Cost hurdles in ethanol production and how some firms are at the leading edge of innovation

Author’s note: The following text in the block quote is derived from Biomass to Biofuels: Strategies for Global Industries, Chapter 13, Fuel Ethanol Production From Lignocellulosic Raw Materials Using Recombinant Yeasts (Grant Stanley and Barbel Hahn-Hägerdal), March 2010 (WILEY).  

This formed the basis for the opinions and subject matter covered in this article.

A challenge to creating a sustainable biomass-to-biofuels industry is that the removal of inhibitors [which fall into 4 groups: aldehydes, ketones, phenols, and organic acids] by physical or chemical means is not currently cost effective.“Converting all pentose sugars to ethanol would reduce production cost of bioethanol by as much as 22% , so considerable research is being made in developing microorganisms that efficiently ferment both hexose and pentose sugars to ethanol.”  (Pg 260)

Historically, ethanol production has relied upon a multi-step production process:

Lignocellulose biomass -> pretreatment -> hydrolysis -> fermentation -> distillation -> ethanol -> distribution

Each step uses distinct enzymatic components and process mechanics. And each step adds layered cost for the producer, which is passed on to the end consumer. A manufacturing approach called Consolidated Bioprocessing (CBP) aims to reduce the costs in the production chain by consolidating cellulose production, hydrolysis and fermentation steps into a single operation.  The desired effect is a significant reduction in production cost, that would result in producers subscribing to CBP having more market power.  With a streamlined, cost-effective production process, producers can reap higher margins on produced ethanol, or influence market price through a low-cost provider pricing strategy to gain market share.  In other words, CBP is a significant competitive advantage for a producer.

A New Hampshire company, Mascoma, founded by Dartmouth biofuel pioneers Charles Wyman and Lee Lynd, has created a cost-effective CBP production process for cellulosic ethanol.  A visual depiction of this process can be found here.

Mascoma has flirted with the IPO process, even committing a filing to the SEC.  Here’s a brief summary.  Regardless of what happens with the IPO process, Mascoma’s production process and research will positively impact the cellulosic ethanol industry for years to come.

Other firms are making similar strides.  QTEROS, a Massachusetts engineering firm, has developed a CBP platform which should expedite commercialization of cellulosic ethanol.  Here’s a brief description of that platform.  QTEROS partnered with a Pune, India-based Praj Industries Ltd. in 2011 to develop CBP processes in Indian ethanol plants.  Praj is a bioprocess engineering and consulting firm with a large footprint in India.  Praj is publically traded on the National Stock Exchange of India.

Both QTEROS and Mascoma have active partnerships with some “big oil” names, including BP’s Alternative Energy fund (QTEROS), and VALERO (VLO), who has partnered with both firms.  More about Mascoma’s partners here.

Other firms are looking at processing improvements to enhance ethanol yield, outside of CBP.  Virdia, a California firm, has developed a process known as the CASE process to enhance the sugar yield from woody biomass.  More about this here.  Upstream processing innovations aimed at reducing production cost with the aim of enhancing producers’ market power will continue at a furious pace.

Summary

Companies that reengineer processes to CBP will see production efficiencies and lower costs, enabling higher margins, or allowing them to cut cost to gain market share.  QTEROS will help existing companies effectively scale from pilot plants to full commercialized volumes via their CBP platform, as will Praj in India. Mascoma will provide the enzymatic components and processes, and downstream producers like Valero, BP, and, presumably, some of the larger ethanol producers like POET, Archer Daniels Midland, Green Plains Renewable Energy, Flint Hill Resources and Abengoa.

Sources:

• Mascoma (website)

• Biofuels Digest

• QTEROS (website)

• Praj (website)