Outlook 2012: Insights and Perspectives from Ethanol Industry Executives

by Kris Bevill and Holly Jessen (Ethanol Producer Magazine) ...The challenges for cellulosic ethanol developers are daunting, but the executives representing those firms see the opportunities far outweighing the challenges and are quite optimistic for the year ahead. Indeed, all the executives in this series of outlook interviews are fundamentally optimistic. The industry is healthy and ready to face the challenges that 2012 will present. Read on to learn the particulars.

For every gallon of ethanol sold, that’s one gallon of gasoline that Big Oil doesn’t sell. And that, says Todd Becker, president and CEO of Green Plains Renewable Energy Inc., doesn’t make the petroleum industry happy. As a result, the renewable fuel standard (RFS) will remain under attack. “We’re going to have to fight vigorously to defend the RFS, because they are going to come after it,” he tells EPM.

Becker considers that battle the single most important issue facing the ethanol industry today.

...“If you blow up the RFS, you blow up any chance of next-generation fuels hitting the market,” he says.”I think that’s the basic issue at hand.”

...Another area where ethanol has found a market is blending with 84 octane gasoline—which, without ethanol’s octane boosting power wouldn’t even be allowed to leave the terminal. This is allowing refiners to switch over refining capacity to producing more conventional blendstock for oxygenate blending, commonly known as CBOB, which creates a market for ethanol producers, Becker says. READ MORE
Outlook 2012: Pleasant Surprises in 2011

...Record-breaking exports of ethanol were another pleasant surprise for 2011. “We knew we were going to produce probably somewhere around a billion gallons more than what the RFS required and that could be a real downer for prices,” he says. “But with the export opportunities to Brazil, Canada and Europe, we really had a nice balance between production and demand.”

...Wendland predicts the battle of misinformation about E15 will continue, as the industry works to get the fuel ready for sale at retail stations. Big Oil has been doing everything it can to keep that from happening. “If they could stall E15, they could create a reason to open up the RFS because there wouldn’t be a market for ethanol,” he says. “It really seems like they have made this a real important line in the sand that they are defending. They don’t want to give up any more of their market share so they are really pulling out all the stops to try to stop E15.” READ MORE
Outlook 2012: Patience is a Virtue

...It may seem like the Ineos project will have been a long-time coming when it begins to produce ethanol next year, but Williams suggests that that would be a misconception. While it may seem to some that there is a significant lag-time between project announcement and construction, the fact is these innovative facilities require a healthy dose of engineering and machinery design, all of which needs to be completed before any steel can be put in the ground. This is what Ineos and other project developers have been earnestly working on in the past few years as they prepare for commercial production, he says. So while there may not yet be many facilities to point to as proof of the cellulosic ethanol’s feasibility, Williams says a little patience may soon pay off as engineering activities are settled and construction projects take off. “It’s not like the IT industry. This requires engineering, it requires attention to all of the safety, health and environmental aspects,” he says. “There’s a certain timeline between discovery and commercial execution of the actual plant. There will be a gestation period and we have to allow companies the time they require to become a commercial reality.

...“You need the idea plus the ability to scale that idea, to engineer that idea, to convert it into a commercial reality. If you look at the three companies that have closed out on loan guarantees—Poet, Abengoa and ourselves—we’re all companies that have been able to bring existing capabilities to the process.”

As far as competition in cellulosic ethanol goes, the game is friendly for now because each company’s singular advancements provide a boost to the entire industry. READ MORE
Outlook 2012: Big First Step

...Now five years into the process, BP’s biofuels arm has more than 4,000 employees in locations around the globe and has invested hundreds of millions of dollars in the Brazilian and U.S. industries. And it’s just getting started.

...As with everything BP does, the decision to focus on energy cane and other tall grasses was a strategic one. Research funded by BP has shown that energy grasses can yield four times as much ethanol per gallon as corn, up to 2,000 gallons of ethanol per acre of feedstock. Also, energy grasses are particularly well-suited for growing in southern regions, which matches well with BP’s targeted area for biofuel production along the Gulf Coast. The citrus, cotton and rice producers along the lower Gulf Coast have struggled in recent years and Ellerbusch says the chance to partner with BP to grow energy grasses will offer a way to revitalize those communities. The company is currently scouting plant sites in Texas, Louisiana and Florida, knowing that it will take several years to establish the feedstock. “We’re going to start initially in the Gulf Coast—it has the right weather and climate—and look to move a bit further to the north, but still in the South, as we expand our portfolio of grasses,” she says. READ MORE
Outlook 2012: Taking 2G Technology to Task

...For a technology developer, the biggest selling point when seeking investors might be that the business model does not require hundreds of millions of dollars to build a production facility. The company’s success is beholden to someone else building the facility to use that technology, however, and, until they build it, the company is unable to prove its own technology and reap the licensing benefits of having a proven, successful process.

This is the situation of many technology developers in the cellulosic ethanol industry...

If your company’s business model is based on projects being built only in the U.S., your chances of attracting big investors are probably slim. “The reality is that the market is international,” Matlof says. “That’s where the biomass is. We don’t have nearly as much biomass as in the tropic regions. The real opportunity is outside of the U.S. and the lack of Congressional incentives with any teeth is ensuring that’s the case.” READ MORE
Outlook 2012: VEETC is Old News

...The Redwood City, Calif.-based company firmly believes the future is high-level blends and advanced ethanol.

...First-generation ethanol has done a fantastic job of filling the need for E10, Horton says. As the industry moves forward into 2012, however, there needs to be an aggressive and massive build out of infrastructure to handle higher blends of ethanol. Secondly, cellulosic and other advanced ethanol products need to begin entering the marketplace. “We’re at a critical transition point in the industry. We need to recognize that what got us to this point is not going to be able to carry us forward in a fast-growth kind of way that I think we want to see,” he tells EPM. “The industry is beginning to shift but we’ve got to come together and focus on the future of our industry. I believe that if we do that, the future for the ethanol industry is unlimited. We will become a true substitute for gasoline, and we will be the leading fuel in this country to offset imported petroleum.” READ MORE