GM banking on biofuel breakthrough
But an Illinois ethanol start-up says it has the technology to make such fuels a reality today—and General Motors says it's the real deal.
At the North American International Auto Show in Detroit on Sunday, GM unveiled a deal with Coskata Inc., saying it would take an undisclosed stake in the firm and help develop its ethanol process. Coskata plans to have its first ethanol plant running by the end of the year, with GM as its first customer.
Coskata executives say they'll break ground on a full-scale plant later this year and have it running by 2011, generating 100 million gallons of ethanol annually.
"This is a speed to market play," said Bill Roe, Coskata's CEO . "It's ready today, and we are moving rapidly toward commercialization."
Coskata's technology involves a unique mix of old chemistry and new science to tackle the hurdles biofuels face to becoming a true substitute for fossil fuels. Experts say that if Coskata's projections hold up—goals which federal researchers didn't expect ethanol companies to meet before 2015 at the earliest—the company has made a historic breakthrough.
"It would be an incredible story if it's true," said Kevin Book, an energy industry analyst with Friedman Billings Ramsey in Alexandria, Va. "This hits on the sweet spots."
GM Chairman Rick Wagoner said Sunday at the auto show that while the company was committed to hybrids, fuel cells and other oil-saving technologies, they would not be produced in enough volume to reduce oil demand for at least a decade. Wagoner said if all flex-fuel vehicles built by Detroit were burning ethanol in 2012, the nation would reduce its oil demand by 18 percent.
"Nothing else we can do gets even close to that kind of impact that soon," he said.
With oil prices hovering near $100 a barrel and gas prices expected to rise above $3.50 a gallon later this year, biofuel companies would seem to have a golden opportunity for growth. But to date, biofuels have been driven by government incentives and mandates rather than consumer demand, and 2007 exposed the limits of current technology.
While the ethanol industry hit a record output of 6.2 billion gallons, it also faced its first political backlash. Ranchers blamed the industry for boosting the price of corn to record levels and driving up food costs. Activists in many cities fought new or expanding plants over environmental concerns such as water use, air pollution and safety.
And despite pressure from Detroit automakers and the ethanol industry, growth in filling stations for E85 fuel remained sluggish: Roughly 1,400 stations out of about 170,000 nationwide offer it. The Detroit automakers have pledged to make half of their new vehicles E85 capable by 2012, but foreign automakers haven't followed suit, successfully lobbying Congress to drop a proposal that would have forced them to make similar changes.
The energy bill President George W. Bush signed last month reflects those politics. It sets a new target for ethanol production of 36 billion gallons by 2022—but requires that 21 billion gallons come from sources other than corn. A host of start-up firms has been chasing ways to make liquid fuels using cellulosic sources—basically plant matter, from jungle grasses to orange peels—and new technologies.
But none of those systems is considered commercially feasible today.
Robert Wallace, an engineer who analyzes biofuel production for the National Renewable Energy Laboratory in Golden, Colo., said next-generation ethanol firms face a variety of hurdles, from uncertain costs of raw materials to unproven methods that might be too costly at large volumes. He said several companies had made claims about their technology, but none had proven fully viable yet.
"You can have all the pieces to a car, but it doesn't mean you have a car," Wallace said. New companies that have small demonstration plants under construction "have to get all the bugs out of running a plant that size before investors start investing."
Coskata is a tiny firm of about 35 people in Warrensville, a suburb of Chicago. Founded in 2006, the company was funded by several venture capitalists who have focused on ethanol and other new energy sources, including tech billionaire Vinod Khosla.
Its process is built around synthesis gas, or syngas, a mix of carbon monoxide and hydrogen emitted when plants, wood or other carbon-containing materials are broken down at high temperatures. That type of gas has been used for centuries as an energy source—it powered gas streetlights in many cities—before natural gas became widely available.
The real trick at Coskata comes from bacteria, specifically, five varieties the company calls its "thoroughbreds." Found by researchers from Oklahoma and Oklahoma State universities in muck in a waste lagoon, the bacteria naturally generate ethanol and similar chemicals from syngas.
The bacteria are grown on a series of straws as thin as a human hair, made from a filter fabric. The gas flows through the inside of the straws, while water is pumped along the outside, and the straws allow the bacteria access to both. The bugs convert the syngas to ethanol, keeping a little for themselves to reproduce, and the water carries the fuel away.
Coskata engineers say their bacteria are about 90 percent efficient at converting gas—a rate that leapfrogs the firm over its competitors. While it's impossible to determine what the price would be at the pump, t he final product would cost less than $1 per gallon to produce, about half that of gasoline, including the capital costs of building a full-scale plant. The system can convert 1 ton of raw material into more than 100 gallons of ethanol, while competing firms struggle to get 70 gallons a ton. The U.S. Department of Energy doesn't expect the industry to hit 100 gallons before 2020.
The process has several other benefits. While corn ethanol plants use roughly 4 gallons of water for every gallon of ethanol, Coskata uses less than a gallon of water. The E85 fuel derived from Coskata's ethanol releases 84 percent less carbon than a gallon of gasoline. And because its filters are held in large plastic cylinders, the company believes it can easily scale its system to 100 million gallons a year or more.
Coskata plans to have a 40,000-gallon-a-year pilot plant open by the end of the year, with the first fuel powering vehicles at GM's proving ground in Milford, Mich. Before the end of the year, Coskata also plans to break ground on a full-size 100-million-gallon plant that it wants to open by 2010. Locations for both plants have not been determined.