November 11, 2013

Biofuel industry renews push to make ethanol from plant waste

A factory to make ethanol out of plant waste will open in Kansas in 2014.

It’s showtime for cellulosic ethanol.

After false starts and outright failures, some major companies are betting there’s still a future in making ethanol out of such things as switchgrass, wheat straw, garbage and the stalks of corn.

And 2014 is shaping up as a crucial test, with the Midwest, especially Iowa and Kansas, at ground zero.

Among the companies is Abengoa Bioenergy, a subsidiary of a huge Spanish company. In southwest Kansas, it will soon open its first commercial-sized cellulosic ethanol plant. Roughly a thousand people are working at a 400-acre site a few miles from Hugoton and plan to finish construction by January.

Abengoa isn’t saying publicly how much the plant will cost, but it is thought to be half a billion dollars. It will be able to make 25 million gallons of cellulosic ethanol a year and will play a crucial role in any future decision by the company about whether to build more such plants.

“This (the Hugoton plant) is critical for Abengoa,” said Chris Standlee, an executive vice president for the company. “We believe there is a great future in cellulosic ethanol.”

Now, the vast bulk of the country’s ethanol is corn ethanol, made from the starch inside corn kernels. Cellulosic ethanol is mainly made from the fibrous structure of plants, such as the stalks. It doesn’t compete with food crops, a criticism of using corn to make ethanol, and there are plentiful supplies of the feedstock.

A few years ago, cellulosic ethanol had a bright future. It was even expected to eventually surpass corn ethanol as the country’s main biofuel.

But hopes for cellulosic ethanol have since faded in the face of technical problems, high costs and bad timing, and it has become a largely toothless player in the country’s energy policy. It has so far failed to provide even the modest amounts initially expected by a federal mandate.

But the industry is marshaling its forces, with some financial help from the federal government, another push to change its fortunes.

Abengoa expects to start production early next year. A couple of cellulosic biofuel plants in Florida and Mississippi, while smaller than the Kansas facility, have already made initial production runs.

Three plants are expected next year in Iowa. The chemical giant DuPont is building a 30 million-gallon plant east of Ames. Poet, one of the world’s largest corn ethanol producers, is in a joint venture called Project Liberty, which is building a large plant scheduled to open in Emmetsburg, Iowa, early in 2014.

ICM, a leading provider of equipment and technology to corn ethanol plants, is entering the fray as well. In a pilot plant in St. Joseph, Mo., the past couple of years, it has been testing ways to produce cellulosic ethanol. It’s now offering technology and a method to existing corn ethanol plants to turn a corn kernel’s cellulosic shell, now used for animal feed, into ethanol.

The efforts are setting up 2014 as a critical year to show “this stuff works,” said Brooke Coleman, executive director of the Advanced Ethanol Council. “The next two or three years are make or break.”

Some success would be a shift for an industry that has been on the defensive.

For years, British oil company BP had been a big supporter of cellulosic ethanol. But last year, it pulled the plug on plans to build a $350 million plant in Florida, saying the money could be better spent elsewhere.

Big talk followed by some spectacular failures have tarred the industry. Range Fuels spent hundreds of millions of dollars on a Georgia plant to turn wood chips into biofuel before giving up and shuttering the plant in 2011 after basically making none of the fuel.

That example and others have bred plenty of cynicism and a strong inclination to wait and see how this new crop of ethanol plants work.

“I want to see if they operate for one day,” said David Ripplinger, an economist at North Dakota State University.

Even ethanol supporters are worried that other obstacles could derail the fuel, even if the plants have some success.

Last year, the Environmental Protection Agency approved a gasoline blend with up to 15 percent ethanol that can be used in a majority of vehicles. That was an increase from 10 percent and would increase demand for ethanol. But E15 is struggling because most fuel stations are reluctant to sell it.

The federal Renewable Fuel Standard, the mandate to use more biofuels, is under siege as well. Companies betting on cellulosic ethanol need the mandate because it helps them snag financing for their plants, which are expensive to build. But the American Petroleum Institute, an oil industry trade group, is lobbying to get the mandate revoked and is finding supporters in Congress.

“I truly believe the ethanol industry is at a very important crossroads,” said Dave Vander Griend, a 35-year industry veteran and head of ICM, which has 300 employees and is based in Colwich.

Still, the new cellulosic plants are poised to prove their worth and bolster the industry’s credibility. It should be easier to make the case to keep the mandate – or at least not water it down much – if the plants show that the fuel can be made in large quantities.

That hasn’t happened so far. The mandate called for 1 billion gallons of cellulosic ethanol this year, but that has been adjusted to 6 million gallons. By 2022, there is supposed to be 16 billion gallons of cellulosic ethanol annually.

What happened?

The recession in 2008 was a blow just as cellulosic ethanol was revving up, making financing scarce. In addition, it’s harder to make fuel out of wood, grass, cornstalks and other such materials than it is from corn, and it has taken time to get the technology and science to work. Cellulosic plants are more expensive to build – about four to eight times more than corn ethanol plants – although that gap is expected to shrink.

The advantages of cellulose is that it’s cheaper than grain, and an acre produces more ethanol. Some corn ethanol plants in the past year were idled by the high price of corn or shortages of the grain.

Cellulose has issues as well. The logistics of getting enough of the feedstock to make large quantities of fuel are daunting and were initially underestimated. The Abengoa plant in Kansas, for example, will use 1,000 tons per day of cornstalks and leaves or wheat straw when operating at full speed.

What has emerged this go-around is the ambition to make the fuel but with some more practical touches. Instead of talk of getting farmers to raise energy crops, for now the plants making their debuts are using waste such as cornstalks, and a few are combing municipal garbage dumps to find the feedstock to make fuel.

At its St. Joseph plant, ICM has been using sorghum and switchgrass to make ethanol but for now has shifted its focus. It wants to help existing corn ethanol plants convert the cellulosic part of the kernel, which can be done with a much lower investment. The company expects to have its first customer for the technology and equipment in a few months.

“We ended up with something we did not anticipate initially,” said Douglas Rivers, director of research and development for the company. “It has a better payback.”

The companies now making the big bets on cellulosic ethanol also have more years of experience behind them.

Abengoa had a small pilot plant in 2007 making the fuel and graduated to a slightly larger demonstration plant in Spain. Moving to a commercial-sized plant can unveil other problems, but the company is confident those can be fixed.

“We have no concerns about the technology,” Standlee said.

Some farmers are reluctant to sell their cornstalks and leaves because they provide nutrients and help keep moisture in the soil. But the company says it takes only part of the agricultural waste, so the soil isn’t harmed. It expects to collect 100,000 to 150,000 tons of feedstock this fall in a 50-mile radius of the plant.

So is the industry finally on the road to success? Stay tuned.

“By the end of 2014, we will have a good idea of how this is working,” Standlee said.

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