With big risks comes the possibility of big rewards. It's a commonly understood truth that many hope rings true for the emerging cellulosic ethanol industry. Because the industry is still in its infancy, some of the risks are more apparent than the rewards at this stage. Industry leaders, while being caught up in the excitement surrounding the industry, are stressing the importance of balancing that excitement with discussion concerning the obstacles that could impede progress toward production on a commercial scale, and coming up with solutions to overcome those obstacles. 

 
 Recognizing that, a variety of people gathered at two separate U.S. cellulosic ethanol conferences held in the fall of 2006. Nearly 300 people attended the ‘Cellulosic Ethanol Summit: Integrating Communities in the Value Chain to Build a New Industry' on Nov. 13-15 in Washington, D.C., while another conference, ‘Commercial and Financial Viability and Prospects for Growth' held Oct. 31-Nov. 1 in Chicago, Ill., drew more than 200 people. 
 
 President George W. Bush's goal to make cellulosic ethanol viable in six years is ambitious. Yet, it's something the U.S. DOE's Larry Russo believes can happen. "When we see the charts of where we are, and where we were, it's doable but not without some hard work," he says. 
 
 However, Russo, the technology lead for the DOE Office of Biomass Program, stressed in his keynote address at the Cellulosic Ethanol Summit the dangers of adopting the "gold-rush mentality," which he warned could ultimately lead to project failure. "We're on a fast train forward, but that train could very easily derail," he says. "We need to maintain the balance, and we need to maintain that momentum."
 
 Keeping that in mind, the goal is to replace 30 percent of gasoline with ethanol by 2030, he says. Corn-to-ethanol production will be able to displace somewhere around 25 percent of gasoline demand, he says. The remainder will have to be squeezed out of biomass. With a total potential of 1.3 billion tons of biomass available to make cellulosic ethanol, it's possible with today's conversion rates to displace the remaining 5 percent with 60 billion gallons a year of ethanol by 2030, he added. With further technological advances, such as increased efficiency and cheaper enzymes, total ethanol production could be increased to 130 billion gallons a year, according to Russo. That would provide the industry with the long-term potential to replace 50 percent to 70 percent of gasoline used in the nation. 
 
 Of course, it isn't enough just to produce more ethanol. It's critical that consumers be able to purchase the added production. In order to maintain the industry, there's a need to produce more flexible-fuel vehicles, and develop the infrastructure for blending and pumping ethanol blends. The issue of gas mileage reduction also needs to be addressed perhaps by the introduction of an E85-hybrid vehicle, Russo says. 
 
 The Cellulosic Ethanol Summit provided an opportunity for Bob Dinneen, president and CEO of the Renewable Fuels Association, to initiate conversations about the challenges the industry is facing. "This is such a critical issue," he says. "This is such an important time."
 
 Dinneen was pleased to see people from the corn-based ethanol industry at the cellulosic-focused event. The corn-based industry has come to realize that it's all about ethanol, and that cellulosic ethanol and corn-ethanol should not be considered competitors, he says. 
 
 "We've finally got people sitting at the same table," Russo added, amplifying Dinneen's comments. "It's taken a long time."
 

 One of the highlights of the Chicago conference was the keynote address delivered by Thomas C. Dorr, undersecretary for the USDA Rural Development division. Cellulosic ethanol is just one part of the battle for energy independence, Dorr told conference participants. While there is no overarching solution, turning biomass into fuel is one of the most promising options for the future. Dorr stressed the importance of making the technology work, adding that in the end, it will work. 
 
 Challenges to Overcome 
 Obtaining the money to finance new technology is an issue for any new venture. Not surprisingly, it was an issue that was brought up by several presenters in Washington, D.C. Producing cellulosic ethanol commercially has the combined downside of being a commodity risk and a technology risk. "You've got the perfect storm to make investors run the other way," says Brian Bolster, vice president of Goldman, Sachs and Co., which in 2006 invested in Iogen Corp., a Canadian company working to build a commercial-scale cellulosic ethanol facility. 
 
 When crude oil prices were at record-high levels, it made ethanol investments particularly alluring. However, now that the price of oil has come down, the enthusiasm has waned somewhat. That prompted two ethanol companies to back off plans to initiate public offerings (IPOs) this summer. In fact, Iowa-based Hawkeye Holdings officially pulled its IPO in late November. Although the company didn't provide any details as to why, company officials indicated that they might be seeking private offerings instead. 
 
 Another challenge that the cellulosic ethanol industry faces is the lack of a traditional engineering, procurement and construction (EPC) contractor, Bolster says. The EPC contract is signed by the builder and technology provider, guaranteeing that the plant will perform. The contract is especially useful to plant developers as they try to obtain financing.
 
 Despite his self-described negativity, which Bolster says he hated to start out his presentation with, the industry has genuine support from the government and the general public. "The industry has a lot of questions, but it also has a lot of momentum behind it," he says. 
 
 Another often-mentioned topic at the conference was lowering the cost of enzymes. To be commercially successful, cellulosic ethanol producers must have access to affordable enzymes, says Bill Baum, executive vice president of business development for Diversa Corp., an enzyme company. The need to develop enzymes that aren't cost-prohibitive, and the research efforts that it entails, has made many companies realize that they can't go it alone. "We [at Diversa] feel that collaborations are going to be very necessary," Baum says. 
 
 Cellulosic ethanol could also change current enzyme production practices, some speakers said. Starch-based ethanol enzymes are mass produced and shipped around the world, says Jack Huttner, vice president of commercial and public affairs for Genencor International. To accommodate for the larger amounts of enzymes that will be needed to treat biomass, enzyme production should be completely integrated with a biorefinery and collocated on-site. 
 
 Emmanuel Petiot, global business development manager of biomass for Novozymes, also focused his presentation on the need for process integration but stopped short of saying that collocation was the best option. Enzyme companies need to partner with those developing biorefineries because, to produce ethanol from cellulosic material, 100 times more enzymes are needed. "This is a fact," he says. "We have to face it." 

 
 The issue of farmer ownership in ethanol projects was also brought up at the conferences. National Farmers Union President Tom Buis praised the industry for the opportunity, hope and jobs it has provided in rural communities, and he advocated local ownership, if possible. "The one thing that we can't do today is go back to sleep in our addiction to oil," he says adding that farmers and ranchers want to be involved in ethanol production. 
 
 Farmers have the capacity to produce crops other than corn. However, since that's a crop they already understand well, they will need incentives to switch, especially to new areas like dedicated energy crops, he says. 
 
 Expanding Cropland
 Another issue that has broad implications for the energy and agriculture sectors in the United States is the availability of land suitable for growing the corn and other feedstocks necessary for the bourgeoning ethanol industry. Conservation Reserve Program (CRP) land could be used to expand available cropland but only if it wouldn't drastically change current sustainable farming practices, Russo says. The CRP has often been considered by many in the industry as a possible way to help meet the need for biomass materials, especially dedicated energy crops. A panel of speakers representing the environmental community cautioned—without calling for a ban on it altogether—against taking more land out of the CRP program. 
 
 While it's tempting to consider turning over the 39 million acres of CRP land, grazing land and other cropland represents a much larger number, says Rich Duesterhaus, senior advisor for the National Association of Conservation Districts. While some marginal land, including CRP, could successfully be used for energy crop production, it would require careful forethought. 
 
 It's important not to lose the gains made over the past 25 years, he says. If CRP land was to be used for crop production the land would have to be protected from erosion. Thoughtlessly removing land from the conservation program could lead to possible short-term downsides, says Jeff Nelson, director of operations for the Ducks Unlimited Office of Governmental Affairs. In the process, environmental degradation and loss of wildlife habitat could damage the ethanol industry's green image. However, some planting of CRP land with dedicated energy crops could work if the land is managed correctly. For example, enough crop stubble could be left in the field after harvest for wildlife cover. 
 
 Meeting the Goals
 Dr. Martha Schlicher, vice president of operations and engineering for Renewable Agricultural Energy Inc. and a presenter at the Chicago conference, provided insight into the type of feedstock mix that would be necessary to keep the ethanol pipeline filled in the years to come. The former head of the National Corn-to-Ethanol Research Center also looked realistically at how much feedstock would be needed to meet construction goals and for the nation to realize energy independence. Schlicher's discussion was based on the goals of producing 15 billion gallons of ethanol by 2015, 25 billion by 2025 and 60 billion by 2040. To achieve those aims, a variety of feedstocks will need to be utilized, she says. In the near term, grain- and sugar-based feedstocks will fill the gap. Corn stover will only be a minor component in the cellulosic material picture, she says. In the mid-term, feedstocks such as wood chips and other existing industry residues will come into play. Dedicated energy crops will be a factor in the longer term. 
 

 Dr. Seth Snyder, chemical and biological technology section leader for Argonne National Laboratory, addressed what is currently the most talked about strategy to create cellulosic ethanol—treating biomass with enzymes to release sugars. Snyder contrasted that method with the thermal chemical conversion technology in which biomass is gasified. "I call it a tweezers-versus-a-hammer approach," he told the audience in Chicago, adding that a tweezer can be used to take out what is needed, while a hammer is used to break everything down. With the gasification process, a mixture of whatever cellulosic material is on hand can be used as a feedstock. On the other hand, with the enzyme approach, a specific enzyme must be used for each feedstock, he says. 
 
 Thermal chemical technology produces a good fuel, but it must be done on a large scale with biomass collected from a large region. 
 The leading investment opportunity in this field is the aging pulp and paper mills. Those locations that are no longer making paper could be converted for ethanol production. "It's not a little niche, it's a large opportunity," Snyder says, adding that there is a potential to produce the same amount of ethanol at converted pulp and paper mills that is currently produced at corn-to-ethanol facilities. 
 
 Holly Jessen is an Ethanol Producer Magazine staff writer. Reach her at <a href=mailto:"hjessen@bbibiofuels.com">hjessen@bbibiofuels.com</a> or (701) 746-8385.

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The ethanol industry is poised to take a giant leap, as techniques to commercialize cellulosic production methods move closer to becoming a reality. But the old saying, "Look before you leap," was one of the messages that came out of two recent conferences focused specifically on the developing cellulosic ethanol industry. Challenges, such as securing project financing, manufacturing cheaper enzymes, producing more flexible-fuel vehicles, and developing the blending and pumping infrastructure for renewable fuels, still loom large, leaving plenty of opportunities for more dialogue and collaboration.

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