‘There needs to be a market’

Source: Written by DONNELLE ELLER AND CHRISTOPHER DOERING, Des Moines Register • Posted: Monday, February 24, 2014

A proposed reduction in the biofuel mandate could scare off cellulosic ethanol investors.

The future of the cellulosic ethanol industry depends on convincing investors that the market for its product will grow.

The EPA has proposed cutting separate requirements for how much renewable fuel, mostly corn-grain ethanol, must be blended in the U.S. fuel supply, and how much cellulosic ethanol.

That’s tantamount to putting a stop sign in front of would-be investors in cellulosic ethanol, according to Bob Dinneen,CEO of the Renewable Fuels Association.

In contrast, Dinneen believes the government has given a green light to hydraulic fracturing, which injects high-pressure liquid to extract oil and gas from rock formations, a technique highly criticized by environmentalists.

“If you got an energy dollar to invest, are you going to invest it in biofuels, where EPA has just signaled their commitment to this program isn’t as serious as people believed? Or are you going to invest in fracking, where the administration and everybody else seems to think this is (growing) and there are tax shelters and other efforts to promote it?” Dinneen said.

Capacity for corn-based ethanol is around 15 billion gallons annually. The EPA’s proposed reduction in the amount of renewable fuel that must be used nationally in essence caps the market at 13 billion. That’s a 2 billion-gallon oversupply that cellulosic ethanol will have to compete with, said Matt Merritt, a Poet spokesman.

“We’ve come a long way in lowering the cost of cellulosic ethanol … but I can tell you the price is not going to be at the price of corn ethanol,” Merritt said. “That’s a process we’ve been working on for decades to make incremental improvements. Cellulose will get there as we gain experience. But unless the industry gets off the ground, how is that going to happen?”

Christopher Standlee, an executive vice president at Abengoa Bioenergy, said the federal government proposal “basically put a box around the market for ethanol, limiting that market to 10 percent, and there is already enough production capacity to produce 10 percent.”

“So what that means is you have first-generation ethanol having to fight with second-generation for market share,” he said.

Brian Foody, CEO of Iogen Corp., based in Ottawa, Ontario, said the first commercial cellulosic ethanol plant based on Iogen’s technology is being built in Brazil by Raízen, a $30 billion Brazilian energy company. It is scheduled to start production in 2014.

Cellulosic ethanol could deliver billions of gallons of ethanol in the United States, Foody said, but “there needs to be a market,” including growth in demand for ethanol blends of 15 percent and 85 percent.

“If people in America look at the ethanol markets as fixed and balanced, there will be no point or no need to invest in and no benefit to invest in new technologies for delivering these fuels,” Foody said.