July 2010 Ethanol Producer Magazine

INSIDE: PLANTS UNDER CONSTRUCTION AND PROPOSED JULY 2010

EPM July 2010

Obama Focuses On Ethanol Missouri Plant Hosts President on White House to Main Street Tour

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contents

vol. 16 no. 7

features 48 PRESIDENTIAL TOUR The Thrill of a Presidential Visit President Obama toured and spoke at Poet Biorefining-Macon in his White House to Main Street tour.

–By Holly Jessen 58 PROJECT DEVELOPMENT—SUGAR/STARCH U.S., Canadian Project Roundup EPM reviews recently completed plants, those still under construction, plus interesting proposed projects.

–By Holly Jessen and Luke Geiver 68 PROJECT DEVELOPMENT—CELLULOSIC Cellulosic Snapshot The U.S. EPA lowered the cellulosic mandate for the first year while cellulosic ethanol developers press on.

–By Anna Austin

76 INTERNATIONAL International Ethanol Report: 2010 Brazil remains second only to the U.S., but other regions expect ethanol growth, too.

–By Luke Geiver and Holly Jessen

82 FINANCE Beating Bankruptcy Conserving cash and continued production are major keys to successfully emerging from Chapter 11.

–By Luke Geiver

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88 ENGINES A Boost to the System Smaller engines can deliver more torque, tapping into ethanol’s higher octane and cooling characteristics.

–By Luke Geiver

94 USE Ethanol to Drink Two fuel ethanol producers talk about producing consumable ethanol as well, while a researcher reports progress on a new purification process.

–By Holly Jessen

ON THE COVER President Obama got a personal tour from Steve Burnett, general manager of Poet Biorefining-Macon, Mo. PHOTO BY GREG LATZA

4

Correction: In the View from the Hill column in the June issue, a Purdue University professor was incorrectly identified. It was Wally Tyner who recently recalculated the impact of indirect land use change for corn ethanol to find the impact to be half that of his earlier modeling.

ETHANOL PRODUCER MAGAZINE

July 2010

contents departments

contributions

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100 CO-LOCATION Cellulosic Ethanol and Power Plant Co-Location: Savings in Synergy There are significant economic and environmental benefits from co-location for both ethanol plants and coal-fired power plants.

–By Frances Williams

106

106 ANAEROBIC DIGESTION Anaerobic Treatment at Ethanol Facilities Ethanol waste streams can be effectively treated via anaerobic digestion, while producing renewable energy for ethanol production.

–By Ryan Johnston

110

110 WATER CO2—A Cost Effective Alternative to Sulfuric Acid in Cooling Systems Recovered CO2 can be injected into cooling water to create carbonic acid for pH control in cooling towers.

–By Mike Mowbray

8 Editor’s Note Projects Advance, Editorial Board Announced

By Susanne Retka Schill 9 Advertiser Index 10 Events Calendar 14 The Way I See It Reflections on the Lessons from the Gulf Oil Spill

By Mike Bryan 16 View From the Hill All in the Details

By Bob Dinneen 18 Drive What We Really Need For a Choice at the Fueling Pump

By Tom Buis 20 eBio Sustainability and Credibility

By Rob Vierhoust 22 Taking Stalk The 2009 Corn Crop—A Year to Recognize Quality

By Charles R. Hurburgh 24 Business Matters New Health Care Bill Affects Business Owners Immediately

By Clinton Baker 26 Business & People

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114 WORKING CAPITAL Ensuring Adequate Working Capital to Support the Business in Good Times—and Bad Even with today’s market volatility, a system can be devised to project cash needs based on market trends and plant history.

–By Scott McDermott

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30 Commodities 32 BIObytes 36 Industry News 118 Marketplace Ethanol Producer Magazine: (USPS No. 023-974) July 2010, Vol. 16, Issue 7. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

POSTMASTER: Send address changes to Ethanol Producer Magazine/ Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

ETHANOL PRODUCER MAGAZINE

July 2010

Susanne Retka Schill Editor's Note

Projects Advance, Editorial Board Announced

S

ummer is here, and with it the 26th annual International Fuel Ethanol Workshop & Expo. This issue is being delivered to the FEW, June 14-17 in St. Louis. Generally the largest of the year, we have a packed issue for you. Associate editors Holly Jessen and Luke Geiver have gathered project development updates on multiple ethanol plants that completed construction this year and are still being built, and visited with developers for the always popular report on proposed projects.

As we’ve noted before, the build-out of new capacity has slowed dramatically in the past couple of years, yet the new crop of proposed projects is more interesting than ever, with new synergies being explored for first generation sugar/starch ethanol facilities. Attention is shifting towards the next generation, where new projects are being proposed even as the first crop of developers strive to get their projects successfully launched. Anna Austin provides an update on a number of those cellulosic projects. This issue is rounded out with features about emerging from bankruptcy, engine developments, ethanol to drink, and as promised last month, Jessen’s report on the thrill of a presidential visit to an ethanol plant in Missouri, along with four excellent articles written by our industry contributors.

Ethanol Producer Magazine is launching an editorial board at this year’s FEW. We’ve long wanted to have a group we could call upon for background information, ideas and feedback for the editorial team, building relationships within the industry and helping us to become better imbedded. We’ve recruited 10 ethanol producers to serve on the first board including Mike Jerke, Chippewa Valley Ethanol Co.; Jeremy Wilhelm, Cilion Inc.; Mick Henderson, Commonwealth Agri-Energy LLC; Keith Kor, Corn Plus; Walter Wendland, Golden Grain Energy; Neal Jakel, Illinois River Energy LLC; Bert Farrish, LifeLine Foods LLC; Eric Mosebey, Lincolnland Agri-Energy LLC; Steve Roe, Little Sioux Corn Processors; and Bernie Punt, Siouxland Energy & Livestock Co-op. Our thanks to these gentlemen for saying yes; we hope to learn much from them in the year ahead.

Susanne Retka Schill, Editor sretkaschill@bbiinternational.com

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ETHANOL PRODUCER MAGAZINE

July 2010

AdIndex www.EthanolProducer.com E D I T O R I A L Susanne Retka Schill Editor sretkaschill@bbiinternational.com

Holly Jessen Associate Editor hjessen@bbiinternational.com

Luke Geiver Associate Editor lgeiver@bbiinternational.com

Jan Tellmann Copy Editor jtellmann@bbiinternational.com

P U B L I S H I N G Mike Bryan

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ETHANOL PRODUCER MAGAZINE

July 2010

COPYRIGHT © 2010 by BBI International

9

PRESIDENTIAL VISIT

Steve Burnett, general manager of Poet Biorefining, Macon, holds a sample of ethanol during the president's April 28 tour of the facility. To his left are Secretary of Agriculture Tom Vilsack and President Obama, and to Burnett's right are Poet CEO Jeff Broin and John Eggleston, president of Poet Biorefining-Macon.

PHOTO: GREG LATZGA

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ETHANOL PRODUCER MAGAZINE

July 2010

PRESIDENTIAL VISIT

The Thrill of a Presidential Visit President Obama’s April 28 visit to the Poet Biorefining plant in Macon, Mo., wasn’t just good news for one ethanol producer. Many believe the whole industry can glean hope from that event.

By Holly Jessen

ETHANOL PRODUCER MAGAZINE

July 2010

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PRESIDENTIAL VISIT

PHOTO: BBI INTERNATIONAL, HOLLY JESSEN

S

en. Wes Shoemyer beamed from ear to ear the day President Barack Obama visited the Poet ethanol plant in Macon, Mo. Besides serving as a Missouri state legislator, Shoemyer is one of 311 farmer members, who, as a whole, own more than 81 percent of the ethanol plant in Macon. Each year, some of the corn he grows is delivered to the ethanol plant. “This is more exciting than when I get a check,” he said, referring to dividend checks received periodically from his ethanol plant investment.

Shoemyer wasn’t the only only person excited by the president’s visit. Steve Burnett, general manager of the Macon plant, led Obama on a private tour of the plant before his speech in the grains building.

He described the president as personable and told how he paused for a talk with six plant employees. During an unscheduled photo opportunity, Obama put his arm around Mary Barbieri, a longtime, hardworking employee. “I’d guess this is the highlight of her life,” Burnett said.

But it wasn’t just a boost for those associated with the Poet plant. Burnett also talked about what the president’s visit means for the whole ethanol industry and farmers who provide corn for that industry. “It’s really a great day for agriculture,” he said.

USDA Secretary Tom Vilsack, the former governor of Iowa was also in attendance. He told EPM that the president has a keen interest in both current biofuels technologies and newer, emerging technologies. He confirmed that the visit to the corn-ethanol plant should be a positive indication of Obama’s support for ethanol. “I thought it was a positive experience for both the president and for the industry,” he said.

Shoemyer speaks to a TV news crew outside Poet Biorefining in Macon, Mo., the day President Barack Obama toured the ethanol plant.

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PRESIDENTIAL VISIT

Members of the media walk to the plant entrance for the event, which in all was attended by 133 invited guests plus another 200 people traveling with the president.

Tom Buis, CEO of Growth Energy, also in attendance, commented to EPM that unfortunately many people just don’t understand that ethanol is a viable alternative for oil that is here today, providing 10 percent of America’s fuel, and that it can replace more. The president’s tour of a corn ethanol plant says that the most powerful person in the world is behind the ethanol industry, Buis said. “I think that his visit today will help get that message out there.”

The President’s Speech After touring the ethanol plant, Obama arrived at the scrubbed and decorated grains building, where 133 invited guests, including Poet executives, board members, plant employees, media and others, had waited for about two hours to hear him speak. Half the plant’s employees, including office staff, had worked with shovels and squeegees in the preceding days to prepare for the event, Burnett said. A hush descended on the crowd when the president

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PRESIDENTIAL VISIT

Poet employees and key staff react as President Obama thanks them for the opportunity to visit the plant. In the front row to the far left are Vilsack and Jeff Broin, CEO of Poet.

entered the facility that lasted about 15 minutes while he toured the plant privately, until “Hail to the Chief ” began playing right before he entered the room.

Only the birds—plentiful, as in any grains building—broke the silence, chirping cheerfully and loudly throughout the president’s talk.

Obama began his speech by congratulating the employees of the Macon plant on their 10-year anniversary. Missouri’s first ethanol plant started producing in May, 2000, with a capacity of 15 MMgy. Today it produces 46 MMgy and employs 45 people. “That means one of you is over achieving,” the president joked.

He also reminded those in attendance that this wasn’t his first visit to an ethanol plant. In 2007, Illinois Sen. Obama was the keynote speaker at the grand opening of the Charles City, Iowa, ethanol plant now owned and operated by Valero Energy Corp.“I believe in what you are doing right here to contribute not only to our clean

52

energy future, but also to our rural economies,” he said. “There shouldn’t be any doubt that renewable homegrown fuels are a key part of our clean energy future—a future of new industries, new jobs in towns like Macon, and new independence.”

Obama went on to reference biofuels multiple times during his brief remarks.

The visit to Macon was part of the president’s “White House to Main Street Tour” that kicked off in December 2009 as a way for Obama to get out of Washington and spend time with American families. As Obama explained, he’s been visiting towns in middle America because they have a lot to teach, including common sense, and he wanted to talk about the economy, both the painful parts and the opportunities.

There’s been some good economic news lately, he said, but that economic recovery hasn’t reached everyone yet. “Times are tough out here,” he said. “In some places, times have been tough for a very long time.”

ETHANOL PRODUCER MAGAZINE

July 2010

PHOTO: BBI INTERNATIONAL, HOLLY JESSEN

PRESIDENTIAL VISIT

The Poet ethanol plant in Macon, Mo., first produced ethanol in May 2000 and was the first plant built in the state.

In the two years Obama spent running for president, he spoke to many people who told him the American dream was slipping out of reach. Times were hard for families and farmers and many young people believed they had to move away from small towns to make a go of it. Success stories like the ethanol plant in Macon, however, show that doesn’t have to be true, he said. “I believe that your company, and companies like yours, can replicate that success all across the country.” The goal is not just to bring the U.S. back to where it was before the economy took a dive, but to create new long-term growth and prosperity.

Then, Obama listed several things that must happen to make that happen, including making schools more competitive and colleges more affordable, as well as reforms for health insurance

ETHANOL PRODUCER MAGAZINE

July 2010

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PHOTO: BBI INTERNATIONAL, HOLLY JESSEN

PRESIDENTIAL VISIT

Signs like this one, welcoming President Obama to Macon, were displayed in several places around the town of about 5,500 people.

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and Wall Street. “And, it means igniting a new clean energy economy that generates good jobs right here in the United States and starts freeing ourselves from dependence on foreign oil,” he said to applause.

Oil has an environmental cost and it threatens the security of the U.S., he continued. For decades the U.S. has talked about the fact that being dependant on foreign oil is bad news for the country’s economy, but working to do something about it has depended upon the price of oil. “We’ve grown actually more dependent on foreign oil every single year since Richard Nixon started talking about this danger of dependency on foreign oil,” he said. While the U.S. talked about the issue, other countries were acting. Places like China and Spain have made serious investments in clean energy, aiming to lead the race, and gain the jobs that come with it. Second best just isn’t good enough for this country, Obama said. The U.S. should be first in wind power, first in biofuels and first in second-generation technologies, such as cellulosic ethanol, he said, and that’s why energy security has been one of his top priorities. Last year, through the Recovery Act, the administration made a large investment in clean energy, including ethanol, that is intended to create or save up to 700,000 jobs. The goal is to double the capacity for renewable energy from sun, wind and biofuels as well as triple biofuels production in the next 12 years.

“That is a goal that we can achieve and it is being worked on right here at Poet, and we’re very proud of that,” the president said.

Other Reactions Even those not able to attend the event appreciated its importance.

About 100 miles from Macon, Ryland Utlaut, general manager and president of Mid-Missouri Energy, a 100 percent farmer-owned ethanol plant located in Malta Bend, Mo., was excited about the event—even though it wasn’t at his plant.

“I think it’s nothing but a positive for the

ETHANOL PRODUCER MAGAZINE

July 2010

PHOTO: BBI INTERNATIONAL, HOLLY JESSEN

PRESIDENTIAL VISIT

Obama supporters and protesters gathered together behind barricades across the interstate from the Poet plant to watch the President's motorcade pass by.

industry,” he told EPM. “No matter what plant affiliation you have, I think we’re all proud.”

Brian Jennings, executive vice president of the American Coalition for Ethanol was also happy about the visit.

Still, Jennings, and others he talked to, had mixed feelings about the president’s speech. While Obama said good things about ethanol’s role in the nation’s energy security and providing jobs for rural Americans, many were hoping for something more. “Would I have preferred to hear the president express support for E15 or extension of the tax incentive?” he asked. “Of course. I think everyone in the ethanol industry would.”

Macon itself, population about 5,500, was abuzz over the fact that the President was coming to their town. Several businesses displayed signs welcoming him and it was a topic of conversation in many stores, restaurants and hotels.

“We’ve never had anything happen like that in Macon,” said area resident Howard Smith.

Although several expressed disappointment that the event was by invitation only, the basic theme was that it was a big deal just to have a U.S. president stop

ETHANOL PRODUCER MAGAZINE

July 2010

by their little town. Angela Bailey, who lives only a quarter of a mile from the ethanol plant, said she was thrilled. “It makes you think that he really does care about Midwest people,” she said. EP Holly Jessen is associate editor of Ethanol Producer Magazine. Reach her at (701) 7384946 or hjessen@bbiinternational.com.

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PROJECT DEVELOPMENTâ&#x20AC;&#x201D;SUGAR/STARCH

U.S., Canadian PROJECT ROUNDUP The North American ethanol industry has had its share of bumps in the road, yet a dozen plants came online the past year, a handful are still under construction and some intriguing projects are proposed.

By Holly Jessen and Luke Geiver

Barley-based Appamatox Bioenergy is nearing completion in Hopewell, Va. PHOTO: FREDERIC WIGGINS, MUNRO PHOTOGRAPHY

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ETHANOL PRODUCER MAGAZINE

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PROJECT DEVELOPMENT—SUGAR/STARCH

ETHANOL PRODUCER MAGAZINE

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PROJECT DEVELOPMENT—SUGAR/STARCH

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n the past year, companies building ethanol plants in the U.S. and Canada have completed construction or moved forward with proposed projects. One happy success story is Aventine Renewable Energy Inc., which pulled out of bankruptcy and announced it would restart construction at two 108 MMgy plants in Mt. Vernon, Ind., and Aurora, Neb. A year ago, EPM published a list of 14 ethanol plants that were under construction, the majority of which have been completed. In the U.S. that list includes, Abengoa Bioenergy of Indiana LLC, Mt. Vernon; Abengoa Bioenergy of Illinois, Madison; Archer Daniels Midland Co., Columbus, Neb.; Big River Resources Galva LLC, Galva, Ill.; Bionol Clearfield LLC, Clearfield, Pa.; Clean Burn Fuels LLC, Raeford, N.C.; Highwater Ethanol LLC, Lamberton, Minn., Homeland Energy Solutions LLC, Lawler, Iowa; and One Earth Energy LLC, Gibson City, Ill. Two plants in Canada completed construction as well: Kwartha Ethanol Inc., Havelock, Ontario, and Northwest Bio-Energy Ltd., Unity, Saskatchewan.

Other companies restarted operations at formerly idled plants. Pacific Ethanol Inc. worked out a reorganization plan and restarted operations at its 60 MMgy Burley, Idaho, plant and White Energy emerged from bankruptcy and restarted its 110 MMgy White Energy Plainview plant in Texas. After Mid-America Agri Products filed for Chapter 11 bankruptcy and mothballed a 44 MMgy ethanol plant in Cambridge, Neb., for about a year, it was restarted by new owner Nebraska Corn Processing LLC in March. Oil companies got in on the ethanol action too. Valero Energy Corp. purchased Renew Energy, (now Valero Renewables Jefferson) for $72 million, and Sunoco Inc., purchased a 100 MMgy bankrupt plant in New York for $8.5 million that is currently undergoing retrofitting.

Of course, the news hasn’t all been good. For other projects, construction has stalled indefinitely. Some sites for

potential ethanol plants have been sitting empty, with little to no activity for long periods—even years. One plant, Minnesota Energy, a 20 MMgy corn ethanol plant in Buffalo Lake, Minn., suspended production indefinitely in March and laid off workers.

Under Construction The list of ethanol plants using a first generation starch/sugar platform currently under construction in the U.S. and Canada is quite short. (For more information about cellulosic ethanol projects, see the following article.)

One plant on that list is ADM’s Cedar Rapids, Iowa, facility. The ethanol and agribusiness giant will add another 300 MMgy to its current capacity of 1.515 billion once construction is completed. The company expects to wrap that up this summer.

With 25 operating ethanol facilities in Nebraska, Wolverine Ethanol LLC is currently working on two new facilities, Alcorn Energy LLC in Phelps County, Neb., and Hi-Line Ethanol LLC in Frontier County, Neb. Tom Randazzo, manager of Wolverine says they are still putting together financing for both facilities.

In Hopewell, Va., Appamattox Bioenergy LLC, is pioneering a plant model in the U.S. for a large, barley-based ethanol plant. President and CEO Craig Shealy says members of the plant toured ethanol facilities in Belgium, Austria, France and Spain to help in the design on the soon-to-be completed Virginia plant, working with their design team to create a one-of-a-kind 65 MMgy facility. “There was no one plant we could go to that would be exactly like ours,” Shealy says. “We had to piece it together based on the components we could see and use.” The plant, which will be completed this summer and go online in early fall, will employ roughly 55 people when finished. “We are focused on originating winter barley,” Shealy says.

“It is the best long term feedstock for our region.” The plant is capable of using almost all cereal grains Shealy says,

ETHANOL PRODUCER MAGAZINE

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PHOTO: NORTHWEST BIO-ENERGY

PROJECT DEVELOPMENT—SUGAR/STARCH

Northwest Bio-Energy in Unity, Saskatchewan, came online in the last year.

but is unique because of the facility’s design specific to barley. Shealy says he was very pleased with the team of designers, Katzen International Inc. and KBR Inc. during the process.

“We are also looking at more projects, but we would like to see margins get a little better,” Shealy adds. In the meantime, the plant has already signed on with Land O’Lakes Purina Feed to market the distillers grains coproduct from the facility which will be called barley protein meal (BPM). Darian Carpenter of Land O’Lakes predicts the BPM will be popular in the U.S. and Europe because it will be produced from non-genetically modified grain. Located in what Shealy says is a historically industrial town, the project has been well received by the community. “We’ve learned a lot in the process, even without a model to look at.” Shealy says. The Appamattox plant has no debt from the project. As for the outlook by Shealy on the grind margins, “We think they’ll get better. It just might take some time.”

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PHOTO: FREDERIC WIGGENS, MUNRO PHOTOGRAPHY

PROJECT DEVELOPMENT—SUGAR/STARCH

The Appomattox Bio Energy facility will use local barley as the main feedstock.

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Proposed Plants EPM’s 2010 spring plant map added proposed plants for the first time, listing 28 proposed projects in the U.S. and four in Canada. Following is a brief review of some of the most promising or interesting projects on that list.

Inland Pacific Energy Center LLC is one proposed project that is aiming for both ethanol and biodiesel production, says Bob Doughty, project manager. The goal is to build a 138 MMgy ethanol plant and a 96 MMgy biodiesel plant in Stanfield, Ore. Although not all permitting was completed, funding for the project is nearly done and it’s possible the group could break ground by November, Doughty says. The energy center will utilize multiple grains as a feedstock for the ethanol plant and will also market corn oil to the edible market. Katzen International Inc. is the ethanol technology provider and Crown Iron Works is working on the biodiesel side. The company plans to use canola as the biodiesel feedstock.

In the future, besides traditional ethanol and biodiesel, the company hopes to also make second generation ethanol. “We’re designing our plant so that we could convert to cellulosic when it gets to the point where it is profitable,” Doughty says.

Already growing over 500 acres of sugarcane for its first commercial sugarcane-to-ethanol facility, California Ethanol + Power LLC has big plans to construct multiple sugarcane-to-ethanol facilities in California's Imperial Valley and in the adjacent Palo Verde Valley.

The first facility will be located in a county Specific Plan area and a California Enterprise Zone. The company reports that it is well into the permitting process, and expects its initial project to be in commercial operations mid-2012. CE+P is partnered with Brazilian sugarcane

ethanol technology provider Dedini S/A as well as U.S.-based green energy design/ builder Fagen Inc. Alpha Holdings LLC wants to build two ethanol plants in Iowa: Tama Renewable Energy Campuses LLC, a 110 MMgy plant proposed for Tama, Iowa, and Dexter Renewable Energy Campuses LLC, a 54 MMgy plant proposed for Dexter, Iowa. Previously called simply Dexter Ethanol and Tama Ethanol, the names were changed to reflect the fact that they will be ethanol and more, says Chris Miller, CEO and managing member, who declined to elaborate on what that included.

Both plants are expected to utilize corn and cellulose as feedstocks. All permits are in hand and the sites are shovel ready, Miller told EPM. The plan is to break ground yet this summer. “It’s been a long struggle,” he adds.

In Cadiz, Ohio, a group of farmers want to build a 23 MMgy ethanol plant

that will produce both food and energy.

Harrison Ethanol LLC will be an integrated bio-refinery that will produce, along with fuel, CO2, beef, milk, corn germ (oil), green electricity, renewable solid fuels and wet and dry distillers grains. The plan is to feed wet distillers grains on site to beef and dairy cattle. The manure from the animals and waste from the ethanol process will be used to produce biogas in an anaerobic digester for power needs with excess power sold to the grid. In April, the group obtained a final permit from the Ohio Department of Agriculture for the confined animal feeding facility. It will have a capacity of 10,000 head of cattle and 2,000 cows.

In Illinois, the plans for a 117 MMgy corn ethanol plant called Algonquian Ethanol are moving forward. Using Applied Process Technology LLC, the Princeton facility will produce 85 percent fuel grade ethanol and 15 percent high grade, indus-

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PHOTO: AVENTINE

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The Aventine Renewables plant in Aurora, Neb., resumed construction after the parent company emerged from bankruptcy.

trial ethyl alcohol. “We are very optimistic about our new technology,” says Chet Perry, president and CEO of Algonquian.

“We believe the technology can be used for retrofits. It’s exciting for the entire

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based power. “This will enable us to have an enormous energy savings,” Perry says.

The distillers grains will be sent directly to the boiler with a moisture content of 46-49 percent. The process will allow the

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PROJECT DEVELOPMENT—SUGAR/STARCH

plant to generate roughly 15 megawatts (MW) of electricity to run the plant, while the remaining 40-45 MW can be sold back to the local grid, according to Perry. The Princeton plant is already permitted without the use of the new technology, and emissions testing for the new techonology need to be completed for additional permits. The plant should come online sometime in 2011. “We are also hopeful and optimistic that these new technologies will qualify and be approved with the EPA under the RFS2 program for an advanced fuel technology,” Perry says.

The first ethanol plant on a reservation was closing in on financing in early May. Groundwork was expected to begin this summer at Wagner Native Ethanol LLC, a 50 MMgy plant proposed for Wagner, S.D. “We’re getting awfully, awfully close,” says Bill Riechers, project coordinator. The plant, which will be designed and built by Fagen Inc. and ICM Inc., will be different from other dry mills. It will have fractionation built into the original design rather than added in later, Riechers says. The plant will use the CO2 naturally present as part of the fermentation process to recover food grade oil. As a result, the distillers grains will contain 50 percent protein and no sulfur. Previous technologies for oil recovery often include the use of hexane gas, which is a “nasty, proven carcinogen” that is seven times more explosive than gas, Riechers says.

In the Southeast, a proposed non-corn-feedstock ethanol project, Agro-Gas Industries LLC, is planned in McMinn County, Tenn.

“We are still seeking the necessary funding,” says Tom Monahan, partner and CEO of the company.

“Our research is on-going with new feedstock sources and processes developing each month.” One of the feedstocks the plant may use is the

ETHANOL PRODUCER MAGAZINE

July 2010

kudzu plant. Originally from Japan, the plant is a vine-like weed that grows predominantly in the South.

Three plants on the East Coast are still seeking financing. The proposed locations at Chester, S.C., Seaboard, N.C., and Jessup, Ga., will all use a corn feedstock and produce roughly 110 MMgy. “We have scrapped plans for a plant in Campbellton, Fla., at this time due to more restrictive air permitting requirements required

by Florida Department of Environmental Protection,” says Lee Hatch of East Coast Ethanol LLC, the parent company for all three proposed plants. “We are still working to get our financing in place for the other plants.”

South of those three proposed plants, Southeast Renewable Fuels LLC has its eye on a rural area outside Clewiston, Fla., for a 22 MMgy ethanol plant. The main feedstock will be sweet sorghum, although molasses derived from sweet sor-

ghum or sugarcane may also be used. The facility will include a combined heat and power plant, using sweet sorghum bagasse with excess power sold to the grid. The company also plans to install a CO2 dry ice plant on site, where gasses from the fermentation process can be converted to dry ice or liquid CO2 for sale. In March, the company submitted its air permit to the Florida Department of Environmental protection for review. “Financing is in place and an announcement forthcoming,” says Don Markley, executive vice president and chief operating officer. The plant is the first of three that the company hopes to construct. EP Luke Geiver and Holly Jessen are associate editors of Ethanol Producer Magazine. Reach Geiver at (701) 738-4944 or lgeiver@bbiinternational.com and Jessen at (701) 738-4946 or hjessen@ bbiinternational.com.

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PROJECT DEVELOPMENT—CELLULOSIC

EPM reviews the status of U.S. cellulosic ethanol projects.

By Anna Austin

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A COSKAT

RANGE

FUELS

VERENIUM

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S

prinkled evenly across the country, the 25-plus cellulosic ethanol projects in the U.S. are utilizing a variety of conversion methods and feedstocks. While some companies/ projects have been around for years, several are quite new, and all are moving at different speeds. Overall progress has been slower than expected when the renewable fuels standard (RFS2) was developed in the Energy Independence and Security Act with targets for mandated use of cellulosic ethanol included.

As many suspected would happen, the U.S. EPA significantly dropped the 2010 cellulosic biofuel requirement with the release of the RFS2 final rule. Initially an overly ambitious 100 million gallons, the 2010 requirement is now a significantly lower 6.5 million ethanol-equivalent gallons. The new cellulosic biofuel standard is based on an updated market analysis considering detailed information from pilot and demonstration-scale plants, an Energy Information Administration analysis, and other publically and privately available market information, according to the EPA. Despite the huge overestimate, the EPA maintains that a number of companies and projects appear to be poised to expand production over the next several years. Additionally, since the cellu-

losic standard is lower than the level otherwise RFS2 Cellulosic Biofuel Requirement required by EISA, cellulosic credits will be YEAR BILLION GALLONS available to obligated 2010 0.1 parties for end-of-year 2011 0.25 compliance, if needed, 2012 0.5 at a price of $1.56 per 2013 1.0 gallon (gallon-RIN). The 2014 1.75 EPA intends to continue 2015 3.0 to assess the growth of 2016 4.25 the cellulosic biofuel in2017 5.5 dustry and issue a notice 2018 of proposed rulemaking 7.0 each spring and a final 2019 8.5 rule by Nov. 30 of each 2020 10.5 year to set the renewable 2021 13.5 fuel standard for each 2022 16.0 ensuing year.

2023+ tba The fledgling cellulosic ethanol industry is working hard to bring capacity online to serve the mandated vol- Project Liberty, the planned 25 MMgy umes that will expand as installed capac- plant to produce ethanol from corn cobs ity increases. The nation’s two top ethanol to be co-located with Poet’s corn-to-ethproducers are moving forward with plans anol plant in Emmetsburg, Iowa. Poet to keep them at the forefront of cellulosic CEO Jeff Broin says the company filed ethanol production as well. an application [for a loan guarantee] with the DOE in April, and needs to have a favorable ruling on it this calendar year.

ADM and Poet Poet LLC unveiled its cellulosic etha- “If we get that favorable ruling, we told nol pilot plant in Scotland, S.D., in early the DOE that we will start construction 2009, leading towards deployment of by the end of this year, which puts us on

PROJECT DEVELOPMENT—CELLULOSIC

track to start up the facility in early 2012,” he says. This spring, Poet announced its long term goal to add 1 billion gallons of cellulosic ethanol production from corn stover to its existing 26 ethanol plants, and produce an estimated total of 3.5 billion gallons of cellulosic ethanol by 2022, or more than 20 percent of the cellulosic ethanol mandated by RFS2.

Archer Daniels Midland Co. hasn’t made its goals public, but in December the company announced it had received a $24.8 million DOE grant to develop and construct a facility in Decatur, Iowa, to convert biomass into renewable fuel.

“Biofuels remain the only widely available alternative transportation fuel available today. This project demonstrates ADM’s commitment to advanced biofuels and our work to meet the goals of the renewable fuel standard program,” said Todd Werpy, ADM vice president, biofuels and biochemical research. The facility will fractionate lignocellulosics with one fraction used to produce ethanol and another fraction used to produce ethyl acrylate, a compound used in plastics, adhesives and coatings. The pretreatment process being developed will also be used in ADM’s efforts to commercialize biocrude, a project being conducted in alliance with ConocoPhillips.

Earlier, ADM received DOE support

for a joint project with Purdue University to commercialize a fermentation process using highly efficient yeast to convert cellulosic materials into ethanol fuel. On the feedstock side, ADM is partnering with Deere & Company and Monsanto to identify environmentally, agronomically and economically sustainable methods for the harvest, storage and transport of corn stover.

A number of other cellulosic ethanol projects are moving through the pilot and demonstration stages aiming towards full commercialization. The following is a snapshot of a number of those projects.

Abengoa Since 2007, Spanish cellulosic ethanol producer Abengoa Bioenergy S.A. has operated a pilot plant in York, Neb., capable of processing 1.5 tons of agricultural residues per day through an enzymatic hydrolysis process. In January, Abengoa announced it had teamed up with MidKansas Electric Co. LLC to develop a cellulosic ethanol and power plant in Stevens County, Kan., that will produce 15 MMgy of ethanol and 75 megawatts of power each year. Abengoa Bioenergy Hybrid of Kansas will use corn stover, wheat straw and switchgrass as feedstocks, procured from producers from seven counties within a 50-mile radius of the plant.

ABHK will require about 2,500 tons of biomass per day. Abengoa received a $76 million U.S. DOE grant to help fund the project. Chris Roach, ABHK project development manager, says construction is slated to commence late 2010; completion is targeted for 2012.

Bluefire Lancaster, Calif.-based BlueFire Ethanol Inc. owns a company-developed patented Arkenol Concentrated Acid Hydrolysis Technology that processes wood wastes, post-sorted municipal solid waste (MSW), rice and wheat straws and other agricultural residues. The company has operated a pilot plant near its southern California offices for roughly five years, and says it is “fully permitted and shovel-ready” to begin work on a 3.9 MMgy facility in Lancaster. In addition, with a total of $88 million in DOE funding and a possible $250 million dollar DOE loan guarantee, for which BlueFire submitted an application in February, the company will construct a 19 MMgy commercial scale facility in Fulton, Mo.

Coskata Developed by Oklahoma State University and University of Oklahoma researchers, Coskata Inc.’s hybrid gasification/fermentation process technology is

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capable of converting multiple biomass feedstocks, including woody biomass, agricultural waste, energy crops and construction/industrial wastes, into synthesis gas.

Along with strategic investor General Motors and plasma gasification company Alter NRG Corp., Coskata officially unveiled its $25 million semi-commercial cellulosic ethanol facility near Madison, Pa., in October 2009, and soon after announced plans for a commercial facility that will be located in the Southeast. According to vice president of government affairs Wes Bolsen, the 55 MMgy facility will utilize 1 to 1.2 million green tons of woody biomass, and upon successful commissioning, will enable the company to license the technology.

$250 million project will recycle and convert approximately 60 percent, or 189,000 tons of MSW at the Three Rivers Landfill where the 20 MMgy facility will be built.

Besides a $50 million U.S. DOE grant, Enerkem recently scored a new round of financing—$50.9 million—from existing and new investors, which includes Waste Management Inc. The company is finalizing project agreements says Marie-Helene Labrie, vice president of government affairs. The construction start date has not been determined, Labrie says, as it is dependent on the completion of a National Environmental Policy Act review by the DOE. Enerkem began operations in January 2009 at its commercial-scale syngasto-ethanol/methanol plant in Westbury, Quebec,

Enerkem

INEOS New Planet Energy

Canadian cellulosic ethanol producer Enerkem Inc. is planning a commercialscale facility plant in Pontotoc, Miss. The

INEOS Bio describes the heart of its combined thermo-chemical and biochemical process as a patented anaero-

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bic fermentation step, through which naturally occurring bacteria convert biomass gases from wood, vegetative residues or construction and demolition materials into ethanol. In 2009, the DOE announced INEOS New Planet Energy LLC would receive a $50 million dollar grant to build an 8 MMgy advanced bioenergy facility in Indian River County, Fla., that will also produce 2 MW of electricity. Construction is due to begin this summer.

KL Energy South Dakota-based KL Energy Corp. employs a proprietary thermalmechanical pre-treatment process that utilizes non-food wood and herbaceous feedstocks. The company began operations at its 1.5 MMgy Western Biomass Energy demonstration scale facility in Upton, Wyo., in early 2008, where the company says it has successfully validated the process and yields initially debuted at its pilot facility in Rapid City, S.D. KL Energy expects to complete upgrades to its demo plant by the third quarter of 2010 to expand its feedstock flexibility. It will restart with a multiple campaign demonstration program with sugarcane bagasse as feedstock.

Mascoma Utilizing a Consolidated Bioprocessing technology that uses yeast and bacteria engineered to produce large quantities of enzymes, Boston-based Mascoma Corp.’s 200,000 gallon per year pilot plant in Rome, N.Y., went on line in the spring of 2009. Justin van Rooyan, vice president of business development, says the pilot facility operates intermittently, producing fuel for testing.

The technology being demonstrated in Rome will be deployed at a commercial facility in Kinross township, Mich., a project for which Mascoma and affiliate Frontier Renewable Resources will be applying for a loan guarantee for this year, van Rooyan adds. One of Mascoma’s notable partnerships is a feedstock

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PROJECT DEVELOPMENT—CELLULOSIC

processing and lignin supply agreement with Chevron Technology Ventures, a division of Chevron U.S.A. Inc., under which CTV will provide various sources of lignocellulosic feedstock to Mascoma. Mascoma will convert the feedstock to cellulosic ethanol using its CBP technology, and provide the lignin byproduct to CTV for evaluation.

Range Fuels Soperton, Ga.-based Range Fuels Inc. went public in November 2007, announcing intentions to build the world’s first commercially viable cellulosic ethanol plant with the help of a $76 million U.S. DOE grant. This spring, Range secured an $80 million USDA loan guarantee to complete the first project phase and begin initiating phase two.

The first project phase includes one gasifier unit that will handle 125 dry tons of wood per day purchased from local suppliers, says CEO David Aldous. “As we continue to scale up, we’ll use the same size equipment but add multiple (gasifier) units,” he says. The plant, which employs a two-step thermochemical conversion process, was on schedule to start up the last week in May, according to Aldous. “[Commissioning] has gone extremely well thus far,” he adds.

The company has teamed up with BP Biofuels for a 36 MMgy commercial-scale project in south central Florida, and plans to break ground on the project this year.

pany plans to use purpose-grown popular trees as a feedstock at its Boardman facility, which is expected to begin producing in 2011.

Zeachem

There are other projects in the U.S. and Canada in various stages of development by Dupont Danisco Cellulosic Ethanol, Iogen, Qteros, ICM, AE Biofuels, Pacific Ethanol and others. Some will be successful and some may not work out as anticipated. Either way, all of these projects are forerunners in helping to meet domestic energy goals and loosen the tight clutch fossil fuels have on the U.S. EP

Headquartered in Lakewood, Colo., Zeachem Inc. was set to break ground on its 250,000 gallon per year demonstration facility in Boardman, Ore., in early June.

Zeachem describes its technology as a hybrid process that fully utilizes all of the available carbon from the cellulose and hemicellulose in a biochemical (fermentation) process, while producing hydrogen from the lignin fraction through a thermochemical process. In May, Zeachem received a $25 million grant awarded by the Office of Energy Efficiency and Renewable Energy Biomass Program to add cellulosic ethanol production capability to the core ZeaChem technology, which currently produces ethyl acetate. The com-

Anna Austin is a Biomass Magazine associate editor. Reach her at 701-738-4968 or aaustin@bbiinternational.com

Verenium In 1995, Verenium Corp., then known as Celunol, secured an exclusive license to commercialize proprietary cellulosic ethanol technology developed at the University of Florida. In 1999, it completed a pilot plant in Jennings, La., where it successfully conducted combined C5 and C6 fermentations.

In April, Verenium announced it had scored an additional $4.9 million from the DOE to fund ongoing activities at its operating 1.4 MMgy demonstrationscale facility, which is co-located with its pilot plant, as an extension of the grant previously awarded in July 2008.

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INTERNATIONAL

International

Ethanol Report: 2010 EPM takes a look at international developments with a special focus on Brazil.

By Luke Geiver and Holly Jessen

ETHANOL PRODUCER MAGAZINE

July 2010

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INTERNATIONAL

T

he heart of world ethanol production remains strongest in the U.S., but the pulse of international growth has started to beat harder. Nearly every region of the world from the United Kingdom to the Asia Pacific has begun construction or proposed new ethanol facilities. The Global Renewable Fuels Alliance reports that in 2010, 22.7 billion gallons of ethanol will be produced, a 16.2 percent increase from 2009. The following report represents a broad overview of this year’s industry growth, governing factors and future projects outside the U.S. and Canada giving a snapshot of ethanol use on a global scale: EPM’s 2010 International Report.

Guiding the Way As in the U.S., several countries are working on mandates requiring the use of biofuels. India’s government will mandate E20 use by 2011 and South Korea has decreased tariffs for materials used to produce renewable energy, not to mention the major role the Brazilian government plays in the production of Brazilian-based sugarcane ethanol. “Europe is working on its own energy directive and that may impact what producers in the U.S. are able to export,” said Tammy Klein, executive director for the Global Biofuels Center. Similar to the obstacles in the U.S., Klein says

most countries implementing biofuels programs are seeking Global Growth energy independence, diverAccording to Klein, ethasification and economic bennol demand will go up by 80 efit even amidst controversy percent by 2015. Nearly 80 over food and land use. “They percent of that demand will will represent a large portion be seen in the Western hemiof demand in coming years,” sphere, with the other 20 perTammy Klein Klein said. “They will also have executive director, cent in Asia-Pacific. In Europe, issues that we have confronted Global Biofuels Ensus Ltd., a 106 MMgy wheatCenter in the U.S. with infrastructure based biorefinery in the U.K. and making sure the mandates began production this past work in conjunction with subyear, and another wheat-based sidies.” proposed project in Grimsby, Of all the governing facU.K. is on the way. tors for ethanol production, In Vietnam, what started the U.S. market remains the out as a speaking engagement, largest influence, although ended in a proposed agreement that may change in the future. to construct eight ethanol fa“Many U.S. companies are Zig Resiak cilities. Zig Resiak, program looking for external markets,” program director, director for Kentucky-based Klein said. “For the first time Agresti ethanol producer Agresti LLC, producers are paying attention said the company has now to the global market. There’s a formed Agresti Vietnam. The number of ethanol producers that won’t new partnership between Agresti and the be able to get access to the California People’s Republic of Vietnam will demarket, so they have to find a market velop municipal solid waste plants in the somewhere for their product.” Klein says Saigon area, and with over 50 percent of markets in China and Europe continue the capital raised for the facilities, Resiak to represent the largest opportunities for says the projects are moving along very export. While governments all over the quickly. “This is also moving faster than world have done a lot to support the bio- the U.S. because of the carbon credits,” fuels industries, Klein said, “The industry said Resiak. “In this market, carbon is an is going to need regulatory certainty.” asset.” Construction will begin in Decem-

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INTERNATIONAL

The majority of Brazil's 440 sugar mills produce produce sugar and ethanol.

ber 2011 and the plants will use feedstock from local landfills. â&#x20AC;&#x153;The reception has been incredibly positive over there,â&#x20AC;? Resiak said, adding the region is in need of environmental help.

Adding to the list of proposed plants in Vietnam, Toyo-Thai, a joint venture group between Italian-Thai Development and Japanâ&#x20AC;&#x2122;s Toyo Engineering, will begin constructing two ethanol facilities. The completion date for both plants is set for 2012 and each plant will use a cassava chip feedstock to create fuel-grade ethanol.

Two other Japanese companies, Itochu Corp. and JGC Corp., will begin construction of a sugarcane-based ethanol plant in the Philippines. Just north of Metro Manila, the capital city of the Philippines, the plant will produce 14.3 MMgy. The Philippines Biofuel Act of 2009 requires the country to use a 10 percent ethanol blend in gasoline fuel by 2011.

D O W N T I M E C R I P P L E S Y O U R P L A N T

Brazil While ethanol use is growing globally, no other country relies on ethanol

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as much as Brazil. The country has already lifted tariffs on ethanol imports in hopes the U.S. might do the same. While the future between the U.S. and Brazil on biofuel imports and exports is still unclear, the role the South American country will play in 2010 and beyond is not hard to see.

Brazil is the largest grower of sugarcane and sugar producer in the world and the second largest ethanol producer behind the United States, according to Brazilian Sugarcane Industry Association (UNICA) which represents sugar, etha-

nol and bioelectricity producers in Brazil.

During the 2008-'09 sugarcane season, Brazil produced a total of 7.2 billion gallons (27.5 billion liters) of ethanol, according to statistics from UNICA and the Ministry of Agriculture, Livestock and Food Supply.

While Brazil’s ethanol production numbers have more than doubled since 2002-'03, it hasn’t been totally smooth sailing. Production held fairly steady, around the 11 or 12 billion liter mark, from 1990'91 to 1995-'96. After a two-year climb

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to 15.3 billion liters in 1997-'98, the amount of ethanol produced dropped to a low of 10.5 billion liters three years later. Since then, the numbers have been steadily climbing to today’s totals of 27.5 billion liters. Growth is slowing, however, Joel Velasco, UNICA’s chief representative in North America, told EPM. During the current growing season, UNICA estimates that 10 new ethanol plants/sugar mills will be built.

The number of new plants coming online was 19 last year, down from 30 and 25 in the previous two years.

Of about 440 sugar mills in Brazil, the majority include ethanol production, which means there is some flexibility between producing sugar and ethanol. This is limited, however, by the fact that most new ethanol plants don’t have sugar factories and older factories don’t have spare capacity, he said. About 100 of those 440 plants only produce ethanol and bioelectricity—no sugar.

The bulk of the ethanol, or more than 91.3 percent, is produced in the south central region of Brazil. This area includes Sao Paulo state, which is responsible for 60.7 percent of the ethanol production. In 2008-'09 the sugar and ethanol company Sao Martinho was the highest producing company in that state, with 411.9 million liters of ethanol production. The rest of Brazil’s ethanol, or 2.4 billion liters produced last season, came from the northeast region.

The Brazilian ethanol industry is very different from the U.S. ethanol industry—and it’s not just about corn versus sugarcane. In Brazil, two types of ethanol are produced and sold to consumers: anhydrous and hydrous ethanol. Anhydrous ethanol, which is the standard in the U.S., contains about 0.5 percent water by volume and is blended with gasoline for fuel use. Hydrous ethanol, on the other hand, can have about 5 percent water. In the last

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growing season, 66 percent of the ethanol produced was hydrous ethanol.

The type of vehicles on the roads in Brazil has changed over the years.

In 1984 more than 94 percent of automobiles made by major automakers could burn E100, or hydrous ethanol, according to UNICA. A variety of factors caused automakers to rapidly decrease the number of ethanol-powered vehicles produced and by 2001 only 1 percent of the vehicles on the road ran on E100.

In 2003, flex-fuel vehicles (FFV) were introduced in Brazil. Today, the majority of vehicles in Brazil are FFV, which can run on E100, gasoline or any mixture of the two, according to the National Association of Automotive Vehicle Manufacturers. In fact, during 2008 there were 2.3 million licensed FFVs on the road compared to 217,021 gas vehicles and only 84 ethanol vehicles.

Whether driving an FFV or not, thanks to a blending mandate in Brazil, all gasoline contains at least some ethanol. Although the blend mandate was temporarily lowered to 20 percent for three months this year due to a short crop, it’s now back up at 25 percent.

The inflow of foreign capital to Brazil’s sugar and ethanol industry has increased recently—especially in 2010.

In the first few weeks of the year alone, there were four major transactions.

“Foreign capital is not new to the industry and isn’t necessarily dominant,” Velasco said, “as illustrated by one of those recent transactions: the merger involving Brenco and ETH, in which domestic capital is by far in the majority.” He also mentioned deals where Brazilian companies have been purchasing stakes in foreign-owned companies.

In mid-2007, foreign capital held a majority stake in 7 percent of the Brazilian sugarcane industry. By the end of 2009, 44 Brazilian sugarcane mills

ETHANOL PRODUCER MAGAZINE

July 2010

were controlled by foreign capital. That added up to 14 percent of the approximately 590 million tons of cane crushed in the 2009-'10 harvest. Foreign control of Brazilian ethanol and sugar companies is now up to 22 percent, not including the latest deal between Petrobras and French controlled Guarani Sugar and Ethanol Group. “Trailing all this activity is a series of events that became more noticeable in the first decade of the new millennium, with the industry in Brazil functioning freely and without government controls,”

Velasco said. “This has truly been the decade of the rise of the cane industry, with efficiency and productivity gains that could only have occurred in a free market environment.” EP Luke Geiver and Holly Jessen are associate editors of Ethanol Producer Magazine.

Reach Geiver at (701) 738-4944 or lgeiver@ bbiinternational.com and Jessen at (701) 738-4946 or hjessen@bbiinternational.com.

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FINANCE

BEATING

BANKRUPTCY For ethanol plants in financial distress, the way out can seem almost impossible, but several plants this year have negotiated a path through reorganization.

By Luke Geiver

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he era of emergence has officially started. Over the past year, several bankrupt and idled ethanol plants have come back online or started the journey to recovery, successfully rebounding from thin crush spreads, bad profit margins and volatile corn prices. Although the threat of bankruptcy still looms for some, the number of plants exiting from the Chapter 11 bankruptcy reorganization process demonstrates the industry is seeing greater financial stability.

Pointing to the unfavorable market conditions of high corn prices and low petroleum costs that eventually pushed many other facilities into bankruptcy, Aventine Renewable Energy Holdings Inc. announced this spring that it had not only emerged from Chapter 11 reorganization, but would also resume construction at two, nearly complete, 80 MMgy facilities in Nebraska and Illinois.

Like Aventine, Pacific Ethanol Inc., has nearly completed a reorganization process that will reduce the debt of the company.

After halting production at all but one of five ethanol plants in 2009, Pacific restarted operations at its 60 MMgy Burley, Idaho, facility this spring. In Texas, 110 MMgy Plainview Bioenergy has resumed operations and is producing at full capacity after parent company, White Energy emerged from bankruptcy in March. The former Renew Energy plant in Jefferson, Wis., also resumed full operations after Valero Energy Corp. purchased the 110 MMgy corn-based ethanol plant in January 2010. The Renew plant filed for bankruptcy and, unable to successfully reorganize, eventually was sold to Valero for $72 million.

Another oil company, Sunoco Inc., purchased a 100 MMgy bankrupt plant in New York for $8.5 million. The former Northeast Biofuels plant is currently Brad Kruse being retrofitted by lawyer for the ICM Inc., and will Bankruptcy and start operations in Renewable Fuels practice group, the fall of 2010.

BrownWinick While some struggling facilities ultimately sold out, as did the owners of the Renew and Northeast Biofuels plants, many others attempt to survive and maintain a majority stake. Jeff White, former CEO of Renew Energy, says maintaining majority ownership is difficult: “No one trusts the debtor.” White ex-

'The plant’s technologies are assets that, if shutdown, can’t be showcased.'

Brad Kruse, BrownWinick

plains many other factors contribute to the difficulties associated with successful reorganization under Chapter 11, yet the stories of others show there is a way out.

Keys to Survival While every plant faced the same unfavorable market conditions, Bradley Kruse, a member of the bankruptcy and renewable fuels practice group at BrownWinick law firm, says plants normally have different levels of financial distress when they enter into Chapter 11 proceedings. “Predicting what will happen in the process is very difficult,” Kruse says. “It’s on a case-by-case basis, and almost everyone that enters will try reorganization ETHANOL PRODUCER MAGAZINE

July 2010

FINANCE

first.” Even before officially filing, nearly $90 million due to the facility’s White says a plant should prepare ability to maintain operations while for the hard times to come. “Accept in Chapter 11. Whether the plant the bankruptcy as early as you can is seeking new investors or simply in order to get debtor-in-possession hoping to sell for a premium price, financing,” White recommends. “If maintaining an operational status will you spend all your money before you positively affect the outcome, even get to bankruptcy, you have no lever- though it costs money every day to age.” keep running. “You will sell for more For White, this is the first step if you stay open,” White says. of the process—preparing and sav“The plant’s technologies are asing before officially filing. By reserv- sets that, if shutdown, can’t be showing a portion of capital, a plant will cased,” Kruse says. The visual of a have the ability to slow down the re- running plant indicates to investors organization process with the bank what’s not working at a plant, and or lenders because the plant will still more importantly, what is working, be able to pay the bills. Avoiding a White says. “If a plant is operating loan request just to remain in opera- at full capacity and does have a few tion allows the debtor to obtain an- bugs, shutting down the plant will other loan or additional financing. By only halt the process of locating and maintaining cash instead of exhaust- fixing those problems.” A halt in oping all capital before filing, a plant has erations also means a plant may lose a better chance to effectively negoti- another key asset, existing employate with a bank and find a way to suc- ees. cessfully reorganize without losing Although the easiest path to everything through liquidation. emergence is to maintain operational Kruse says there are other ave- status there are other options. In the nues a plant can take to avoid liquida- event a plant totally shuts down as did tion as well. Automatic stay provisions many of the former VeraSun plants prohibit a creditor from collecting a after it filed bankruptcy in 2008, othdebt which gives the debtor room to ers can assume management in the breathe, and executory contract pro- interim. During the VeraSun bankvisions allow the debtor to cancel un- ruptcies, Hinz says that some of the favorable future contracts banks found themselves for commodities. Ultimateowning ethanol assets that ly, White and Kruse both they had to do something say that slowing down the with. While they figured process is crucial for the out what to do, ICM was plant’s survival. brought in to maintain The most important the plants. “We protected thing a plant can do to the human assets and the avoid a total loss is to do physical assets so that what the plant most likely when the plants were ready Trevor Hinz, does best—run. Trevor director of to go again, they would be buisiness and Hinz, director of business development, ICM ready to come back onand development for ICM line,” Hinz says.

Inc., says the underlying During a shutdown reason for many recent period, Hinz says ICM will bankruptcies was not operating defi- create an individual plan for each faciencies at the plants. White explains cility. Then, members from ICM will that the Jefferson plant, which was go the facility and perform needed initially valued at roughly $9 million, tasks ranging from general maintewas purchased by Valero Corp. for nance to employee updates on the

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status of the plant. In some cases, Hinz says ICM can inherit an existing staff and in others, may bring in extra staff for special needs. With ICM currently retrofitting a New York plant for the new owner

86

Sunoco Oil, Hinz says that as more and more refiners get into the industry, the industry will grow and learn from them (refiners). “We will become a more sophisticated industry,” Hinz says.

Avoiding the Past Growing into an industry that is more highly evolved, or “sophisticated” is exactly what White believes will prohibit a repeat of past bankruptcies among etha-

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FINANCE

'You better be ready for another rainy day, because we (the industry) will have another rainy day.'

Jeff White, former CEO, Renew Energy

nol producers. Although crush spreads are currently favorable for most facilities, a down cycle is always on the horizon. “We will go through cycles where margins get better,” White says. “And then you have more supply again and subsequently, margins get shrunk again. Anytime the supply and demand are close together the industry will cycle downward, but with growth, the bad times won’t be as bad.” Growth in White’s view means two things. One, developing and employing the most qualified and skilled people with a background in the industry. And two, creating a plan that

prices margins by including both the price of corn and ethanol into the equation.

“Personnel overall is a small cost in the big picture,” White says. He attributes a large portion of the success in the sale of the Jefferson plant to the fact that he brought in a team of individuals that had an extensive background and skill set for each required position. “Many plants under invest in people when they should be finding the best out there.” White explains that a $300 million ethanol company is no different from a $300 million company in a different industry. While the non-etha-

nol company most likely has a top level, highly skilled employee or set of employees, most ethanol plants simply promote from within without ever attempting to locate more qualified individuals.

Even with the most highly qualified people running the plant, White says that a plant can’t be successful no matter who is running it, if speculation exists. “A plant needs to make a plan that includes the price of corn and the price of ethanol while pricing margins.”

With a string of record ethanol output production numbers dating back to October of 2009, the positive trend for producers is clear. But as White points out, this may not always be the case. “You better be ready for another rainy day, because we (the industry) will have another rainy day.” EP Luke Geiver is an associate editor of Ethanol Producer Magazine. Reach him at (701) 738-4944 or lgeiver@bbiinternational.com.

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ENGINES

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A Boost to the

System A team of engine developers from Ricardo Inc. has downsized a standard engine using ethanol-infused technology. The result: a smaller engine with huge gains.

By Luke Geiver

ETHANOL PRODUCER MAGAZINE

July 2010

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he move to downsize wouldn’t normally indicate that something big is on the way, but a team of engine developers from Ricardo Inc. is showing that in the ethanol industry, less may actually mean more. For over a year the team from Ricardo, in partnership with Growth Energy, has been developing an ethanol boost direct injection (EBDI) gasoline engine. Weighing 400 to 500 pounds less than a comparable diesel engine, the EBDI engine grew out of an interest in ethanol fuel properties and the idea of engine efficiency gained through downsizing. The nearly complete EBDI project combines fueling strategies, combustion control and ethanol boosting technology.

The result: a smaller, more efficient engine optimized for ethanol that will provide better fuel economy and performance than a flex-fuel engine.

To demonstrate that these mileage gains and performance enhancements are truly happening, Growth Energy provided Ricardo with two GMC Sierra 3500 HD trucks (each with a curb weight of 6,000 pounds).

The Ricardo team began recording data on

the trucks with the standard engines intact.

At the current stage of testing, the team has substituted the 6.0-liter V8 gasoline engine—standard in the vehicles—with a smaller EBDI-infused 3.2L V-6 and begun testing their work. “We are trying to go to the extreme end of the downsizing spectrum,” says Rod Beazley, product group director for Ricardo’s spark ignited engine department.

“We wanted to see how much we could gain in both fuel economy and performance.”

Beazley, who initially started the ethanol based engine project, says the substituted EBDI provides vastly superior performance to the standard gas engine based on tests already completed.

Ricardo’s technology utilizes the latent heat of vaporation and the high octane rating of ethanol fuel to create fuel economy improvements up to 30 percent. “What we are seeing is engine technology catching up with fuel technology,” says Chris Thorne, director of public affairs for Growth Energy.

“This is an example of an engine leader saying they can make the leap.”

The leap for Ricardo meant designing a cutting-edge engine based on a combina-

Rod Beazley product group director, Ricardo

Luke Cruff chief engineer, Ricardo

tion of pre-existing technologies, using a fuel commonly associated with less-than-optimal fuel mileage. “One of the biggest challenges we dealt with was pushing the limits of current base engines,” says Luke Cruff, chief engineer of the group. “There were constraints because of what is currently used.” Thorne points out that what currently exists in most vehicles, standard engines with low blends of ethanol fuel, was a trend that the team from Ricardo was not afraid to move away from.

“Most flex-fuel vehicles just have a minor tweak. None of them have been optimized for fuel (ethanol) qualities,” he said.

Engines such as the standard 6.0L V8

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the team removed from the 1- ton demonstration truck have problems linked to what the Ricardo team calls â&#x20AC;&#x153;overfueling.â&#x20AC;? To overcome this problem Beazley Rod Harris says the team changed chief engineer, and upgraded most of Ricardo the major architectural components in the 3.2L V6 engine.

Cruff explains that the â&#x20AC;&#x153;overfuelingâ&#x20AC;?

Beazley refers to happens because a typical blend of gasoline does not provide the high octane rating or have the cooling capability of ethanol blends. As the engineâ&#x20AC;&#x2122;s cylinders build more pressure and take in more air, the cylinders become octane thirsty. The implementation of a fuel with a high latent heat of vaporation like ethanol acts as a cooling agent, reducing the temperature when the cylinders start to get â&#x20AC;&#x153;thirsty.â&#x20AC;?

With most engines, as the temperature rises in the cylinders, the probability of engine knock increases. The engine knock occurs

PHOTO: CHRIS RAMIREZ

ENGINES

Growth Energy has worked with Ricardo on the EBDI engine since the project first started.

as oxygen pushed into the cylinder heads detonates off the spark and high temperatures, and for most engines to reduce the knock means lowering that temperature

in the cylinders. Without the reduction of the knockâ&#x20AC;&#x201D;that pinging sound car owners sometimes hear under high load operationâ&#x20AC;&#x201D;the pressure and torque created in

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ENGINES

Another Approach to Direct Injection Ricardo is not the only team utilizing ethanol’s cooling power in engine development. A group of former Massachusetts Institute of Technology colleagues, now working under the name, Ethanol Boosting Systems LLC, has developed a similar engine. “We have been working for about 10 years on ways to improve the efficiency of gasoline at an affordable cost,” says Daniel Cohn, co-founder of the company. “We want engines that everyone can afford to buy.”

After forming a relationship with Ford Motor Co., Cohn says they began testing their idea through computer modeling at MIT. The results of the testing revealed one thing, according to Cohn: ethanol’s ability to suppress unintended knock is tremendous. “If you pour alcohol on your arm, it cools your arm,” Cohn sites as an example. “The same process happens within the engine when using ethanol.” The MIT colleagues are developing a downsized engine that produces torque levels equal to those of larger engines. Cohn explains that through the use of the ethanol booster technology his team has developed, a typical V8 5.0-liter engine could be replaced with a 2.0L engine, ultimately resulting in a 25 percent gain in efficiency at one-third the size.

EBS’s direct injection (DI) alcohol-boosting engine incorporates a small volume of ethanol fuel taken from a separate ethanol tank, and injects the ethanol into the cylinders at the desired time. The team is still running tests on the engine and estimates the DI system will cost roughly $1,500. “We want to minimize the gallons put in the secondary tank used for the injection system,” Cohn says. One important aspect of the engine is the potential for use in current flex-fuel vehicles. Cohn says the DI engine makes flex-fuel cars more attractive as the engine could draw from the E85 tank, for use in the injection process.

Cohn says his team started with the question, “Why not use ethanol capabilities to make this happen?” In the latter stages of the process, it seems ethanol may have always been the answer.

the cylinder heads cannot remain at the intended level, and the result equals a loss in power, performance and the reduction in fuel economy as more fuel is needed to lower the temperature.

Beazley says with the EBDI system, the engine doesn’t have to introduce extra fuel to keep the components cool because of the ethanol cooling agent the system injects into the cylinders. “We are focusing on improving thermal efficiency,” Cruff says. The EBDI takes advantage of engine control algorithms that detect both the amount of needed ethanol and the proper time to inject the fuel. Along with the injection system, the engine uses

an exhaust gas recirculation system that helps to control the temperature levels of the engine and the tailpipe emissions.

The combination of the ethanol injector technology, exhaust gas recirculation system, and the ability to measure how much of the ethanol is needed at a particular time has the Ricardo team excited about the implications of their work. Beazley says the project started out of his interest in the octane rating of ethanol, and now has Ricardo President Kent Niederhofer willing to say that the EBDI could eventually replace conventional engines.

Rod Harris, another chief engineer

ETHANOL PRODUCER MAGAZINE

July 2010

PHOTO: CHRIS RAMIREZ

ENGINES

The Ricardo Engine was unveiled earlier this year at a Washington, D.C. event by, left, to right, Gen. Wesley Clark, Poet CEO Jeff Broin, Growth Energy CEO Tom Buis and Ricardo President Kent Niederhofer.

working on the engine, points to the performance numbers as a reason to agree. “There is an extreme level of performance with this engine. The EBDI engine using E85 will produce 900 newton meters of peak torque with 450 plus horsepower while a regular engine using pump gasoline will produce 775 newton meters of peak torque with 400 horsepower,” Harris says.

And the performance gains aren’t limited to one type of ethanol blended fuel or one size of engine according to Harris. “We think this technology is scalable. We can take the engine technology and scale it down to fit a passenger car,” Harris says. “The goal is to run on whatever fuel the engine has been given. EBDI controls the fueling, the spark timing, and the EGR rate. Ultimately, no matter what blend of fuel, the engine will always be running at an optimal level.”

The multiple application possibilities of the EBDI system also have Growth Energy enthused by the implications of what the Ricardo team has created. “You could put the technology in a tractor, a bus, the back of a skid steer and it is much more cost effective than a diesel,” Thorne says. After starting the research, the Ricardo team recognized early on that their work could reach a wide spectrum of vehicle owners. To ensure that the technology will function and perform to the team’s desired level, the GMC trucks are ETHANOL PRODUCER MAGAZINE

now being put to the test outside of the lab. “We wanted to get this into running demonstrator vehicles,” Beazley says. He explains that although the current testing results speak for themselves, there are still those who doubt the achievements of the EBDI. A trip to the 2010 Washington Auto Show helped to cure that problem.

“At the show people were curious,” Thorne explains. But like many people who didn’t attend the show, Thorne says, there were also those who doubted the ethanol optimized engine. “All they had to see was the return on the mileage and they were onboard.”

In early fall, the team will have completed final testing on the engine in the heavy duty trucks, testing they say will solidify what the engine can do. In store for the engine this summer is a range of tests including extreme climate conditions of arid, desert situations and below-zero temperatures, as well as city stop-and-go driving. Until the testing is complete, the team plans to showcase their technology with one goal in mind. “Getting our message out to a broader audience is what we are trying to do,” Beazley says. EP

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Luke Geiver is an associate editor of Ethanol Producer Magazine. Reach him at (701) 738-4944 or lgeiver@ bbiinternational.com.

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Anyone working in the ethanol industry has heard the joke about drinking their work. For a few, however, ethanol for human consumption is no laughing matter.

By Holly Jessen

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n the United States, about 12 billion gallons of fuel ethanol was produced in 2009. In the same year, beverage alcohol totaled only about 1.2 billion gallons. That number includes 905 million gallons of wine and beer produced in the U.S. plus another 337 million gallons of distilled spirits bottled in the U.S. for domestic use, according to Alcohol and Tobacco Tax and Trade Bureau records.

Looking at the two industries side by side brings up a question.

Could an ethanol plant already producing fuel ethanol also produce ethanol to drop an olive in and drink out of a martini glass? Johannes “Hans” Van Leeuwen, professor of environmental and biological engineering at Iowa State University, thinks ethanol plants should reach out and grab a share of the alcohol market. “It’s nothing to be sniffed at,” says the researcher, who’s working on perfecting a way to purify raw ethanol for beverage purposes.

A few ethanol producers are already making it work. Chippewa Valley Ethanol Company in Benson, Minn., has been producing vodka alongside fuel and industrial grade ethanol since 2002. Ethanol producer Archer Daniels Midland Co. produces both fuel and beverage alcohol—vodka and gin—from corn.

The amount of ethanol for human consumption produced

by CVEC is just a drop in the bucket compared to the total U.S. numbers. The ethanol plant’s nameplate capacity is 45 MMgy, but Mike Jerke, general manager of CVEC, won’t say exactly how that’s divided among fuel, industrial ethanol and alcohol to drink. “The vast majority is fuel and continues to be fuel,” he

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PHOTO: CVEC

Drink It or Burn It

The ethanol plant in Benson, Minn., is well known for also producing vodka.

says. “But we have seen some really nice growth in the specialty areas.”

The plant’s first foray into the world of alcohol for human consumption was with Shakers, the premium vodka it produces for Infinite

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July 2010

PHOTO: CVEC

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CVEC-produced Shakers Vodka comes in two flavors, rye and wheat.

Spirits. “It’s a good vodka,” says Jerke. “I think anybody that has done a little tasting would recognize that.”

Besides Shakers, CVEC also produces ethanol for about half a dozen other companies that use it in various whiskies, vodkas, flavored vodkas and bourbons. Recently, the plant went though the rigorous certification process to produce certified organic products, such as CROP Organic Vodka and Prairie Organic Vodka, he says.

At CVEC, the fermentation pathways for fuel, industrial ethanol and beverage ethanol are very different, starting with the feedstocks.

The plant takes in No. 2 field corn for fuel and industrial ethanol production, as well as rye and wheat to make two separate flavors of vodka, and organically grown corn for Prairie Organic Vodka, Jerke says.

Fermentation of fuel ethanol and industrial grade ethanol does sometimes overlap for part of the process. However, for the most part, fermentation of the different types of alcohol is quite different, though Jerke didn’t specify how. “It’s considerably more involved for the industrial side and an additional step further for beverage grade,” he says. Despite those limiting factors, the plant does have some flexibility to shift production, depending on profit margins. Producing alcohol for more than one use helps CVEC mitigate risk. “I think that’s the key,” Jerke says. “Diversification really is the key in our industry, with as volatile as commodity markets are.”

Production of beverage alcohol requires a distilled spirits permit, which CVEC has through its company Glacial Grains Spirits LLC. The permit allows CVEC to ship an undenatured, consumable product, so the vodka can be bottled and labeled off site. A distilled spirits permit is quite different from a fuel ethanol permit, according to Art Resnick, di-

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rector of public and media affairs for the Tax and Trade Bureau. “The procedure to qualify as a distilled spirits plant is a lot more complex than that required of an alcohol fuel plant,” he tells EPM. The vodka and gin produced by Archer Daniels Midland are all made from the same corn that is used to make fuel, Beth Chandler, company spokesperson, told EPM. The ADM plant in Peoria, Ill., produces fuel, industrial grade alcohol and a high-proof grain neutral spirit that is used as a stock to make beverage alcohols like vodka. The plant in Clinton, Iowa, has the capability of producing fuel alcohol as well as vodka and gin, although currently the plant is making gin from beverage alcohol shipped in from the Peoria plant. “One of the benefits of producing both fuel and beveragegrade alcohol at one plant is that the milling and feed processing part of processing the corn can be shared for a number of different grades of alcohol products,” Chandler says.

In all, ADM produces a total of 24 products from corn, including food ingredients, animal feed, fuel ethanol and beverage alcohol.

All the products are made by separating No. 2 dent field corn into corn oil, for cooking

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PHOTO: IOWA STATE UNIVERSITY

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Lingshuang Cai uses her nose, along with gas chromatograph-mass spectrometry, to separate and identify various impurities in commercial alcohols and raw ethanol.

oil; corn fiber and hulls, for animal feed; corn gluten, used in poultry feed; and corn starch, which is converted into dextrose, a sugar. Besides being the main ingredient for ethanol, dextrose is used to make high fructose corn syrup to sweeten soft drinks and baked goods or xanthan gum to provide body, texture and stability in things such as salad dressings, gra-

vies and sauces. Dextrose is also used to make biodegradable plastics at the company’s first commercial bioplastics facility, which is colocated with the ethanol plant in Clinton, she says.

ADM isn’t the only big name ethanol company that has experience producing ethanol for multiple uses. In the 1990s, Abengoa

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Bioenergy, then High Plains Corp., made a beverage product at its ethanol plant location in York, Neb. “We later decided that our future was in fuel ethanol rather than beverage,” says Christopher G. Standlee, executive vice president of Abengoa, “and the additional distillation equipment used for the industrial and beverage quality alcohols was removed and moved to another plant for expansion purposes there.”

The World’s Purest Vodka Around six hours south of CVEC’s plant, startup company Mell O3z LLC (pronounced mellows) has developed a patent-pending process using ozone and granular, activated carbon to remove impurities from diluted neutral grain spirits, or ethanol. Mell O3z’s concept is that a standard fuel ethanol plant could, after further distillation, use its process for purification and market undenatured corn ethanol as the purest vodka on the market. “That sounds like snake oil talk, but I can tell you that there are good scientific reasons for making that statement,” says Van Leeuwen, vice president of Mell O3z.

In the U.S., chlorine is used for 95 percent of disinfection and purification, while in Europe, ozone is more widely used. Since he’s familiar with the use of ozone for purification, Van Leeuwen started with cheap brandy and whiskey, “really rotgut stuff,” he says, and used ozone to turn it into something not exactly high class, but drinkable. In other words, although the process won’t turn a $5 bottle of alcohol into a $30 bottle, it will improve the $5 bottle. “You can get from $5 to $10 with our process, with only pennies,” he says, adding that the process can be used with multiple feedstocks for the manufacture of vodka as well as other items like cough syrup and mouthwash.

Van Leeuwen is working with Jacek Koziel, an ISU associate professor, and Lingshuang Cai, an analytical chemist, to analyze raw ethanol on a chemical and sensory level in novel ways. From a chemical standpoint, Koziel says, there are a lot of similarities between the aromatic compounds in wine and hog waste, both substances he has analyzed in the lab. For example, a chemical and sensory analysis of a commercial alcohol might identify sulfur containing compounds producing a skunky sewer-like odor, leftover volatile fatty ETHANOL PRODUCER MAGAZINE

acids that smell like body odor or phenolics that give a barnyard or smoky smell.

In the lab, researchers compared 13 commercial vodkas to the new product, purified by ozone, Cai says. One very smelly vodka contained as many as 49 impurities—including some that are simply not healthy for a human to ingest. Although the researchers were careful not to say a brand name, they did say the product is very expensive vodka. The majority of the vodkas didn’t smell quite so bad and contained about 20 to 30 impurities. Only two had about 10 impurities. “There are a lot of bad smells from those commercial vodkas,” Cai says.

Smell is very important to taste, Van Leeuwen says. While the mouth is only sensitive to four or five of the most basic flavors, the nose is actually very sophisticated. Everything else humans taste is done through the nose. “It’s ultimately up to the consumer to evaluate something with their noses and decide if they will buy it or not,” Koziel explains.

July 2010

There’s still more work to be done. The technology works in a lab scale and a small pilot scale. The next step, Koziel says, is to ramp it up to full pilot and commercial scale. “We think we know how to bring it up to the next level,” he says. “The core of technology is there.”

Negotiations to commercialize the technology in the U.S., Canada and Mexico are ongoing, Van Leeuwen says. Although they’re not ready to release details yet, Mell O3z is working with a company in California that wants to commercialize it. The goal is to work with an ethanol plant in Iowa that is currently making fuel ethanol, and convert the plant to ethanol production for human consumption. In the future, other ethanol plants could potentially add consumable ethanol as a value-added product for a relatively low cost. “We all know that booze costs a lot more than gas does, so there’s obviously a big benefit,” he says. EP Holly Jessen is associate editor of Ethanol Producer Magazine. Reach her at (701) 7384946 or hjessen@bbiinternational.com.

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CO-LOCATION. BY FRANCES WILLIAMS

PHOTO: INBICON

Contribution

Cellulosic ethanol developer Inbicon has a plant co-located with its parent company, Danish power producer DONG Energy.

Cellulosic Ethanol and Power Plant Co-Location: Savings in Synergy Feedstock sharing, cost savings and regulatory compliance are among the benefits in co-location.

A

s the world continues to focus on cellulosic ethanol as a renewable and sustainable source of energy, efforts within the biofuels industry to make it more commercially viable are increas-

ing. Biomass feedstocks are in abundant supply, and the reduction in CO2 emissionsâ&#x20AC;&#x201D; up to 90 percent compared to gasolineâ&#x20AC;&#x201D;is impossible to ignore, as is the potential of cellulosic ethanol to boost energy independence and create

jobs. Recent improvements in process technology and production costs have many companies pursuing the dream of bringing this advanced biofuel to market.

One promising strategy for making cellulosic ethanol

economically viable is the colocation of an ethanol facility and a coal-fired power plant.

There are significant economic and environmental benefits for both industries when they are tied together in the same location in the form of feedstock

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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Chart 1

Efficiency Comparison Biomass Co-Firing

Base case

Coal 2300 MW

Power Plant

Power 966 MW

Coal 2070 MW

Power 869 MW

Power Plant 75 MW Heat 115 MW

Biomass 420 MW (2000 Metric-ton/day)

Residue 230 MW

Ethanol Plant

Green Power 58 MW

17 MW Ethanol 63 MMgy

Economic Assumptions: Net earnings: - Savings in coal consumption (80 cents/gigajoule) - Power selling price (30 USD/MWh) - Green electricity premium ($30/MWh) - Ethanol sales

Net cost: - Biomass purchasing - 2nd-gen. ethanol plant excluding CHP ($205 million) - Power plant retrofit and tie-in ($22 million) - Other 2G plant operating cost (91 cents/gallon ethanol)

The above diagram illustrates co-location with a medium-sized coal-fired power plant. A portion of the normal coal input can be replaced by the lignin byproduct of the biomass ethanol production and generate cleaner electricity as well as higher value liquid biofuels.

SOURCE:NOVOZYMES

sharing, cost savings and regulatory compliance.

When a power plant is co-

located with a cellulosic ethanol facility, it can take advantage of co-firing lignin in its coal boilers

ETHANOL PRODUCER MAGAZINE

July 2010

to produce electricity. Ligninâ&#x20AC;&#x2122;s clean-burning properties and high BTU levels make it an ef-

fective power source, one that results in much lower carbon emissions than those produced

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CO-LOCATION. BY FRANCES WILLIAMS Chart 2 400

300

NPV (million USD)

Net Present Value 200 NPV co-f iring, GE Premium=$30 /MWh 100

0 1

1.5

2

2.5

3

3.5

NPV Ethanol/Power Plant co-location, GE Premium=$30 /MWh NPV co-f iring, GE Premium=0 /MWh

-100 NPV Ethanol/Power Plant colocation, GE Premium=$0 /MWh

-200

(GE= green electricity) -300

-400

Ethanol Price (USD/gallon)

- Internal rate of return=10% (above inflation) - 20-year pay-back - 10-year accelerated tax deduction scheme

Models suggest that a coal-fired power plant direct co-firing biomass will suffer a loss (dashed green line) unless the green electricity (solid tan line) revenue is high. Above $2.35 per gallon of cellulosic ethanol produced in a co-located plant, the power supplier profits (dashed black line). With a green electricity credit, profits are realized at $2.10 per gallon (solid brown line). No subsidies on feedstock or ethanol are assumed.

SOURCE:NOVOZYMES

102

by burning coal. This environmental benefit is increasingly relevant in light of the current renewable portfolio standards (RPS) found in state regulations that could become part of federal policy in the future. An RPS requires electricity providers to produce a certain percentage of power from renewable energy sources within a set timeframe. There are currently 30 states, including the District of Columbia, with some form of RPS, with goals ranging from 10-50 percent of electricity produced from renewable sources within the next 20 years. Eligible sources of the renewable energy include hydro, wind, solar, geothermal and biomass. There are some clear benefits of RPS policies: Improved energy security Reliable energy delivery Protection against fossil fuel price and supply volatility Environmental effects—improved air, soil and water quality Despite the fact that power plants moving towards increased “green electricity” production will pay more to purchase biomass than coal, an effective colocation setup can result in profit for both the electricity and ethanol producers (See Chart 1). Lignin—which is of significant value to the power plant—is basically a byproduct for the ethanol facility that must either be turned into landfill waste or burned into steam and electricity at a relatively high cost. A similar tradeoff occurs when the power plant’s excess steam and electricity (which is currently wasted) is sold to the ethanol plant. This exchange allows the ethanol producer to realize a significant capital cost savings— up to one-third—by avoiding the need to invest in onsite cogeneration equipment, including a lignin-fueled boiler and turbine generator system.

Besides these environmental and economic advantages, other benefits to the power plant include the following:

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July 2010

A more cost competitive power supply Capacity increments that meet load growth Portfolio diversity Cynthia Bryant Increased loglobal business cal control of supdevelopment manager, ply assets Novozymes Co-location is of significant value to the cellulosic ethanol plant both through direct cost savings and operational efficiency. In addition to the previously mentioned reduction in capital and equipment expenses, the plant can save in areas such as labor, warehousing, site development, and energy and fuel costs.

There is also great potential for flow integration, value-added waste stream recovery, and the sharing of management and overhead expenses. Other benefits include additional industrial infrastructure and a market for the lignin byproduct.

Furthermore, onsite generation results in a more reliable and affordable supply of both power and steam. Co-location also further reduces the carbon footprint of an ethanol plant and allows it to be more competitive via its decreased operating costs.

In addition to these synergies, colocation of ethanol and power plants contribute significant economic development to their community in the form of new jobs.

A recent Novozymes case study explored various co-firing and co-location production scenarios. (See Chart 2) Our process modeling showed that in situations where a green electricity premium of $30 per MWh is charged, an ethanol price of approximately $2.10 per gallon (before any ethanol subsidies) is the break-even point for a co-location producer. Ethanol prices above this amount will allow the

ETHANOL PRODUCER MAGAZINE

July 2010

producer to make more money producing ethanol from just the cellulose and hemicellulose (and burning the lignin separately for power) than by burning the whole biomass feedstock. This same model showed that when no green electricity premium is included, the break-even price for the cellulosic ethanol is approximately $2.35 per gallon (pre-subsidy).

With plans in place for a growing number of bio-electricity plants, there is some concern about competition for biomass feedstock between power and cellulosic ethanol producers. Experts at Novozymes are not subscribing to this theory. Cynthia Bryant, global business development manager, explains: â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t see this as an either/or situation. Instead, we believe that it is feasible to optimize the feedstock to meet the needs of both the ethanol and

electricity industries. When effective colocation strategies are put into place, any increase in startup costs is well worth the investment because of the higher return in the end.â&#x20AC;? EP Frances Williams is a communications specialist at Novozymes. Reach her at frwi@ novozymes.com or (919) 494-3048.

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ANAEROBIC DIGESTION. BY RYAN JOHNSTON

PHOTO: BIOMETHANE

Contribution

The Biothane instrumentation and control skid includes reactor pumps, a chemical pump table and touchscreen control panel.

Anaerobic Treatment at Ethanol Facilities Anaerobic digestion is an effective system to treat waste streams and produce renewable energy for ethanol plants.

E

nergy use is a primary cost consideration for ethanol producers. It is crucial that a modern ethanol facility find ways to reduce energy costs to minimal levels, increasing the plantâ&#x20AC;&#x2122;s positive net energy balance in order to increase profit margins. For this reason an increasing number of ethanol facilities are installing energy-producing anaerobic digestion systems. Anaerobic digestion is an ideal fit for the ethanol

industry, converting waste streams inherent to the ethanol production process into sources of renewable energy, while reducing the carbon footprint of the facility.

Anaerobic technology relies on the conversion of organics into a biogas rich in methane. The concept of anaerobic digestion is not a new one; cultures around the world have harnessed the power of methane gas for centuries. In the late 1800s, for instance, the British town of Exeter and the In-

dian city of Bombay were drawing gas from local waste sources to use as a fuel for gas street lamps.

Since then, advances in science and technology have led to new, highly-efficient anaerobic processes housed in cost-effective, emission-free digestion systems, which offer many advantages to those producing ethanol. While many people are concerned about odor, modern designs allow for a completely sealed digester, which creates an odorless anaerobic sys-

tem for a pleasant operating environment and happy neighbors.

Anaerobic Digestion for Ethanol Production A number of waste streams in ethanol facilities require cleanup.

Evaporator condensate streams, dryer/scrubber streams, and any number of other miscellaneous waste streams specific to a given facility must be treated. Aerobic systems are one possible solution, but the drawbacks of this technol-

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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PHOTO: BIOMETHANE

ogy significantly reduce their costeffectiveness. One issue is that they produce a very high amount of sludge which must be constantly conditioned and disposed of, a process which requires energy, time, effort and an investment in specialized equipment. Aerobic systems also require massive amounts of energy to operate and sustain. As energy use is already a primary concern of todayâ&#x20AC;&#x2122;s ethanol producer, it makes little economic sense to install a system that requires large amounts of energy to operate, particularly when other, better options exist.

Anaerobic systems are a far more effective solution, and are not susceptible to the problems aerobic systems face. Rather than act as an energy draw, anaerobic systems produce renewable, methane-rich biogas for the facility, often generating more energy than

This 14-foot diameter reactor was custom-built and shipped to an ethanol facility in Kansas for the treatment of evaporator condensate stream.

the system requires. Anaerobic systems also convert influent organics almost entirely into methane and CO2, generating very little excess sludge in the process. The high organic load in the waste streams of ethanol facilities makes

ETHANOL PRODUCER MAGAZINE

July 2010

this water particularly well-suited to an anaerobic process.

For these reasons, high-rate anaerobic treatment systems have become a standard feature in ethanol facilities. In addition, effluent from anaerobic treatment systems

can often be recovered and returned to the ethanol production process, lessening the facilityâ&#x20AC;&#x2122;s water demands.

Thin Stillage Digestion Water is no longer the only

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ANAEROBIC DIGESTION. BY RYAN JOHNSTON source of anaerobically-treatable waste in ethanol facilities. In recent years, the demand for renewable, sustainable energy combined with the fluctuation of corn syrup costs in the marketplace has put new pressure on ethanol producers to find new, more cost-effective sources of energy. This market pressure has led to innovation by Biothane and companies like it, opening the door to the anaerobic treatment of thin stillage.

Thin stillage is a natural byproduct of the

biomass fermentation process, generated during the centrifuging of whole stillage out of the first distillation column. As a general practice in an ethanol operation, some of this stillage is used as back-set for the facility’s cooking steps.

But the remainder of this thin stillage has traditionally been delivered to an evaporator, which concentrates the liquid into corn syrup. The corn syrup is then either sold as-is or is added to the distillers grain, which is then dried and sold as distillers dried grains with solubles.

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This method of handling thin stillage has two primary drawbacks. First, evaporating thin stillage is energy intensive, and creates yet another high-energy-related cost for the ethanol facility. Second, the price of corn syrup fluctuates. As the cost-effectiveness of thin stillage evaporation relies on a certain minimum price point for corn syrup, evaporation has become an unreliable and often economically unsound treatment method.

Luckily, thin stillage is rich in organics, and can easily be converted anaerobically into a source of renewable, sustainable biogas. For this reason, anaerobic systems can often provide a more reliable, cost-effective process for treating thin stillage. In addition to generating energy, the solids extracted from the thin stillage treatment system’s effluent can be sold for use as an effective soil conditioner. As an additional benefit, many states now offer renewable energy credits, awarded to companies that offset their use of the grid with renewable energy they produce themselves.

Of course, anaerobic treatment of this stillage is not always the best solution. Occasionally, energy costs are low enough, and the demand for distillers dried grains with solubles and corn syrup is high enough, that evaporation and resale of these byproducts provides a greater value than the energy savings recognizable through anaerobic treatment. Ethanol producers should take care to work with a reputable, knowledgeable supplier of anaerobic technology to determine whether a particular thin stillage stream is an economically-viable source of energy for a particular facility.

Comingled Digestion Some facilities go even farther. A fascinating trend has developed recently where ethanol production plants have been built alongside a dairy or beef cattle operation, for the primary purpose of creating a symbiotic, energy-efficient system between the two utilizing anaerobic digestion. These facilities use comingled, constantly stirred anaerobic digesters to mix the ethanol facility’s thin stillETHANOL PRODUCER MAGAZINE

July 2010

age with manure collected from the neighboring farm or feedlot. The digester creates vast amounts of energy, so much that its output can satisfy 70-90 percent of the ethanol plant’s entire energy demand. This kind of enormous reduction in energy costs leads to rapid payback for the ethanol producer, followed by greatly reduced operating costs.

In addition, the plant’s dried distillers grains, no longer mixed with corn syrup, remain an excellent food source for the neighboring cattle.

This closed loop system is both elegant and efficient. Animals generate manure, and ethanol production generates thin stillage. The manure and stillage are fed into a comingled anaerobic digester, eliminating the need for either party to dispose of these waste streams by conventional methods. The digester produces biogas which generates enough electricity to satisfy up to 90 percent of the ethanol facility’s needs. The ethanol facility, in turn, produces dry grain which is fed back to the cattle, which in turn generate more fuel for the digester. The system produces very little waste, and both the ethanol facility and the farm benefit.

suitable for a particular site. No treatment system, anaerobic or otherwise, is appropriate for every single plant.

Biothane, or another known expert in anaerobic digestion, will study your facility’s specific needs and present a plan that ensures your anaerobic systems meet all three of these important criteria. Be sure to talk to people who are operating systems designed by your potential anaerobic technology designer. Verify firsthand that these other facilities are receiving the

benefits they were promised from their system, that they’ve received excellent training, support and post-commissioning service. Capital cost is an important factor, but so is system reliability and long-term support. EP Ryan Johnston is sales leader digestion technologies at Biothane LLC, a business unit of Veolia Water Solutions & Technologies. Reach him at ryan. johnston@veoliawater.com or (856) 541-3500.

Tomorrow today will be yesterday. In order to be successful tomorrow, ethanol producers must maximize value creation from corn today. Buhler has the equipment and process know-how to produce food, feed and fuel from the same bushel of corn. This makes you more profitable today and more environmentally friendly tomorrow. A full line of equipment, combined with in-house process engineering and unrivaled after sale support, equals customized solutions without limits.

Buhler Inc., 13105 12th Ave N., Plymouth, MN 55441, T 763-847-9900 buhler.minneapolis@buhlergroup.com, www.buhlergroup.com/bioenergy

Considerations Before Purchase Because of its numerous benefits, anaerobic treatment has become a mainstay at ethanol plants all over the country and around the world. Digestion systems can be incorporated in the early stages of facility design, or can be added to existing ethanol plants without complication.

When adding anaerobic treatment, a system should be custom-designed and custom-built for the site from the ground up.

There are three important characteristics of any successful anaerobic digestion system: it must be suitable, technically viable, and economically sound. Economically, an anaerobic system should pay for itself over a timeline that makes sense for the facility. The system must be technically viable, designed to handle the biological needs of the facility’s influent, at average as well as peak conditions. Finally, and most importantly, the system must be ETHANOL PRODUCER MAGAZINE

July 2010

The solution behind the solution.

109

WATER. BY MIKE MOWBRAY Contribution

CO2â&#x20AC;&#x201D;A Cost Effective Alternative to Sulfuric Acid in Cooling Systems Captured CO2 from the fermentation process can be used for pH control in cooling water, reducing scale formation.

S

ulfuric acid has been used to reduce alkalinity in cooling towers for decades. By neutralizing carbonate alkalinity with acid, scaling potential is reduced on heat exchangers, and often systems can be run with less

water. However, handling large quantities of acid can be hazardous and requires special permitting. More importantly, the cost and availability of sulfuric acid varies from year to year. In 2009, acid prices were more than double current costs.

World market sulfur prices are increasing, so itâ&#x20AC;&#x2122;s likely that the price of sulfuric acid will be volatile again in 2010.

Using carbon dioxide gas for pH control as an alternative to sulfuric acid can be economically practical in many appli-

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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ETHANOL PRODUCER MAGAZINE

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cations. This is particularly true at fuel ethanol plants which generate CO2 as part of the fermentation process. This gas is vented through a scrubber, where a portion of it can be recaptured for use as a replacement for sulfuric acid.

This recovered CO2 can be injected into the cooling water, where it dissolves in the water to create carbonic acid. The acid formed can replace 60-90 percent of sulfuric acid used in the tower. For a typical 50 MMgy ethanol plant, this can save $15,000 to $35,000 annually at today’s acid prices.

Carbon dioxide doesn’t eliminate alkalinity like sulfuric acid does. Instead, by converting carbonate to bicarbonate alkalinity, the potential for scale formation is significantly reduced. This distinction is important, and can be useful beyond just pH control in many applications.

There are other benefits to using CO2 for cooling water pH control. First, it is less likely to cause corrosion than sulfuric

acid, since CO2 treated water will typically buffer out at a pH of 8.3. It is possible to drive the pH lower with excessive overfeed, but in practical applications, the pH won’t ever go below 6.0, so the chance of an accidental acidification of the cooling water is greatly reduced. Also, reducing sulfuric acid feed reduces the amount of sulfate in your discharge water. Again, using a hypothetical 50 MMgy ethanol plant,

Benefits to CO2 Use

Carbon dioxide influences water pH differently than sulfuric acid. When sulfuric acid is added to water containing carbonate alkalinity, the alkalinity is neutralized, as shown in the following equation:

CaCO3 + H2SO4 CaSO4 + H2CO3 CaSO4 + H2O + CO2 When carbon dioxide is added to water containing carbonate alkalinity, the alkalinity is converted to bicarbonate alkalinity, as shown:

CaCO3 + CO2 + H2O

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ETHANOL PRODUCER MAGAZINE

July 2010

111

WATER. BY MIKE MOWBRAY sulfate concentration in the cooling tower bleed would decrease by up to 200 parts per million, eliminating between 180,000270,000 pounds of sulfate discharge annually.

One more benefit to CO2 injection is seen in plants trying to reduce water discharge through recycling where the introduction of additional contaminants reduces its usefulness. Replacing sulfuric acid with carbon dioxide can provide

more flexibility for water reuse within a plant.

Planning Considerations U.S. Water Services has successfully converted several plants to pH control using carbon dioxide. This experience has yielded several important lessons, the most important one being that CO2 is not a complete replacement for sulfuric acid. A sulfuric acid backup system must

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112

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be available for two reasonsâ&#x20AC;&#x201D;as a failsafe in case your gas feed breaks down for some reason and, because a supplemental acid feed may be required in the summer, due to the reduced solubility of carbon dioxide in warm water. In the winter months, we have found that CO2 is usually sufficient on its own.

Carbon dioxide can be transferred into cooling water by means of either a blower or a compressor.

At the cooling tower, a specially designed injector is used to introduce the carbon dioxide gas into the system. The location and design of the injector are crucial to effective carbonic acid formulation. If multiple towers are treated from the same system, careful balancing of the piping pressure and header elevation is required, because the gas will always go to the point of least resistance. This can be challenging, as the back pressure will change based on water level in the tower basin, pipe length and even temperature. Itâ&#x20AC;&#x2122;s often easier to have a separate feed system for each tower.

Choosing the correct transfer system is also important. Compressor systems are generally the less expensive option, and they can control gas injection over the broadest range of conditions. Downsides for compressors are high noise levels while operating, shorter life time, and higher maintenance costs. In particular, it is critical that all moisture be removed from the CO2 prior to compressing it in the storage tank. Carbon dioxide can dissolve into the water, and form carbonic acid in the bottom of the tank, resulting in tank leaks.

Positive displacement blowers have the benefit of being less maintenance intensive and have a longer

Â&#x2039; 1DOFR &RPSDQ\ 1DOFR WKH ORJR DQG WKH WDJOLQH DQG ' TRASAR DUH WUDGHPDUNV RI 1DOFR &RPSDQ\

ETHANOL PRODUCER MAGAZINE

July 2010

life expectancy. They can be fitted with silencers, which make them quiet enough to have in the main plant area. The downside is the up front cost, which is higher than a compressor system. In addition, the operating range is not as broad, so the blower system must be carefully designed for the application in which it will be used.

the temperature and moisture content of the gas, and the distance that it needs to be transferred. In addition, there are several ways to control the amount of CO2 added to the system. Even the injection header must be designed specific to the plant layout. Depending on the amount of piping required, and the spot market price of acid, the payback can be 12 months or less. As with any project, the

ultimate success will be based on careful design up front, and careful monitoring during operation. EP Mike Mowbray is the marketing and technology manager for U.S. Water Services. Reach him at mmowbray@ uswaterservices.com or (866) 663-7632.

Microbiological Controls One of the concerns of adding CO2 to a cooling tower is the quality of that gas. In an ethanol production process, CO2 is recovered from a fermentation scrubber.

A well-run scrubber will remove the majority of ethaMike Mowbray nol, ethyl acetate marketing and and acetaldehyde technology vapors.

However, manager, U.S. Water Services a small percentage will still get into the CO2 and then into the tower, where it could potentially act as a food source for bacteria growth. It is important to maintain good microbiological control in your cooling system when you switch to CO2 for pH control. A well-thought-out biocide program, coupled with regular monitoring for microbiological growth, makes this managable.

Adding carbon dioxide to your cooling water system can be an effective method of controlling cooling water pH. It has the potential to provide several benefits to a plant, beyond just the economic payback.

The basic concept is to remove CO2 from the scrubber vent, and transfer it to the cooling tower basin. Some careful design is required to deal with

ETHANOL PRODUCER MAGAZINE

July 2010

113

WORKING CAPITAL. BY SCOTT MCDERMOTT Contribution

Ensuring Adequate Working Capital to Support the Business in Good Times—and Bad A systematic approach incorporating operating history with financial and statistical methods helps in forecasting liquidity needs in volatile markets.

I

f there is one thing ethanol plant managers and boards have learned through the recent challenging market environment, it is the importance of ensuring adequate cash reserves. We’ve all heard the phrase

“cash is king,” but it takes on a whole new meaning when you find yourself running short.

Over the past year, too many plants learned the hard lessons of what happens when you run out of cash. The fact is that the worst

time to raise cash or working capital is when you need it. And, when you run out of cash, your options become rather limited. The BFO here (blinding flash of the obvious) is make sure you don’t run out of cash by ensuring you

have sufficient working capital— before you need it. To do that, it is of the utmost importance to forecast cash sources and uses for the future and then ensure there are adequate cash resources on hand to fund those future needs.

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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Of course, this is easier said than done, especially given today’s market volatility and uncertainty.

The goal is to balance shareholder demands for dividends with ensuring adequate working capital to protect the core business.

Anticipating and translating market volatility and risk to define implications for the company’s working capital is no small task. That said, just because it is difficult does not mean it is impossible. In fact, many successful commodity trading organizations and banks have developed sophisticated programs to ensure their organizations have the liquidity required to support their operations in good markets—and bad.

Ascendant Partners has been working with independent ethanol plants and their banks to develop a systematic approach for a company to use to ensure it has adequate liquidity to support the business. The program incorporates a combination of operating history with sound financial and statistical methods to provide information the company can employ to minimize the risk of a cash shortfall. The program does not replace board and management experience and intuition or their commodity risk management programs. It simply provides another tool for the board and management to use in guiding the business through challenging waters.

The program consists of two key elements: a working capital reserve fund to protect the core business and an early warning system that helps ethanol companies anticipate cash shortfalls utilizing Ascendant’s financial simulator, a sound financial and statistical modeling approach. The outcome of the simulation is a risk adjusted, free cash flow forecast.

Value-at-risk systems are common at large commodity-based companies, trading companies and banks. These systems range from daily market capital-atrisk systems in trading organizations to stress testing and portfolio capital allocation systems in banks. From its experience working with the ethanol companies and banks in the industry, Ascendant came away with a comprehensive understanding of the important concepts. The best concepts from each were leveraged to develop a solution for the ethanol production companies to better manage working capital in the face of external risks such as policy changes or financial shocks, and the more direct risks of large hedging losses, negative margin environments, plant disruptions or even plant idling.

To determine the right funding level for the working capital reserve fund, Ascendant works with the board and management through a disciplined process to define their risk tolerance; to look

ETHANOL PRODUCER MAGAZINE

July 2010

at use history, which helps in identifying the probability and duration of negative markets/events; and to quantify the likely impact of those factors on working capital. This systematic approach to defining the need for a reserve fund better positions management to communicate and support the value of the fund with key stakeholders.

The second part of the process is to develop a disciplined, sound approach for forecasting expected cash sources and uses given market conditions and outlook.

There are a number of ways in which market and operational volatility and risk impact the business. The obvious one is how prices and ethanol production margins affect the business, but there are other factors to take into consideration as well.

Recently we saw commodity prices run higher and many plants found themselves short on working capital because of the additional cash requirement of the higher value of inventories and accounts receivable. The higher prices also increased working capital needs due to margin calls on hedging positions. In addition to the above considerations, it is important to look at the working capital implications of an operational disruption or sustained negative margin environment that may suggest idling plant operations.

It is also important to proac-

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WORKING CAPITAL. BY SCOTT MCDERMOTT

Figure 1 A financial simulator combines relevant commodity trends with company financial information to project cash flow needs.

SOURCE:ASCENDANT

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6 Month Risk Adjusted Free Cash Flow Summary (July 31, 2010) 1,000 dollars, except where noted different

Budget Free Cash Available for Financing Activities(1) (less) WC Reserve Fund(2) Ending Free Cash Available for Financing Activities

50% Probability

75% Probability

95% 99% Probability Probability

15,940 (3,960)

16,668 (3,960)

16,021 (3,960)

15,094 (3,960)

14,114 (3,960)

11,980

12,709

12,061

11,134

10,154

(1) Free Cash Flow Before Deducting Working Capital Reserve Fund and After Allocating Distributions Monthly @ 40% (2) Working Capital Reserve Fund consists of cash requirements to sustain a 3 month plant idle Figure 2 An example of a summary table produced as part of the financial simulation process.

SOURCE:ASCENDANT

tively work with lenders to ensure the revolving working capital lines are adequate to support the business in volatile markets. Remember, the worst time to raise cash is when you need it.

The Ascendant financial simulator uses 20 years of history to capture the interrelationship between ethanol, gasoline, corn and natural gas. The historical prices are used to project the distribution of potential prices given the interrelationship between markets.

The forecasted price distributions for ethanol, corn and natural gas are run through the company’s financial pro forma (see Figure 1) to produce the probability of free cash flow or risk-adjusted free cash flow for three and six months. The new price distributions and updated financials are revised on a regular basis so the system can serve as an early warning system for free cash flow.

The outcome of the simulation is a risk-adjusted series

of free cash flow forecasts that management can use to anticipate cash needs going forward. Figure 2 illustrates one of the summary tables produced as part of the process.

Managing cash flow can be challenging, but there tools available to assist ethanol plant management and boards in determining the appropriate cash reserve fund level. For further information on managing your working capital or to obtain a free copy of

a case study demonstrating how this tool works, please contact the author. EP Scott McDermott is a partner in Ascendant Partners Inc. Reach him at custserve@ ascendantpartners.com or (303) 221-4700.

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Appraisals Spokane Industries Inc. 509-921-8868 www.spokanemetalproducts.com

Reach your customers Your Solution. Advertise Today.

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Natwick Associates Appraisal Services 800-279-4757 www.natwick.com

Due Diligence Harris Group Inc. 206-494-9422

ETHANOL PRODUCER MAGAZINE

July 2010

Maas Companies 507-424-2640

www.maascompanies.com

Research & Development www.harrisgroup.com

Insurance ERI Solutions, Inc. 316-927-4294

Miscellaneous

Engine Testing Roush Industries 734-779-7736

www.roush.com

erisolutions.com 121

EPM MARKETPLACE Transportation Marine Odin Marine, Inc. 203-969-3400

www.odingroup.com

Rail Ameritrack RailRoad Contractors, Inc. 765-659-2111 www.ameritrackrailroad.com

Rail Consulting Rail Safe Training, Inc. 712-212-4145 www.railsafetraining.com

Railcar Gate Openers The Arnold Company 800-245-7505 www.arnoldcompany.com s.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.c

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Biomass Magazine is a trade journal serving companies that use and/or produce power, fuels and chemical feedstocks derived from biomass. Collectively, these biomass utilization industries are positioned to replace nearly every product made from fossil fuels with those derived from plant or waste material.The publication covers a wide array of issues on the leading edge of biomass utilization technologies, from biorefining, dedicated energy crops and cellulosic ethanol to decentralized power, anaerobic digestion and gasification. Itâ&#x20AC;&#x2122;s all here.

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Reach your customers Your Solution. Advertise Today.

EPM MARKETPLACE Renewable Energy Solutions

122

ETHANOL PRODUCER MAGAZINE

July 2010

Save the Date

27th ANNUAL

June 27 - 30, 2011

Indianapolis, Indiana USA www.fuelethanolworkshop.com

2010

THANK YOU THAN

Sponso ors s & Supporting Organizations Sponsors s

速

Supporting Organizations

TM

ACORE

American Council On Renewable Energy

2010

THANK YOU T

Exhibiting Companies A&B Process Systems Aaron Equipment Company, Inc. Absolute Power and Communications, Inc. ADF Engineering Inc. ADI Systems Inc AGRA Industries Inc Agri-Systems dba ASI Industrial AIAT Anstalt - Andritz Separation - Ondeo IS Air Resource Specialists, Inc. Alberici Constructors Alfa Laval, Inc. Allied Locke Industries Alloy Consulting & Equipment, Inc. AMEC American Coalition for Ethanol American Process Systems Member Eirich Group American Tank & Vessel, Inc. American Yeast AMG, Inc. Anderson Chemical Co. Andy J. Egan Co. Angel Yeast Co., Ltd Anhydro Inc. ANTIOCH International, Inc. Anton Paar USA Apache Stainless Equipment Corporation APECS, Inc. Applied Process Technology International, LLC ( APTI ) Applikon Biotechnology, Inc. Aqua Power Inc. Arisdyne Systems Ashland Hercules Water Technologies AT&F Advanced Metals LLC ATEC Steel Fabrication and Construction, LLC BBI International BinMaster Level Controls BioFuels Automation Biofuels Business Biofuels International BioFuels Journal Magazine Biomass Products & Technology Biothane Bliss Industries, LLC Blue Ribbon Corp.

Boerger, LLC Boulay, Heutmaker, Zibell & Co. PLLP Brown Tank LLC Buckman Buhler Inc. Burns & McDonnell BWF America Inc. Canadian Renewable Fuels Association CECO Environmental Corp.

CEDA & Catalyst Services Center Oil Company CenterPoint Energy Services, Inc. Centrisys Corp Cereal Process Technologies CH2M HILL ChemTreat, Inc. Christianson & Associates, PLLP CHS Renewable Fuels Marketing Clifton Gunderson LLP Cloud -Sellers Cleaning Systems

CompuWeigh Corporation Consulate General of Brazil in Chicago Conveyor Eng. & Mfg. Cooling Technology Institute Cooling Tower Depot, Inc. CPM Roskamp Champion CRANE Energy Flow Solutions Crown Iron Works Company Dasco Inc. Davenport Dryer Decanter Machine, Inc. Determan Brownie, Inc. Dionex Corporation DuPont Easy Energy Systems, Inc. EcoEngineers EdeniQ Eisenmann Encore Business Solutions ENTRIX, Inc. EnviroLogix Inc. Ethanol Analytical Solutions (EAS) ETS Laboratories ExperTune, Inc. Extrel CMS Fagen Inc. FCStone FeedForward, Inc. Ferm Solutions Fermentis - Division of Lesaffre Yeast Corp.

FlaktWoods Flottweg Separation Technology, Inc. Fluid Engineering/TM Filtration Fluid-Quip, Inc. FM Global Foss North America Freez-it-Cleen Fremont Industries FWS Group of Companies G.S. Robins & Company Gamajet Cleaning Systems, Inc. GE Healthcare Life Sciences GE Water & Process Technologies GEA Barr-Rosin GEA Westfalia Separator, Inc. Genencor A Danisco Division Genesis III Grace Davison GreenShift Corporation Growth Energy H2O Innovation, Inc. Harris Group Inc. Hengye USA Hogenson Construction HPD Hydro-Klean, Inc. Hydro-Thermal ICM, Inc. Inbicon Biomass Refinery Indeck Power Equipment Company Industrial Construction and Engineering Industrial Scientific Corporation Innospec Fuel Specialties Inspectorate America Corp.

Interra Global Corporation Intertek Oil, Chemical & Agri Invensys - Foxboro

Jacobs Corporation Jamestown/Stutsman Development Corporation John Crane Inc. John Zink Co. LLC Jordan Technologies Inc Kahler Automation Corp.

KBR Kennedy and Coe, LLC Kice Industries, Inc. Koppers Inc. Laidig Systems, Inc. LAI-PRO, LLC Lallemand Ethanol Technology Larox Corporation LECO Corporation LOTUS Mixers Inc. M&W Contractors, Inc. Maas Companies Malcolm Pirnie, Inc. Marcus Construction Company Market Activities LLC Martrex, Inc. Mason Mfg., Inc. McCormick Construction Company Mcgyan Biodiesel MECO Shaft Seals, div. Woodex Bearing Company Metrohm USA METTLER TOLEDO Micada Michael Best & Friedrich LLP Midland Scientific, Inc. Midwest Laboratories Midwest Towers Miller Insulation Mist Chemical & Supply Co. Mitchell County, Georgia Monitor Tech Corporation Monsanto Company MVTL Laboratories NAFTC Nalco National Corn to Ethanol Research Center National Railway Equipment Co. National Sorghum Producers Neogen Corporation North American Bioproducts Corporation (NABC) Northwest Scientific, Inc. Novozymes OI Analytical Ondeo IS Orival Water Filters Ortman Ethanol Water Resources Pace Analytical Services, Inc. Pavilion Technologies PeopleFlo Manufacturing, Inc. Perten Instruments, Inc. PhibroChem Ethanol Performance Group Pinnacle Engineering Inc Pioneer Hi-Bred International, Inc. Plant Maintenance Services Premium Plant Services, Inc. ProQuip, Inc. Protectoseal Company, The Quality Technology International

R&R Contracting Inc. Rain for Rent R-Biopharm, Inc. Renewable Fuels Association Renewal Service Inc. Resonant BioSciences Rich Connell AGRI-SEARCH, Inc. Roadway Worker Training Roeslein & Associates, Inc Romer Labs Inc. RTP Environmental Associates, Inc. SafeRack Salof Refrigeration Co., Inc. Save Our Steam Schaefer Bio-Engineering, LLC Scott Equipment Company Scott Health & Safety Seneca Companies Sentry Equipment Corp SGS North America, Inc. ShipXpress Shuttlewagon, Inc. Siemens Spraying Systems Co. Stanley Consultants Sukup Manufacturing Co. Sulzer Process Pumps SunOpta BioProcess Inc. TAPCO INC The Arnold Company The IMA Financial Group, Inc. The New York Blower Company The Walling Company Total Filtration Services Tramco, Inc TranSystems Tranter, Inc. Trident Automation, Inc. Trihydro Corporation U.S. Energy Services U.S. Tsubaki, Inc. Univar USA Inc. US Department of Energy Biomass Program US Water Services US EPA Environmental Protection Agency USDA/ARS VAA, LLC (Van Sickle, Allen) Valley Equipment Company Verenium Corporation Vertical Software, Inc. Victaulic Victory Energy Operations Vogelbusch USA, Inc. W. Soule & Company Warrior Mfg Watson-Marlow Pumps Group WB Services/The Andersons WCR Incorporated Weaver Silos Westmor Industries WIKA Instrument Corporation Winbco Tank Company YSI Life Sciences Zeochem LLC

47 Years of

Solutions

TM

For the past 47 years, the Sukup family has been engineering innovative solutions to make grain production more efficient and more profitable.

Solutions like:

+ 30,000 lb. roof load rating and a five-year warranty on Sukup Commercial Bins.

+ Our new 135’ Commercial Tank - the world’s largest erected free span tank with a maximum capacity of 1.2 million bushel.

+ QuadraTouchTM controls on Sukup Tower Dryers that offer unmatched drying accuracy and efficiency.

+ Industry-leading fans with top airflow ratings and trouble-free operation.

The latest additions to the Sukup family of products - bucket elevators, drag conveyors and chain loop conveyors - complete the full line of products that make your grain storage facility operate smoothly.

Our company was founded in 1963 on the desire to improve the grain drying process and make grain production more profitable and that’s still our driving force. To that end, our company holds 80 patents and Eugene Sukup has been inducted into the Iowa Inventors Hall of Fame. Engineering innovative solutions to make grain production more efficient and profitable...That’s Sukup.

Sukup Manufacturing Co. Engineering SolutionsTM Sheffield, Iowa 50475-0677 n 641-892-4222

w w w. s u k u p . c o m

n info@sukup.com

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