How do you generate $2B in cellulosic ethanol, with no upfront investment?
It ought to be a classic in a pub quiz. How do you generate 2 billion dollars in cellulosic ethanol, with no upfront investment?
(Replacing the old one — how do you become a millionaire in cellulosic ethanol? Start out a billionaire.)
It sounds like a crazy come-on from an old friend of mine, Mr. Free Money himself, Matthew Lesko, who wrote a series of books on topics such as “Free Money for Everybody” or “Free Money from the Government” and ran riot on late night television spots for years.
But this time, there really are billions to be generated with no upfront investment required from the plant operator. So, pony up to the news desk here, and let me explain.
The news arrived from Iowa last week. Siouxland Energy Cooperative has licensed the Edeniq’s Cellunator and Pathway technologies for its 60 million gallon per year ethanol plant located in Sioux Center. Production will start by Q4 2016.
Meaning that Edeniq is shifting into “deployment stage” at warp speed. Why? It all comes down to the cost and emissions implications of Edeniq’s technology, which is now in deployment mode.
What is the Pathway technology, again?
The Pathway Technology integrates the Cellunator equipment with cellulase enzymes to convert corn kernel fiber to cellulosic ethanol. Edeniq says that it utilizes existing fermentation and distillation equipment to produce up to 2.5% cellulosic ethanol and up to a 7% increase in overall ethanol yield.
The Cellunator high-shear milling equipment is a leading yield-enhancement technology that offers the most significant and consistent increase in ethanol yield and corn oil production.
Here’s what it means for the everyday owner/operator.
1. Revenue. An upgrade that can generate up to $15 million in new revenue per plant — up to $6 million in conventional ethanol and up to $9 million for cellulosic ethanol. (Based on a 100 million gallon plant). That’ll be split between the producer and Edeniq. We understand that up to $10M is available for the owner/operator.
2. Yield enhancement, more corn oil and cellulosic ethanol, all at once. Jeff Altena, Operations Director of Siouxland Energy Cooperative, said it best: “We selected Edeniq because we are able to achieve three of our goals – yield enhancement, additional corn oil production, and cellulosic ethanol production – with one investment and in six months’ time.”
3. No upfront investment required. We hear that Edeniq’s prospective owner, Aemetis, would fully fund the equipment and enzymes and analytics so there is no capex or opex cost to the plant from an Edeniq upgrade.
4. No marketing required. Aemetis even markets the advanced biofuels so that every dry mill ethanol plant in the US can receive cash from cellulosic ethanol each week without any financial investment.
5. Speed. Deploying the equipment takes less than six months
6. Assurance. The Cellunators that “shear” feedstock into small particles have a record of 99.9% uptime.
Taken as a group, these are rare terms indeed. More lucrative for most plants than, for example, the indtroduction of corn oil extraction technology only — and at far better terms.
Where is Edeniq in its EPA approval process?
We hear that the Edeniq process is about to receive EPA approval. The “Edeniq pathway” for cellulosic ethanol from corn kernel fiber was approved last year after a three year EPA process. The first “company registration” is in the final steps. From there, a company registration requires a filing by an ethanol plant to enable the EPA to know address and other information related to the operation of the EMTS system for RIN generation. It’s not an onerous or risky procedure.
On that subject, Pacific Ethanol’s Stockton California plant filed for D3 RINS based upon Edeniq technology in late January. Our understanding is that the EPA is reviewing a couple of final issues that will be resolved by providing clarifications — and approval is imminent.
What’s the impact to the industry as a whole?
If every US producer added Pathway to all of the 14.5 billion gallons of current production, the overall impact could be:
1. $2.49 billion in overall value-added revenue. $1.40 billion from cellulosic ethanol and $1.09 billion from conventional ethanol (based on the current $1.68 ethanol July contract, and based on the cellulosic ethanol credits priced by Michele Rubino in his March Madness webinar earlier this year, which are highlighted below).
Note: That slide did not add in the $1.01 cellulosic ethanol federal tax credit and the $0.14 rise in ethnanol’s value since Q1, which would raise the value of cellulosic ethanol to $4.89 per gallon and the value in this “maximum national value” scenario to $2.85 billion — by raising the value of the cellulosic gallons by $366 million.
2. 1 billion additional gallons — 358 million cellulosic ethanol gallons and 645 million gallons of added conventional ethanol.
Now, that’s a maximum. The likely impact might be considerably titled towards the highly-advantaged cellulosic ethanol — shipped into the California market where it will realize the most value.
More on the technology.
Bolt-on cellulosic ethanol: The Digest’s 2016 Multi-Slide Guide to Edeniq.
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