Big Players Invest in Cellulosic Ethanol

June 10, 2012 11:09 PM


For decades now, cellulosic ethanol has been a technology that has always been three to five years out. No more.
In the U.S., ribbon cutting has taken place—or will be soon—on commercial cellulose plants, and in Italy, a major plant will start producing cellulosic ethanol later this year. "Cellulosic ethanol is a reality, it is here today," says Jim Collins, President, DuPont Industrial Biosciences. He spoke June 6 at the International Fuel Ethanol Workshop and Expo in Minneapolis.
DuPont will be breaking ground on a 28 million gallon per year cellulosic plant in Nevada, Iowa, later this year. Feedstock for the plant will be corn stover. The company has been working on cellulosic ethanol for 10 years, and has been testing its technology at a pilot plant in Tennessee.
Earlier, POET, one of the nation’s largest ethanol producers, began construction on a cellulosic plant in Emmetsburg, Iowa, that will be built next to one of the company’s corn ethanol plants. Adding cellulosic plants to existing corn ethanol plants offer key cost and efficiency advantages, speakers said at the workshop, and several corn ethanol plant officials say they are pursuing that option.
When these and other plants are completed, they will represent as much as 190 million gallons of ethanol, and up to $60 million in annual revenue for farmers who provide biomass feedstocks such as corn stover, switch grass, sorghum and wood from tree farms. Crop residues, particularly corn, offer the greatest feedstock potentials, according to the Department of Energy.
But will cellulosic ethanol represent competition for the corn-based ethanol market? No way, says Wallace Tyner, an ag economist and energy specialist at Purdue University. "Corn ethanol will always be cheaper," he says.
As of last month, the rack wholesale price of ethanol was $2.22/gal., compared to $2.95 for unleaded gasoline in Nebraska. The price of cellulosic ethanol, at least initially, will need to be considerably higher, Tyner says. Without governmental subsidies, crude oil prices will have to be $120/barrel for cellulosic ethanol to compete with gasoline.  At present, oil prices have declined to $85/barrel.
What then, will allow cellulosic ethanol to compete? Two ways: The government’s mandate of cellulosic ethanol production contained in the renewable fuels standard (RFS), and a cellulosic tax credit for blenders. Collins and others say such incentives are necessary to give cellulosic ethanol a boost just like similar measures were necessary for corn-based ethanol earlier this decade, which allowed corn ethanol to grab about 10% of the liquid fuels market.
Companies with deep pockets are investing in cellulose, Tyner says, "because if oil goes to $250/barrel, they look golden." Experts at the Minneapolis workshop said that just like corn ethanol production costs have come down markedly from 2005 when the ethanol boom began, so too, will cellulosic production costs decline as that industry takes off.
The necessary RFS and tax incentive are under fire from critics, however, such as the oil industry, opponents of such measures in Congress, and from some animal agriculture sectors. "The RFS is a real piece of visionary legislation," Collins says, and has provided an incentive for companies to invest.
He notes that 50 countries have biofuel mandates and policies. However, the oil industry has gone to court to try and ban the RFS. Legislatively, "their (the oil industry) plan is to set it up this year with a debate and go after the RFS next year," says Tom Buis, CEO, Growth Energy. "Next year, the real battle will occur. They want to stop the next generation of biofuels."
Cellulosic ethanol is good for farmers, Collins says, because it creates a market for farmer raised biomass. One common misconception is that the removal of biomass is bad for farmland, he says. In fact, excessive biomass that high corn production can create can be yield limiting, and a portion of biomass can removed in a way that adequately protects the soil, studies show.
Moreover, removal of excessive biomass may make it easier to grow corn following corn. Up to 2 tons per acre of corn stover can be removed from the land with no harmful effects in places like Iowa, providing the land is not sloping to any great extent, according to experts.
Tyner says that what the cellulosic ethanol industry truly needs beyond government incentives is a market, and one that offers promise is the military. "The Navy and Air Force really want cellulosic ethanol," he says. Their motivation is concern that is major oil producing nations could decide to stop shipping oil to the U.S., making jet fuel hard to come by. This could be a huge market, he says. It all depends on Congress, however, and right now, Congress is not in an investing mood. "Last week," Tyner says, "a House committee said no (to the military’s request)."
Despite its bright future, the cellulosic ethanol industry today is just in its infancy. For 2012, the RFS mandate calls for 500 million gallons of cellulosic ethanol to be produced and 16 billion gallons by 2022. The present corn ethanol mandate is 15 billion gallons, which the industry has hit, creating the so-called blend wall.
The Environmental Protection Agency estimates that just 8 million gallons of cellulosic ethanol will be produced this year, however, from demonstration and pilot plants, so EPA is adjusting the mandate down for 2012.



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