INSIDE: 2010 EXPORTS ON TRACK TO SET RECORDS
Steady Progress To Scale Iogen Continues to Clean up, Optimize its Cellulosic Process
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contents
vol. 16 no. 11
features 42 PROFILE 1,000 Keys An update on Iogen’s progress developing cellulosic ethanol with partner Dutch Royal Shell. –By Susanne Retka Schill 48 EXPORTS U.S. Ethanol Enters Global Marketplace Favorable pricing and other short term factors have boosted ethanol exports, even to Brazil. –By Holly Jessen 54 POLICY Is the RFS Broken? The EPA has drastically lowered the cellulosic target for the RFS twice, raising concerns in the embryonic industry. –By Kris Bevill
60 USE Generating Alternatives A Wyoming firm has developed a fuel cell technology using ethanol, and other primary alcohols, to generate power and commodity chemicals. –By Kris Bevill
54 4
ON THE COVER: Iogen CEO Brian Foody PHOTO BY JANA CHYTIL
ETHANOL PRODUCER MAGAZINE
November 2010
contents departments
contributions
8 Editor’s Note The Emerging Generation By Susanne Retka Schill 9 Advertiser Index 12 Events Calendar 14 The Way I See It Stop Digging Pavlov’s Hole By Mike Bryan
66 66 REGULATION California’s Low Carbon Fuel Standard: Current and Future Impact Details of reporting requirements for lowering carbon intensity of fuels are laid out.
16 View From the Hill If It Walks Like a Duck … By Bob Dinneen 18 Drive Food Versus Fuel Debunked By Tom Buis 20 eBio Certifying Biofuels: Not a Piece of Cake Yet By Rob Vierhoust
–By William A. Newman
22 Taking Stalk A Choice Between Raisins and Pickles By Kurt Thelen 24 Business Matters The Opportunity to Complement Your Business is Now By Dave Burger 26 Business & People 28 Commodities 30 BIObytes
68
32 Industry News 70 Marketplace
68 ENZYMES The Economics of Enzyme Production A comparison of on-site versus delivered enzymes reflects advancements in efficiency. –By Pamela Simms-Borre
6
Ethanol Producer Magazine: (USPS No. 023-974) November 2010, Vol. 16, Issue 11. 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
November 2010
Jeff Tussey GENERAL MANAGER CASTLE ROCK RENEWABLE FUELS WISCONSIN, USA
BIOFUEL IS MORE THAN JUST BUSINESS IT’S ABOUT PARTNERSHIP
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Novozymes’ solutions help your plant run smoothly and your mind rest easy. Our enzymes give you higher ethanol yields, faster throughput, and lower overall processing costs. Add to that our unmatched technical expertise and our unique training programs, and you won’t find a better partner. www.bioenergy.novozymes.com
Novozymes is the world leader in bioinnovation. Together with customers across a broad array of industries we create tomorrow’s industrial biosolutions, improving our customers’ business and the use of our planet’s resources.
Susanne Retka Schill Editor's Note
The Emerging Generation he Fall 2010 Fuel Ethanol Plant Map being mailed with this issue reflects fallout from the 2008 shakeout and following recession, with more consolidations and name changes appearing. The number of conventional ethanol plants using a starch/sugar platform under development has fallen precipitously as expected and the action is turning to the cellulosic arena. While we have only six cellulosic plants installed or under construction that meet the 1 MMgy threshold to be listed on the map, the list of proposed facilities is growing. To be on a map, of course, there needs to be a place to put a dot, so that list will grow as more projects advance to naming a location. Our cover story this month profiles one of those cellulosic ethanol pioneers—Iogen Energy. I toured the research laboratories and demonstration plant in August. Since then several news announcements indicate the pace is increasing at Iogen. Cellulosic developers are beginning to ask whether the renewable fuels standard needs revising lest it hinder advanced biofu-
T
els development. Associate Editor Kris Bevill takes a look at the problems arising with the U.S. EPA’s downsizing of the cellulosic volume. For her feature on the 2010 boom in exports, Associate Editor Holly Jessen asks her sources whether it’s just a blip in the chart or an indication of a new trend. My Editor’s Note in the September issue, “It’s About the Message,” quoting Merle Anderson’s calculations on the energy use of corn ethanol, prompted a couple of responses from readers. Excerpts from their letters appear below.
Susanne Retka Schill, Editor sretkaschill@bbiinternational.com
letters to the editor Multi-Pronged Approach
Make that Zero Fossil Fuels
T
n your editor’s note you talk about Merle Anderson’s number crunching. It says that “96,000 gallons of renewable fuel divided by 480 gallons of fossil fuel equals 200 gallons of ethanol produced for each gallon of fossil fuel.” That is still a shocking number to me, and I’m sure for every American. Why isn’t the beginning of the whole process being done with renewable biodiesel [to raise and transport corn], and change that number from 480 gallons of fossil fuel to zero fossil fuel?
hanks for the interesting and informative article in the September issue. Increased crop yield and improved ethanol manufacturing efficiencies continue to make ethanol a more viable product in the marketplace. The improvement is uplifting and necessary as the industry grows. Perhaps it’s time to take a more multiprong approach in improving the average consumer’s view on ethanol. The average driver does not ponder the statistics behind the agricultural, manufacturing, distribution and marketing of ethanol. All they hear or think is that you get 20 to 30 percent less miles per gallon using that
8
stuff and it destroys small engines. I’ve been purchasing ethanol (mostly E85) for quite a few years for my flex-fuel vehicles. We need research and comment on the technological improvements in auto fuel efficiency as it relates to the use of ethanol in newer autos and trucks. Perhaps that is a little closer to the consumer’s pocketbook than crop yields, distillers grains feed and gas production for the beverage industry. Keep up the good work and spread the word. Ethanol ain’t perfect, but it’s ours!
I
On the point about turning public opinion, people don’t really care much about the benefits of ethanol other than how they are going to feel in the wallet or purse. We need to make it well known to every American in the U.S.: ethanol is cheaper. By the way, the ethanol industry isn’t all about corn. There are many other forms of ethanol being produced or emerging. Sugar ethanol here in America is just about to change in a major way. Alan Anderson Anderson Consulting, Carmichael, Calif.
Hal Puchalski Milwaukee, Wis.
ETHANOL PRODUCER MAGAZINE
November 2010
AdIndex www.EthanolProducer.com 74 2011 International Fuel Ethanol Workshop & Expo 17 2011 National Ethanol Conference 75 2011 Pacific West Biomass Conference & Trade Show
E D I T O R I A L Susanne Retka Schill Editor sretkaschill@bbiinternational.com
36 44 47 73 64 41 40 58 2 59 56 51 39 57 3 37
Holly Jessen Associate Editor hjessen@bbiinternational.com
Kris Bevill Associate Editor kbevill@bbiinternational.com
Jan Tellmann Copy Editor jtellmann@bbiinternational.com
E D I T O R I A L Mike Jerke
B O A R D
Chippewa Valley Ethanol Co. LLLP
Jeremy Wilhelm
Cilion Inc.
Mick Henderson
Commonwealth Agri-Energy LLC
Keith Kor Walter Wendland Neal Jakel Bert Farrish Eric Mosebey Steve Roe Bernie Punt
Gamajet Cleaning Systems Inc. Gavilon Genencor® - A Danisco Division Gevo ICM, Inc. Inbicon Indeck Power Equipment Co. Interstates Companies Lallemand Ethanol Technology Nalco Co. Natwick Associates Appraisal Services Novozymes Phibro Ethanol Performance Group Pioneer Hi-Bred International Inc. POET Sweet Sorghum Ethanol Association Union of Concerned Scientists Victory Energy Operations, LLC Vogelbusch USA, Inc. Wabash Power Equipment Co.
Corn Plus LLLP Golden Grain Energy LLC Illinois River Energy LLC LifeLine Foods LLC Lincolnland Agri-Energy LLC Little Sioux Corn Processors LP Siouxland Energy & Livestock Co-op
P U B L I S H I N G Mike Bryan
ADI Systems Inc. Agra Industries Inc. BetaTec Hop Products Biomass Power & Thermal BinMaster Level Controls BrownWinick Law Firm Buckman Laboratories Inc. Buhler Aeroglide Burns & McDonnell Church & Dwight Co. Inc. CPM Roskamp Champion EISENMANN Corp. Fagen Inc. FCStone, LLC Fermentis - Division of S.I. Lesaffre Flottweg Separation Technology
62 63 15 & 21 65 5 10 & 11 38 35 19 46 45 7 13 23 76 52 25 53 34 50
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ETHANOL PRODUCER MAGAZINE
November 2010
COPYRIGHT © 2010 by BBI International
9
Not just a new technology, but a new ethanol industry.
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ETHANOL EVENTS
12
7th Canadian Renewable Fuels Summit November 29-December 1, 2010
Pacific West Biomass Conference & Trade Show January 10-12, 2011
Hilton Lac-Leamy Hotel Gatineau, Quebec Network with leaders of government and industry at the Canadian Renewable Fuels Association’s seventh annual summit to be held this year in the nation’s capital. The summit attracts participants from across North America and around the world and is open to members and nonmembers alike, and representatives from all levels of the biofuels industry including grain and cellulosic ethanol producers, biodiesel producers, Canada’s leading petroleum companies and agriculture associations. www.crfs2010.com
Sheraton Seattle Hotel Seattle, Washington With an exclusive focus on biomass utilization in California, Oregon, Washington, Idaho and Nevada, the Pacific West Biomass Conference & Trade Show is one of three distinct regional offshoots of the International Biomass Conference & Expo. The program will focus on the vast potential for biomass utilization in the Pacific West, featuring more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance. The preliminary agenda is now online. www.biomassconference.com/pacificwest
National Ethanol Conference February 20-22, 2011
International Biomass Conference & Expo May 2-5, 2011
JW Marriott Desert Ridge Phoenix, Arizona Focused on vital marketing and public policy issues, the theme of the 2011 National Ethanol Conference is “Building Bridges to a More Sustainable Future.” Join this premier ethanol networking event to discuss the future of an industry that will be the bridge from a petroleum-fueled economy to one that is anchored in renewable fuels, sustainably produced from grains and cellulosic biomass. www.nationalethanolconference.com
America’s Center St. Louis, Missouri The 4th Annual International Biomass Conference & Expo is the biomass industry’s largest, fastest-growing event. In 2010, the conference was attended by 1,700 industry professionals from 49 states and 25 nations representing nearly every geographical region and sector of the world’s interconnected biomass utilization industries—power, thermal energy, fuels and chemicals. With six tracks, 38 panels, 120 speakers, 400 exhibitors and an anticipated 2,500 attendees in 2011, this event will continue to be the industry’s leading educational, networking and business development forum. Speaker abstracts are now being accepted online. www.biomassconference.com
International Fuel Ethanol Workshop & Expo June 27-30, 2011
Southeast Biomass Conference & Trade Show November 1-3, 2011
Indiana Convention Center Indianapolis, Indiana Entering its 27th year, the FEW is the largest, longest running ethanol conference in the world. The FEW is renowned for its superb programming which remains focused on commercial-scale ethanol production—both grain and cellulosic—operational efficiencies, plant management, energy use, and near-term research and development. With five tracks, 32 panels, 100 speakers, 400 exhibitors and an anticipated 2,500 attendees in 2011, the FEW remains the ethanol industry’s leading production-oriented, educational, networking and business development forum. Speaker abstracts are now being accepted online. www.fuelethanolworkshop.com
Hyatt Regency Atlanta Atlanta, Georgia The 2010 event was an energetic success with 600 in attendance and featuring a sold-out trade show. The 2011 event will again focus exclusively on biomass utilization in the Southeast—from the Virginias to the Gulf Coast. The Southeast Biomass Conference & Trade Show is one of three distinct regional offshoots of the International Biomass Conference & Expo. The program will feature more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance. www.biomassconference.com/southeast
ETHANOL PRODUCER MAGAZINE
November 2010
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The Way I See It
Stop Digging Pavlov’s Hole New feedstocks for biofuels production are continually being groomed to step onto center stage. In fact, most of them are ready now. I’m talking about feedstocks like algae, switchgrass, miscanthus, jatropha, seaweed, camelina oil, single-cell microorganisms, and a wide variety of cellulosic materials. Add to this some of the more traditional feedstocks like corn, sorghum, wheat, barley, sugarcane, and the opportunities for biofuels production are nearly limitless. A recent report by the Truman National Security Project states that biofuels, such as ethanol, are having a significant impact on reducing our dependence on petroleum. But the really good news is that we have just begun to scratch the surface of what is achievable. Algae, for example, is on the very precipice of becoming a major feedstock for biodiesel production as well as second generation ethanol. Switchgrass and miscanthus will be valuable feedstocks for ethanol production. They not only help minimize soil erosion, but can provide needed income to farmers from marginal land. We discard enough cellulosic material in landfills alone each year to produce billions of gallons of ethanol. We bury it! You can bet that future generations will look back in disbelief and wonder why we simply buried all of that energy. It’s not technology or demand that’s holding us back, it’s all about price. Everything is compared to the price of a gallon of gasoline or a gallon of diesel fuel. There’s not one of the feedstocks mentioned that we cannot effectively turn into energy. Not next year, or five years from now—we can turn them into energy today. It just can’t be done at or below the price of a gallon of petroleum in many cases.
We whine about our energy dependence, fuss about military spending and complain about oil spills, yet we continue to bury energy by the millions of tons every day in landfills, we let marginal land sit idle and turn our backs on new technologies. Why? Because they cost more than petroleum-based fuels. We’re like Pavlov’s dog. Every action evokes the same reaction. When the price of oil goes up, our reaction is always the same: “We need to develop a robust biofuels industry and stop our dependence of foreign oil.” When the price goes back down: “We like biofuels, but we just can’t justify paying more than we do for gasoline or diesel.” When another war breaks out, our reaction is “If we were energy independent, we would not have to go halfway around the world to defend our oil supply.” When the war is over, or at least not on the news every night: “We like biofuels but we just can’t justify paying more than we do for gasoline or diesel.” As the old saying goes … when you find yourself in a hole, the first thing to do is stop digging. Folks, we are in a hole, a very deep hole, and yet we continue to dig and bury more and more energy in the process. That’s the way I see it.
Mike Bryan Chairman mbryan@bbiinternational.com
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ETHANOL PRODUCER MAGAZINE
November 2010
VIEW FROM THE HILL Dinneen
If It Walks Like a Duck… By Bob Dinneen ashington is full of clever names to describe the dysfunctional way in which it sometimes operates. This year, we will be witness to one of my personal favorites—the Lame Duck. After the elections, Congress will return to work to deal with all the issues that it failed to address before adjourning for the elections. Specifically, it must pass annual appropriations bills that will fund the federal government for the coming year—things such as the military, air traffic controllers, etc. Also likely to see an up or down vote is legislation that would extend expiring tax cuts and incentives. Most prominent of these in the public eye are the so-called Bush tax cuts that expire at the end of the year. Political prognosticators in Washington will tell you that if this bill does make it to the floor of the House or Senate, it will be a straight up or down vote on whether to extend them for a short time. Essentially, this will be a punt from the current Congress turning the ball over to the incoming Congress and those newly elected members. Such a dynamic provides America’s ethanol industry an opportunity to extend important tax incentives critical to the continued growth of this industry. The reason is as simple as the tax incentive itself. And therein lies the secret to success. With a lame duck Congress in chaos resulting from the retirements and new members-elect, it will not have an appetite for new legislation that requires committee hearings and markups. Rather, it will be looking to legislation and policies that are already vetted and, for lack of a better analogy, they can simply cut and paste. The Volumetric Ethanol Excise Tax Credit, or VEETC, fits this bill to a tee. This is a policy that has been fully vetted, proven to be effective, and enjoys bipartisan support in both the House and the Senate. It can easily be included in tax legislation as is, requiring only a change to the expiration date that, frankly, is fixed with correction fluid and a pen.
W
16
In this space, I have repeatedly warned that expiration of VEETC comes with consequences. Hundreds of millions of gallons of capacity may idle, tens of thousands of Americans will lose their jobs, and America will import more oil. With concerns over the economy and job creation still dictating Congressional behavior, it is unlikely members want to see more Americans added to unemployment rolls. Extending the tax incentive now will make discussions on how to enhance and improve the incentive more productive. Having to start over from scratch would add a new layer of challenges to those this industry already faces. Let me be clear: This is not a guarantee. There is still work that must be done. The air of contradiction within the industry perceived by Congress over the importance of VEETC has hampered efforts to resolve this issue. It is critical that the industry say forcefully and in a united voice that extending VEETC is essential to the continued evolution of ethanol production in America. Despite the industry having multiple voices throughout its history, we have been able to unite behind policies important to the industry and I believe we will once again. There is simply too much at stake. I encourage anyone interested in securing the future for biofuels in America to call their members of Congress—current and/or newly elected—and let them know these tax policies are important. Your voices will make the difference. Bob Dinneen is president and CEO of the Renewable Fuels Association. Reach him at (202) 289-3835.
ETHANOL PRODUCER MAGAZINE
November 2010
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DRIVE Buis
Food Versus Fuel Debunked By Tom Buis merica’s farmers are the most productive in the world. The only evidence you need for that is this year’s spectacular corn harvest, realized despite some terrible weather conditions. This year’s harvest is proof that the productive capacity of American farmers is unmatched, with the ability to coax more bushels out of fewer acres. The bottom line is that America’s farmers produce all the grain we need for food, for livestock feed and for fuel. While those of us in farming and the ethanol industry know this, there are many who don’t know what capabilities we have as a nation when our farmers cultivate the soil. In fact, there are those who are still actively trying to stoke illegitimate fears that demand for corn ethanol will somehow drive up food prices—despite the facts, proven over and over again, that there is no substantial link between ethanol production and grocery prices. Let’s review the history. Two years ago this month, the Grocery Manufacturers of America—representing the world’s largest grocery makers—launched a smear campaign against the ethanol industry in an attempt to blame the rising cost of food on American ethanol producers. In response, a small group of ethanol producers founded Growth Energy with a mission: educate consumers, the press and policymakers about ethanol and dispel the myths and lies perpetuated by those who tried to say there was a “food versus fuel” issue. Growth Energy launched an aggressive campaign to counter the invalid claims, erroneous news reports and false statements. We aggressively promoted the facts so that consumers across America would know the real reasons behind the hike in their grocery bill: high oil prices and Wall Street speculators. Other factors influencing high food prices included costs for labor, transportation, advertising and packaging—not ethanol.
A
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Corn can’t be blamed either. Grains are only a small portion of the cost of food. For every one dollar spent in a grocery store, approximately three cents goes to corn-related costs at the farm. Even General Mills—one of the world’s top consumers of grains—admitted as much when it’s chief financial officer, Don Mulligan, was quoted in the St. Paul Pioneer Press saying that grain was only 5 to 10 percent of the company’s total costs. And the World Bank—which early on took the position that biofuels were to blame for high crop prices—reversed itself this year after conducting a more thorough study and is arguing that the effect of biofuels on food prices has not been as large as originally thought. The very reason that food prices have increased while corn prices have steadily decreased by 35 percent since their peak in 2008 is because there is no link between food and fuel. There’s a mountain of grain out there. And as demand for clean, renewable ethanol continues to grow, our farmers will be able to meet all the demand for food, fuel and feed in this country without driving up prices at the grocery store. We just need to keep telling the public, the press and the policymakers the truth. This is why Growth Energy was formed. And since our inception, the debate on food versus fuel has been weakened. Oh, and by the way, we are still waiting for an apology from GMA. Tom Buis is CEO of Growth Energy. He can be reached at tbuis@ growthenergy.org or (202) 545-4000.
ETHANOL PRODUCER MAGAZINE
November 2010
eBIO INSIDER Vierhout
Certifying Biofuels: Not a Piece of Cake Yet By Robert Vierhout nly a few weeks away, Dec. 5 is an important date for biofuels in the EU. After that day, in theory, oil companies will no longer be allowed to use biofuels in the EU unless the biofuel producer can deliver an authorized certificate that sustainably grown crops were used, which will be a major challenge. The reason? Except for two German-recognized voluntary schemes, there are no EU authorized certification schemes in operation. The consequence? Not enough certified 2010 crop will be available for compliance. Oil companies have started to spread the message that if the law will be upheld, and there is no certified biofuel available, they will declare force majeure, go for the buy-out and pay penalties instead. I hear you thinking: how can it be possible that almost two years after the EU renenewables law was passed, implementation is still a problem? There are a number of explanations. First of all, there was a substantial delay at the European Commission level itself. The law required further guidelines on a number of articles which should have been ready by December, but in June only two were released. The third on grasslands is still not out. The guidelines are crucial for member states and economic operators to make the law work. Partly because of this delay almost all member states are late in having transposed the EU law into national law. Transposition is vital because national laws will set the framework and the implementation rules for economic operators. Without national law, the industry cannot move on. For clarity: EU directives put obligations upon member states and not upon economic operators. To date there is only one EU member state that transposed the EU law earlier this year—Germany. But here too, problems occurred. Germany had planned to apply sustainability criteria July 1—six months before EU compliance was needed. Because Germany opted for a rather technically complicated and very detailed transposition there was no certification scheme available on that short notice that could fulfill the German conditions. Germany decided to delay everything until Jan. 1. There are two certification schemes (ISCC and REDcert), but neither is EU approved. The high level of complexity of the EU law combined with the fact that EU regulators, national regulators and the economic operators—farmers, traders, biofuels producers and oil companies—are confronted for the first time with this kind of legislation
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is the third reason that time tables have not been met. For most of the member states, this is so complex that they are still learning. Most of the 2010 crop now in storage cannot be certified due to the absence of national or voluntary schemes. That is irrelevant for oil companies, however. From next month onward, they will buy only the biofuel that has a certificate. Unless immediate action is taken, the consequences of this delay in transposition and implementation will be disastrous. If the oil industry sticks to its guns and will not buy uncertified biofuel, then most biofuel production for the EU market will come to a grinding halt. The European Commission needs to realize how serious the situation is. The commission has given up hope that most of the member states will be ready by the end of the year. Voluntary schemes could still turn the problem around, but such schemes can be used only if these are EC approved, which takes about six months. Only then can auditing begin, provided there are enough auditors around who can do the job. The commission does not believe it will approve any voluntary scheme before the end of the year. So, from that perspective we cannot expect any progress either. The only solution I see to this problem is to grandfather in the 2010 crop. The member states could grant such a grandfather clause, but it would require that the commission be lenient and not start an infringement procedure for non-compliance. The situtation we are facing was more or less to be expected, even if the commission had not been late with its guidelines. Certifying the sustainability of biofuels presents a steep learning curve for all those involved, and leniency is the only way forward in the short term. I am certain that 18 months from now, biofuel sustainability certificates will be business as usual and a piece of cake. Robert Vierhout is the secretary-general of eBIO, the European Bioethanol Fuel Association. Reach him at vierhout@ ebio.org.
ETHANOL PRODUCER MAGAZINE
November 2010
TAKING STALK Thelen
A Choice Between Raisins and Pickles By Kurt Thelen ear-round supplies of quality cellulosic feedstocks will be required for future cellulosic ethanol refineries. With the exception of nonwoody biomass, the seasonal growth pattern of biomass makes proper storage a significant logistical component. Since biomass is a perishable commodity, harvest-storage strategies must be designed to minimize respiration loss and the formation of molds that inhibit bioconversion. Fortunately, we have two model systems in the ruminant livestock industry from which to base bioenergy feedstock storage systems: 1) dry the feedstock down, usually in the field, to a level that will not support microbial activity thereby reducing respiratory loss and the formation of molds; and, 2) ensile the feedstock by harvesting wet biomass and packing to facilitate anaerobic lactic and acetic acid formation and preserve from further decomposition. In the farming vernacular, the two strategies are known respectively as 1) baling and 2) chopping. Both systems are readily deployable—the equipment is already out there on farms and growers know how to use it. Baling has the advantage of relatively lower equipment costs, less water in the final stored product, and generally less respiratory storage loss. Baling requires considerably more harvest time, however, including a day or more of field drying, more trips across the field to mow, rake and bale, higher losses due to machine handling of fragile dry biomass, and greater risk from inclement weather. Conversely, chopping systems require much less time for harvest and because of lower in-field losses, harvest more energy per acre relative to baling. Equipment costs are higher, however, and although dry matter density of tightly packed silage is equal to that of baled hay, much of the weight is from water resulting in heavier loads to transport. Early microbial biomass-to-ethanol conversions were inhibited by lactic acid but recently developed strains appear to have overcome this initial concern. Field drying once was the most common system, but, as technological advancements paved the way for larger farms chopping-ensiling systems began to emerge as the preferred method east of the Mississippi River. Time savings from field to storage, less reliance on cooperative weather, and the ability to reduce field biomass loss were the main drivers for the transition to chopping systems in the more humid eastern U.S.
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Managing moisture levels is key regardless the method. Biomass must be less than 20 percent (preferably less than 15 percent) moisture for bales and at least 50 percent moisture to ensure good packing and anaerobic fermentation conditions for chopping systems This results in a moisture level danger zone for biomass harvest of 15 to 50 percent moisture—too wet to preserve in a baled form and too dry to preserve in an ensiled form. Switchgrass demonstrates the optimization challenge. The ideal time to harvest switchgrass and other warm season perennial grass crops from an ecological, economic and agronomic perspective is approximately two weeks after the first killing frost (28 degrees Fahrenheit)—generally late October in Michigan. This timing allows translocation of nutrients to the roots to ensure winter survival and facilitates leaching of remaining cytoplasm nutrients from the plant to the soil following frost-induced rupturing of cell wall integrity. Michigan experience indicates switchgrass is still about 30 percent moisture two weeks after the first frost and little additional field drying occurs before the first harvest-inhibiting snow accumulation. If switchgrass is left standing in the field until spring, 15 percent moisture can be obtained, but greater than 50 percent biomass loss can be expected from snow-induced lodging—an economically unsustainable loss for growers. A compromise system we are investigating involves direct chopping warm season perennial grasses several weeks prior to the first frost when whole plant moisture levels in the 50 percent range are conducive to excellent packing and ensiling conditions and much of the translocation of nutrients to the perennial root system has occurred. We are currently researching the impact on winter survivability. Geography will determine which strategy emerges. Field drying and baling will be more common in the arid West while chopping-ensiling systems will likely prevail in the more humid East. The final conversion platform will also determine the harvest storage method used. The extra water present in ensiled systems will likely preclude use in thermal conversion platforms, particularly direct biomass-to-heat conversion systems, but the water may actually be beneficial for biological conversion to liquid transportation fuels. Kurt Thelen is a professor in the Department of Crop and Soil Sciences at Michigan State University. Reach him at (517) 355-0271 or thelenk3@msu.edu. ETHANOL PRODUCER MAGAZINE
November 2010
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BUSINESS MATTERS Burger
The Opportunity to Complement Your Business is Now By Dave Burger hough the economy is surrounded by uncertainty, there may be an opportunity looming for a financially sound company to expand and purchase a complementary business. For an ethanol plant, this is a realistic option. Recently, our firm helped an existing biofuels client acquire a complementary company to enhance its core business. We believe going through the steps of due diligence, being aware of valuations and negotiations and enhancing bank relationships can help make this kind of transaction a smooth and profitable one. One of the first and most important steps in acquiring a business is to research and understand the company’s financial statements. Due diligence is important to ensure the prospect is what it claims to be. Whether it is inventory, sales contracts, equipment or buildings, everything should be verified. Red flags involving ownership of assets may arise during due diligence. In this situation, the asset’s title should reveal if it is pledged to debt. Perhaps there is a new technology or patent with the company. If so, do the research to be sure where it stands. Another situation might arise if there is a significant amount of inventory and equipment with the prospect. A little homework will uncover whether that equipment is leased and should go back to the owner at the end of the lease. A valuation should help review the company’s earnings, allowing for adjustment during unusual circumstances and highlighting areas for improvement. If an ethanol plant already has strong management, accounting and purchasing structures in place it can easily leverage those benefits on to the new business. Having wisdom, technology and a great staff puts one ahead of the curve when it comes to streamlining an acquisition. Another key point during due diligence is to look at future earnings, not just numbers from prior years. A business may have been profitable in the past and is perhaps sitting on the cusp of a new technology that would allow better future earnings. On the flip side, the company may have lost significant contracts, which might hurt future income. The take-home message is that future earning potential may be comparable to prior years, but the buyer must be sure the expected dynamics are at least comparable to those prior years.
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For example, a plant has a nearby customer who buys wet distillers grains (WDG) for a good price. Suddenly the customer doesn’t want to buy WDG anymore or may close altogether. The plant may then have to dry the product and ship it, both of which add cost. This is why a review of current contracts and purchase commitments is also critical. During negotiations, it is better to have an accounting and consulting partner involved sooner rather than later. Financing and structuring the deal from a tax standpoint is ultimately beneficial for the buyer. Getting this partner involved too late simply won’t provide the best tax treatment possible. It is no secret people do business with those they like and trust. Therefore a good banking relationship is critical to the sale or purchase of a complementary company. A bank needs to have confidence in its clients and their operations and the best way to do that is to open your doors and bring your banker to the plant. Take loan officers, credit approvers and loan committee members on a ground-floor tour, introduce them to employees. Allow the lenders to see managers working with employee teams. These things will earn confidence points with a financial institution and give loan approvers buy-in to the operation. Never surprise your lender. Be sure to communicate your financial situation. Since most credit facilities are structured by loan covenants including minimum net worth and debt service coverage ratio, a company needs to fully understand these ratios and their impact on the plant. This is not a time to violate covenants with a lender, especially if they don’t see it coming. Keeping the communication lines open lets the lender see you are doing everything you agreed to at the inception of the loan. Buying a secondary company that enhances your core business structure is a good way to utilize the success of a solid operation. In times of uncertainty, a well-managed company can have the strength to take on a new company while controlling risk. The opportunity to grow and expand is ideal for any sound business and should be considered for sustainability down the road. Dave Burger is a CPA and member and manager of the manufacturing group in the Wichita office of Kennedy and Coe LLC. Reach him at burger@kcoe.com or (800) 303-3241. ETHANOL PRODUCER MAGAZINE
November 2010
Fueling Our Future The Billion Gallon Challenge It’s time to write a new chapter for American biofuels. The next generation of sustainable, low-carbon biofuels is poised to cut America’s oil dependence, help tackle climate change and provide new economic opportunities across rural America. But commercialization of this promising technology has stalled because of outdated policies that don’t work in today’s marketplace.
A new report by the Union of Concerned Scientists shows how we can get clean biofuels back on track. The Billion Gallon Challenge provides an investment tax credit and loan guarantees to spur construction of the advanced facilities needed to produce the first billion gallons of cellulosic biofuel. It achieves that goal at a fraction of the cost of existing subsidies like the Volumetric Ethanol Excise Tax Credit (VEETC), which wastes billions of taxpayer dollars each year without expanding production of clean biofuels. More than 1000 scientists and economists across the United States are supporting the Billion Gallon Challenge because they know that until the next generation biofuels reach commercial scale, we can’t secure the clean energy future that America needs.
You can learn more about the Billion Gallon Challenge at www.ucsusa.org/smartbioenergy.
Union of Concerned Scientists
Business&People Ethanol Industry Briefs
The Corn Plus LLLP board of directors named Mark Drake to replace long-time general manager Keith Kor at the 49 MMgy Winnebago, Minn., plant. “Mark comes to Corn Plus with a proven management record of more than 25 years experience driving revenue growth in the fuel grade ethanol and specialty starch industries,” said Bill Drager, board chair. As CEO and president of Southwest Iowa Renewable Energy in Council Bluffs, Iowa, Drake was responsible for the construction and start up of the 110 MMgy facility.
Enzyme developer Verenium Corp. has appointed Kevin Bracken as vice president of manufacturing. In this position, Bracken will focus on expanding the company’s enzyme manufacturing capabilities. He will report to Janet Roemer, president and chief operating officer of Verenium’s enzymes business. Prior to joining Verenium, Bracken served as vice president of manufacturing at Vical Inc., a developer of biopharmaceutical products. He previously served as vice president of process engineering and manufacturing at Universal Preservation Technologies Inc., and was director of engineering at Molecular Biosystems.
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Dupont Danisco Cellulosic Ethanol LLC has appointed John Mafrige as vice president of commercial development. His duties will include leading strategic business efforts in marketing, value chain development, licensing, business operations and regulatory affairs. Mafrige will also hold a position on the company’s senior leadership team. DDCE CEO Joe Skurla said Mafrige will be a great assessment to the company’s management team. “His leadership experience in fuel products and business development will contribute to our success as we accelerate deployment of advanced biofuels and prepare to deliver instrumentgrade solutions to the market.” New Zealand-based technology provider LanzaTech NZ Ltd. has signed a memorandum of understanding with Henan Coal and Chemical Industrial Corp., one of the China’s largest coal producers, to produce ethanol and chemicals through the integration of coal gasification and LanzaTech’s fermentation process. A letter of intent was also signed to establish a bioenergy research center to develop and commercialize the technology to convert syngas to ethanol and chemicals. LanzaTech has proven its syngas-to-ethanol technology at a pilot scale and plans to begin operating a demonstration-scale facility by the second half of 2011.
Glycos Biotechnologies Inc., a biochemical company, has added Rob Toker as vice president of partnerships and market research. In this position, Toker will be responsible for the company’s overall partnership strategy and related international market research required to successfully deploy the company’s technology worldwide. Toker He will also focus on feedstock and commodity market analysis, negotiation and contracting. Prior to joining GlycosBio, Toker served at Sindicatum Carbon Capital as senior vice president and as head of trade and investment for UK Trade & Investment’s Houston region. He currently serves on The Rice Alliance for Entrepreneurship and Technology advisory board, the University of Texas System Technology Transfer advisory board, the Greater Houston Partnership Carbon Trading Task Force, and the Houston Technology Center energy steering committee. The Canadian Renewable Fuels Association has launched a redesigned website and updated logo. The new website—www.greenfuels.org— offers five main areas of information: About CRFA, Industry Information, Resource Center, Public Policy and Media Center. The site incorporates social media aspects, including Facebook and Twitter, and will be updated
with new information, reports and studies on a regular basis. Merrick & Company was awarded the 2010 American Business Ethics Award Oct. 9 by the Foundation for Financial Service Professionals. The award was received by Merrick in recognition of the company’s high standards of ethical behavior in everyday business conduct. “This award is a validation that Merrick & Company employees live out our commitment to the firm values, of which ethical behavior is fundamental to internal service to our employees and external service to our customers,” said Ralph Christie Jr., principal engineer, chairman, president and CEO of Merrick. The company is an engineering, design-build, architecture, surveying and geospatial solutions firm that serves multiple industries, including alternative fuels.
Chromalox Inc., a manufacturer of electric heat and control products, is offering a new self-regulating cable for use by process industries including alternative fuels, power generation, oil and gas, and pulp and paper. The Chromalox SRP cable is suitable for applications where operating temperatures are too high for standard freeze-protection cables, or where caustic lines may be steam cleaned, according to the company. The cables are manu-
ETHANOL PRODUCER MAGAZINE
November 2010
Sponsored by
factured in 5-, 10- and 15-watt versions with operating voltages from 120 to 277 volts.
to 60 percent due to accelerated digestion of organic waste and lower aeration requirements for energy savings.
Fluid Components International has made available its model FS10A analyzer flow switch/monitor for use in all types of process and emissions sampling systems, including gas chromatographs, mass spectrometers, optical spectrometers and photometers. The company said that, unlike capillary bypass flow meters and controllers, the FS10A has no cavities, orifices or dead-legs that trap fluids and lead to contaminated samples, which preserves sample integrity and provides faster system sampling times.
Distillation Technology Inc. recently released results of independent studies that found its new technology can reduce conventional distillation energy costs by 75.6 percent and recover capital investment costs within one year. The Bubble Spray Distillation system removes 99.5 percent of the alcohol from an alcohol-water solution and produces a distillate with at least 98 percent alcohol concentration in one pass. The process rectifies the shortcomings of earlier vacuum distillation attempts by employing three key elements: an improved spraying system, the utilization of optimized heat pump temperature ranges and employing carbon dioxide to maximize stripper processes. DTI is currently seeking funding and a plant location to install a pilot system.
Biowish Technologies has introduced its trademarked BiOWiSH technology in the United States, having moved its corporate headquarters from Australia to Chicago earlier this year. Delivered in active microbial form, BiOWiSH is made up of a proprietary blend of enzymes, cofactors and nutrients that has been proven to accelerate the breakdown of all non-living organic matter into its final inert compounds. The product can reduce sludge production by up
Yokogawa Electric Corp. announced the release of the R1.02 upgrade to Real-time Production OrganizerTM (RPO)—a suite of manufacturing execution system platform packages that integrate the vertical production execution workflow across departments. With the R1.02 upgrade, RPO now includes Workflow Composer VP, a newly released package that supports the use of Business Process Modeling Notation and is used together with enhanced versions of Production
ETHANOL PRODUCER MAGAZINE
November 2010
Instructor VP and Production Supervisor VP as well as third party packages to standardize and automate business processes.
streamlines the tuning process, according to ExperTune’s founder John Gerry. The PlantTriage system monitors control system performance continuously, automatically diagnosing and prioritizing process, control and instrumentation problems. Integrated analysis and tuning tools improve plant results by focusing effort on the most critical issues.
Rich Cook has assumed the position of Strategic Business AdvanceBio LLC, a Cincinnati-based advanced biofuel Leader for U.S. Water Services focusing primarily on technology company, targeted segments of has developed its nextthe food and bevergeneration, sugar-based age industry. Cook, fuel ethanol process. who was previously a The process is capable regional manager for of utilizing sugars dethe company, has more rived from sugar cane, than 20 years of water sweet sorghum, sugar Cook treatment experience beet and similar crops ranging from district and regional for the production of fuel ethanol and green power while generating manager to corporate account zero liquid waste. When built in management in a variety of inconjunction with the sugar mill- dustries.. “U.S. Water Services has ing operation, plants employing done an exceptional job of bringAdvanceBio’s sugar-based etha- ing value to customers across a nol process will have the same, broad spectrum of industries,” low greenhouse gas footprint Cook said. EP found in Brazil’s existing canebased fuel ethanol industry. The SHARE YOUR INDUSTRY BRIEFS To be included in Business & People, send inforcompany is working with groups mation (including photos and logos if availcurrently developing cane and able) to: Industry Briefs, Ethanol Producer sweet sorghum-based projects in Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax the United States. information to (701) 746-8385, or e-mail it to ExperTune Inc. announced the capability to tune cascade control loops directly from the web browser interface of the PlantTriage Loop Performance Monitor. This greatly
sretkaschill@bbiinternational.com. Please include your name and telephone number in all correspondence.
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COMMODITIES REPORT
Natural Gas Report
Wholesale power, natural gas prices to remain low Oct. 1—Wholesale power prices typically track with natural gas—the dominant fuel source for marginal power supply. While correlated, the wholesale power market analysis can be misleading due to other factors such as capacity, transmission, losses, and a variety of ancillary services. Regional differences further complicate the analysis, and the lack of a single market index, which the NYMEX provides for natural gas, creates additional ambiguity. For the first time in the modern era, power demand fell for two consecutive years, in 2008 and 2009 (down 4.7 percent). The fall coincided with record added wind generation capacity, increased participation in demand response programs, and 6,500 megawatts (MW) of new coal-fired generation. In 2010, demand recovery has been stronger than predicted. Obviously, much of 2010 power demand which is up 4.7 percent has been weather driven. Most estimates put 2010 power demand growth from factors other than weather at roughly 1.8 to 2.2 percent. It is clear that the regions most heavily affected by the recession are gaining the most in the recovery based on improved industrial production, including the Southeast, Gulf and Midwest. But, with two years of decline, it will likely take several years to recoup the demand loss without the aid of weather.
By Brad Smith, U.S. Energy Services Inc.
Interestingly, power prices have not moved commensurately with the industrial demand improvement that has been obscured by the weather (and the parallel drop in natural gas prices). That suggests the impact of added generation capacity which grew in 2008 and 2009, and continues to grow. One could argue forward power prices do not support the build-out of new generation facilities… period. Regardless, 2010 will see almost 5,000 MW of extra coal-fired and 4,000 MW of additional wind generation capacity. Forward power prices are still dominated by changes in natural gas prices and have fallen despite increased industrial and weatherrelated demand. The capacity increases imply an additional layer of weakness. Even with unanticipated, substantial gains in demand going forward, the power market is unlikely to tighten for several years. Efforts to retire significant volumes of coal-fired generation are meaningful, but also not expected for several years. Therefore, we anticipate that power prices will continue to track with natural gas— with both remaining low through calendar year 2011 and perhaps into 2012. EP
Corn Report By Jason Sagebiel, FCStone
Yield prospects, corn stocks trigger volatility Oct. 4—The USDA’s September corn stocks report triggered liquidation within the corn complex. The corn market had been rallying day after day as funds and spec monies flowed into the agriculture commodity markets. Corn surpassed $5.25 per bushel on concerns of declining yield figures being reported from areas of the eastern Corn Belt and fear that same trend could occur in the western Corn Belt as well. Despite the lower yield expectations, the Sept. 30 corn stocks report was bearish to the complex. Old crop corn stocks totaled 1.71 billion bushels versus analyst estimates of 1.407 billion bushels. This implied that corn usage between June and August was 2.60 versus 2.59 billion bushels the same period a year ago. Ultimately feed demand is one of the factors that impacted the bigger ending stocks number. As an end result, carry-out-to-use ratio percents will jump to 12.7 percent without any alterations to demand. The market was looking towards the October USDA supply/ demand report to offer market direction into the balance of the year. Harvest is expected to advance smoothly this fall as compared to last’s year wet, slow harvest, ultimately adding pressure to the marketplace. The market going forward will be determined on weather issues that may arise in South America. In addition,
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traders will monitor wheat seedings into this fall. Any adverse weather conditions in South America’s next growing season will burden U.S. prices as winter approaches. EP
ETHANOL PRODUCER MAGAZINE
November 2010
COMMODITIES REPORT
DDGS Report
Regional Ethanol Prices ($/gallon on Oct. 4) Front Month Futures (AC) $1.910
RACK
REGION
SPOT
West Coast
2.130
2.440
Midwest
2.070
2.400
East Coast
2.120
2.330
By Sean Broderick, CHS Inc.
Corn futures drive DDGS market moves Oct. 4—Distillers grains follow corn—markets are slow to go up, and slow to go back down. September was no exception, as prices hit yearly highs followed by corn futures falling hard the week of Oct. 4. Compared to recent years, DDGS prices have held up pretty well as a percentage of corn. Barge markets hit a high of $180 in the Gulf, and have now dropped to the low $160s. California has seen a similar rise and fall. Asian buyers continue to focus on containers, as tight Gulf elevations and vessel freight is pricing out bulk deliveries. Bulk delivered prices are currently about a $25 per metric ton premium to containers. Corn and soybean exporters are competing for the empty containers as they suffer the same Gulf elevation issues. A positive note is that the
International Maritime Organization, which influences the vessel insurers, is expected to recharacterize DDGS as nonhazardous, which should reduce bulk rates. Domestic demand is steady. Cattle are still out in green pastures, but there will eventually be seasonally increased wetcake production, which will limit the dry, and keep prices from dropping too much. Hog feeding has resumed higher inclusion rates as new crop DDGS contains little vomitoxin, if any—a welcome change from last year. Given the volatility, the corn futures market will determine market direction, but DDGS is a good enough value that exports should rebound this winter. EP
SOURCE: DTN
Regional Gasoline Prices ($/gallon on Oct. 4) Front Month Futures (RBOB) $2.0861
REGION
SPOT
West Coast
2.195
2.281
Midwest
2.080
2.140
East Coast
2.125
2.064
RACK
SOURCE: DTN
DDGS Prices ($/ton) LOCATION
NOV. 2010
OCT. 2010
Minnesota
115
120
110
Chicago
140
136
136
Buffalo, N.Y.
135
125
150
Central Calif.
171
168
170
Central Florida
159
154
NOV. 2009
153 SOURCE: CHS Inc.
Corn Futures Prices DATE
(Dec. corn, $/bushel)
HIGH
LOW
CLOSE
Oct. 1, 2010
4.94 3/4
4.65 3/4
4.65 3/4
Sept. 1, 2010
4.47 1/4
4.37 3/4
4.46 3/4
3.46
3.37 1/2
Oct. 1, 2009
3.40 1/2
Ethanol Report
SOURCE: FCStone
By Rick Kment, DTN Biofuels Analyst
Ethanol prices trade in wide range
Oct. 4—Ethanol prices have been erratic to say the least, as sharp gains in the corn market through mid-September drew traders into the ethanol market over the past month in an aggressive, all-out buying frenzy. Ethanol demand remained extremely strong with buyers reporting tight supplies as both domestic and export demand held strong through early September. But with corn prices falling sharply, traders are quickly backing away from the market. Some export markets see the recent gains as being too aggressive for current production prices. This is leaving the ethanol market in a volatile swing which may continue to move higher and lower over the next several weeks. Corn futures are tumbling fast near the first of October following the
quarterly stocks corn report that revised corn supplies. This is pushing ethanol prices to a significant discount to the gasoline price—a relationship that was the opposite just a couple short weeks ago. Strong noncommercial trade or fund buying interest has redeveloped in the energy markets recently, which has pushed RBOB gasoline prices nearly 15 cents higher at a time when the seasonal tendency of the market is to work lower due to lighter driving activity. Additional support could be seen in the energy complex over the first part of the fourth quarter if the stock market continues to hold recent gains. EP
Cash Sorghum Prices ($/bushel) Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas
OCT. 1, 2010
SEPT. 3, 2010
SEPT. 17, 2009
4.06 4.06 3.91 4.10 4.18 4.31
4.15 4.05 3.86 4.32 4.16 4.52
2.71 2.69 2.52 3.07 2.59 3.64 SOURCE: Sorghum Synergies
Natural Gas Prices
($/MMBtu)
SEPT. 1, 2010
AUG. 1, 2010
SEPT. 1, 2009
NYMEX
3.651
4.774
2.843
N. Ventura
3.580
4.540
2.600
Calif. Border
3.490
4.320
2.620
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production Output
(1,000 barrels)
Per day
Month
End stocks
July 2010
857
26,581
17,784
June 2010
854
25,631
18,610
July 2009
738
22,887
14,223
SOURCE: U.S. Energy Information Administration
ETHANOL PRODUCER MAGAZINE
November 2010
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BIObytes Ethanol News Briefs
A new process turns WDG into a nonperishible, high protein feed.
Company receives patent for WDG-based animal feed
SD conducts ethanol blend test South Dakota is currently testing E30 in some of the state’s flex-fuel vehicles to compare the cost-effectiveness of various ethanol blends. A test pool of 86 model-year 2009 Chevrolet Impalas is being used to compare the cost per operating mile of E85, E30 and E10. Half of the pool
is being fueled with E10 for the entire year. The remaining 43 vehicles were fueled with E85 for six months and will use E30 for the remainder of the yearlong study. Test results from the E85 portion of the study showed the fuel did not improve operating costs per mile.
Researchers unlock plants’ sugar secret A team of British researchers has successfully modified plant genes to more easily access the sugars trapped inside lignocellulose. Researchers first located the two enzymes that appeared to control xylan, which holds approximately one-third of the sugars that could be used for cellulosic ethanol production. The team then removed
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those enzymes from Arabidopsis plants and discovered that the altered plants functioned as well as traditional plants. Work will immediately begin to apply this discovery to willow trees and, eventually, energy crops such as miscanthus and corn stover.
Novera Protein Inc. has received a patent for its process to convert wet distillers grains (WDGs) and/or syrup into a new class of animal feed. Wet brewers grains, WDGs, syrup, or a combination of any of the three are combined with other protein sources to alter the amino acid structure of the final protein. The result is a nonperishable bypass protein that contains 47 percent crude protein, compared with an average
26 percent crude protein found in distillers dried grains. Wet mill ethanol plants in regions with large cattle populations are ideal locations for Novera’s operations, according to company President and CEO Tom Haschen. Allowing Novera to co-locate a feed production facility with the ethanol plant could provide the producer with additional revenue sources as well as a means to dispose of unwanted syrup, he said.
Cedar Rapids RR tracks extended Cedar Rapids and Iowa City Railway Co. is installing a new 9,000-foot track in Cedar Rapids, Iowa. The railway, commonly known as CRANDIC, initiated the project to serve the Archer Daniels Midland Co. ethanol plant located just a few miles from the new track. ADM’s newest plant is a 300 MMgy dry
mill, which began operating at the end of August, co-located with its 420 MMgy wet mill. Although rain has delayed the project CRANDIC still aims to get it completed this winter.
ETHANOL PRODUCER MAGAZINE
November 2010
Growth Energy, the Renewable Fuels Association and six other groups sent a letter in September to U.S. DOE Secretary Steven Chu asking him to restore funding to the Renewable Energy Loan Guarantee Program and fix shortcomings of the program. The letter followed the withdrawal of $1.5 billion from the program in August. In total, lawmakers have “borrowed” $3.5 billion to pay for shortfalls in state revenues and the “Cash for Clunkers” program. Program funds are now 60 percent below the level that was appropriated by Congress. In addition, the DOE has been slow in dispersing its resources and has only issued one loan guarantee as of April 2010, according to a U.S. Government Accountability Office report. “Our members have spent many years and billions of dollars collectively developing renewable energy technologies,” the letter
said. “Many projects are ready to be deployed, but due to the collapse of the global financial markets and the innovative nature of some of the technologies, they are having difficulty securing the necessary financing. The LGP was specifically designed to overcome these obstacles and its inaction sends the signal that the government is no longer a willing partner to the industry… we urge you to fix the shortcomings of the LGP so that we can continue to work together for a clean energy future in America.” Also signing the letter were the Clean Fuels Development Coalition; the Solar Energy Industries Association; the American Council on Renewable Energy; the Biomass Coordinating Council, American Council On Renewables; the Biotechnology Industry Organization and the American Wind Energy Association.
BBI launches Biorefining magazine BBI International’s newest magazine, Biorefining, will provide in-depth coverage of advanced biomass refining, from technology scale-up, project finance and policy and markets. “Starting in October, Biomass Magazine will be rebranded as Biomass Power & Thermal to illustrate the three-year-old publication’s exclusive editorial focus on the biobased electricity and heat generation sectors,” said Ron Kotrba, editor of Biorefining. “At the same time, the editors of Biorefining will focus on advanced biofuels and biobased chemicals.” Along with the mag-
PHOTO: BIO ARCHITECTURE LAB
Groups ask DOE to fix loan program
Bio Architecture Lab and Statoil, one of the world’s largest offshore oil and gas producers, are collaborating on a project to produce ethanol from macro algae (seaweed) grown off the coast of Norway.
BAL, Statoil to study ethanol from macro algae Bio Architecture Lab and Statoil in September announced a partnership on the production of macro algae (seaweed) to ethanol. Under terms of the agreement, Statoil will fund BAL’s research and development and demonstration projects, and if
successful, will also fund the commercialization of BAL’s technology in Norway and elsewhere in Europe. BAL will have the right to equity participation and will receive royalties on all ethanol and byproducts.
AdvanceBio engineers develop process to eliminate vinasse
azine, BBI will hold the International Biorefining Conference & Trade Show in 2011. For details, see www.biorefiningconference. com.
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November 2010
AdvanceBio LLC, a Cincinnati-based engineering and consulting firm, has developed a technology that eliminates the vinasse produced as a byproduct of sugar-based ethanol production. Vinasse consists of mostly water with a small amount of organic material and has little market value. Brazilian sugarcane-to-ethanol producers typically truck the byproduct
to fields, where it used for irrigation, but that method of disposal could pose environmental concerns in highly populated areas. The company said its technology is compatible with any sugar processing technique and could adapt to any front-end process. AdvanceBio is consulting with U.S. groups seeking to locate sugar-based facilities in the southern U.S. 31
VeraSun drops demands made to corn farmers In late August, corn farmers who were paid in 2008 for corn deliveries to nowbankrupt VeraSun Energy Corp. received letters asking for some of that money back. The farmers’ lawyers responded with a flurry of their own letters. “I suspect that the New York lawyers received literally hundreds of letters with similar defenses outlined in them and thousands of sheets of back-up information demonstrating the futility of proceeding further,” Joe Peiffer, a Cedar Rapids, Iowa, lawyer told EPM. Then, just as suddenly as the issue had come up, it disappeared. On Sept. 30, the deadline the VeraSun estate had given farmers to repay the money, the demands were withdrawn. “That was great news, almost the best news we could have gotten on that topic,” Rick Tolman, CEO of the National Corn Growers Association, told EPM. He added that it was something that the organization could put in the win column, with a green check mark by it. Darrin Ihnen, president of NCGA, was also pleased. “This is great news for farmers at a time when we need to focus on bringing in our crops,” he said. “We’re glad the lawyers saw the light and realized they had no legal justification to go after us.” The good news came in the form of an email from Randy Schaefer, a lawyer with SilvermanAcampora LLP, on Sept. 30. “Please be advised that we have received sufficient information to determine that the VeraSun estate will not pursue a claim for relief against corn producers and the demands are hereby withdrawn,” she wrote. Schaefer added that a list of corn producers “against whom we are withdrawing our demands” would be forthcoming. New York law firms SilvermanA-
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campora and Kelley Drye & Warren LLP issued the letters that asked corn producers to repay 80 percent of the payments they had received from VeraSun in the 90 days before the company filed for Chapter 11 bankruptcy in 2008. Peiffer said he felt giddy when he heard the news. He was one of 50 or more attorneys who banded together to work on the problem, Peiffer said. Each attorney sent letters to the VeraSun estate attorneys, laying out two solid defenses against the argument that corn farmers received preferential treatment. A preference payment is when a creditor is paid before other creditors, allowing them to recover more money than if the bankruptcy estate had distributed the money after the bankruptcy. Corn producers did not receive preferential treatment because producers were paid in the ordinary course of business, he said, typically delivering corn and getting paid the next week. In addition, a 2005 amendment to the bankruptcy code provides an exception to preferential treatment for those that used forward contracts. It’s not clear at this point which argument worked. “It could be either of them,” Peiffer said. “Frankly, I don’t care. We got where we needed to get.” Also on the case was the NCGA, which Sept. 28 sent its own letter to the law firms, insisting the demands be withdrawn. “We believe that many of the foregoing demands were made without any legal and factual foundation and, as such, constitute an impermissible effort to collect alleged debts that are clearly not owing,” wrote attorney David Lander of Thompson Coburn LLP. “They appear to have been made without the inquiry reasonable under the circumstances. More-
over, we believe that the claims asserted in the vast bulk of these letters are not warranted by existing law or a non-frivolous argument for the extension, modification or reversal of existing law or the establishment of new law.” The NCGA letter pointed to a host of defenses, including the fact the many of the payments were made in connection with forward contracts and/or in the ordinary course of business. “It appears that in sending out your demands in this case, absolutely no effort was made to distinguish such payments from the other payments upon which you made demand,” Lander wrote. “As a result, you ended up demanding the return of thousands of payments that were paid within terms. This is in direct contrast to the established practice in most bankruptcy cases.” Although the organization had not heard of any farmers having repaid the amount demanded in the claim, the NCGA letter also asked the VeraSun estate to return any funds that might have been collected. “We just wanted to make sure that if anybody did pay that they did get their money back,” Tolman said. What was good news for corn farmers, however, was not applied to others, such as elevators and service providers that did business with VeraSun during that period. The VeraSun estate is still reserving the right to go after them.
ETHANOL PRODUCER MAGAZINE
—Holly Jessen
November 2010
In August, the U.S. EPA and the U.S. Department of Transportation proposed an overhaul to the current “petroleum-centric” fuel economy labels that are displayed on every new vehicle for sale in the U.S. Gina McCarthy, EPA assistant administrator, said the alterations will be the broadest changes made to the labels since their debut more than 30 years ago. “Today we have technologies that are revolutionizing the way we drive,” she said. “As new fuel savings and emissions-cutting technologies emerge from the laboratory and start appearing on showroom floors and in driveways across America, we think a new label is absolutely necessary to help consumers make the right decision for their wallets and for the environment.” The current fuel economy label is very minimal in the information it provides to consumers. The label displays the vehicle’s average miles per gallon (MPG) and compares that to other vehicles within the same class. The goal of the new labels is to expand that basic information by including data on fuel consumption and tailpipe emissions and provide information on where to locate a Web-based tool that will provide extended information on the vehicle’s performance. Two general design options were offered in the agencies’ proposal. One features a letter grade, which would reflect the vehicle’s combined fuel economy and greenhouse gas (GHG) emissions performance. The other more closely resembles the current label, but also includes fuel consumption and emissions information as well as a slider bar to illustrate the car’s performance compared to all other vehicles. Labels on flex-fuel vehicles (FFVs) are already required to identify the vehicle as an FFV, to list the fuels that can be used in the vehicle and to indicate the fuel economy of the vehicle when operated on gasoline. In the
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PHOTOS: U.S. EPA
EPA proposes label changes for overall fuel economy, FFVs
The U.S. EPA is accepting comments on proposed redesigns for vehicle fuel economy labels meant to increase consumer awareness regarding fuel usage and emissions levels.
proposal, the agencies suggested three new for FFV labels. The first option is to keep the current labeling requirements, which would result in FFV labels showing a lower fuel economy for E85 than gasoline. The second would require the labels to include fuel economy values calculated in miles per gallon. The EPA acknowledges that this approach would result in a label stating that E85 results in fewer miles per gallon than gasoline, so it suggests adding text to the label that says: “While the E85 MPG values are lower than the gasoline MPG values, the use of E85 is typically slightly more energy efficient than the use of gasoline.” Additionally, the EPA said it could add to the label CO2 emission rates, which would be lower for E85 than gasoline, and fuel costs. The third option would list the vehicle’s fuel economy in miles per gallon of gasolineequivalent, which would illustrate the slightly higher miles per unit of energy that a vehicle would achieve when fueled with E85. The EPA’s goal to combine fuel economy and GHG emissions performance into one rating admittedly presents a problem when la-
November 2010
beling FFVs, because those vehicles can be operated on more than one type of fuel. In the proposal, the EPA said that “empirical evidence” shows 99 percent of FFV owners use gasoline instead of E85. Therefore, it proposes to base combined fuel economyGHG emissions ratings for FFVs on gasoline. “However, if a manufacturer can demonstrate that some of its FFVs are, in fact, using E85 fuel, then the merged values can be based in part on E85 performance, prorated based on the percentage of the fleet using E85 in the field,” the agency wrote in its proposal. The EPA is accepting comments on all of its proposed labeling changes, including the trio of FFV options and its proposal to base merged ratings for FFVs on gasoline use rather than E85, through Nov. 22. The proposed rule and labels can be viewed at www. epa.gov/fueleconomy. Comments may be submitted via e-mail to newlabels@epa.gov.
—Kris Bevill
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Cellulosic producers advance projects Recent activities in the cellulosic ethanol industry have shown that while financing continues to be a major hurdle, technological advancements continue to be made and companies are beginning to construct their first commercial-scale facilities.
BlueFire Renewables Inc. BlueFire has secured 15-year offtake and feedstock supply contracts for its proposed Fulton, Miss., plant and named Fargo., N.D.based Wanzek Construction Inc. as its engineering, procurement and construction (EPC) contractor. Company CEO Arnold Klann said the agreements will help BlueFire secure its pending $215 loan guarantee from the U.S. DOE. “There’s no reason for this project not to get financed, save for the governmental loans not getting through due to bureaucratic hold-ups,” he said. “We have met and greatly exceeded every criteria that we know of that has been set by the DOE loan guarantee program.” BlueFire’s proposed 19 MMgy facility will convert various wood waste feedstocks into ethanol using the company’s acid hydrolysis technology. Mobile, Ala.-based Cooper Marine & Timberlands will supply the facility with 770 dry tons per day of feedstock beginning in December 2012 at a cost of $25 per ton, according to Klann. When ethanol production begins, Tenaska Biofuels LLC has agreed to purchase and market all of the fuel produced at the plant. BlueFire’s sale price will be based on a pricing contract that includes rack ethanol prices for the area to which the fuel will be delivered, minus transportation costs, with a kicker for renewable identification number (RIN) credits, he said.
Fiberight LLC Fiberight and U.K.-based TMO Renewables Ltd. have agreed to design and build 15 commercial-scale cellulosic ethanol production facilities across the U.S. within the next five years. With capacities from 10 to 15 MMgy, they will utilize a combination of TMO’s process technology and Fiberight’s fractionation and digestion technology to convert municipal solid waste (MSW) to ethanol at a more efficient, cost-effective pace. “Together, the companies are on track to become one of the largest producers of cellulosic ethanol in the U.S. during 2011, helping to divert millions of tons of waste away from landfills every year,” said Fiberight CEO Craig Stuart-Paul. Fiberight’s 5 MMgy facility in Blairstown, Iowa, will serve as the initial site and others in the Mid-Atlantic and Florida areas have been identified for the next five plants.
Glycos Biotechnologies Inc. Houston-based GlycosBio has engineered the first microbial platform for the synthesis of biofuels and biochemicals—ethanol, butanol, acetate, acetone, isopropanol, succinate and propionate— from fatty acids. “Until now, microbial platforms to enable the biological production of fuels and chemicals from fatty acids have been nearly non-existent,” said Paul Campbell, chief science officer for GlycosBio. “Through our research, we were able to prove the effectiveness of fatty acids to produce higher value chemicals at very high yields with an empirical ethanol yield double that which is usually achieved with sugars. These results demonstrate that fatty acids can be a great alternative to cellulosic sugars.”
www.vbusa.com office@vbusa.com (713) 461-7374
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Fulcrum BioEnergy Inc.
American Process Inc.
CEO Jim Macias said MSW currently being tipped at landfills in the Reno-Lake Tahoe, Nev., basin will provide approximately 90,000 tons of annual feedstock for Fulcrum’s planned 10.5 MMgy Sierra Biofuels Plant near Reno. The company began EPC activities earlier this year and expects to begin producing ethanol using a thermochemical process in mid2012. A subsidiary of Fluor Corp. was awarded the contract to provide EPC services for the $120 million project. “It took us longer to raise the capital in this very tough market, but we’re very pleased to get this project going and demonstrate the commercial viability, not just for our project but for the industry,” Macias said. Fulcrum is planning projects in Houston, Colorado, Florida, Oklahoma, Tennessee and New England.
Georgia-based API began work in August on its 900,000 gallon per year cellulosic ethanol facility in Alpena, Mich. The plant will be co-located with a decorative panels industrial hardwood plant and will convert industrial wood hydrolyzate waste to ethanol and aqueous potassium acetate beginning next year. Valero Energy Corp. is invested in the project, which has so far also received approximately $23 million in state and federal grants.
Enerkem Inc. Enerkem broke ground Aug. 31 on its 10 MMgy MSW-to-ethanol facility in Edmonton, Alberta, which will convert 100,000 metric tons of trash annually when it becomes operational. “As a result of this facility, we will become the first major city in North America to see 90 percent of residential waste diverted from landfill by 2013,” said Edmonton Mayor Stephen Mandel. “This groundbreaking marks the launch of a transformative project and leads the first wave of commercial-scale advanced biofuels plants in North America,” Vincent Chornet, Enerkem president and CEO, said. Enerkem also is developing a 20 MMgy MSW-toethanol project in Pontotoc, Miss.
Mascoma Corp. Mascoma has acquired Canada’s SunOpta BioProcess Inc. for $51 million. It will use SunOpta’s first-step pretreatment process with its own technology to produce cellulosic ethanol more efficiently and cost-effectively. Mascoma CEO Bill Brady said the company chose SunOpta’s technology because it is a steam explosion technology that uses no harsh chemicals or acids. Construction is to begin at the company’s 20 to 40 MMgy plant in Kinross, Mich., by mid-2011 and be completed in 2013.
KL Energy Corp. Wyoming-based KL Energy is working with Brazil’s Petrobras to develop and commercialize bagasse-to-ethanol technology. Petrobras is investing $11 million in the project, which will be used to modify KL Energy’s demonstration facility and fund process optimization and technology licensing. The companies will install the technology at one of Petrobras Group’s Brazilian sugarcane mills. The 4 MMgy project is expected to be completed in 2013. —Kris Bevill
1-800-827-1662 • www.interstates.com
ELECTRICAL CONSTRUCTION • ELECTRICAL ENGINEERING • AUTOMATION • INSTRUMENTATION ETHANOL PRODUCER MAGAZINE
November 2010
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Plants upgrade, restart production Plants in Wisconsin, Iowa and North Dakota are planning upgrades and one idled plant in Minnesota has restarted production. In financial news, one company reports increased net sales and revenue, another said it will repay shareholders and a third has repaid state incentives it received for a plant it never completed.
Ace Ethanol LLC The 42 MMgy Ace Ethanol, Stanley, Wis., received $595,000 in federal American Recovery and Reinvestment Act funds distributed through the Wisconsin State Energy Program that will be used to upgrade its waste heat recovery from its regenerative thermal oxidizer. “We hope to have the project competed this year,” said Neal Kemmet, general manager.
Lincolnway Energy LLC Lincolnway will burn biomass in an existing boiler to offset the plant’s use of coal, said Rick Brehm, the plant’s president and CEO, thanks to a $1.9 million USDA Repowering Assistance Program grant. Authorized under the 2008 Farm Bill, the program establishes USDA payments for the use of biomass to replace fossil fuels. The 55 MMgy Nevada, Iowa, plant will invest another $2 million to install storage and handling equipment.
Blue Flint Ethanol LLC Great River Energy and Headwaters Inc. have partnered with Knorr Farms to build a corn dryer at the 50 MMgy plant in Underwood, N.D. Construction began in August to add 600,000 bushels of corn storage and a natural gas-powered dryer with a capacity of 4,000
bushels per hour. Installation of the corn dryer was expected to wrap up by mid-October. “It should be just in time for this year’s harvest,” said Jeff Zueger, general manager.
Denco II LLC A group of local investors, many of them farmers, purchased an idled ethanol plant in Morris, Minn., in late August and returned it to full operation in early October, according to Mick Miller, general manager. The plant has gone through many changes in the past 10 years. Morris Ag Energy Inc. was purchased in 1999 by Diversified Energy Company LLC, known as Denco, and upgraded from 7 MMgy to 17 MMgy. In 2006, Australia-based Big Island Grain LLC purchased the plant and kept the name. Its newest owners renamed it Denco II.
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PHOTO: ACE ETHANOL
Ace Ethanol LLC in Stanley, Wis., will install heat exchange equipment with $595,000 in stimulus funding.
The 24 MMgy plant was in cold idle for 20 months, but in good condition and ready for start up. “We do have plans to make facility improvements as we go,” Miller said.
Rex American Resources Corp. The former retail company announced a
ETHANOL PRODUCER MAGAZINE
significant increase in quarterly sales thanks to its alternative energy segment. For the second quarter of 2010 Rex had net sales and revenue of $65.1 million, up from $17.1 million in the second quarter of 2009. Those numbers included contributions from One Earth Energy LLC, a 100 MMgy ethanol plant in Gibson City, Ill., of which Rex has 74 percent ownership. One Earth completed its first full quarter of production in the third quarter of 2009. The fiscal second-quarter results do not, however, include the 100 MMgy NuGen Energy LLC at Marion, S.D., in which Rex acquired 48 percent ownership in June. The company has interests in seven ethanol plants with a combined capacity of 632 million gallons.
Glacial Lakes Corn Processors In September, the Glacial Lakes Corn Processors board of directors announced it would repay more than $11.1 million to its investors during the 2011 fiscal year, ending Aug. 31. “Our board and management believe this
November 2010
action demonstrates our continued success in restoring the financial health and viability of our company and we believe the time has come to repay our investors,” said Mark Schmidt, board chairman. The board asked shareholders for needed working capital, rather than declare bankruptcy in 2008. The South Dakota cooperative, which owns ethanol plants in Watertown and Mina, assessed 6 cents per share prepaid unit retain, with a 99 percent response from approximately 4,200 investors.
Tate & Lyle plc After announcing this spring that it would not complete construction on its Fort Dodge, Iowa, plant, Tate & Lyle repaid $1.42 million in state incentives. The company received the incentives to create 100 jobs with average salaries of $23.54 an hour, including benefits. No plans have been announced for the plant. Construction stopped just short of completion in March 2009. —Holly Jessen
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VEETC waiting game continues The ethanol industry has been playing the waiting game for months, with very little news about the Volumetric Ethanol Excise Tax Credit. Set to expire at the end of the year, VEETC, or as it is commonly known, the blender’s credit, has yet to be renewed. That’s a scary prospect for many in the ethanol industry, especially considering what has happened to the biodiesel industry after its tax incentive expired at the end of 2009 and attempts to get it extended have failed repeatedly. Many biodiesel plants have been idled or slowed production, and many jobs were lost. The Renewable Fuels Association told EPM the organization is continuing to work with lawmakers in an effort to get the extension passed before it expires at the end of the year. “We remain hopeful that an extension of VEETC will occur in the lame duck session of Congress in November,” said Matt Hartwig, communications director. “We are also realistic that it’s an uphill battle.” On the other hand, Growth Energy would like to see a change in the way VEETC funds are passed out. The group’s Fueling Freedom Plan proposes to get ethanol the same market access as Big Oil enjoys. “That is why we have proposed our
Fueling Freedom Plan which will eliminate the barriers to the transportation fuels market by building out ethanol dispensing infrastructure in the form of 200,000 blender pumps, a federal loan guarantee for construction of ethanol pipelines and production of flex fuel vehicles,” said Stephanie Dreyer, public affairs associate. Since the plan was introduced, Growth Energy has been reaching out to energy, commerce and national security groups, Dreyer said. If Congress does have an energy debate, the group wants the Fueling Freedom Plan to be part of that discussion. In addition, in early September, Growth Energy held its first legislative conference, at which 90 of its members met with members of Congress. “According to many of our members, our message was well-received on the Hill,” she said. Still, as it has said since summer, Growth Energy does support a multi-year extension of VEETC. The group feels strongly that its plan is the best way to go, but if that isn’t implemented it doesn’t want to see the tax credit lapse. “Because the VEETC plays such a crucial role in our energy independence, Growth Energy believes that the tax credit will pass in some form by the end of the year,” Dreyer told EPM.
RFA heard the Obama administration’s view on VEETC at its Sept. 30 annual meeting. Heather Zichal, the president’s deputy assistant for energy and climate change policy, spoke to the group about the administration’s commitment to clean energy, and specifically, ethanol. “As you know, we support the extension of the ethanol tax credit and recognize how important the industry is,” she said. President Obama says the U.S. has a choice when it comes to energy policy—action or inaction, she pointed out. It’s a choice between the old ways or the new and between leading the global race or falling behind other countries. She also pointed out that about 95 percent of the fuel powering cars, trucks, planes and trains comes from oil. More than half of that oil comes from overseas, accounting for more than one-third of the carbon emissions in the U.S. “With statistics like that, there’s no question that biofuels will continue to be a critical component of our energy policy—and along the way, it’s going to reduce our dependence on foreign oil, create jobs, protect the environment and invigorate rural economies,” she said. She also brought up the subject of tax credit reform. Zichal said the White House does want to work with the ethanol in-
dustry and Congress on options for reform. “We want to make sure that it’s guided by a recognition that the existing program does work—we’re certainly not looking to upend a program that works, as occasionally happens in Washington,” she said. “We want to make sure that we are all on the same page as we move forward and have these discussions.” Another high-level individual that has been vocal in supporting the extension of VEETC is Secretary of Agriculture Tom Vilsack. This spring he told EPM he was in favor of longterm extensions of the ethanol financial incentives. Without incentives such as the blender’s credit and the Cellulosic Biofuel Producer Tax Credit, it will be difficult to get investors interested, he said. Since then he’s expressed the same support repeatedly in various news reports. Along with VEETC, the small producers tax incentive and the tariff on imported ethanol are set to expire at the end of the year. The cellulosic tax incentive expires at the end of 2012. —Holly Jessen
EPA’s biogenic emissions rule could affect entire ethanol industry The U.S. EPA is in the process of reviewing nearly 7,300 comments it received in response to its unexplained inclusion of biogenic emissions in its final greenhouse gas (GHG) Tailoring Rule. Historically, biogenic emissions—those that occur as a result of the combustion or decomposition of biological materials—have been considered carbon neutral and have therefore been excluded from GHG regulations worldwide. The EPA followed that protocol when it proposed the Tailoring Rule, but by the time the rule was finalized in May, it had decided to include biogenic emissions when accounting for total GHG emission levels. The effects of this inclusion could be disastrous for many industries, including ethanol, as evidenced in comments filed with the agency. “The equal treatment of biogenic emissions and petroleum-based emissions creates a clear disincentive for manufacturers of alternative fuels, and will adversely affect their ability to obtain permits in a timely fashion, require additional capital to install emission controls, limit production flexibility and diminish capacity for market expansion to meet increasing renewable fuel standard blend volume requirements,” said Valero Energy Corp., in its comment to the EPA. Approximately onethird of the corn that enters ethanol plants is converted to CO2 as a
result of fermentation. Those emissions have typically been discounted as being carbon neutral, but if the EPA’s rule stands as is, they will soon have to be factored into the facility’s GHG emissions. Valero cited calculations that show the fermentation process at a 50 MMgy plant releases 157,000 tons per year of CO2. When combined with other emissions, a production facility that size would emit approximately 277,000 tons per year of CO2. This would place nearly every ethanol plant in the U.S. within the constraints of the EPA’s Tailoring Rule, which will subject all sources that emit more than 100,000 tons per year of CO2 equivalent to permitting requirements beginning July 1. “Every bushel of corn produced releases 17 pounds of CO2, so they are significant emissions and including them in the Tailoring Rule or any other greenhouse gas accounting framework greatly exaggerates the carbon intensity of our industry,” said Geoff Cooper, vice president of research for the Renewable Fuels Association. Many ethanol plants with operating capacities of 100 MMgy or greater will already be subject to the Tailoring Rule because they emit more than 100,000 tons per year of GHG emissions without including biogenic emissions. But Cooper said the entire industry will be negatively affected if biogenic emissions
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calculations continue to be a requirement, as will every other biomassusing industry. “The inclusion of biogenic emissions annihilates any rationale for doing a renewable electricity standard, so it’s a much broader issue than just biofuels,” he said. The potential for this inclusion to hamper a growing renewable energy industry becomes even greater if the EPA’s regulations were to be carried over into some type of national cap and trade system, he added. “If an ethanol producer has to have offsets for biogenic emissions, then it hits everybody hard. The implications go far beyond a Tailoring Rule.” The National Corn Growers Association pointed out that it has long been the policy of the EPA, as well as the European Union and the U.N.’s Intergovernmental Panel on Climate Change, to consider biogenic emissions carbon neutral.“NCGA strongly feels that the supporting science is appropriate for EPA to continue to consider biomass fuels and fuels produced from biomass as carbon neutral as the IPCC and others do,” the group said. “Reversing the long-standing principle of biomass carbon neutrality would not be a correct policy response.” Groups such as the Environmental Defense Fund as well as hundreds of private citizens, most of whom are concerned about proposed
biomass-to-power facilities in their areas, said there is no such thing as “carbon neutral” emissions and all emissions should be accounted for, regardless of their origin. The Environmental Defense Fund applauded the EPA for recognizing the importance of “accurately accounting” for GHG emissions from biogenic sources in its final rule, although it did confess that not all biogenic feedstocks are equal. The group recommended the EPA devise a method to account for each biogenic feedstock separately and take into consideration carbon shifts across regional landscapes. Other groups continue to suggest entire life-cycle analysis calculations. “Obviously, that is not practical, it’s not scientifically justified and, frankly, it’s lunacy to think our industry could do something like that,” Cooper said. It is unclear when the EPA will complete its analysis of the comments received. According to the EPA, as the rule currently stands applicable sources of GHG emissions from all sources and fuels, including biogenic emissions, will be subject to permitting requirements beginning Jan. 2. —Kris Bevill
PROFILE
1,000 KEYS Iogen continues to improve its cellulosic ethanol process and signs indicate deployment is approaching. By Susanne Retka Schill
The brick hangar where Iogen got its start is still in use. The center of the Iogen logo on the tall building indicates where the building is divided, with industrial enzymes produced on the left and cellulosic ethanol produced in the demonstration plant on the right. The research laboratories and corporate headquarters, pictured on the left, are housed next door.
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of floor space as the boardroom upstairs. So, it is not until one walks through the demonstration plant next door that it begins to resemble an ethanol plant. And it is here that the real challenges in scaling up a new process present themselves, as the tank sizes grow to 180,000 liters. “We don’t go to the demonstration plant unless we’ve had bench and pilot scale validation,” says CEO Brian Foody. “But when you build it bigger you have problems. We have issues with cost, issues with wear, we have issues with the overall operating chemistry. And in each, you have to go through and debug it slowly and steadily.” Foody’s dad started the business in 1972 with the idea of finding a way to make low-grade cellulosic materials more digestible for cattle and sheep feed. The process he developed has become the leading pretreatment in the cellulosic ethanol industry, says his son. At the time it was called steam explosion. Today the general approach is referred to as dilute acid pre-hydrolysis. The company has developed a successful business producing industrial enzymes that are used in the pulp and paper, grain processing, brewing, textile, and animal feed industries. In 2002, its cellulosic ethanol work ramped up when it entered a joint venture with
PHOTO: JANA CHYTIL
he rather abstract concept of scale—bench, pilot and demonstration—takes on more meaning when one tours the Iogen Corp. campus. Nearly 300 people work at its facilities situated on the edge of the airport in Ottawa, where the company started up in the 1970s in an empty hangar. Today the campus covers almost 10 acres, and several additions have been made to that original brick hangar. There’s an inverse relationship of scale and people. Iogen says more than half of its personnel work in research and development, about one-fifth in manufacturing and the remainder in sales and administration. In the laboratories where enzymes are developed and processes are refined, several scientists are occupied in each section, running tests in tubes and flasks using expensive looking machines perched on benches. The scale can get even smaller—micro tubes are used to test for the successful transfer of genes expressing desirable enzyme traits. Moving from bench scale to pilot scale means moving up from one liter flasks to 1,500 liter tanks, and it is here that the individual pieces of the puzzle are put together in a continuous, albeit still small, process. The entire pilot plant at Iogen covers about the same amount
Iogen CEO Brian Foody is stepping aside as CEO of the Shell joint venture, Iogen Energy, as commercialization nears. Duncan Macleod, a former Shell executive, began as chief operating officer this summer and took over as CEO in November.
44
ETHANOL PRODUCER MAGAZINE
November 2010
PROFILE
Year
Ethanol (L)
Ethanol (gal)
Cumulative (L)
2004 2005 2006 2007 2008 2009 2010 to Sept.
89,871 129,547 16,811 2,598 206,525 581,042 438,584
23,741 34,223 4,441 686 54,558 153,495 115,862
89,871 219,418 236,229 238,827 445,352 1,026,394 1,464,978
Cumulative (gal) 23,741 57,964 62,405 63,091 117,650 271,145 387,006
Iogen publishes its cellulosic ethanol production figures on its website.
Dutch Royal Shell plc to build the demonstration plant and commercialize cellulosic ethanol. Iogen Energy Corp. started with $25 million in private investment and $10 million from the Canadian government. The demo plant is now at $65 million and counting, according to Jeff Passmore. Passmore, who began working with Iogen as a consultant, recently left the company as its executive vice president to return to the consulting world as Passmore Group, with Iogen his first client. Foody has developed an apt analogy to provide an answer to the frequently asked question—what will be the key to success for cellulosic ethanol? It isn’t one key, he says. “It’s more like a big hotel and somebody says I want every room to be clean here. You have a thousand keys. You have to go into each room and clean it and fix it up and move on to the next.” Foody also compares the cellulosic development process to software, where each release has multiple improvements, some major and some minor. Iogen is now working on Releases 8 and 9 of its enzymatic hydrolysis process, with Release 8 focused on reducing water use and 9 on driving down costs. “I just heard today about one of our objectives to reduce variable costs over the past year by 35 percent,” Foody adds. “The fellow who had this goal said at the beginning, ‘I don’t know how I’m going to make it,’ but over the course of 12 months through well over 25 initiatives, he was able to make savings here and there that ultimately added up to the overall goal.” ETHANOL PRODUCER MAGAZINE
Perhaps one of the biggest indicators that Iogen is nearing the ultimate goal of leaping to commercial size is that the demonstration plant, which began operation in 2004, is now running continuously. “We’re convinced that this is the crucial element for success,” Foody says. When scaling up, the first phase in pilot and demonstration projects is to run the plant on an experimental basis, collecting data on component operations, he explains. “We feel like the next stage for everyone before we build large plants is to really have validated on a day in, day out basis that these systems operate effectively.” Foody reports the hydrolysis systems in the demonstration plant have been running continuously for two years and although other units shut down periodically either for cleaning cycles or as they turn over batches, they are essentially running continuously as well. The Iogen production record posted to its website reports 115,862 gallons of cellulosic ethanol was produced this year through September. Last year, the plant produced 153,495 gallons, thrice that of 2008’s production of 54,558 gallons. The inventory of cellulosic ethanol has been put to use in company promotions such as being the first to sell cellulosic ethanol blends at retail for a month last year at a Shell station in Ottawa. Iogen and its partner Shell provided fuel for the limousines at the G8 summit in Scotland last year, as well as other events, giving the fuel exposure to politicians and the public. The company has touted its role in supplying high performance race cars,
November 2010
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PROFILE
providing cellulosic ethanol to Drayson Racing for the American Le Mans series and to Ferrari for the Formula One season. Iogen even encouraged those racers to locate cellulosic ethanol supplies closer to the events to save on shipping costs, says Passmore. In the end, only Iogen had supplies—an indication that nobody else is really making much cellulosic ethanol yet, he points out. Another indication that Iogen is nearing the ultimate goal is the addition of a Shell executive, Duncan Macleod, to the management team. He came onboard this summer as chief operating officer of the Shell/Io-
gen joint venture Iogen Energy Corp. and was to take the CEO reigns from Foody in November. Macleod is no stranger to Iogen. He was on the due diligence team that vetted Iogen’s cellulosic technology when Shell was searching for partnerships to enter the advanced biofuels arena. He helped craft the Iogen Energy joint venture that began in 2002 and served on its board before moving to Shell Hydrogen as its vice president. With more than 30 years of experience at Royal Dutch Shell plc, Macleod brings global experience and an oil perspective to the Iogen offices at Ottawa.
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â&#x20AC;&#x153;Shell realized that biofuels were going to be part of the energy systems as much because of customer and government need and less driven by Duncan Macleod technology optimi- CEO, zation,â&#x20AC;? Macleod Iogen Energy says. While there were interesting debates with hydrocarbon scientists about the most efficient way to fuel combustion engines, he says, other societal goals have become important factors. â&#x20AC;&#x153;I think Shell got that early.â&#x20AC;? Shell was keenly interested in partnerships to examine a number of pathways, and to learn. â&#x20AC;&#x153;One of the things that worried the board is that the hydrocarbon business works in the complete supply chain from source to output, working to control and manage and optimize. With biofuels, the front end is about agriculture and farming, and we knew nothing.â&#x20AC;? Conversations with other oil executives echoed that concern, he says. â&#x20AC;&#x153;It it was and still is a struggle for the big energy companies. The front end of the supply chain is the farming business. It is seasonal. Oil and gas pump out every day of the year. When energy companies have to deal with biofuels, all of a sudden itâ&#x20AC;&#x2122;s not just understanding the mechanics or the chemistry of it, itâ&#x20AC;&#x2122;s the seasonality. When I look at Iogen over the years, a lot of this detail, the nitty gritty understanding of that front end and how the agricultural cycle works is incredibly important.â&#x20AC;? Iogenâ&#x20AC;&#x2122;s strategy has been built around first working with strawâ&#x20AC;&#x201D;the feedstock with established logistics for collection and ample supplies on the Ontario and Quebec farms surrounding Ottawa. The scientists have also run tests with corn stover, baggasse and multiple other feedstocks. â&#x20AC;&#x153;There are not first order differences, but second order differences,â&#x20AC;? Foody says. â&#x20AC;&#x153;There are minor constituents in corn stover that are different.â&#x20AC;?
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ETHANOL PRODUCER MAGAZINE
November 2010
PROFILE
Iogen expects its enzymatic hydrolysis technology will be easily adaptable to any of the feedstocks being considered for cellulosic ethanol, with the exception of softwood. Straw is the targeted feedstock for Iogen Energy’s first commercial scale plant being planned for central Saskatchewan. While Iogen executives have given up naming a target groundbreaking date, due to having missed earlier targets, there are signs that construction will soon begin. Macleod’s arrival at Iogen Energy is one indicator. While Iogen supplies the conversion technology, Shell is supplying its expertise in engineering and building large projects―not to mention its bankroll. Another indicator is that Iogen Corp. initiated a capital campaign in midSeptember, retaining Goldman, Sachs & Co. as its exclusive financial advisor. (Goldman Sachs, along with Petro-Canada, were early investors in Iogen.) “Iogen Corp., a 50/50 partner with Shell in Iogen Energy, believes raising additional capital to allow Iogen Corp. to match Shell as an equal partner would be a positive for the technology commercialization schedule,” Macleod explains. The project also has a $200 million commitment from the Canadian government. That federal commitment is what triggered Iogen’s withdrawal from a proposed project in Idaho that was a winner in the first round of U.S. DOE grants. “We were running three parallel tracks in Idaho, Saskatchewan and Germany. We reached the point where we had to decide which to push over the goal line,” says Passmore. “We were most advanced in Canada, least advanced in Germany. At that time Canada committed for $200 million, whereas in the U.S. there was the commitment for the $80 million grant, and it looked like another year of negotiation for the loan guarantee.” As it turned out, the decision hasn’t set back the project, since the other awardees of the first DOE grants have struggled to meet the loan guarantee conditions.
ETHANOL PRODUCER MAGAZINE
It remains to be seen if a change in sites will be a setback. An agreement made in mid-2009 appears to have fallen through. Canadian paper maker Domtar has withdrawn its offer to Iogen Energy to build at the site of the idled Prince Albert, Saskatchewan, pulp mill. Iogen is still in discussions with Domtar, but will revisit other sites that had been considered earlier. Another plant using Iogen technology is in early development in Brazil. Shell and Brazil’s big ethanol producer Cosan S.A. have agreed to create a joint venture. Once regulatory approval is received, the details
November 2010
will be negotiated and planning will begin for deploying the new technology at one of Cosan’s plants. “The addition of Cosan to our broader family creates a set of international opportunities that we need to be ready to exploit,” Foody says. Macleod’s addition to the management team is a sign Iogen is getting ready. EP Susanne Retka Schill is editor of Ethanol Producer Magazine. Reach her at sretkaschill@ bbiinternational.com or (701) 738-4922.
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EXPORTS
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ETHANOL PRODUCER MAGAZINE
November 2010
EXPORTS
2010 is shaping up to be a record year for U.S. ethanol exports— and that’s just looking at the data through July. By Holly Jessen
ETHANOL PRODUCER MAGAZINE
November 2010
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EXPORTS
W
ith ethanol exports booming in 2010, the question remains whether the year is an anomaly or the beginning of export expansion. In the first seven months of the year, 182.7 million gallons of U.S. ethanol was shipped to other countries. Only one year in the past two decades, 1995, has seen more ethanol––197.5 million gallons––exported than the amount exported so far this year. “We’re expecting that we could export in excess of 300 million gallons this year,” says Geoff Cooper, who tracks exports for the Renewable Fuels Association as its vice president of research and analysis. Although the numbers are notably higher this year, the U.S. industry has been exporting its product for years, Cooper says. The difference this year is the saturation of the U.S. domestic market. “There’s really nowhere else to go with ethanol in the U.S. markets, so the natural progression of things is to start developing foreign markets,” he says. Spring was a peak time for U.S. ethanol exports. A total of 48.3 million gallons was exported in March and 40.8 million gallons in April. “Things really boomed in March and April, both,” he says. “Just in those two months alone we exported nearly 90 million gallons.” The numbers were not as dramatic the next two months, dropping to less than 20 million gallons followed by a rebound in July, when 25.2 million gallons were exported. Exports tracked by the Foreign Agricultural Service, Global Agricultural Trade System, include denatured and nondenatured, nonbeverage, ethanol traditionally used for industrial purposes, although it can be used for fuel. “Our industry is exporting product and there’s international demand for ethanol,” Cooper says, “whether it’s for fuel, which most of it is, or whether it’s for some other industrial purpose.” Through July, the U.S. had exported 121.7 million gallons of undenatured ethanol and 61 million gallons
of denatured. Canada, Netherlands, United Arab Emirates (UAE), Brazil and Jamaica, listed from highest to lowest, were the top five importers of U.S. denatured ethanol while Netherlands, India, Mexico, South Korea and UAE were the top importers of undenatured ethanol. Brazil is another notable importer of U.S. ethanol. The country imported a significant amount of U.S. ethanol in the early spring, dropped back down to virtually zero shipments in May and June, and then imported more in July. “We have historically been a net importer of Brazilian ethanol,” Cooper says. “Today, things have reversed and we have actually exported substantially more ethanol to Brazil than we’ve actually imported this year.” UAE also presents an ironic story. The country is a substantial oil producer and a member of OPEC. “We think it’s interesting that there are oil sheiks from UAE driving around with corn ethanol in their gas tanks,” Cooper says.
Who’s Exporting? Big River Resources LLC is one example of an ethanol producer that plans to export product. Starting in September, the company dedicated its capacity at the Galva, Ill., plant to producing undenatured ethanol solely for export for the next 60 or 90 days, Jim Leiting, general manager, tells EPM. This is the company’s first foray into ethanol exports and the goal is to capture an improved margin structure. “We identified an opportunity in the marketplace and our plant had the capacity to do this,” he explains. Big River Resources looked at the possibility of exporting ethanol for about three months before diving in, ultimately after holding sales for ethanol export. The company now has two buyers that are exporting its ethanol to Europe’s main port at Rotterdam in Netherlands. Although the company currently plans to wrap up production of undenatured ethanol before the end of the year, Big River will extend that if,
ETHANOL PRODUCER MAGAZINE
November 2010
EXPORTS
U.S. Denatured Ethanol Exports through July 2010 60,000,000 50,000,000 Gallons
40,000,000 30,000,000 20,000,000 10,000,000 -
SOURCE: RFA/USDA GLOBAL AGRICULTURAL TRADE SYSTEM
U.S. Undenatured (Non-Beverage) Ethanol Exports through July 2010
30,000,000 25,000,000 Gallons
20,000,000 15,000,000 10,000,000 5,000,000 -
SOURCE: RFA/USDA GLOBAL AGRICULTURAL TRADE SYSTEM
after review, it makes sense to continue, Leiting says. Platinum Ethanol LLC, a 110 MMgy plant in Arthur, Iowa, is another plant with its eye on foreign markets. This plant has exported ethanol off and on this year although manager Nick Bowdish declined to say how much is being sold into the export market. “We’ve got the flexibility to go back and forth depending on what indicators are being shown in the marketplace,” he says, adding that it takes a couple days to make the switch to undenatured ethanol. “All changes are made on the go,” he says. “Then it’s just a matter of segmenting different products in different tanks.” Both plants have distilled spirits ETHANOL PRODUCER MAGAZINE
permits (DSP) and both general managers say the process of transporting the product from the plant to where it’s exported isn’t much different from what is usually done. At Platinum Ethanol, the product is shipped out via rail, the same way it would be if it were going to be used domestically, Bowdish says. Of course, the bulk of ethanol produced in the U.S. is still being used domestically. The Andersons Inc., which has three ethanol plants in Michigan, Indiana and Ohio, tells EPM it currently isn’t exporting ethanol, although the company acknowledges that some of its ethanol may have found its way into other country through resellers. “We continue to explore opportunities as they arise, but our plants are not
November 2010
EXPORTS
TOTAL U.S. ETHANOL EXPORTS (Denatured & Undenatured, Non-Beverage)
GALLONS
200,000,000 180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000
96
19
97
19
98
19
99
19
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
) LY
JU N-
A
0
1 20
(J
SOURCE: RFA/USDA GLOBAL AGRICULTURAL TRADE SYSTEM
ideally situated for export execution,” Mike Irmen, director of ethanol services, tells EPM. “Plants that are along the river system, set up to load 100-car unit trains or in locations that don't consume more ethanol than is produced locally are more likely to work into export channels.” Another barrier for The Andersons is that the EU spec for ethanol is undenatured and less than 3 percent water content. “We could work around the water content issue, but it would command a premium to compensate us for the water removal and efficiency and yield loses,” Irmen says. The good news for the domestic ethanol industry is that it’s becoming a sophisticated, global industry, Cooper tells EPM. “The U.S. ethanol industry truly is a global energy provider today, where as it hadn’t really been one in the past,” he says. In another way, increased exports have been a mixed blessing, Cooper adds. U.S. producers are now exporting a homegrown, renewable fuel—and the benefits associated with that—to other countries. “One of the founding principles of the industry was, let’s do what we can to increase our domestic fuel supply and reduce the amount of oil that we import,” he says. “So here we are now in a situation where the U.S. ethanol industry is standing at the ready to produce more ethanol and to assist in 52
reducing the amount of foreign oil that we need, and yet the industry is being held back because of the limit on E10.” The situation underscores the need for immediate approval of E15, he adds. Leiting also points to the delay in E15, as well as concerns as to how long it will take to introduce that fuel successfully into the marketplace. “We would prefer to have a good strong domestic market,” he says. It all adds up to producers being forced to export ethanol due to “regulatory red tape” that has delayed the approval of E15, Bowdish says. He’d like to see the U.S. EPA approve E15 as soon as possible, “so that all Americans can use more ethanol, more homegrown renewable fuel, in their gas tanks,” he says.
Why the Spikes? One place to look for the stimulus in export volumes is to the north, says Rob Esposito, the head of Latium Capital’s ethanol and related products trading unit. Canada is importing U.S. ethanol due to higher wheat prices, a major ethanol feedstock there, and the 2010 Canadian ethanol mandate. “Although the Canadian government has a 5 percent renewable fuels standard, some of the provinces have higher mandates— Saskatchewan is at 7.5 percent, Manitoba is at 8.5 percent,” he says.
ETHANOL PRODUCER MAGAZINE
November 2010
EXPORTS
An even bigger factor can be found to the south, with drought in Brazil leading to a smaller sugar cane crush. April through August, Brazil saw significantly lower-than-average rainfall, with conditions in some areas extreme, according to UNICA, the Brazilian sugarcane industry association. Additionally, Brazilian sugar exports are up nearly 11 percent from the same period for the 2009-’10 harvest. That contrasts with a nearly 50 percent decrease in ethanol produced for export at mills in south-central Brazil. By the end of the sugarcane harvest, UNICA expects that the south-central region will export 1.45 billion liters (383 million gallons), a drop from 2.76 billion liters exported in last year’s harvest. “Total ethanol sales by mills in the south-central region from the beginning of the harvest to mid-August totaled 9.69 billion liters, of which 8.82 billion were destined for the domestic market,” UNICA said. Then there’s that all-important price issue. In May, the RFA calculated that, taking into account transportation, tariffs and other factors, the retail price of Iowa ethanol was $2.701 and Sao Paulo, Brazil, ethanol was $2.818, more than an 11-cent difference. That means E10 made from U.S. ethanol would be about 8 cents cheaper than a gallon of gasoline without ethanol. Even if the tariff weren't in place, E10 made with imported Brazilian ethanol would be 6 cents more than E10 made with domestic ethanol. For most of the year, U.S. ethanol has been priced lower than gasoline. In the spring, the price spread was as high as 80 cents less for E100 than conventional gasoline. Moving into late summer and fall, however, that price relationship has shifted. Looking at futures prices, Rick Kment, a Telvent DTN biofuels analyst, points out that ethanol traded for the lowest price of $1.46 a gallon on June 29, compared to $2.07 futures prices for gasoline on the same day. By close of market on Sept. 16, that had changed to a futures price of $2.07 for ethanol and $1.924 for gas. In that month and a half, ethanol futures prices went from a ETHANOL PRODUCER MAGAZINE
significant discount of 60 cents a gallon to a premium of 15 cents. “A lot of this has really been driven by the increased cost of production,” he says, “although the strong export and domestic demand has helped to solidify and to sustain the higher price.” Corn prices increased in late summer and early fall, meaning increased production costs for U.S. ethanol plants. Kment believes this will mean lower export numbers in September and October. “That has significantly increased overall ethanol prices and will more than likely significantly narrow the price difference between these markets,” he says. Kment suggested that the increased exports to Brazil could be more of a seasonal movement around Brazil’s sugarcane harvest, rather than a trend toward exporting more U.S. ethanol to Brazil overall. He also pointed to Russia, where drought will reduce its wheat exports, which, in turn, will likely mean higher demand for corn. That will help support higher corn prices, with ethanol prices generally tracking corn. As U.S. ethanol loses its price competitiveness, countries such as Brazil may move back to exporting their product rather than importing U.S. ethanol. “It’s a very convoluted system, where one action in one area might effect and impact a totally different market,” he explains. In addition, it’s not known what impact raising the blend limit could have on the industry and pricing. Could it spur on another movement to overbuild capacity? Kment asks. Would consumers want and use E15 and would retailers offer it? “That really is challenging to put concrete, significant numbers on [whether] higher blending will, or will not, significantly impact price,” he says. “There are a lot of what ifs.” EP Holly Jessen is associate editor of Ethanol Producer Magazine. Reach her at (701) 738-4946 or hjessen@ bbiinternational.com.
November 2010
POLICY
Is the RFS Broken? Prospective cellulosic ethanol producers are beginning to doubt the usefulness of the renewable fuels standard and fear the impact of lessened federal support. By Kris Bevill
54
ETHANOL PRODUCER MAGAZINE
November 2010
POLICY
ETHANOL PRODUCER MAGAZINE
November 2010
55
POLICY
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Each November, the U.S. EPA is tasked with setting the RFS volume requirements for the following year. Gasoline and diesel projections from the U.S. DOE’s Energy Information Administration are used to calculate the overall standard. Cellulosic standards, however, are determined based on EIA projections as well as EPAconducted assessments of the cellulosic ethanol industry. After the EPA conducted its industry analysis in summer 2009, it reduced the cellulosic volume requirement for the first year’s implementation in 2010 from 100 million gallons to only 6.5 million ethanol-equivalent gallons, which is about 5 million gallons of actual fuel. In its industry assessment, the agency relied heavily on biomass-based diesel fuel substitute producers, such as Cello Energy, to contribute to the cellulosic biofuels target. As of October, most of the anticipated producers were not known to have produced any cellulosic biofuel, and it’s unlikely that the 5 million gallon cellulosic goal will be reachable by the end of the year. Considering the fate of the 2010 mandate, it wasn’t surprising that when the EPA issued its proposed 2011 RFS volumes in July, it once again slashed the cellulosic biofuels requirements. The initial 2011 target for cellulosic biofuels was 250 million gallons, but the EPA estimated a more feasible target of between 6.5 and 25.5 million ethanol-equivalent gallons (representing
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here’s a growing consensus among the budding cellulosic ethanol community that the renewable fuels standard (RFS) is not doing its job. Enacted in 2005 and amended in 2007, the RFS was part of legislation designed to spur greater production of renewable fuels by ensuring demand through the establishment of mandatory blend levels for those fuels. But for the second year in a row, the EPA is proposing to drastically reduce the cellulosic biofuels volume requirement. While probably necessary due to lack of available fuel, continual lowering of the mandate brings into question the effectiveness of the program and the unintentional negative impacts it could have on the industry it was created to assist.
5 and 17.1 million actual gallons), and will settle on an exact total by Nov. 30. Potential producers and refiners have both reacted strongly to this proposal, but for very different reasons.
A ‘Chilling Effect’ “Setting low cellulosic ethanol volumetric targets has a chilling effect on investment in cellulosic ethanol,” says Mark Stowers, vice president of science and technology at Poet LLC. “EPA is sending a signal to the investment community that they don’t see cellulosic ethanol developing at a rate that is consistent with the RFS. There’s a lot of investment in this technology that is maturing, and it would be sad to see that shortened by lack of investment.” Poet was one of the first producers to receive federal funding for its cellulosic project and has also received substantial support from the state of Iowa for its Project Liberty, and Stowers says the advancements Poet has so far made in the cellulosic arena would not have been possible without the government’s financial support. Poet, like many other future cellulosic producers, is close to realizing the commercial-scale cellulosic facility, but it needs more financing in order to complete the project. “We’re kind of in a stage where it’s not related to technology anymore,” he says. “It’s really related to the ability to get financing and the overall economic climate. There’s plenty of opportunity to hit those [RFS] numbers, but it requires a lot of capital. If there’s no incentive based on the RINs [renewable identification numbers], it’s going to be a challenge.” “It really does signal in a negative way to the market that the program isn’t working as designed,” says Ted Kniesche, vice president of business development at Fulcrum Bioenergy Inc. Fulcrum recently began engineering, procurement and construction activities at its 10.5 MMgy Sierra Biofuels Plant near Reno, Nev., and anticipates producing cellulosic ethanol beginning in 2012. So while his company isn’t directly affected by the 2011 volumetric targets, Kniesche says it still impacts his conversations with investors and their view of the market in general. “I think that lowering the target year after year just puts a damper on biofuels in general,” he says. “I think a lot of
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The Short List The producers identified by the EPA for possible 2011 cellulosic biofuel production include: AE Biofuels: AE Advanced Fuels Keyes - Keyes, Calif. The EPA says AE Biofuels expects to start up a 20 MMgy cellulosic ethanol facility next June and that it will produce 500,000 gallons of fuel next year. Agresti Biofuels LLC - Pike County, Ky. Site work has been completed at this 20 MMgy cellulosic ethanol facility, but construction is on hold. The EPA has it scheduled to start up in October 2011 and predicts it will produce 1 million gallons of fuel in 2011. Bell Bio-Energy - Atlanta, Ga. The EPA says that while a location has not even been selected for this proposed 14.4 MMgy diesel fuel substitute facility, it believes the simplicity of the company’s single-step production process would allow it to construct a commercial-scale plant in six weeks. The EPA is also unclear about when fuel would begin to be produced or whether it would even qualify under the RFS2 program, but still believes the company could contribute 7 million gallons of fuel to the 2011 cellulosic mandate. Cello Energy - Bay Minette, Ala. The cellulosic diesel producer continues to be pegged by the EPA as a potential producer of cellulosic biofuels, although the EPA stated that the company has yet to produce significant volumes of fuel at its 20 MMgy facility. Despite the delay, the EPA says Cello Energy could produce 5 million gallons of cellulosic diesel in 2011. DuPont Danisco Cellulosic Ethanol LLC - Vonore, Tenn. The company began producing cellulosic ethanol at its 250,000 gallon-per-year facility earlier this year and plans to contribute 150,000 gallons of fuel to next year’s cellulosic volume. Fiberight LLC - Blairstown, Iowa. The company continues to modify its existing corn ethanol plant to be capable of producing cellulosic ethanol derived from municipal solid waste. Production capacity at the facility will be 6 MMgy by late 2011, but it expects to produce no more than 2.8 million gallons of cellulosic ethanol next year. KL Energy Corp. - Upton, Wyo. The company is in the process of upgrading its facility to produce cellulosic ethanol from various feedstocks and is expected to contribute 400,000 gallons of fuel to the 2011 cellulosic volume. Iogen Corp. - Ottawa, Ontario. The 500,000 gallon-per-year demonstration-scale facility has been in production since 2004 and has never sold fuel into the U.S. market for activities other than promotional events. Nonetheless, the EPA says it’s possible that Iogen could provide 250,000 gallons of cellulosic ethanol toward the 2011 mandate.
companies are in the same position we’re in, which is once we prove the commercial viability of plant No. 1 we can move very fast and build a much bigger program behind that first plant. We have big ambitions for contributing to that RFS target and that’s one reason why we don’t want it to continually erode.” In comments filed with the EPA, DuPont Danisco Cellulosic Ethanol LLC also warned that the continued waiving and lowering of cellulosic biofuel volumes will have a negative effect on investments. “As a result, the cellulosic biofuel volumes fail to function as a true mandate, and fail to provide the consistent incentive and risk mitigation needed to drive the early market and biorefinery construction and comETHANOL PRODUCER MAGAZINE
mercial production,” the company stated. Jennifer Hutchins, DDCE corporate communications director, says the company will produce its predicted share of next year’s cellulosic fuel and lowering the mandate hasn’t stalled DDCE's progress so far, but it is a significant issue for the industry as a whole. “The technology is proven,” she says. “The technology works. There’s been impressive progress in the industry and we realize that volumes were set based on projected production, but it’s important to recognize that we're at a tipping point and a consistent mandate is necessary to ensure that investments continue in our industry.” The RFS needs to be reevaluated to stay aligned with market realities and the overall intentions of the program but Hutchins
November 2010
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says it will remain a vital component of the industry as deployment begins. “We fully expect to eventually be an unsubsidized industry,” she says. “But we need the mandates now to ensure that we can encourage investment in this fledgling industry.”
Paying the Price Of course, refiners don’t view the RFS in the same light as producers. While producers are concerned that waiving down the mandate will discourage investment and drive down the market for their product, refiners are far more concerned with the money they must pay for
RINs that represent those renewable fuels. A reduced mandate lessens the financial tug on refiners. The American Petroleum Institute, which represents more than 400 members of the oil and natural gas industry, commented to the EPA that it should reconsider its already low assessment and reduce next year’s waiver even further than the proposed 5 million gallons. In fact, API suggested that each year’s cellulosic biofuels waiver should be based on three months of continuous demonstrated production rather than “subjective projections.” Patrick Kelly, API’s policy advisor for downstream fuels issues, says refiners struggle
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to comply with federal regulations when mandates keep changing with short notice. “It’s difficult for companies to plan their compliance and operations for the future year when the EPA estimates are so optimistic,” he says. “The proposal for the 2010 standard was 100 million gallons. When we got the final rule, EPA estimated 5 million gallons. It was a significant jump and obligated parties did not see the final rule until they were in the compliance period. And what’s the actual amount that’s going to be produced this year? It’s somewhere close to zero.” Kelly says the notion of requiring production before determining a mandate wouldn’t have to affect cellulosic producers negatively. “We’re not suggesting changing the overall cellulosic number for the dates going forward,” he says. “It’s just that the only way for obligated parties to have any kind of certainty in compliance is through this cellulosic waiver. If a company is to begin producing, they’re still able to produce the cellulosic RINs and they still have essentially a guaranteed market for the products they produce.” Most of the companies on the EPA’s 2011 list haven’t produced cellulosic ethanol continuously for three months, so according to API they should be removed from the list and the waiver should be adjusted accordingly. “Because there’s no certainty that any of them will be producing, they shouldn’t be counted for the overall mandate,” Kelly says. “Essentially, the volumes that EPA expects are likely not going to be produced. That’s not to say these companies won’t start production in 2011, but the EPA estimates are overly optimistic. Because the only way to accurately gauge how much they’re going to be producing is to look at their demonstrated capacity, the mandate for this year should be less than a million gallons of cellulosic. The minimum number EPA set out is 5 million … it appears that for this year that number was overly optimistic and we think it’s optimistic for the 2011 mandate as well.” Producers counter with the point that setting a mandate based on proven production levels would be inconsistent with the RFS’ goal to increase production of alternative fuels. “This is about a 90 percent
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monopoly that the petroleum industry has on our liquid transportation fuels,â&#x20AC;? Stowers says. â&#x20AC;&#x153;They need to comply like everybody else. They have a tremendous amount of financial resources that dwarf the size of the ethanol industry, so I donâ&#x20AC;&#x2122;t see a concern.â&#x20AC;?
Unique Situation While cellulosic producers and the petroleum industry are not likely to agree on RFS volumes, certain refining companies find themselves in what could be an awkward middle ground. Valero Energy Corp. refines 2.8 million barrels of oil per day and is a member of API. Its subsidiary, Valero Renewable Fuels LLC, has the third largest ethanol production capacity in the U.S. The company is also invested in three cellulosic ethanol companiesâ&#x20AC;&#x201D;ZeaChem Inc., Qteros and American Process Inc. Perhaps because of its unique position, Valero has taken a neutral stance on the RFS and is focused instead on generating revenue within the confines of the legislation. Bill Day, Valeroâ&#x20AC;&#x2122;s executive director of communications, says the company plans to continue to invest in cellulosic opportunities regardless of reduced RFS mandates. â&#x20AC;&#x153;At some point cellulosic technology will be viable on a level basis with corn ethanol, and it makes more sense to use non-food feedstocks for ethanol,â&#x20AC;? Day says. â&#x20AC;&#x153;The goal for Valero is to eventually have some cellulosic production at our existing ethanol plants in addition to the corn ethanol production that we have. â&#x20AC;Ś Weâ&#x20AC;&#x2122;re convinced that ethanol, whether itâ&#x20AC;&#x2122;s corn ethanol or cellulosic ethanol, is going to be an important part of American fuels, and we are a fuel company. So whether itâ&#x20AC;&#x2122;s gasoline, corn ethanol or cellulosic ethanol, diesel fuel or jet fuel, thatâ&#x20AC;&#x2122;s the business we want to be in.â&#x20AC;?
Bigger Battles According to Day, refiners will be more affected by the overall increase in the RFS than by adjustments made to the cellulosic biofuels mandate. â&#x20AC;&#x153;In the United States, demand for refined gasoline peaked in 2007 and has been flat or declining since then,â&#x20AC;? he says. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t expect it will ever again reach the levels it hit in 2007. Demand for refined gasoline is going to drop in this country and any incremental demand for ETHANOL PRODUCER MAGAZINE
fuel will be made up not by gasoline, but by ethanol. As more and more ethanol is required for use and, at the same time, the demand for gasoline drops, refiners like Valero will probably be looking for ways to add more ethanol into their fuel.â&#x20AC;? Fulcrumâ&#x20AC;&#x2122;s Kneische says members of the cellulosic ethanol industry have begun discussing what measures they can take to improve the RFS so that it functions in the way it was meant to. â&#x20AC;&#x153;If they created the RFS2 to act more like a mandate, much like you see in renewable portfolio standards, where you have penalties for non-compliance and you really
put the onus on the established energy industry to be stakeholders in this industry and be invested in its success, then I think youâ&#x20AC;&#x2122;ll see a very different dynamic,â&#x20AC;? he says. â&#x20AC;&#x153;Youâ&#x20AC;&#x2122;ll see investment flow a lot faster to biofuels in a way that is efficient. Right now, I think thereâ&#x20AC;&#x2122;s at best some ambivalence among the oil majors and others because as long as the cellulosic industry continues to lag, itâ&#x20AC;&#x2122;s not really any skin off their back.â&#x20AC;? EP Kris Bevill is an associate editor at Ethanol Producer Magazine. Reach her at kbevill@ bbiinternational.com or (701) 850-2553.
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Generating Alternatives New technologies offer producers a pathway to generating power and profits through the production of salable coproducts. By Kris Bevill
NDCPower's headquarters in Cheyenne, Wyo. PHOTO: NDCPOWER
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s producers continue working to gain approval to use more of their ethanol in gasoline, technology developers are also working to create new and unique uses for the fuel. More often than not, these new technologies are in the early stages of development and are relatively untested at the commercial level. But because they are new, most developers are eager to partner with a producer to prove their technology and form strategic relationships. One of these technology developers is Wyoming-based NDCPower. The company has developed a fuel cell that is capable of converting any primary alcohol, including ethanol, into both electric power and commodity chemicals. The company is now in the process of selecting a site to demonstrate its fuel cell technology and according to general manager Jessica Mitchell, an ethanol plant could offer the ideal location for a demonstration site. “We want to work with a partner that can benefit alongside of us, and ethanol producers make a lot of sense,” she says. “For ethanol producers, we offer a pretty unique opportunity to diversify their product line. If ethanol is used as a feedstock, the salable product from the unit is acetic acid and the power that’s generated can be used to power the producer’s existing needs in a behind-the-meter configuration. The partner would be providing us feedstock, but they’re going to be enjoying electric power and somehow sharing in the increased sales revenues from the acetic acid.”
Technology NDCPower’s technology employs an electro-chemical process in a fuel cell to generate electricity and, depending on the feedstock used, various saleable chemicals. For example, ethanol produces acetic acid while methanol produces formic acid. Mitchell likens the inner workings of the fuel cell to a gigantic battery. “It operates at room temperature and pressure and there are no moving parts,” she explains. “We do not combust the molecule, like you would in a traditional generator or steam turbine or similar types of technologies. We have catalysts inside the unit that drive the reaction.” The fuel cell units are modular in design, which offers a few benefits, according to Mitchell. The units are hot-swappable, so if a unit is malfunctioning it can be replaced without taking the entire system offline. Also, the 1 kilowatt modular design allows NDCPower to supply as many or as few units as required by the customer/partner. So far, the company has delivered kilowattsized units to its customers, which include the U.S. Department of Defense, but has yet to ramp up to a megawatt scale.
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Added Benefits Perhaps the most intriguing aspect of NDCPower’s technology is its ability to provide users with a commodity byproduct and eliminate CO2 emissions at the same time—two characteristics that are otherwise unheard of in fuel cell technology. “Most fuel cells, in fact, I think it’s all of them, produce only one thing and that’s electric power,” Mitchell says. “Our fuel cell is unique because it offers producers electric power, but the waste ETHANOL PRODUCER MAGAZINE
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product also has high value.” For ethanol producers, the acetic acid created in the process could fetch up to $600 per ton on the commodity market, she says. “The ethanol market is, you could say, marginal. But the acetic acid market is quite aggressive and that is because acetic acid is a key intermediary in many processes, including production of many plastics.” For producers seeking to gain a leg up on future greenhouse gas regulatory measures, NDCPower’s fuel cells offer two advantages. First, because ethanol is used as the feedstock to generate electricity, it has the potential to be deemed a renewable source of energy, which could alleviate some of the pressure to comply with demands for reduced intake of fossil fuels. Second, the technology converts CO2 that would typically be emitted into the atmosphere into a chemical byproduct, virtually eliminating all CO2 emissions from the units. “If you combust ethanol, all of the carbon ends up converted to CO2 to make power, but you don’t make anything else,” Mitchell says. “If you instead use this kind of electrochemical process to generate power, you do so while sequestering that carbon in the form of commodity chemicals that you then sell. You also get an advantage because turbine generators that combust really need to operate at pretty stable power delivery platforms. But our technology is what we call ‘instant on.’ When you ask it for power it delivers, and when you’re done it shuts off.” Mitchell says this added feature means that producers could utilize the units to level out the facility’s peak power requirements. While NDCPower’s technology is fairly new, it doesn’t have the “new technology” price tag that usually accompanies novel equipment systems. The final cost depends on the size of the project, but Mitchell says the back of the envelope calculation shows that the investment would be comparable to installing a turbine generator, for both capital costs and operating costs. The company was able to achieve competitive pricing because of its realistic approach to the technology, according to Mitchell. “We don’t have expensive catalysts and we don’t have seETHANOL PRODUCER MAGAZINE
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NDCPower's stack modules can meet varying power demands.
November 2010
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Logistics Aside from a ready supply of feedstock, the most important aspect of a potential
NDCPower demonstration facility site will be its proximity to liquid product transportation outlets, according to Mitchell. The electrical generation equipment wouldnâ&#x20AC;&#x2122;t necessarily have to be located within the ethanol plant, but it would require a fair amount of site space. â&#x20AC;&#x153;If we had a space that was the size of a semi-trailer, that would be three to four megawatts worth of cells,â&#x20AC;? Mitchell says. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s some holding tanks and pumps and other ancillary equipment, so we would need a space commitment, but I donâ&#x20AC;&#x2122;t think itâ&#x20AC;&#x2122;s egregious. Obviously, we would have to figure out how to handle the power. Weâ&#x20AC;&#x2122;re going to be generating power and we would need to get that to the appropriate point of utilization, but the nice thing about ethanol producers is theyâ&#x20AC;&#x2122;ve got the liquid ground transportation problem all worked out. Whether they have rail or trucks, it makes it a nice co-location possibility. Whether weâ&#x20AC;&#x2122;re on the same plant or just adjacent, that doesnâ&#x20AC;&#x2122;t really matter.â&#x20AC;? The size of the ethanol plant would
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lective membranes,â&#x20AC;? she says. â&#x20AC;&#x153;The key to our ability to deliver this unique technology is our catalyst screening platform. Theyâ&#x20AC;&#x2122;re very specialized catalysts that are designed with cost in mind. We recognized that platinum catalysts or rare earth metals were not realistic, so have focused our efforts on formulations that are economically viable. This allows us to field units with attractive value propositions.â&#x20AC;? Mitchell stresses that while the costs between her companyâ&#x20AC;&#x2122;s fuel cells and a traditional turbine generator may be similar, producers have the opportunity to make money back from NDCPowerâ&#x20AC;&#x2122;s technology, ultimately lowering the price paid for energy. â&#x20AC;&#x153;You get a lot better payback on your investment [by producing acetic acid] than you would by burning and just throwing away all the carbon and CO2,â&#x20AC;? she says.
NDCPower's electricity generation systems can be instantly turned on or off to meet the user's energy demands.
dictate the amount of electricity generated and acetic acid produced. Mitchell says 1 ton of ethanol will generate 1.35 tons of acetic acid and 1.4 megawatts of power. â&#x20AC;&#x153;The thing to do would be to sit down and identify what magnitude of product sales are desired and how much power the producer is currently utilizing from the grid, then try to balance that in a way that is independent and unique to each application,â&#x20AC;? she says. â&#x20AC;&#x153;What makes sense for one plant may not make sense for another.â&#x20AC;? EP Kris Bevill is an associate editor at Ethanol Producer Magazine. Reach her at kbevill@bbiinternational.com or (701) 850-2553.
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ETHANOL PRODUCER MAGAZINE
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REGULATION. BY WILLIAM A. NEWMAN Contribution
California’s Low Carbon Fuel Standard: Current and Future Impact The state’s CO2 reduction goals regulations are in place, unless a referendum delays implementation.
California’s low carbon fuel standard (LCFS) was enacted to support the California Global Warming Solutions Act of 2006. California meets 96 percent of its transportation fuel needs with petroleum-based fuels. The state believes that the LCFS regulations will allow markets to determine the lowest cost path toward expanded use of alternative fuels while meeting expected future fuel demands. The state officially adopted its LCFS a year ago, designed to lower greenhouse gas (GHG) emissions by reducing the full fuel-cycle carbon intensity of transportation fuels used
in California. Regulated parties face reporting requirements for 2010, and must begin reducing carbon intensities in 2011, beginning with a 0.25 percent reduction the first year and increasing to 10 percent in 2020.
Carbon Intensity Measures The LCFS requires that California fuel providers (producers, importers, refiners and blenders) meet (on average) a standard for GHG emissions, based on annual average carbon intensity. Carbon intensity is defined as the amount of lifecycle GHG emissions reported
as grams of CO2 equivalent per megajoule (gCO2e/MJ).
Life-cycle GHG Emissions The regulations define “life-cycle greenhouse gas emissions” as “the aggregate quantity of GHG emissions ( including direct emissions and significant indirect emissions such as significant emissions from land use changes), as determined by the executive officer, related to the full fuel life cycle, including all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distri-
bution and delivery and use of the finished fuel to the ultimate consumer, where the mass values for all greenhouse gasses are adjusted to account for their relative global warming potential.” LCFS regulations define transportation fuel as “any fuel used or intended for use as a motor vehicle fuel or for transportation purposes in a nonvehicular source.” Specific regulated fuels include California reformulated gasoline (CARFG); California reformulated gasoline blendstock for oxygenate blending (CARBOB); oxygenate (includes ethanol); diesel; biomass-based diesel, and alter-
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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native fuels such as compressed or liquefied natural gas (CNG or LNG), biogas, electricity, and hydrogen. The table shows the energy density assigned to each fuel type.
Life-cycle GHG emissions for various fuels Fuel (Units) Energy Density CARBOB (gals) 119.53 (MJ/gal) CaRFG (gals) 115.63 (MJ/gal) Diesel Fuel (gals) 134.47 (MJ/gal) CNG (scf ) 0.98 (MJ/scf ) LNG (gals) 78.83 (MJ/gal) Electricity (KWh) 3.60 (MJ/KWh) Hydrogen (kg) 120.00 (MJ/kg) Anhydrous Ethanol (gals) 80.53 (MJ/gal) Neat Biomass-based diesel (gals) 126.13 (MJ/gal)
Regulated Parties The regulated parties are the in-state producers or fuel importers, who must comply with LCFS and report to the California Air Resource Board, and the importer, who owns the fuel stock in first tankage in California. Generally, when one party transfers a transportation fuel to a non-regulated party (except the ultimate consumer), the recipient becomes a regulated party.
LCFS Credits, Deficits LCFS credits or deficits for each fuel or blendstock are calculated by taking the average carbon intensity requirement and subtracting the actual (reported) carbon intensity value of the fuel. That result is multiplied by a factor determined by the fuel energy displaced and multiplied by a factor used to convert credits to units of metric tons (MT). There are many exceptions for applying this formula, and the actual formula is listed in Section 95485(a)(3). A party using a fuel with carbon intensity below the baseline generates credits. Those parties with carbon intensities above the baseline generate deficits. For LCFS compliance, a party’s credits must exceed its deficits. A party cannot have a negative balance for two consecutive years. A party also cannot have a credit to deficit ratio of less than 90 percent without being in violation of the regulations.
Reports, Documentsation While specific requirements vary based on type of fuel, any fuel ownership transfer must be recorded with a product transfer document that lists fuel volume and the fuel’s average carbon intensity. The most recent quarterly progress report deadline extension allowed 2010 first-and second-quarter reports to be submitted by Sept. 30. For 2011 and beyond, quarterly progress reports for all regulated parties must be sent to the CARB executive officer by May 31 for the the first quarter, Aug. 31 for the second, and Nov. 30 and Feb. 28 for the last two quarters, respectively. Report items vary based on regulated fuel type. All quarterly reports, though, must include a statement attesting to the accuracy and validity of the report, fuel volumes and carbon intensity levels. Annual reports are due by April 30 for the previous calendar year. The 2010 annual report is due April 30. Specific requirements apply to various types of regulated fuel but all annual reports must include: Fuel volume Carbon intensity levels Total credits and deficits
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generated within the compliance period Any credits carried over from previous compliance period Total credits acquired from another party, with that party identified Total credits sold or otherwise transferred, with the recipient party identified Total credits retired within the LCFS Total credits exported to programs outside the LCFS. Regulated parties must determine the applicable fuel pathway for fuel transfers. Supporting pathway selection documentation must include certification from supplier, product transfer document, contracts and invoices. LCFS assesses penalties based on indirect land use changes (ILUC) associated with different fuel types. While such penalties are intended to promote use of less carbon-intense fuels, they are among the most controversial LCFS provisions. Regulated parties generating LCFS credits must demonstrate the physical pathway from production to delivery in California. Required documentation includes production facility registration; maps identifying physical pathway route segments
for shipments via boat, pipeline, rail or truck, and documents regarding the introduction and exit of fuel shipments from the physical pathway. A regulated party must retain certain records for at least three years and supply them within 20 days of a written request including product transfer documents, copies of all data and reports submitted to the executive officer, records for each fuel transaction and records used for compliance or credit calculations.
Outlook, Potential Impact Various studies debate the potential economic and environmental impacts of low carbon fuel standards. Three lawsuits have been filed in response to California’s passage of LCFS. California has also qualified a ballot initiative for the November election that would delay LCFS implementation. While California’s LCFS faces some uncertainties, environmental issues and movements that emerge in California tend to spread across the country. Other states are considering similar regulations and the U.S. EPA began requiring GHG reporting last January. Affected parties need to monitor related developments and be prepared to face new compliance requirements. EP William A. Newman is an assurance services partner in the Houston office of Weaver LLLP. Reach him at 832.320.3261 or William.newman@weaverllp. com.
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ENZYMES. BY PAMELA SIMMS-BORRE
PHOTO: NOVOZYMES
Contribution
The Economics of Enzyme Production Novozymes makes the case for delivered enzymes, sharing results of studies on costs and effectiveness.
development as well Not long ago, you as enzyme developcould ask any plant ment, so a lot has manager what the changed since the most costly part of topic first surfaced.” cellulosic ethanol proThe latest genduction was, and he eration of cellulosic or she would answer enzymes has finally “Enzymes.” Now enCynthia Bryant moved the industry zyme costs have been global business within the reach of reduced, but worries development commercialization. still abound about manager, With the latest enhow much enzyme is bioenergy, Novozymes zymes available to the needed and how best to source it. These worries are not industry, an average cellulosic ethas relevant anymore, says Cynthia anol plant of 55 MMgy will need to receive enzyme shipments only Bryant of Novozymes. “The discussion about on- twice a week. This development site enzyme production versus significantly reduces the volume a delivered enzyme solution has of enzymes a plant needs to be been going on for years, but we equipped to handle. Due to this need to set the scene as it stands reduction, the logistics, material today,” says Bryant, global busi- handling, and delivery timeliness ness development manager, bio- are no longer an issue, making energy for Novozymes. “In the plant operations a little less compast few years, the industry has plex on a daily basis. “We’ve moved beyond the made great strides within process
barrier of multiple truckloads of enzyme deliveries per day,” Bryant says. “We have reduced dosage and at the same time increased the percentage of cellulose converted. Now, using Novozymes Cellic CTEC2, we’re talking enzyme delivery a couple of times a week.”
Carbohydrate Sources not Equal Besides the issue of enzyme volume, another much discussed topic is the ability of production facilities to employ the cheap carbohydrate sources that they already have at hand. Many plant managers think that these carbohydrates—coming from the distillate, stillage, hydrolysis, etc.—can be recycled and used as a sugar source during enzyme fermentation, effectively lowering the cost of enzymes. Unfortunately, although they can be used, these by-product carbohydrates are ex-
tremely inefficient ingredients for effectively growing enzyme-producing microorganisms. “Being an enzyme producer, we were very interested in investigating the possibility of using lower-cost sources of carbohydrates, so we carried out a very intensive study into the possibility,” Bryant says. “Unfortunately, we found that fungal fermentation yields are significantly lower when you use a lower-quality carbohydrate. It just doesn’t pay off to switch to lowercost sources.” Although biomass carbohydrates are inexpensive, their heterogeneous nature can make them difficult to use in some fermentations. Each 5- and 6-carbon sugar possesses a different uptake rate in microorganism metabolism. Along with the crude biomass sugars there are also often significant inhibitors present, which can lead to lower fermentation yields and higher investment
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
November 2010
costs. “The industry’s hope that lower-cost carbohydrate sources would be a cost improvement for enzyme production is just not true,” she adds.
A Look into the Future To explore the true economics of enzyme production, Novozymes investigated a set of scenarios that made it possible to objectively compare on-site and delivered production models. Novozymes developed production scenarios for an average-size plant producing 55 MMgy of cellulosic ethanol, looking ahead to the year 2013. The models anticipated the values for expression and dosage for three operational capabilities—novice, intermediate and advanced. “The dosing figures used in these scenarios are not guaranteed, but represent feasible benchmarks for our various partners, based on where we believe enzyme performance will be in 2013,” Bryant explains. The novice uses an inexpensive, royalty-free cellulase strain, but the expression rate (grams of enzyme protein per liter of broth) is low at 50 g/L, and the dosage of enzyme needed later during processing is very high at 14 percent wt/wt mg enzyme product per gram cellulose. The intermediate uses a moderately expensive and more advanced cellulase strain. While the expression numbers are still low at 50 g/L, the dosage is much lower at 7 percent wt/wt mg enzyme product per gram cellulose. The advanced, using a rather expensive, advanced cellulase strain with limited blending of other enzyme types, does even better with an expression of 70 g/L and a low dosage of 4 percent wt/wt mg enzyme product per gram cellulose.
In the analysis, Novozymes assumed technology that would result in the lowest possible capital cost for an on-site production setup and indexed the capital cost for building such a plant to the standard investment required to construct the ethanol facility. In fact, the setup for on-site production is one that has not been commercially proven yet, but offers the promise of the lowest possible capital costs. Likewise, the enzyme cost was calculated for the different models and indexed to the use cost of enzymes produced and delivered from Novozymes. In the scenarios, it is important to note that the Novozymes-delivered cost also includes the expense of transporting enzymes to the ethanol plant.
The table shows the results of four ethanol production scenarios for 2013 comparing the costs of delivered enzymes with the capital investment costs for on-site production using different assumptions for enzyme efficiencies. SOURCE: NOVOZYMES
with on-site enzyme production are enabling the long-term viability of the cellulosic ethanol industry. And on top of the increased enzyme costs and capital investments needed for on-site enzyme production, there are also other reasons why on-site enzyme scenarios are not efficient.
Increasing Complexity High Capital, Operating Costs In all three on-site production scenarios, both the capital investment and the enzyme cost were significantly higher than for a standard ethanol plant. In an economy where it is already difficult to secure funding for a cellulosic ethanol plant, adding the expense of building an on-site enzyme production facility makes this challenge even more difficult. The enzyme cost calculations for on-site production scenarios, when compared to a Novozymesdelivered baseline, showed substantial increases. The enzyme cost index value for a novice plant increased by almost four times, by more than two times at an intermediate plant, and by 68 percent for an advanced on-site production operation. Likewise, the capital investment required to incorporate on-site production increases by a factor of almost two . As seen from the numbers in the table, none of the scenarios
ETHANOL PRODUCER MAGAZINE
November 2010
Novozymes believes that future developments within the industry will further decrease the viability of on-site enzyme production. Due to the complicated nature of biomass substrates, the enzymes needed to produce cellulosic ethanol are becoming increasingly complex. Higherperforming enzymes will be more multifaceted than those used today, and multiple-strain production as well as blending techniques will be required. Handling multiple-strain, complex enzymes will be more expensive, and additional capital investment will be required. These innovations will raise enzyme performance and reduce use cost, but will also make it much more difficult to produce the enzymes. This will result in higher capital costs, requiring larger facilities and more equipment, further decreasing the viability of on-site enzyme production. “In most cases individual ethanol plants will not have the inhouse expertise to drive develop-
ment of these advanced enzymes, and those few that do will have to significantly increase their capital investments to accommodate these new production realities,” Bryant says. On-site enzyme production is not enabling the cellulosic ethanol industry today, nor will it be a competitive option in the future. Enzyme dosages have achieved a commercially relevant level, and some of the expected benefits from on-site production—such as using carbohydrate by-products— do not deliver on their promise. Cellulosic ethanol enzymes such as Cellic CTec2 are becoming more complex, and multiplestrain production will soon be required in order to achieve optimal performance levels. The increased complexity will require greater capital investments for on-site production facilities. Taking all of these things into consideration, the delivered enzyme model is the most cost-efficient solution for the industry. EP Pamela Simms-Borre is a communication specialist for Novozymes. Contact Cynthia Bryant, global business development manager, bioenergy, Novozymes, at cwby@ novozymes.com.
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EPM MARKETPLACE Associations/Organizations Growth Energy 202-545-4000
www.growthenergy.org
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EPM MARKETPLACE J.C. Ramsdell Enviro Services, Inc. 877-658-5571 www.jcramsdell.com
Tank Cleaning Services Hydro-Klean, Inc. 515-283-0500 Seneca Companies 800-369-5500
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Design/Build
Westmor Industries 320-589-2100
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Consulting Environmental
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Aquaterra Environmental Solutions, Inc. 877-913-8200 www.aquaterra-env.com
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Feasibility Studies Harris Group Inc. 206-494-9422
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Harris Group Inc. 206-494-9422
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Conveyors–Drag Intersystems 800-228-1483
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Tanks Agra Industries, Inc. 715-536-9584 ATEC Steel 620-856-3488
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EPM MARKETPLACE Distillation Equipment
Laboratory-Testing Services
SRS Engineering Corpration 951-526-2239 www.srsbiodiesel.com
Foundation Analytical Laboratory 712-225-6989 www.foundationanalytical.com
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Midwest Laboratories, Inc. 402-829-9877 www.midwestlabs.com
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Loading Equipment Determan Brownie, Inc. 800-835-6074
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Maintenance Software ICM, Inc. 877-456-8588
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Millwright Agra Industries, Inc. 715-536-9584
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Molecular Sieves ICM, Inc. 877-456-8588
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Quality Kiln and Dryer Inc. 318-335-2001 www.qualitykilnanddryer.com
Fermentors
ICM, Inc. 877-456-8588
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Parts & Services ICM, Inc. 877-456-8588
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Thermal Oxidizers
Process Control
WINBCO Tank Company 641-683-1855
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Filtration Equipment Fluid Engineering 814-453-5014
Harris Group Inc. 206-494-9422
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Productivity Enhancements www.fluideng.com
Fractionation-Corn Buhler Inc. 763-847-9900
Grace Davison Renewable Technologies 410-531-8731 www.gracebiofuels.com
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PROVEN RELIABILITY for VOC, CO & PM ABATEMENT EISENMANN Corporation Crystal Lake, Illinois
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Spokane Industries Inc. 509-921-8868 www.spokanemetalproducts.com
Miller Insulation Co., Inc. 701-297-8813 www.millerinsulation.com
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ETHANOL PRODUCER MAGAZINE
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EPM MARKETPLACE Wastewater Treatment Services
Transportation
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Rail Consulting Rail Safe Training, Inc. 712-212-4145 www.railsafetraining.com
Railcar Gate Openers
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Marketing Fuel Ethanol CHS Renewable Fuels 651-355-6271
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Miscellaneous Maas Companies 507-424-2640
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