The Cellulosic Ethanol Industry Faces Big Challenges

Source: By Kevin Bullis on August 12, 2013, MIT Review • Posted: Monday, August 12, 2013

The advanced-biofuels industry is in danger of withering away.

A series of cellulosic-biofuel plants are finally starting to come on line after years of delay. But the new wave of plant openings, good news as it is for the emerging industry, also shows just how far it still has to go.

Earlier this year Kior, a startup based in Pasadena, announced that it had shipped its first renewable diesel, made from pine wood chips. Last week, the chemical company Ineos started making ethanol from wood chips and other plant materials at a facility in Columbus, Mississippi, that can produce up to 8.5 million gallons of fuel a year. By next year more than a dozen multimillion-gallon plants are scheduled to be finished in the U.S. Although the plants are considered commercial scale, they’re still relatively small compared with corn ethanol plants, which often produce 100 million gallons of fuel per year.

The facilities won’t come close to meeting the requirements set out by the 2007 renewable-fuel standard, which was central to President Bush’s efforts to bring fuels made from biomass to market. What’s more, many of the new plants will struggle in an already saturated ethanol market.

Cellulosic biofuels, made from materials such as wood chips and corn stalks, were mandated as part of the Energy Independence and Security Act of 2007. They were supposed to help end what Bush called America’s “addiction to oil.” The renewable-fuel standard called for a rapid increase in the amount of fuel that comes from conventional corn-based ethanol as well as cellulosic ethanol.

Corn ethanol production surged, but cellulosic-ethanol production has been delayed both by technical challenges and by a lack of funds for commercial plants. The renewable-fuel standard originally called for a billion gallons of cellulosic ethanol to be blended into the nation’s fuel supplies this year, but the Environmental Protection Agency has reduced the target to just six million gallons. Next year’s target is 1.75 billion, but the EPA is expected to set a new level based on what it expects companies can produce.

The new wave of biofuel plants will include a 25-million-gallon facility from the corn ethanol giant Poet and a 27.5-million-gallon facility from DuPont, but many of the others will produce 10 million gallons or less. It’s a small start. Meeting the ultimate goals of the renewable-fuel standard would require 300 biofuel plants, and each one would need to produce not 25 million gallons of fuel, but four times that amount.

Right now cellulosic ethanol can’t compete on its own. It costs more than either corn ethanol or gasoline. Wallace Tyner, a professor of agricultural economics at Purdue University, says cellulosic ethanol will never be cheaper than corn ethanol. However, Poet says it hopes to eventually make cellulosic ethanol competitive with gasoline. Getting to that point, at the very least, will require support from the renewable-fuel standard to help the company build more plants and achieve some economies of scale.

The standard has always been controversial (see “The Mess of Mandated Markets”). Right now, there’s a bill before the Senate that would repeal it. This year it’s also been the subject of a series of House hearings and white papers, and the leadership of the House Energy and Commerce Committee is now deciding how to proceed. The chairman of the committee, Republican Fred Upton of Michigan, introduced the most recent hearing by saying, “In my view, the current system cannot stand.”

“Killing the renewable-fuel standard kills whatever future there is for cellulosics,” Tyner says. For now, however, that probably isn’t a big concern: the standard is likely to remain in place, since it has the support of President Obama and many in the Senate.

In Tyner’s view, the industry faces another major challenge. “Cellulosic ethanol today is a nonstarter,” he says; there’s not enough demand for ethanol of any kind.