FEATURED ARTICLE
Cellulosic Ethanol shipment, Iogen
Canadian Prime Minister Paul Martin (right) and Iogen President Brian Foody launch the world's first shipment of cellulosic ethanol to the commercial fuel market April 21, 2004. Iogen's demonstration plant in Ottawa can produce 1 million gallons annually.

Finally, Cellulosic Ethanol

Interview with Iogen Energy vice president Jeff Passmore on the commercial future of cellulosic ethanol

By Bill Moore

They called it "jungle rot." It ate up tents and cots and soldier's clothing in the jungles of the South Pacific during the Second World War. But its discovery more than sixty years ago now seems destined to spark a revolution in the energy industry, and help address the twin problems of global warming and oil depletion at the same time.

In 2003, Americans consumed a record 2.81 billion gallons of dry grain-based ethanol, milled and fermented largely from corn or maize, although other grains are used, depending on the region. Sold as either an E10 or E85 blend with gasoline, it's a workable petroleum substitute that helps cut smog, but it takes nearly as much energy to grow it, harvest it, and convert it into alcohol as the energy you get out of it. The ratio of energy input versus energy output has been estimated at about 1 to 1.4. Nothing to write home about. And while it's popular with corn growers and Midwest politicians, it continues to rile critics who see it as just another example of wasteful government "pork barrel".

For at least the last twenty years, researchers in both the USA and Canada have been working on ways to produce ethanol more efficiently, not from premium grain crops but from their waste. In corn's case, it's called "stover'. The trick was to find a way to get the enzymes that destroyed troops clothing on Guam, to learn to do the same to the woody cellulose that makes up all plant matter. The advantage of cellulosic ethanol -- besides reducing dependence on imported oil -- is that it can result in energy ratios of 1 to 7, and reduce CO2 emissions from the 30 percent attributable to grain ethanol to 80-90 percent, drastically cutting net greenhouse gas emissions from cars.

The first company to solve the problem on a commercial scale is Iogen Energy, located in Ottawa, Canada. It took three attempts to get the very busy Jeff Passmore -- the company's vice president -- to sit down with EV World -- by telephone -- to talk about the world's first demonstration cellulosic ethanol plant, which is currently turning out on a continual basis more than a million gallons of alcohol "fuel" annually.

Passmore first explained that there is no difference in the molecules that make up both grain-based and cellulose-based ethanol. They are identical. The difference is what the primary feed stock is, and in the latter's case its the waste matter that is typically left in field or perhaps baled as bedding for farm animals. Here, virtually any type of plant material can be used, but for reasons of economics, the preferred feed stock is wheat and barley straw, followed later by corn stover and eventually switch grasses. Passmore likes the straws because baling technology already exists to harvest and transport it, which isn't currently true for corn stover. And, apart from a few demonstration plots, there is little switch grass planted.

This situation is likely to determine where Iogen builds its first commercial scale cellulosic ethanol plant; and right now southeast Idaho looks the most promising. A plant in Nebraska will eventually follow, he told EV World.

Balance and Sustainability Are Keys
Using agricultural "waste" poses its own dilemma, because what is left in the fields eventually returns to the soil in the form of fertility-promoting humus. So, I asked Passmore, about how farmers of the future will balance their desire to make the most of their agricultural waste without jeopardizing the long-term health of their soil

He acknowledged that balance and sustainability are the keys. How much waste needs to be put back into the soil and how much can be harvested for ethanol production will depend on the condition of their soils. He explained that in some regions like the black soil zones of the Red River Valley that straddles the border of Minnesota and the Dakotas, excess crop waste is a problem. The waste used to be burned, but environmental concerns have pretty much halted that practice.

"What we're talking about doing here, is taking the stalks, cobs and leaves. We're still leaving a four to six inch stubble above the ground, and then all the root system remains."

"I've got a lot of confidence in farms to husband their own land," he continued. He foresees a time when cellulosic ethanol plants will offer to take 40 percent of a farmer's crop waste. That farmer will then decide which fields will be harvested. He will probably rotate fields, so that the same field isn't cropped year-after-year.

Building Bioenergy Refineries
So, what's going on down in those vats of plant waste? According to Passmore, the first procedure is to "pre-treat" the feed stock.

"That's just a mechanism for exploding the biomass so that we increase the surface area of the material. Then we add enzymes, and then those enzymes attack the cellulose in the fiber and turn that cellulose into glucose; and of course, once you've got glucose, you've got a fermentable sugar for fermentation and distillation."

Besides cellulose, plants also contain two other major substances, hemi-cellulose and lignin, a tar-like substance that is the "glue" that holds the plant together. It is the lignin that makes cellulosic ethanol such a "winner" in terms of reducing GHG emissions, because it is separated in the sugar stream and burned as a fuel, reducing the amount of external energy needed to produce the final fuel.

In addition to ethanol, future cellulosic ethanol plants will also produce electricity, fertilizer, CO2 for the soft drink industry, and citric acid. "There's a whole bunch of co-products that these biomass materials can be turned into, and these will have a major impact on the cost-effectiveness of the plant," Passmore told EV World.

The keys to producing cellulosic ethanol are the enzymes secreted by microorganisms first identified on Guam. Iogen and the US government have been researching ways to "domesticate" these microorganisms, so that, depending on what you feed them, they will manufacture enzymes that will break down different types of plant material. Passmore said that the enzymes are akin to human saliva, proteins that attack specific types of "food".

Iogen's primary business is producing industrial-grade enzymes that are used in four different sectors: the animal feeds business where enzymes are used to help poultry and swine digest their food more efficiently for better nourishment; the textile industry where enzymes are used to pre-soften the denim in blue jeans; pulp and paper business where enzymes help reduce the amount of chlorine that's needed to whiten the paper; and finally in the new ethanol fuels arena.

From Pilot Batches to Continuous Runs
During the 1990s, Iogen built two small, pilot plants that produced small batches of cellulosic ethanol in the 500 gallons range. The current, $30 million demonstration plant uses 50,000 gallon tanks and runs on a continuous basis. Passmore told me that its purpose is to learn how to scale up the process to true commercial levels, a process that is ongoing and continuing to absorb company funds.

In April of 2004, the company shipped its first tanker loads of cellulosic ethanol to Petro-Canada where it's blended with gasoline. With a capacity of a million gallons a of ethanol annually, the Ottawa plant is forty times the size of the pilot facility at NREL in Golden, Colorado. Every day, Iogen's plant converts 1000 pound bales of straw into ethanol.

Passmore addressed another critical factor to the success of cellulosic ethanol, that of location. Future plants will need to be located in regions with strong biomass resources that are within 80 to 100 miles of the plant. Any further away than this and the cost of transporting the bulky bales of feed stocks undermines the cost-effectiveness of the technology. This obviously dictates a certain amount of decentralization in the fuel industry of the future, with Passmore's "biorefineries" becoming nearly as prevalent as the ubiquitous, towering white grain silos that dot the Midwest and Great Plains today. It's possible to also foresee a revitalization of small regional rail lines for transporting fuel to distant markets, since moving it by diesel tanker truck may prove too costly. The refineries would also mean jobs in depressed rural regions.

What wasn't addressed is the impact that drought or insect infestations will have on fuel production. Future energy supplies will be dictated much more by the cycles of nature than they currently are.

Finding the money to build a $250 million commercial-scale plant won't be easy, Passmore observed. He explained that the main equity holders will usually invest 20 percent of their own money, leaving the remaining 80 percent to be financed. But here, all new technologies confront the barrier of conservative banking values, which typically don't support loaning money to unproven technologies and markets. So, what Iogen is hoping to do is convince both federal governments in Canada and the United States, as well as Germany and the UK, to provide economic instruments to help "kick start" the industry, at least some of the early plants. After that, conventional investment banking sources should feel comfortable enough to step in and fund future expansion.

Other factors determining where future cellulosic ethanol plants will be located will be availability of water, natural gas and rail lines. He sees the ethanol from biorefineries in southeast Idaho being shipped by "unit trains" to California because trucking it will simply be too expensive.

Ironically, this morning I rode my Tidalforce M750 electric bike down to the old Burlington Northern train station in Omaha. As I stopped to take some photos, a train pulled past me with a number of tank cars, one of which was clearly labeled "ethanol." I suspect we'll see many more such tank cars going forward.

Even more intriguing, I talked to the caretaker of the Art Deco-era structure that now sits empty. He mentioned that his aunt, who farms just across the river, near Persia, Iowa, cleared a total of just $60 last year, after all her expenses had been paid. The establishment of biorefineries will have enormous economic spin-off for rural communities like Persia that sit along rail lines. Passmore pointed out that farmers will earn needed income selling what, up until now, has been waste. There will be baling jobs, trucking jobs, and plant jobs.

Passmore also estimates that each plant will create about 500 construction jobs over the course of 18 months. Most importantly, this is money that stays in the community rather than being spent on imported oil from hostile nations.

Each plant would produce 60 million gallons of ethanol, 35 MW of electricity, all the enzymes it needs for pre-treatment, fertilizer, CO2, and citric acid. However, installing the necessary equipment to capture the various byproducts adds to the capital cost of the facility, so there needs to be a market for each to justify the investment.

Given the heavy investment required, the obvious question is, can cellulosic ethanol compete with grain-based ethanol? Passmore believes it can but one of the key determining factors is going to be the cost of the feed stock, which should be cheaper than grain, though it will also be bulkier to transport. So, achieving competitive costs with grain ethanol is Iogen's first target. After that, the ultimate goal is to achieve competitive pricing with gasoline. Based on the current run-up in the price of oil -- briefly breaking the $50 a barrel mark yesterday (August 20, 2004) on the futures market -- it seems likely that sooner, rather than later, the cost curves of each will cross, and American's are going to have to get used to paying a lot more at the pump.

Once Iogen has perfected its technology and gotten the first couple of commercial-scale plants up and running, its long-term business plan is to sell licenses and enzymes to licensees, as well as offer technical support.

It would seem that given fossil fuel energy prices and the fact that virtually all cars sold today can run E10 without modification that the market for Iogen's product seems pretty much assured. On top of this, Passmore estimated that by 2005 there will be 4 million vehicles on the roads of America capable of burning E85, many of them government and industry fleets, but a lot in the hands of consumers who probably aren't even aware they can use this home-grown fuel.

To raise awareness and to demonstrate the feasibility of using E85 in Canada, Iogen and GM Canada have partnered with MissionGreen to drive a GMC Yukon and Silverado from Nova Scotia to British Columbia.

If you drive a Ford vehicle, look for the "leaf" emblem on the front corner panel of your car or truck; these vehicles should be able to use E85, if you can find it.

Passmore defends the much criticized 'flex fuel' initiative that gave carmakers and fleet owners EPACT compliance credits for these vehicles, when most drivers ended up using regular gasoline in them. As more E85 becomes available in the coming years, those millions of vehicle will be able to use this fuel, and the defenders of the program will finally be vindicated.

Still, America and Canada have a long way to go to even begin to supplant 10% of both nations' daily gasoline consumption. The United States consumes 371 million gallons of gasoline a day. To replace just 10% would require companies like Iogen to produce 37 million gallons every 24 hours. At present, ethanol distillers produces only 7.3 million gallons a day

However, Passmore believes that given the number of dry grain ethanol plants coming on line or being built, that the industry will exceed the US government's 2010 goal of 5 billion gallons per year.

He added that in doing a study for one of its investors, Royal Dutch Shell, Iogen found that the United States showed the greatest potential for large numbers of cellulosic ethanol plants. He said that in France the maximum number would be about six, in Germany four, in the UK two or three and in Canada maybe six or eight, while he calculates America could build dozens just to handle straw and stover.

As for the future of switch grass, which former CIA director James Woolsey favors, Passmore said that while it produces high yields of biomass, a farmer is going to have to decide which is more valuable, raising the grass for ethanol production or using the land for grain crops.

Interestingly, Iogen has two oil company investors, which are minor shareholders, and according to Passmore, their long term forecasts suggest that oil is going to settle, over the long term, in the $18-20/barrel range, which means that ethanol, both dry grain and cellulosic, will have a hard time reaching price parity without continued government subsidies. Looking at $50 a barrel oil today -- or with the price of a gallon of petrol in the UK now at £4 or $7.27/gal. -- it seems difficult to imagine oil returning to the $20 range, but the industry has seen price collapses before.

Still, Passmore is confident that his company's technology may, in fact, be able to eventually compete at $20 a barrel, at least that's the goal. If oil continues to hover in the $40-50 range, it will be a lot easier to convince governments, communities and investors to throw their support behind building biorefineries all over the world.

"Once we get the first plant up and running, and there is confidence there that the technology is delivering, then you could imagine a scenario where you licensed multiple plants on a yearly basis," he concluded.

It's a scenario that is becoming easier to envision with every tank-load of ethanol that leaves Iogen Energy's plant.

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Times Article Viewed: 14176
Published: 21-Aug-2004

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