Iowa aims for next-gen biofuels leadership: 18 hot projects

As the Digest’s eight-state Midwest tour continues – we look at Iowa, the long-time leader in US renewable fuels production.

Will the Queen of Biofuels continue to reign as King Corn makes way for King Next-Gen? We look at 18 hot technologies powering Iowa’s next growth wave.

Shenandoah, IA – It stands to reason that the leading US state in renewable fuels production would have long ago achieved net energy independence when it comes to transportation fuel. Iowa does not disappoint in this respect – to offset its 2.7 billion gallons in gasoline and diesel demand, the state produced 3.9 billion gallons of ethanol and biodiesel last year.

The state has been exceedingly prosperous in recent years, with a 24 percent growth in GDP since the Renewable Fuel Standard was first established in 2005, ahead of the national rate.

But as they say, that was then, this is now.

Earlier this month, Bob Dinneen, CEO of the Renewable Fuels Association, noted that ethanol production in Iowa and Nebraska had fallen as much as 30 percent in a short-term response to drought conditions and high corn prices.

Earlier this year, a researcher from the University of Illinois determined that ethanol plants won’t be able to pay more than $6.75 per bushel of corn and remain economically viable. The figure was based on the analysis of an average 100 million gallon per year facility in Iowa producing 2.8 gallons of ethanol and 17 pounds of DDGS per bushel.

Now, drought conditions will ease, and prices. Production can be expected to return to normal, and as soon as the new crop season gets underway.

But the 2012 season’s corn production raises the question: What is Iowa doing to assure continued leadership in renewable fuels by extending its feedstock range beyond corn and soybeans?

6 Trends

The answer is – a lot. In our investigations in Iowa this week, we noted 6 trends worth carefully watching, which take us from opportunities with existing feedstocks to exotic newcomers like algae.

Our thesis now is essentially unchanged from 2010, when we published our 10-Part Bioenergy Project of the Future overview – the existing ethanol and biodiesel fleets represent the near-term opportunity to add capacity through production efficiencies, plant conversions (such as converting from ethanol to biobutanol), cellulosic biofuels bolt-ons, or symbiosis (where the residues of one biofuels process become the feedstock for another).

Selected first-gen expansion opportunities

Last spring, Cargill Corn Milling president Alan Willits affirmed that the company is planning to spend $200 million to expand and retrofit their corn processing facility in Fort Dodge Iowa.  In an interview with Reuters, Willits stated, “We want to be a part of that whether it’s serving our farm customers or our food customers. We don’t think we can be relevant to them if we don’t have some skin in the game relative to biofuels. That was one of the motivations to invest in that facility.”

The facility is slated for a target production of 115 MGy, with 200 employees and an opening date in the fourth quarter of 2013.

The opportunities go beyond expansion with greenfield projects, We note that, in celebrating its 5th birthday yesterday, the Green Plains Renewable Energy plant in Shenandoah has quietly expanded its production capacity from 50 million to 70 million gallons, through process improvement. POET has also over the years consistently reported gains in yield and throughput at its sites.

On the biodiesel side, Ag Processing last May re-started the mothballed 60 million gallon per year biodiesel plant formerly known as East Fork Biodiesel in Algona. Now known as AGP Algona, the company bought the facility in 2011. Total installed capacity for the company is now 120 million gallons annually.

Overall, the state now has 325 million gallons in active biodiesel capacity, according to Iowa Biodiesel Board director Randy Olson, plus another 25 million gallons that are currently mothballed, or in various states of shutdown or transition. Production expectations are bullish – between 200 and 250 million gallons for the year.

Olson adds: “Now that we have a working RFS for biomass based diesel, the biodiesel market outlook is more predictable than it has been in its short history.  Biodiesel is as an advanced biofuel, as defined by the EPA- the 1st commercially available US produced advanced biofuel produced across the country.  And, with biodiesel, we can truly have both food and fuel.  Biodiesel feedstocks become available through the production of protein- whether that be the soybean meal used as animal feed, or fats that come from the processing of animals.  The price that biodiesel producers pay for that feedstock adds significant value back to the food chain.”

Corn oil powers biodiesel hopes

One of the major new feedstocks being integrated into biodiesel is corn oil from the ethanol plants that are abundant throughout the State.

7 Iowa plants (within the POET fleet alone) have now installed POET’s patent-pending corn oil technology, at Ashton, Coon Rapids, Corning, Emmetsburg, Gowrie, Jewell and Hanlontown. While we don’t have a breakout of POET’s corn oil production in Iowa, overall the company is now producing 235 million pounds per year across 14 sites – enough to provide feedstock for approximately 31 million gallons of biodiesel.

Cellulosic biofuels arriving

It’s not well known, but Iowa is the US leader in cellulosic biofuels projects that have finalized their financing, with three now underway: Fiberight’s project in Blairstown, the POET Liberty project in Emmetsburg, and the the Dupont Cellulosic project in Navada.

Fiberight. In January, US Agriculture Secretary Tom Vilsack announced that the USDA has approved a conditional commitment for a $25 million guaranteed loan for the Fiberight biorefinery. When operational, the facility is expected to produce approximately 3.6 million gallons of cellulosic ethanol per year, from municipal solid waste, other industrial pulps and seed corn waste.

Dupont. Last month, DuPont Industrial Biosciences announced it will contract with Fagen to build its 25 million gallon cellulosic ethanol biorefinery in Nevada. During 2011, DuPont purchased land adjacent to the existing Lincolnway Energy ethanol plant, which will enable potential synergies in energy and logistical management.  DuPont had already contracted KBR Inc. to execute the front-end engineering, procurement and detailed engineering design work for the project, and continues to work with Iowa State University to complete large-scale stover supply chain testing.

POET-DSM. Poet-DSM broke ground in March on their $250 million “Project Liberty” co-located at its ethanol plant in Emmetsburg. The facility is expected to be up and running in between 18 and 24 months. It is expected to use 750 tons of corn cobs and other corn waste from area farms, bringing in between $15 million and $20 million in additional revenue for local farmers. Royal DSM is providing funding for $250m project.

Biobutanol conversions

One of the biggest trends in recent years has been the growing momentum in converting fiorst-gen corn ethanol plants to biobutanol. In a typical conversion, a 100 million ethanol plant will be converted to 80 million gallons of biobutanol. These have the same value in terms of the Renewable Fuel Standard, because biobutanol gallons count for 1.3 ethanol gallons because of higher energy density. Plus, biobutanol blends in at 12 to 16 percent with gasoline under EPA rules, needs no infrastructure change, and has a strong second market in chemical sales.

Gevo has completed one conversion, at Luverne, MN, and is currently commissioning the plant.

Meanwhile, Butamax has enrolled 11 ethanol plants in its early adopters program, and five are in Iowa. Big River Resources of Iowa, Corn, LP (Goldfield), Lincolnway Energy (Nevada); Platinum Ethanol (Arthur) and Little Sioux Corn Processors (Marcus).

Biobased products

The biobased revolution is everywhere, and there too Iowa has focused its efforts on providing and maintaining leadership. The signature project to date has been the Metabolix project in Clinton, which is commercializing the production of Mirel, a family of high performance bioplastics which are biobased and biodegradable alternatives to many petroleum based plastics.

Metabolix is also developing a proprietary platform technology for co-producing plastics, chemicals and energy, from crops such as switchgrass, oilseeds and sugarcane.

Opportunities in algae

Perhaps the most fascinating new technology in late development today in Iowa is the BioProcess Algae project, co-located at the Green Plains Renewable Energy plant in Shenandoah, in the far southwest corner of the state.

The company is now in the process of upgrading to a 5-acre demonstration of its modular technology – which is expected to be the final step before active commercialization at Shenandoah and other sites.

Three things are especially notable about the project. First, it’s proven that it can successfully utilize excess CO2 and process heat from the Shenandoah ethanol plant to produce microalgae.

Second, it has proven (at pilot scale) that its unique growth media can work – and this is an important breakthrough, because the company is growing microalgae out of solution, using a biofilm. The thesis is that this approach will offer a high surface area to enhance light penetration, productivity, harvest density and gas transfer. Once the algae have reached critical density, they are srayed off the biofilm into a shallow bed of water, 2-3 inches deep, hugely reducing the amount of water that has to be moved in order to harvest algae.

Third, Green Plains is still supporting the project. Even in the “a penny really matters” world of corn ethanol, GPRE is well-known for a relentless focus on viability and profitability – and they have been adamant that the BioProcess Algae project is not a science project – but a focused exploration of value-add opportunities for their ethanol fleet – and that as soon as the project shows that it is not meeting GPRE’s tough success criteria, it will be shut down. Well, its not shut down.

And, as CEO Tim Burns notes, “you have to aim for the lowest cost production. That’s the winner.”

Meanwhile, the company is already taking orders. In June, BioProcess Algae and KD-Pharma Bexbach announced that they have entered a commercial supply agreement for the production of EPA-rich Omega-3 oils for use in concentrated EPA products for nutritional and/or pharmaceutical applications. Under the agreement, BioProcess Algae will supply microalgal oils which will be refined by KD-Pharma’s proprietary Supercritical Fluid Technology to produce highly-concentrated vegetable sourced EPA oils.

We’ll be profiling BioProcess Algae in more detail in September.

How it all comes together: communities of progress

Take Nevada, Iowa for an example. For years, its been most widely known as the nearby support town to the sprawling Iowa State University complex at Ames, and because a tremendous amount of magazines routed their subscription cards to a data processing center there.

But its become a little titan, home to a first-generation ethanol plant (locally-owned by central Iowa citizens), the next-generation DuPont Cellulosic Ethanol plant (under construction), and Thesis Chemistry.  Jill Euken, Deputy Director, at the ISU Bioeconomy Institute in AMex has become a big fan of the town as a success story in renewable fuels and economic revival.

“The community has built a reputation for its ability to provide infrastructure, investment and debt capital, linkages to State of Iowa services,” she noted for the Digest. For her, it has all the elements working together that make economic revival and growth possible:

Leadership. A committed group of local leaders staff and volunteer (in Nevada’s case, at the Nevada Economic Development Council.

Producer partners. Agricultural producers who are intimately involved in community development efforts.  Many producers are not only investors in the first generation ethanol facility, but are involved in designing best management practices for the feedstock supply chain for the DuPont plant.

Partnerships. The community helps industries build partnerships with Iowa State University (ISU) faculty and the ISU research park to support R&D.

Other technologies of note

The Iowa economic success story wouldn’t be complete without a mention of some of the biomass harvesting technologies, for next-gen fuels, that have developed in the state as it turns towards the next generation.

Two are of special note. FarmMax’s Residue Recovery System is a cost-effective, single-pass biomass harvesting system. FarmMax has been hard at work developing a combine that can really do it all – adds the cob collection and processing right into the process – a single-pass system, as opposed to the two-pass systems that are being deployed by POET Biomass, which goes after the cobs and stover once the corn is picked up.

Meanwhile, Iowa-based Kelderman Manufacturing announced last April that it is building the largest bale picking truck (BPT) in the world for the Kansas Alliance for Biorefining and Bioenergy in an attempt to reduce biomass transport costs to make cellulosic ethanol production more profitable. The KABB thinks that by reducing supply chain costs, production can fall by 30 cents a gallon. The 600-horsepower BPT can collect nearly three semi-loads of square bales per hour.

The bottom line

Iowa has had a remarkable run in the 200s as it built up its corn ethanol fleet. It’s opportunities in the 2010s, though, are in their own way even more remarkable.

The story has three threads. Great technology – intelligent partnering with existing companies, and substantial community involvement at all levels throughout the state.

The results are measured more than by capacity expansion – though that there is – also, in expanding to multi-feedstock and multi-product platforms that turn companies that ride the commodity price rollercoaster into sustainable industrial enterprises. And, create the job flow and energy independence that creates popular support strong in the community.