Hampered by recession, company finds success in corn market

Source: Amanda Peterka, E&E reporter • Posted: Tuesday, October 21, 2014

As big cellulosic ethanol players are ramping up production this year, one smaller advanced biofuel company has turned its attention from the cellulosic industry back to corn ethanol.

Mascoma Corp.’s bet has so far paid off. In just two years, the 55-employee Massachusetts-based company has captured 20 percent of the ethanol industry’s demand for yeast, a key ingredient needed to ferment corn into the alcohol-based fuel.

“Some of the real lessons were to be honest with yourself about what you do better than anyone else and what you don’t, and focus there,” said Bill Brady, the company’s CEO, in a recent interview.

Mascoma’s story highlights the challenges in building a domestic cellulosic ethanol industry from the ground up, as well as the opportunities for companies that have thought outside the cellulosic ethanol box in the wake of the recession.

As many other advanced biofuel startups did, Mascoma began in the mid-2000s, when lawmakers were considering significantly increasing mandates for the amount of renewable fuel that refiners must blend in petroleum gasoline and diesel.

Part of the new requirements in the renewable fuel standard was a mandate for cellulosic ethanol, or ethanol made from plant-based materials such as the crop residue left on the ground after harvest, perennial grasses and municipal solid waste.

“The vision at the time was to build an end-to-end process, and build, own and operate cellulosic ethanol plants. And off the company went developing that,” Brady said. “The industry took a lot longer to develop than was originally anticipated. We were definitely a part of that and caught up in that.”

But the recession made it difficult for advanced biofuels companies to secure financing for big, capital-intensive biorefineries. The industry has meanwhile faced a barrage of criticism from oil industry critics for failing to meet the yearly targets established in the 2007 renewable fuel standard.

In the wake of uncertainty over the industry, some advanced biofuel companies have doggedly gone ahead with cellulosic ethanol — POET-DSM Advanced Biofuels LLC and Abengoa Bioenergy, both big players in the corn ethanol space, recently opened commercial-scale plants in the Midwest to convert crop waste to cellulosic ethanol (Greenwire, Oct. 17). DuPont Co. is also expected to open a plant later this year.

Other smaller companies went bankrupt, including Range Fuels, a company that had attempted to build a cellulosic biorefinery in Georgia. But many advanced biofuel companies have shifted focus from fuels to chemicals, finding more value in the short term in those markets.

Brady said Mascoma, which has been funded by both private equity and support from the Department of Energy, probably lost a couple of years unsuccessfully trying to finance its cellulosic ethanol venture during the recession. Valero, the nation’s third-largest ethanol producer, pulled out of the company’s proposed cellulosic ethanol plant in Michigan.

Brady said that in 2011, in the midst of financing difficulties, Mascoma began to consider going a different route and focus instead on reconfiguring its technology for use in corn ethanol.

“The world faces two really big challenges: How do you get an efficient conversion of biomass to fuel … and how does the world make molecules closer and closer to gasoline beyond ethanol?” Brady said. “Our view is that the first challenge needs to be tackled first.”

A year later, Mascoma introduced yeast microorganisms for use in the fermentation of corn into ethanol. And in just two years, Mascoma has grown to capture a fifth of the ethanol industry yeast market, or the yeast needed to produce about 2 billion gallons of ethanol a year.

According to Brady, the technology allows ethanol producers to reduce their enzyme usage by about 50 percent and to increase the amount of ethanol they get out of a bushel of corn by about 2 percent.

Mascoma has also developed a yeast microorganism for fermenting sugar cane into ethanol in Brazil.

Brady said the company still sees a market for its product in the cellulosic ethanol industry and hopes to cash in on the recent progress in the industry. But Brady said the involvement in cellulosic ethanol would depend in part on how aggressively the government commits to the new fuel.

He called on the Obama administration to reverse proposed rollbacks in the renewable fuel standard’s mandates for ethanol and advanced biofuels.

“I think fortunately we’ve reconfigured our business model such that our entire company is not dependent on the rise and fall of the RFS,” Brady said.