Don’t Spill That Ethanol! Those Cellulosic Fuels Are Worth $4.33 a Gallon.
by Jim Lane (Biofuels Digest) The value of cellulosic fuels has reached $4.33 per gallon in the California market. That’s real-world, today, including the energy and the low-carbon attributes, and not based on speculation. The value has risen 59 cents, or 15.7 percent in the past 17 months.
The soaring fuel values are prompting at least two companies to substantively re-evaluate plans to de-emphasize, or even abandon renewable fuels as too costly to produce. Virent (now a subsidiary of Tesoro) and Velocys are two companies which have, subtly or more overtly, put fuels right back into the bullseye of their ambitions. And some highly-regarded first-gen ethanol operations, like Siouxland, are deploying Edeniq’s wonder tech to produce cellulosic ethanol from corn kernel fiber.
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Keep in mind that just a few years ago Velocys was one of the earlier companies to pivot towards the natural gas market — seeking the opportunities via a shift from biomass to natgas as a feedstock. The crack (or “crush”) spread in natgas had, with the plunging natural gas prices, outstripped the opportunities in biomass. But now, oil prices have plunged, fuel margins have compressed, and the importance of low-carbon fuels in the real-world, operating markets that have carbon pricing is gaining quickly.
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Should cellulosic capacity expand by more than 500 million gallons, we’d expect to see the California low carbon premium begin to climb down.
But. Canada’s. LCFS. Is. Coming. So, keep in mind that another major LCFS market will be opening up soon across Canada (B.C. already has one, but this would be 7-8X as large), and Canada is only about 30 percent smaller than the California market.
And, there continue to be rumors about a US East Coast LCFS. And we keep looking at the EU, and wonder when those guys will stop talking up a big carbon game and get a low-carbon transport policy together that grows a market instead of scaring it out of existence.
Bottom line, there’s plenty of room for cellulosic to grow before the value drivers lose their pricing power. READ MORE and MORE (Boston Business Journal 2009)
