In the year 1826, the first authentic internal combustion engine in America was developed by Samuel Morey. The engine, which ran on alcohol and turpentine, powered a small boat at eight miles per hour up the Connecticut River, but the invention never attracted investors. Another early developer of the internal combustion engine was German inventor Nicolaus August Otto, when in 1860, he used ethanol as a fuel in his four-stroke engine. Otto's fuel of choice was the widely available and untaxed alcohol used in spirit lamps throughout Europe.
Turn of the century Americans saw Henry Ford design his Model T as a flexible fuel vehicle able to run on ethanol, gasoline, or any combination of the two fuels. But as the country's ability to efficiently refine cheap and abundant crude oil into gasoline increased, ethanol use as a motor fuel waned.
In the 1960s, Brazil provided a major shift in the industry by adopting an energy policy mandating ethanol as a motor fuel. Brazil continues today as the leading producer of ethanol for automobiles, with over four billion gallons per year of ethanol production from sugarcane. The U.S. is close behind at three billion gallons.
Due to the Arab oil embargo of 1973, Congress began to see the need for a domestically produced renewable fuel like ethanol. In the early 1980s, President Jimmy Carter requested that Archer Daniels Midland (ADM) convert its new beverage alcohol plant into a fuel alcohol facility. The fuel alcohol plant was part of a wet milling plant producing fructose. ADM processed corn into ethanol for several years before other wet mills added alcohol finishing capacity to produce enough fuel ethanol volume to give the burgeoning industry some degree of validity in the eyes of the petroleum industry.
The emergence of the new generation cooperative and the farmer-owned ethanol plants of the mid-90s drastically increase the development of the ethanol industry. By the late 1990s, the LLC structure (which allows non-agricultural investors) became more common. The recent stabilization of the ethanol market coupled with the profit potential has rekindled interest in privately owned facilities. By the late 90s, plant production capacities moved into the 20 to 30 million-gallon range. As corn-to-ethanol conversions improved, plant sizes increased, further reducing operating costs and improving the overall bottom line profits. In addition, the increasing acceptance of distillers dried grains with solubles (DDGS) as a high-value animal feed supplement, helped boost revenue.
In part, this renewed interest has been spurred on by the development of new markets previously served by Methyl Tertiary Butyl Ether (MTBE), the only fuel oxygenate competitor that ethanol had. In 1997, the Environmental Protection Agency announced that significant levels of MTBE were detected in Lake Tahoe in California. Since that time, thousands of groundwater wells across the United States have been found to be polluted beyond use by MTBE. As of this writing, 18 states, including California and New York, have banned MTBE-laced gasoline. Many others have bills which are expected to be signed in the near future. Gasoline marketers have, in many states, voluntarily opted out of MTBE and switched to ethanol as the only practical fuel substitute.
Source: BBI International http://www.bbiethanol.com