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Cellulosic Ethanol Targets Slipping

For those who read this blog, this story will come as no surprise. I have been warning for a couple of years that the cellulosic ethanol proponents have been getting ahead of themselves with predictions of how quickly the industry will scale up. In fact, not only have I said that they were vastly overpromising (see this essay challenging Vinod Khosla’s claims; he had the U.S. at 50 billion gallons of ethanol by 2020) but that enzymatic cellulosic processes would ultimately lose out to biomass gasification processes.

I think if I told people that we would cure cancer within 5 years – or better yet mandated that we cure cancer within 5 years or pay penalties as a result – people would generally think I was daft. In this case, they understand that technology can’t be mandated. But commercial cellulosic ethanol is a problem that we have been working on for just as long as we have been trying to cure cancer, and commercial success has proven elusive. Yet these same people don’t bat an eye when proponents casually assure everyone that commercial success is just around the corner.

This week, there have been two separate reports that indicate that the targets are indeed slipping:

Consumers to Pick Up Tab for Off-Target Cellulosic Ethanol Industry

Cellulosic ethanol is turning out to be an underachiever so far.

The 2008 Energy Independence and Security Act set a goal of producing 100 million gallons of cellulosic ethanol in the U.S. by 2010 and 250 million gallons by 2011, but a survey conducted by David Woodburn of ThinkEquity strongly indicates that the industry is likely to miss its mark.

Woodburn expects only 28.5 million gallons of cellulosic ethanol to be produced in the U.S. in 2010, leaving a 71.5 million gallon gap.

“Congress put this 100 million figure out there and I’m not sure they had any idea about the capacity in the industry,” he said.

28.5 million gallons works out to be almost 2,000 barrels a day. With that in mind, I will go one step further and say that we won’t even produce 28.5 million gallons in 2010. I also expect that the producers with announced plans to produce cellulosic ethanol in 2010 will do so at a loss on every gallon.

The article goes on to explain that consumers will be penalized as a result – that retailers must effectively pay “$2 for every gallon of cellulosic ethanol they couldn’t find.” Keep in mind, this comes about directly because people have overpromised – causing expectations to rise to high – and they are going to underdeliver. These are big pet peeves of mine.

The second report on the pending shortfall came from the Energy Information Administration (EIA). In their Annual Energy Outlook 2009, the EIA suggests that cellulosic ethanol will fall far short of the mandated levels. More on that story from CNN:

As Obama Picks Cellulosic Advocates, EIA Predicts Shortfall

WASHINGTON -(Dow Jones)- The U.S. won’t be able to meet its mandate to produce 36 billion barrels of biofuel by 2022, according to the government’s top energy forecaster.

The EIA forecasts ethanol supply from cellulosic feedstocks reaching 12.6 billion gallons (including both domestic and imported production) in 2030, while biodiesel and biomass-to-liquid diesel fuel use rise significantly, reaching nearly 2 billion gallons and 5 billion gallons, respectively, in 2030.

The Renewable Fuels Standard of a year ago mandates 36 billion gallons of ethanol usage by 2022, with 16 billion gallons coming from cellulosic ethanol. As I said at the time, those numbers didn’t appear to be remotely credible. The EIA report indicates that we won’t have reached that level by 2030. I do note that this is a very big increase in the EIA projections, however, which previously projected less than 1 billion gallons of cellulosic ethanol being produced in 2030 (see comments on Guy Caruso’s Senate testimony in 2007 here). Maybe they believe at least some level of technology can be mandated.

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December 19, 2008 - Posted by | cellulosic ethanol, EIA, energy policy, politics

20 Comments

  1. Gosh, RR I hope you did not hurt your self with those predictions of bad predictions. You may want to do some stretching exercises first.

    Government policy that sets modest but achievable goals to force industry to expand the envelop is a good thing. Outrageous goals are just silly. While I am a supporter of ethanol, I am also a skeptic. I am impressed with the progress ethanol has made since the 2005 energy bill, but there is no way that by 2007 we could have learned what, if any, unintended consequences might be.

    Mandates and incentives should be big enough to support the first of kind costs but not so large as to create a bubble down the road. For example, in the US wind turbines are being erected at a record pace However, this record pace will have an insignificant effect on US generation mix. My reading of the DOE report that describes the barriers to archiving 30% wind penetration indicates that the goal should be approached slowly.

    Growing too fast creates bubbles that burst. Then the industry must overcome perception of not being viable. This of course begs the question, is the industry viable at all?

    Comment by Kit P | December 19, 2008

  2. Gosh, RR I hope you did not hurt your self with those predictions of bad predictions. You may want to do some stretching exercises first.Government policy that sets modest but achievable goals to force industry to expand the envelop is a good thing. Outrageous goals are just silly. While I am a supporter of ethanol, I am also a skeptic. I am impressed with the progress ethanol has made since the 2005 energy bill, but there is no way that by 2007 we could have learned what, if any, unintended consequences might be. Mandates and incentives should be big enough to support the first of kind costs but not so large as to create a bubble down the road. For example, in the US wind turbines are being erected at a record pace However, this record pace will have an insignificant effect on US generation mix. My reading of the DOE report that describes the barriers to archiving 30% wind penetration indicates that the goal should be approached slowly. Growing too fast creates bubbles that burst. Then the industry must overcome perception of not being viable. This of course begs the question, is the industry viable at all?

    Comment by Kit P | December 19, 2008

  3. By 2020,we’ll be throwing everything but the kitchen sink into our gas tanks. Sure,we’ve got 4 or 5M bpd of spare capacity now,but there’re no new tar sands projects underway. No more deep sea drilling being done. Production slipped 500,000 bpd in Russia over the last year. It will slip more and more in years to come. Mexico will be importing oil in 5 years. Venezuela may be an importer by 2020. Peak Oil will be back with a vengeance. What sends the world economy into a tailspin next time around,$150 oil….$200….$250? Sure,we can attribute the current crisis to housing. But,what busted the housing bubble? Why couldn’t an increasing number of borrowers make their mortgage payments? Could $4 gas and $300 utility bills have anything to do with it?

    Comment by Maury | December 19, 2008

  4. By 2020,we’ll be throwing everything but the kitchen sink into our gas tanks. Sure,we’ve got 4 or 5M bpd of spare capacity now,but there’re no new tar sands projects underway. No more deep sea drilling being done. Production slipped 500,000 bpd in Russia over the last year. It will slip more and more in years to come. Mexico will be importing oil in 5 years. Venezuela may be an importer by 2020. Peak Oil will be back with a vengeance. What sends the world economy into a tailspin next time around,$150 oil….$200….$250? Sure,we can attribute the current crisis to housing. But,what busted the housing bubble? Why couldn’t an increasing number of borrowers make their mortgage payments? Could $4 gas and $300 utility bills have anything to do with it?

    Comment by Maury | December 19, 2008

  5. OK, I’m officially an unemployed HVAC/R graduate.

    I have some interests that are the focus of my job search. One of them in existing building stock energy issues.

    First hat tip to Doc Searls.

    Link of my interest called Transition Team Weighing Blockbuster Housing and Stimulus Proposal. Here’s the pdf 2030 Challenge Stimulus Plan

    From a broad perspective viewpoint I think I’d call this approach progress.

    Course it’s only a plan and there are always details, details, details.

    Now to dig in.

    RBM

    Comment by Anonymous | December 19, 2008

  6. OK, I’m officially an unemployed HVAC/R graduate.I have some interests that are the focus of my job search. One of them in existing building stock energy issues.First hat tip to Doc Searls.Link of my interest called Transition Team Weighing Blockbuster Housing and Stimulus Proposal. Here’s the pdf 2030 Challenge Stimulus PlanFrom a broad perspective viewpoint I think I’d call this approach progress.Course it’s only a plan and there are always details, details, details.Now to dig in.RBM

    Comment by Anonymous | December 19, 2008

  7. I am sorry to see ethanol flop, but it is what it is.
    Meanwhile, the LA Times today had a review of a new Ford Fusion hybrid, by Dan Neil, a very credible critic. He said he got 53 mpg in town with this car.
    Far more promising than ethanol is palm oil. Much higher yields per acre and easily convertible into diesel. There are environmental concerns, but if planted on degraded grazing land, those concerns can be handled. Brazil has square miles that could handle palms. If oil stays above $50-60 a barrel, palm oil makes sense.
    Meanwhile, predictions of $200 barrel oil, Maury? Did you not see what happened whenoil passed over $100? Demand retards, then goes into reverse.
    The price mechanism is a wondrous thing.

    Comment by benny "MOAG" cole | December 19, 2008

  8. I am sorry to see ethanol flop, but it is what it is. Meanwhile, the LA Times today had a review of a new Ford Fusion hybrid, by Dan Neil, a very credible critic. He said he got 53 mpg in town with this car.Far more promising than ethanol is palm oil. Much higher yields per acre and easily convertible into diesel. There are environmental concerns, but if planted on degraded grazing land, those concerns can be handled. Brazil has square miles that could handle palms. If oil stays above $50-60 a barrel, palm oil makes sense. Meanwhile, predictions of $200 barrel oil, Maury? Did you not see what happened whenoil passed over $100? Demand retards, then goes into reverse.The price mechanism is a wondrous thing.

    Comment by benny "MOAG" cole | December 19, 2008

  9. $33 a barrel on the NYMEX.
    I guess we can drink the ethanol.

    Comment by benny "MOAG" cole | December 19, 2008

  10. $33 a barrel on the NYMEX. I guess we can drink the ethanol.

    Comment by benny "MOAG" cole | December 19, 2008

  11. Pretty amazing content the last few days. Keep up the good work.
    Merry (insert your personal holiday here)

    Comment by JIMj | December 19, 2008

  12. Pretty amazing content the last few days. Keep up the good work. Merry (insert your personal holiday here)

    Comment by JIMj | December 19, 2008

  13. big FARMA AND AGR STATES ARE STILL WINNERS, NOW AND WHEN ETHANOL IS LAID TO REST–WHENEVER AND HOWEVER.

    THEY GET THE “GREEN $”, THE PUBLIC GETS THE “HOSE”.

    THAT WAS ALWAYS THE BASE BEHIND THE 30 YEAR SUBSIDY.
    2006/2007 RETURN $ WAS ONLY THE “LAST HURRAH”. ALL FUTURE RETURNS ARE END OF LIFE PREMIUMS.

    Comment by Anonymous | December 20, 2008

  14. big FARMA AND AGR STATES ARE STILL WINNERS, NOW AND WHEN ETHANOL IS LAID TO REST–WHENEVER AND HOWEVER.THEY GET THE “GREEN $”, THE PUBLIC GETS THE “HOSE”.THAT WAS ALWAYS THE BASE BEHIND THE 30 YEAR SUBSIDY.2006/2007 RETURN $ WAS ONLY THE “LAST HURRAH”. ALL FUTURE RETURNS ARE END OF LIFE PREMIUMS.

    Comment by Anonymous | December 20, 2008

  15. http://www.technologyreview.com/energy/21811/?a=f

    This could be interesting in a limited way

    Comment by takchess | December 20, 2008

  16. http://www.technologyreview.com/energy/21811/?a=fThis could be interesting in a limited way

    Comment by takchess | December 20, 2008

  17. Palm oil makes sense if oil stays above $50-60 a barrel? Only if the price of palm oil stays below $350 per tonne. Currently it is just below $500 per tonne, having peaked at over $1200 per tonne.

    http://www.fao.org/es/esc/prices/CIWPQueryServlet

    As soon as demand for palm oil were to increase significantly, so would its price. The market is just too thin for palm oil to be a major contributor to fuel supplies in the near or medium term.

    Comment by Ron Steenblik | December 21, 2008

  18. Palm oil makes sense if oil stays above $50-60 a barrel? Only if the price of palm oil stays below $350 per tonne. Currently it is just below $500 per tonne, having peaked at over $1200 per tonne.http://www.fao.org/es/esc/prices/CIWPQueryServletAs soon as demand for palm oil were to increase significantly, so would its price. The market is just too thin for palm oil to be a major contributor to fuel supplies in the near or medium term.

    Comment by Ron Steenblik | December 21, 2008

  19. I am sure you saw this post but thought I would throw it out for those who had not:

    ‘And they continue to support cellulosic ethanol even though the … ethanol would require the annual harvest and transport of 320 million tons of biomass.’


    Obama, Vilsack and Salazar: The Ethanol Scammers’ Dream Team

    Comment by EHS Director | January 10, 2009

  20. I am sure you saw this post but thought I would throw it out for those who had not:’And they continue to support cellulosic ethanol even though the … ethanol would require the annual harvest and transport of 320 million tons of biomass.’Obama, Vilsack and Salazar: The Ethanol Scammers’ Dream Team

    Comment by EHS Director | January 10, 2009


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