Five years ago, cellulosic ethanol seemed to hold a lot of promise. The only thing missing was the ramp up to commercial production. But, as Jeremy Martin of the Union of Concerned Scientists explains to host Bruce Gellerman, then the recession happened.
GELLERMAN: Well, back in 2007 then-President George W. Bush promised federal funds to find new fuels for our cars.
BUSH: One of these days, the scientists tell me, and I believe, that we will be able to manufacture fuel for your automobiles from switch grass, or biomass, or wood chips. And then all of a sudden if you really think about it and are optimistic about America’s capacity to use technology to change our way of life, then all of a sudden you begin to see the rationale for saying we can reduce gasoline usage by twenty percent over the next ten years. I believe it's coming. I really do.
GELLERMAN: And since 2007, the federal government has devoted hundreds of millions of dollars in subsidies and loan guarantees for companies hoping to make fuels from plants - but so far progress is stalled. Jeremy Martin is a biofuels expert with the Union of Concerned Scientists.
MARTIN: The promise was to start producing commercially as early as in 2010 at a level of 100 million gallons, and then going up steadily to this level of 16 billion in 2022. And what’s happened is that that first production hasn’t happened yet. The facilities which were - didn’t get built and a lot of that has to do with what happened in 2008 and 2009, and I’m sure everybody will remember that those were tough years to get a loan for just about anything and, in particular, for new technology.
GELLERMAN: But back in the Bush administration in 2007, the government awarded $385 million dollars in grants to jumpstart ethanol from woodchips and switch grass, citrus peel…
MARTIN: Yeah, and also agricultural waste – things like corncobs and corn stalks and even garbage. But I would say they announced that level of grants, actually if you went through the records you’d find that the majority of those checks never got cashed or even mailed out. Those grants required the companies to raise a lot of private capital to match government money, which probably seemed reasonable in 2007. But of course, 2008 and 2009 were very tough years to borrow money under any circumstances.
GELLERMAN: Well, one of the companies that did cash the federal checks was Range Fuels in Georgia. They actually built a plant. What happened to them? They got over 160 million dollars in loan guarantees and in grants and in money from the state.
MARTIN: Yeah, they are the one exception. They moved very quickly and got started. So there are a lot of different ways that people have to convert this cellulosic biomass into fuel. And you know, they were using an existing technology that just wasn’t cost competitive. Unfortunately, we learned the hard lesson first and the other technologies are still, you know, at the starting gate.
GELLERMAN: So, is this an example of the federal government trying to pick arenewable energy technology winner and having a failure? Because, as I understand it, they haven’t produced a drop of cellulosic ethanol.
MARTIN: I think we’re certainly behind schedule. As far as picking winners, I mean there was an important reason that people wanted an alternative to oil and that was climate change, it was oil dependence, high oil prices. And I think all of those reasons remain just as true today as they were in 2007. So that’s why, I think, it’s worth taking the time and sticking with this one because we do need alternatives to oil.
GELLERMAN: Well, the backer of that plant in Georgia actually has a new company in Michigan. And I’m looking at an article that he had to, you know, tell potential investors what the risks were. And this is a direct quote: ‘We have a limited operating history, a history of losses, and the expectation of continuing losses, and we have no experience in the markets in which we intend to operate.’ Boy, that sounds pretty risky!
MARTIN: Vinod Khosla, I think, is the investor you’re referring to.
GELLERMAN: Yes, he was the one that did Range Fuels and this one.
MARTIN: Yeah. Generally these start-up companies have a variety of backers. He’s backed a number of these new technologies, and I think his approach is to look for a lot of things and hope some of them pan out. And you know, the first bet here hasn’t paid off and he lost a good bit of money on that but he’s still bullish that there’s a market here in the future. And I remain convinced that it’s worth focusing on and that it’s worth investing in.
GELLERMAN: Well, cellulosic ethanol promises to be a lot cleaner than gasoline, I guess something like 85 percent in terms of greenhouse gasses?
MARTIN: Yeah, that’s exactly right. And there aren’t a lot of other alternatives that are that clean. And when you look at the scale of the problem, how much gasoline we use, the technology that allows us to turn environmentally friendly sources of biomass into fuel, it’s a really important technology and one that’s worth investing in.
GELLERMAN: So, is the challenge right now technological? Is that the problem?
MARTIN: Well, there’s certainly technological challenges, and a variety of different approaches, and a number of companies with new technologies. Some of them use heat and gas to convert the biomass into gasses, and through what they call a thermo-chemical process that they use to make fuel, others use enzymes.
GELLERMAN: Those are things, chemicals that speed up processes.
MARTIN: Yeah, or organisms, microorganisms. So there’s a variety of different technologies, and the technologies certainly is one of the challenges. But the financing of these facilities has proven to be one of the really significant challenges. And I think that’s one where the circumstances that weren’t foreseen in 2007 really have slowed things down.
GELLERMAN: The technology or the idea of getting energy out of this material is not new. It goes back to 1898!
MARTIN: Yeah, absolutely! And people have done it on occasion. The question is making it cost-effective. I think it’s long been recognized that if you could make biomass into fuel, you could have a great business.
GELLERMAN: But didn't Chevron Oil and Shell, didn't they have investments in cellulosic companies? What happened to their investments? What happened to those companies?
MARTIN: Well, a lot of those major oil companies are investors in many of the cellulosic companies. I’m looking forward to seeing them produce fuel instead of just press releases. But you know, they’re the ones who control the fuel market, and, essentially these laws that Congress has passed, amount to encouragement to them, or a requirement, that they clean up their act and start producing cleaner fuels. The technology will march forward with or without government support, but how long it takes to really start to displace oil and to really start to reduce these emissions is what’s at stake here.
GELLERMAN: Well, Jeremy Martin, thanks so much.
MARTIN: My pleasure, thank you.
GELLERMAN: Jeremy Martin is a biofuels expert and senior scientist with the Union of Concerned Scientists.
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