What Happened to a Buck a Gallon?

Coskata will produce ethanol for under US $1.00 a gallon anywhere in the world, from almost any input material. – Coskata Vision Statement

A bit more than a year ago, I read a number of claims from ethanol start-up Coskata stating that they would be able to produce ethanol from cellulose for less than $1.00 a gallon. One thing that is very important to me as an engineer is that you deliver what you say you will deliver – or more. If you deliver less, you lose credibility. If it becomes a habit, you lose all credibility.

I am not a fan of hype, and I don’t like my tax dollars funding hype. So when I think someone is overly guilty, I will often report on it. I did:

Coskata: Dead Man Walking

A couple of comments I made in that essay:

The fact that they don’t even have an operating pilot plant should tell even the most optimistic supporter that they have little basis for their claims of producing ethanol for less than $1/gal.

My prediction? I predict that Coskata’s suggestions that they will produce ethanol for less than $1/gal will look ridiculous in hindsight.

There were two reasons that I took exception to their claim of “under $1/gal.” First, they had no pilot facility upon which to base that claim. Making such a claim on the basis of lab tests is pretty reckless, as you are staking credibility on the line with little to back it up.

Second, the claim was incredibly misleading because there was no capital recovery in the number. If you don’t understand what that means, consider this. Let’s say I claim to be able to make gasoline for a nickel a gallon. But to do that, I have to build a plant that costs a trillion dollars. Do you really think then that I can make ethanol for a nickel a gallon? If I specified that my operating expenses amounted to a nickel a gallon, then that may be a true statement – which would then lead to questions about capital costs. In the case of Coskata, these capital costs are not trivial, and thus “$1/gal” immediately goes way up because capital isn’t free.

Well, that was a bit over a year ago, and two things have happened. First, they now reportedly have an operating pilot plant:

Coskata leaks word that demo plant is up and running

Ethanol developer’s CEO tells the Cleantech Group at the Boston Forum that its pilot facility, capable of producing 50,000 gallons a year, has been operating for nine weeks.

Warrenville, Ill.-based ethanol developer Coskata has been planning to announce the opening of its demonstration plant in October. But CEO William Roe leaked the news a little early.

Let me congratulate them on that accomplishment, and sincerely wish them the best. They will gain important operating knowledge from this plant – and I believe they will learn that their earlier cost claims weren’t credible.

The second thing happened at this week’s gasification conference. Coskata’s gasification provider – AlterNRG – made a presentation. Apparently they did not get the memo from Coskata, because they had on their slide that “Coskata expects overall operating costs to be less than $1.25/gallon.” That may not seem like much, but that’s a potential upward creep of 25%, and their pilot plant is barely warm. Further, they specified that this was just for operating costs; something Coskata’s early claims did not specify.

Another thing that AlterNRG said specific to their gasifier is that it really needs tipping fees for the economics to work. I expect long term, there will be more competition for biomass, and tipping fees will start to decline. So a company that is dependent on tipping fees is making a pretty risky bet in my opinion. In my first ever essay on Coskata almost two years ago – Coskata Hype – I wrote about the potential need for tipping fees:

My guess is that unless they found someone to pay a steep tipping fee to get them to take biomass, there is nowhere in the world that they will be able to make ethanol via gasification for under $1/gal.

Coskata would not be the only company back-pedaling on their cost claims. Last year Mascoma claimed “The cost of fuel from the process is similar to Coskata’s at about $1-1.50 a gallon.” (Like Coskata, Mascoma is a Vinod Khosla-backed venture).

Now they have changed their tune:

“Governments need to help with the financing for the first plants, once you have those the private sector will start to come in,” said Jim Flatt from research and development at U.S. biofuels firm Mascoma, speaking at a conference in Amsterdam.

“Oil needs to trade at a sustainable level of $100 or above to make this competitive,” said Flatt.

Both of these companies have quietly increased their projected costs (although Coskata still has the <$1/gal claim on their website). Bear in mind that neither company has anything that would be considered much of a demonstration plant. Coskata's recently completely pilot plant has a nameplate capacity of 3 barrels a day. So reality about cellulosic ethanol appears to be setting in for everyone. Everyone except for General Wesley Clark, who just went on record with this whopper: U.S. seen unlikely to meet ethanol fuel-content goal

Retired U.S. General Wesley Clark, co-chairman of the Growth Energy group, said the 100 million gallon level could be reached in time if the cap on the permitted level of ethanol in regular gasoline is increased to 15 percent from 10 percent.

“There is cellulosic capacity standing by … but the later than policy decision is (taken), the less likely we are to meet that 2010 mandate of 100 million gallons,” he told reporters during a trip to Ottawa.

The auto industry says gasoline containing 15 percent ethanol could damage engines and fuel lines in some older cars, and has urged regulators not to approve the higher blend.

“There are a lot of people who see it our way — namely, that this is good for the environment, it’s good for jobs, it’s good for national security. It doesn’t hurt automobiles,” said Clark.

That’s right, just lift the 10% cap, and the cellulosic ethanol will start to flow. Plus, it will be under a buck a gallon, it will create jobs, and it will bring us one step closer to energy independence.

I don’t meant to downplay the issue of the 10% cap, but there is room to put a lot more ethanol out there in the form of E85 even with the 10% cap – if it could be made in a cost-competitive manner. But that won’t open up the cellulosic taps. We actually had a pair of those until about 1920, at which time they were shut down because they weren’t economical.

About That Logistics Problem

In 2006 I warned about just how many trees a cellulosic ethanol plant could consume:

Cellulosic Ethanol Reality Check

Let’s consider a typical mid-sized 50 million gallon per year ethanol plant. Using Iogen’s demonstrated yields, the biomass requirement would be 50 million/70 = 714,286 tons of biomass per year. According to Dr. Bruce Marcot, an ecologist at the USDA Forest Service the average Douglas fir yields about 1660 lbs of pulp (90% of the tree’s weight). So, to run a mid-sized cellulosic ethanol facility would require the equivalent of 714,286 tons * 2000 lbs/ton /(1660) or 860,585 Douglas firs PER YEAR. That’s a lot of biomass, and it puts into perspective the issue of a declining EROEI as biomass must be secured from farther afield.

Seems that people are starting to figure this out, as forestry experts are starting to wonder where Mascoma is going to get all of the trees to supply the cellulosic ethanol plant they plan to build in Michigan:

When Making Fuel From Wood, Be Sure You Have Wood

That’s the lesson Michigan is learning as forestry experts question whether the state can grow enough timber to support what could be the nation’s first cellulosic ethanol plant producing commercially viable biofuel from wood. Biofuel startup Mascoma plans to build the $225 million refinery near Sault Ste. Marie in Michigan’s beautiful upper peninsula. It is working with Longyear, a Michigan timber company that owns at least 100,000 acres of forest in the western part of the state.

The million refinery would consume 375,000 cords of timber — a cord measures 8 feet long, 4 feet wide and 4 feet tall – to make 40 million gallons of cellulosic ethanol annually. Therein lies the problem.

Of course if you saw my initial essay, you were aware of this problem a couple of years ago. Pretty soon they will figure out that while this may seem like an enormous amount of wood, at least it will go for a good cause. It will produce enough ethanol to replace 0.02% of our gasoline supply.