Cellulosic Ethanol ‘Floodgates’ May Open in 2013, Poet LLC Says

Cellulosic ethanol output may surge starting in 2013, when the first commercial-scale plants “open the floodgates” for the fuel, according to the largest U.S. corn-based biofuel producer.

Poet LLC plans to start production in 2013 at a 25 million- gallon-a-year plant in Iowa and secured a $105 million conditional loan guarantee from the U.S. Energy Department this year, said Greg Hartgraves, the company’s director of research. Competitors BP Plc (BP/) and Abengoa SA (ABG) also plan facilities by that year for the fuel, made from inedible grasses and crop waste.

“My hope is by 2013 when we start seeing some of these plants come online, that will open the floodgates,” Hartgraves said today in a telephone interview from Sioux Falls, South Dakota, where Poet is based. The company is the country’s biggest corn-based biofuel maker by installed capacity.

The U.S. hasn’t been able to meet federal mandates established under a 2007 energy law to blend cellulosic ethanol with gasoline because insufficient quantities have been available. The Environmental Protection Agency has had to reduce the target figure for blenders by more than 90 percent during the past two years. The annual mandates run through 2022.

“We will ultimately meet the mandate, and that of course requires a consistent federal energy policy,” Hartgraves said, declining to say when this could happen.

Policy Needs

The government needs to provide investors with confidence the ethanol mandates won’t be scrapped, he said.

“Even if the technology plays out like we believe it will, it’s still not an inexpensive technology, and financing is not a trivial matter,” he said. “Without that consistent energy policy, it becomes risky for people to invest or finance these opportunities.”

Cellulosic ethanol differs from conventional ethanol because it is made from substances such as corn stover, rather than the edible part of crops.

Poet’s first cellulosic ethanol plant, dubbed Project Liberty, is being built in Emmetsburg, Iowa, next to an existing ethanol plant. All Poet’s 27 refineries use corn to make ethanol, meaning there’s potential to build a cellulosic plant next to each to make use of the stover, said Hartgraves.

“We’re already looking at what the next plant is going to look like,” he said.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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