U.S. government granting $385M to six cellulosic ethanol plants

The U.S. government today announced grants of up to $385 million USD to help six American cellulosic ethanol companies "help revolutionize the industry," a spokesperson said.

U.S. Department of Energy (DOE) Secretary Samuel W. Bodman today held a press conference announcing that DOE will invest up to $385 million for six biorefinery projects over the next four years.

The money has technically not yet been appropriated, we should note. And while Congress set an authorization level in the 2005 Energy Policy Act, it has yet to actually appropriate the funds. But the DOE is seemingly planning on receiving virtually all of the money.

Officials said today’s announcement is part of the administration’s pledge to support commercialization of breakthroughs in biofuels, announced earlier this year in the State of the Union address by U.S. President Bush. See the Cleantech Group's Bush beckons for biofuel.

"This shows a commitment by this president to invest in the energy sector. As the world's economies continue to grow, there's a continuing demanding for crude oil. It's important to add diversity in our fuel mix," said Craig Stevens, press secretary for the Department of Energy, to the Cleantech Group.

Combined with the industry cost share, more than $1.2 billion is to be invested in these six biorefineries. Discussions between the selected companies and DOE will begin immediately to determine final project plans and funding levels. Funding will begin this fiscal year and run through FY 2010.

The following six projects were selected:

• Abengoa Bioenergy Biomass of Kansas, LLC of Chesterfield, Missouri, up to $76 million.
  The proposed plant will be located in the state of Kansas. The plant will produce 11.4 million gallons of ethanol annually and enough energy to power the facility, with any excess energy being used to power the adjacent corn dry grind mill. The plant will use 700 tons per day of corn stover, wheat straw, milo stubble, switchgrass, and other feedstocks.
  Abengoa Bioenergy Biomass investors/participants include: Abengoa Bioenergy R&D, Inc.; Abengoa Engineering and Construction, LLC; Antares Corp.; and Taylor Engineering.
• ALICO, Inc. of LaBelle, Florida, up to $33 million.
  The proposed plant will be in LaBelle (Hendry County), Florida. The plant will produce 13.9 million gallons of ethanol a year and 6,255 kilowatts of electric power, as well as 8.8 tons of hydrogen and 50 tons of ammonia per day. For feedstock, the plant will use 770 tons per day of yard, wood, and vegetative wastes and eventually energycane.
  ALICO, Inc. investors/participants include: Bioengineering Resources, Inc. of Fayetteville, Arkansas; Washington Group International of Boise, Idaho; GeoSyntec Consultants of Boca Raton, Florida; BG Katz Companies/JAKS, LLC of Parkland, Florida; and Emmaus Foundation, Inc.
• BlueFire Ethanol, Inc. of Irvine, California, up to $40 million.
  The proposed plant will be in Southern California. The plant will be sited on an existing landfill and produce about 19 million gallons of ethanol a year. As feedstock, the plant would use 700 tons per day of sorted green waste and wood waste from landfills.
  BlueFire Ethanol, Inc. investors/participants include: Waste Management, Inc.; JGC Corporation; MECS Inc.; NAES; and PetroDiamond.
• Broin Companies of Sioux Falls, South Dakota, up to $80 million.
  The plant is in Emmetsburg (Palo Alto County), Iowa, and after expansion, it will produce 125 million gallons of ethanol per year, of which roughly 25 percent will be cellulosic ethanol. For feedstock in the production of cellulosic ethanol, the plant expects to use 842 tons per day of corn fiber, cobs, and stalks.
  Broin Companies participants include: E. I. du Pont de Nemours and Company; Novozymes North America, Inc.; and DOE’s National Renewable Energy Laboratory.
• Iogen Biorefinery Partners, LLC, of Arlington, Virginia, up to $80 million.
  The proposed plant will be built in Shelley, Idaho, near Idaho Falls, and will produce 18 million gallons of ethanol annually. The plant will use 700 tons per day of agricultural residues including wheat straw, barley straw, corn stover, switchgrass, and rice straw as feedstocks.
  Iogen Biorefinery Partners, LLC investors/partners include: Iogen Energy Corporation; Iogen Corporation; Goldman Sachs; and The Royal Dutch/Shell Group.
• Range Fuels (formerly Kergy Inc.) of Broomfield, Colorado, up to $76 million.
  The proposed plant will be constructed in Soperton (Treutlen County), Georgia. The plant will produce about 40 million gallons of ethanol per year and 9 million gallons per year of methanol. As feedstock, the plant will use 1,200 tons per day of wood residues and wood based energy crops.
  Range Fuels investors/participants include: Merrick and Company; PRAJ Industries Ltd.; Western Research Institute; Georgia Forestry Commission; Yeomans Wood and Timber; Truetlen County Development Authority; BioConversion Technology; Khosla Ventures; CH2MHill; Gillis Ag and Timber.

When fully operational, the six are expected to produce more than 130 million gallons of cellulosic ethanol per year.

Critics of ethanol (see Ethanol a boondoggle, says Milken) complain the industry receives unfair subsidies. Today's grants underscore the U.S. government's support of the industry. DOE press secretary Stevens defended the grants to the Cleantech Group.

"We think this is the quickest, most efficient, reasonable, practical way to reduce our reliance on crude oil. We know the technology is there. If we can make this cost competitive with corn ethanol, it'll loosen the grip of oil producing nations. In addition, it gives a further source of possibility of hope to American farmers. It's an American-grown product."

Some say cellulosic ethanol should be viewed as a transitional fuel. All-electric vehicles, say some automakers and industry-watchers, are the future (see Why hydrogen cars will fail.)

When asked if it made sense to spend so much money on pricey cellulosic infrastructure, especially if cellulosic ethanol remains expensive and electric vehicles are the end-game, Stevens said the industry should watch for coming announcements.

"There is an investment in battery technology. There's an investment in hybrid technology. But in terms of ethanol as a transitional fuel, it's important to keep investment strong."

Mitch Mandich, CEO of cellulosic grant recipient Range Fuels, which recently announced a plant in Georgia (see Range Fuels to produce 1B gallons of cellulosic ethanol) told the Cleantech Group the additional money will help his company scale its production quicker.

"Our technology is modular in nature, so we can just add more modules to the Georgian plant. Commercial-level production is at least 10M gallons of ethanol yearly. We'll start around that level at our plant in Georgia, but will be submitting for a permit next week to scale that plant to as much as a hundred million gallons a year over time."

Mandich thinks Range Fuels' cellulosic product, at least, will be competitive with corn-based ethanol pricing on a per gallon basis.

"We know our capital cost will be higher, but we believe our operating costs will be lower. And they're going to do nothing but improve over time."