Going from nothing to something is an increase of infinite magnitude, as any mathematician will tell you. Last year, when two of the first major U.S. cellulosic ethanol facilities were turned on, the prospect for a new, low-carbon fuels industry brightened considerably.
Both grand openings were held in Iowa, a state with considerable excess corn stalks, leaves, and cobs to serve as feedstock. In Emmetsburg, a joint venture between corn ethanol producer Poet and Dutch chemical firm DSM opened a 95 million-L-per-year facility to break down and ferment some of that stover. It was followed two months later by DuPont, which opened its 115 million-L plant in the town of Nevada.
But something else that was supposed to happen didn’t. A second wave of facilities was expected to be getting the green light by now. Instead, producers and investors, troubled by reductions in a federal biofuels mandate called the Renewable Fuel Standard (RFS), are questioning domestic demand for fuel made from biomass.
“The current phase is indeed just the start-up. To get the second wave to come on quickly will require a steady regulatory environment and signal from the government that they will implement the RFS,” says Jan Koninckx, business director for biofuels at DuPont.
Under the 2007 Energy Independence & Security Act, the RFS dictated that fuel blenders purchase an enormous amount of cellulosic and other advanced fuels, including ethanol, through the year 2022. But while the first facilities were being built, the Environmental Protection Agency slashed those mandated quantities.
Late last year, EPA lowered the 2016 blending requirement to 870 million L of such fuels from 16 billion L. So far there has been no word of requirements for 2017 and beyond.
Back in Iowa, there is plenty to do in the present. The role of the first facilities hasn’t changed: Operators must prove that the biomass supply chain is reliable, the machinery functions smoothly, and ethanol can be produced consistently and at high yield. Fully commissioning a new type of plant can easily take a year. Indeed, five months on, the DuPont facility is still not producing ethanol.
And things can go wrong. In 2014, Spanish energy firm Abengoa finished building an 85 million-L-per-year cellulosic ethanol plant in Hugoton, Kan. But it was idled last year as Abengoa struggled under a massive debt load.
In contrast, DuPont is closing in on its goals for its first facility. Koninckx says his team is past any doubts about biomass supply.
“We work with hundreds of farmers. Many of the farmers we started with have continued in the program, plus we’ve got new people,” Koninckx explains. “At first, we did most of the work ourselves to make sure it was sustainable and good quality feedstock. Now more farmers have taken over those steps themselves.”
As for the plant itself, it is still undergoing the commissioning process. “We’re working through it to make sure it is safe and efficient. That is going fine. We’re fully staffed and energized,” Koninckx says. He expects ethanol production will start this year.
Poet did not respond to requests for an interview, but Chief Executive Officer Jeff Broin recently told the Minneapolis Star Tribune that the plant in Emmetsburg has begun shipping ethanol and could hit full production by the end of 2016.
In addition to the RFS, other factors such as the current oil glut may mean DuPont and Poet/DSM will be the only large cellulosic facilities to operate in the U.S. for a while, suggests Dan Cummings, an industry veteran and consultant at Guidewire Strategies.
“I think it’s just going to take a longer runway to grow. Even oil and gas development has slowed,” Cummings says. He points out that as long as drivers and automakers stick with 10% ethanol fuel blends, cellulosic producers will have to compete with lower-cost corn ethanol for room in the tank.
But the cellulosic industry may find growth opportunities, for example by shipping fuel to Western states. California, Oregon, and Washington provide extra subsidies for low-carbon fuel, Cummings points out. Companies can also look outside the U.S. “There is a market demand in other parts of the world for these technologies,” he asserts. Indeed, DuPont’s strategy is to license its technology, not produce fuel itself. It has already signed license agreements in Macedonia and China.
“We are active in almost every continent,” Koninckx says. “Northeast China is a big corn-growing region. The landscape there looks a lot like Iowa.”