.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} tr.d0 td { background-color: #ccccff; color: black; }
ALL Fuels & Energy Co. announced last week that it is close to reaching a deal that would give it rights to use and sell a “super enzyme” that could reduce ethanol production costs to less than $1 per gallon and make cellulosic ethanol production more feasible. It plans to finish testing the enzyme in May and use it in its first ethanol plant in Manchester, which is still in the planning phase.

This is just one example of a wide range of new technologies that promise to transform the corn-based ethanol industry, which in recent months has been hit hard by tight profit margins. With so many choices in new technology, some ethanol companies are weighing their options, while others are making huge investments now, hoping to come out ahead of the competition.

“They don’t know what to bet on,” said Robert Brown, director of the Bioeconomy Institute at Iowa State University. “I don’t know what to bet on. There are too many choices, I think, right now, a smorgasbord, and they’re afraid they might end up with the wrong thing. Actually I think we’ll see a diversity of biofuel technologies reach the marketplace, and it may be many, many years before we see the (industry) move to one particular technology.”

Improvements to production efficiency and byproducts that can be sold in addition to ethanol are the most sought-after advancements in the industry today. But Brown considers these “incremental improvements” compared with the development of advanced biofuels (renewable fuels other than ethanol that are derived from a renewable biomass), which is still about five to 10 years away from being commercialized. Poet LLC plans to begin building the first cellulosic ethanol plant in Iowa next year, which it expects to become operational in 2011.

The motivator

Driving the research and development of new technologies is federal legislation President George Bush signed into law last December that requires fuel producers to use at least 36 billion gallons of biofuels by 2022, five times the quantity being used today. More than half of that goal, 21 billion gallons, must come from advanced biofuels.

The requirement guarantees a market for ethanol and will help ease a glut in the marketplace that resulted after several new ethanol plants came online quickly. Last year, U.S. ethanol production jumped by nearly 2 billion gallons to an annualized rate of more than 7.8 billion gallons. Iowa ranks No. 1 for ethanol production capacity, with nearly 2.1 billion gallons of annual production capacity on line now and 1.4 billion under construction.

Corn-based ethanol companies are especially keen on enhancing operations after current market conditions have squeezed profit margins. VeraSun Energy Corp. said in its year-end 2007 financial report that although sales of ethanol were up dramatically due to several plants coming on line, the average price of ethanol fell 30 cents per gallon. Xethanol Corp. said in its year-end report that it has suspended construction of a second ethanol plant in Blairstown and may cut back on production at its current facility because the high price of corn and natural gas, the changing ethanol market and a volatile capital market have made conditions unfavorable.

Inside the kernel

One of the main advances in the ethanol industry today is finding ways to further break down the corn kernel, creating more products that can be sold in addition to ethanol. Extracting oil from the corn kernel and selling it to biodiesel producers is one idea that’s taking off.

Steve Roe, general manager of Little Sioux Corn Processors in Marcus, claims his plant was the first to adopt the technology in 2005. Installing the technology cost around $2 million, but the new process now generates around $1.75 million in additional revenues each year, he said.

“It’s not something that’s going to make a difference between profit and loss,” Roe said, “but for the investment it makes you a lot of money and it’s something that’s not hard to do.” The company also can still sell distillers grain as a lower-fat feedstock that some farmers prefer, he added.

Roe said additional products like this have become more important as market conditions remain tenuous. “I think it’s going to make people take a closer look at what they’re doing,” he said. “When the industry was profitable, a couple million dollars in the end wasn’t that big of a deal; now it is.”

VeraSun Energy Corp. announced in December that it has begun work on an oil extraction facility at its ethanol biorefinery near Aurora, S.D., which it expects to yield 7 to 8 million gallons of corn oil annually (one gallon of corn oil yields approximately one gallon of biodiesel). It will roll the technology out to its Fort Dodge and Charles City plants by the end of 2009.

Meanwhile, Poet has developed Broin Fractionation technology (trademarked as BFRAC), which allows it to break the corn kernel into three fractions: fiber, germ and endosperm. The endosperm is used to create ethanol, and the remaining fractions can be used in high-value co-products, such as corn germ meal and corn oil.

“Similar to what we did with a barrel of oil 80 years ago, we learned how to make more things from oil,” said company CEO Jeff Broin. “We’re learning how to make more things out of a corn plant than in the past.”

Efficiencies

Improving the efficiency of ethanol plants is an ongoing process, said Lucy Norton, managing director of the Iowa Renewable Fuels Association, with many different approaches. Finding ways to reduce energy use has become especially important with energy prices reaching record levels.

Poet announced this month that it has reached an agreement with the city of Sioux Falls, S.D., to use methane generated from the Sioux Falls Regional Sanitary Landfill to power its ethanol production facility near Chancellor, replacing a portion of its natural gas needs.

The company also has developed a technology that allows it to skip having to cook the grain before fermentation, which results in a 15 percent reduction in energy usage at a plant as well as creating a higher ethanol yield per bushel, a reduction in plant carbon dioxide emissions and better byproducts, Broin said.

Ames-based Frontline BioEnergy LLC has been working with Chippewa Valley Ethanol Co. in Benson, Minn., to install a 75-ton-per-day biomass gasification system that would replace more than 90 percent of the plant’s natural gas energy inputs with biomass power, a renewable and much cheaper source.

Many of these technologies that improve efficiency now also could be helpful in generating second-generation biofuels.

Brown said he is involved in a proposal submitted to the Iowa Power Fund that would install Frontline’s gasification technology into an existing Hawkeye Energy Holdings ethanol plant to produce syngas. The syngas could then be converted into ethanol.

Dean Sukowatey, president and CEO of ALL Fuels, said his company’s “super” enzyme will not only reduce production costs at existing plants, but can make biomass fermentation more feasible as well. He is working on a licensing and marketing agreement with a major university to sell the patented process through ALL Fuels subsidiary AFSE Enzyme LLC, but would not release more details until the deal is signed.

Beyond the grain

Broin compares the effort to reach commercial production of advanced biofuels to the 1960s attempt to put a man on the moon within a decade. With enough investment and interest among multiple stakeholders, he believes we “can get there in the very near future.”

Poet was one of six biorefinery projects selected by the U.S. Department of Energy in February 2007 to receive a total of $385 million over the next four years to create a commercial-scale cellulosic plant. Poet will use a biochemical process to free sugars from biomass and then ferment them into alcohol. Broin said his company has already proved it can do this in the laboratory, but not on a commercial scale.

The fermentation process is one of two approaches for converting biomass into a renewable fuel, said ISU’s Brown. The other, which is gaining more attention, is a thermochemical approach that uses heat, pressure and a catalyst, such as Frontline’s gasification system.

Either way, Brown said, the technology exists to produce fuel from biomass, but the implementation of that technology is hindered by high capital and production costs. Broin agrees that the cost to make ethanol from cellulose is not yet competitive with grain-based ethanol.

“I think there’s a hesitation on making those capital investments until we know for certain that the price of oil will stay north of $100,” Brown said. Yet a reluctance to invest in this new technology means “we’re not going to reach Congress’ goal” of using 21 billion gallons of advanced biofuels per year by 2022, he said.

Brown believes a government policy setting limits on carbon dioxide emissions could encourage more investment, as well as technological advancements that reduce the capital costs of building plants.

Broin believes subsidies will be necessary to speed up the development process. “Cellulosic ethanol obviously is high-risk, and the Department of Energy grants and potential loans are going to be very important to this industry to get it up and off the ground,” he said.

With cellulose biomass being less expensive to produce than corn and the amount of ethanol that can be produced from an acre of land being higher for cellulose than corn, questions arise whether corn-based ethanol will be viable once advanced biofuels become feasible. Brown believes that with the potential to get more ethanol yields from the corn kernel and the ability to convert corn stover to fuel, grain-based ethanol plants could add cellulose ethanol production as an extension to their plants in addition to the industry developing stand-alone cellulosic plants.

“We’re not going to see some silver bullet come in and solve the energy problems,” he said. “It’s going to be a gradual investment. … Keep in mind, it took something like close to 100 years in improving the efficiency and economics of turning petroleum to gasoline. That doesn’t happen overnight.”