USDA feasibility grants give efficiency, feedstock opportunities

By Kris Bevill | February 10, 2011

The USDA’s Rural Energy for America Program recently provided funding for 68 feasibility studies to a variety of companies throughout the United States with the goal of reducing energy costs and identifying renewable energy alternatives. Three of the grants were issued to ethanol producers.

DENCO II LLC in Morris, Minn., received a $50,000 grant to supplement the cost of an energy audit at its 24 MMgy corn-to-ethanol facility. Newly launched Commonwealth Biofuels LLC, based in central Kentucky, received $20,000 to explore the potential for switchgrass-to-ethanol facilities in that region of the state. And in New Jersey, East Coast Energy Solutions received $47,500 to conduct a study for its proposed 40 MMgy ethanol plant which would also produce 5 megawatts of power using a combined heat and power system.

Mick Miller, general manager at DENCO II, said energy efficiency has been a main focus of the plant’s new owners ever since they purchased the facility last fall. The plant was built in the 1990’s and was initially a piecemeal facility, according to Miller. A group of local shareholders formed Diversified Energy Company LLC, otherwise known as DENCO, and purchased the plant in 1999. They contracted with ICM Inc. and Fagen to rebuild the facility and expand its capacity from 7 MMgy to 15 MMgy. The facility was re-purchased by an Australian company in 2006 and was idled in 2009. Last August, the plant was purchased by local shareholders, including a group of former DENCO employees. Among them was Miller, who had served as the plant manager while it was operated by DENCO. He said that because many of the new shareholders and management were staff previously at the plant, they are well-aware of the need to improve the plant’s energy efficiency and water intake to compete with the newer and larger ethanol facilities. “We used to look at making energy improvements to our facilities just to reduce our cost of production, but today it’s two-fold,” Miller said. “It’s important to reduce your input costs, but also to pick projects that help make sure you’re reducing your overall carbon footprint. We’re always monitoring our carbon intensity and anything we can do to produce our ethanol cheaper and with less energy - it’s a win-win for the plant.”

The USDA grant is a 25 percent cost share, Miller said, so will supplement the cost of a thorough third-party energy audit of the plant. When complete, audit results will be used to inform the plant management’s decisions as to where energy improvement investments should be made. At that point, the company plans to apply for further USDA grants to make improvements. “Our projects aren’t pending USDA dollars, but in the event that the USDA has an opportunity to assist us, it may help us decide to do one project over another because it may improve the ROI [return on investment] or the affordability for us,” Miller said.

In addition to the pending energy audit, DENCO II is exploring the possibility of using storm water collected from the city of Morris to replace up to 90 percent of the well water it currently uses to produce ethanol. Discharge limitations in the plant’s state permit require it to make improvements to the quality of water being discharged from the facility, according to Miller. While this alternative is currently in the preliminary stages, Miller said it is the most interesting option for the plant.

Josh Manning, managing partner of Commonwealth Biofuels, said his company plans to construct a 2 MMgy switchgrass-to-ethanol facility in central Kentucky. The company’s plans include up to three facilities, but Manning said the market will dictate how quickly the company moves to construct the second facility. Central Kentucky has suffered in recent years due to a declining tobacco industry. Manning believes that switchgrass could serve as an alternative for the agriculture industry there and is currently considering four locations for the initial plant. “A lot of that area has been agricultural historically and a lot of it has been struggling now, so there’s lots of land available to do this sort of project on,” Manning said.

The feasibility study is the first step in Commonwealth Biofuel’s plan to acquire federal backing for its commercial-scale plant. Manning said the company plans to apply for a USDA loan guarantee in the future. He believes federal support will be crucial to the cellulosic ethanol industry’s success.

Several attempts to contact a representative of East Coast Energy Solutions were unsuccessful. According to the company’s website, it plans to construct a $120 million facility that will use “new advanced technology to produce food, feed, fiber, ethanol and biodiesel with the potential to utilize as many renewable synergies as are feasible.”