In 2011, several years after the Renewable Fuel Standard set quotas for cellulosic ethanol, second-generation biofuel companies were working furiously to create it. The cellulosic quotas applied to renewable fuels made from cellulose, hemicellulose, or lignin – the parts of plants indigestible to humans. Using everything from cornstalks to tall grasses and wood waste, a dozen firms declared that commercial production was just around the corner.
At the same time, critics were having a field day. In the first 12 months of the RFS program, from July 2010 to June 2011, no companies managed to register any cellulosic biofuel for sale and use, and Forbes called the activity “fields of pipedreams.” Efforts to repeal the 15 billion gallon cellulosic ethanol mandate in the Renewable Fuel Standard reached a fever pitch. Impatience, loan defaults, public failures among companies like Range Fuels, and a sluggish financial landscape helped propel the narrative that making fuels from biomass would never happen.
But after years of industry-wide anticipation and delays, commercial-scale second-generation biofuel companies are taking their first wobbly steps across the finish line
The stories of some of the winners follow a classic pattern -- long-term research and methodical scale-up.
Ineos, a chemical company based in Switzerland, began research in waste gasification in 1991. It spent twelve years developing the technology, launching a demonstration scale hybrid gasification and fermentation plant in Fayetteville, Ark., in 2003. Construction of its commercial plant in Vero Beach, Florida began in 2012, with the first ethanol production in 2013. “We are producing commercial quantities of bioethanol from vegetative and wood waste, and at the same time exporting power to the local community – a world first,” said Ineos CEO Peter Williams, PhD, at the time.
Enerkem, a Canadian waste to energy company, opened its doors in 2000, but moved quickly through a pilot project and demonstration of cellulosic biofuel production. The grand opening of its commercial plant in Edmonton was in June of 2014. Where Enerkem was vocal about its commercial scale plan for fuels and chemicals, Ineos was more of a silent runner, developing its technology without much fanfare.
POET-DSM was not far behind. With 26 corn ethanol plants, POET is one of the world’s largest ethanol producers and has been a U.S. renewable fuel engineer for 25 years. Partnering with the global biotech company Royal DSM, POET’s next-generation facility opened in September of this year and is leveraging agricultural waste. Located in Emmetsburg, Iowa, the cellulosic plant is designed to produce 20 million to 25 million gallons of cellulosic ethanol from corn cobs, leaves, husks and stalks as a “bolt-on” to a traditional corn ethanol plant.
The latest to open is Abengoa, a 73-year-old technology company based in Spain that celebrated the grand opening of its Hugoton, Kansas, plant this October. The facility plans to produce 25 million gallons of cellulosic ethanol a year, plus 22 megawatts of renewable energy from non-food crops and agricultural and wood waste. Its platform will also allow it to expand its revenue stream by developing bioplastic, biochemical, and drop-in jet fuels.
The big surprises in the field are two relatively new upstarts from Italy and Brazil – both using the same technology. “They’ve just come out of nowhere very quickly,” says Jim Lane, editor and publisher of Biofuels Digest.
Beta Renewables began shipping cellulosic ethanol made from wheat straw from its plant in Crescentino, Italy, last year, just two years after the company was created. GranBio, in Alagoas, Brazil, is another such dark horse. It began commercial production of cellulosic ethanol this spring from unused leaves and tops of sugarcane, three years after the company was founded.
“Crescentino is a project many thought would never get built,” Lane says. “Several years of industry skepticism preceded a decision by Beta’s parent Biochemtex to build the project off its own balance sheet.” The result, he says, is a 20 million gallon cellulosic biofuels project that lies just south of the Italian Alps in the vicinity of Torino, with towering columns that dominate the sprawling farmland surrounding it.
Both companies are pursuing biological routes to cellulosic ethanol using the Proesa process which uses heating and enzymes to break down biomass, or depolymerize it (see “Breaking Down the Wall,” left) and fermentation to produce ethanol. Beta Renewables and Proesa are the product of a long evolution in M&G (the Mossi Ghisolfi Group), beginning with the 2004 acquisition of Chemtex, an engineering and process company specializing in plastics and polyesters. The company shifted cellulosic ethanol R&D to its research facility in Rivalta Scrivia, Italy in 2011. The next year, Chemtex partnered with Danish enzyme company Novozymes to garner a USDA loan guarantee for a cellulosic plant in North Carolina, and the separation of biobased technologies into Biochemtex came about in 2013.
In a sense, the Crescentino plant serves as a proof-of-concept for other companies to evaluate licensing the Proesa process, as did the Brazilian GranBio sugarcane bagasse facility in Alagoas.
“GranBio brings more vision, finance and relationships to execute projects in Brazil at scale. They’ve licensed appropriate technologies and made technical partnerships, and their focus has been more about translating these great technologies, mostly from the States and also from Italy down to Brazil,” says Lane.
Alan Hiltner, GranBio’s executive vice-president, says the company’s president, Bernardo Gradin, recognized an opportunity and had resources to spare.
“When he started the company three years ago, we looked at the sector and we realized that there was a big mismatch—the people who had the technology didn’t have the money. The people who had the money didn’t have access to land. The people who had the land didn’t have the technology,” says Hiltner. “So we realized that if some company could put everything together—technology, access to competitive feedstock, capital, and execution capabilities—that would be the key to success. So from the beginning we decided to address these four challenges at the same time. Everything came together at the same moment.”
The Slow Race to Commercialization
The shortcomings of “first-generation” biofuels, such as corn-based ethanol, have been apparent for a decade. Fuels derived from crops have the potential to drive up the cost of food. They’re more expensive than fossil fuels. They share the environmental shortcomings of the crops they come from—high use of pesticides and fertilizers, soil erosion, overuse of water, and the release of greenhouse gases, though to a much lesser extent than fossil fuels.
All this was supposed to change with “second-generation” biofuels, derived from fibrous biomass rather than high-energy sugars and grain. To kick-start the production of these fuels in the United States, the federal government amended the federal renewable fuels standard in 2007 to require increasing proportions of these more environmentally friendly renewable fuels to be blended into gasoline.
The mandate required 6.5 million gallons of cellulosic ethanol be blended in 2010. Unfortunately, there was virtually no cellulosic fuel to blend—not that year or the years that followed. RFS mandates were lowered for 2010, 2011, and 2012. Total actual production in 2013 was barely more than 800,000 gallons. The EPA is expected to revise its mandate for cellulosic fuels again this summer.
Why has production lagged so far behind projections?
The high cost of capitalization has complicated investment in cellulosic plants, especially since the rules governing which fuels qualified under RFS2 weren’t final until 2010. To get financing for the technology, get through five or six scale-ups, construct a plant, and build a biomass supply chain was a tall order, and not surprisingly, only now are four U. S. commercial plants coming on line. Says Lane, “The wave is here now, but it has been a slow train coming.”
Contributing to cellulosic ethanol’s slow start is the complicated fermentation process required to make it. Compared to the well-established chemical processes used to make diesel, the biological fermentation process to brew ethanol is much less predictable and much harder to scale up.
Finally, the pace of cellulosic ethanol production looks all the worse through the lens of “some very crazy expectations,” says Lane. Federal regulators set targets to create demand for cellulosic ethanol but ramped up targets several years too soon. The mismatch between the mandate and actual production, says Lane, has been “absolutely crazy.”
In some cases, delays came down to problems in obtaining adequate feedstocks ( plant biomass needed for production). In other cases, the technology has been less efficient than expected. Much-heralded Kior announced last spring that it had to temporarily halt operations in its Columbus, Miss., plant because the overall yield of transportation fuels from each ton of biomass has been lower than expected “due to a delay introducing our new generation of catalyst” and mechanical failures interfering with the desired chemical reactions in its reactor. It has since declared bankruptcy.
But most problems come down to money—either the cost of production or the financing needed to build a plant. The cost of doing business combined with the insufficient financing has created what some observers have dubbed the “Valley of Death” for next-generation fuel companies.
The industry’s high costs and production shortfalls frightened off many investors and have created an additional obstacle—something that Lane calls “the ‘Valley of Disbelief’ --“the period when companies have figured out a means across the Valley of Death but the market remains irrationally skeptical.”
This ad is part of the Renewable Fuels Association's advertising campaign "Don't Mess With the RFS"
Brooke Coleman, executive director of the Advanced Ethanol Council, agrees that expectations for advanced biofuels were unrealistic. “There’s a pervading thought out there that cellulose has not come through like we thought,” he says. Instead, he adds, it’s almost inevitable that federal mandates and cellulosic ethanol production would be mismatched – at least in the beginning.
Any new technology, he says, “has a hockey stick development curve, so the initial years are incremental and slow. And then all of a sudden you have replication of the technologies that work, and it becomes a very efficient and aggressive growth curve if the marketplace is prepared for that type of growth.
The big hurdle now, says Coleman, is federal policy—specifically, uncertainty whether revised mandates will be high enough to guarantee a market.
Abengoa chair Felipe Llorente has singled out attacks on biofuel mandates by fossil fuel producers as an obstacle. The American Petroleum Institute, for example, launched a massive campaign in 2013 to repeal the Renewable Fuel Standard.
“Technologically we’re fine,” says Coleman. “The problems we’re having are primarily with the administration of the program. The thing that is keeping cellulosic biofuels at bay -- one, two and three on the list -- is policy uncertainty, policy uncertainty, policy uncertainty.” As a result, he says, plans for a second wave of plants are frozen until revised RFS mandates are announced. “With a handful of notable exceptions,” he says, “they’re on hold.”
The Dark Horses
The rocky ground for new cellulosic plants in the U.S. may have allowed Beta Renewables and Granbio to nose ahead in the race to production.
To some extent, their quick progress in comparison to other companies is an illusion. The parent companies of Beta Renewables were working on cellulosic technology long before forming Beta Renewables. GranBio engineers had the chance to work several months at Beta Renewables’ Crescentino plant to understand the technology they were licensing. According to analyst Claire Curry of Bloomberg New Energy Finance, “It’s kind of easy for the licensee because everything is done for them. And Beta Renewables guarantees performance.”
Nonetheless, GranBio did several things extraordinarily well, especially in its strategic partnerships and its “don’t reinvent the wheel” approach to cellulosic biofuel. One reason GranBio has been able to start production so quickly, says Vonnie Estes, U.S. managing director of Granbio, is that “we’re not developing technology; we’re deploying technology.” (Estes has since left GranBio; see interview, left).
Another advantage is location. Bioflex 1 is located only about 34 miles from the Atlantic port of Maceió – a good place to be since GranBio plans to export half of its ethanol production. “I am an economist, and I have to say that the price of ethanol is what makes an economist humble, because it is so hard to predict how the ethanol prices are going to evolve,” says Hiltner. “If we had to export it today, 50 percent would probably be directed to California.” He says that demand and prices are also subject to any revisions of the cellulosic biofuel standard by U.S. Environmental Protection Agency, another indication of the importance of stable policies. (For more on GranBio, see our web exclusive at www.bioenergyconnection.org.)
To Jim Lane, the key to GranBio’s quick rise has been people, resources, and an eye to the bottom line. He adds that BetaRenewable’s exciting Proesa technology is one of the factors behind its success, along with its partnerships, extensive research, and the willingness to take risks. And their swift ascent offers lessons to other aspiring next-generation companies, fast on their heels.
The next wave
Also keeping its eye on Brazil, Canadian company Iogen Corp., has been working on cellulosic ethanol in its Ottawa facilities since 1978. Iogen’s 1 million gallon per year demonstration plant has been operating since 2004. The operation has given the company extensive insight into the technical and economic challenges of next generation fuel production and led to more than 300 patents.
In 2012, Iogen partnered with Raizen Group in Brazil to build a 10 million gallon a year cellulosic plant alongside the Pinto sugar cane mill in Piracicaba, São Paulo. Construction began in November 2013, with production expected by the end of this year. The Brazilian Development Bank has already approved funding for a second plant in Brazil.
In the U.S. activity has been frenzied since inception of the Energy Independence and Security Act in 2005, with several dozen companies launching pilot and demonstration scale programs (see Bioenergy Connection, Spring 2011, “Are we there yet?”).
DuPont broke ground on its $200 million, 30-million-gallon cellulosics plant in November 2012. Located in Nevada, Iowa, it will produce cellulosic ethanol from corn stover – the stalks and leftovers from a corn harvest. “The plant’s entire operation will be greenhouse gas neutral – it is fully sustainable and has zero net CO2 emissions,” DuPont reports.
Meanwhile, Biochemtex, in partnership with Novozymes and Leaf Technologies, continue to expand its reach. The venture is moving forward with a plant in Clinton, North Carolina using the energy grass Arundo donax, a wheat-straw to ethanol plant in the Fuyang region in China in partnership with Guozhen, and a partnership with Energochemica for a cellulosic plant in Strazske, Slovak Republic.
Of course, what some proponents see as the finish line is really just a starting point. One of the most pressing questions is whether cellulosic ethanol can continue to be produced in a cost-effective manner. Some plants, for example, are producing nutraceuticals and cosmetics as co-products as a way to finance their biofuels operations. Another question is whether the RFS and its policy incentives will stay in place and be strong enough to drive demand and attract investors. Still another challenge is growing and harvesting feedstock in a manner that is truly sustainable.
Along with the frontrunners, there are many other companies still at the pilot and demonstration scale facing these challenges. They will be pushing forward as the lessons learned from these pioneers are gleaned in the coming years. With licensing as a catalyst to adoption, cellulosic ethanol production could spread quickly if government incentives remain in place.
“This is a real fuel,” said Steve Mirshak, business director for Dupont’s cellulosic ethanol business, at a recent renewable fuels summit in Iowa. “We’ve been talking about it a long time, and in 2014, it’s here. We need Washington to reinforce its commitment to the [RFS].With stable policy, we’ll see rapid growth.”