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Summary:

In the summer of 2008, 2009 looked like it could be a breakout year for the next generation of ethanol. There were dozens of companies racing to be the first to churn out cellulosic ethanol made from non-food crops and plant waste from pilot and even […]

In the summer of 2008, 2009 looked like it could be a breakout year for the next generation of ethanol. There were dozens of companies racing to be the first to churn out cellulosic ethanol made from non-food crops and plant waste from pilot and even commercial-scale plants. Well, that was before the credit crunch hit and investors starting to close their wallets. Now there are just a couple cellulosic ethanol makers that have started producing the next-gen fuel on a pilot scale, and plans for commercial-scale have been largely been pushed from 2009 into 2010. And who knows if those deadlines will be met if we’re still deep in the downturn?

Range Fuel’s CEO David Aldous confirmed with us last week that the startup, which uses a thermochemical process to turn biomass into synthetic gas and then fuel, doesn’t expect its commercial-scale plant in Soperton, Ga., to start producing fuel well into 2010. The plant is supposed to be able to scale up to 100 million gallons per year and was originally planned to produce fuel in 2009. Range Fuels was an early mover in the space, and is still a little better off than some, having snagged an $80 million loan guarantee from the Department of Agriculture under the 2008 Farm Bill to complete construction of the commercial plant. Aldous says Range Fuels is also looking to get in on the next round of loan guarantees that the DOE is starting to hand out now.

Verenium, a cellulosic ethanol maker in Cambridge, Mass., found an important partner in UK oil giant BP, but is still struggling financially. The company confirmed with us that it is delaying starting construction on its first commercial-scale plant — a 36 million gallon-per-year, $300 million facility in Highlands County, Fla. — until at least 2010. And earlier this month an outside auditor said that Verenium might have to cease operations if it doesn’t raise more capital. The company needs at least $300 million to complete its JV with BP, according to Forbes.

Coskata, a cellulosic ethanol maker that created a lot of buzz because it’s backed by GM and Vinod Khosla, isn’t faring much better. Coskata CEO Bill Roe said this month that the company is now waiting for a loan guarantee from the Department of Energy to build its first commercial-scale plant and that it’s on hold until then. Coskata was previously hoping to break ground on the plant — expected to produce 50 million-100 million gallons of ethanol annually — this year and to complete the factory in late 2010 or early 2011.

As former CEO of biodiesel maker Imperium Renewables, Martin Tobias, explained at Earth2Tech’s Green:Net conference this week, when investors are looking at hundreds of millions in commitments to just get to the first stage of production, oftentimes that’s the first commitment they shy away from in a downturn. He should know, as Imperium raised hundreds of millions and was all set to IPO before the markets started to look shaky and the company pulled back. It puts a company in a difficult position when you’re halfway through a $100 million-buildout, and you need another couple hundred million to complete it, and the wind just gets knocked out of the market, Tobias said.

The same thing is happening to cellulosic ethanol, which often involves even more capital costs than more traditional biofuels because it’s a newer technology and the feedstocks are more diverse. That means the dream of filling flex-fuel vehicles with more sustainable non-food crops (not corn!) will be deferred for another couple years. Those capital costs will likely shut startups out of the physical buildout, at least while credit remains tight. But that doesn’t mean they have to sit on the bench. For the oil and corn ethanol companies that survive the downturn — and manage to finance big projects — startups will be there to add value by licensing their technology.

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By Katie Fehrenbacher

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  2. Robby Rodriguez Thursday, March 26, 2009

    Katie,

    Good reporting. You are working hard to make some sense of a tangled web out there – that’s for sure! But don’t be spoofed by what is sometimes claimed to be next-gen ethanol in order to receive a multimillion dollar aggie grant or loan guarantee – something which these companies are obviously strangled without receiving. You do a good job reporting but you are really missing some of the intrinsic basics herein. Like what will really be the renewable fuel outputs of some of the large firms you’ve quoted within your article?

    Case in point: Define ligno-cellulosic ethanol for us. Then go back and see what is supposedly coming down the pike from within this category of hungry and/or temporarily stranded contenders…

    Thanks.

  3. I guess right now isn’t the perfect year to start next generation ethanol manufacture and usage. I still think it’ll work out in the near future though, unless a new, even better breakthrough comes out.

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  5. Ronald Adamowicz Friday, March 27, 2009

    The report on cellulosic ethanol plant construction is missing much information. First, Dr. Steven Chu the new Secretary of Energy loves cellulosic ethanol, he was involved in early research with Diversa (VRNM) in termite enzymes, he has guaranteed the creation of a new era of second generation ethanol (cellulosic). Dr. Steven Chu is the one signing the loan guarantees!

  6. William Dittl Friday, March 27, 2009

    There are several projects that are moving along rather well that were never mentioned. In fact, they include POET’s plan to make cellulosic ethanol from corn cobs and the CMECP project involving SunOpta BioProcess using woodchips in Little Falls Minnesota. The CMECP project is particularly high profile because it has received considerable media coverage, it has state funding and it has real industrial partnerships. The fact that the process uses SEA pretreatment is also pretty telling. Some of the companies you mentioned have only been around 2 years or less. SunOpta’s technology is being used in four cellulosic ethanol plants right now (3 of them are DOE-funded); including Verenium’s facilities, the CRAC pilot plant in China and they York, Nebraska pilot plant (that facility was entirely designed by SunOpta BioProcess). The CMECP project is one of the most advanced projects in the United States. Likewise, the last portion thw riter mentions is licensing and that’s quite accurate in terms of both pretreatment and microbial applications.

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  8. These companies can talk up their technologies all they want, but can they perform?

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