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By Robert Rapier on Nov 11, 2008 with no responses

Xethanol Now Defunct

This will be my last ever story on Xethanol. I have written a number of stories on them in the past. I wrote that their claims that they would be the first to produce commercial cellulosic ethanol were ludicrous. That was the gist of the interview I gave to Sharesleuth when they were writing their Xethanol exposé. I predicted that Xethanol would “offer up a litany of excuses and delaying tactics for why their cellulosic ethanol plant is not up and running.” I explained to several reporters that the technology agreements they touted to investors could be had for next to nothing, and in February of 2007 I predicted that Xethanol would eventually go bankrupt. I was sounding these warnings when the share price was $12. It eventually fell to well under $1.

You know where this is going, don’t you? I had failed to check in on Xethanol for a while, but today I did a search for the stock symbol, and got this: “No quote found for that symbol.” Hmm. So I searched Google News, and found this:

Xethanol changes name, energy focus

The self-proclaimed discredited cellulosic ethanol company Xethanol Corp. relaunched itself on Aug. 28 on the New York Stock Exchange as Global Energy Holdings Group Inc. and is ushering in what company executives hope will be new life for the company.

“We’re moving on from ethanol and the reason is – the business model doesn’t work,” Ames said. “With the price of corn and energy…we’ve lost a lot of money doing that. We’ve spent a lot of money in cellulosic research and nothing out there is really fruitful and will make a major economic impact on producing ethanol.”

And in another article, former Xethanol CEO David Ames made a very profound statement:

Ames is skeptical that cellulosic will change the U.S. energy system. He said difficulties associated with making the fuel will not be eased by making it in bigger batches.

You can scale widgets, but you can’t scale chemistry,” he said.

This is exactly what I keep trying to tell people who insist that cellulosic ethanol is going to proceed along a Moore’s Law path and scale up to displace significant quantities of gasoline. It’s not going to happen. The chemistry and physics are working against you.

I truly feel bad for Xethanol investors, but this is what can happen with overhyped technology. The investor who is out of their field of expertise can’t easily distinguish an overhyped company from a company with true potential. But that’s one reason I write this blog: To sniff out and expose the hypesters, while promoting the diamonds in the rough.

On a more positive note, their new direction (into methane) is a much more promising field. Biomass can be fermented to methane at a fraction of the expense and complexity that it takes to make cellulosic ethanol. This doesn’t mean they will be a commercial success, but their odds have gone from one in a million to one in a hundred.