In recent weeks, Gevo flipped the switch on its first commercial-scale facility making advanced biofuels and renewable chemicals. Retrofitting a brownfield ethanol facility in Minnesota to produce isobutanol from corn starch, a chemical that packs more energy than conventional corn-starch ethanol, the development may signal the beginning of the next wave of bioenergy innovation.
Principally designed to do one thing – ferment large quantities of corn starch into millions of gallons of ethanol – first generation production facilities are inefficient energy users and produce a great deal of waste. Retrofitting first generation ethanol facilities, which are prodigious consumers of electricity and water, is proving to be a bankable (read: “capital light”) strategy for ramping up production of biofuels while reducing the industry’s environmental footprint.
In a typical ethanol retrofit, innovative conversion processes and technologies are “bolted onto” existing assets to create an integrated biorefinery. Modeled after petroleum refineries, integrated biorefineries use biological matter to produce a range of end-products: transportation fuels, chemicals, and heat and power. These facilities are designed to be more efficient, sustainable, and profitable than first generation corn-starch ethanol refineries. Gevo’s 12 million gallon per year facility is just one of several integrated biorefineries arising from the ashes of first generation ethanol.
Accounting for around 10% of U.S. liquid fuel consumption in the transportation sector, corn starch-derived ethanol is a well-entrenched juggernaut in the global alternative energy landscape. As discussed in Pike Research’s Biofuels Markets and Technologies report, the United States currently leads all countries in ethanol production with nearly 13.9 billion gallons per year in 2012 (Brazil is next with an estimated 7.3 billion gallons). The industry grew 720% between 2000 and 2010, with strong foundational support from an even stronger agricultural lobby. From a pure growth perspective, it has been hailed as the most significant success story in American manufacturing.
But despite ethanol’s rapid rise in the United States, the industry has faced significant backlash in recent years. This opposition has stoked heated debate both inside and outside the industry. From contributing to increases in food prices, causing indirect land use change (ILUC), and exacerbating efforts to reduce greenhouse gas (GHG) emissions, first generation ethanol has become a punching bag for environmentalists and tech-oriented clean energy enthusiasts alike.
Policy momentum has shifted as well. The revised Renewable Fuel Standard (RFS2) administered by the Environmental Protection Agency (EPA) capped corn starch-derived ethanol at 15 billion gallons per year, shifting support to advanced biofuels derived from cellulose and other non-food resources. VEETC, a key tax credit that played an instrumental role in the industry’s growth over the past decade, lapsed in 2011.
Lacking goodwill and facing a sluggish economy, growth within the industry has dropped off considerably in recent years from its 2008/2009 high.
Despite a precipitous drop-off in plant construction, existing ethanol facilities in the United States could provide fertile ground for the next wave of clean energy expansion. With an estimated $45 billion in subsidies granted by the U.S. government over the past 30 years and more than $30 billion worth of steel already sunk by major players like Valero, ADM, and POET, the greatest near-term biofuels opportunity is likely to lie in brownfield plant conversions and retrofits rather than greenfield builds. Gevo’s recent success suggests that we are likely at the bottom of this next innovation cycle.
As I’ll highlight in Pike Research’s upcoming Scaling the Bio-Based Economy webinar, emerging business models are demonstrating that existing ethanol assets provide a platform for the integration of a host of Smart Energy technology systems. Bio-digesters, for example, can process waste streams into biogas for onsite power generation and process wastewater. Companies like Lanzatech and algae producers such as Algae-Tec are seeking to prove that the waste carbon dioxide produced by ethanol facilities can be used to produce advanced biofuels and renewable chemicals. Meanwhile, the integration of combined heat and power (CHP) technology offers plant managers the ability to consume energy more efficiently.