Alico Abandons Cellulosic Ethanol Plant Plans

In the process of mapping out these dozen or so companies that are racing to build the first cellulosic ethanol plants in the U.S., we discovered that not all the companies are still rushing forward. Some, in fact, have quit the contest completely. Alico, a land management company that was one of the six companies that the Department of Energy chose to fund to build a cellulosic ethanol plant, said on Monday that it will not actually build that planned plant. In a press release the company said it now has no intention of building the plant nor will it pursue the federal grant money.

In its statement Alico explained it had abandoned the cellulosic ethanol idea because:

“the risks associated therewith outweighed any reasonably anticipated benefits for Alico.”

Given Alico’s press release was rather vague, we confirmed with the DOE that, yes, Alico had also informed the government of their recent decision to get out of the cellulosic ethanol biz. The DOE tells us:

“Cellulosic biofuels hold great promise for lowering greenhouse gas emission and reducing Americas dependence on fossil-fuels. The U.S. Department of Energy recently received a letter from Alico, Inc. notifying us that they will no longer pursue funding for their project. The Department has not yet determined next steps on this matter.”

It’s significant news, because while corn-based biofuels have been getting bad press, next-generation cellulosic ethanol was supposed to be another, more positive story. And the DOE said back in Feburary 2007 that it would invest up to $385 million for six biorefinery projects over the next four years, Alico being one of the chosen ones. This federal investment is supposed to help the country meet President Bush’s goal of making cellulosic ethanol economically feasible with gas by 2012 and help reduce U.S. gasoline consumption by 20 percent in ten years. Well, not if the companies don’t end up building them. In Alico’s case the company says another firm will be taking its torch. In an updated press release today Alico says that “During the past year, Alico has been working with New Planet Energy LLC on this project and NPE is continuing its pursuit of cellulosic ethanol.” We’ll see what happens with that. Our big question is, isn’t the DOE supposed to be vetting the companies that it pledges money to to build our green technology future? Because ultimately these cellulosic plants will be expensive to build, and the companies involved need to have a solid commitment to investing in this technology. Not just an interest in getting media attention. And the costs of the plants will likely be a lot higher than the companies have been anticipating. Alico had previously planned to use up to$33 million from the DOE to build a cellulosic ethanol plant in LaBelle, Florida. If the plant was anywhere near the cost of the ones that Range Fuels and Coskata are building, \$33 million is hundreds of millions of dollars short of the full plant costs.

And while the next-generation of cellulosic ethanol plants are taking a lot of investment to build, the current generation of corn-based ethanol producers have been scaling back on building plants as the margins of that business have become really thin. The latest was POET, which canceled plans for a plant in Glenville, Minn. in May due to permitting problems. Before that Pacific Ethanol, Panda Ethanol, Renewable Agricultural Energy, BioFuel Energy Corp. and VeraSun all said they would suspend construction of ethanol facilities as well.

So while you’re checking out our map of cancelled plans for corn ethanol plants, please look at our map detailing all the cellulosic ethanol plants that are (hopefully) going up in the U.S. in the next few years.