You’ve likely heard rebuttals to today’s National Research Council report questioning the viability of large-scale cellulosic ethanol production, the most prevalent being that it relies on an enormous number of assumptions. The text itself asserts “… with all the expertise available to us, our clearest conclusion is that there is very high uncertainty in the impacts we were trying to estimate.”
However, there are points with which most in the cellulosic ethanol industry agree. These issues outline a path toward creating a viable and sustainable cellulosic ethanol industry.
I haven’t gotten through all 650 pages of the report yet, but a couple points stand out so far:
1. Inconsistent public policy is a barrier to the cellulosic ethanol industry.
This is a point that the ethanol industry has long maintained, and the report confirmed it, noting the 2008 request by Texas Gov. Rick Perry to waive the Renewable Fuel Standard.
“EPA denied that request, but economic dislocation waivers are still possible. Undoubtedly, uncertainty of enforcement of the [Renewable Fuel Standard] is an impediment for private-sector investment.”
It goes on to point out the cellulosic ethanol tax credit is set to expire in 2012 and the Biomass Crop Assistance Program’s future is uncertain.
Producers and investors must know the lay of the land before they can move forward in this effort. If policies keep changing, there’s no confidence that what’s true today will be true tomorrow. The same is true for farmers looking to invest in the machinery to harvest biomass.
"Investors look at the long-term prospects of a project before getting involved, and uncertainty from Washington adds an element of risk to those projects," he said.
2. Lack of fueling infrastructure limits ethanol’s ability to enter the fuel supply at higher blend levels.
This has been an ethanol industry point for years: We have hit the “blend wall,” the point at which we’re blending all the ethanol at E10 that can legally be used in today’s vehicles. E15 buys the industry time to build out infrastructure, but as the report asserts:
“… even with a blend limit of 15 percent, the blend wall will be reached again around 2014. Thus, the blend wall is a major barrier for increasing ethanol production beyond about 19 billion gallons even if the blend limit is 15 percent.”
To proceed, we need a large effort to produce more Flex Fuel Vehicles and more Flex Pumps, which can dispense different ethanol blends such as E10, E30, E50, or E85. If the consumer can choose any blend, the oil industry will lose its strangle-hold on the economy.
“It would require large and rapid investments in fuel dispensers for E85 plus millions of flex-fuel vehicles produced and sold each year.”
There are about 8 million Flex Fuel vehicles on the road today, and both GM and Ford have committed to making half the new cars they sell in 2012 Flex Fuel. These efforts as well as efforts to get more Flex Pumps in stations across the U.S. must increase. The longer we wait, the longer it will take to break our reliance on oil.
These points and others are not a reason to stop cellulosic ethanol commercialization efforts. Rather, they clarify work that still needs to get done and stress the importance of work that is getting done to address these needs.
I’m working on another post addressing POET’s process for cellulosic ethanol in the context of this report. Look for that tomorrow and maybe more depending on how much of this I can get through.
This morning, the Department of Energy announced a conditional commitment for a loan guarantee for Project LIBERTY, POET's project to make cellulosic ethanol out of corn crop residue.
The story has generated a lot of coverage, including the New York Times and Wall Street Journal. There was also a comprehensive update from Ucilia Wang at earth2tech. If you're wondering where the project stands, watch this video interview with Project LIBERTY Director Jim Sturdevant:
For more on the announcement, see releases from POET and the DOE.
For a long time, POET has pointed out that a loan guarantee will be required to fund our first commercial cellulosic ethanol plant. Yesterday, POET CEO Jeff Broin was one of 34 CEOs of renewable energy companies who signed a letter to Congressional leadership calling on them to support the U.S. Department of Energy's loan guarantee program. Here's the press release:
CEOs Call on Congress to Fully Fund DOE Renewable Energy Loan Guarantee Program
Elimination of Funding Would Harm US Competitiveness and Energy Security Washington
(March 29, 2011) - In a letter sent today to Republican and Democratic leaders of the House and Senate, CEOs of 34 renewable energy companies strongly urged support for the Department of Energy’s loan guarantee program in order to preserve billions of dollars of private sector investments that will build the nation’s domestic clean energy infrastructure.
The thirty-four CEOs representing companies from every renewable energy sector – solar, wind, geothermal, biomass and biofuel –have already invested tens of millions of dollars in projects that are being considered by the Department of Energy for loan guarantees. Without the loan guarantee program, the companies will be unable to begin construction of major commercial renewable energy projects. Without loan guarantees, America’s effort to compete with China, Germany and others in the clean technology marketplace will be undermined.
In their letter, the 34 CEOs noted: “The projects for which our companies have applied – all of which are ready to begin construction between now and September 30th of this year –represent more than $13.3 billion of investment in 28 states and will generate 15,600 construction jobs and 10,200 operating jobs as well as thousands of additional jobs for equipment and services provided by suppliers.”
According to the letter, sent to Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY), Speaker of the House John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA), “The loan guarantee program is a win-win-win for taxpayers, American clean technology and the communities and states where these investments are being made. The program’s real costs are paid for by the companies that submit applications, and each federal dollar of loan guarantees leverages $13 in private capital investment.”
The letter with the names of 34 CEOs and their companies is attached as well as a list of companies and location of their projects.
Click here to read the complete letter. For background on the loan guarantee program, see a blog post from Katie Fehrenbacher at Earth2tech.
Last week, the Iowa Power Fund released an economic impact study looking at the 31 projects they funded. One of those was Project LIBERTY, about which the study had this to say:
The research being conducted at POET Project Liberty is on the cutting edge of ethanol production research and has the potential to provide significant benefit to the State of Iowa. The project includes the transformation of a traditional ethanol biorefinery into an integrated corn‐to‐ethanol and cellulose‐to‐ethanol biorefinery. POET hopes to validate the technology and economics at commercial scale at multiple POET biorefineries in Iowa. The project will use corn grain and corn cobs to produce conventional and cellulosic ethanol in one facility. The corn suppliers and biorefinery operators seek to take advantage of the economies of scope ‐ reducing total average cost by increasing the number of different products produced. The POET project will reduce the state’s reliance on foreign oil by producing ethanol from renewable agriculture crops produced in Iowa.
For the economic impact, see the press release we issued last week.
Over the weekend, Department of Agriculture Secretary Tom Vilsack weighed in on the issue and agreed, calling the Register article "inaccurate." Here's the opening paragraph of his letter:
A Nov. 14 article, "Report Questions Cellulosic Ethanol Merits," suggested USDA doubts the future of biofuels made from crop residues and other cellulosic materials. That is inaccurate. The future of biofuel from cellulosic materials is bright. And its promise for creating economic opportunity in rural America is profound (emphasis added).
Secretary Vilsack went on to reiterate his department's support for cellulosic ethanol, saying "In the Midwest, corn and corn stover will remain the primary energy crop." We agree and welcome the U.S. Department of Agriculture's continued support for cellulosic ethanol.
For four straight years I have attended the Infocast Cellulosic Ethanol Summit in Washington, DC, the latest occurring just this week. The annual Summits are signposts along the evolutionary path of an innovative technology. The 2007 conference presentations featured new and better ways of making cellulosic ethanol. Research and development had proven the technology, and people were awakening to the challenges of biomass harvesting and logistics. The national economy was strong.
In 2008 several conference speakers announced the construction of pilot plants, and some had even started operating. A few companies were working with biomass suppliers and solving logistics problems. In spite of an economic downturn, industry excitment was growing. At last year's conference, more companies had entered the race. Technologies were getting more efficient and costs were being reduced. Several companies promised that commercialization is getting close. However, they cited a lack of capital as growing concern.
The concern was valid. The overarching theme of this year's conference was the lack of capital. Technology and biomass logistics have continued to mature and costs have been reduced. POET Project LIBERTY and several other companies are now standing on the rim of the commercialization canyon, needing a federal loan guarantee parachute before taking the leap. However, as the press has covered over the past few months, federal loan guarantees for biofuels projects are slow in coming.
But today I continue to have optimism. Range Fuels received a loan guarantee from the USDA. Fulcrum Bioenergy and the DOE agreed on a "detailed indicative term sheet" for a DOE loan guarantee. And POET Project LIBERTY continues taking positive steps toward a DOE loan guarantee. LIBERTY's technology and biomass logistics are ready. POET will start construction when it receives the federal loan guarantee.
Cellulosic ethanol has the potential to eliminate--not just reduce, eliminate--America's dependency on foreign oil, while improving our environment and creating jobs. Our industry's evolution must, and WILL, march forward.
The article was titled "Report questions cellulosic ethanol merits" and the headline certainly fits the article, but not the report. Nothing in the full report questions the merits of cellulosic ethanol, but if you read the article you're left with the impression it calls for shifting research and funding from cellulosic ethanol to algae.
The report lists algae as one of two additional options for consideration and contains exactly two mentions of the word "algae." Here is the relevant section:
Second, there are a number of new feedstocks, such as algae and other oil seed crops, that seem to hold significant potential. Although significant funding has positioned algae as a biofuel feedstock, additional efforts are needed.
That's it. Not a single mention of shifting dollars from cellulosic ethanol to algae. The Des Moines Register article paints cellulosic ethanol in the worst possible light and pits it against algae when the actual report clearly does neither. Here are the five recommendations of the report:
USDA/REE should validate the development of a cellulosic feedstock system and determine which feedstocks indicate significant sustainable potential in various regions of the US.
USDA/REE should support cross-functional educational and outreach programs in agriculture, chemistry and engineering disciplines to support a new workforce that has a strong foundation in chemurgy skills.
USDA/REE should increase resources to support research and cross-functional educational programs to address challenges for utilization of agricultural derived bioproducts and biomass.
USDA/REE should evaluate bio-power from biomass in terms of efficiencies, regionalization, liquid fuels and electricity. REE also should effectively communicate its vision and the potential scope and research needs for biomass crops.
USDA/REE should continue to support the Global Strategy to Improve Agricultural and Rural Statistics Report of which ERS and NASS are an integral part and also should broaden the scope of its data analysis to include the Forest Service and NRCS.
(Emphasis added). If I'm reading it correctly, that actually seems advocate investing MORE money in cellulosic ethanol research. I encourage you to read the full report yourself. I'll do some more digging and have more to say on this soon.
Today, we stopped to recognize a big milestone in POET's quest to commercialize cellulosic ethanol. We gathered in Emmetsburg, Iowa with Governor Chet Culver and representatives from USDA, Iowa State University, Idaho National Lab, the U.S. Department of Energy, the Iowa Power Fund, ag equipment manufacturers and, most importantly, many of the 85 are farmers who will bring us 56,000 tons of corn cobs, leaves, husks and stalks this fall.
The reason for the event was to commemorate the coming fall harvest, which will mark the first commercial harvest for Project LIBERTY and the largest biomass harvest for cellulosic ethanol in history. It was held next to the site where a $3 million biomass storage area that will hold 23,000 tons of biomass was under construction (pictured here behind POET CEO Jeff Broin and Culver).
The biomass kickoff was attended by more than 300 people and in addition to the celebratory speeches, there was a lot of information for the farmers on things like soil sustainability, biomass storage and government incentives. More of this information will be posted on this blog, Flickr and POET TV.
A new, comprehensive, report from the Economic Research Service at the United States Department of Agriculture (USDA) looks at the current status, near-term challenges and long-term implications of "next-generation" biofuels for the agricultural sector. In an inventory of companies pursuing next-generation biofuels, they find that 50 percent will use feedstocks from agriculture and conclude that agriculture could play a significant role as next-generation biofuel production expands.
From reducing the cost of cellulosic ethanol production to our work with farmers to secure the biomass and the partnership with the Department of Energy, POET Project LIBERTY was a prominent part of the document. One particular passage from the article made it into Feedstuffs:POET may be the first with a commercial plant for producing cellulosic ethanol.
In looking at the near-term challenges to developing next-generation biofuels, they identified many of the same hurdles that POET VP Scott Weishaar identified in his recent testimony to the House Agricultural Committee. The report specifically mentions the lack of an available market, along with reducing costs, securing financing and biomass supply. As Weishaar said in his testimony, there is clearly a role for policy-makers to play in helping the industry overcome these challenges.
On February 8th, the United States Department of Agriculture (USDA) made public the proposed rules for the Biomass Crop Assistance Program (BCAP), a program authorized by the 2008 Farm Bill. BCAP assists land owners and operators with the collection, harvest, storage, and transportation of material for biomass conversion activities.
On March 25th, POET submitted comments on BCAP to USDA. These comments will be considered along with all others submitted in the revision of the final rules. To view POET's comments, visit the Federal Regulations website. We commented on several sections of the rules including the guidelines for the receipt of matching funds.
USDA changed the rules from earlier versions so that the farmer could receive matching payments for two years following the date of issue of the first matching payment. We asked that USDA further clarify this to allow the farmer to include biomass receipts from the years prior to their request for matching payment. This would allow the farmer to receive matching payments for biomass from at least three harvest years instead of only two.
In the early years (2010 & 2011), POET Project LIBERTY will not accept as much biomass as it will 2012 and beyond when the plant is in full operation. Unfortunately, the current Farm Bill expires at the end of 2012. So, another POET comment was for the USDA to include BCAP in the next Farm Bill. Extending BCAP would allow the farmer to take maximum economic advantage of this important program, and help to make cellulosic ethanol a primary component to the U.S. energy campaign.
USDA should announce the final BCAP rules sometime this summer. At that time, POET Project LIBERTY will apply to become an official BCAP biomass conversion facility and farmers can register to receive matching payments. Visit the BCAP website to learn more about the program and the proposed rules.
