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By Robert Rapier on Sep 11, 2013 with 23 responses

What Happened to Advanced Biofuels? Let Me Explain

Ask and Ye Shall Receive

Last week, The Economist posed the following question: “What happened to biofuels?” The biofuels in question are so-called second generation biofuels that are produced from trees, grasses, algae, — in general, feedstocks that don’t also have a use as food. The appeal is obvious to anyone concerned about the world’s dependence on petroleum, and further worried that a major shift to biofuels will cause food prices to rise. So let’s address that question.

Entrepreneurs Revive a Century-Old Idea

About a decade ago, a number of entrepreneurs began to use their political influence to convince the US government that the only things keeping the US from running our cars on advanced biofuels was lack of government support, and interference from oil companies. These advocates eventually won over enough political support that state and federal governments began to funnel large amounts of taxpayer dollars into advanced biofuel ventures. President Bush spoke of running cars on switchgrass in his 2006 State of the Union address.

The federal government sought to deal with supposed oil company intransigence with a mandate requiring gasoline blends to contain growing volumes of corn ethanol initially, but starting in 2010 advanced biofuels as well. The federal government mandated that by the year 2022 the fuel supply had to use 36 billion gallons of biofuels, with 21 billion gallons coming from advanced biofuels.

But the history of cellulosic fuels goes back much further than many of those entrepreneurs realized, and many set out to reinvent the wheel with tax dollars. It was nearly 200 years ago, in 1819, when French chemist Henri Braconnot discovered how to break cellulose down into component sugars, which can then be fermented to ethanol. The Germans first commercialized cellulosic ethanol production from wood in 1898, and the first commercial cellulosic ethanol plant in the US was built in 1910 to convert lumber mill waste into ethanol. Nevertheless, many budding biofuel entrepreneurs insisted that this was a field in its infancy, and therefore required generous government support until it could stand on its own.

Some attempted to produce fuel from wood via a different route. Wood (or natural gas or coal) can be partially burned to produce synthesis gas (syngas), which consists of hydrogen and carbon monoxide. That syngas can be converted into diesel (among other fuels) using the same process that Germany used to produce fuel in World War II. The problem is that this is a terribly expensive process, and so there are only a handful of commercial plants around the world that use either natural gas or coal (South Africa, which had its roots in their inability to secure petroleum because of sanctions resulting from their apartheid policies).

We do have a small trickle of advanced biofuels that are beginning to collect EPA credits. In other words, for the first time the EPA is officially approving batches of these fuels for sale into the market. This first took place last year with a batch of 20,069 gallons from a company that subsequently went bankrupt. And therein lies the challenge. Of course this stuff can be produced. But can it be produced economically? The answer to that is no, the approaches that have been taken to date are nowhere near that point regardless of the hype to the contrary.

Moore’s Law to the Rescue?

The high costs have never been a deterrent for Silicon Valley entrepreneurs who wielded Moore’s Law as the solution to every problem. In their minds, the advanced biofuel industry would mimic the process by which computer chips continually became faster and cheaper over time. But advanced biofuels amounted to a fundamentally different industrial process that was already over 100 years old. A decade into this experiment it is clear that Moore’s Law isn’t solving the cost problem.

In an interview with Wired Magazine in 2006 called My Big Bet on Biofuels, Vinod Khosla, one of the co-founders and the first CEO of Sun Microsystems,  described his investment in Kergy (which later became Range Fuels). He wrote that to his knowledge, they had invented “the first anaerobic thermal conversion machine.” In fact at that time there were hundreds if not thousands of these gasifiers around the world, mostly used to produce power (a much lower cost proposition than biofuel production).

My experience touches on all of these areas: biomass conversion, gasification, and production of liquid fuels — and I wrote a number of articles critical of the claims coming from the Range Fuels/Khosla camp. Some referred to me as “Range Fuels’ Number 1 Critic.” But the mainstream press couldn’t say enough great things about the company, right up until they declared bankruptcy in 2011. Hundreds of millions of dollars of taxpayer and investor dollars had been wasted, and the company never produced a drop of qualifying renewable fuel.

Now some might say that failure is just a part of doing business and trying new things. That’s true, and I would never have criticized these companies and their promoters except they were influencing energy policy on the basis of inflated claims and collecting tax dollars as a result. If entrepreneurs try and fail on their own dime, then that’s their business. (I work for an energy entrepreneur). But if they take tax dollars, it’s my business as a taxpayer. And if they take investment dollars, it may become my business if I am advising investors.

Epic Analyst Fail

In fact I did give a fair bit of investment advice as some of the advanced biofuel firms began to take their companies public. Amyris (NSDQ: AMRS), Gevo (NSDQ: GEVO), and KiOR (NSDQ: KIOR) were three Vinod Khosla-backed companies that went public, and the value of his stakes has reportedly declined more than a billion dollars since (nearly a billion dollars at the time of that article, but the shares of all those companies continued to decline). I have been asked by investors about the prospects for each of these three companies (among others) since their IPOs, and every time I warned people away. That has proven to be good advice, because since their respective IPOs Amyris is down 85 percent, Gevo has fallen 89 percent, and KiOR is down 88 percent.

Yet one analyst after another recommended these firms to clients, and then continued to reiterate those recommendations. Take KiOR, for example. KiOR uses a process in which they rapidly heat up wood chips to form a bio-oil, which can then be upgraded with hydrogen in pretty standard refining equipment to produce diesel and gasoline. KiOR has their own spin on the process, but the basic process has been around for a long time. The problem has always been cost.

After the IPO, the market promptly bid KiOR’s value up to $2 billion. In response, I wrote an article arguing that KiOR was grossly overvalued. (I explained my decision not to short the company even though I felt they were grossly overvalued, but some investors contacted me to tell me they did short the company on the basis of my recommendations).

But analysts remained undeterred. After KiOR announced a net loss of $31.3 million for the first quarter of this year, several analysts reiterated ratings of “Overweight” or “Outperform” on the company. For instance, Pavel Molchanov from Raymond James reiterated the “Outperform” rating that he first made on August 15, 2011 when shares were at $11. When second quarter results came in far below projections, Molchanov reiterated the Outperform rating and $9 price target. Shares are now down under $2, a drop of more than 50 percent just since the Q2 results were released.

The point here is that this was totally predictable from the chemistry and low energy density of biomass, and of the science involved in trying to economically turn that into a low margin commodity like fuel. There is no magic catalyst or magic process that can overcome that. No matter how I sliced the numbers, I couldn’t see how any of these biomass to fuel companies were going to make any money other than through government largesse. (I am not saying that no scheme will ever work economically, but many in these space don’t understand the challenges and thus they fail by over-promising and under-delivering). So I advised investors to stay away, even as the analysts continued to believe the hype that many of these companies put out.

No Funeral Just Yet

KiOR isn’t dead yet though. In fact, I talked to a reporter on Monday, and advised that they would probably bounce off the bottom soon. There is probably one or two cycles of more positive news ahead, and they may very well get additional injections of cash from Mr. Khosla. As if on queue, shares were up 25% in trading on Tuesday. But even though the share price may see sharp gains at times, the road ahead will be very challenging for them, and the risk of bankruptcy is high in the long-term. So I would continue to avoid most companies in this space, unless you simply want to put some money down in lieu of a trip to Vegas.

I don’t feel the same way about the entire renewable energy space. Solar photovoltaic (PV) panels, for instance, benefit from Moore’s Law effects, but their manufacture is very different than the production of biofuels from biomass. And in fact, we are seeing not only exponential growth in the installation of solar PV panels, we see costs dropping exponentially. I have been reiterating my view for more than six years that I think the future belongs to solar power. The mistake from biofuel entrepreneurs, politicians, and investors in that space was that this is how things would play out for biofuels.

Link to Original Article: What Happened to Advanced Biofuels? Let Me Explain

By Robert Rapier. You can find me on TwitterLinkedIn, or Facebook.

  1. By MarcusHart on September 11, 2013 at 4:39 pm

    Do you see any possible way that biofuels can compete with petroleum/fossil fuels? Or are they at a permanent physical disadvantage to petroleum/fossil fuels?

    • By Robert Rapier on September 11, 2013 at 4:58 pm

      No, but it’s going to require higher petroleum prices and biofuel options with low petroleum inputs. If the embedded petroleum inputs are too high, then rising petroleum costs won’t necessarily help with competitiveness.

  2. By Shiggity on September 11, 2013 at 5:56 pm

    Biofuels were looking good until Tesla Motors came around. I know this just sounds like fanboism, but liquid fuels just can’t compete against electricity in the transportation sector, you’d need a biofuel that was 10-20$ a barrel.

    EVEN IF you could make biofuels that cheaply, there are more expensive products you can make from the processes than simply gasoline. They can do high end pharmecudical things, high end biotech, etc.

    Then natural gas is running into the same problems as ethanol. When you use a food input to produce fuels bad things happen to the marketplaces. When you trade potable water (fracking) for natural gas, you run into the exact same problem. You’re trading a vital input for another.

  3. By Tom G. on September 11, 2013 at 6:15 pm

    Solar panels are currently about 13-22% efficient and cost about $.50 -.90/watt depending on the type, manufacturer and of course quantity. When solar panels become 30-35% efficient and their costs drop to about $.35/watt; it will be game over for many of the older technologies we currently depend on. I fully agree with Roberts above statement; “I think the future belongs to solar power”.

    It’s going to be really difficult in the near future to justify the continued use of fossil fuels with their associated waste products and fuel expense for things like electricity generation. Solar with its free fuel is going to be really hard to beat when the capital cost and efficiencies are about the same.

    Solar will be just one of many other new technologies we will use going forward.

    • By ttman on September 15, 2013 at 12:31 am

      We’d better get a move on in electrifying our trains network and finding an efficient way to store large quantities of electricity. Otherwise, our solar powered future will have some serious flaws and we will be at a much lower standard of living – with more people than ever.

  4. By Bob on September 11, 2013 at 8:20 pm

    Robert, I thought you were working on some kind of biomass project. Did I misunderstand? Or am I missing something in the whole picture?

    • By Robert Rapier on September 11, 2013 at 8:26 pm

      Bob, there are lots of ways to utilize biomass that don’t involve trying to break it down and reform it into liquid fuel. Yes, I am involved a few things with biomass; mostly to produce power.

  5. By ben on September 11, 2013 at 9:45 pm

    As Ronald Reagan famously quipped in his ’84 presidential debate with Walter Mondale, “Now there you go again….” In this instance, there you go again,
    offering up another inconvenient truth. This article is so on point that I dare say
    that I wish I’d written it.
    Regrettably, there are no silver bullets in the biofuels business—unless, of course, a DOE or USDA grant/loan guarantee is your ammunition of choice supplied courtesy of Washington lobbyists and savvy PAC contributions. Alas, physics poses some difficult constraints and those vexing personalities with their chemical engineering degrees continue to agitate where so many others are quite anxious to go along to get along (and possibly get in on a little of the action). Hey, it’s human nature. And such an impulse is precisely what the Corn Belt politicians and Farm Lobby collaborators have relied upon for more than two decades; if there is anything in Robert’s overview with which I might offer only minor clarification, it is on this point that federal promotion of biofuels began (quite half-heatedly and temporarily) in the Reagan years with the Synfuels Corporation and continued in earnest during the Bush 41 administration with the passage of the Clean Air Act Amendments of 1990.
    The history here is fascinating and only eclipsed by the behind-the-scene politicking that would essentially pit Detroit (engines/tailpipes) and Houston (oil/transport fuels) in what they viewed as a zero-sum game where the taxpayer would ultimately be left without a chair when the music stopped playing. Someday, the whole, self-serving story will be told. Who knows, maybe it has the makings of R-Squared editor’s next book:)

    • By ttman on September 15, 2013 at 12:29 am

      If he said it in 1984 with Mondale, he first famously said it in a 1980 debate with Jimmy Carter. And a shame to quote the guy who took the solar panels off the White House in a discussion of energy.

  6. By Matt Wulfers on September 12, 2013 at 8:16 am

    The main thing biofuel has going for it is the existing transportation fuel infrastructure. Also, the energy density beats batteries or fuel cells by orders of magnitude. Making gasoline or diesel from biomass is certainly a great technical challenge, but there is room for improvement with game changing science (yes people have known about hydrolysis of cellulose for ages, but they have not been trying to turn it into transportation fuel until relatively recently). I agree that the technology is not good enough in the present day to compete with traditional petroleum (sell, sell, sell!!!) but I have my eye on the space for future investment opportunities, maybe 5-15 years down the road.

  7. By ben on September 12, 2013 at 11:27 am

    Matt writes
    “…… but they have not been trying to turn it into transportation fuel until recently.” Huh?
    The Germans relied upon FT applications in WWII and South Africans had it in commercial production well ahead of it’s own troubling era of international economic sanctions. Why, we even used it in fits and starts here in the US during the early 20th Century. Hmm, maybe folks should read a bot more on the subject. There’s a decent primer out there written by that Rapier fellow:)
    I’m not into biofuels bashing. I love alcohol. Hell, I’ll even drink the stuff! I just happen to believe that highest and best use for grains is as foodstuffs and much other fiber has other (more) beneficial applications. I do, however, promote energy from waste where the waste isn’t more wisely redirected to other commercial uses; waste as process energy (cogen or trigen) is a favorite and where we have an awful lot of room for improvement. Microturbines powered by gas (to include biogas) are a valuable piece of the efficiency/conservation equation and a place where technical progress points to more aggressive applications in the days ahead (and here I tip the optimist cap
    to R-Squared’s upbeat energy observer, Mr. Benjamin Cole:).

  8. By takchess on September 12, 2013 at 11:59 am
  9. By Benjamin Cole on September 14, 2013 at 8:45 am

    Great blogging and lots of good comments too, and thanks to Ben for noticing my optimism.

    Yes, in general biofuels for use in transportation is a bad idea; and now there is cheap CNG and LPG (LPG stations are common in Thailand btw). It seems like higher mpgs, natural gas powered vehicles and PHEVs make more sense. BMW is introducing a fancy car that will get 90 mpg (rated; it is PHEV). Every PHEV in America does more for our national security than an F22 fighter jet.

    That said, yields continue to rise in fuel crops, about 2 percent a year for corn ethanol and 4 percent a year for palm oil. I don’t know sugar. At some point they become competitive. Whether it is moral to grow fuel is another question….palm oil already makes money at $100 a barrel as a fuel, so biofuels can compete—the question is, should they?

    I still think an all-PHEV fleet powered by pure ethanol (in high compression motors) is an interesting option. The fuel demand would be so small, that perhaps it could be met without any fossil fuels. This option would make sense if global warming became an obvious crisis….

    The real point is, by switching transportation to natural gas or batteries or much higher mpgs there is no end of the world—we actually get higher living standards and cleaner air. With even mediocre government, this is the future….

    I would not mind urban areas in which ICEs were banned. I recognize no right to pollute the air other people breath. Imagine a city with clean air, and relatively quiet streets.

  10. By ben on September 14, 2013 at 9:42 pm

    Ben Cole writes:
    “Palm oil already makes money at $199 a barrel….” Perhaps, but what happens when the competing fuels dips to $75/bbl? The issue, as Rapier rightfully puts it, is one of “sustainability” not of merely reaching momentary benchmarks. Investor requirements for risk-mitigation and viable ROI goals are predicated on weathering the ebb and flow of business cycles. Absent significant subsidies in the form of capita/ or operating grants and/or loan guarantees, biofuels have fallen short of meeting such an objective. This is not to bead-mouth renewable fuels, but simply to point out that they have yet to prove an open-ended commercial efficacy. Perhaps they will eventually prove viable. My inner compass tells me that other fueling options will emerge, to include those cited by our friend the Optimist.
    Rapier is too kind a gentleman to eviscerate the folks who continue to promote options contrary to overarching national interests under the cover of “job creation” at any cost.
    Fortunately, America’s fiscal constraints are putting the brakes on “don’t ask, don’t tell”
    federal spending programs that offer too little bang for the buck. A sequestration-level funding baseline is here to stay, so the bioenergy industry must rely on the merits of sound financial models to maintain a toehold in an emergent clean energy marketplace. The competition for limited investment dollars will be no less stringent in the years just ahead with increasingly burdensome R&D/ production costs of energy demanding sharp-pencil calculations on where best to obligate the capital (including that of the Treasury) to promote greater energy security.
    So, there is no readily apparent “end of the world” in sight. There is, however, the specter of diminishing returns on the next barrel of fossil fuels discovered/produced and that portends a great deal of creative destruction in the energy marketplace. It is during such periods of transition that great fortunes are made even as a few oxen are gored (or is that sacred cows slaughtered?:), the markets demand solutions that actually aim to solve humanity’s problems (not simply play a game of musical chairs with hope of grabbing some of the loot before the tune stops playing).
    As for ICE-free zones, I guess I might pose a practical question as to where the urban air that we breath actually ends and where the suburban/rural oxygen begins. Cross-jurisdictional enforcement has always proven a bit of the rub:).
    Thanks for tolerating my pesky disposition.

  11. By MrEnergyCzar on September 14, 2013 at 11:07 pm

    EROEI is a big factor… nothing replaces cheap, easy to get, conventional oil, which hit it’s peak production back in 2006….


  12. By Forrest on September 15, 2013 at 10:45 am

    Second generation ethanol is off to slow start per government
    schedule dictates. Investment revenue per the continuing six year great
    recession has played havoc with such. The technology for cost effective
    processing still within pilot stage of production, but some good news. One company very busy upon converting generation one ethanol plants with gen II process capabilities. This is a very cost effective bolt on process for cellulosic process of corn kernel that fits nicely within typical corn starch process. Payback is less than a year with the premium value of this ethanol. Also, a benefit, much more corn oil produced and nutrition value of DDG is improved though output diminished. These ethanol plants produce so much corn oil for biodiesel that another company is busy with small inplant processing equipment for converting low value corn oil to high value commercial grade biodiesel. Poet company is finishing up production plant ’14 for cellulosic processing of corn stover. The Ag colleges studies have concluded 25% reduction of stover best conditions for field growth. Corn cobs alone can produce 1 billion gallons ethanol. Poet is owned by the farm community and is famous for success per their bottom up approach to investment. So much of cost is supply management of bulky feed stock. They have been working on strategies for some years, evaluating production costs and have figured out a competitive arrangement with farmers. Capital costs improve as they cogen with current gen I corn process plants. Also, the arrangement will allow improved transition time for their plants and they plan on selling technology to other ethanol plants. There is a synergy within the two sharing equipment and water. The cellulose byproduct, lignin, has more btu energy per pound that coal and utilized within the processing for heat requirements making the plant almost self sufficient (no NG most of time). Also, the byproduct can be used for electrical generation per steam turbine cycle. This combined processing
    will push ethanol fuel up the chain when evaluating carbon footprint.

    Waste stock ethanol is steadily climbing production. Easy Energy Systems is one such company that sells internationally. Its low production and custom engineering per the feed stock requirements. But, a total win per decreasing waste problems and selling a valuable commodity.

    Algae chemical production is still garnering much interest and support, but no production facilities that I know of. The gasification processes continue to develop and I believe some commercial production on line. Michigan has one of the early wood to ethanol processes that is on and off with production.

    What the benefit of ethanol? Much and many! First fuel to bump heads with petro and win. You see petrol has all the legacy benefits of infrastructure, depreciated equipment, and mature technology. Meaning it’s a long standing commodity that we are all aware of shortcomings and have work arounds. We know what to expect. Ethanol is different and should not be compared to gasoline as a straight up replacement. Both have strengths and weakness. Ethanol has less btu per gallon, but fuel characteristic needed by efficient engines. Ethanol can react with some metals and plastics to weaken or corrode, but overall has less chemical activity when compared to gasoline. We just know gas and have worked the problems out. Gasoline is a complex hydrocarbon with varying makeup, some 150 or more molecules some of which are carcinogens. Health studies publish the death rate per this pollution stream. The aromatics the worse offenders. Ethanol is a simple pure food grade molecule that emits simple pollution stream. This should be much easier to control waste. Ethanol is the cheapest octane booster known for gasoline. Over all cost savings to consumer for E10 gas have reached 50 cents per gallon. You see ethanol allows use of low grade gasoline. The higher distillates much harder to sell or sell at low cost per supply economics. Also,the octane booster (ethanol) instead of being more expensive than gas is cheaper by a good margin. E15 is projected to save customers an additional 10 to 15 cents per gallon. Ethanol acts a detergent upon fuel system. Combustion chamber, spark plugs, and engine oil stay cleaner per less hydrocarbon buildup. Ethanol dries up gas and this is a good thing. Before E10 engines suffered from moisture. Remember of stalled engines from winter moisture and cans of “heat”.

    Ethanol takes more work to produce and my guess produces more Americian jobs per gallon of fuel. Jobs produced by small domestic businesses. Engine technology has hardly started to exploit the fuel per efficiency. All engines designed to petrol specs, but pick up some efficiency with ethanol. Only race engines developed to fully exploit ethanol, but do so solely for power. No commercial engine fully exploits ethanol for the high torque, high compression efficiencies. The few custom engines experimental appear to pull even with mpg of gasoline engines. Ethanol does support the diesel cycle which in itself would put mileage on par with gasoline. Ethanol engines probably
    would receive lower gear ratio’s per the torque advantage. Meaning less rpm required for same speed. Engines could be smaller as the fuel carries liquid oxygen.

    Finally, I don’t buy the food or fuel myth. Internally, farming is more prosperous since biofuel. Result more farms, better farming practices and equipment. For example U.S.
    cheap subsidized corn is not putting Mexican farmers out of the business. Subsidies
    for farmers per tax dollar greatly diminished or gone.

  13. By ben on September 15, 2013 at 4:36 pm

    Is that the faint din of a funeral dirge I hear on the horizon? Who would have thought Wall Street operators would have a hand in speculation that might do injury to the purity of American commerce? And to think, injury to agribusiness at that! Why, whatever happened to safeguarding the sacred character and interests of our grain farmers out in America’s heartland? Hmm, guess the boomerang of unintended consequences from Washington’s policy prescriptions (politics) raises its ugly head once again!
    Folks like Forrest would do well to put away the pom-poms for the moment and take a long, hard look at what has happened to the Clean Fuels industry over the past few years. It is, at once, a well-entrenched special interest lobbying to maintain a place at the cashier’s window over at Treasury and, yet, a marginal player in the broader energy marketplace enduring a major bout of buyer’s remorse. The time of wishful thinking is over. Fiscal realities in Washington and state houses around the nation point to a new phase for renewable energy (of which I’m an unapologetic proponent). The practical disciplines of profitability and EROEI dictate that America’s taxpayer/consumer enjoys a much better bang for the buck instead of vague, wink and grin representations of those fleeting “jobs” for local communities.
    Of course we all seek greater energy security for America. I’m just not convinced that we are on a path to achieve that via endless rounds of research grants and open-ended mandates out of Uncle Sam’s alphabet soup of federal agencies. Regrettably, even the preternatural souls over at the pentagon jumped on the gravy-train along the way as legislative liaison officers for the service secretaries, JCS and the service chiefs reported on a bipartisan coalition supporting subsidies for homegrown energy sources. DOD, facing the immense burden of higher energy costs and mission creep against the backdrop of budget constraints took note of the Siren’s call to the gunwales. All of this took shape against the backdrop of an implosion of the capital markets and the US/global economy thanks to the same genre of folks we now find speculating on RINs–or anything else they might dig up for a quick buck.
    Times are a changing and any cheerleaders out there need to think long and hard before they hoist the pom-poms to sing their favorite biofuel alma mater’s song. Rather, an understated black suit and polished shoes might be more apt attire
    for the days ahead.
    Hey, as Mr. Cole will attest, I’m one of the quasi-optimists:)

  14. By Forrest on September 16, 2013 at 9:19 am

    Advanced biofuels have not lived up to the earlier hype. Way to much optimism published per the quick calculations propaganda from those who would most benefit from easy government money. Is the technology viable? Appears to date affirmative. My take on the energy sector is positive. We have a habit in U.S. of throwing money at problems and expecting quick results. Problem is the science, technology, R&D, expertise and methods need to develop and improve, this takes time. This new technology is a step by step process. Typical of new disruptive technologies. I don’t believe any one process is wholly going to dominate. I think it will be the process that over time proves it’s economic value. It is valuable to nation to keep afloat the technology to enable the fruiting of best solution. It is good that companies do not attempt to rush production cycle with less than optimal process and quickly fail with conventional wisdom reaching unfair conclusions. Overall the benefit to economy could be very positive. The processes will only get better and more cost effective. Wood, grass, and crop residue the primary supply stocks. Michigan State University is working on economics of pelletizing grass for easier shipping and storage. The pellets utilized for ethanol or pellet stoves. The pellets greatly reduce bulk, are more dense, and easier to transport/load unload.

    Sugar beets production is increasing and also need time to fully develop cost improvements, but already competitive. Sugar beet processors, also gain from cogen of cellulosic process. The public does not fully understand the advantage petro has per a long history of technological improvements. Very difficult to compete with long established business.

    Even though we have the benefit of increased gas and oil reserves, we should not abandon advance biofuels. We lead upon this technology and need to continue to foster growth. Overall the cost is minimal. Corn ethanol has proven economic value and will pull advanced biofuels along. We enjoy more stable energy prices by having alternatives. Petro companies have become infamous per their history of letting supply shortages happen with ensuing price gouging. Politics and regulations have jerked them around so much, I think they gave up trying. Ethanol while only 14 billion gallons have worked to dampen market swings. Since gas supply is tight small disruptions will influence sale price greatly. Ethanol has totally independent production stream and works as counter weight to petro market swings. We can only guess on the savings. Also, it would be great if the world energy needs were not hostage so much to oil. It would be great if we could take some of these middle east countries down without inflicting so much economic cost. The U.S. is spending mega bucks to ensure international free flow of oil. We could save much money and lives if the oil wasn’t the only source of transportation fuel. What is that worth? We can only guess. How about the benefit of poor countries getting a economic lift per biofuel? This could be a very positive effect as well.

  15. By Dave Swenson on September 23, 2013 at 12:38 pm

    As usual, a first rate summary. There are two comparatively large operations scheduled to come on line in Iowa in 2014. One owned by Poet and another venture by DuPont. Both are under construction, and both have field tested corn stover collection technologies and logistics. Each will produce 30MGY, but as I understand it, the $1.01 per gallon U.S. tax credit they could be eligible for expires at the end of 2013, as also do very beneficial depreciation allowances for the newly constructed outfits. So, the question truly remains as to whether either can be profitable in either the short run or the long run without extra-ordinary government help.

    And as we’ve seen to date: time will tell. So far time has said, no!

  16. By Alistair Connor on October 15, 2013 at 8:37 am

    Hi Robert. I wondered if you had any comment about the Beta Renewables plant in northern Italy?
    Their claim, industrial production of “advanced biofuel at a cost-competitive price relative to conventional biofuels”, is actually fairly modest when you think about it… but does it hold water?

    • By Tom G. on October 15, 2013 at 9:19 am

      And also this announcement from Coolplanet and their carbon negative process. Looks like the building of 3 production plants is going forward.

    • By Robert Rapier on October 15, 2013 at 5:13 pm

      They are probably being generous with the phrase “cost-competitive.” It’s cellulosic ethanol, so unless they have a deal that gives them generous tipping fees then they are substantially higher on cost than something like corn ethanol. The energy balance is probably not good too, as cellulosic is generally produced as a very dilute solution. That will require lots of distillation energy.

  17. By Curtis on November 12, 2013 at 1:49 am

    Robert. I live thirty minutes from the defunct Range Fuels, now Freedom Pines owned by yet another Khosla investment, LanzaTech.

    It is good to learn that the LanzaTech purchase, bought at auction on the Soperton, GA Court House steps at a cost of $5 mil was once described as “… the first anaerobic thermal conversion machine.”

    Let the record show:

    1. The thermal impact on $25 million GA tax dollars was total. Burned right through them.

    2. Sarcasm abounds. Some keep hoping something can be worked out with Jack Daniels of Old No. 7 fame so the still could be put to good use.

    3. While we wait for LanzaTech CEO Dr. Jennifer Holmgren to make good on her version of the 100 job promise, we will just watch the turkey, dove and pigeons enjoy one of the most expensive bird roosts ever built.

    P.S. Don’t look now, but it does appear that Mr. Khosla is building himself his own private sunset industry.

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