AE Biofuels to re-start Keyes facility

By Kris Bevill | October 14, 2010
Posted Nov. 9, 2010

AE Biofuels Inc. recently received $4.5 million in financing from Third Eye Capital Corp., which will be used to repair its 55 MMgy corn-based ethanol plant in Keyes, Calif. The plant is expected to become operational in the first quarter of 2011.

According to AE Biofuels, the plant was originally constructed in 2008 by Cilion Inc. at a cost of $130 million. It was shuttered in 2009 due to technical and market issues. In March, AE Biofuels signed a three-year lease agreement with Cilion and began working to acquire funding to repair and reopen the plant.

Andy Foster, president and chief operating officer of AE Biofuels' advanced biofuels division, said a full crew will be on-site beginning Nov. 9 to conduct the necessary repairs, most of which will consist of valve and piping replacement. "The original valves that were spec'd for the plant turned out to be the wrong valves," he said. "It's not market rocket science, it's a fairly straight-forward fix, [but] replacing every valve at the plant is not an inconsequential deal." Some re-piping will also be completed, as well as additional work to the plant's water treatment facility, he said. The entire re-vamp will be completed for the amount financed by Third Eye Capital.

Once operational, the plant will function completely off-the-grid, due to an onsite steam turbine, according to Foster. The plant will also have zero water discharge which, when combined with the energy generation, will give the plant a 2.6 to 1 energy balance. "There are other plants in the country that are doing the same thing, so we're not unique in that perspective but it's definitely the wave of the future in terms of being more conscious about natural resources," he said.

After corn-based production is achieved at the Keys plant, the company will begin commercializing its enzymatic technology for cellulosic ethanol production. Foster said the goal is to refine AE Biofuel's patent-pending process using locally obtained feedstocks, including corn stover and various energy grasses. Ultimately, the company plans to replace 25 percent of its corn input with agricultural wastes. "It took us a little bit longer to raise funds necessary to complete the plant," he said. "But I expect we're going to be a [cellulosic] player in 2011."

Once operational, AE Biofuels will be able to participate in California's ethanol producer incentive program, known as CEPIP. The program offers an incentive of up to 25 cents per gallon of ethanol produced, capping at $3 million per year per facility, during months when the ethanol crush spread is less than 55 cents per gallon. During months that the crush spread is greater than $1 per gallon, participating producers will be required to pay back incentives at a rate of up to 20 cents per gallon of ethanol produced. Facilities must have capacities greater than 10 MMgy and must be operational to receive CEPIP incentives. Currently, Calgren Renewable Fuels LLC is the only ethanol facility in California that meets the program's participation requirements.