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10 Questions for Poet's CEO Jeff Broin

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Corn ethanol producer Poet is at an important juncture in its two decade history. The company is embracing the changing landscape of the biofuel market by investing in new cellulosic ethanol technology and building a $200 million plant dubbed Project Liberty in Emmetsburg, Iowa that will produce 125 million gallons per year of ethanol, of which 25 million gallons will be cellulosic made from corn waste. Later this year the company says it will start churning out cellulosic ethanol from a small pilot-scale facility in Scotland, S.D.

But is Poet being aggressive enough on cellulosic, and will it succeed in becoming a cellulosic ethanol player that will license its technology to other biofuel firms? That’s the company’s intention. But we wanted to know more details about what technology the company is using for cellulosic, and how important the cellulosic market is for Poet. So we asked. Here are 10 questions that Poet’s CEO Jeff Broin answered for us via email:

1). Poet’s strategy is to introduce cellulosic ethanol plants in conjunction with its sizable corn-based ethanol business. Do you ever see the company’s cellulosic ethanol business rivaling or surpassing the corn ethanol business in size and revenues, and if so, in what time frame?

We see both the corn-to-ethanol and the cellulose-to-ethanol processes coexisting and enhancing each other well into the future.

2). Does the company have plans to make cellulosic ethanol from other feed stocks besides corn cobs, fibers and byproducts?

POET is heavily focused on corn cobs and corn fiber due to the benefits we have identified with them. Our 26 plants are located in areas of high corn supply, we have existing relationships with farmers who supply us corn and invest in our plants and we have 20 years of experience operating in that environment. So in the near term, we are looking at cobs and the 5 billion gallons of ethanol that our nation could produce from them. However, our conversion technology is transferable and once we have perfected the technology on cobs, we will begin looking at other feedstocks.

3). Some startups are claiming they will be able to make cellulosic ethanol for as low as $1 per gallon. What is your predicted price for producing Poet’s cellulosic ethanol at the pilot plant and at the larger scale at the commercial plant?

Dozens of companies, including POET, can make cellulosic ethanol in their lab. The challenge for everyone is to make the process commercially viable. Producing cellulosic ethanol is currently more expensive than corn ethanol, but we believe that we can make it commercially viable by the time our first plant comes online in 2011.

With the process at commercial scale, we can start to improve it and continually bring the cost down like we have with corn ethanol for the past 20 years. Long term, our goal is to make cellulosic cost competitive with corn ethanol.

4). These startups are focusing all of their resources on the IP to make cellulosic ethanol as cheaply and efficiently as possible. What is the technology Poet is using to produce cellulosic ethanol? Is it Poet’s own IP?

As a fully integrated ethanol producer, POET has always been a developer of its own technology. The development of cellulosic ethanol technologies started eight years ago with fractionation and raw starch hydrolysis, both of which are foundational for the integrated corn and cellulose to ethanol biorefinery. We are pursuing enzymatic conversion for cellulosic material in collaboration with several government agencies, universities and other companies. Our intention is to develop our own IP around the process so that it can be licensed to other ethanol producers.

5). Do you think it will be the same customers who buy corn ethanol that will buy cellulosic ethanol? Or do you expect you will need to create a new market for cellulosic?

Ethanol is the same molecule whether it comes from starch or cellulose. The customers for cellulosic ethanol should be the same as those who have purchased corn ethanol in the past.

6). There’s been some changing political will towards corn ethanol over the past year. Are you satisfied with the current biofuel regulation or do you think there needs to be significant changes?

The tax credit for blending ethanol cost the U.S. Treasury a little more than $3 billion last year. At the same time, the higher price of agricultural commodities decreased direct support to farmers by approximately $8 billion. And according to Iowa State University, it has kept down the cost of gasoline in the country by 29 to 40 cents per gallon, saving consumers about $40 to 60 billion. I think you could call that a great return on investment.

In order for the ethanol industry to do more, some adjustments need to be made so that our country can use more renewable fuels. Although the government has mandated the production of 36 billion gallons of biofuels by 2022, the industry will soon produce the annual equivalent of ten percent of our nation’s transportation fuel. Since the base blend of ethanol in gasoline is ten percent and growth in E85 has been minor, there will be no market for additional ethanol.

The government needs to do two things to solve this problem. First, we need to increase the base blend of ethanol in gasoline. This has been very successful in Brazil, where they have a 25 percent base blend and studies have shown that some cars get better gas mileage on 20 or 30 percent ethanol than they do on straight unleaded gasoline. That will help increase the amount of ethanol we can use in the short term. Long term, we need to speed up development of mid-level blend infrastructure so that ethanol can become a true competitor to gasoline. In order to do that, state and federal government can play a role in incentivizing pump conversion and flex fuel vehicle production.

7). With the rise in corn prices this year, the corn-based ethanol business has gotten pretty tough. Do you see your cellulosic ethanol business as playing a part in helping alleviate or diversify the tough corn ethanol market?

We have seen difficult times in the corn-based ethanol industry before. We remain confident that corn-based ethanol will be a successful supplier of transportation fuel for our nation in the long term.

8). In the great debate over how much corn ethanol is affecting food prices, what do you think about some newer reports that have said biofuels have affected food prices significantly?

Every study depends on the assumptions of its author, and the opponents of renewable fuels have been able to generate a few that say what they want. Almost every independent study I’ve seen has said that ethanol production has had a very small impact on the consumer’s price for food, especially in comparison to the impact of rising energy prices.

A study from the Agricultural and Food Policy Center at Texas A&M said, “The underlying force driving changes in the agricultural industry, along with the economy as a whole, is overall higher energy costs, evidenced by $100 per barrel oil.” Just do the math. A semi can haul 4,200 boxes of corn flakes at a time, and with 10 ounces of corn in each box, that’s a total of 46.9 bushels of corn. At a $6 bushel, the corn in all 4,200 boxes has a value of $281.40. To haul those boxes 1,500 miles, however, would cost $881.25 with diesel priced at $4.70 per gallon. That means it takes 21 cents of diesel per box to get it to the store, yet the value of corn in that box is less than seven cents. What do you think is the real driver of higher food prices?

9). Is the company working on ways to make its corn ethanol business more sustainable? Do you use any sustainability standards? And can you provide some examples of sustainable moves?

POET’s goal has never been to be the largest producer of ethanol, but rather the most efficient producer of ethanol. Our drive for efficiency takes many forms, but most often it involves efforts to decrease our use of fossil energy.

POET’s patent-pending raw starch hydrolysis process named BPX™ converts starch to sugar and ferments to ethanol with the use of enzymes — not heat. This reduces energy use in the plant by 8 to 15 percent and also reduces the need for cooling water. After years of development, the process was taken to commercial scale production in 2004 and is now in 21 of POET’s ethanol production facilities.

At our facility in Chancellor, S.D., we are installing two alternative energy sources that will use waste to power the plant. We are in the final stages of constructing a solid waste fuel boiler that will burn wood chips otherwise destined for a landfill. We are in the early stages of constructing a pipeline to bring methane gas from a local landfill. The combination of the two power sources has the potential to displace the entire natural gas usage at the plant

POET is a member of the Combined Heat & Power Partnership of the EPA and our plant in Ashton, Iowa, received an EPA Energy Star Award for the use of CHP to reduce greenhouse gas emissions.

Several of our production facilities also make use of technologies that reuse and recycle water. One recycles water already used by a nearby power plant. Another gets a third of its water from a wastewater treatment plant. And another draws all of its water from an adjacent quarry that discharges it as part of their normal de-watering operation.

10). Do you favor one presidential candidate’s biofuel and energy policy over the other, and if so, which one?

POET is encouraged that voters are increasingly realizing that our country’s dependence on foreign oil is dangerous and unsustainable. We are confident that our political leaders will continue to support the domestic ethanol industry and we look forward to working with the administration of whichever candidate is elected.

13 Responses to “10 Questions for Poet's CEO Jeff Broin”

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  2. Biofuelsimon,

    On your first point, the Corn Flakes box is not meant to be all-encompassing but rather a proxy for what other factors go into food costs. Even for the largest U.S. food aid program, 65% of their costs are not food related, but rather transportation, handling costs and administration.

    On your question, we’ve been working with numerous universities and other researchers to study the agronomic value of cobs and found that their nutrient value is much less than their weight. In fact, many farmers say that they are a nuisance because they take nitrogen and a lot of time to break down. Other studies have shown that you can remove up to 50% of the stover without impacting soil quality (depending on where you are). I’d be happy to chat with you in greater depth if you’re interested.

  3. Jeff’s points about the cost of corn in a box of corn flakes only hold water if you’re buying cornflakes. If you’ve got to buy a bag of corn, then you get the rise in transportation cost and 100% of the rise in the price of corn, which is why people who buy corn and process it themselves at home are feeling the pinch around the world.

    I’d be interested to know just how sustainable Jeff thinks that cellulosic ethanol is in terms of soil structure and fertility. Does he think that removing stalks (not his interest admittedly) would be a good thing?

  4. Brian J. Donovan

    Louisiana Enacts the Most Comprehensive Advanced Biofuel Legislation in the Nation

    Advanced Biofuel Industry Development Initiative Benefits Consumers, Farmers and Gas Station Owners with Localized “Field-to-Pump” Strategy

    Baton Rouge, LA (September 18, 2008) – Governor Bobby Jindal has signed into law the Advanced Biofuel Industry Development Initiative, the most comprehensive and far-reaching state legislation in the nation enacted to develop a statewide advanced biofuel industry. Louisiana is the first state to enact alternative transportation fuel legislation that includes a variable blending pump pilot program and a hydrous ethanol pilot program.

    Field-to-Pump Strategy
    The legislature found that the proper development of an advanced biofuel industry in Louisiana requires implementation of the following comprehensive “field-to-pump” strategy developed by Renergie, Inc.:

    (1) Feedstock Other Than Corn
    (a) derived solely from Louisiana harvested crops;
    (b) capable of an annual yield of at least 600 gallons of ethanol per acre;
    (c) requiring no more than one-half of the water required to grow corn;
    (d) tolerant to high temperature and waterlogging;
    (e) resistant to drought and saline-alkaline soils;
    (f) capable of being grown in marginal soils, ranging from heavy clay to light sand;
    (g) requiring no more than one-third of the nitrogen required to grow corn, thereby reducing the risk of contamination of the waters of the state; and
    (h) requiring no more than one-half of the energy necessary to convert corn into ethanol.

    (2) Decentralized Network of Small Advanced Biofuel Manufacturing Facilities
    Smaller is better. The distributed nature of a small advanced biofuel manufacturing facility network reduces feedstock supply risk, does not burden local water supplies and provides for broader based economic development. Each advanced biofuel manufacturing facility operating in Louisiana will produce no less than 5 million gallons of advanced biofuel per year and no more than 15 million gallons of advanced biofuel per year.

    (3) Market Expansion
    Advanced biofuel supply and demand shall be expanded beyond the 10% blend market by blending fuel-grade anhydrous ethanol with gasoline at the gas station pump. Variable blending pumps, directly installed and operated at local gas stations by a qualified small advanced biofuel manufacturing facility, shall offer the consumer a less expensive substitute for unleaded gasoline in the form of E10, E20, E30 and E85.

    Pilot Programs
    (1) Advanced Biofuel Variable Blending Pumps – The blending of fuels with advanced biofuel percentages between 10 percent and 85 percent will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the equipment used to dispense the ethanol blends to ascertain that the equipment is suitable and capable of producing an accurate measurement.

    (2) Hydrous Ethanol – The use of hydrous ethanol blends of E10, E20, E30 and E85 in motor vehicles specifically selected for test purposes will be permitted on a trial basis until January 1, 2012. During this period the Louisiana Department of Agriculture and Forestry Division of Weights & Measures will monitor the performance of the motor vehicles. The hydrous blends will be tested for blend optimization with respect to fuel consumption and engine emissions. Preliminary tests conducted in Europe have proven that the use of hydrous ethanol, which eliminates the need for the hydrous-to-anhydrous dehydration processing step, results in an energy savings of between ten percent and forty-five percent during processing, a four percent product volume increase, higher mileage per gallon, a cleaner engine interior, and a reduction in greenhouse gas emissions.

    Act No. 382, entitled “The Advanced Biofuel Industry Development Initiative,” was co-authored by 27 members of the Legislature. The original bill was drafted by Renergie, Inc. Representative Jonathan W. Perry (R – District 47), with the support of Senator Nick Gautreaux (D – District 26), was the primary author of the bill. Reflecting on the signing of Act No. 382 into law, Brian J. Donovan, CEO of Renergie, Inc. said, “I am pleased that the legislature and governor of the great State of Louisiana have chosen to lead the nation in moving ethanol beyond being just a blending component in gasoline to a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. The two pilot programs, providing for an advanced biofuel variable blending pump trial and a hydrous ethanol trial, established by the State of Louisiana should be adopted by each and every state in our country.”

    State Agencies Must Purchase or Lease Vehicles That Use Alternative Fuels
    Louisiana’s Advanced Biofuel Industry Development Initiative further states, “The commissioner of administration shall not purchase or lease any motor vehicle for use by any state agency unless that vehicle is capable of and equipped for using an alternative fuel that results in lower emissions of oxides of nitrogen, volatile organic compounds, carbon monoxide, or particulates or any combination thereof that meet or exceed federal Clean Air Act standards.”

    Advanced Biofuel Price Preference for State Agencies
    Louisiana’s Advanced Biofuel Industry Development Initiative provides that a governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to purchase E20, E30 or E85 advanced biofuel at a price equal to fifteen percent (15%) less per gallon than the price of unleaded gasoline for use in any motor vehicle.

    Economic Benefits
    The development of an advanced biofuel industry will help rebuild the local and regional economies devastated as a result of hurricanes Katrina and Rita by providing:
    (1) increased value to the feedstock crops which will benefit local farmers and provide more revenue to the local community;
    (2) increased investments in plants and equipment which will stimulate the local economy by providing construction jobs initially and the chance for full-time employment after the plant is completed;
    (3) secondary employment as associated industries develop due to plant co-products becoming available at a competitive price; and
    (4) increased local and state revenues collected from plant operations will stimulate local and state tax revenues and provide funds for improvements to the community and to the region.

    “Representative Perry and Senator Gautreaux have worked tirelessly to craft comprehensive advanced biofuel legislation which will maximize rural development, benefit consumers, farmers and gas station owners while also protecting the environment and reducing the burden on local water supplies,” said Donovan. “Representative Perry, Senator Gautreaux, and Dr. Strain, Commissioner of the Louisiana Department of Agriculture and Forestry, should be praised for their leadership on this issue.”

    About Renergie
    Renergie was formed on March 22, 2006 for the purpose of raising capital to develop, construct, own and operate a network of ten ethanol plants in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each ethanol plant will have a production capacity of five million gallons per year (5 MGY) of fuel-grade ethanol. Renergie’s “field-to-pump” strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. On February 26, 2008, Renergie was one of 8 recipients, selected from 139 grant applicants, to share $12.5 million from the Florida Department of Environmental Protection’s Renewable Energy Technologies Grants Program. Renergie received $1,500,483 (partial funding) in grant money to design and build Florida’s first ethanol plant capable of producing fuel-grade ethanol solely from sweet sorghum juice. On April 2, 2008, Enterprise Florida, Inc., the state’s economic development organization, selected Renergie as one of Florida’s most innovative technology companies in the alternative energy sector. By blending fuel-grade ethanol with gasoline at the gas station pump, Renergie will offer the consumer a fuel that is more economical, cleaner, renewable, and more efficient than unleaded gasoline. Moreover, the Renergie project will mark the first time that Louisiana farmers will share in the profits realized from the sale of value-added products made from their crops.

  5. Jeff Baker

    Which Party Will Make or Break Biofuels?

    Biofuel is a bright spot in our economy. Corn Belt states now have cheap fuel, expanding economies, and budget surpluses. Biofuel industries are still evolving. Ethanol refineries are coming online in numerous other states: Texas, Louisiana, Florida, Arizona, Oklahoma, Georgia, New York, Pennsylvania, and California. Alternative feedstocks such as sorghum, organic waste, biomass and algae are being introduced. The State of Louisiana and Renergie are building a network of small, localized sweet sorghum ethanol plants, with a 5 to 1 return. Subsidizing biofuels creates jobs, stimulates our economy, and generates County, State, and Federal tax revenue. Money back in your pocket. Every dollar spent on biofuel subsidies results in $10 in economic stimulus. So go figure.

    Merrill Lynch reported that ethanol blended into regular gasoline lowered the cost by 15% and saved 60 billion dollars this year. The new ethanol blender pumps will make a bigger impact, depending on who gets elected President. Typically, blending ethanol with gasoline is done in large quantities by oil companies or fuel distributors. Who ever does the blending gets the 51 cent per gallon tax credit subsidy. With the new onsite blender pumps, the retail gas station will get the tax credit. That changes everything. Retailers are expected to pass along most of the blending subsidy to the consumer. Thus, the various blends, E20, E30, E40, E50, E85 will be about 40 to 50 cents a gallon cheaper at the blender pumps. Cheaper than ethanol already is. The Republican Party wants to discontinue the blending subsidy and take this discount away from you.

    If the subsidy stays, ethanol blended at the pump will compete head-on with regular gasoline. This is why Big Oil wants the Republicans to get rid of the blending subsidy. They are threatened by the coming blender pumps. The American Petroleum Institute and the National Petrochemical and Refiner’s Association are challenging the North Carolina Blending Act. Big Oil is trying to prevent NC fuel retailers from blending ethanol and gasoline at the pump and taking-over the blending subsidy. If retail blender pumps prevail, the blending subsidy will be passed-on to consumers, and the oil industry will lose it. Ethanol blends at the pump will be much cheaper than gasoline. Blends might soon outsell gasoline, as is the trend in Iowa, Minnesota, Kansas, Nebraska and other ethanol producing states.

    The Republican Party receives huge campaign contributions from Big Oil and their intermediaries. Their battle cry is drill, drill, drill, which we need to do. But drilling now will only impact fuel prices moderately, 7 to 10 years from now. And why all the fanfare about offshore drilling, when oil companies already have 6,000 oil and gas leases they’re not using?

    The Republican platform also calls for eliminating the 54 cent per gallon import tariff on foreign ethanol. That would flood the market with imported ethanol and weaken our domestic ethanol industry. The Republicans advocate that we should lessen our dependence on foreign oil by replacing it with a new dependence on Brazilian Ethanol. This would increase our Trade Deficit and the interest we pay on the National Debt, because we pay for imported fuels with debt instruments and Government Bonds. Importing Brazilian ethanol would not save you much. After shipping and handling costs from Brazil to the U.S., oil companies would pocket the rest. The consumer might save a penny or two at the pump, but your hidden cost would be 6% floating interest on imported fuel, paid for with debt instruments.

    By following the Republican plan to end the ethanol import tariff, we would flood the market with foreign ethanol, trade one dependency for another, drive up the Trade Deficit and the National Debt, and pay more revolving interest on imported fuel. Instead, we need to keep stimulating domestic biofuels.

    The subsidies we pay on petroleum based fuel are SIX TIMES higher than what we pay on ethanol, biodiesel and biogas methane, yet oil companies make record breaking multi-billion dollar profits. If the Republicans want to discontinue Biofuel subsidies, they should also discontinue Petroleum subsidies. But, instead, they fight to keep $50 Billion worth of annual petroleum subsidies intact. Republicans are clearly aligned with their benefactors – Big Oil.

    The Republicans plan to end affordable biofuel subsidies and to end the ethanol import tariff. This would disrupt a sector of our economy that is thriving, and cost you 40 to 50 cents a gallon at the pump. Domestic Biofuels are now a key component of our National Security. Disrupting our Biofuels Plan is poor judgment and NOT in our National Interest.

    The Republican Deception is:
    Big Oil First. Not Country First.


  6. Is cellulosic ethanol still a zero sum game in the battle for an efficient means to produce energy? I’m interested in seeing if corn is worth the while of the United States as a means to energy production much like the nuclear energy situation. What I mean by this is, one where we end up gaining more energy out of the process than we lose.