The Digest’s 2018 Visual Guide to the economics, politics of renewable fuels

If you have ever wondered why a conventional ethanol and biodiesel producer like Aemetis has announced a first-of-kind commercial-scale cellulosic ethanol project in the US, we’ve prepared this graphic to help you see why it’s Wall Street rather than Main Street that loves cellulosic ethanol.

Right away, you can see that the cellulosic business prospectively looks nothing like conventional corn ethanol in terms of cost, or price structure. Instead of the bulk of the costs going to the supply chain via the growers, a small pittance goes back into the supply chain for the almond and fruit waste feedstocks that Aemetis will use. The rationale for the growers is to avoid regulation that will surely come in California to limit the bad smog over the San Joaquin Valley from all of the waste-burning going on.

Instead, the money goes for a lot more capex — cellulosic ethanol can be five times more expensive per gallon in terms of capex  — at the capacities that are being deployed now — as conventional corn ethanol. In fact, the Aemetis project, amortized over 20 years, will cost 72 cents per gallon just for the equipment — and some lenders would want this amortized over 15 years which would raise the capex costs (per gallon per year) to 95 cents.

Given that ethanol wholesales for $1.45 per gallon, that’s a daunting beginning. Yes, a 25 cent per gallon cost for almond waste feedstock (assuming $20 per ton and a process yield of 80 gallons per ton) does help offset that high capex — in fact, it helps a lot. But wholesale ethanol is not what cellulosic ethanol is all about.