Bringing up the throttle on cellulosic ethanol

Although there are challenges facing the second generation ethanol industry, progress is being made. This article appears in the April issue of EPM.
By Holly Jessen, Susanne Retka Schill | March 16, 2016

U.S. EPA data shows 2.18 million cellulosic ethanol D3 RINs (renewable identification numbers) were generated in 2015. That news was one of three main highlights of 2015, according to Brent Erickson, executive vice president of the Biotechnology Industry Organization’s industrial and environmental section. “For the first time, our industry exceeded EPA’s projections,” he says. “That development should prompt EPA to raise its estimates of the industry’s ability to produce fuel.”

For this issue, EPM talked to Erickson and Brooke Coleman, executive director of the Advanced Biofuels Business Council. The story will also provide updates on nine facilities: two colocated with corn ethanol plants that have already produced cellulosic ethanol, four plants commissioning and some still in development.

In the discussion on cellulosic biofuels in the Nov. 29 final rule for the renewable fuel standard (RFS) for 2016, the agency named just two companies as reaching consistent production—Quad County Corn Processors and Ensyn, a producer of cellulosic heating fuel. The two are expected to produce a combined total of 5 million gallons in 2016. The list of those expected to produce some gallons is much longer. The EPA is estimating 19 million gallons could be produced in 2016, which is 25 percent of the projected maximum.  

In the meantime, two of the big three U.S. cellulosic developers are in transition while work continues to debug and debottleneck the first-of-their-kind facilities, with the companies reluctant to provide details. 

Erickson focuses on the positives, pointing to work to scale up cellulosic biorefinery operations from pilot and demo scale to completing construction on commercial facilities. “That is a clear signal that cellulosic and biorefinery technologies have reached the next stage of commercialization,” he says, “where plants can be replicated based on proven and tested designs and incorporating lessons learned from large-scale production.”

He points out that anytime a new technology is scaled up from R&D to full commercialization, there are bound to be bumps in the road. “These companies have all built first-of-a-kind, commercial-scale biorefineries—the point of such facilities is to fully vet the process at scale and learn from engineering and market challenges so that additional biorefineries can be improved and engineering costs can be lowered,” he says. 

Policy uncertainties may be restricting progress on the projects that have been built, Coleman suggests. “If you’re not sure you’re going to have a customer, there’s not a huge push to be the first to market,” he says. “Some are laying back and working out the kinks waiting until the kinks are worked out in Obama administration’s approach to the legislation.”

Policy is the critical driver in energy markets, he says. “For the most part there is no such thing as a free market when it comes to energy. Utilities have monopolies all over this country. Oil companies control the supply chain when it comes to motor fuels.” Federal policies aid the oil industry in multiple ways, he says, from protecting overseas oil assets and shipping lanes down to preferential treatment in the tax code.

Getting the RFS administered properly, fixing the bias in the tax code and continuing to expand the market for ethanol blends are critical, he says. “We need to make sure we continue to develop new markets for these products. Investors invest in growth markets. They don’t invest in stagnant or shrinking markets for any product,” Coleman says. The industry’s Prime the Pump program and the USDA’s latest blender pump program are important. “The RIN credits are a huge part of creating an incentive for opening up the market,” he adds. “Getting the RFS back on track opens up the marketplace for new types of renewable fuel.”

Successfully challenging the EPA’s interpretation of its authorities in the final rule is needed to keep the advanced and cellulosic biofuels industries moving forward, Coleman says. “There’s really two big waiver issues. One affects the entire RFS and gives the oil industry too much power to avoid the obligations of the program by refusing to distribute renewable fuel,” he explains. A law suit has been filed by several organizations representing renewable fuel sectors to challenge the EPA’s attempt to broaden its waiver authority from advanced and cellulosic biofuels, which it has done every year, to include the general renewable fuel category.

The second issue surrounds the cellulosic waiver credits, which can be purchased by an obligated party in lieu of buying the fuel. “EPA has a very difficult job in trying to assess every year how much cellulosic biofuel will be available,” he says, and the waiver credits are intended to be the solution if the volumes are set too high. “The solution to that uncertainty is to use a good, flexible methodology in predicting those numbers as opposed to what they’re doing right now, which is flooding the market with cellulosic waiver credits and allowing the oil industry basically to sit on the sidelines, buy waiver credits and not sign long-term offtake agreements for our fuel.”  It has a chilling effect on investments, he explains. “If the oil industry does not feel like it has to sign long-term offtake agreements for cellulosic biofuels, it becomes significantly more difficult to build projects because financial capital markets want to see there’s going to be a customer for the fuel before spending money on the project.” 

Moving forward, Erickson believes the biggest challenge the cellulosic ethanol industry faces is reviving investment so that more biorefineries will continue to be built. “BIO has estimated that EPA’s delays in issuing the RFS rules caused a $13.7 billion shortfall in the investment necessary to build cellulosic and advanced capacity,” he says. “While the first-of-a-kind cellulosic plants were being completed, new plants should have been started or planned—there were some, but too few.”

Erickson also addresses the industry’s need for long-term stable policies.  “Each of these companies has been working for more than a decade on the challenges. We sometimes forget that, in comparison to other technologies, this is a remarkably fast pace,” he says. “It’s unfortunate that policymakers’ attention spans are even shorter than that.”

The good news is that there are lawmakers who do seem to be interested in helping the industry start, once again, to attract investment. “I believe it is realistic to expect some policy proposals to be brought forward and I believe it is realistic to expect cellulosic ethanol production to continue to ramp up,” he says, “which will generate some interest and excitement around this industry again.”

Another highlight of the past year is that the EPA began considering whether cellulosic sugar producers, rather than only biomass-to-fuel producers, could participate in the RFS and generate RINs. “There could be efficiencies in allowing one biorefinery to convert biomass to sugar, while another ferments the sugar to fuel,” he says. “EPA has indicated it will consider rules to enable this new pathway. And after years of unconscionable delays in approving pathways, this is another positive sign that EPA intends to make progress on approving new cellulosic biofuels.”

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Plants in Operation

Pacific Ethanol Stockton LLC
Stockton, California
In December, the California ethanol plant was the first to use Edeniq Inc.’s Pathway technology to produce cellulosic ethanol from corn kernel fiber. Pacific Ethanol said at the time that it expected to receive EPA approval to qualify the gallons for D3 cellulosic RINs in the first quarter of the year. “Since the Pacific Ethanol announcement in December, we have seen a marked increase in customer interest in the Pathway technology,” Edeniq said in a written statement. By mid-February the company announced it had signed an agreement to license the technology for all of Flint Hills Resources’ seven ethanol plants. Edeniq customers that have already installed the Cellunator technology, a colloid mill which frees up additional starch and pretreats fiber making it more susceptible to enzyme hydrolysis, can be producing cellulosic ethanol in three to six months after signing a contract, with no capital expenditures, the company said. So far, a total of 29 Cellunators have been installed at six U.S. ethanol plants, three of which are Flint Hills facilities, the company said. Edeniq’s second business model, a bolt-on technology to convert corn stover, sugarcane bagasse or other cellulosic feedstocks to cellulosic sugars, can be used to produce ethanol, other biofuels, biochemicals and, or biobased products.

Quad County Cellulosic Ethanol Plant
Galva, Iowa
Quad County Corn Processors, a 35 MMgy corn ethanol plant, also has the capacity to produce 2 MMgy of cellulosic ethanol from corn kernel fiber and in November passed the 2 million gallon production mark. By the end of January, the company reported it had generated 2,991,096 D3 RINs since inception. That has helped expand sales into racing fuels. “At least one racing company is committed to using cellulosic ethanol to reduce their carbon footprint,” said Delayne Johnson, CEO of Quad County Corn Processors. “I expect there will be other markets develop, now that we have had stable production for over a year.” The company’s next steps are continued testing of the higher-protein distillers grains in poultry, swine and dairy in 2016, and, once the EPA approves a yeast, conversion of C5 sugars to ethanol.

Commissioning Stage

Abengoa Bioenergy Biomass
Hugoton, Kansas
Abengoa Bioenergy’s parent company in Spain is going through financial restructuring. In late January the company said it planned to sell its noncore assets, including its first-generation biofuel plants and about a month later Abengoa Bioenergy U.S. Holdings filed for Chapter 11 bankruptcy, with the exception of two of its corn ethanol plants and its cellulosic ethanol plant. The fate of the company’s second-generation investments—including a demonstration plant in Spain and its first commercial-scale 25 MMgy facility in Kansas—was unknown at press time. Neal Gillespie, economic development director of the Stevens County Economic Development Board, confirmed only five or six employees were at work at the Hugoton plant, performing maintenance tasks. “We think this negative could be turned into a positive if the right buyer comes along,” he said. Although Abengoa did not provide update information for this story, Fulcrum Bioenergy Inc. confirmed to EPM that Abengoa will be moving forward with the $200 million engineering, procurement and construction contract for Fulcrum’s first waste-to-jet fuel facility, which was awarded in May.

DuPont Cellulosic Ethanol LLC
Nevada, Iowa
DuPont told EPM it expects to produce its first cellulosic ethanol at the 30 MMgy Nevada plant in 2016. The company’s Vonore, Tennessee, pilot facility “fulfilled its purpose of scaling up our cellulosic technology on multiple feedstocks” and was closed at the end of 2015, the company confirmed. “We are focusing our energy and resources on bringing our Nevada biorefinery into operation this year,” DuPont said in a written statement. While there are some question marks surrounding DuPont’s cellulosic ethanol investment due to the announced merger with Dow Chemical, reports from Nevada, Iowa, indicate there’s activity at its recently completed cellulosic ethanol plant and meetings with feedstock growers were recently held. “DuPont remains committed to the commercialization of cellulosic biofuel,” a company spokesperson said in a written statement responding to a question about the merger, “and will focus its resources on its Iowa facility and securing technology licensing opportunities around the world.” 

Indian River BioEnergy Center
Vero Beach, Florida
IneosBio completed construction on its facility in June 2012. The plant is designed to produce 8 MMgy of cellulosic ethanol from vegetative and yard waste and municipal solid waste, along with 6 MW renewable power. The first power was generated in September 2012, and the first ethanol was produced in June 2013. IneosBio’s hybrid technology gasifies biomass, generating power in the process, then uses the syngas to feed an ethanol-producing microorganism. In a presentation last spring to the U.S. DOE, the company said it had overcome an initial barrier of power outages caused by integration issues with the grid. The company had to go back to pilot scale to explore options to deal with the second issue, cyanide poisoning of the biocatalyst. It shut down to install a hydrogen cyanide scrubber and debottleneck the plant in December 2014. In the March presentation, the company said performance testing was scheduled for the second half of 2015. An EPA table of cellulosic ethanol producers in the final rule indicates ethanol production starting in the first quarter of 2016, with a range of expected production for 2016 of zero to 5 million gallons.

Poet-DSM Advanced Biofuels LLC
Emmetsburg, Iowa
Construction on the 25 MMgy plant was completed in mid-2014 and a grand opening held in early September of that year. Among the celebrants was the king of the Netherlands, the home base for joint venture partner DSM. The EPA’s list of cellulosic ethanol producers shows Poet DSM as beginning production in the fourth quarter of 2015, with the expected range of production for 2016 between zero and 15 MMgy. The plant is reportedly nearing the end of the extended commissioning period that has been the experience of all second-generation developers soon to begin continuous operations. 

Projects in Development 

Carolina Cellulosic Biofuels LLC
Clinton, N.C.
BetaRenewables and Biochemtex, companies in the M&G Group, are working with North Carolina partners to develop a 20 MMgy cellulosic ethanol at Clinton, N.C. Initially dubbed Project Alpha, the project duplicates the company’s first plant in Crescentino, Italy. “CCB has secured the supply chain, completed the permitting activities and is now finalizing all the remaining requirements to complete the project financing,” says Silvia Sacco, M&G spokesman. The project received conditional approval for a $99 million loan guarantee under the USDA 9003 Bio-refinery Assistance Program and nearly $4 million in BCAP funding for perennial crop establishment on 4,000 acres. Site preparations have begun, Sacco says, and construction is slated to begin later this year when finances are closed.

Enerkem Alberta Biofuels
Edmonton, Alberta
Enerkem has begun producing biomethanol from nonrecyclable MSW. “We recently added equipment to double our methanol capacity in Edmonton and we are now resuming operations,” says spokewoman Anne Pare. “A module converting our biomethanol into advanced ethanol will be added during 2016, which will give us the flexibility to sell both products.”   Ethanol production at the 10 MMgy Enerkem Alberta Biofuels is expected to begin in 2017. Enerkem has two proposed projects waiting to duplicate the model once the Alberta facility is fully operational. That includes Vanerco, a joint venture with GreenField Specialty Alcohols in Varennes, Quebec, and Enerkem Mississippi Biofuels in Pontotoc, Mississippi. 

ICM Biofuels pilot plant and R&D facility
St. Joseph, Missouri
In July, ICM hit a major milestone when it completed the second of two 1,000-hour performance runs of its Gen 2 technology, using first switchgrass and then energy sorghum as feedstocks. Since then, the company has been working to prepare a final report for the U.S. DOE. The company had previously proved out its trademarked and patent pending Gen 1.5 Grain Fiber to Cellulosic Ethanol Technology in 2012. The company predicts this technology will “create the most cost-effective pathway to commercialization with anticipation of a first commercial adopter occurring in 2016,” it said in a written statement.

Author: Susanne Retka Schill
Senior Editor, Ethanol Producer Magazine
701-738-4922
sretkaschill@bbiinternational.com

Author: Holly Jessen 
Managing Editor, 
Ethanol Producer Magazine 
hjessen@bbiinternational.com
701-738-4946