The Core of Advancement
There’s a perfectly good reason why Iowa should be the center of cellulosic ethanol development in the United States, according to project stakeholders and state officials. Well, several good reasons, actually, starting with feedstock. Corn is king in Iowa, where millions of acres of corn are harvested annually, more than any other state. That’s great for ethanol producers, who have a stronghold within the state and take advantage of the abundant corn stocks to produce more gallons of ethanol than any other state. In fact, in 2009 the 38 Iowa ethanol production facilities consumed 1 billion bushels of corn, about 46 percent of the state’s crop, and produced 30 percent of the U.S.’ ethanol, according to the Iowa Office of Energy Independence. The high concentration of feedstocks, which includes more crop residues than any other state, and ethanol production matters greatly to cellulosic biofuels developers who plan to piggyback their technology with corn ethanol’s infrastructure.
A robust research environment, a biofuels-savvy workforce and widespread public support round out the short list of benefits Iowa offers to budding cellulosic and advanced biofuels projects. “When you have a unique value proposition to an industry and the industry understands that right away, it’s great to have that opportunity to engage with so many companies that are just as excited as you are about the opportunity,” says Martin Mitchell, international project manager, bioscience industry investment, for the Iowa Department of Economic Development. “We have a significant skilled workforce in the area of industrial biotechnology. We have that infrastructure in the ground [and] in the past 48 months, we’ve seen over $3.5 billion in capital investment projects in the industrial biotechnology/renewable space.”
There’s another reason cellulosic developers are flocking to the Hawkeye state—money. For Iowa, recruiting cellulosic and other renewable energy projects is not just an economic development talking point. The state is putting its money where its proverbial mouth is, and has spent the past few years carefully selecting innovative projects to invest in and nurture to commercialization. The hope is that all of this effort will result in what former Gov. Chet Culver refers to as the “silicon prairie of the Midwest.”
In an effort to turn Culver’s vision into a reality, the state established the Iowa Power Fund in 2007. Iowa legislators approved a $100 million budget for the program, to be spent on research and development, early stage commercialization, and technology developments that would ultimately lessen Iowa’s dependence on fossil fuels. Budget cuts and redirected funding to flood recovery efforts, educational programs and community grants ate up just over a quarter of the program’s funding, whittling the program’s available funds down to around $75 million. In the first three years of the four-year program, the Power Fund board received at least 335 applications, requesting a total of $699.2 million, clearly demonstrating the desire for state support of cutting-edge renewable technology projects.
As of last December, the fund had invested about $51.6 million in 39 projects—13 of them focused on biofuels. Project participants are required to commit matching funds to Power Fund grants and have contributed more than $300 million to their respective projects. Culver says he “couldn’t be more excited” about the program’s performance. “Our state has become a laboratory for the research and development related to second- and third-generation renewable technologies,” he says. “We’re attracting innovators and entrepreneurs to places like Shenandoah and Emmetsburg and, most importantly, because of this investment and this approach, we’re going to help solve the energy challenges across the Midwest, and around the world potentially, with some of these breakthrough technologies.”
Companies participating in Power Fund projects include some of the biggest names in the ethanol industry. Poet LLC is the program’s poster child, receiving more than $14 million for its Project Liberty—bolt-on cellulosic ethanol technology used to convert corn stover to cellulosic ethanol. The company will install the technology at its 55 MMgy corn ethanol plant in Emmetsburg and plans to produce 25 million gallons of cellulosic ethanol beginning in 2012. Kerri Johannsen, executive officer of the Power Fund, says Project Liberty was one of the first projects selected for funding, in part because of its potential to accelerate cellulosic ethanol technology. “Iowa has the resources and infrastructure, including existing ethanol production, that make us an ideal location for next-generation ethanol production, but there are still many logistical hurdles to overcome to get there,” she says. “The Power Fund’s investment in Project Liberty demonstrated our belief in the technical expertise and determination on the part of Poet to get this done and the great potential for Iowa that would be attached to this project’s success.” Johannsen says the board’s approval for the project was also influenced by the leveraged funding that Poet would bring to the state. The project has a committed match of more than $230 million, including other grants and Poet's investment.
Jim Sturdevant, director of Project Liberty, says the decision to locate the project in Iowa was an easy one. The abundance of available feedstock, namely corn, as well as the large concentration of traditional ethanol plants in the state were the company’s main motivators, although community and farmer support also played a role in convincing Poet that Iowa was the right place to commercialize cellulosic technology. “Our Phase 1 approach is to co-locate cellulosic plants with our corn-based plants,” he says. “There are many advantages to following that business model. The fact that Iowa is a strong supporter of corn-based ethanol, it’s just common sense that it would be a strong supporter for cellulosic ethanol, too.” Poet operates seven corn ethanol plants in Iowa and has received strong political support as well as financial support in exchange for it doing business there. “We’ve felt all along that Iowa was a leader in our nation’s renewable energy campaign and they’ve come through,” Sturdevant says. “Their actions support our perception.”
Algae, MSW Projects
Green Plains Renewable Energy Inc. has received approximately $4 million from the Power Fund for its BioProcess Algae LLC project to cultivate algae from CO2 and waste water produced at GPRE’s 65 MMgy corn ethanol plant in Shenandoah. The two-phase project was awarded about $2 million in Power Fund grants for each phase and is the only project to receive second-round funding from the Power Fund, according to GPRE. The total budget for the project is nearly $11.5 million. The project just recently entered the second phase, which includes operating at-scale bioreactors to grow and harvest the algae at commercial-size volumes.
According to GPRE CEO Todd Becker, there was never a question as to where the company would locate its algae project, regardless of state funding. “We probably could have located it at any one of the states that we have an ethanol plant in, but it’s really a partnership that started a long time ago between our company and the state of Iowa and we’re appreciative of that partnership,” he says. “We were willing to invest, with or without them, but we thought with them was a great idea because it’ll create jobs in Iowa if we build these [reactors] out at scale. There’s a chance to have algae reactors at every ethanol plant in Iowa. That’ll provide a lot of jobs and downstream opportunities as well.”
Just under $3 million of Power Fund money has been doled out to Fiberight LLC for its municipal solid waste (MSW)-to-ethanol project at Blairstown. The $7 million project is expected to be among the first to actually produce cellulosic ethanol at commercial volumes in 2011 and will commence operations soon at its retrofitted corn ethanol plant. The availability of corn-based feedstocks doesn’t benefit Fiberight’s operations and CEO Craig Stuart-Paul says the company didn’t initially plan on locating its first commercial project in Iowa. “Our original thought when we bought the plant was to strip it down and move it, but the more we looked at the situation in Iowa … a lot of the things that we needed were already there,” he says. “So we thought we’d just stay put. That, so far, has turned into a good decision.” Fiberight’s feedstock of choice, MSW, turns out to also be plentiful in Iowa. The state has a 50 percent waste diversion goal, a paper mill with available waste located near Fiberight’s facility and many small landfills that could also service the plant. In addition, infrastructure and what Stuart-Paul describes as “welcome” were two very important components to Fiberight’s decision to remain in Iowa. “There’s a fairly hefty permitting requirement and also a very extensive financing requirement for second-generation biofuels,” he says. “While a lot of states pay lip service to it, when you actually get into the process of getting permits and financing done, things grind to a halt. What we’ve found in Iowa was not only did we get rapid access to the Iowa Power Fund, we also got rapid access and willing support from all of the relevant agencies to make sure that this project got going.” Fiberight applied for a Power Fund grant in February and was awarded the money on Aug. 29, a timeline that would make any company seeking federal funding jealous. “A lot of work was done during that period of time, but they have a fast-track process and they make things happen,” Stuart-Paul says. “If you have a driving force saying ‘we want these projects to happen,’ people will make things happen. That willingness to help is a big difference.”
But for all the development the Power Fund has fostered over the past few years, there’s a very real chance the money will dry up before any of the projects reach their conclusion. This is the last approved year for the program’s initial run and it entered the year already short on funds. In late December, the Power Fund board was negotiating contracts for about $35 million in funds, well over the program’s actual remaining budget of about $22 million. There’s also some question as to whether the new governor and legislature will renew the four-year program before the end of this year. In December, a press officer for incoming Gov. Terry Branstad said the governor will be reviewing all of the state’s programs, including the Power Fund, to determine whether they should receive renewals. Ultimately, the decision of whether to continue the program will be based on its cost/benefit analysis, he said.
Culver and others believe the choice to continue the program should be obvious. According to an economic impact study recently conducted by the Office of Energy Independence, the Power Fund’s investments through September equaled only about 10 percent of the actual project costs. Between 2007 and 2014, annual economic activity associated with Power Fund projects averages out to more than $100 million, including construction activities and ongoing project operations. State tax revenues from the projects are expected to exceed $2 million this year. Culver says he hopes the new state leaders will agree that the Power Fund is worth investing taxpayers’ dollars in. “I respect the fact that they’ve had very fair questions and that’s the case with every appropriation,” he says. “At the end of the day, I think the facts are going to be overwhelming in terms of continuing to support these renewable energy research investments. These are cutting-edge research projects that have tremendous potential. Obviously not every one of them is going to be the solution tomorrow, but I think it’s fair to say that any number of these projects will make it to commercialization and beyond. That’s what I’m focusing on.”
Author: Kris Bevill
Associate Editor, Ethanol Producer Magazine