Is Cellulosic Ethanol Running on Empty?

The tank for cellulosic ethanol inched closer to empty at the end of November, as the EPA released its 2011 revision of the US Renewable Fuel Standards. The standards, adopted by Congress as part of the 2007 Energy Independence and Security Act (EISA), are goals, not mandates.

With its 2011 modification, the EPA reduced the volume of cellulosic biofuels from 250 million gallons to 6.6 million gallons, a whopping 97 percent reduction. The overall total of renewable fuels for 2011 remained the same at 13.95 billion gallons, or 8.01 percent of all transportation fuels used domestically. Conventional corn ethanol will make up nearly 92 percent, or 12.8 billion gallons, of 2011’s volume.

The EPA faced significant challenges in developing the new goals. One of these was trying to reconcile the disparate feedback it received on the proposed rule. In the proposed rule, the EPA suggested a cellulosic biofuels projection in a range of 6.5 to 25.5 million ethanol-equivalent gallons. In comments, petroleum refiners supported a standard at the lower end of the spectrum, while those in advanced biofuels suggested the standard be set at the higher end of the range. Because commenters did not provide quantitative assessments of volumes, however, the agency based its assessment on the production capabilities and data from the Energy Information Agency (EIA).

The EIA projected the production of 3.94 million gallons of cellulosic ethanol in 2011. The EPA went one step further and contacted each company for information about its processes and outlook. Ultimately, the EPA identified five companies that could potentially supply cellulosic ethanol to domestic markets.

• Dupont Danisco Cellulosic Ethanol (DDCE) in Vonore, TN converts corn cobs into ethanol, and is scheduled to produce 150,000 gallons in 2011.
• Fiberight in Blairstown, IA converts MSW to ethanol and is scheduled to produce 2.8 million gallons in 2011.
• KL Energy in Upton, WY converts wood chips and wood waste into ethanol and is scheduled to produce 400,000 gallons in 2011.
• Range Fuels in Soperton, GA converts wood chips into methanol and ethanol and is scheduled to produce 100,000 gallons of ethanol and 2.9 million gallons of methanol in 2011; given a methanol equivalence value of 0.75, this fuel represents 2.3 million ethanol equivalent gallons.
• KiOR in Houston, TX produces bio-crude which can be further refined into transportation fuel, and if the company chooses to do this, it could produce 200,000 gallons of cellulosic biofuel.

Because the actual numbers fell below the low end of the range, the EPA settled on a 6.6 million gallon target. The agency's rational for this number was provided:

We believe that the cellulosic biofuels standards should provide an incentive for the industry to grow according to the goals that Congress established through EISA. However, we also believe that the cellulosic biofuel standard that we set should be within the range of what can be attained based on projected domestic production and import potential. Any estimate we use to set the cellulosic biofuel standard for 2011 will have some uncertainty in terms of actual attainment, and the level of such uncertainty generally rises with the volume mandate. Our intention is to balance such uncertainty with the objective of providing an incentive for growth in the industry. To this end, we explored the 2011 volumes for individual companies as projected by EIA to determine not only what volumes might be anticipated but more importantly what volumes were potentially attainable.