Feedstock Flexible Ethanol

One of the keys to achieving the next step in commercializing renewable transportation fuels is to have a refining technology that can utilize a variety of biomass feedstocks. In the case of cellulosic ethanol, there are a lot of competing technologies out there, but not very many that can operate using virtually any cellulosic feedstock. Coskata is an Illinois startup whose technology appears to have this flexibility. Coskata recently closed a $40 million private equity financing as reported earlier this month by Private Equity Hub in their report “Blackstone Backs Cellulosic Ethanol Startup Coskata.”

According to Coskata’s Chief Marketing Officer, Wes Bolsen, “what this round does is get us through construction of our commercial demonstration plant as well as the initial engineering on our first commercial facility.” Coskata’s commercial demonstration plant is designed to produce 40,000 gallons per year of ethanol using a variety of cellulosic feedstocks. The plant is built at what Bolsen terms “minimum scale engineering,” meaning that while the output of the plant is not at a commercial volume, the size of the plant is large enough so the basic modules do not have to be fundamentally reengineered in order to follow up with construction of a full scale plant. Bolsen stated their demonstration plant, which is being built near Pittsburgh, Pennsylvania, is “on schedule to be producing in early 2009.”

Coskata also intends to use the proceeds of their recent financing to begin the initial engineering of their first commercial facility. For this Coskata intends to build a plant with an initial capacity of 50 million gallons per year. The cellulosic ethanol plants at full scale – 100 million gallons per year – in general have been estimated to cost $400 million each. Coskata expects this plant, which can be expanded to refine 100 million gallons per year, to cost somewhat more than half that amount for the first 50 million in capacity, about $250-300 million. Bolsen stated Coskata has a partner involved in this project and expects an announcement early next year.

Meanwhile, Coskata has also signed an agreement to build a 100 million gallon cellulosic ethanol facility in Clewiston, Florida, in partnership with U.S. Sugar Corporation. With 181,000 acres of sugar cane under cultivation, U.S. Sugar is the largest sugar producer in the United States. As they begin to take this land out of production, U.S. Sugar intends to produce sugar as before, while using the cane residue (“bagasse”) after processing for sugar to refine into ethanol.

Coskata’s recent successful financing is particularly impressive given how much more difficult major project financing has become. In early 2007, with much fanfare, the U.S. Dept. of Energy announced funding to bring cellulosic ethanol to market, as noted in their February 28th, 2007 press release entitled “DOE Selects Six Cellulosic Ethanol Plants for Up to $385 Million in Federal Funding.” In this announcement, six companies were named; Abengoa Bioenergy, ALICO, Inc., BlueFire Ethanol, Iogen Biorefinery Partners, Broin Companies (now named POET), and Range Fuels.

According to a spokesperson at the DOE, ALICO Inc. and Iogen Biorefinery Partners have withdrawn. It appears that two of the others, Abengoa Biorefinery and Bluefire Ethanol are still seeking matching funds from private financing sources. Only RangeFuels and POET have actually broken ground on cellulosic ethanol refineries. But the plant RangeFuels is building in Soperton, Georgia, which they claim is still on track to begin producing in 2009, processing wood chips, is initially designed to produce 10 million gallons per year, not the 50-100 million gallon per year size of truly commercial scale facilities. POET’s plant in Iowa, which will refine ethanol from corncobs, will be part of a corn ethanol refinery producing 100 million gallons per year, but 90 million of those gallons will be refined from corn using conventional ethanol distillation processes, only 10 million of the annual ethanol will come through cellulosic conversion of corn cobs. So it appears that most of the DOE’s initially anointed cellulosic frontrunner companies are either stalled or downscaled in their plans. This, combined with the unprecedented difficulties today in obtaining project financing, means the future of cellulosic ethanol is definitely at a crossroads.

When the U.S. Renewable Fuel Standard was enacted as part of the Energy & Security Act of 2007, the goal was to increase production of renewable transportation fuels from 8 billion gallons per year to 36 billion gallons per year. The estimated production of renewable fuel in 2008 is not quite 10 billion gallons, and virtually all of it is from corn ethanol using conventional distilling methods. Nearly all of the remaining 26 billion gallons, well over 20 billion gallons per year, is expected to come from cellulosic ethanol refining. As we calculate in our feature report “Cellulosic Ethanol,” there is easily enough feedstock to meet this goal – in fact, even without dedicated energy crops, there is enough cellulosic feedstock in the U.S. from waste streams, forest trimmings and crop residue to supply material for up to 100 billion gallons of ethanol per year. Coskata’s technology, which can process any of these primary feedstocks without fundamental modifications to their plant design, probably helps explain why they are raising significant private investment capital when most other companies are not.

When assessing the potential of cellulosic ethanol, the prevailing question is which of the emerging refining technologies can operate at a commercial scale. Ten billion gallons per year of cellulosic ethanol will require 100 refineries producing 100 million gallons per year – at a capital expense for these refineries of $400 million each that is $40 billion dollars. If these refineries were to multiply to a scale where – along with electric hybridization of vehicles and fuel economy improvements – they would replace 100% of petroleum consumption for light vehicles in the United States, that would require 1,000 refineries producing 100 billion gallons per year, at a cost of $400 billion dollars. Such a sum of money seems both daunting yet feasible – didn’t we just throw $700 billion at the mortgage meltdown? Don’t we spend (at $50 per barrel) over $200 billion per year on imported oil?

One thing is certain – if the United States is to accomplish the goals of the 2007 renewable portfolio fuel standard, and beyond, refineries will need to start construction now. The fact that Coskata is securing project financing from private sources in these tumultuous economic times is testament to the strength of their technology. Their progress should encourage anyone who is waiting to see the next big moves in an emerging industry that represents one of only a few major steps America needs to take to become an energy independent nation.

There are dozens of DOE backed projects to accelerate development of renewable
transportation fuels in the U.S., but only a few approach commercialization.
(Source: U.S. DOE)

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