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Cellulosic ethanol moves from the lab toward commercial production
Nov 11, 2008 (The Kansas City Star - McClatchy-Tribune Information Services via COMTEX) --
The idea of producing plentiful amounts of ethanol from materials such as switchgrass and wood scraps has successfully emerged from the laboratory, but challenges lie ahead.
The ethanol industry spent years honing the necessary science and technology, and that job is essentially finished. Now the work has started to bring cellulosic ethanol to commercial production.
By 2022, a federal mandate calls for annual production of 16 billion gallons of ethanol from cellulose -- along with 15 billion gallons from the main U.S. ethanol source now, corn.
A handful of small facilities will begin producing cellulosic ethanol as early as next year, which will test whether the fuel can live up to its potential and be commercially viable.
"I think the science is real," said Candace Wheeler, a technical fellow for General Motors Inc., which is investing in cellulosic ethanol. "The next couple of years are very critical."
The move to small-scale plants comes during a tumultuous period for the ethanol industry, which has so far relied on making ethanol out of corn. The industry's financial problems have deepened in recent weeks as ethanol prices have plummeted, along with gasoline's.
The problem is aggravated by record-high corn prices last summer, driven in part by increased demand for making ethanol. Corn prices have since declined, but many ethanol producers had locked in those higher commodity costs for future purchases, fearing at the time that prices would go even higher.
The financial squeeze has cast a deep shadow on the industry. VeraSun Energy Corp, the second-largest ethanol producer in the U.S., earlier this month filed for bankruptcy. Plans for additional corn ethanol plants by other producers have largely been shelved. About 9 billion gallons of ethanol are expected to be produced in the U.S. this year, virtually all from corn.
Meanwhile, consumers for the first time in nearly two years are seeing ethanol prices that, despite falling in recent weeks, are higher than conventional gasoline. Combined with ethanol's lower energy content compared with gasoline, its higher price is providing a poor value to consumers. That situation, if it persists, could slow the acceptance of ethanol as an alternative fuel.
"It's now the high-priced spread," said James Williams, an economist for WTRG Economics.
Many analysts, however, expect ethanol to eventually be cheaper than conventional gasoline. Regardless, there will be pressure to expand ethanol production because of the federal mandates.
Cellulosic ethanol is starting from scratch in making sufficient ethanol to meet the mandate. But the industry expresses confidence that this is the next-generation biofuel. Cellulosic ethanol is friendlier to the environment and will put less pressure on food prices. Cellulose also has the potential to produce more ethanol than corn.
Although the initial capital costs are much higher -- a cellolosic plant can cost four times what a corn ethanol plant does -- it's estimated that ethanol made from cellulose will be substantially cheaper.
That confidence was on display at the Platts Third Annual Cellulosic Ethanol and Biofuels Conference in Chicago last month. Coskata Inc., which has General Motors as an investor and plans to open a demonstration plant next year near Pittsburgh said its operating cost for producing ethanol would be under $1 a gallon.
"This technology is ready," said Wesley Bolsen, chief marketing officer of the Warrenville, Ill., company. "We need to start hunting elephants."
Major oil companies are also ratcheting up their investments in cellulosic ethanol. Susan Ellerbusch, vice president of global fuels for BP, said the company had spent $2 billion on biofuels in the last two years, and biofuels by 2030 could account for 30 percent of supplies in meeting demand for transportation fuel.
Cellulosic ethanol is considered the cornerstone in that growth and the reason BP is investing in the industry.
"We think the time is now," she said.
Obstacles must be overcome before it is a cornerstone of a new alternative energy structure. It will take hundreds of production facilities to produce the 16 billion gallons under the federal mandate, which in turn will need hundreds of millions of tons of feedstock such as trees, switchgrass and corn byproducts to make the fuel. The logistics of procuring the feedstock are daunting, and keeping feedstock costs down is crucial, especially given the processes' higher capital costs.
Simply moving out of the laboratory, where cellulosic ethanol was made in beakers, to producing thousands of gallons can expose problems. One issue that has come up is that the price of the enzymes used in one conversion method has to come down to be economically used in large-scale production.
"Beaker to beaker it can work very well, but scaling up can be more difficult," said Richard Bain, a principal research supervisor at the National Renewable Energy Laboratory.
It is one reason the industry is scaling up slowly. Range Fuels Inc., a Colorado company, is building a cellulosic ethanol plant in Georgia that will use wood to produce ethanol. It eventually could produce 100 million gallons a year but is scheduled to open next year at 20 million gallons a year.
Abengoa Bioenergy is building a 100 million gallon a year ethanol plant in Colwich, Kan., but 85 million will be used to make corn ethanol and just 15 million for ethanol from cellulose such as wheat straw. In St. Joseph, ICM Inc. of Kansas City is building a cellulosic ethanol facility that will produce less than 5 million gallons a year. It is being built next to an existing corn ethanol plant to reduce the cost.
Capital costs and financing are an issue. Cellulosic plants are about four times the cost of a plant that makes corn ethanol. Especially with the cellulose industry in its infancy, private financing for a company's initial plant has been all but impossible -- and that was before the global credit crisis. Creditors what to be sure that the technology works and the production plants are commercially viable.
"We have people saying they want to be first in line for the second plant," said Arnold Klann, president of Blue Fire Ethanol, a California ethanol company.
In general, the ethanol industry is looking toward government grants and loan guarantees, which are being issued for the first phase of plants. Tax credits of up to $1.01 a gallon of cellulosic ethanol capacity will also be available through 2012.
But in the end, the cellulosic processes will have to prove their commercial worth to get the financing needed for future, large-scale plants.
"Everyone is from Missouri," said Klann, referring to the state's Show-Me motto.
That attitude extends to the feedstock needed to make cellulosic ethanol, and the delivery and storage infrastructure that also must be developed.
"Feedstock is going to be the major issue," said Joseph Skurla, president of DuPont Danisco Cellulosic Ethanol, which broke ground this month on a pilot plant in Tennessee that will produce 250,000 gallons of ethanol a year.
DuPont said feedstock needed to stay below $75 a ton for the process to be economically viable. The numbers are squishy, but by some estimates switchgrass can be available from farmers for $30 to $60 a ton. Increased demand could boost those prices, however, and declining ethanol prices will put even more pressure on feedstock costs.
"The challenge is the need to have sufficient quantities of feedstock at a reasonable price," said Jon Erickson, a manager of energy at Black& Veatch Corp.
Concern over feedstock costs at first glance is puzzling. The U.S. Department of Energy estimates 1.3 billion tons of cellulosic material are available each year, or enough to produce the ethanol needed to replace 30 percent of the transportation fuel used in the U.S.
Cellulosic ethanol production is also expected to spur more planting of so-called energy crops, grown expressly to make fuel. Both Kansas and Missouri are in a belt that is considered prime territory to grow switchgrass, a native plant.
"This is a win for rural America," said Burton English, a University of Tennessee professor who has overseen several pilot plantings of switchgrass to study the crop's potential.
Though convinced of the potential, English said issues remained. More switchgrass will have to be planted to meet demand, which will increase the cost. Switchgrass can be crowded out by weeds, for instance, which will require the use of herbicides.
To meet demand, the industry is considering growing switchgrass on land now set aside for conservation purposes, which could be a political issue.
The grass will also have to be baled and stored for use at ethanol production plants, which will need feedstock year round.
A 10 million gallon a year plant will need 40 trailer-truckloads of wood each day of production. If the plant uses wheat straw, which has a lower density, it will take even more truckoads.
To ensure enough feedstock at an economical price, a few companies are looking at using municipal waste.
The city of Edmonton, Canada, recently signed such a contract with an ethanol company.
ICM's facility in St. Joseph will be able to rely in part on corn fiber from the adjacent corn ethanol plant. The fiber, part of the corn kernel, isn't used to make corn ethanol but can be used for cellulosic ethanol.
Bain, of the National Renewable Energy Laboratory, said dealing with issues such as feedstock supplies reflects cellulosic ethanol's transition as it emerges from the laboratory and lays plans to grow.
"The devil is in the details," he said. "But I think it will actually happen."
To reach Steve Everly, call 816-234-4455 or send e-mail to severly@kcstar.com
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