A recent announcement by BlueFire Ethanol Fuels that it is relocating a planned biorefinery from Riverside County, Calif. to Fulton, Miss. highlights some of the issues that potential cellulosic ethanol plants are facing. Cited as the reasons for the relocation: timing and taxes.
In 2007, BlueFire was awarded a $40 million grant from the Department of Energy (DOE) to construct the facility. The DOE’s intention in awarding these grants was to fast-track development of cellulosic ethanol. Licensing for BlueFire’s first plant in Lancaster, Calif. took 20 months, however. The DOE wanted the facility up and running faster than this 20-month process would allow.
As a result, BlueFire began searching for other locations in states that didn’t require the lengthy licensing procedure. According to Arnold Klann, President and CEO of BlueFire, “The Economic Development people in Mississippi, and in Itawamba county, welcomed us, and facilitated the project in every way.” The company now expects the permitting process to be done by March of 2010, nine months after starting the process.
Another issue with building the plant in Calif. was the state’s economic issues. Recent budget problems precipitated a rise in tax bills for the facility—what would have been an $8.3 million tax bill became a $9.3 million tax bill overnight.
A broader issue, one that all cellulosic ethanol projects face, is financing. To get financing, a company must demonstrate that the risks inherent in the business are manageable. By signing long-term off-take agreements prior to seeking financing, for instance, the company can assure its investors that revenue will be stable, thereby mitigating the risk on the demand side.
By using Forest2Market’s bioenergy feedstock price index, which is customized to a facility’s supply shed, companies can also mitigate the risk of feedstock price changes. The index takes all the components of delivered wood fiber prices and ties them to established indexes and price databases. By using this index in both supply and off-take agreements, bioenergy companies can share the risk associated with feedstock prices with their suppliers and purchasers.
While some of the risks can be successfully controlled, one risk cellulosic ethanol companies have not been able to mitigate or share is the risk that the technology won’t work. This second generation ethanol has yet to be produced on a commercial scale. Projects underway have missed multiple deadlines. Range Fuels, for instance, which has been long touted as first in line to become commercially viable, missed deadlines in both 2008 and 2009. A recent report suggests the plant is about half completed. The plant is scheduled to be operational in 2010, though the date is certainly in question.
One reporter, Katie Fehrenbacker, has likened following celluslosic ethanol development to watching the grass grow. As Range Fuels demonstrates, progress for production is slow despite all the incentives being offered by federal and state governments, and proving the technology will continue to be the biggest obstacle. Until this happens, the U.S. is unlikely to meet the renewable fuel standards (set by Congress in 2007) of 100 million gallons by 2010—most peg the output for 2010 at a few million gallons. The standard rises to 250 million gallons in 2011.
We'll continue to track progress at the following cellulosic ethanol projects, which will use wood and/or wood waste as part or all of their feedstock.
Suz-Anne Kinney
Forest2Market: July 14, 2023
