Approved at Last

Abengoa CEO offers European view of programs
By Kris Bevill | September 12, 2011

On Aug. 19, the U.S. DOE offered to guarantee $133.9 million in financing for Abengoa Bioenergy U.S. Holding Inc.’s first commercial-scale cellulosic facility. With federal financial backing in place, the company is marching ahead with its plans to establish a 23 MMgy multi-feedstock facility in Hugoton, Kan., by 2013 and expects to begin construction by the end of September.

The DOE’s loan guarantee approval for biofuels projects has been notoriously hard to come by, so successfully emerging from the process is a major milestone. Poet LLC was the first cellulosic ethanol project to receive a nod, garnering a $105 million conditional commitment earlier this summer for its facility in Iowa. But despite the slow start and lengthy approval process (Spain-based Abengoa filed its initial loan guarantee application two years ago), Abengoa Bioenergy President and CEO Javier Salgado says he is satisfied with the program overall and believes the U.S. programs can serve as an example for other countries to emulate when determining how best to support biofuels expansion. “If we were to have 50 percent of the support of what this country has had for new-age technologies and projects, I would be happy in Europe,” he says. “The requirements on any loan guarantee are very challenging for any company. There are more projects than there is available money, so competition is very high. We have been competing with other energy technologies that, from a commercial standpoint, have more maturity, less uncertainty and definitely less risk. I think that has been a little bit detrimental to our industry and, overall, the process for our industry is complex, but our relationship with the loan guarantee office has been very good. It’s a tough problem, but I think DOE is going to be able to put in some beautiful projects in a very complex environment.”

The Hugoton project is a prime example of the complexity of cellulosic ethanol. In addition to producing ethanol, the company will construct a cogeneration facility on-site that will produce 20 megawatts of biomass-based electricity to run the ethanol plant. The plant is expected to require about 300,000 tons of corn stover to produce 23 MMgy of ethanol using its enzymatic hydrolysis process. In late July, the USDA also approved a Biomass Crop Assistance Program to establish 20,000 acres of switchgrass in the area surrounding the plant. If all goes well, switchgrass will be ready to harvest for use at the facility during its inaugural year in combination with stover and wheat straw already promised to the company by 60 area farmers. Salgado says the BCAP project is not vital to the plant’s success because it already has supply agreements in place with farmers, but it will be helpful in proving the energy crop concept and will serve as an example for the deployment of that concept throughout the U.S.

Once the biomass procurement concept has been proven and the Hugoton plant is up and running, Abengoa will target its six existing U.S. corn-based ethanol plants as co-location opportunities for cellulosic facilities and will also entertain the option of serving as a technology provider to third parties. “Globally, there are about 600 biorefineries producing ethanol today,” he says. “We are trying to introduce a new concept, which is a new technology, and the risk associated to develop that technology is going to be mitigated, and the deployment is going to be much faster, if we are able to co-locate those assets with the existing infrastructure. I believe this could become a reality very soon.”

For now, however, all of the company’s cellulosic focus is geared toward Hugoton, Salgado says. As of late August, the company had finalized a construction agreement and was expecting to receive its air permit within a few weeks. Executives were working around the clock to finalize the loan guarantee by Sept. 30 and it appeared the company would be able to hold a groundbreaking before the start of October. Approximately 300 jobs will be created during the construction of the plant. The facility will provide 65 full-time jobs when operational. 

—Kris Bevill