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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.