Cellulosic Ethanol ‘to Be Cost Competitive by 2016’

by | Mar 12, 2013

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Cellulosic ethanol is on track be cost competitive with corn-based ethanol by 2016, a development that could drive the fuel’s production, according to an industry survey conducted by Bloomberg New Energy Finance.

The survey focused on 11 major players in the cellulosic ethanol industry, all of which use a technique known as enzymatic hydrolysis to break down and convert the complex sugars in non-food crop matter, and a fermentation stage to turn the material into ethanol, BNEF said.

Cellulosic ethanol cost 94 cents a liter to produce in 2012, about 40 percent more than ethanol made from corn, BNEF said. That price gap will close by 2016, surveyed cellulosic ethanol producers predicted.

Project capital expenditures, feedstock and enzymes used in the production process are still the largest costs of running a cellulosic ethanol plant, the respondents said in the survey. But technology has pushed operating costs lower. For example, enzyme costs for a liter of cellulosic ethanol dropped 72 percent between 2008 and 2012 due to technological improvements, BNEF said.

Cellulosic ethanol producers will shift their focus from technology enhancements to logistical planning over the next five to 10 years in an effort to rein in capital costs, suggesting the industry is maturing, said BNEF’s lead biofuel analyst Harry Boyle.

Globally, there are 14 enzymatic hydrolysis pilots, nine demonstration-stage projects and 10 semi-commercial scale plants either announced, commissioned or due online shortly, according to the survey. Five of the semi-commercial plants are in the US and more are expected to open in Brazil in the near future, BNEF said. A semi-commercial facility with a capacity of 90 million liters per year requires an initial capital outlay of about $290 million.

By 2016, when second- and third-generation plants with capacities between 90m and 125m liters will be commissioned, initial capital costs per installed liter are expected to fall from $3 to $2 due to economies of scale and a reduction in over-engineering, BNEF said.

Meanwhile, some corn-based ethanol producers are struggling to maintain profits.

Some simple corn-based ethanol plants, which can only produce ethanol and distillers grains from corn, have temporarily shut down as production costs have exceeded revenue, according to a report released by the US Energy Information Agency. As of January 2013, the number of idled plants had grown to at least 20.

Profit margins at plants that can recover other products, such as corn oil, have been 15 cents to 20 cents per gallon higher than plants without that capability, the EIA said. Margins at plants without corn oil recovery have been negative (see graph), forcing plant shutdowns in Nebraska, Illinois and Minnesota.

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