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Vegas Clean Energy Summit: Tale of Two Biofuels

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NRELcornbiofuelAt Senator Harry Reid’s Las Vegas Clean Energy Summit on Monday, the two ends of the ethanol spectrum — first generation corn ethanol and next-generation cellulosic ethanol — were in full representation, but the stark contrast between the group’s diverging goals was clear. While the corn ethanol crew, rocked by shuttered plants and bankruptcies, is scrambling for small policy gains on issues that can help it survive, the cellulosic firms are struggling to scale to commercial production over the next five years and looking for help from government funding. Both sides have their hands out to the federal government (like most cleantech firms) but with very different requests.

First the corn ethanol side. Led by the very vocal chairman of ethanol trade group Growth Energy, General Wesley Clark, the corn ethanol sector is demanding small-step policy measures, like asking the Environmental Protection Agency to lift the amount of ethanol that can be blended with fuel from 10 percent to 15 percent. At the Vegas summit Clark named this as his number one of a five step program for boosting biofuel use in the U.S. and Clark has been reiterating this issue since March.

The CEO of the country’s largest ethanol maker Poet, Jeff Broin, has been repeating this same request to the press this week, claiming that the “Development of biofuels not made from corn will halt,” if the EPA doesn’t mandate increased ethanol blending. Groups like the American Coalition for Ethanol have also created petitions on the topic.

There are a couple issues with raising the blend wall, as Kate Galbraith of the New York Times pointed out earlier this year: fuel blends with more ethanol can result in a slight reduction in miles per gallon, they can damage engines and equipment that are not flex-fuel compatible, and land use changes and fertilizer requirements for growing corn mean indirect greenhouse gas emissions from ethanol production.

Of course the corn ethanol industry is fighting tooth and nail for incremental changes in the face of a disastrous year, with plants closed down and bankruptcies. As Broin put it to Bloomberg this week: “The industry needs to expand sources of supply to ensure financing for new projects.” With the current weak market, it needs the government to help it do that.

The cellulosic ethanol folks have an equally hard but very different task and set of demands for the feds. They’re praying that the economics of their technology works at a large commercial scale over the next several years, and — given the past six months of difficult financing — that they can get funds from the government to reach that scale. At the Vegas summit, Energy Secretary Steven Chu put it eloquently, with the empathy of a true scientist: I would personally be very disappointed if cellulosic ethanol from agricultural waste and energy crops hasn’t reach scale in five years.

A cellulosic ethanol maker like Verenium is betting on a loan guarantee from the DOE to help it scale to commercial production. In the company’s earnings call this week CEO Carlos Riva said that at the end of June Verenium was told by the DOE that it had moved into the due diligence phase (the final stage before receiving the award). Verenium is putting on a confident face that it will receive the loan, saying it’s not a matter of if but when it will receive the loan guarantee.

Unlike the mature corn biofuel sector that is now trying to patch up a sinking ship, the cellulosic ethanol firms are in the early days, where the risk is high but it’s still too early to expect any major failures. I would estimate that in about 2-3 years, we’ll start seeing a massive ramp up of some of the cellulosic ethanol firms, and in about five years the cellulosic industry will start to look a lot more like the current corn industry: busy with public campaigns and lobbying efforts to fight for every subsidy they can get to keep afloat.

6 Responses to “Vegas Clean Energy Summit: Tale of Two Biofuels”

  1. LittleWally

    The ethanol industry knew full well when they got their last govt mandate in 2007 that the blend wall would be an issue before they reached the 15 billion gallon cap, but back then they said that E85 could be rapidly implemented with FFVs (which was also completely fanciful). Now it’s 2009, and their E85 fantasy is confirmed (i.e., excess capacity beyond the blend wall cannot be taken up by FFVs, mostly because it is always overpriced), so they are crying that their mandates and subsidies need to keep growing. It is their classic bait and switch approach to getting what they want.

    That is great for any industry to have the gov’t to generously subsidize and also keep forcing folks to buy your product, but it’s probably not very sound energy policy. Cellulsoic ethanol is STILL 5 years away, like it always has been, even after billions of gov’t grants and subsidies. E15 may be ok for most cars, but EPA sure has not completed all of the studies it would need to in order to verify that. Once all the studies are done and we know what E15 really means (not just to new cars, but all 300 million cars, and the 10’s of millions of small gasoline engines like lawnmowers and chainsaws), then we can figure out if our current ethanol obsession really makes sense. Also, it’s not just about engines, it’s also about understanding E15’s effects on air quality. What is the big rush to more ethanol mandates?

    Why not just take a breather for a few years and freeze corn ethanol where it is, and guarantee that only cellulosic fuels will qualify for all future additional mandated biofuel volumes. That way cellulosic can grow the way it should. And in all likelihood, by the time cellulosic ethanol actually can show it maybe works (5 yrs), we will also have learned how to convert biomass into gasoline that doesn’t have the same kind of compatibility and low energy content problems that ethanol has. Current issue of Science (Aug 14) has a good summary of these ‘green gasolines’ ( see ). Oh, or we’ll also be pretty close to a good electric car in 5 yrs as well, and those don’t need to use any ethanol.

  2. Brazil has a blend limit of 26 per cent for non-flex-fuel vehicles, so apparently it’s not just a big deal in other countries. I agree with the previous commenting, there’s been no evidence brought forward that a 15 per cent blend is going to do damage to cars.

  3. Thanks Nathan,
    Some good points. I don’t necessarily think E15 is an issue that corn and cellulosic are fighting over, just that the corn ethanol guys seem to be the ones prominently pushing this. If for just the basic fact that cellulosic isn’t ready to sell to that demand yet.
    I admit I havent done extensive research on how the E15 blend will effect non flex fuel gear, which is why I pointed to Kate’s article that mentions as such, as I think she’s been following that closely.
    In terms of how bad the year has been for ethanol, perhaps disastrous is a strong word – let’s just say “bad” then.

  4. Katie,
    I respectfully disagree with a couple of points in your post. First, both cellulosic and corn ethanol (both of which Gen. Clark & Growth Energy represent) are united behind increasing the blend level up to E15. I was at the Summit, and I heard them both singing the same tune on this one. Even Secretary Chu recently spoke in favor of E15.

    Second, while there have been some bankruptcies in the corn ethanol industry, has the year really been “disastrous?” Ethanol will increase production from 9 billion gallons last year to 11.75 billion this year, more than a 23% increase. I know you guys have been preoccupied with your ethanol death watch, but that’s a big jump up.

    Second, if E15 “can damage engines and equipment that are not flex-fuel compatible,” why don’t any of the studies conducted by industry, government or higher education show that? Take a look at all of the supporting science for E15: