Cellulosic ethanol, what happened, what’s happening?
By Irshad Ahmed, Consultant with Lee Enterprises Consulting and Member of MITSBAA Entrepreneurs Group, Massachusetts Institute of Technology
Special to The Digest
The story of cellulosic ethanol in the United States has had more plot twists than The Crying Game, the acclaimed Hollywood brain twister—except that this story promises to end with a predictable happy ending.
I believe cellulosic ethanol is here to stay for the long haul and it is finally exhibiting real potential to establish a critical-mass commercial base alongside the corn-ethanol industry. Its commercial success will come from the technical ability of the processes to extract value from all components of the biomass material in addition to cellulosic ethanol from primary sugars.
What Happened?
The past two decades of the United States’ ethanol industry are full of both exciting technological innovations and spectacular failures in trying to commercialize the Ethanol Version 2.0: the cellulosic kind. The progress of cellulosic ethanol has been lost in translating the technological breakthroughs into commercial projects.
The ethanol industry’s failure to establish a critical production base on biomass conversion was not due to technological challenges or lack of will power on part of the entrepreneurs or shortage of project financing. The slow progress can mostly be attributed to the widely gyrating public policy that injected not only a great deal of uncertainty into the marketplace regarding the future of cellulosic ethanol, but it also elevated financial investment risks for the willing investors. This was mainly due to lack of clarity and/or commitment of public policy backing the future of biofuels through executable programs that are consistent over longer time horizons—a necessary ingredient to induce confidence in the investment community.
One of the key issues has been uncoordinated program initiatives between various Federal and State agencies, especially among the US Departments of Energy and Agriculture and the US Environmental Protection Agency. Despite all good intentions, many of the bioenergy initiatives achieved limited to no commercial successes during the 1990s and most of the 2000s. It is only in the past 6 years that we are seeing the plot twist to create a launch pad that is conducive to commercialization of cellulosic ethanol.
The US DOE and USDA Loan Guarantee Programs for Biorefinery projects have been of great value in helping the industry manage project financing risks. However, despite Congressional allocation of significant funding over the years totaling in billions of dollars, the programs implementation and trickling down of funds to a wide number of desperately needing projects have been limited. During the 1990s and following the 9/11 tragedy, several of the early trailblazing companies, such as Pure Energy Corporation, BC International, MASADA, Quadrax Corporation, Arkenol, and others just to name a few, struggled to address the inherent new technology risk and convince the greater investment community to secure structured project financing to build cellulosic ethanol biorefineries. Most of these early movers struggled, and a majority number failed trying to sustain their efforts through angle investments and/or debt load.
One other important factor that contributed heavily to the limited success of the first attempts to commercialize cellulosic ethanol was due to the fact that almost all technology developers only focused on extracting and converting only the C6 glucose sugar derived from the cellulosic portion of the lignocellulosic biomass material—which under the best circumstances represented under 50-percent of the biomass material being processed. This approach not only suffered with low ethanol yields but it also wasted higher-value C5 xylose sugars from hemi-cellulosic portion of the biomass and lignin by utilizing it as the boiler fuel to provide process heat.
Most of the commercial activity of the 1990s and 2000s resulted into a series of failed projects with industrywide losses exceeding billion dollars or more. The feedback loop created with these failed projects, combined with the financial markets meltdown of 2007-2008, literally choked the project financing pipeline, resulting in a complete shut-down of all commercialization activities pertaining to new cellulosic ethanol projects.
What’s Happening?
The last two decades of research and development activities resulted in four major technological pathways for cellulosic ethanol production:
- Dilute Acid Hydrolysis;
- Concentrated Acid Hydrolysis;
- Enzymatic Hydrolysis; and
- Biomass gasification to SynGas followed by fermentation or catalytic conversion to ethanol
Historically, each of these approaches have suffered from either low yielding intermediate conversion step(s) or required heavy primary fossil energy inputs to drive the processing plants, hence rending them economically or sustainably useless. However, the good news is that the past six years have seen a sea change in the development of efficient and multi-faceted technologies that are not only energy efficient thereby generating higher renewable energy output to fossil energy input rations, but they are also designed to effectively utilize a greater percentage of carbon into higher value products and coproducts as well as cellulosic ethanol.
Advances in genetic engineering is finally enabling the fermentation of mixed sugars into ethanol through both yeast and bacterial strains. The process that releases sugars from biomass material also releases traces of chemicals that inhibit the fermentation process resulting in low ethanol yields. Any attempt to purify these sugars had a detrimental effect on sugar concentrations. To make the matters worst the fermentation of mixed sugars made it almost impossible to optimize the fermentation process to efficiently utilize both five- and six-carbon sugars. Recent advances in process and genetic engineering have attempted to solve both of these problems.
The gasification approach had its own set of problems. One of the key process limitations come from the fact that the syngas produced from biomass invariably produced traces of hydrogen cyanide (HCN), which resulted in shutting down the fermentation process. HCN is syngas is toxic to microorganisms even at as low a concentration as 15 ppm. Under 1 ppm HCN is necessary to scale-up and support a commercial scale gasification based cellulosic ethanol biorefinery. INEOS Bio has been working to fix this problem by incorporating HCN scrubbers at their Vero Beach, Florida plant.
Integration of cellulosic ethanol with higher-value chemicals has also been a key to managing and deflating financial risks for commercialization of these projects. By supporting a higher value chain through production of higher value chemicals and/or co-products with cellulosic ethanol is resulting in significantly better profit margins. Continuous processing techniques is resulting into smaller foot print thereby reducing capital cost of the cellulosic ethanol biorefineries by a factor of two to five.
The lessons learnt over the past decades of technological failures are resulting in the solutions that have taken these cellulosic ethanol technologies on a commercial path to success. Companies like DuPont, POET, American Process, ICM, ZeaChem, just to name a few have developed technologies and launched several commercial and/or demonstration scale projects for cellulosic ethanol production in the United States. As of the first quarter of 2016, there are 15 projects at various stages of development and construction in the United States totaling over 100 million annual gallons of production capacity. The feedstock of choice ranges from corn stover, straw, corn cobs, hard and soft wood, switchgrass, crop and wood residues to municipal solid waste. The largest of the cellulosic ethanol plants has been designed with a nameplate capacity to produce 30 million gallons of cellulosic ethanol annually from corn stover.
By my estimate, there are over 42 additional projects in various stages of development and/or financing in the United States and abroad, utilizing one or more of the technologies that traditionally fall in the hydrolysis and/or gasification systems approach. In addition, there are a wide variety of technical approaches based on pyrolysis and plasma based technologies as well as Fisher-Tropsch systems that are designed to produce “drop-in” fuels or other hydrocarbon based fuels other than cellulosic ethanol from biomass.
On the project financing front, increased risk hedging and management approaches are making it possible to achieve structured project financing. Entry of larger companies, such as DuPont, POET, DSM, and INEOS into the cellulosic ethanol space is rapidly and positively changing the perception of the financial community to commit funds for the deployment of next generation of cellulosic ethanol projects.
Supported by the Renewable Fuels Standard (RFS-2) as part of the Energy Policy Act of 2007, and the Renewable Identification Number (RINs) program that are designed to reward the non-food source based ethanol production over traditional corn-ethanol into a mandated market that is calling for 16 billion gallons of cellulosic ethanol to be produced by 2022, the future of bioethanol looks bright. While it took couple of decades for the public policy to come in-sink with the market based reality, we now have multiple policy drivers in place that are complementing each other, thereby clearing the path to commercial success for not just cellulosic ethanol but all renewable biofuels and other sustainable technologies and products.
I end this commentary with hope that there are no more plot twists to cellulosic ethanol movie that is already in its third decade of making. I can’t wait to be first in line to see it at a plant near me.
About the Author
Irshad Ahmed has an MBA from the Sloan School of Management at the Massachusetts Institute of Technology and graduate degrees in chemical, agricultural and biological engineering from MIT, Cornell University, University of New Hampshire and IICT, India. He has advanced management certifications in Agribusiness from Harvard Business School and in Management & Leadership from MIT Sloan.
He has served as an adjunct at Lehigh University and was on the Board of Advisors of the Speed School of Engineering at the University of Louisville. Irshad is a recognized expert in the renewable energy with over 25 years of experience and currently handles many aspects of Project Finance & Development activities for Lee Enterprises Consulting, the world’ largest biomass and biofuels consulting group.
He is the inventor of E-Diesel and cellulosic ethanol biorefinery technology platforms and fuel additives. He holds 31 patents, has written four books and over 100 publications, and manages over $200 million in ethanol, biodiesel and waste-to-energy projects. He has raised over $500 million in equity and project financing for renewable energy projects during his career. He has served in lead corporate management capacities at the US EPA, Booz Allen & Hamilton, as the President of National Biodiesel Foundation. Irshad is the CEO of Pure Energy Corporation and an associate at the MITSBAA Entrepreneurs Group, Sloan School of Management at the Massachusetts Institute of Technology. More about Lee Enterprises Consulting here. .
Category: Thought Leadership
