Time and materials add up to huge sums of capital. The cellulosic ethanol plants themselves are costing between $200 million and $300 million to build, and this does not take into account the millions of dollars already invested in research and development. As early as 2010, VB/Research estimated that venture capitalists had spent more than $0.5 billion on early-stage cellulosic ethanol companies within a two-year span.

Loan guarantees from the Department of Energy have helped significantly. The DOE, for example, finalized a $132 million loan guarantee to Abengoa. According to Bloomberg Energy, the private sector has invested $14.7 billion domestically in biofuels in the last six years.

But investors have been wary because producing cellulosic ethanol on a commercial scale has not been done before. Moreover, this biofuel will compete against the 100-year-old oil industry where capital costs have long been covered. This enables the oil industry to weather a period of low prices.

The ABA’s McAdams points out that the oil industry has not built a new refinery for 40 years. This makes the last three years’ of cellulosic ethanol facility construction during a prolonged recession all the more impressive, he says. The first generation of biofuels has provided a strong foundation on which to build, McAdams adds.

The renewable fuel industry is currently dealing with high capital costs. Fortunately, it is making progress toward reducing these costs, observes Charles Wyman, a professor of chemical and environmental engineering and holder of the Ford Motor Co. Endowed Chair in the Bourns College of Engineering at the University of California, Riverside. Wyman has a long history of research on converting cellulosic biomass to commodity products, including ethanol, with current emphasis on pretreatment and enzymatic hydrolysis.

While the cellulosic ethanol industry is making progress, investors want to see more certainty moving forward, Wyman says. That is why the future of the Renewable Fuel Standard is important to them and the biofuels industry as a whole. The RFS mandates an increasing amount of renewable fuel to be blended into transportation fuel each year, climbing to 36 billion gal. by 2022.

Calls by the oil industry and others to repeal the RFS, plus the oil industry’s unwillingness to blend 15% ethanol into gasoline — essentially creating a man-made blend wall of 10% — have sent a chilling message to investors, says Tom Buis, CEO of Growth Energy. While Buis does not expect the RFS to be repealed, uncertainty will have an impact on the development of other cellulosic ethanol projects.

“We haven’t surmounted proposed changes to the RFS, but we are encouraged by the administration’s commitment to it, and there is enough bipartisan support that will likely keep it from being repealed. The biofuels industry is making its voice heard,” POET-DSM’s Hartig says.