Cellulosic Ethanol Production Jumps 64% in August as New Production Ramps Up

Source: By Jordan Godwin, OPIS • Posted: Wednesday, September 28, 2016

Cellulosic ethanol production, which has lagged far behind early expectations, may finally be starting to ramp up.

Renewable Identification Number (RINs) generated from cellulosic ethanol production spiked nearly 64% from July to August, recent U.S. Environmental Protection Agency data show.

While overall cellulosic biofuel (D3) RIN generation in August rose a modest 2.8% on month, the portion of those RINs generated from cellulosic ethanol made significant gains, rising to a three-month high of 303,539 gal. Cellulosic ethanol production tumbled to a 2016 low in July at 185,532 gal as production was forced to slow down in the middle of a scorching heat wave across the Midwest.

An overwhelming majority of cellulosic biofuel RINs are generated through the production of renewable natural gas (RNG) and renewable liquefied natural gas (LNG). In August, 9.51 million D3 RINs were generated through the production of renewable CNG and 5.88 million D3 RINs were generated through the production of renewable LNG, both relatively stable from July.

Through August, 2.51 million D3 RINs have been generated by ethanol production this year, already surpassing 2015’s total of 2.18 million RINs and more than tripling the 2014 total of 728,509 RINs.

Quad County Corn Processors — which has single-handedly accounted for more than 95% of the total D3 RINs generated since production began at its Galva, Iowa, plant in July 2014 — saw production rise in August, and expectations are for similar results in September before a planned maintenance gets underway early next month, sources said. Quad County Corn Processors uses a Cellerate process to produce cellulosic ethanol from corn kernel fiber at a rate of nearly 3 million gal/yr.

One source indicated that while Quad County Corn Processors has accounted for the lion’s share of D3 RINs from cellulosic ethanol production, August’s EPA numbers showed there were an increasing number of RINs produced elsewhere.

In April, POET-DSM said its 20 million gal/yr Project Liberty cellulosic ethanol plant in Emmetsburg, Iowa, had finally entered its “ramp-up phase.” POET-DSM spokesman Matt Merritt last week said that the plant is aiming to run at full capacity for stretches by the end of the year and plans to hit capacity at a continuous rate in 2017.

“We’re making strong progress in Emmetsburg at moving to capacity, and we’re learning a lot about the process that will make the next plant even more efficient, affordable and competitive,” Merritt said. “We’re confident that we will be running at full capacity at a continuous rate. With new technology, it’s tough to pin down an exact time.”

The September total of cellulosic RINs generated from ethanol production should also get some help from a producer that was just admitted to the D3 club.

EPA recently approved Pacific Ethanol’s registration for producing cellulosic ethanol and D3 cellulosic RINs at its Stockton, Calif., plant from corn fiber using Edeniq’s Pathway Technology. The plant aims to produce more than 1 million gal/yr, which comes through a bolt-on process at its 60 million gal/yr Stockton ethanol facility. Production began last December, but the ability to generate D3 RINs was not activated until Sept. 9, sources said.

One source estimated an additional 50,000 to 100,000 D3 RINs will surface in the September figures once the Pacific Ethanol cellulosic production is added to the mix.

With Quad County’s production nearing capacity again as temperatures ease and additional production from POET-DSM and Pacific Ethanol coming on line, the September figures could challenge the monthly record of 446,422 gal set in March.

The new production is coming on line as two potential production mammoths are waiting in the wings.

Through August, just 2.3% of the 109.75 million D3 RINs generated in 2016 have come from cellulosic ethanol production as multiple plants have continued to face setbacks. In December 2015, Abengoa announced plans to suspend production at its 25 million gal/yr Hugoton, Kan., plant. That plant is now on the market, with hopes of having a buyer in place by the end of October.

DuPont has also faced production hiccups at its 30 million gal/yr cellulosic ethanol facility in Nevada, Iowa. The company said in its July comments to the EPA on the proposed Renewable Fuel Standard (RFS) targets for 2017 that production at the plant is scheduled to begin this year, but DuPont spokeswoman Wendy Rosen said no cellulosic ethanol was produced in August at the company’s Nevada plant.

EPA in May proposed the 2017 cellulosic biofuel target volumes at 312 million gal, far below the 5.5 billion gal Congress envisioned for 2017 in its statutory volumes. In 2015, EPA data show just 140.64 million cellulosic biofuel (D3) RINs were generated.

In that proposal, EPA outlined its four U.S. projected producers of liquid cellulosic biofuel by 2017 as well as GranBio in Brazil, which has a 21 million gal/yr sugarcane bagasse facility, and Ensyn’s wood waste cellulosic heating oil plant in Canada. While actual production volumes were withheld in those projections, the fact that EPA projected liquid cellulosic biofuel to amount to just 30 million gal of the targeted 312 million gal total indicates that the agency doesn’t expect those plants to approach their combined capacity of more than 60 million gal in 2017.

Cellulosic D3 RINs trade activity in the spot market has heated up in recent weeks, and prices have firmed as a result. OPIS assessed cellulosic RINs for
2016 at $2.03/RIN on Wednesday, up 6cts on week and 13cts on month.

“We’re starting to see more and more of them pop up, and there’s no doubt there’s strong interest from the (buyers),” one broker said. “If they start to hit the market in large volumes, it’ll be interesting to see how prices react.”