POET, one of the larger producers of corn-based ethanol in the United States, says it will start churning out cellulosic ethanol by the end of the year. The company started construction on a $4 million pilot-scale cellulosic ethanol facility in Scotland, S.D., a few months ago, and now says that facility will be completed and operational within 2008. POET hopes the pilot-scale plant will help perfect the technology for a planned commercial scale plant named Project Liberty in Emmetsburg, Iowa, that will start construction in 2009.
The Sioux Falls, S.D.-based company’s announcement will likely make the numerous startups working on cellulosic ethanol a bit nervous, as one of the incumbent big players has set an aggressive time table. And POET has the advantage of being able to rely on its existing infrastructure of corn-based ethanol plants to move into the cellulosic game. The company is aiming to build its cellulosic plants adjacent to its existing corn-based plants, and will use waste corn cobs and corn kernel fibers from the adjacent plants to produce the cellulosic ethanol.
The setup assures the company a feedstock and helps it hedge against the uncertainty of cellulosic ethanol; it could ultimately not be an economically viable technology or a good investment for the company. And the company is definitely hedging — for POET’s 125 million gallon per year Liberty plant, supposed to be operation in 2011, just 25 million of that capacity is supposed to be for cellulosic ethanol. Integrating the plants will also make the cellulosic process faster and cheaper to market for Poet. Poet’s CEO Jeff Broin said in a speech for the announcement:
POET believes this approach is the fastest way to achieve the commercialization of cellulosic ethanol. You see, the challenge is not to produce cellulosic ethanol in the lab. Dozens of companies have done that already, including POET.
Poet also has significant funds to back its plans. It has its sales from its corn-based ethanol business and the DOE selected POET to receive up to $80 million in funds for the plant.
But POET is also facing a variety of hurdles. The price of corn has gone sky-high, hurting corn-based ethanol makers everywhere, so having cellulosic plants rely on corn as well could prove challenging. And, though the company has opened other corn ethanol plants this year, POET recently canceled plans for a plant in Glenville, Minn., due to permitting problems — the thin margins for corn ethanol obviously didn’t help keep those plans alive.
There’s also the fact that there are many other eager startups working on cutting-edge and innovative ways to produce cellulosic ethanol that have nothing to do with corn and the traditional ethanol industry. These newcomers, like Coskata, Synthetic Genomics and Range Fuels are turning to scientific breakthroughs like synthetic biology and genetics. Their valuable IP is getting backed by venture capitalists. They are also a lot more aggressive than POET and spending hundreds of millions on their plants. So, like so many industries that face monumental shifts, we’ll see how well the older POET does when facing the disruptive newcomers.