Pacific Ethanol is the largest ethanol company on the West Coast. Ethanol has received heavy support from the U.S. government as an alternative to gasoline. Blending subsidies make the production of corn-based ethanol profitable, while import tariffs keep international ethanol producers (like those in Brazil) from competing. The Energy Independence and Security Act of 2007 requires ethanol production to increase fivefold by 2022, and Pacific Ethanol, as one of the largest producers in the nation, is in a position to take advantage of the fuel source's demand growth.
Ethanol's momentum could slow or die, however, thanks to the terrible publicity that corn-based ethanol has been receiving in the press. By driving up corn demand, ethanol has increased the prices of food, and it ultimately uses more oil than an energy-equivalent amount of gasoline (because corn uses oil as a fertilizer), making it less carbon-efficient and more petroleum-dependent than gasoline. To remedy these problems, cellulosic ethanol, which is derived from plant wastes, is emerging as an alternative. Pacific Ethanol is currently researching methods to cost-effectively turn wood chips into green fuel, and is in the process of constructing a 2.4 million gallon per year facility (the largest in the Northwestern United States. Its plans for expanding its cellulosic business after the facility's construction are still undefined.
All forms of ethanol, however, face significant infrastructure problems. Running a car on ethanol requires a different type of engine that most cars in circulation don't have, so making the switch from gas to ethanol will be very difficult, as it would require replacing millions of vehicles. Though a few automakers are producing flex-fuel vehicles and ethanol companies are teaming up with refiners to bring the fuel to pumps around the country, there is (as yet) no legislative support for these costly infrastructure changes and the mandated 36 billion gallons is less than 25% of the 160 billion gallons of gasoline used in the U.S. every year, making private industry unlikely to take the transition seriously. Pacific Ethanol competes with companies like VeraSun Energy, ConAgra, Nova Biosource Fuels, Verenium Corporation, and Bluefire Ethanol.
Pacific Ethanol is the largest producer of ethanol on the West Coast. Ethanol is a sugar-based biofuel, essentially a form of alcohol, which produces energy when burned. In the current social and political climate, where people are worried about problems that stem from gasoline use (like climate change, terrorism, and a thinner wallet), ethanol is being touted by many sources as the next major source of automotive fuel. Though it burns with only two-thirds of the energy of gasoline, it is relatively clean and is considered to be a renewable energy because it is most often made from corn (which can be regrown). Ethanol can also be produced from plant and animal wastes, known as cellulosic ethanol, which is generally considered to be more efficient and environmentally-friendly than corn-based ethanol. Pacific Ethanol has entered the cellulosic ethanol business, and is in the process of building its pilot production facility.
Pacific Ethanol sells its ethanol to petroleum refiners, who incorporate into gasoline blends to be sold at retail stations around the country. Its two largest customers, each with more than 10% of its sales shares, are responsible for 32% of the company's revenue.
In 2009, PEIX incurred a net loss of $308.2 million on revenues of $316.6 million. This represents a 110.3% increase in net loss on a 55.0% drop in total revenues from 2008, when the company lost $146.5 million on $703.9 in revenues.
Currently, American cars can run on a mix of 90% gasoline and 10% ethanol, though there isn't nearly enough corn-based ethanol being produced at the moment to meet this capacity. Part of the goal of the government's support of ethanol is to increase ethanol production and use to a scope well beyond that of the standard 10% blend. E85, a blend of 85% ethanol and 15% gasoline, is the big hope for the biofuels industry because the widespread adoption of E85 would grow the level of ethanol demand almost as high as that of oil (for gasoline). There are, however, a number of blockades to the widespread adoption of E85 in the U.S.:
Currently, Pacific Ethanol is the largest manufacturer of corn-based ethanol on the west coast. The company competes with a number of other biofuels companies - and the market is expanding quickly.