Demand, meet supply

Ethanol demand is spurring big corn planting
CNet News (Reuters): Ethanol fuels huge corn planting

Crop report came out today. Lots of new corn plantings. LOTS more.

Iowa, traditionally the No. 1 corn state, would plant 13.9 million acres this year, up 1.3 million acres from 2006, USDA said. Illinois would plant a record 12.9 million acres of corn, up 1.6 million acres, while cutting soybean plantings by 1.4 million acres, the largest decline in the country.

Some points from the Reuter's article:

At the Chicago Board of Trade, corn futures prices plunged the daily trading limit of 20 cents a bushel on prospects for a huge crop. Prices for this year's soybean crop fell as much as 33 cents a bushel, and wheat was down 27 cents a bushel.

This is textbook economics. This is a good development from the farmers' standpoint. Farmers lead a fairly embattled lifestyle. So, market disruption aside, farmers are finally in growth mode - even if it's short-lived.

Another point:

Farmers could collect nearly $46 billion with a mammoth corn crop, said Ann Duignan, an analyst at Bear Stearns, "which in our view is positive" for sales of farm equipment.

The chairman of farm equipment maker Agco, Martin Richenhagen, said when farmers are flush with cash, "they often then invest in equipment."

The Renewable Fuels Association, a trade group for alternative fuels, said with high yields the U.S. corn crop could hit 13 billion bushels. "Such a harvest would meet the needs of all the sectors that rely on it," said RFA.

The difficulty here is following the growth of the ethanol industry. If E85 doesn't catch on and we keep bringing new ethanol plants online, then we run the risk of keeping this market out-of-balance. The risk in this industry is the level of fragmentation that exists among producers. The list of corn producers on the RFA web site show a lot of small mom & pop producers. This level of fragmentation could distort the market demand and perhaps induce over planting.

Let's see what happens.

Soy Beef

Brazil and Argentina have beef (dispute) over soy beans.

U.S. corn producers aren't the only one creating enemies over their biofuels aspirations. Brazil and Argentina, both large soy bean producers, are conflicting with each other to discredit their soy bean industries. Argentina is the second largest soy bean exporter behind the U.S. They are low cost and have strong government support (via Tax subsidies). Brazil's emerging biodiesel industry could sure use some of that soy goodness. According to this article, however, Brazil's not happy about it:

Brazil soy oil is the number one ingredient used in making biodiesel. Soy oil companies think Argentina's cheaper costs will cut them out of the market, especially the export markets.

"We're going to convince the government that they have to gun for Argentina on this issue, play tough," said Carlo Lovatelli, president of the Brazilian Vegetable Oils Industry Association, or Abiove.

"Biodiesel investments are heading to Argentina and not Brazil because it makes more sense to produce it there than here because of tax and trade incentives. We can be importing biodiesel from Argentina very soon," Lovatelli said.

While a fair playing field is good for consumers (even the poor ones that Brazil purports to support), this type of market-distorting behavior will create more problems in trying to get these industries off the ground. The reality is that the world needs more biodiesel than either country can produce. So it makes sense to create synergies rather than disputes. Brazil's higher soy bean oil prices can serve as a measure by which Argentina can (should) raise their prices. The increased profits can better finance further economic development. This seems to be the impetus behind Bush's latest visit to Brazil.

This is all pretty benign at the moment. It won't really get exciting until someone is caught steeling or spying. No politician or executive has been arrested or fired. So we'll see if this heats up.

More on Butanol

Technology Review: BP's Bet on Butanol
http://technologyreview.com/Energy/18443/

This is another good interview with BP Biofuels head on Butanol.

A key point:

TR: So how is butanol better?

PN: The key way is higher energy density. Whereas ethanol is around about two-thirds the energy density [of gasoline], with butanol we're in the high eighties [in terms of percent].

It's less volatile [than ethanol]. It isn't as corrosive, so we don't have issues with it at higher concentrations beginning to eat at aluminum or polymer components in fuel systems and dispensing systems. And it's not as hydroscopic--it doesn't pick up water, which is what ethanol can do if you put it in relatively low concentrations. So we can put it through pipelines.

Butanol doesn't have the political backing that ethanol has (remember, farmers aren't all chemists). But BP's interest on it legitimizes it as a viable alternative.

Detroit goes to Washington

Yahoo!Finance Article: Bush, Auto Execs to Talk Flex-Fuel Cars

Another good step for the U.S. Automakers:

Bush scheduled a White House meeting Monday with General Motors Corp. chairman and chief executive Rick Wagoner, Ford Motor Co. chief executive Alan Mulally and DaimlerChrysler AG's Chrysler Group chief executive Tom LaSorda.

The focus is on Bush's support for flexible-fuel vehicles, which are capable of using gasoline and ethanol blends, and his administration's plan to cut gas consumption by 20 percent in 10 years.

The three auto leaders have pledged to double their production of flexible fuel vehicles to about 2 million a year by 2010.

I'm still waiting on my E85 ethanol station.

Biofuels Essay part 2: The dirty little secret about petroleum

Much of the broader debate about oil understandably focuses on the current political upheaval (i.e. the Iraq War) and future political conflicts (fighting over oil with China). But it doesn’t address the question as to why we just don’t change to something else. The answer is almost always left out of this discussion: technically speaking, there is no better liquid fuel than petroleum. It’s a small point, admittedly, but it bears discussion.

Discussions on getting off oil inevitably degrade into “yeah, but” statements without a real viable alternative solution.The fact of the matter is that oil is a great fuel and energy source. This discussion would benefit from understanding why this is the case. In discussing alternatives, it would help to understand why we use what we have now. And again, I'd like to take credit for much of these thoughts, but there are some really great thought-leaders out there that have, in some form or fashion, spoken to these points in the media. But none in this kind of a pro-petrol context (which I think is important).

So what makes oil a good fuel source?
There are some very specific reasons why petroleum is a great source of energy for transportation and other processes.

Extremely high energy density
If you look at any material as a provider of energy, then oil is one of the best of them. By comparison, there aren’t many materials that have the amount of energy contained in oil distillates that exist in natural abundance.

Relative Abundance (i.e. cheap)
Aside from recent speculation on the amount of oil left on earth, there has been until recently an abundance of oil on earth. All of the supply shocks in the 70s and recently have never been due to the oil not being present – only our ability to supply it. Mostly, however, crude oil has always been extremely cheap. The oil industry emerged at the beginning of the 20^th century due to its relatively low capital costs involved with extracting it (Jed Clampett just shot at a duck in his backyard and oil shot out of the ground). The 1990’s saw $10/barrel oil and, with it, massive consolidations of big oil companies – Chevron/Texaco, BP/Amaco/Arco, Exxon/Mobil.

The notion of abundance is being challenged as of late mostly because of doubts regarding existing deposits and skyrocketing demand from emerging economies (China). This not withstanding, oil in most of the world remains around the $5/gallon range. While high compared to historical prices, this price is not particularly unaffordable given the impact that transportation has on our daily lives (this is a worthy point for debate).

Easy to extract and transport
While Oil is a great commodity, what keeps it valuable is the transportation and refining network that has been created for it. Oil can affordably be extracted Egypt and sent to California for refining, and sent to Europe. Within the U.S., oil can be transported through thousands of miles via pipelines – in fact you don’t even have to wait for “your” oil to come out; just pull from the other end what you put in. Only in America. Only sometimes in Canada.

Jed Clampett aside, putting an oil platform in the middle of the ocean is still a relatively cheap and easy venture compared to the oil underneath it. If we could spend $100MM for a machine that sat in the middle of Iowa and could extract all the corn from the entire state than that would be a great deal.

Cheap to refine into many different products
Oil refining has become a very efficient and mature process through decades of refinement. Very little oil is wasted and many different products can be created from its processes. The cost of oil refining has decreased significantly in the last 75 years and currently only accounts for a small % of the price of gasoline. This is great from a technology standpoint, but it also means that any competitor has to be well-positioned in its processing cost structure. Wind and solar are doing a good job in getting scale to compete with coal. But something like hydrogen is a long way away from competing as a liquid fuel source (still too expensive to make). This underscores how hard it will be to beat oil. But we will.

Wikipedia Entry on oil refining: http://en.wikipedia.org/wiki/Oil_refining

Great MIT Talk on energy (particularly prof. Daniel Nocera's discussion on energy solutions).

Venture Ready?

RedHerring Article on water technology investment:
Parched for VC Funding
Water-treatment technologies are hot, but VC investment is cold


This article speaks of a lacking in the investment in water technologies in the VC industry. It cites some of the following reasons:

It wasn’t supposed to be this way. A Progressive Investor report titled “Investing in Water” released Monday estimated the world market for water-related businesses at roughly $400 billion. And even that amount is not enough to save the 1.6 million people that the World Health Organization estimates die every year from drinking contaminated water.

Even with this large market potential, they claim three primary reasons why investments have been sparse (abriged):

1) Dearth of breakthrough tech and management teams: Technology Partners’ Mr. Ehrenpreis said most of the business plans he’s seen so far don’t meet two key criteria he looks for: a significant innovation or technology breakthrough, and a stellar entrepreneurial management team.

2) Economic factors: The biggest water treatment opportunities are in developing countries, which have the least money to buy innovative technologies, said Joel Makower, a principal at research firm Clean Edge. “There’s a bit of a disconnect there,” he said. “It’s a financial-resource issue as much as a natural-resource issue.”

3) Longer return times: The likely water-industry growth path is slow and steady, and that kind of growth—about 4 to 6 percent per year—is hardly what industry investors “go gaga for,” Ms. Fried said. ATV’s Mr. Wiberg agreed, pointing out that VCs seek out companies that pioneer disruptive technologies, not incremental improvements.

It begs the question as to weather these types of industry/infrastructure clean tech plays are really venturable. VCs generally only invest in businesses predicated on some technology advantage. Most VCs make their homes near large universities for this reason. But most importantly, they invest in businesses that will create a specialty product, not a commodity. Water is almost the definition of a commodity. So it is difficult to legitimize large VC investments that do not generate a huge valuation for the company. Water projects are usually handled by municipalities for this reason - governments don't really need an ROI. VCs stay as far away from governments in their business dealings as possible. But it begs the question as to who should make these investments. VCs know how to manage the development, but governments have a vested interest in their development.

So after all that, it makes sense to me that there aren't very many VC-backed water technology companies.

But another question arises: do biofuels meet the VC investment model? I think the answer is "barely". There are many technologies that provide a proprietary means of processing biomass into ethanol. But remember, VCs make their money by improving the company valuation and then selling/dumping the company on a second buyer. This second buyer is usually another company that could create some value by having the technology in-house, or the public markets via an IPO. But if you look at ethanol producers' financial statements, these are typical commodity businesses. Low gross margins. Commodity pricing predicated on long-term contracts. High operations and logistics requirements. This sounds like the airline industry. But it's going forward regardless.

We'll look at this some more....

Montana Coal

CNBC Video on Montana's Coal initiatives

Montana is positioning itself to be a leader in coal gasification and liquefaction processes. This is an interesting video interview of the state's Governor.

Power from Biodiesel

Article on CNet: Texas Power Plant Runs on Biodiesel

Using Biodiesel for power generation is an interesting option. Biodiesel has some drawbacks in its physical properties - particularly its freezing point. But these are limitations mostly in usage as an automotive fuel. But in power generation, there are more controls that can be engineered into the generation system to mitigate these limitations.

It doesn't seem that this is a sustainable, scalable solution for power generation. Seeing it in niche applications such as suggested hear is encouraging. 5 MW is no small feet. 10MW will be something good.

Biodiesel from waste products won't solve the U.S. dependency on oil. The U.S. generates about 2.7 billion pounds of waste vegetable grease a year. If all of it were harvested and converted to biodiesel, it would produce about 350 million gallons of fuel. If half of the inedible tallow and animal fat from slaughterhouses were harvested, another 500 million gallons would be produced, according to figures from Eidman.

Normally, biodiesel is more expensive (made from pure triglyceride sources). But having access to cheap feedstocks like animal fat and having a narrow supply chain (just trucks to the plant), change the overall economics to something more tenable. These are great options for keeping energy in small communities close by and still being ecologically responsible.

Doug

The Brazilian Ethanol Affair

Good article on Bush's trip to Brazil:
RedHerring: Fueling the Ethanol Trade.

This is an interesting overview of Bush's trip to Brazil. Essentially Bush & Brazil agreed to some common research goals, common commercialization practices and more.

The Farmer's apparently don't like it:

“Transferring the United States’ addiction on foreign oil to foreign biofuels doesn’t make sense,” said Tom Buis, president of the U.S. National Farmers Union, in a statement. “This agreement is the wrong step in the wrong direction at the wrong time.”

But this sounds like more of a partisan opinion. More ethanol at lower prices is better for consumers (albeit, not so much for suppliers). The problem here is that the U.S. is incurring many difficulties in developing the ethanol market.

First, expensive corn is disrupting many parts of our economy including food. That means that no matter how cheap the ethanol is, it can't get cheaper with corn. And as much as we don't like high fuel prices, we don't like high steak or bacon prices either. Not going to fly.

Second, Brazil is a fast growing economy and they're going to be buying more cars. They're probably going to need more ethanol than they can produce. So they may need ours (the U.S. produces nearly the amount of ethanol as Brazil - even with the industry in its infancy - and you thought U.S. manufacturing was dead).

Third, the U.S. needs to eventually start exporting ethanol and need to extend its market reach throughout the region. If cellulosic ethanol can get down to $1-$2/gal from $3-$4/gal, then U.S. producers have the opportunity to export to Brazil according to their marginal costs that may be comparable to Brazil's production costs. Creating some market commonalities will make it easy for the U.S. to accept Brazilian ethanol and vice versa.

But there's two items to note about Brazil:

First is that tariff:

Sugarcane ethanol from Brazil costs about $0.80 per gallon to manufacture, less than half the price of U.S.-made corn-based ethanol, which costs about $1.74 per gallon, according to analysts. The U.S. did not agree to drop its $0.54-per-gallon tariff on Brazilian ethanol imports, but the National Farmers Union still worried the pact could undermine U.S. corn growers and increase the country’s dependence on foreign biofuels producers.

Second, Brazil has oil. Opening up the U.S. to their ethanol exports might be a bargaining chip to getting more of said oil (or drilling rights, etc). You can see PetroBras' reserves below:




So it is conceivable that this "deal" is merely the start of a broader trade deal that will take place in the coming years.

We'll keep watch on this soap opera.

Doug

I want to say "Duh"...

TechnologyReview article: Hell and Hydrogen

This purports to be an introspective article about Hydrogen. But it's main point is that Hydrogen production causes carbon dioxide.

Duh.

That's the primary problem with hydrogen. It's too difficult to make. I thought everybody knew that. Why would we even mess around with biodiesel if we could just make the hydrogen?

Here's what it says:

The reason hydrogen-powered cars would produce more carbon dioxide emissions than regular cars starts with the fact that it takes energy to create hydrogen. One way to produce hydrogen is to extract it directly from fossil fuels; indeed, a 2004 National Academy of Sciences study predicted that fossil fuels would be the main source of hydrogen for "several decades." The other way is to split water molecules using electricity. Naturally, BMW talks up this approach, envisioning electricity that would ultimately be supplied by renewable sources. BMW brochures feature the Hydrogen 7 parked in front of wind turbines and shiny photovoltaic arrays. But renewable sources furnish only 2 percent of the world's electricity (not counting hydropower's 16 percent). Coal, by contrast, supplies 39 percent--and is the worst emitter of carbon dioxide, watt for watt. Clearly, a great use for renewable power is to replace coal power. But is it worthwhile to divert even a small part of it to the task of manufacturing hydrogen?

Hydrogen is not an energy source. It's an energy carrier. We need to make it from a better source than electricity (another carrier). Ultimately, we need to make hydrogen from solar (wind counts as solar too - solar causes wind). Solar is a free renewable source. Hydrogen is a good carrier.

Biofuels, however, is a good intermediate step. They claim to be nearly carbon neutral - meaning they emit as much CO2 as they absorb themselves (so it should be a wash).

So while this article makes a point, it's just not a terribly interesting one.


Doug

Drunk on ethanol?

A rather ho-hum article on ethanol:
Biofuels Boom Raises Tough Questions

This article doesn't bring up any new issues about the ethanol economy (at least not new to this blog). But it does bring up a few interesting discussion points:

"I think we're in a very interesting era. We are recognizing a problem and we are finding lots of potential solutions," said David Tilman, an ecologist at the University of Minnesota.

But if we're serious about achieving energy independence and mitigating global warming, Tilman and other experts said, one of those solutions must be energy conservation.

That means doubling the fuel economy of our automobiles, expanding mass transit and decreasing the amount of energy it takes to light, heat and cool our buildings. Without such measures, ethanol and other innovations will make little more than a dent in the nation's fossil fuel consumption.

While this statement is 100% true, I would caution about the notion of making efficiency a solution. Demand-side solutions such as these can't be an all-inclusive solution to this problem.

But also note that human beings (especially Americans) have never done a good job of conserving. Often times, growth comes in parallel with additional electric bills or longer commute times. It's a rarity that we find opportunities to really make an impact on our consumption. So while I'm a big proponent of reducing consumption, I realize that we cannot expect people to inherently change their behavior out of this moral imperative. We've got to provide people an improved lifestyle with a lower energy consumption. We can't expect people to buy a Prius over a F150 just because it uses less gas (I don't like Prius' by the way) or some other moral imperative.

Biofuels Essay Part 1: The fuel energy dilemma

Human beings use fuel-based energy sources for a variety of tasks. Heating, lighting, and transportation. These can be considered basic human necessities that every person on earth has a right to. What we have created, however, a world economic system based on a single liquid fuel source – oil – that only a handful of entities own and control.

The prospect, when considered this way, is a bit scary. Could you imagine if ALL of the world’s food came from, say, 5 countries? Human beings historically have not done a good job of sharing our planet’s resources “fairly” and “humanely” (assuming there were one common agreed definition to these worlds).

Throughout world history, the desire for economic power and influence has pushed humans to take actions that have had dire consequences to millions of people for generations. (A few examples: African Slave Trade, Trail of Tears, Opium Wars, Israeli/Palestinian Conflict, Japanese occupation of the Korean Peninsula).

The fuel oil challenge is no different. We are utilizing one single source of fuel to provide a basic human necessity. The people (in the form of governments and companies) in control of this resource are behaving in ways to continue to hold power over the rest of the world (or at least their nearest neighbors). This challenge has posed several issues that are critical to human life that must be solved.

There are four primary issues: Security, Supply, Environmental Impact, and Demand: (Just as a note, I didn’t think of these category divisions. Rather, I noted them from a few presentations from executives from BP that I have viewed over the last few years. Here is one of them that you can view online from Steven Koonin, Chief Scientist at BP).

Security

• There is a disjoint between high sources of petroleum and high demand of petroleum. This is creating difficult power dynamics between these countries.
• Some sourcing governments are “unstable” (Iraq prior to Sadam Houssein) or on bad terms (Iran & U.S., U.S. & Venezuela). Non-democratic or otherwise unstable governments tend to support more critical forms of policy. Developed consumers need to develop a
• In attempting to get supply, you need to compete with other governments. China and India will be competing with the U.S. and Europe over oil which may cause difficulties in other forms of trade and policy between these nations.

Supply

• We can’t find enough (harder to find)
• We can’t get enough out (harder to extract)
• We have to fight with other governments over the known supplies (realizing the scope of the relatively fixed amount).

Environmental Impact

• Emissions from using oil and other carbon-based fuels like Coal are significantly harmful to the environment.
• We’re concurrently killing other parts of our environment (deforestation + CO2 emissions alter the earth’s metabolism).
  

Demand Growth

• People are getting more prosperous and, as a result, want to consume more energy (electric stoves, car, computer, etc.).

So to sum this up bluntly, our entire world economic structure is highly levered to a fuel source that is damaging our environment, is expensive to find and extract, is making people/countries powerful, but bear little responsibility to the outside world (and making the rest of the world tolerant of this behavior).

While this may sound a bit dire, we should note some strong points within this system. From a security standpoint, many governments are great partners for trading oil products. Canada, for example, is an excellent trading partner with the U.S. The United Arab Emirates, have also been very supportive of western nations and are positioning Dubai as being a world financial center. China, while still a strong competitor for oil, is developing its economy nicely and providing new opportunities for its population to prosper. It is doing so with the notion of diversifying its energy consumption to minimize harmful impacts.

So there are definitely challenges, but there are many who are taking note and trying to make changes. These bright points should be highlighted in this ongoing debate.

How did we get here?

Tom Friedman makes a point in The World Is Flat about how many little decisions can lead to big outcomes. He notes his daughter’s science fair project where she connects the development of sputnik to the development of the internet. I think the current U.S. oil situation can be viewed that way. We have, over the decades, made very short-term decisions based on the best information available at those times. As time has progressed and the oil game has evolved, the world has found itself in an ongoing conflict with itself (and nature) that presents two potential outcomes: an unparalleled calamity or the biggest comeback in human history.

We’ll see which one we pick.

Oil Country Embraces Green Energy

Article: Emirates, MIT Team Up for Green Energy
on Newvine.

The UAE, named the highest per-capita emitter of greenhouse gases, is making moves to bring green energy to their country.

The article notes:

The agreement signed Sunday between the Abu Dhabi Future Energy Co. and MIT created the Masdar Institute of Technology in Abu Dhabi. Masdar will pursue Abu Dhabi's plan to use its oil income to develop a more sustainable renewable energy sector and an economy based on green energy expertise.

We want "talent and innovative technologies to enhance economic development and promote new industries using renewable energy," said Sultan al-Jaber, ADFEC's chief executive.

Solar power in the sun-drenched country is one chief research area. The government of Abu Dhabi emirate has already dedicated $350 million to a giant solar power initiative.

This is a significant article for two reasons:
1) It illustrates that a government who has benefitted from the upside of green house gases (cars, urban development, etc) is also ready to make the investment to mitigate their impact. That's responsible and thoughtful. This is a nation whose economy is predicated on this valuable national resource and is showing themselves as embracing energy alternatives. They have been leaders in diversifying their economy in a variety of ways and this joint venture with MIT is another data point.

2) Make no mistake about it, the UAE is an Arab Muslim nation. They are participating in the world economy in a thoughtful and meaningful way when other middle eastern nations are...not. In addition, they are doing it according to their own system of values - no interest income from banks; only Muslims may own land, etc. With all of the rhetoric on the daily news about Muslim and middle-eastern nations (often in rather derogatory ways), the UAE should be shown as an example of a nation that is using its success to contribute to be part of the world's dialogue - including green energy development.

China's Impact Growing

SF Chronical Article:
A WARMING WORLD: China about to pass U.S. as world's top generator of greenhouse gases

This is a very telling article about China's impact on global CO2 emissions. It's clear that China - and all other successful developing nations - have a responsibility in managing its CO2 emissions. What is most interesting to me is understanding how to get China to take a responsibility (and in fact, a leadership role) for its environmental impact. China doesn't respond to external pressure. As a governing body, it makes decisions definatively in such a way that minimizes criticism. Unlike the U.S., where it is all but a mandate to be scrutinous of the actions of the government and elected politicians, China continually shirks such interactions. Couple of cases in-point: currency revaluation, anti-dumping laws, piracy crackdowns, intellectual property enforcement, and more.

I think that it would do the world some good in finding a more uplifting means of getting China on-board. While they are clearly embracing alternative energy and low-CO2 technologies (including wind, nuclear, biofuels, etc), it will not act due to external pressure. We need to engage them differently.

What's with the tariff?

Article on Yahoo! about Bush's visit to Brazil:
Bush Seeks Ethanol Alliance with Brazil


The tariff on Brazilian ethanol into the U.S. is going to come back to bite the U.S. sooner or later. Perhaps after we open a few more plants. Or perhaps after the WTO forces our hand. But even with the tariff, the Brazilians can produce ethanol that is cost competitive with U.S. producers. As Brazil's economy grows and their ability to keep ethanol in stock may change some of these dynamics. But until then, those tariffs are going to be the 800 lb gorilla in the room.

Nice article on biomass gasification

Article: Gasification May Be Key to U.S. Ethanol.


This article gives some additional information about the finding the DOE gave out last week, in particular those that utlize a gasification technology platform.

Here are some details from the article:

— Alico Inc., a LaBelle, Fla.-based agribusiness company, would get up to $33 million to turn yard waste, wood waste and citrus peel into syngas, which would then be converted into ethanol, electricity and hydrogen.

— Range Fuels Inc., of Broomfield, Colo., would get up to $76 million for a plant near Soperton, Ga., to convert timber scraps into syngas to make ethanol and methanol.

— Abengoa Bioenergy, a St. Louis-based division of Spain's Abengoa SA, would receive up to $76 million for an 11.4 million gallons-per-year plant in Colwich, Kan., that would use both biochemical and thermochemical processes to convert corn stalks, wheat straw and switchgrass.

These three projects represent almost half of the funding from the government to construct these plants. This is a significant bet on this type of technology which has always been just too expensive to roll-out in any scale:

Energy Secretary Samuel Bodman pegged the current cost of gasification as being about twice as much as the average $1.10 per gallon cost at corn-based ethanol plants.

This technology is a rather old one that is getting new life. It has always been too costly in capital and low in revenue to really develop. Low prices for oil and other energy sources made it an impractical matter. Nations like South Africa, cut off from oil supplies during the apartheid era utilized a coal gasification technology for its own oil needs. Our current energy crisis is bringing new technologies like gasification back to the forefront.

A quick description of the process: you heat (a process called pyrolysis) biomass (wood, wheat, and many other materials) into a syngas - a mixture of carbon monoxide and hydrogen. This mixture can then be "built-up" into a final product, usually a string of carbon atoms. Gasoline, diesel, ethanol, butanol, and more. This is a very energy intensive process and requires very heavy equipment.

This DOE investment represents a big step into evolving this form of processing. Gasification, albeit expensive, is a rather robust method for processing. It can take almost anything as a feedstock and make many different products (depending on the design of the equipment, of course). The design innovations to be developed are the catalysts needed for each pathway to the desired final products (there are different ways of getting different products). Once understood and advanced, this technology could be versatile and inexpensive enough to produce any variety of products depending on market demands and prices. This marks a significant potential in this technology.

Let The Games Begin

DOE Grants $385 Million to six companies to build industrial-scale cellulosic ethanol plants.
(read the press release).

This is in stark contrast to an TR article response I wrote a few days ago.

First thing, these investments are in-line with the DOE's cellulosic energy strategy. They have two 'platforms' that they see as the most viable for producing cellulosic ethanol: sugar (consisting of enzymatic hydrolysis to lignin products) and thermochemical conversion (consisting of pyrolysis and gasification).

Here's a quick diagram from the DOE site:

Six companies are getting a share of the allotted money to build their plants. This amount will be payable through 2010. Some specifics are at the end of this posting. But here are some details:

If the investment dollar amount is any indication of importance, then the government sees less of a role from the BlueFire and ALICO projects. It's not entirely clear why (I'll do some more digging), but it is interesting to note.

The article also notes that the investments that the government has made in these projects represents 32% of the overall investment ($1.2 Billion in total, $385 Million coming from the government grants).

This brings up some interesting statistics about these 6 companies:

This chart shows how much the government is investing in overall capacity and how materially efficient these projects purport to be (in terms of the mass of inputs, etc). Broin, however, stands out. First, the capacity that Broin is purporting at producing seems very high. I'm not sure what their processes are, but apparently the government sees a lot of promise in this project. According to the press release, they will be producing 120MM gal of ethanol (25% of it cellulosic), along with Hydrogen and electricity. So they seem to have come with their A-game. Broin includes enzyme developer Novozymes which has garnered a lot of attention given their ability to develop high-performance enzymes for bioprocessing. Second, the mass efficiency for Broin is ahead of the pack. This says they're making 12MM gals of ethanol / ton of feed stock annually. That's about 20% higher or more better than their competitors.

RangeFuels, who is developing a thermochemical process shows the second highest material efficiency.

The end result is that these six projects show a real horse race between competitors and should go a long way in letting this market take shape. Broin (including Novosymes), Iogen, and RangeFuels seem to be the most promising in this field, though.





Details (from the press release):

Abengoa Bioenergy Biomass of Kansas, LLC of Chesterfield, Missouri, up to $76 million.
The proposed plant will be located in the state of Kansas. The plant will produce 11.4 million gallons of ethanol annually and enough energy to power the facility, with any excess energy being used to power the adjacent corn dry grind mill. The plant will use 700 tons per day of corn stover, wheat straw, milo stubble, switchgrass, and other feedstocks. Abengoa Bioenergy Biomass investors/participants include: Abengoa Bioenergy R&D, Inc.; Abengoa Engineering and Construction, LLC; Antares Corp.; and Taylor Engineering.

ALICO, Inc. of LaBelle, Florida, up to $33 million.
The proposed plant will be in LaBelle (Hendry County), Florida. The plant will produce 13.9 million gallons of ethanol a year and 6,255 kilowatts of electric power, as well as 8.8 tons of hydrogen and 50 tons of ammonia per day. For feedstock, the plant will use 770 tons per day of yard, wood, and vegetative wastes and eventually energycane. ALICO, Inc. investors/participants include: Bioengineering Resources, Inc. of Fayetteville, Arkansas; Washington Group International of Boise, Idaho; GeoSyntec Consultants of Boca Raton, Florida; BG Katz Companies/JAKS, LLC of Parkland, Florida; and Emmaus Foundation, Inc.

BlueFire Ethanol, Inc. of Irvine, California, up to $40 million.
The proposed plant will be in Southern California. The plant will be sited on an existing landfill and produce about 19 million gallons of ethanol a year. As feedstock, the plant would use 700 tons per day of sorted green waste and wood waste from landfills. BlueFire Ethanol, Inc. investors/participants include: Waste Management, Inc.; JGC Corporation; MECS Inc.; NAES; and PetroDiamond.

Broin Companies of Sioux Falls, South Dakota, up to $80 million.
The plant is in Emmetsburg (Palo Alto County), Iowa, and after expansion, it will produce 125 million gallons of ethanol per year, of which roughly 25percent will be cellulosic ethanol. For feedstock in the production of cellulosic ethanol, the plant expects to use 842 tons per day of corn fiber, cobs, and stalks. Broin Companies participants include: E. I. du Pont de Nemours and Company; Novozymes North America, Inc.; and DOE’s National Renewable Energy Laboratory.

Iogen Biorefinery Partners, LLC, of Arlington, Virginia, up to $80 million.
The proposed plant will be built in Shelley, Idaho, near Idaho Falls, and will produce 18 million gallons of ethanol annually. The plant will use 700 tons per day of agricultural residues including wheat straw, barley straw, corn stover, switchgrass, and rice straw as feedstocks. Iogen Biorefinery Partners, LLC investors/partners include: Iogen Energy Corporation; Iogen Corporation; Goldman Sachs; and The Royal Dutch/Shell Group.

Range Fuels (formerly Kergy Inc.) of Broomfield, Colorado, up to $76 million. The proposed plant will be constructed in Soperton (Treutlen County), Georgia. The plant will produce about 40 million gallons of ethanol per year and 9 million gallons per year of methanol. As feedstock, the plant will use 1,200 tons per day of wood residues and wood based energy crops. Range Fuels investors/participants include: Merrick and Company; PRAJ Industries Ltd.; Western Research Institute; Georgia Forestry Commission; Yeomans Wood and Timber; Truetlen County Development Authority; BioConversion Technology; Khosla Ventures; CH2MHill; Gillis Ag and Timber.