The number of facilities, their size and ownership may affect the sustainability of the industry, and the socio-economic benefits that could be realized by rural communities.
The Saskatchewan government has suggested that our ethanol industry be export-based. The recommendation is 400 million litres per year of ethanol production with 65% of that production exported to other provinces or the United States. The existence of reliable export markets for Saskatchewan ethanol is highly questionable. Investment in large scale production facilities relying on an export market may affect the sustainability of the industry.
From an economic perspective, a focus on meeting domestic demand would lead to more sustainable development, eliminating the risks associated with overdeveloping in the hope of capturing potentially uncertain export markets. If demand for Saskatchewan ethanol grows substantially, production could be increased accordingly as markets develop. The US industry has proven that it is possible to increase production very quickly through new construction and expansion of existing production capacity. If demand decreases, however, or does not grow beyond domestic consumption levels, underutilized export production capacity could be an extremely expensive and wasted investment. Even domestic demand may decrease or be eliminated over time by factors such as competition from other renewable fuels and energy sources such as hydrogen, solar power, wind power etc., or from changes in transportation, energy efficiency, energy consumption etc.
Focusing on meeting domestic demand for ethanol through local, farmer-owned initiatives may protect the ethanol industry from some of the economic pressures facing other industries:
In the US, 66% of ethanol production capacity is farmer-owned through membership in New Generation Co-ops. 85% of the new U.S. ethanol production capacity being constructed in 2002 is owned by farmers. In Saskatchewan, the province has entered into an agreement with a US owned real estate / transportation company to establish ethanol production facilities.
In addition to these concerns, there are other factors that may affect the sustainability of a grain-based ethanol industry in Saskatchewan: