Achieving these goals will not be easy. Several technologies to produce cellulosic ethanol, proven in small-scale facilities, are moving toward commercial production. But challenges remain in scaling the technologies, reducing production costs and financing large-volume plants.
To spur commercial development, the U.S. Department of Energy (DOE) announced grants of $385 million for six commercial-scale cellulosic ethanol biorefineries in February 2007. Chesterfield, Missouri-based Abengoa Bioenergy and Range Fuels in Broomfield, Colorado, were each awarded $76 million, BlueFire Ethanol in Irvine, California received $40 million and Sioux Falls, South Dakota-based Poet was granted $80 million. These companies expect to complete commercial-scale facilities between 2009 and 2011. The two remaining firms, Alico, in La Belle, Florida, and Iogen in
Ontario, Canada, awarded $33 million and $80 million respectively, have dropped out of the program (see sidebar).
The grants were awarded under Section 932 of the Energy Policy Act of 2005, which authorized DOE to fund commercial demonstration of advanced biorefineries that use cellulosic feedstock to coproduce ethanol, bioproducts, heat and power. Awards were capped at 40 percent of the total project cost, up to a maximum of $80 million.
By investing in these facilities, DOE is sharing the risk of financing first-of-a-kind technology and providing crucial funding at a difficult stage in the development process. “DOE funding helps raise additional money and financing for the project by reducing the project risk through the upfront engineering investment and as a form of commitment from the U.S. government for the project,” explains Chris Roach, Project Development Manager for Abengoa Bioenergy.
Christopher Scott, CFO of BlueFire Ethanol, believes that without DOE funding, projects like these might not get built. “There is a funding gap between VC (venture capital) and expansion capital. With this commercial biorefinery program, DOE has helped bridge the financing gap.”
Funding from DOE also has helped to “substantiate the company and our technology,” says Mitch Mandich, Range Fuels' CEO. “The money is advantageous for investors, because their funds go that much further.”
When selecting companies for the program, DOE sought diverse technologies using a broad array of feedstocks scattered across different regions of the country. Grants were allocated to three distinct cellulosic technologies: gasification, enzymatic hydrolysis and acid hydrolysis. Feedstocks include agricultural residues, wood waste from forestry operations, green waste, and eventually energy crops, such as switchgrass.
GASIFICATION: RANGE FUELS
Range Fuels started construction of a 40-mgpy cellulosic ethanol plant near Soperton, Georgia in November 2007. The plant will employ a gasification process to produce syngas, a combination of carbon monoxide and hydrogen, using wood waste from surrounding forests and mills. A proprietary catalytic process converts the syngas to alcohols, which are separated and further processed to maximize ethanol production.
A modular system design permits Range Fuels to grow the plant incrementally. “Initially the plant will produce slightly under 10-mgpy of ethanol from the first unit,” Mandich says. “Three additional units are planned, bringing total production up to 40-mgpy of ethanol and 9-mgpy of methanol.” Completion of the first unit is slated for late 2009, with production starting early 2010.
Gasification processes typically produce syngas by reacting carbon-based materials at high temperatures with steam and small amounts of oxygen. By-products of the process include tars, slag and other unwanted substances. Range Fuels' system does not use oxygen. Instead, the process applies heat and pressure to the biomass, converting it to a gas, which is then reformed with steam into syngas. “The only by-product from the first stage of this two step process is ash,” Mandich explains.
Very little energy is required to run the system. Initially, natural gas is used to heat the gasification system. Once started, the catalytic stage produces sufficient heat for the gasifier, eliminating natural gas usage and creating a self-sustaining process.
Range Fuels has tested the system extensively at its pilot facility in Colorado. But the final proof of the technology will come from scaling the mechanical and physical hardware along with the process to handle commercial volumes. “You are looking at all aspects, from heat and heat transfer to mass and energy balance across the plant,” Mandich says. “We think the catalyst will give us multiple years of life, but you are not going to know that until you run it in production at full scale.”
To date the majority of the company has been funded with private equity. Obtaining debt for these projects is difficult due to the risk profile, he explains. “Equity companies are willing to take more risk for the potential reward.” Last March the company raised over $100 million in a Series B financing. “We are lucky we did our fundraising in March so we are not out there trying to raise money in this very difficult market,” he adds. Public funding includes the $76 million pledge by the DOE, which will be allocated as the plant reaches specific production volumes, and a $6 million grant from the state of Georgia.
ENZYMATIC HYDROLYSIS: POET AND ABENGOA
Poet and Abengoa Bioenergy will utilize enzymatic hydrolysis and fermentation techniques to produce cellulosic ethanol. The processes employ enzymes to liberate fermentable sugars locked in the complex carbohydrate structures that form the cell walls of plants. Microbes then ferment the sugars into ethanol.
Poet will convert an existing 50-mgpy corn ethanol facility in Emmetsburg, Iowa, into a 125-mgpy biorefinery, which will include a 25-mgpy cellulosic ethanol plant (sSee “Turning Field Residue Into Ethanol Feedstock,” June 2008). The company currently produces over one billion gallons of corn ethanol at 23 plants spread across seven states. The new $200 million facility, called Project Liberty, will produce cellulosic ethanol from 770 bone dry tons of corncobs and corn fiber. Construction is expected to start in early 2010 with completion and commissioning in the second half of 2011.
Colocating the corn and cellulosic ethanol facilities will allow Poet to leverage its relationships with the hundreds of farmers that already provide corn to the plant, says James Sturdevant, Director of Project Liberty. “Those same farmers will provide the cobs as well.” The cellulosic ethanol facility also will take advantage of the existing biorefinery infrastructure, including roads, railroads, utilities and land.
Waste from the cellulose to ethanol process will be used to produce steam in a solid fuel boiler and biogas in an anaerobic digester, generating process heat for the entire biorefinery. “That will significantly reduce our usage of natural gas,” Sturdevant explains.
The company will complete a $9 million pilot-scale cellulosic ethanol plant, adjacent to its 9-mgpy corn ethanol refinery in Scotland, South Dakota in late 2008. The facility will produce 20,000 gallons of cellulosic ethanol from corncobs and fiber. Lessons learned from the development, testing and validating of the technology at the Scotland facility will be applied to the design and engineering of Project Liberty. Testing of the solid fuel biomass boiler is underway at the corn ethanol refinery in Chancellor, Iowa.
Companies awarded Section 932 grants negotiate agreements with DOE, specifying how the funds are dispensed throughout the project. Under the first DOE agreement, Poet received $3.7 million in October 2007 for the preliminary design, permitting and preparation of the National Environmental Policy Act (NEPA) documentation. A second agreement was signed in October 2008 for the remaining $76.3 million to cover the final design and construction. Poet is also receiving $14.75 million in funding from the Iowa Power Fund and a $5.25 million grant from the Iowa Department of Economic Development.
Abengoa Bioenergy also will build a hybrid biorefinery producing corn and cellulosic ethanol. The new facility in Hugoton, Kansas will produce 85-mgpy of corn ethanol and 11.4-mgpy of cellulosic ethanol from 400 dry metric tons of biomass. Total project costs are estimated at $500 million, including $190 million for the cellulosic ethanol plant. Abengoa currently produces 198-mgpy of corn ethanol in the U.S. and 142-mgpy in Europe. The company also operates a cellulosic ethanol pilot facility in York, Nebraska.
Initially, biomass feedstock for the Hugoton plant will include corn stover, wheat straw and milo stubble. The project will work with local farmers to establish energy crops, such as switchgrass, on nonfood producing acres, Chris Roach explains. “The object is to have a sustainable supply of renewable, reliable biomass that is also diverse.”
Colocating the two facilities permits the plants to share infrastructure, such as utilities, logistics and support operations, which results in capital savings through economies of scale. A biomass gasification system producing syngas for thermal energy will reduce fossil fuel usage and greenhouse gas emissions.
Abengoa has received $15 million of its $76 million DOE grant to fund the preliminary design, permitting and environmental review. Roach expects the firm to finalize negotiations for the remaining funds after completing the NEPA review process in late 2009. Construction will begin shortly thereafter, with completion slated for 2011.
ACID HYDROLYSIS: BLUEFIRE ETHANOL
BlueFire is developing a $150 million cellulosic ethanol facility in Riverside County, California. The so called Mecca project will use acid hydrolysis to convert the green waste portion of the MSW stream and green agricultural waste, currently sent to landfills, into 17-mgpy of ethanol. The firm expects to begin construction in late 2009.
Cellulosic biomass is composed of cellulose, hemicellulose and lignin. The first step in BlueFire's process employs concentrated acid hydrolysis to separate the cellulose and hemicellulose from the lignin and then hydrolyze (breakdown) the cellulose to produce simple sugars for fermentation. After hydrolysis, a filtration and pressing process removes the lignin and other insoluble materials from the sugar mixture.
A chromatographic system separates the acid from the sugar. The process concentrates and recycles 98 percent of the sulfuric acid for reuse. The remaining one to two percent of the acid left in the sugar solution is neutralized with lime, creating hydrated gypsum that can be easily separated from the sugar solution. Specially developed cultures of yeasts are then used to ferment the sugar stream into ethanol.
By-products from the process include lignin, which will be burned in solid fuel boilers to satisfy about 70 percent of the plant's thermal needs, a yeast stream that can be sold into the animal feed markets and agricultural grade gypsum. The project's proximity to Los Angeles is advantageous in reducing the cost of transporting feedstock to the plant and moving the ethanol to market. “The whole idea was to find a technology that would minimize, if not mitigate, many of the logistical issues,” Scott says.
California is an ideal market for the technology because of the amount of curbside source separation and primary separation of waste materials. Feedstock used in the process includes green agricultural waste, commercial landscaping green waste, clean woody C&D debris and short paper fibers that can't be recycled.
Prefabricating equipment and modular construction techniques will lower costs and speed building of the plant. Testing equipment at the factory prior to shipping to the site also mitigates risk during construction, Scott explains. “It gives us a lot more certainty.”
BlueFire is finalizing negotiations with DOE for the second phase of its award, geared toward construction, and has started to draw down on the phase one award for the permitting and design stage. Scott believes the DOE grant is making it easier for the company to raise money. The grant solicitation process really put the project through the ringer, applying a high level of scrutiny to the process, the management, the technology and the engineering, he explains. “Now when we talk to people they know our name and they know we are one of the Section 932 awardees.”
But the current credit crisis is complicating financing. “In today's markets you can't leave any stone unturned,” Scott says. The company is talking to people about new and inventive options to bridge the financing gap. “We will continue to move forward with the project and to think outside the box for creative financing options.”