Verenium and Aventine are Circling the Drain
By Robert Bryce
For years, ethanol boosters have promised Americans that “cellulosic” ethanol lurks just ahead, right past the nearest service station. Once it becomes viable, this magic elixir -- made from grass, wood chips, sawdust, or some other plant material -- will deliver us from the evil clutches of foreign oil and make the U.S. “energy independent” while enriching farmers and strengthening small towns across the country.
Consider this claim: “From our cellulose waste products on the farm such as straw, corn-stalks, corn cobs and all similar sorts of material we throw away, we can get, by present known methods, enough alcohol to run our automotive equipment in the United States.”
That sounds like something you’ve heard recently, right? Well, fasten your seatbelt because that claim was made way back in 1921. That’s when American inventor Thomas Midgley proclaimed the wonders of cellulosic ethanol to the Society of Automotive Engineers in Indianapolis. And while Midgley was excited about the prospect of cellulosic ethanol, he admitted that there was a significant hurdle to his concept: producing the fuel would cost about $2 per gallon. That’s about $20 per gallon in current money.
Alas, what’s old is new again.
I wrote about the myriad problems of cellulosic ethanol in my book, Gusher of Lies. But the hype over the fuel continues unabated. And it continues even though two of the most prominent cellulosic ethanol companies in the U.S., Aventine Renewable Energy Holdings and Verenium Corporation, are teetering on the edge of bankruptcy. As noted last week by Robert Rapier on his R-Squared Energy blog, Verenium’s auditor, Ernst & Young, recently expressed concern about the company’s ability to continue as a going concern and Aventine was recently delisted from the New York Stock Exchange.
On March 16, the accounting firm Ernst & Young said Verenium may be forced to “curtail or cease operations” if it cannot raise additional capital. And in a filing with the Securities and Exchange Commission, the company’s management said “We continue to experience losses from operations, and we may not be able to fund our operations and continue as a going concern.” Last week, the company’s stock was trading at $0.36 per share. It has traded for as much as $4.13 over the past year.
Aventine’s stock isn’t doing much better. Earlier this month, the company announced that it may seek bankruptcy protection if it cannot raise additional cash. Last Friday, Aventine’s shares were selling for $0.09. Over the past year, those shares have sold for as much as $7.86.
The looming collapse of the cellulosic ethanol producers deserves more than passing notice for this reason: cellulosic ethanol – which has never been produced in commercial quantities -- has been relentlessly hyped over the past few years by a panoply of politicians and promoters.
The list of politicos includes Iowa Senator Tom Harkin, President Barack Obama, former vice president Al Gore, former Republican presidential nominee and U.S. Senator John McCain, former president Bill Clinton, former president George W. Bush and former CIA director James Woolsey.
There are plenty of others who deserve to take a bow for their role in promoting the delusion of cellulosic ethanol. Prominent among them: billionaire investor/technologist Vinod Khosla. In 2006, Khosla claimed that making motor fuel out of cellulose was “brain dead simple to do.” He went on, telling NBC’s Stone Phillips that cellulosic ethanol was “just around the corner” and that it would be a much bigger source of fuel than corn ethanol. Khosla also proclaimed that by making ethanol from plants “in less than five years, we can irreversibly start a path that can get us independent of petroleum.”
In 2007, Kholsa delivered a speech, “The Role of Venture Capital in Developing Cellulosic Ethanol,” during which he declared that cellulosic ethanol and other biofuels can be used to completely replace oil for transportation. More important, Khosla predicted that cellulosic ethanol would be cost competitive with corn ethanol production by 2009.
Two other promoters who have declared that cellulosic ethanol is just on the cusp of viability: Mars exploration advocate Robert Zubrin, and media darling Amory Lovins.
Of all the people on that list, Lovins has been the longest – and the most consistently wrong – cheerleader for cellulosic fuels. His boosterism began with his 1976 article in Foreign Affairs, a piece which arguably made his career in the energy field. In that article, called “Energy Strategy: The Road Not Taken?” Lovins argued that American energy policy was all wrong. What America needed was “soft” energy resources to replace the “hard” ones (namely fossil fuels and nuclear power plants.) Lovins argued that the U.S. should be working to replace those sources with other, “greener” energy sources that were decentralized, small, and renewable. Regarding biofuels, he wrote that there are “exciting developments in the conversion of agricultural, forestry and urban wastes to methanol and other liquid and gaseous fuels now offer practical, economically interesting technologies sufficient to run an efficient U.S. transport sector.”
Lovins went on “Some bacterial and enzymatic routes under study look even more promising, but presently proved processes already offer sizable contributions without the inevitable climatic constraints of fossil-fuel combustion.” He even claims that given enough efficiency in automobiles, and a large enough bank of cellulosic ethanol distilleries, “the whole of the transport needs could be met by organic conversion.”
In other words, Lovins was making the exact same claim that Midgley made 45 years earlier: Given enough money – that’s always the catch isn’t it? – cellulosic ethanol would provide all of America’s transportation fuel needs.
The funny thing about Lovins is that between 1976 and 2004 -- despite the fact that the U.S. still did not have a single commercial producer of cellulosic ethanol -- he lost none of his skepticism. In his 2004 book Winning the Oil Endgame, Lovins again declared that advances in biotechnology will make cellulosic ethanol viable and that it “will strengthen rural America, boost net farm income by tens of billions of dollars a year, and create more than 750,000 new jobs.”
Lovins continued his unquestioning boosterism in 2006, when during testimony before the U.S. Senate, he claimed that “advanced biofuels (chiefly cellulosic ethanol)” could be produced for an average cost of just $18 per barrel.
Of course, Lovins isn’t the only one who keeps having visions of cellulosic grandeur. In his 2007 book, Winning Our Energy Independence, S. David Freeman, the former head of the Tennessee Valley Authority, declared that to get away from our use of oil, “we must count on biofuels.” And a key part of Freeman’s biofuel recipe: cellulosic ethanol. Freeman claims that “there is huge potential to generate ethanol from the cellulose in organic wastes of agriculture and forestry.” He went on, saying that using some 368 million tons of “forest wastes” could provide about 18.4 billion gallons of ethanol per year, yielding “the equivalent of about 14 billion gallons gasoline [sic], or about 10 percent of current gasoline consumption.” Alas, Freeman fails to provide a single example of a company that has made a commercial success of cellulosic ethanol.
Cellulosic ethanol gained even more acolytes during the 2008 presidential campaign.
In May 2008, the Speaker of the House Nancy Pelosi touted the passage of the subsidy-packed $307 billion farm bill, declaring that it was an “investment in energy independence” because it providing “support for the transition to cellulosic ethanol.”
About the same time that Pelosi was touting the new farm bill, a spokesman for the Renewable Fuels Association, an ethanol industry lobbying group in Washington, was claiming that corn ethanol was merely a starting point for other “advanced” biofuels. “The starch-based ethanol industry we have today, we’ll stick with it. It’s the foundation upon which we are building next-generation industries,” said Matt Hartwig, a spokesman for the lobby group.
In August 2008, Obama unveiled his “new” energy plan which called for “advances in biofuels, including cellulosic ethanol.”
After Obama’s election, the hype continued, particularly among Democrats on Capitol Hill. In January 2009, Tom Harkin, the Iowa senator who’s been a key promoter of the corn ethanol scam, told PBS: “ethanol doesn't necessarily all have to come from corn. In the last farm bill, I put a lot of effort into supporting cellulose ethanol, and I think that's what you're going to see in the future…You're going to see a lot of marginal land that's not suitable for row crop production, because it's hilly, or it's not very productive for corn or soybeans, things like that, but it can be very productive for grasses, like miscanthus, or switchgrass, and you can use that to make the cellulose ethanol.”
Despite the hype, cellulosic ethanol is no closer to commercial viability than it was when Midgley first began talking about it back in 1921. Turning switchgrass, straw or corn cobs into sizable volumes of motor fuel is remarkably inefficient. It is devilishly difficult to break down cellulose into materials that can be fermented into alcohol. And even if that process were somehow made easier, its environmental effects have also been called into question. A September 2008 study on alternative automotive fuels done by Jan Kreider, a professor emeritus of engineering at the University of Colorado, and Peter S. Curtiss, a Boulder-based engineer, found that the production of cellulosic ethanol required about 42 times as much water and emitted about 50 percent more carbon dioxide than standard gasoline. Furthermore, Kreider and Curtiss found that, as with corn ethanol, the amount of energy that could be gained by producing cellulosic ethanol was negligible.
In a recent interview, Kreider told me that the key problem with turning cellulose into fuel is “that it’s such a dilute energy form. Coal and gasoline, dirty as they may be, are concentrated forms of energy. Hauling around biomass makes no sense.”
Indeed, the volumes of biomass needed to make any kind of dent in America’s overall energy needs are mind boggling. Let’s assume that the U.S. wants to replace 10 percent of its oil use with cellulosic ethanol. That’s a useful percentage as it’s approximately equal to the percentage of U.S. oil consumption that originates in the Persian Gulf. Let’s further assume that the U.S. decides that switchgrass is the most viable option for producing cellulosic ethanol.
Given those assumptions, here’s the math: The U.S. consumes about 21 million barrels of oil per day, or about 320 billion gallons of oil per year. New ethanol companies like Coskata and Syntec are claiming that they can produce about 100 gallons of ethanol per ton of biomass, which is also about the same yield that can be garnered by using grain as a feedstock.
At 100 gallons per ton, producing 32 billion gallons of cellulosic ethanol would require the annual harvest and transport of 320 million tons of biomass. Assuming an average semi-trailer holds 15 tons of biomass, that volume of biomass would fill 21.44 million semi-trailer loads. If each trailer is a standard 48 feet long, the column of trailers (not including any trucks attached to them) holding that amount of switchgrass would stretch almost 195,000 miles. That’s long enough to encircle the earth nearly eight times. Put another way, those trailers would stretch about 80 percent of the distance from the earth to the moon.
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