2 ethanol plants sign offtake agreements with Sweetwater Energy

By Susanne Retka Schill | January 30, 2013

ACE Ethanol LLC and Front Range Energy LLC have signed 15-year agreements with Sweetwater Energy Inc. to purchase cellulosic sugars for processing at their corn-ethanol facilities. Both plants expect to begin by replacing about 7 percent of the corn currently processed.

Sweetwater’s patented, decentralized process will convert locally available cellulosic, nonfood biomass, such as crop residues, energy crops and woody biomass into highly fermentable sugar. Each contract has a total potential value in excess of $100 million, according to Sweetwater, and requires a minimal capital outlay by the individual ethanol producers while stabilizing their feedstock cost over the life of the agreement.

“Ace Ethanol has been bench testing Sweetwater’s cellulosic material for some time and we’re confident that this project will be commercially profitable,” said Neal Kemmet, president of Ace Ethanol, a 48 MMgy plant in Stanley, Wis. “Anybody in the industry can speak to the need to diversify feedstocks,” he added. “We’ve reached a ceiling on corn-based ethanol. The next phase is going to happened with cellulosic ethanol.”

ACE Ethanol notified the Wisconsin Department of Resources of its plans early in the process and the formal permitting process will begin in a few weeks, Kemmet said. “We’re hoping that the feedstock change will be a straightforward process in the air permit.” ACE has begun discussions with its marketer, Elbow River Marketing, how best to handle the generation of cellulosic ethanol renewable identification numbers (RINs). The company expects to begin using the cellulosic sugars by mid-2014.

“It’s very exciting to be an early adopter of Sweetwater’s technology and to bridge that gap from grain to cellulosic ethanol,” says Dan Sanders Jr., Vice President of Front Range, a 40 MMgy plant in Windsor, Colo. “Supplementing our corn with this sugar allows us to displace some of the volatility of the corn market, with the goal of moving a higher and higher percentage of our production to cellulosic. We’ve had great success fermenting Sweetwater’s sugar, and from a business standpoint, we have great confidence in Sweetwater’s management team.”

With those offtake agreements in place, Sweetwater is gearing up to finalize its commercialization plans. In September, the company announced it had hired Merrick & Company to engineer the facilities, which will use reactor technology provided by the Danish firm, BioGasol ApS. In addition to providing the pre-treatment technology, the use of Danish technology is bringing with it a loan guarantee from the export bank of Denmark, according to Jack Baron, president and chief operating officer of Sweetwater.

With the debt financing in place, Sweetwater expects to begin construction on the first facilities in Colorado and Wisconsin this summer. Each facility will have a total footprint of 5 acres and be capable of processing 100 metric tons of dry biomass per day, ranging in moisture from 10-70 percent. “Sixty-five percent comes out as sugars -- 40 metric tons of C6 sugars and 25 metric tons of C5 sugars per day,” Baron said, enough to produce up to 3.6 million gallons of ethanol per year.

The C6 sugars are readily fermented by the standard yeast used in the ethanol process.  Sweetwater is in discussions with providers of modified yeasts capable of fermenting the C5 sugars. While cofermentation is the goal at the ethanol facilities, the company does have proprietary technology to separate the two types of sugars. Cofermentation will be contingent upon the regulatory approval of the modified yeasts that will end up in the distillers grains feed coproduct. 

Sweetwater received a patent in December for its “hub and spoke” business model—the manufacture and deployment of distributed pretreatment units designed for the extraction of sugars from any cellulosic feedstock for the production of ethanol. Baron said 40 miles will likely be the maximum distance to economically transport the liquid sugar solutions, permitting the placement of the facilities closer to feedstocks and in a central location for several processors. The company is in discussions with other users of cellulosic sugars such as biobased chemical developers in addition to existing ethanol producers.