Rushing Ahead Reasonably

The future of the ethanol industry is filled with promise, including currently increasing production numbers coupled with the tantalizing possibility of advances in cellulose-to-ethanol technologies. Industry leaders recognize that with the explosive growth comes growing pains, however.
By Holly Jessen | August 01, 2006
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What does the future hold for the ethanol industry?
For the industry's leading design/build companies—all of which consider long-term forecasting business as usual—the industry will remain hyper busy and tested at every turn in the years ahead. As builders are now sometimes forced to turn projects away or schedule them far into the future, it appears they—and the vendors that serve and supply them—will continue to be faced with a multitude of customers clamoring for attention in the next half-decade. All the while, the business of ethanol production will continue to advance, grow and adapt into a dual starch/cellulose-based energy industry.

For most, however, dealing with the here and now is priority No. 1. That alone, says Bib Swain, is enough to lose sleep over. Swain, founder and president of Virginia-based Delta-T Corp., says the challenge of balancing available resources with the expectations of a growing industry is now one of the ethanol industry's top concerns. "We'd all like to do every job that comes to us, but there are realistic capacities," he said during the 2006 FEW's "Forum of Futuristic Thinkers," a June 21 general session panel that included representatives of Fagen Inc., ICM Inc. and Broin Companies, as well as the National Corn Growers Association and the U.S. DOE.

The panelists didn't agree on everything, but all concurred that quality should never be compromised for quantity—a mantra that could apply to both the facilities being built and the products those plants produce. Dave Vander Griend, president and CEO of Wichita, Kan.-based ICM, referred to the blights of the 1980s, a time when many ethanol plants failed to operate properly. Today, all the big names in the ethanol business consistently build plants that are reliable and exceed nameplate capacity. "We don't wish to sacrifice quality to try get out quantity," he said.

But how exactly is that done? How does an industry continue a rapid, multi-year expansion without delay, and without making errors. Staffing up and reaching out to new and different vendors is part of the solution, but those are two things that are easier said than done. Delta-T, which has virtually doubled in size over the past few years, began increasing staff numbers four years ago in preparation for industry growth, Swain said. "However, I don't believe any one of us anticipated the almost vertical rise in the number of [U.S.] plants," he admitted.

Despite a new employee's level of skill or education, it typically takes about six months to a year before they're truly comfortable working in the plant or in the field, Vander Griend added. Beyond that, it's simply difficult to find qualified people on demand these days. Workers with mechanical, piping or electrical skills, for example, are in extreme demand, especially with the projects to rebuild refining capacity in the south after Hurricane Katrina. "To be as blunt as I can, we do not have the level of craftsmen in this country [that] we used to have—people that are willing to go out and work with their hands," Vander Griend said.

Ron Fagen, Fagen Inc.'s president and CEO, added, "We have lots of good people … [but] we're always looking."

Getting the right personnel on the bus isn't the industry's only bottleneck right now. In fact, from an engineering perspective, the industry is well-staffed, Swain said. It's the building and fabrication outfits—the physical side of the business—that's stretched thin on people and resources, he explained, referring to the challenges of getting tanks fabricated, for example, and coping with the fluctuating price of metal. Those types of issues make it hard to get stable bids from suppliers and add to increased delivery times. "And yet, the customer, ever understandably, wants to get that ethanol plant in the ground, and up and running as soon as possible to take advantage of these high ethanol prices," Swain said.
While industry suppliers, many now deeply invested in the ethanol industry, increase their own staffs and ramp up manufacturing capabilities, the design/build firms have sometimes been forced to look for help from new qualified takers. ICM, for example, is working to qualify additional vendors to work with its company. However, the process takes time, Vander Griend said. On the other hand, Delta-T—a company with no apprehension about working internationally—is looking to utilize its connections to suppliers overseas when domestic vendors can't deliver on demand.

Responsible Growth
Although Wall Street has been eying the ethanol industry for about three years, its virtual endorsement of the ethanol sector has created a windfall for the industry in the last six to eight months, Swain said. In the past, ethanol projects looking for Wall Street investment were met with chains on the doors and guard dogs. "Today, they roll out the red carpet," Swain said, adding that ethanol is finally considered a legitimate, respectable enterprise.

Jeff Lautt, chief operating officer of Broin Management, agreed that it is an exciting time. The ethanol industry is experiencing unprecedented growth. "It's exciting for the veterans of the industry, it's exciting for the newcomers," he said. "It's creating all kinds of opportunities."

That rapid growth can be a worry as well as a boon, however. It's important to make good decisions along the way to avoid long-term stress. "We want to be responsible as a company," Lautt said. "We want to be responsible as an industry."

Fagen talked about the same issue. The "wild frenzy" to build ethanol plants right now does worry him, he said. It's crucial that plant developers conduct exhaustive corn supply studies and make sure existing plants are aware of new plants coming into an area. "We can't build ethanol plants on top of ethanol plants. … We have to give them some elbow room," he said, adding that the companies represented on the panel had been conducting themselves responsibly.

Bruce Noel, chairman of the National Corn Growers Association's Ethanol Committee, worries about issues facing family farmers. Considering the danger for family farmland to be broken up and sold as more families stop farming, it's important to keep farmers involved in the investment side of ethanol, he said. He's also concerned about the effect on urban and rural communities as ethanol plants expand capacity, increasing truck traffic and stress on infrastructure. "It scares the hell out of me, our success," he said.

Diverging Thoughts on Cellulose
How soon cellulose-to-ethanol production will be made commercially viable is an oft-repeated question in the ethanol industry. It didn't take long for the subject to come up during the Forum of Futuristic Thinkers.

Swain said he made his first batch of ethanol from cellulose around 1984. "Those technologies (enzymatic hydrolysis and acid hydrolysis) have been around for a while, [and] we've made improvements," he said.

Back then, when asked how long it would take to commercialize cellulosic ethanol production, his answer was five years. He was right—but he just made the statement too early in history, he quipped, saying, "I think today may be the starting point."

The question, some say, is whether five years is soon enough. Delta-T and most other technology providers are sinking money into science and logistics of cellulose-to-alcohol conversion, Swain said. He's convinced that a commercial cellulosic process is needed within three years, however. Otherwise the U.S. starch-to-ethanol industry will put so much stress on corn prices that it will put ethanol plant designers and builders "out of work for a while" until the technology catches up, he said.

Lautt agreed that the first commercial cellulosic ethanol plant might be possible in five or six years. However, making it profitable is about more than just "cracking the code" with design advancements. The remaining hurdles, including collection, transportation and handling of biomass, might be even bigger issues than getting the technology right, he said.
Larry Russo of the DOE's Office of the Biomass Program projected that a cellulose-to-ethanol plant would be operating by about 2012, six years down the road. The way the DOE looks at it, it won't be a grain-ethanol industry and a separate cellulosic ethanol industry, he said. Instead. the federal department anticipates that cellulosic production will be incorporated into existing dry-mill ethanol plant infrastructure.

In the future, he feels ethanol will be produced at a hybrid plant with some cellulose-to-ethanol production happening in addition to standard starch-based production. This setup allows the existing infrastructure to be used. "It makes your risk of failure minimum," Russo said.

On the other hand, Swain said he doesn't think corn-to-ethanol plants will be retrofitted for cellulosic production. The commercially viable technologies will need extremely different equipment than is now used to produce ethanol from corn. Another factor is the location of feedstock. The biomass used for cellulosic ethanol won't come from the Midwest. "The Midwest has had a good run with grain," Swain said, explaining that the really big cellulose stockpiles will be located nearer the coasts.
Lautt agreed feedstock location will drive cellulosic ethanol plant locations. Some cellulosic plants may be built next to traditional ethanol plants, but the facilities won't likely be integrated, he said.

Vander Griend countered. He said "phase one" for the cellulosic ethanol industry, at least for ICM, won't involve feedstocks like switchgrass. He called the idea of switching straight from corn to switchgrass "silliness." Although a stand-alone, large-scale cellulose-to-ethanol plant might come in five years, he doesn't consider it phase one. Rather, for ICM, phase one of cellulosic ethanol will mean utilizing the fiber off the corn kernel to produce additional gallons and revenue, he said. In that way, he agreed with Russo, who said cellulosic ethanol plants would be, in effect, snapped on to current ethanol facilities—utilizing the energy and infrastructure synergies already in place. Making grain plants the platform for the next step will allow existing infrastructure for grain handling and storage to be used.

Vander Griend also talked about producing ethanol from the heavy levels of cellulosic material already in the fields—corn stover and wheat straw. Of course, he acknowledged there are still issues with storage and maintaining the quality of the material after it's harvested. "That's how we believe it will evolve," he said. "We are committed, as are other companies, to building a facility to verify this type of technology."

Ray Katzen, an independent consulting engineer and a revered industry pioneer, asked a question from the audience about creating ethanol from corn stover. He mentioned a study on the subject was abandoned after a year. "Why? Because once it hits the ground, it's worthless," he said, asking Russo if the DOE was working on issues with harvesting, transporting and storing corn stover. Specifically, Katzen inquired about single-pass harvesting technology.

Russo responded that the DOE is looking into corn storver as a model feedstock for cellulose-to-ethanol production. As a relatively challenging crop, it was thought that if the questions on stover could be answered, those answers would help unlock the secrets of other cellulosic materials, he said.

Unfortunately, work in that arena, until recently, has been a small part of the budget. That will be expanding in the future, however. A national laboratory in Idaho is currently working with various equipment manufacturers to decrease the cost of corn stover as a delivered feedstock, Russo added.
Land stewardship is something that needs to be kept in mind, Noel said. From a conservation angle, a certain amount of corn stover needs to be left on the field. Another question to address is how much farmers will get paid for the extra material.

Growth and Conservation
Another concern at the forefront of any producer's mind is the corn price at which ethanol is no longer profitable. By 2008, the ethanol industry will take in 4 billion bushels of grain, Vander Griend said. Corn prices will go up as a result.

Industry partners in the seed industry have indicated corn production will be able to increase enough for 15 billion gallons of ethanol by 2012, he said. The problem is that the industry will probably need it by 2010. "Our goal, from an ICM standpoint, has always been sustainable agriculture—and we will not have sustainable agriculture if ethanol plants can't get corn and can't profitably operate," Vander Griend said.

Improvements in corn genetics should make it possible to increase the number of acres dedicated to corn in order to produce 15 billion gallons of ethanol by 2015, Noel said. He cautioned that the expansion needs to be carried out intelligently, however.

Swain joined the ethanol industry, he said, to help raise the price of corn. Ethanol is now more profitable, but corn prices haven't gone up as he hoped. "I personally look forward to driving the cost of corn up," he said, adding that the corn farmer deserves a return on his investment, too.
At current corn yield growth rates, Delta-T's internal projections are that 15 billion gallons of ethanol will use about half the corn crop. "We don't think we can do that politically or economically without the price of corn going up dramatically," he said.

Building on the theme of responsible growth, there was also a general consensus that water conservation is a high priority for the industry. A lot of work has already been done in that arena, Vander Griend said, explaining that with current technology, 100 percent of process water is recyclable. However, with the thermal process, there's still a need to discharge steam through evaporative cooling, which means, in many plants, simply venting it.

To capture that steam with a closed loop system, it's a dollars and sense issue. It costs money and energy to capture that water. "I don't think your pockets are that big," Vander Griend said.

However, water conservation is something ICM, as a design firm, is looking into. It's an important natural resource, for one thing. And, in some locations, necessity could drive ethanol plants to install closed-loop systems.

Delta-T plants use 2.8 gallons of water per gallon of ethanol, Swain said. A newly introduced Delta-T technology cuts that back to 1.5 gallons.
That amount could become zero water per gallon of ethanol at a higher cost. For example, a 100 MMgy ethanol plant with corn coming in at 15 percent moisture could produce its own supply. "We can actually, theoretically become a net producer of water out of the plant, if we chose to do that," Swain said. "It's just a matter of the economics."

Holly Jessen is an Ethanol Producer Magazine staff writer. Reach her at hjessen@bbibiofuels.com or (701) 746-8385.