Energy Status Report

by Dave Schuler on September 3, 2014

There’s an interesting status report here on some of the factors which may influence worldwide energy use. I’ll add my own. Today marks the opening of the first commercial “cellulosic ethanol” plant in Iowa:

DES MOINES, Iowa (AP) — A new era of ethanol fuel production will begin soon as Iowa refineries begin full operation using materials other than corn kernels.

Iowa has two major cellulosic plants under construction that will use corn plant leaves, stalks and cobs to make ethanol.

The first to go online is Project Liberty, a plant in Emmetsburg built by Sioux Falls, South Dakota-based ethanol-maker POET and Royal DSM, a biotechnology company based in the Netherlands. The $250 million plant, set for a grand opening Sept. 3, will produce up to 25 million gallons annually.

It’s among the first facility of its size in the country to make ethanol from plant material.

A $225 million DuPont plant at Nevada, in central Iowa, will start production this fall and make 30 million gallons annually.

A cellulosic ethanol plant uses plant material other than sugar or corn starch for making ethanol. In other words, it doesn’t make fuel out of food. That has enormous potential to change the cost profile of ethanol-production in the United States. That’s only in its infancy but I expect it to grow rapidly.

{ 2 comments… read them below or add one }

PD Shaw September 3, 2014 at 10:31 am

It cannot grow much because the demand for ethanol is currently being met with less expensive ethanol methods. The cellulosic-ethanol plant’s capital costs are roughly twice those of a corn-ethanol plant, and it appears to be largely because celluse is much harder to break down than the sugars in grain and grape. Which in turn, suggests that cellulose will only expand if the material is relatively (and perhaps substantially) cheaper than corn or sugar, or the government mandates its use.

Government mandates appear to be the preferred route, but private investment won’t be as robust when an industry is dependent upon government subsidy. Which makes initial efforts to focus on corn stalks interesting, a waste product that should be cheap, always available, and protected by Congress. I’m not sure this is an improvement, since it increases the value of growing corn over other diverse crops. Corn ethanol returns about 40% of its weight into distiller’s grains that are used as animal feed.

Guarneri September 3, 2014 at 12:40 pm

I first became aware of this technology while at the bank, some 24 years ago. A fellow banker (and also former engineer) were asked to take a look at the wave of project financings for “trash to cash” facilities (biomass of numerous types) then in vogue. We quickly learned that the basic technology dated back to at least WWI and that the commercial viability had undergone numerous cycles. They quickly became known in the institution as “cash to trash” deals.

With that preamble and, noting that depending on who is selling what, the numbers move around here are some observations.

1. The production methodology is historically and still dis-economic, its up cycles driven variously by need spikes (wars), relative low and high points in fossil fuel alternatives and, as PD points out, subsidy or mandate – which comes and goes.

2. The relatively poor economics derive, on a BTU per unit normalized basis, from higher capital costs (I’d say 4x not 2x) and high extractive ingredient costs. This is especially true of enzymatic extraction of useable carbon from raw materials. Lots of enzyme reactor tanks and high enzyme costs. As such, government subsidy generally is utilized for over half of capital costs. As PD points out – Risky. [I used to refuse to let the firm invest in medical deals because as I would quip "I don't want to pick up the paper one morning and find out Ted Kennedy has put our company out of business.]

3. On the bright side, it does appear to be a technology that has the inherent capability to make a large dent in the suite of potential transportation fuel supply resources, dramatically reduces greenhouse gases if you go for such things, and has several viable raw material sources – not just corn stalks and cobs.

Given the sordid, almost 100 year, history of previous attempts, it seems far too early to be popping champagne corks. However, compared to horribly niche and also subsidy-requiring technologies such as solar and wind (anyone been following Germany and wind?? snicker) it definitely falls into the “worth watching” category. Giving a nod to imprecise and naturally overly-optimistic assumptions it appears to stand on its economic merits with oil over $140-$150. Otherwise you are a) overpaying for a perceived global warming risk that hasn’t caused temperature rises for some 19-25 years (depending on how you measure) despite a 15% increase in atmospheric CO2 or, b) imputing sufficient cost to ME oil dependency to pay for corn cob fuel. The latter may be the more rational calculation, though establishing economic impact might prove impossible given the politics.

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