Cellulosic Ethanol - It Ain't Happening

Remember back when cellulosic ethanol was just around the corner? Yeah - it's been "just around the corner" for 20 years.

Like a lot of these fuel sources (which true believers and a shockingly high percentage of the uninformed "I get my opinions from Hollywood movies" general population) will tell you only don't exist because the big oil companies won't support them - cellulosic ethanol is in fact limited by market economics... also known as common fucking sense.

The problem is this: the economics behind the EPA mandate (thank Bush and Obama for that one) to produce 500 million gallons this year and 1 billion next year are a complete joke. The cost of feedstock is 500% or so higher than "planned," no commercial plant has ever come on line and most test plants produce uneven results.

The latest to pull out is BP (see article below), but they are only one in a long list of companies who have backed away from commercializing this technology which will save us all produce a small amount of gasoline substitute at a very high price. The reality is that even if you took all of the logical feedstock for cellulosic ethanol you would only produce about 3-5% of the US fuel (not energy - just fuel) demand. Meh.

But the believers have a solution! All the government needs to do is invest more of their own money into commercializing the technology and all will be solved! I don't know where these idiots hide their brains when they advocate things like that, but as recent experience has shown (A123, Solyndra) the last thing the Govt. should be doing is picking winners and putting public money behind unproven businesses and technology.

Then again - if we get Barakismo the sequel for the next 4 years, I think it would be a good time to start up a bullshit ethanol company, get a $500 million govt. loan, have him come speak, pay yourself a huge salary, go public, sell your shares, and run for the hills. That's probably the only smart move in all of this.

By Kevin Bullis on November 2, 2012

Why It Matters

Cellulosic ethanol could lower petroleum consumption and carbon dioxide emissions, but so far no commercial plants have been built.

When BP backed out of building a $350 million, 36-million-gallon-per-year plant in Highlands County, Florida, last week, the cellulosic biofuels industry, which tries to make fuel from grass and wood chips, lost one of its most promising projects. The cancellation raises the question, if BP can’t bring cellulosic ethanol to market, can anyone?

BP had already started developing a 20,000-acre farm to grow special crops for the plant, such as a type of sugarcane that produces larger amounts of biomass and less sugar than the kind used to make sugar and ethanol in Brazil. As recently as last year, the CEO of BP Biofuels touted the project as evidence that “the technology is coming through” and a new “global commodity is starting to emerge.”

But the cellulosic industry is struggling, despite years of promises and an ambitious federal renewable fuels standard, which took effect in 2010, that mandates a market for cellulosic ethanol that was to have reached 500 million gallons per year by now and a billion by next year. The first commercial plant hasn’t been built, and the U.S. Environmental Protection Agency has had to repeatedly waive the cellulosic ethanol requirement. At first, biofuels companies blamed the lack of commercial facilities on their inability to finance large plants. When a few big players like BP stepped in to say they’d finance plants, it looked like that problem was about to be swept away.

Now that BP has backed out, prospects look considerably dimmer. BP says it will still fund research to develop cellulosic ethanol, but it’s decided the $350 million it would need to fund the plant would be more profitably spent elsewhere.

BP isn’t saying much about its reasoning. But the Biotechnology Industry Organization says uncertainty about government policy is hurting the industry. Without more certainty of government support, the organization says, “it’s no surprise that private investments will flow to incumbent technologies” rather than to new cellulosic biofuels technology. But there is probably a far more basic problem: the market for ethanol in the United States is saturated. Until recently, the EPA limited ethanol levels in gasoline to 10 percent for ordinary vehicles—and ethanol made from corn easily supplies this. Many cars can use 85 percent blends, but gas stations that dispense it are rare. A new EPA rule raises the limit for ordinary cars to 15 percent, but this only applies to newer cars. If gas stations switch to the 15 percent blend, about a third of their customers won’t be able to use it, so gas station owners are reluctant to switch.

There’s also good reason to think that the cellulosic technology isn’t competitive, in spite of what many biofuels companies say. Each company’s costs are based on small-scale plants, and it’s impossible to know how the enzymes and micro√∂rganisms used in the process will perform at a large scale, says David Ripplinger, an economist at North Dakota State University.

Economists have recently done field studies to determine just how much the feedstocks—the grasses, wood chips, straw, or corn stover—actually cost to grow, harvest, and get to a biofuels plant. Whereas early estimates—the ones that helped spur the cellulosic ethanol mandates—put the cost at $30 a ton, the actual costs are more like $80 to $130 a ton. That means the grass and wood chips required to make a gallon of ethanol will cost $1.30 to $1.48—even before anything is done to process them. (For context, the price of a gallon of processed ethanol made from corn is now $2.40 a gallon.)

Based on the cost for plants like the one BP proposed in Florida, the cost could be 10 times higher for a cellulosic plant than a corn ethanol one, at least for the first plants, says Wallace Tyner, a professor of agricultural economics at Purdue University.

Yet while BP has backed out, other large companies are going forward with plans to build commercial plants, if ones that are somewhat smaller than BP’s proposed one. Abengoa is one year into the construction of a 25-million-gallon-per-year cellulosic ethanol plant in Hugoton, Kansas, with the help of a $132 million government loan. Since BP’s announcement, DuPont has confirmed plans to break ground on a 28-million-gallon-per-year cellulosic ethanol plant later this year. Corn ethanol giant Poet, based in Sioux Falls, South Dakota, is building a 25-million-gallon-per-year facility in Emmetsburg, Iowa, after turning down a government loan after it managed to raise enough private financing for the product. Mascoma, which announced a partnership with the oil company Valero last year, hopes to build a 20-million-gallon ethanol plant in Kinross, Michigan, next year, and it says its technology allows for production costs of just $2 a gallon—based on tests at a smaller scale.

BP’s decision was “disheartening,” Ripplinger says. But he says it’s not yet the death knell for cellulosic ethanol. “What we know is that cellulosic ethanol doesn’t work for BP with the energy crops it was using in Florida,” he says. “The question remains what that means for the broader cellulosic effort.”

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