Governors' Biofuels Coalition

But for one of the industry’s leading companies, 2014 has been a different story. That company is KiOR, a Texas-based firm backed by Silicon Valley venture capitalist Vinod Khosla. You may remember Khosla and KiOR as the subjects of a 60 Minutes piece in January about the struggles of green energy.

KiOR, which makes cellulosic biofuels using woody biomass and non-food feedstocks, has, to put it mildly, struggled. Just days after that 60 Minutes report, the company announced it was idling its flagship plant in Columbus, Mississippi, as it tries to improve the facility’s efficiency and yield.

And Monday, the company indicated it may not reopen the plant, as it admitted “substantial doubts about its ability to continue as a going concern,” with its funding almost gone.

The announcement is another setback for the industry, which has battled to remain relevant, amid the furor over the Renewable Fuel Standard, the US law that mandates a certain amount of various biofuels be blended in with US transportation fuels each year, to wean the country off of oil. For 2014, the Environmental Protection Agency, which administers the RFS, had proposed mandating 17 million gallons of cellulosic biofuels, and it said it was counting on KiOR to make up to 9 million gallons this year. That obviously isn’t going to happen.

So, most observers think that the EPA will have to revise downward its cellulosic target when it finalizes the rule this spring, as it has had to do every single year. The cellulosic industry just hasn’t been able to achieve the production targets that the EPA has set for it.

The oil industry has fought hard to repeal the RFS, saying that it is unworkable, and one of its main beefs is the cellulosic mandate. The industry is forced to buy compliance waiver credits in order to satisfy the mandate, because cellulosic biofuels aren’t available. They call them “phantom fuels.”

The EPA already is having to reduce its 2013 cellulosic mandate, due in large part because KiOR failed to produce as much fuel as the agency had projected. KiOR said in August that it made just 75,000 gallons of biofuels in the second quarter of the year. EPA had been counting on KiOR to make 5-6 million gallons for the whole year.

For now, cellulosic biofuels backers are saying that KiOR’s problems are limited to just the company and that the rest of the industry still holds promise. The three new plants scheduled to come online this year — Poet-DSM’s 25 million gal/year cellulosic ethanol plant in Iowa, Abengoa Bioenergy’s 25 million gal/year cellulosic ethanol plant in Kansas, and DuPont’s 30 million gal/year cellulosic plant in Iowa – are still reportedly on track.

“I do not think this announcement impairs financing more broadly,” said Brooke Coleman, executive director of the Advanced Ethanol Council. “Each project has its own technology and value proposition.”

But KiOR’s struggles just give the oil industry more ammunition to go to Congress to seek a repeal of or favorable changes to the RFS.

And advanced biofuels makers fret that any destabilization of the RFS will cause potential investors in their industry to flee for the hills. That’s why KiOR’s announcement could be bad news not just for the company itself, but for the industry at large.