New Technologies for Ethanol Production

What follows is a rather cursory summary of material presented in exhaustive detail in a report prepared for Visant Strategies and due to go on sale in March. It is a material which we believe to be of interest to both investors in alternative fuels and those developing new production technologies in this area.

The Conventional Wisdom

Ethanol has been consistently getting a lot more press than usual ever since George W. Bush gave it prominent mention in his State of the Union address in January. (Apparently, no one remembers that he previously pushed hydrogen as the fuel of the future and then inexplicably stopped promoting it.) Scientific American had a cover story on Ethanol in January, and U.S. News and World Report in the first week of February. You can’t get much more au courant than that.

Neither cover story was what ethanol supporters would want to see in mass circulation journals, however. Both expressed doubts as to the inevitability of ethanol’s supremacy as a gasoline replacement, and both stated rather emphatically that current corn based production could not be expanded to levels remotely equivalent to the current flow of gasoline out of the oil refineries. Both also suggested that the farm lobby was the prime mover behind the ethanol initiative.

In addition, both articles gave cursory mention of cellulosic ethanol, which, interestingly, also figured in the State of the Union address. Bush, of course, gave a ringing endorsement to cellulosic ethanol production while the authors of the two cover articles allowed that it might be the answer, pending further research.

So the emerging conventional wisdom is that producing ethanol from corn is an aggie boondoggle while production of cellulose is the real solution. Here’s our take on the matter.

The Unconventional Wisdom

One of my old editors, who himself derived unholy glee from agitating journalistic hornets’ nests, used to delight in telling me that good journalism is about stirring up controversy. “Readers don’t want some bland statement of the facts,” he would say with a fiendish grin. “They want blood. So give them blood and throw in some facts so they don’t choke on the blood.”

It was good advice generally, and I’ve tried to follow it. Dish up some bright red arterial blood along with some solid research, and you’ve got a good article. So I would dearly like to get the blood flowing right away by making some outrageous statement to the effect that cellulosic ethanol is horseshit. Stir up the controversy, take the contrary position, defy conventional thinking.

But it just ain’t that simple. Sure the blood would flow freely, but the statement wouldn’t be strictly factual. The fact is that cellulosic ethanol is not a sure bet, but it does represent a much more plausible approach or approaches than an exclusive reliance on grain. Corn based ethanol may serve as an octane booster, but it won’t replace gasoline on an even modest scale. You can take that to the bank. In fact, grain alcohol is not even worth talking about as a long term energy strategy. On the other hand, cellulosic ethanol may indeed replace pump gas, though my bet is that it won’t, at least in most places.

An Inconvenient Fact

Aren’t they all? Here’s a really inconvenient fact for people hyping cellulosic ethanol. In certain respects there’s simply no such thing.

Cellulosic ethanol is an almost uselessly loose term referring to any of a number of different techniques for taking cellulose, the fibrous structural material in vascular plants, and making ethanol out of it. Cellulose, like starch, is a long chain molecule made up of a multitude of shorter sugar molecules, and, if you can separate those sugar molecules, you can ferment them to produce ethanol.

Now the several techniques for reducing cellulose to sugar are most definitely not equivalent to one another; they have different chemistries, different feedstock and equipment requirements, and almost certainly different economics, and, furthermore, they’re in heated competition with one another which is why it’s so misleading to speak of cellulosic ethanol as if it were some unitary entity. Maybe more than one will establish itself in the marketplace, but that’s unlikely. Maybe none will succeed at all.

Second inconvenient factoid supporting the notion of “no such thing”: Except for a single plant in Japan, nobody is making cellulosic ethanol on an industrial basis. There’s a couple of plants under construction elsewhere, but most of the companies claiming intellectual property having to do with cellulosic processes are still trying to raise money to build second stage pilots. Cellulosic ethanol is not happening in any real commercial sense. Supposedly it’s just around the corner, but it’s been just around the corner since the nineteen twenties when it was first seriously proposed for industrial scale production.

Does that mean it won’t happen? Not necessarily. What it means is that it assuredly will not happen quickly. Two plants under construction are so utterly meaningless in terms of the needs of the global transportation industry for liquid fuels that that the whole discussion would be positively hilarious if the possibility of serious shortfalls in conventional liquid fuels were not so real.

Knock on Wood

In the strictest sense cellulosic ethanol refers to production processes based upon hydrolysis, that is, chemical reactions involving water. Most extant techniques use water based solutions containing the cellulosic feedstock and either specialized enzymes or strong acids.

The acid hydrolysis techniques can be further segmented into two smaller groupings, those using concentrated acid and those employing dilute acid. In both cases sulfuric acid is the favored reagent.

Enzymatic hydrolysis techniques, which get most of the press today as well as most of the investor support, can also be placed into two fairly distinct subcategories, those that use packaged enzymes, either purchased from a third party or manufactured in separate facilities, and those that introduce organisms into the solution which then secrete the desired enzymes, acting as little bio-refineries as it were.

The virtue of any and all of these techniques is that they free the ethanol producer from reliance upon expensive feedstocks such as grain, sugarcane, sugar beets, and other food crops. Instead the distiller can make use of much lower value plants and plant materials such as various grasses, fast growing trees, forest wastes, wood wastes from manufacturing, agricultural wastes such as corn cobs, and even municipal landfill containing paper and other undissolved cellulose or hemicellulose.

Unfortunately, some of the proposed cellulosic production techniques have trouble processing the closely related hemicellulose, a secondary structural material in vascular plants which can also be rendered into ethanol. Furthermore, most will not work properly with wood waste from softwoods such as pine and fir. Since a great deal of wood production and processing does involve softwoods, that deficiency eliminates a huge potential resource. The same could be said of hemicellulose which accounts for much of the biomass in vascular plants.

I should mention here that plants contain a further principal constituent element called lignin which binds the cellulose and hemicellulose into tight bundles and protects them from exposure to the external environment. Lignin cannot be transformed into ethanol via hydrolytic processes because, unlike cellulose and hemicellulose, lignin is not made up of simple sugars, so what it represents is a form of waste. Lignin, incidentally, is essentially the stuff that holds a plant together, and it resists attacks from heat, caustic chemicals, and physical force. Lignin is impervious to most enzymes, and thus in order to expose the cellulose and hemicellulose, the plant operator must pre-condition the feedstock in some way. Use of steam, bleach, and acids are common methods for stripping lignin from the underlying fibers.

By this time you might be arriving at the notion that plant materials are not inclined to be very cooperative in rendering up their resources of cellulose and hemicellulose for ethanol production. And if that’s your thought, you would be right.

If, for instance, you’re going to resort to the brute force methods employing acids, you’ll find yourself spending a lot to purchase those gallons and gallons high strength, high purity sulfuric acid, more money for chemicals to neutralize what acid you can’t reclaim, and yet more money on gas and electricity to maintain the high heat and pressure necessitated by these processes. You’ll also have to invest in expensive processing equipment that is resistant to pressure and corrosion. Acids have been shown to work for over 100 years, but, for the above stated reasons, the economics have never looked particularly good. The handful of companies still pushing acid today claim that the economics have improved and maybe so, but after a century of market failure it’s a hard sell.

What about enzymes? The D.O.E. appears to be betting on enzymatic hydrolysis, and so is the investment community. So also is a single large incumbent ethanol producer, Abengoa of Spain, which is building a huge facility in Europe, due to open in a few years. But one can also make a case for betting against this technology. Enzymatic processes carry a very high capital cost, and the enzymes themselves are expensive if one chooses to buy them from a major vendor like Diversa or Novozymes, though prices have come down quite a bit. Another problem that we see with enzymes that does not appear very amenable to any near term solution is the lengthy period of time required for the enzymes to do their work—generally several days for processes that have been reported in scientific papers. That means that for a facility of a given size a relatively small number of gallons ethanol is emerging on an average hourly basis. Sure, you can just make the plant bigger and increase production that way, but then up goes your capital cost.

A lot of people will be watching Abengoa to see if they make a go of it. If they do, a great deal of enzymatic hydrolysis capacity will get built, and fairly quickly, I’m assuming. If not, the alternative energy business will get another black eye which it sure as hell doesn’t need.

Quasi-cellulosic Ethanol

I love the word quasi. If something is quasi, it kinda is but not quite. So if you’re quasi you literally get to try out an identity. If that’s not cool, what is?

So what’s quasi about the quasi cellulosic production methods? It’s that, while they do convert the cellulose into ethanol, albeit by a roundabout chemical pathway, they also convert damned near everything else into ethanol—the hemicellulose, the lignin and whatever other hydrocarbons are present in the biomass.

So quasi-cellulosic sounds a whole lot better than just plain cellulosic. Well, maybe.

There are basically two quasi-cellulosic ethanol production methods out there, gasification and anaerobic digestion. Both have their strengths and both have their weaknesses, and it’s not entirely clear at this point if those weaknesses do not exceed those of the hydrolytic production techniques.

Gasification and Ethanol from Syngas

Gasification is a process discovered way back in the seventeenth century and used to produce fuel since the beginning of the nineteenth century in the form of coal gas or town gas, as it was called. The basic process is simple: you take a hydrocarbon such as coal or biomass, subject it to incomplete combustion at high temperatures and pressures, and, voila, you get this noxious stuff called producer gas consisting of hydrogen, carbon monoxide, and some carbon dioxide.

The exact chemical composition of the producer gas will depend upon that of the feedstock. If you start with something with a lot of hydrogen like natural gas, you end up with roughly two parts hydrogen and one part carbon monoxide and very little CO2. Start with wood or most forms of biomass, and the ratio of hydrogen to carbon monoxide goes way down, which isn’t good.

When you clean up the producer gas, removing the CO2, char, heavy metals, and other crud, and add hydrogen if you need to, you end up with syngas, short for synthesis gas, which is simply two parts hydrogen to one part carbon monoxide. Syngas is a useful, low pollution fuel all by itself, and it can be rather easily converted into methanol, ethanol, ammonia, diesel oil, gasoline, and kerosene. It’s what is called a chemical precursor.

Gasifiers themselves are remarkable for their overall lack of design maturity after more than two hundred years of deployment in the field. A multitude of design variants having to do with basic configuration are extant including entrained flow, fluidized bed, slurry bubble, supercritical steam, and plasma types, and no one design has achieved a reputation for indisputable superiority and each has its advantages and disadvantages. Still other design variations involve whether pure oxygen or atmospheric air is used in the combustion process. Typically, gasifiers tend to be specialized for use with one particular feedstock, a fact which contributes to the considerable design diversity.

Most of the sales activity in gasifiers involves large units intended for use with coal feedstocks. These are produced principally by Lurgi and General Electric. Literally hundreds of lesser companies round out the market, most manufacturing smaller units intended to run off biomass. These are widely used in developing nations to run syngas gensets for distributed electricity. Very few have been employed to make liquid fuels, however, even on an experimental basis.

While coal gasification may be said to be a mature technology, biomass gasification is fraught with difficulties. A massive industry in small scale wood gasification sprang up during World War II to provide producer gas to power motor vehicles in the face of wartime shortages of petroleum fuels, but that industry largely collapsed in the early postwar period and it did not result in the emergence of reliable designs. Indeed, biomass gasifiers have always been plagued with problems of rapid residue buildup and the consequent necessity of frequent teardowns and cleaning operations. Such problems may be tolerable when the gasifier is serving a need for remote power generation on an intermittent basis, but when the gasifier is part of high volume industrial production line for manufacturing liquid fuel, low availability and high maintenance requirements are intolerable. This in large part explains the paucity of biomass gasification facilities in the production of alternative fuels.

There are two ways make ethanol out of syngas—run it through a series of catalysts or expose it to certain microbes. Several companies favor the first approach including Pearson Technologies, Phoenix Biofuels, Syntec, and others, while only BRI (Bioengineering Resources, Inc.) is attempting to commercialize the other strategy, the one involving bugs.

Gasification of both coal and biomass has been extensively covered in the scientific literature, and the news is not good in regard to biomass. Gasification of biomass certainly can be done, but most of the cost estimates to date are two to three times as much as for refined petroleum products of equivalent energy content. We have seen credible claims from Volkswagen recently indicating that a cost breakthrough may have been achieved, primarily due to a new design of gasifier from a European firm named Choren, so perhaps there’s hope. It must be noted, however, that Volkswagen’s SunFuel program, which employs Choren gasifiers, is dependent upon the continued availability of ultra-low cost municipal wastes. As production volumes increase, the cost of this feedstock could rise sharply since the supply is not unlimited.

As to the relative merits of bug-based versus catalyst-based conversion of syngas to ethanol, we simply don’t know since commercial demonstrations of either technology are lacking. Catalysts are easily poisoned by contaminants, and contaminants are difficult to remove from bio-syngas, but, conversely, microbes provide relatively low conversion efficiencies. A lengthy University of Eindhoven study suggests that microbial conversion is the preferred technique, but the same study cites overall poor economics as compared to oil refining.

Digesters, Aerobic and Anaerobic

Anaerobic digesters are devices that convert biomass—often though not always municipal or agricultural waste—into methane gas through the agency of certain anaerobic bacteria which perform their functions only in the absence of oxygen. Such bio-methane is generally too contaminated to utilize right out of the digester and must subsequently be “scrubbed” by one means or another. The resulting purified methane may then be burned directly in a microturbine or natural gas piston engine and used to produce electricity, or, alternately, used as a chemical feedstock.

Aerobic digesters, which are entirely experimental at this time, utilize micro-organisms that breathe oxygen.

Anaerobic digesters are unglamorous and evil smelling devices that are yet one of the singular success stories of the whole alternative fuels industry. Thousands upon thousands are used on farms and waste dumps throughout the U.S. and Europe because they work and because they’re cheap. Such a device is located a few hundred yards from where I sit, and it has been operating reliably and profitably for the past twenty years. It runs on gas from a landfill and dumps electricity into the grid.

Digesters are relatively inexpensive both to build and to operate, but traditional designs have poor conversion efficiencies in the 50% range. Recently, however, a number of innovative designs have been developed which are said to convert over 80% of biomass into bio-gas, a much higher figure than has been achieved by any gasifier.
Such a high efficiency anaerobic digester could be used to produce ethanol by first converting the methane into syngas via the familiar steam reformation method but the economics of such a pathway are uncertain. Better I think to produce methanol from methane and then convert that into gasoline via the Mobil catalytic process. One’s other choice is to use a proprietary technology developed by MixAlco in Texas which dispenses with syngas conversion altogether and produces mixed alcohols from the methane through an entirely different chemical pathway.

MixAlco is startup founded by a Texas A&M professor named Mark Holtzapple and to date has only constructed a small pilot plant. As Holtzapple himself is quick to admit, the economics of the process are unproven in any full scale commercial operation. Nevertheless, MixAlco’s claim that the process can accommodate a large variety of low value high moisture feedstocks and that mostly off the shelf parts may be used to build the low temperature, low pressure processing units is encouraging. As Holtazpple himself puts it, “our process uses low tolerance wastewater treatment technology, while the enzymatic hydrolysis guys are employing costly pharmaceutical industry equipment on a very large scale.”

For a number of reasons we think anaerobic digesters are apt to play a large part in the future of biofuel. They’re cheap, they work on a small scale, they tolerate many different feedstocks, and they don’t require the constant teardowns and labor intensive residue removal procedures associated with gasifiers. The methane that they produce must be cleaned, but there are a number of fairly low cost procedures for doing, that and you’re not wrestling with the highly toxic vapors you get with gasifiers.

The real drawback is the very slow processing speed, and there’s really no getting around that. Microbes like to take their time, and any attempt to speed up the process with enzymes is going to add a big cost item to the process.

No Silver Bullet

Cellulosic ethanol production techniques may or may not prove themselves cost effective. We won’t know for certain for years. Investing in a company with novel processing technique is a lot like investing in a pharmaceutical startup. The payoff, if any, is years away. It should be noted, however, that nobody to date has a launched a big IPO off a biofuel startup. Biofuel is a fairly hot market, but it’s not showing true bubble tendencies as yet.

One final note: we haven’t seen any new entrants in the hydrolysis space for a long time. Most of the startup activity currently involves gasifiers and other high temperature reactors. Whether that represents a shift in the direction of the ethanol industry remains to be seen, however.

Ethanol Issue

This is an excellent article; must reading for all government officials and VC’s who would invest in these industries. It's comprehensive and right on all the facts. If you read between the lines, you see why it’s so difficult to pick a ‘winner’ new great new idea in energy technology.