Federal Loan Programs Ill-Suited for Cellulosic Ethanol

by Cole Gustafson (Prairie Business Magazine) ... In addition to problems on Wall Street following the collapse of the financial markets, cellulosic biofuel producers have lacked standard benchmarks of performance like those used in grain corn ethanol plants (1 bushel of corn yields an industry average of 2.81 gallons of ethanol). Federal loan programs have also not been tailored to the size and scope of next-generation biofuel plants.

...The Mascoma Corporation, which is at the forefront of cellulosic ethanol development, recounted that it had contacted nearly 200 lenders in an effort to obtain financing, but found only two who would work with it.

...Coskata Inc. presented a list of 12 diverse technologies to produce cellulosic biofuel. It argued that a wide range of feedstocks should be considered viable for conversion to biofuel. The company said this would broaden geographic opportunities and reduce market pressure on a single commodity. As it is, the productivity of different feedstock and technology combinations are difficult to discern and create anxiety on the part of lenders searching for production benchmarks.

...The amount of loan funding available also is in question. Federal loan programs require a minimum of 30 percent private capital from commercial lenders or equity. However, in the present lending market, lenders are reluctant to go this far with unproven technology.

...Cellulosic ethanol developers are especially envious of the renewable electricity industry. In addition to tax credits, the wind and solar industries have an option of converting those monies into direct grants. READ MORE