.
But what hidden truth lies within the message borne by that sticker? What real consequences exist in this transformation?
Some would argue that this innovation actually does more harm than good. If that’s the case, it wouldn’t be the first time. As I’ve written before in this blog, “…innovation for innovation’s sake can come with negative consequences. Remember ‘New Coke’? (Although I liked it…) It became a short-lived disaster for Coca-Cola Co.”
But this may be far worse than lousy-tasting pop, for several reasons.
First, ethanol appeared to be a viable solution – at least when corn prices were stable and ethanol comprised no more than 5% of each gallon of gas. But now, ethanol is being moved up to 10%, and corn prices have and are continuing to rise globally, in no small part because the use of corn for fuel has helped drive down supply and drive up demand – for fuel, food and feedstock. Bloomberg’s BusinessWeek just had an article on the inter-relation of crops, shortages and prices. With up to 40% of U.S. crops steered toward fuel use, prospects for improvement are not promising.
Some have linked corn shortages and the inability to afford even basic foodstuffs, in part, to the revolutions unfolding in the Middle East. As one columnist wrote, “In short, in exchange for not reducing greenhouse emissions, ethanol reduces the availability of food to the poor” .
Second, ethanol is less efficient than gasoline. Recently a German automotive magazine AutoBild published a report that for every 250 miles driven, a vehicle needs an extra gallon of ethanol-laced gas. With a gallon of gas already topping $3.50, this innovation could get painful.
Moreover, mechanics are finding that ethanol gums up fuel injectors, decreasing fuel efficiency, boosting fuel consumption – and requiring more frequent (and expensive) injector maintenance.
Third, the use of corn to fuel cars – in turn – only fuels further favorable economics for corn farmers, who received $27 billion in subsidies [Read more]. This is the same industry that at the recent Daytona 500 race, encouraged some of the about 200,000 spectators to wave green “American Ethanol” flags. Frankly, am afraid they didn’t even know what they were supporting.
Neither do we.
Ultimately, innovation is about true value creation , whereby the ultimate balance is achieved between the expectations of industry or special interests – and consumers. Otherwise, if not adjusted for mutual gain, this form of innovation creates more hardship for the poor and inefficient and higher costs for all.
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Robert Brands is the founder of InnovationCoach.com, and the author of “Robert’s Rules of Innovation: A 10-Step Program for Corporate Survival”, with Martin Kleinman – published Spring 2010 by Wiley (www.robertsrulesofinnovation.com).
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