New Cellulosic Ethanol plant in Colorado near Denver
While traveling through the Colorado mountains on the way to Steamboat
Springs this winter, I noticed that a growing number of the evergreens
have taken on a rusty shade of brown. This is a result of mountain pine beetle damage
which has claimed more than a million acres of lodgepole pine trees in
Colorado and threatens to kill virtually all mature lodgepole pines in
the state in the next 3 to 5 years.
I was curious about the eventual outcome of these trees because dead trees pose a significant wildfire threat as they allow fires to quickly spread out of control. I thought that the state should provide some incentive for the trees to be harvested and used either for heating or some other commercial use before they go up in smoke and take mountain properties with them. So I asked my friend, Dan Bihn, a leading expert in renewable energy and biomass, if there were any plans along those lines. I was surprised to find that despite the fact that these trees are dead and would be better off harvested, the cost of doing so makes it impractical. Part of it stems from the fact that Colorado doesn’t have much of a logging industry and there are no access roads to go in and remove the trees once they have been cut. And building logging roads is controversial because it induces people to go 4-wheeling in areas that were previously off limits.
In this week’s Rocky Mountain News, there was an article about converting these dead trees to ethanol with a new cellulosic ethanol plant near Denver to be built by Lignol Innovations and Suncor. The cost of the plant will be $88 million, including a $30 million grant from the Department of Energy. The annual output will be 2 million gallons per year (MGPY) of ethanol from processing 100 tons of wood per day, including lodgepole pine trees that have been killed by the mountain pine beetles. I began to do the math on this and realized that this plant, despite costing nearly 50% more than the $60 million Front Range Energy corn ethanol plant I wrote about previously, will produce ethanol at only 1/20 the rate of the corn ethanol plant. Of course, the wood should be nearly free, which would help with profitability. The price per bushel of corn is starting to approach the ethanol price that can be produced from it. If there wasn’t a ready market for the wet distiller’s grain as livestock feed, it might be difficult to make a profit from corn-based ethanol. Firewood in this area costs around $200/cord and each dry cord of pine weighs about a ton, so if the plant had to pay that much for wood, it would exceed the value of the ethanol produced by a factor of two.
In the case of the cellulosic ethanol, I thought I’d
do a quick comparison to the BTU ratio of energy in vs. energy out just
to see as a percentage how much wood is being converted to ethanol. At
2 MGPY, the daily output of the plant would be about 5500 gallons per
day. This is equivalent 420 MBTU/day in ethanol. The input to the
process in the form of 100 tons of wood, using a value of 6500 BTU/lb,
would represent an energy content of about 1300 MBTU/day. This means
that the ethanol energy coming out is about 1/3 of the wood energy
going in. It makes one wonder if it wouldn’t be more advantageous to
grind up these trees into pellets and use them for home heating,
although the potential demand for wood pellets is not as high as for
ethanol. There is another byproduct of this process called lignin
which is used to make lubricants, but I’m not sure how much value that
adds overall to the process. Also not stated in the article or on
Lignol’s website is whether the plant uses an external source of fuel
like natural gas, or if a portion of the wood can be used to generate
the heat required by the process. If all the heat and electricity
could be generated by a portion of the wood that is used as input to
the process, it can have a very high overall energy balance. That’s
particularly important because critics of the ethanol industry like to
point out that there are fossil fuels used in its production, so energy
balance and carbon dioxide from fossil fuels works to counteract the
benefits of the renewable nature of the ethanol’s raw materials.
Making 2 million gallons (approximately $4M worth) of ethanol per year would have a very long payback on $88M investment even if the raw materials were free. Not taking into consideration paying the plant’s staff or the interest on the investment, it would take over 20 years to pay for itself. If the investment had only a 5% interest rate that would require more than $4 M/year in debt service, so it would not even be a break even endeavor. I’m pretty sure that much of the justification behind this plant is as a proof-of-concept since the Lignol technology has only been demonstrated at a pilot-scale facility in British Columbia previously.
Range Fuels of Broomfield, Colorado was also mentioned in the article. Range Fuels has a process for converting cellulosic material to ethanol, but decided that the source of wood in Colorado was not reliable enough to locate a plant in Colorado because the wood is spread over thousands of square miles. The reason they located their first plant in Georgia was to be where raw materials from the forestry industry are more readily available. The initial production at the Soperton, Georgia plant is expected to produce at 20 MGPY initially and is planned to ramp to 100 MGPY eventually. The cost of the Range Fuels initial plant is expected to be $225M so although it will cost 2.5 times as much as the Lignol plant, it is expected to produce 50 times as much ethanol per year when at full capacity.
Ethanol has perhaps the best potential to transition society from its gasoline addiction. E85 ethanol can be used today in any flex-fuel vehicle as a gasoline substitute. E85 is available for 20 to 30% less than the price of gasoline at some gas stations in Colorado. It is hoped that with increased ethanol demand there will be an increase in cellulosic ethanol research to help stimulate the supply. Using cellulosic material to make ethanol would remove a common objection people have to using corn-based ethanol, i.e., it is made from a food source which increases food prices. Having said that, I’ll explain in a future article why corn today represents a reasonable feedstock for the ethanol industry while working toward cost breakthroughs on cellulosic ethanol production.
I was curious about the eventual outcome of these trees because dead trees pose a significant wildfire threat as they allow fires to quickly spread out of control. I thought that the state should provide some incentive for the trees to be harvested and used either for heating or some other commercial use before they go up in smoke and take mountain properties with them. So I asked my friend, Dan Bihn, a leading expert in renewable energy and biomass, if there were any plans along those lines. I was surprised to find that despite the fact that these trees are dead and would be better off harvested, the cost of doing so makes it impractical. Part of it stems from the fact that Colorado doesn’t have much of a logging industry and there are no access roads to go in and remove the trees once they have been cut. And building logging roads is controversial because it induces people to go 4-wheeling in areas that were previously off limits.
In this week’s Rocky Mountain News, there was an article about converting these dead trees to ethanol with a new cellulosic ethanol plant near Denver to be built by Lignol Innovations and Suncor. The cost of the plant will be $88 million, including a $30 million grant from the Department of Energy. The annual output will be 2 million gallons per year (MGPY) of ethanol from processing 100 tons of wood per day, including lodgepole pine trees that have been killed by the mountain pine beetles. I began to do the math on this and realized that this plant, despite costing nearly 50% more than the $60 million Front Range Energy corn ethanol plant I wrote about previously, will produce ethanol at only 1/20 the rate of the corn ethanol plant. Of course, the wood should be nearly free, which would help with profitability. The price per bushel of corn is starting to approach the ethanol price that can be produced from it. If there wasn’t a ready market for the wet distiller’s grain as livestock feed, it might be difficult to make a profit from corn-based ethanol. Firewood in this area costs around $200/cord and each dry cord of pine weighs about a ton, so if the plant had to pay that much for wood, it would exceed the value of the ethanol produced by a factor of two.
In the case of the cellulosic ethanol, I thought I’d
do a quick comparison to the BTU ratio of energy in vs. energy out just
to see as a percentage how much wood is being converted to ethanol. At
2 MGPY, the daily output of the plant would be about 5500 gallons per
day. This is equivalent 420 MBTU/day in ethanol. The input to the
process in the form of 100 tons of wood, using a value of 6500 BTU/lb,
would represent an energy content of about 1300 MBTU/day. This means
that the ethanol energy coming out is about 1/3 of the wood energy
going in. It makes one wonder if it wouldn’t be more advantageous to
grind up these trees into pellets and use them for home heating,
although the potential demand for wood pellets is not as high as for
ethanol. There is another byproduct of this process called lignin
which is used to make lubricants, but I’m not sure how much value that
adds overall to the process. Also not stated in the article or on
Lignol’s website is whether the plant uses an external source of fuel
like natural gas, or if a portion of the wood can be used to generate
the heat required by the process. If all the heat and electricity
could be generated by a portion of the wood that is used as input to
the process, it can have a very high overall energy balance. That’s
particularly important because critics of the ethanol industry like to
point out that there are fossil fuels used in its production, so energy
balance and carbon dioxide from fossil fuels works to counteract the
benefits of the renewable nature of the ethanol’s raw materials. Making 2 million gallons (approximately $4M worth) of ethanol per year would have a very long payback on $88M investment even if the raw materials were free. Not taking into consideration paying the plant’s staff or the interest on the investment, it would take over 20 years to pay for itself. If the investment had only a 5% interest rate that would require more than $4 M/year in debt service, so it would not even be a break even endeavor. I’m pretty sure that much of the justification behind this plant is as a proof-of-concept since the Lignol technology has only been demonstrated at a pilot-scale facility in British Columbia previously.
Range Fuels of Broomfield, Colorado was also mentioned in the article. Range Fuels has a process for converting cellulosic material to ethanol, but decided that the source of wood in Colorado was not reliable enough to locate a plant in Colorado because the wood is spread over thousands of square miles. The reason they located their first plant in Georgia was to be where raw materials from the forestry industry are more readily available. The initial production at the Soperton, Georgia plant is expected to produce at 20 MGPY initially and is planned to ramp to 100 MGPY eventually. The cost of the Range Fuels initial plant is expected to be $225M so although it will cost 2.5 times as much as the Lignol plant, it is expected to produce 50 times as much ethanol per year when at full capacity.
Ethanol has perhaps the best potential to transition society from its gasoline addiction. E85 ethanol can be used today in any flex-fuel vehicle as a gasoline substitute. E85 is available for 20 to 30% less than the price of gasoline at some gas stations in Colorado. It is hoped that with increased ethanol demand there will be an increase in cellulosic ethanol research to help stimulate the supply. Using cellulosic material to make ethanol would remove a common objection people have to using corn-based ethanol, i.e., it is made from a food source which increases food prices. Having said that, I’ll explain in a future article why corn today represents a reasonable feedstock for the ethanol industry while working toward cost breakthroughs on cellulosic ethanol production.
Is Corn Getting too Expensive?
You don't have to own an ethanol stock to know that the media and the people who believe what they have to say have become apoplectic in their disdain for ethanol over the past year. Many pundits are parroting each other and blaming ethanol as the root cause for rising food prices and worldwide food shortages. They do this with such conviction that you'd think they must spend their free time collecting bushels of corn to donate to starving people of the world when they are not pontificating on the topic. There's only one problem with their assertions: They are...Headlines:
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