The �holy grail� of biofuels now in sight

Scotland, S.D.

With one foot planted in a pile of corn cobs, Mark Stowers explains how agricultural waste, transformed into ethanol, will turbocharge the US economy, boost its energy security, and help save the planet, too.

This holy grail of biofuels, called cellulosic ethanol, has been �five years from commercialization� for so long that even Dr. Stowers admits it�s become a joke.

But now the research director for POET, the nation�s largest ethanolmaker, based in Sioux Falls, S.D., says that despite bad economic news and major obstacles, cellulosic�s time is near. Other scientists agree.

Corn-based ethanol, which many critics argue does not do enough to slow climate change, is nearing US production limits. In Washington, cellulosic ethanol is gaining political traction. And cellulosic technology seems ready for prime time � at last.

�Cellulosic ethanol is real�

The proof, Stowers says, lies inside a nearby windowless, high-roofed single-story metal building. Filled with a maze of pipes and vats, this $8 million test facility is a miniature cellulosic ethanol plant that pumps out 20,000 gallons a year of nearly clear alcohol extracted from cobs like the ones beneath his feet.

�This pilot plant shows cellulosic ethanol is real � that the technology is here,� Stowers says. �Ultimately, cellulosic will allow us to make significant inroads to replacing oil for our nation�s gasoline needs.�

The 2007 Energy Inde­pen­dence and Security Act Renewable Fuels Standard (RFS) calls for boosting production of biofuels to 36 billion gallons a year by 2022 � about 15 billion gallons of it corn ethanol, the rest cellulosic. (By contrast, the US produced about 9 billion gallons of corn ethanol last year.) That would replace about one-fifth of the nation�s gasoline needs without displa­cing current crops.

But looking forward, biofuels could play a far larger role. By 2030, biofuels may reach 60 billion gallons, according to a new report released Feb. 10 by Sandia National Laboratory. That would require 480 million tons of biomass, including 215 million tons of dedicated energy crops like switchgrass. Such fuel crops would require 48 million acres of what is now pasture or idle land, the report says.

Such a shift would slash annual US tailpipe carbon dioxide emissions by 260 million tons a year � about equal to the emissions from 45 coal-fired power plants. Cellulosic ethanol feedstock crops would require little or no irrigation, a big advantage over corn. The cost: about $250 billion, the same or less than that of boosting US oil production by the same amount.

One-third of nation�s needs by 2030?

With a few key technology improvements, the United States could do even better, creating up to 90 billion gallons of ethanol by 2030, enough to meet one-third of the nation�s transportation fuel needs, Sandia found. In that scenario, about 75 billion gallons would be cellulosic fuel. Just 15 billion gallons a year would come from corn, the report said.

Getting there will be a huge challenge. The handful of pilot cellulosic plants in the US produce maybe 1 million gallons a year. Production would have to be ramped up a thousandfold to meet the 2013 federal goal of 1 billion gallons. That seems unlikely, given the economy�s tailspin.

Of the six commercial-scale cellulosic biofuel plants funded by the US Department of Energy (DOE), two have bowed out. Another smaller-scale project supported by DOE, a partnership between Lignol Energy of Vancouver and Calgary-based Suncor, withdrew Feb. 9.

Not on track at the moment

As of right now, �we�re not on track� to produce 1 billion gallons of biofuel annually by 2013, says Thomas Foust, biomass technology manager at the National Renewable Energy Laboratory in Golden, Colo. �Obviously, the credit crunch and recession have put dampers on and delayed commercial plants. But a number of companies are still pursuing it very vigorously. We�re doing the same.�

Next year, the POET company will begin construction of its first 25-million-gallon commercial-scale cellulosic plant dubbed �Liberty� in Emmetsburg, Iowa, Stowers says.

The DOE is paying for 40 percent of the $200 million facility, expected to open in 2011. After that, POET plans to �bolt on� similar corn-cob-munching cellulosic factories at its 26 conventional corn-based ethanol production facilities, he says.

Not to be outdone, Range Fuels, a Broomfield, Colo., company, last month won an $80 million loan guarantee from the US Department of Agriculture for the nation�s first commercial-scale cellulosic ethanol plant, now under construction in Soperton, Ga. It aims to begin production next year.

�Blend wall� may crimp ethanol

To succeed, cellulosic will have to buck not only low oil prices, the credit crunch, and recession, but also uncertain demand � thanks to the �blend wall.�

The RFS today requires refiners to blend into gasoline about 14 billion gallons of ethanol � about 10 percent of US gasoline consumption. But with ethanol production capacity near that level now, cellulosic producers may not find many buyers � unless the national blend mandate for ethanol is raised to 15 percent or higher, which is what ethanol producers and farmers would like.

�The blend wall has a huge potential impact on cellulosic ethanol development,� Foust says. �The No. 1 issue is a stagnant economy. But next to that, the issue that won�t resolve itself is the blend wall.�

Some environmental groups worry that this means traditional corn-based ethanol will benefit more than environmentally friendly cellulosic. Others say older vehicles� emissions systems will be damaged by a higher percentage of alcohol in fuel, thus worsening air pollution.

Low oil prices hurt ethanol

�We can�t afford to play fast and loose with Clean Air Act protections,� says Nathanael Greene, senior policy analyst at the Natural Resources Defense Council (NRDC), an environmental activist group.

Another huge hurdle is cost-competitiveness. Cellulosic ethanol requires a more complex process that uses costly enzymes. At present, a gallon of cellulosic ethanol costs about $2.25 a gallon to produce: That�s 40 to 50 cents more than corn ethanol and 75 cents more than gasoline. But under Sandia�s projections, cellulosic ethanol�s retail cost could fall to just $1.72 a gallon without any incentives or taxes and still be competitive with gasoline � if oil costs $90 per barrel.

But with a barrel of crude now selling for roughly $40, it�s difficult for cellulosic or even corn ethanol to compete. Still, POET, Foust, and others are looking ahead to when the global economy stabilizes and oil bounces back to around $90 a barrel.