Coskata: Dead Man Walking
Since the Coskata announcement that they were going to be able to produce ethanol for “under US $1.00 a gallon anywhere in the world” – documented here – I have gotten a number of requests for comments on the technology. After all, GM is on board! GM can’t be wrong, can they? Vinod Khosla’s enthusiasm couldn’t be misplaced either, could it? After crunching the numbers, my conclusion is that not only is this not the ‘slam dunk’ that is being projected, you probably have a better chance of hitting a blindfolded shot from mid-court than Coskata has of producing cost-competitive ethanol.
What leads me to this conclusion? Earlier today I provided some extensive analysis for someone, so I thought I would share it. I am naturally skeptical any time a company comes on the scene and claims – with no operating experience – they can do what Coskata claims (which is also something nobody else has been able to demonstrate). But I also believe in analyzing claims to the greatest extent possible to see if there is anything there. Sometimes this analysis involves reading through patents. Sometimes it involves crunching publicly available information. That’s what I will do in this case.
The source of the numbers is the following article, but is also available elsewhere:
There are several pieces of data that are important to note:
Earlier this month, the company told Greentech Media that it already had begun building the 40,000-gallon-per-year plant…
Coskata said the project will cost $25 million, and will be located at the site of a pilot-plant gasifier owned and operated by Westinghouse Plasma Corp., a wholly owned subsidiary of Alter Nrg Corp.
They are building a 40,000 gallon per year pilot plant, which is about 2.6 barrels of ethanol a day. (The fact that they don’t even have an operating pilot plant should tell even the most optimistic supporter that they have little basis for their claims of producing ethanol for less than $1/gal).
Note that the site already has a gasifier, which is one of the most expensive pieces of kit in a gasification plant. Yet the cost is still $25 million – for something that will produce less than 3 barrels a day. Now, take a good look at the graphic below:
Source: EIA Annual Energy Outlook 2006
Note that the capital costs for a corn ethanol plant are around $25,000 per daily barrel of production. (Caveats are that the graphic is for full-sized plants, and the numbers are a couple of years old). How does this compare to the Coskata announcement? If we look at the 2.6 barrels a day they are planning to produce – and the $25 million price tag – we find that the capital cost per daily barrel is $9.6 million per daily barrel. That is almost 400 times the cost of a corn ethanol plant, and 150 times the per daily barrel cost of a recently announced Neste biodiesel plant.
Of course this is pilot scale, but the capital costs would have to go down by a factor of 100 before they could even start to get competitive – and remember they haven’t even charged the gasifier to the project! To put this all into perspective ConocoPhillips built a 400 barrel per day GTL pilot plant (Coskata is also GTL, but the “L” is going to be ethanol instead of diesel) for $75 million. The cost of that facility was $188,000 per daily barrel – and those economics weren’t good enough to justify scaling up to commercial size.
One final thing I would point out is that the selectivity of these processes generally favors methanol over ethanol. They may be able to push the selectivity toward ethanol, but they will almost certainly end up producing mixed alcohols that will have to undergo purification to ethanol.
The technology will either need a drastic redirection or this is a dead end. Even with a drastic redirection, the present cost that is two orders of magnitude too high to be competitive says that over-hyped Coskata is quite a long-shot to make it to commercial production. Of course with large enough subsidies almost anything is possible.
My prediction? I predict that Coskata’s suggestions that they will produce ethanol for less than $1/gal will look ridiculous in hindsight. The next few years will see a record amount of back-pedaling from most of the companies trying to establish a foothold in this space – and overpromising on their technology to do so. There will be the normal litany of excuses – such as ‘the oil companies are suppressing the technology’ – but in the end the chemistry, physics, and most importantly the capital costs and logistical challenges will catch up with them. Yes, excuses will be made, but those who know a little about the technology will know what really happened. It’s going to be TDP all over again.
- For those who want an inside edge in the energy sector.
- Written by veteran energy analysts and insiders with a track record of accurately predicting trends.
- 100% FREE!
- And Much More...
2014 EIA Energy Conference
July 14-15, 2014 - Washington, D.C.
Platts 4th Annual NGLs Conference
Sep. 29 - Oct. 1, 2014 - Houston, TX