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By Robert Rapier on Dec 1, 2007 with no responses

Responsible Ethanol Goes Bankrupt

Last year I wrote a story about an ethanol company that was trying to produce ethanol in a more sustainable fashion:

E3 Biofuels: Responsible Ethanol

They had a great idea. Use corn to make ethanol, feed the byproducts to cattle, digest the manure to produce methane, and use that to fuel the boilers. Complicated? Yes, but definitely a more sustainable way of producing ethanol – if they could pull it off.

During the construction of the plant, I had some contacts who kept me in the loop with respect to what was going on. However, once they began the start-up, all news updates stopped. There was nothing new on their website. (The last time I checked was last week). I couldn’t get any further information from them. The lack of information gave me a feeling that things weren’t going according to plan.

Because things don’t always go according to plan, I was quick to correct people when they said that E3 Biofuels was getting a 5/1 or whatever outrageous energy return the proponent claimed. I don’t know how many times I had to point out that these were projections, and that the plant wasn’t even commissioned yet. Vinod Khosla said it often, as if the plant was up, running, and producing ethanol with a very high energy return. From his white paper “Is Ethanol Controversial?” (MS Word download):

E3 Biofuels achieves an energy balance for corn ethanol of approximately five, using the Argonne National Labs GREET model – a number higher than what many cite for cellulosic ethanol! I have seen plants at every point in the continuum form old energy inefficient plants to highly optimized plants. Most plants being built in California, and there are thirteen at last count, pick locations near cattle feedlots to save the energy of drying the byproduct distillers grain. This dramatically increases energy balance relative to gasoline above 2X. Start replacing other natural gas used in the process with methane from manure form the cattle as can be done in California, a simple process of installing digesters, and the energy balance again improves substantially. Add the conversion of the remaining leftovers from manure digesters, as E3 Biofuels has done, and you get close to a 5X.

Note that is wasn’t “E3 Biofuels is expected to achieve….” No, “E3 Biofuels achieves….” and they do it with a few simple tweaks. If only…..

OK, by now you are wondering if I am going somewhere with this. Yes, I am:

Mead ethanol plant filing bankruptcy

LINCOLN — An innovative “closed loop” ethanol plant at Mead, Neb., now in debt because of mechanical failures and financial losses, will close while the company seeks to reorganize under bankruptcy protection.

E3 BioFuels LLC and its holding company filed bankruptcy papers Friday in Kansas City, Kan., seeking protection from creditors who have not been paid while the plant struggled with start-up problems.

“It’s a temporary shutdown,” said E3 spokesman R. J. Wilson. “With the mechanical failures hampering us, it has made it difficult to be profitable.”

During the plant’s grand opening in June, it was hailed as a model for improving the environment and for fighting global warming.

This is exactly, EXACTLY why I caution against getting carried away with projections. This is exactly what I have been so critical of Vinod Khosla about. Projections don’t always come true. I can guarantee you that Khosla’s vision of 200 billion gallons of ethanol by 2030 isn’t going to happen. But he is testifying to congress that it can happen, and that is influencing our energy policies in the wrong direction.

I had high hopes for E3 Biofuels, but I was pretty frank when people wrote and asked the question of why more ethanol plants didn’t go the E3 route. Simple. It makes the plant more complex and more expensive, and it wasn’t a proven technology. And it still isn’t.