Part I of II
Cellulosic ethanol arrives at scale — “The five years away
forever” put to rest — but are there troubling waters still ahead?
For whom, and why?
There’s a gigantic disconnect between two sections in the country
as to whether the United States should be celebrating the success
or the failure of cellulosic biofuels — biofuels made from crop
residues, energy crops, and other feedstocks including municipal
solid waste, and which feature a 60 percent or greater
full-lifecycle reduction of greenhouse gas emissions compared to
On the one hand are the supporters — including project
developers, growers, the US Department of Energy, Department of
Agriculture, several foreign governments (particularly in the EU)
and supporters of renewable fuels.
They point to the growing number of commercial-scale
biorefineries, and the reaching of cost-competitiveness with $100
oil, as signature achievements of the renewable fuels movement.
Many of the supporters will be gathered in Hugoton, Kansas next
week for the official opening of Abengoa (ABGB)
Bioenergy’s commercial-scale cellulosic biorefinery, which at 25
millions gallons of capacity will (for a period of a few months)
be the world’s largest of its type.
Typical of supporter enthusiasm is this report from the
Department of Energy:
In September 2012, conversion
technologies were demonstrated at the National Renewable Energy
Laboratory…where scientists led pilot-scale projects for two
cellulosic ethanol production processes: biochemical conversion
and thermochemical conversion. Both…demonstrated process yield
and operating cost…At the biochemical pilot plant, cellulosic
ethanol was produced at a modeled commercial-scale cost of $2.15
per gallon—a process that was approximately $9 per
gallon just a decade ago. For the thermochemical pilot plant,
cellulosic ethanol was produced at a modeled commercial-scale
cost of $2.05 per gallon.
On the other hand are ranged a number of detractors — oil
companies, some environmentalists, skeptics of government R&D
for renewables, and mandate-hating conservatives.
Typical of their critique is a report from
Jonathan Fahey of the Associated Press that ran last
“As refineries churn out this so-called cellulosic fuel, it has
become clear, even to the industry’s allies, that the benefits
remain, as ever, years away…The failure so far of cellulosic fuel
is central to the debate over corn-based ethanol…Ethanol from corn
has proven far more damaging to the environment than the
government predicted, and cellulosic fuel hasn’t emerged as a
replacement…Cellulosic makers are expected to turn out at most 6
million gallons of fuel this year, the government says. That’s
enough fuel to meet U.S. demand for 11 minutes…Corn ethanol…has
limited environmental benefits and some drastic side
effects…Despite the mandate and government subsidies, cellulosic
fuels haven’t performed. This year will be the fourth in a row the
biofuels industry failed by large margins to meet required targets
for cellulosic biofuels….
“The Obama administration’s annual estimates of cellulosic fuel
production have proven wildly inaccurate…supporters acknowledge
there is almost no chance to meet the law’s original yearly
targets that top out at 16 billion gallons by 2022…expectations
were simply set too high. To attract support from Washington and
money from investors, the industry underestimated and understated
the difficulty of turning cellulose into fuel…
Fahey continues, “The industry was also dealt a setback by the
global financial crisis, which all but stopped commercial lending
soon after the biofuel mandates were established in 2007…Hundreds
of companies failed that had attracted hundreds of millions of
dollars from venture capitalists and government financing.”
You’ve come a long ways, baby
Part of the excitement around competitive-cost cellulosic
biofuels is the magnitude of the effort and the achievement. Just
a few years ago, the projected cost per gallon was $9.00. Just a
few years ago, a kilogram was a tough quantity to find produced in
the United States.
A problem of targets and language
One of the biggest confusions over the Renewable Fuel Standard is
the language of the “cellulosic mandate”. It’s not much of a
mandate, at the end of the day. Congress set a maximum target of
21 billion gallons of advanced (that is, no-corn ethanol) fuel by
2022, which included biodiesel, all other forms of advanced fuels
that EPA qualified, and cellulosic fuels.
DuPont’s Nevada cellulosic biofuels
plant, as of earlier this year. The core technology and
fermenter units can be seen at center; at left center, biomass
intake; at left, storage and distillation
The maximum target for cellulosic was 16 billion gallons by 2022
— but it was specifically tied back to actual capacity levels,
given that the fuel was, in 2007, only available in labs. EPA was
required to reset the mandate each year to actual production
In other words, no production, no mandate. It’s not exactly right
to say that the Congress “mandated” the blending of 16 billion
gallons of cellulosic biofuels in 2022. It is true to say that
Congress intended to mandate that, if the industry produced the
volumes, Congress would require obligated parties (such as oil
refiners and marketers) to blend the (competing) fuels into their
petroleum fuels, or pay for waiver credits. Which is to say, if
the detractors could come up with some way of frightening the heck
out of investors and otherwise frustrate efforts to build
capacity, the mandate would disappear.
Imagine an EPA mandate that says, in effect, “we mandate lower
levels of arsenic and mercury in groundwater if someone comes up
with a product to substitute for the one causing the arsenic and
mercury problem. If no one produces a substitute, you can go on
polluting.” Well, imagine the galvanizing impact on polluters.
They could take the hard road of developing cost-effective
alternatives, or the easier road of demonizing all the substitutes
and thereby keeping them out of the market.
The Projection Problem
POET-DSM’s Project LIBERTY under
construction last winter. The project opened to great fanfare
One of the difficulties relates back to the difference between
capacity and production. What happens if someone builds a 10
million gallon integrated biorefinery that can make fuels or
chemicals — and market conditions change radically mid-year to
make either fuels or chemicals wildly more profitable or
A normal industrial response to changing commodity demand is to
alter production – shift to a higher-value market, and tune up or
down the volumes. At some times, it makes sense to idle or limit a
plant’s production capacity — and definitely, industry will make
$5 chemicals over $3 fuels every time, if the input costs are the
INEOS Bio New Planet Energy’s 8
million gallon cellulosic ethanol plant in Vero Beach, FL —
also producing a healthy stream of renewable power.
Another problem. When is a plant market-ready, as opposed to
mechanically complete? No plant operates at full capacity until it
has gone through a commissioning period — and that can range from
moths to several years as bottlenecks in a design are worked out.
Take for example Gevo (GEVO).
It has four production lines, which can a) produce ethanol b)
produce isobutanol for the fuel markets c) produce isobutanol for
the chemical markets or d) be idled individually or in total
because of input/output commodity price imbalances, commissioning
troubles, or technology upgrades.
The 21.6 million gallon per year
GranBio project which just opened in Alagoas, Brazil.
So, EPA has the tricky job of projecting production volumes, as
opposed to “mechanically-complete production capacity”. In the
short-term, it will have troubles projecting production volumes
from new plants that may intend to be in full production with,
say, 6 months, but encounter more bottlenecks than expected. In
the long-term, it has the problem of deciding how much fuel will
be made for a domestic market, how much may be exported, and how
much production capacity might be devoted to making higher-value
Industry’s optimistic timelines
The cellulosic fuels movement and industry probably didn’t help
itself much back in 2007 when the first commercial-scale DOE
grants were awarded to six projects.
The project and promise. “Abengoa Bioenergy
Biomass of Kansas LLC received $76 million for a proposed plant in
Colwich, Kan. The facility will thermochemically and biochemically
produce 11.4 MMgy of ethanol from 700 tons per day of corn stover,
wheat straw, milo stubble, switchgrass and other feedstocks. The
project is expected to start construction in late 2008. Abengoa is
also building a pilot-scale cellulose facility in York, Neb.”
The actual outcome.
The project grew to 25 million gallons, shifted to Hugoton, Kansas
from Colwich — and is opening this year after starting
construction in late 2011.
The project and promise. “ALICO Inc. received
$33 million for a 13.9 MMgy project in LaBelle, Fla. The project
is also proposed to produce electric power, hydrogen and ammonia
from 770 tons per day of yard, wood and vegetative wastes.
Construction is slated to begin in 2008 with start-up in 2010.”
The actual outcome.
ALICO backed out, their partners New Planet Energy stayed in and
ultimately partnered with INEOS Bio. The partners shifted the
project to 8 million gallons of ethanol and 4MW of renewable power
in Vero Beach, FL, started construction in 2011, completed in
2012. The project remains in a commissioning period — which may
possibly finish up by year end when equipment upgrading is
The project and promise. “BlueFire Ethanol Inc.
received up to $40 million for a proposed facility in southern
California. The facility will be sited on an existing landfill and
produce about 19 MMgy of ethanol from 700 tons per day of sorted
green waste and wood waste from landfills. Construction is slated
to begin in 2008.”
The actual outcome.
The company (now known as Bluefire Renewables (BFRE))
has struggled to complete financing, and is still intending to
build but has not yet commenced construction although site-prep
work has been done and designs are in place. Ultimately, BlueFire
shifted the project to Natchez, Mississippi and attracted a total
of $87 million in grants when this project was re-awarded out of
Recovery Act funds.
The project and promise. “Broin Companies
received up to $80 million for its Project Liberty proposal. The
company plans to add cellulosic ethanol production to its existing
corn dry mill in Emmetsburg, Iowa. Construction is expected to
begin later this year.” At the time Ethanol Producer observed,
“The company plans to convert the company’s existing 50 MMgy
Emmetsburg, Iowa, corn dry mill plant to also handle cellulosic
feedstocks, mainly corn stover. The expansion is slated to take
approximately 30 months and increase the facility’s capacity to
125 MMgy of ethanol.”
The actual outcome.
The company, now known as POET, formed POET-DSM Advanced Biofuels
in a JV with DSM, and opened the 20 million gallon Project Liberty
this year in Emmetsburg,
The project and promise. “Iogen Biorefinery
Partners received up to $80 million to build its proposed 18 MMgy
facility in Shelley, Idaho. Iogen already operates a
demonstration-scale wheat straw-to-ethanol facility in Canada.”
The actual outcome.
The company ultimately abandoned the project. The Shell-Cosan JV
Raizen broke ground last November on a $100 million, 10 million
gallons first commercial facility in Piricicaba, Brazil that was
expected to open by the end of this year.
The project and promise. Range Fuels was awarded
up to $76 million for a proposed project near Soperton, Ga. The 40
MMgy ethanol plant would also produce 9 MMgy of methanol from
1,200 tons per day of wood residues and wood-based energy crops.
Construction on the Khosla Ventures-backed project is expected to
begin this year.
The actual outcome.
The company and project ultimately failed, and the site was sold
to LanzaTech, which maintains a pilot facility there to this day —
although LanzaTech is focused at this point on developing its
first commercial-scale capacity in China.
Some unexpected big wins along the way
The project and promise. Beta Renewables was not
formed in time to compete for the 2007 DOE grants, or the round of
grants announced under the Recovery Act in late 2009. Chemtex was
developing a technology at the time, and ultimately formed Beta
with investors Texas Pacific Group and Novozymes (NVZMY).
The actual outcome.
The company opened a 20 million gallon commercial-scale facility
in Crescentino, Italy in 2012, which is now operating at full
capacity. The company has signed firm deals for new plants in
China and Slovakia, and is developing a project on its own balance
sheet for North Carolina. More licenses are expected over the next
The project and promise. GranBio was not formed
in time to compete for the 2007 DOE grants, or the round of grants
announced under the Recovery Act in late 2009.
The actual outcome.
The company opened a 21.6 million gallon commercial-scale facility
in Alagoas state in Brazil this past month, which is currently the
world’s largest. The company has announced plans to invest $724.5
million in five cellulosic ethanol plants during the next few
The project and promise. DuPont (DD)
Industrial Biosciences (operating than as the JV DuPont Danisco
Cellulosic Ethanol) either did not compete or did not win a 2007
DOE grant, or in the round of grants announced under the Recovery
Act in late 2009.
The actual outcome.
The company is expected to open what will become the world’s
largest cellulosic ethanol facility in the world when its 30
million gallon, $200M Nevada, Iowa plant is completed by the end
The project and promise. Enerkem’s Edmonton
project was not legible for a DOE grant because it is in Canada —
but it did pick up a grant for a future project in Pontotoc,
The actual outcome.
The company just opened its first commercial 10 million gallon
facility — which owing to trends in commodity prices, is currently
producing methanol instead of ethanol. All of it, though, from
Edmonton’s supply of municipal solid waste.
The tale of the tape
Six commercial-scale projects were originally envisioned by the
DOE in 2007. Ultimately, we have four open, one more this week,
two more by the end of the year, four in development, and
ultimately a whole generation of new technology competitors with
at-scale capabliities. One failed.
The timelines were not pretty. We’re seeing the real wave hit the
beach in 2014, something like 5 years late.
Were the targets “juiced”?
According to a Digest source employed in a senior role at Iogen
during 2007, when the EISA Act established the cellulosic targets:
“There was no way those targets were going to get met. We were
the only company at the time that had reached demonstration scale,
and we did not believe that we would be ready with a first
commercial facility by that timetable. Knowing how long it takes
to get to pilot and demonstration scale, a first commercial and
then a fleet of new plants.
“Most experts agreed that we need until the mid-decade to really
start ramping up capacity. And this was before the 2008-09
financial crisis and other factors causing slowdowns. We told
everyone this, and originally the timetables and targets were much
more conservative. But one prominent investor in the sector was
far more bullish, called the more conservative targets “a joke”,
and at some stage Congress became convinced that a more aggressive
timetable was the right way to go.”
[Editor's note: The DOE
timetables for first commercials in the 2007 grants indicated
that 159 million gallons in capacity would have reached
mechanical completion by 2010, with Iogen's 18 million gallons
coming on-line after that — but only if all projects were
financed and all were successful technologically. At the time,
one of the six had reached demonstration-scale, and another one
or two had reached pilot-scale. It is virtually impossible to
imagine how the projects would have reached steady-state
operations in 2011 without skipping a minimum-scale full
demonstration step altogether. The absence of a proven
demonstration at scale of the technologies would prove to be, in
some cases — fatal to projects which proceeding to jump to scale
prematurely — and a delaying factor in financing for the rest.]
How realistic were the targets and timelines given the state of
It’s easy to answer this one. Given the outcomes, the projects
were real, the timelines were not.
For example, POET’s 2007 projections indicated a construction
start in 2007 and and opening as soon as 2010. But the company
only reached pilot-scale at Scotland, South Dakota in the 4th
quarter of 2008 and began producing cellulosic ethanol in Q1 2009.
Commercial biomass harvesting began in Q3 2010.
Now, realistic timelines and realistic projects are two different
things. The United State originally hoped to invade France in
1943, 19 months after Pearl Harbor, and ended up staging Operation
Overlord in June 1944, 12 months and 63% later than the original
targets. The winning of the war was vastly more important than the
timeline. And in the case of POET-DSM — the opening of the plant
in 2014 is proof that the journey had a successful ending.
Which brings us to the problem of financing. As we’ll
continue in PART II of this special report, which you can find here.
Jim Lane is editor and publisher of Biofuels Digest where this
was originally published.
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