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At 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.