“The charm of fishing is that it is the pursuit of what is elusive but attainable …” — John Buchan, Scottish novelist and historian
Now replace the word “fishing” in this quote with “cellulosic ethanol.” For many, large-scale production of this biofuel has been far off on the horizon. But for others — especially those who have weathered the stumbling blocks on a daily basis — commercialization is ultimately attainable.
Take Abengoa Bioenergy US Holding Inc., for example. After working with farmers in central Kansas to produce feedstocks and iron out the logistics of getting them from the field to the plant, Abengoa will begin producing cellulosic ethanol early next year at its 25 million-gal.-per-year facility in Hugoton, Kan.
Biomass sourcing and logistics, followed by technology and scale-up issues, have been two of the main stumbling blocks to getting cellulosic ethanol off the ground, says Christopher Standlee, executive vice president of institutional affairs at Abengoa Bioenergy.
As one of the largest international producers in the starch ethanol business, Abengoa, based in Seville, Spain, is accustomed to managing large volumes of feedstock. Its Hugoton staff has been working with area farmers over the last four years to contract the plant’s biomass needs for several years of production, Standlee says.
“Biomass collection and storage is not insurmountable, but it is hard work,” says Steve Hartig, general manager of licensing, POET-DSM. Another facet of biomass collection is learning how to do it sustainably. POET-DSM and DuPont Industrial Biosciences, or DIB, have been working with researchers from Iowa State University who have been monitoring how soil health is affected when corn stover is removed.
DuPont has been working with Iowa farmers for the last four harvests, and POET-DSM is in its seventh harvest working with growers. These companies have learned a great deal more about the amount of residue that can be removed without adversely affecting crop or soil quality.
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Getting a new industry up and running — from developing the technology to engineering the process to constructing facilities — is by no means an easy process, says Steve Mirshak, business director for cellulosic ethanol at DIB. In addition to the crop residue management considerations previously noted, there are various challenges in coordinating the harvest and transportation of biomass from the field to the cellulosic ethanol plant.
DIB is contracting primarily with aggregators (such as custom harvesters) to collect and transport biomass. “The number of equipment providers continues to grow, as does the commercial harvest of corn residues for a 30 million-gal.-per-year facility,” Mirshak says.
DIB’s cellulosic ethanol plant (co-located with corn plant Lincolnway Energy in Nevada, Iowa) requires the expertise of more than 200 equipment operators for a two-month period in the fall. “We are working to expand the pool of workers that are available for that period of time,” Mirshak notes.
“Investors and innovators have had to build a supply chain for feedstock while balancing supplier and buyer demands for value, quality, quantity and cost. We are working with farmers to encourage their participation in this exciting new opportunity,” Mirshak says.
He adds that the equipment industry will continue to expand and innovate with the growth of the cellulosic ethanol industry. “Several areas of growth opportunity exist, including consolidating harvest operations into fewer steps and bringing commercial-grade equipment, quality control and greater specialization to the stover harvest. We are seeing entrepreneurs and investors stepping into the gap now, and that’s encouraging.”
Another stumbling block has been the volatility of commodity prices over the last few years in both the corn and oil industries, says Michael McAdams, president of the Advanced Biofuels Association.
The cost-effective conversion of cellulose to ethanol has certainly presented challenges. “There is a reason that trees can live hundreds of years — cellulose is strong,” says Ronald Miller, managing director for Prisma Advisors LLC, Pekin, Ill., which specializes in working with startup companies in the alternative energy and biotechnology sectors. Technologies to break down cellulose (such as acid hydrolysis and gasification) economically have been more difficult than initially thought, especially when you go to scale it up, Miller says.
The companies that will be producing cellulosic ethanol next year have already logged years of development. Abengoa’s Standlee provides a glimpse into the process and timeline: “We began testing our proprietary enzymatic hydrolysis technology at laboratory scale in 2003, and first produced cellulosic ethanol at a pilot-plant scale in York, Neb.
“In 2007, we built a demonstration plant in Salamanca, Spain, which started production in 2009,” he continues. “We started construction on our commercial-scale facility in Hugoton in 2011, and are now on the cusp of completing construction. We expect to start operations this December or in January.
“Through this deliberate and careful ramp-up, we have run this process for many thousands of hours and are confident that our technology will be scalable to commercial production rates without major issues,” Standlee says.
Time and materials add up to huge sums of capital. The cellulosic ethanol plants themselves are costing between $200million 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 $0.5billion 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.
The RFS is “flexible enough to accommodate various swings in both production and availability of fuels,” says Abengoa’s Standlee. “The petroleum industry has had six years to plan for the infrastructure needed to distribute ethanol-blended fuels. Automobile manufacturers now produce the great majority of their vehicles as flex-fuel vehicles, capable of using blends up to 85% ethanol, and they have recently acknowledged the great potential benefit of higher ethanol blends from both an environmental and an octane and mileage standpoint.”
The EPA has tested and approved all vehicles that have been manufactured since 2001 for E15 use. “As these vehicles have become over 80% of the vehicle fleet, we are confident that adequate markets exist for blends greater than E10,” Standlee says.
“E15 is already offered at several fuel stations in the Midwest, but access does need to expand,” DIB’s Mirshak says. “The easiest way for that to happen is for fuel station operators to stop feeling pressure from parent companies not to offer the fuel, and for misrepresentations about E15 to give way to the reality that it’s an affordable, high-energy fuel that works. As resistance to allowing station owners to offer E15 decreases, consumers will be able to get the fuel in more locations. That, in turn, will help open up the market for cellulosic ethanol.”
Stumbling blocks to the growth of cellulosic ethanol exist. But the industry is keeping its eyes on the prize. And the prizes are significant — reduced dependence on foreign oil, lower greenhouse gas emissions, investments in rural communities, growth in green collar jobs, returns on investment for ethanol producers and their investors, and new markets for farmers who could produce a number of different feedstocks.