Responsible Ethanol Goes Bankrupt

Last year I wrote a story about an ethanol company that was trying to produce ethanol in a more sustainable fashion:

E3 Biofuels: Responsible Ethanol

They had a great idea. Use corn to make ethanol, feed the byproducts to cattle, digest the manure to produce methane, and use that to fuel the boilers. Complicated? Yes, but definitely a more sustainable way of producing ethanol – if they could pull it off.

During the construction of the plant, I had some contacts who kept me in the loop with respect to what was going on. However, once they began the start-up, all news updates stopped. There was nothing new on their website. (The last time I checked was last week). I couldn’t get any further information from them. The lack of information gave me a feeling that things weren’t going according to plan.

Because things don’t always go according to plan, I was quick to correct people when they said that E3 Biofuels was getting a 5/1 or whatever outrageous energy return the proponent claimed. I don’t know how many times I had to point out that these were projections, and that the plant wasn’t even commissioned yet. Vinod Khosla said it often, as if the plant was up, running, and producing ethanol with a very high energy return. From his white paper “Is Ethanol Controversial?” (MS Word download):

E3 Biofuels achieves an energy balance for corn ethanol of approximately five, using the Argonne National Labs GREET model – a number higher than what many cite for cellulosic ethanol! I have seen plants at every point in the continuum form old energy inefficient plants to highly optimized plants. Most plants being built in California, and there are thirteen at last count, pick locations near cattle feedlots to save the energy of drying the byproduct distillers grain. This dramatically increases energy balance relative to gasoline above 2X. Start replacing other natural gas used in the process with methane from manure form the cattle as can be done in California, a simple process of installing digesters, and the energy balance again improves substantially. Add the conversion of the remaining leftovers from manure digesters, as E3 Biofuels has done, and you get close to a 5X.

Note that is wasn’t “E3 Biofuels is expected to achieve….” No, “E3 Biofuels achieves….” and they do it with a few simple tweaks. If only…..

OK, by now you are wondering if I am going somewhere with this. Yes, I am:

Mead ethanol plant filing bankruptcy

LINCOLN — An innovative “closed loop” ethanol plant at Mead, Neb., now in debt because of mechanical failures and financial losses, will close while the company seeks to reorganize under bankruptcy protection.

E3 BioFuels LLC and its holding company filed bankruptcy papers Friday in Kansas City, Kan., seeking protection from creditors who have not been paid while the plant struggled with start-up problems.

“It’s a temporary shutdown,” said E3 spokesman R. J. Wilson. “With the mechanical failures hampering us, it has made it difficult to be profitable.”

During the plant’s grand opening in June, it was hailed as a model for improving the environment and for fighting global warming.

This is exactly, EXACTLY why I caution against getting carried away with projections. This is exactly what I have been so critical of Vinod Khosla about. Projections don’t always come true. I can guarantee you that Khosla’s vision of 200 billion gallons of ethanol by 2030 isn’t going to happen. But he is testifying to congress that it can happen, and that is influencing our energy policies in the wrong direction.

I had high hopes for E3 Biofuels, but I was pretty frank when people wrote and asked the question of why more ethanol plants didn’t go the E3 route. Simple. It makes the plant more complex and more expensive, and it wasn’t a proven technology. And it still isn’t.

24 thoughts on “Responsible Ethanol Goes Bankrupt”

  1. Well, a Chap 11 filing is not the end of the world, though hardly a positive sign. It just means (at best0 they need more time to pay creditors.
    I hope the E3 plants works. But, increasingly, I am beginning to suspect that for biofuels to work, the oil should come from trees (such as jatropha, which are not tilled and ploughed and then cut down in annual cycles. The jatropha have seeds, the seeds bear oil, you pick the seeds. Squeeze out the oil. Not that simple, but way more simple than corn production. I think real applications for diesel. The Indians and Chinese are planting millions of acres of jatropha. It does crowd out native forests, but most forests are already chopped down.
    Maybe someone can rescue the E3 plant. New equipment sometimes fails.
    Have to admit, RR is looking more right all the time: Biofuels just ain’t that great. But every contribution can help.

  2. Jatropha doesn’t ‘crowd out native forests’, it crowds out food crops – all the yield projections are based on it being planted on fertile soil. And because there will be a high concentration of buyers, if all the proposals for jatropha planting are realised, farmers will see the price of their new cash crop plummet in a way that’ll make coffee seem like a really great thing to grow.

    Also – at the moment, the Indians and Chinese are planting hundreds of thousands of acres, not millions. It isn’t going to replace palm oil or soybean oil.

    Jatropha is a worse bloody myth than corn ethanol.

  3. Cattle manure for feedstock or fuel is a non-starter because farmers will need to keep that for fertilizer, if not now, then in the near future. In fact, I previously made this same observation with regard to crop residue. It’s a no-brainer, so why can’t people see it? Well, at least it seems that someone else is opening their eyes.

    Limited biofuel feedstock supply?
    http://www.enn.com/top_stories/article/26110

    Judging from the Mead article, an inability to get feedstock was not the cause of the plant’s failure. But what were the cattle fed on, and how was that produced? Not with ethanol, of course. Diesel or gasoline was needed for the farm machinery, and chemical inputs (pesticides and fertilizer) where needed for the feed crops. I say this because it’s a safe bet the cattle didn’t eat distillers grain alone. If that were the case, this operation could be a perpetual motion machine.

    One more prediction I am going to make: as chemical fertilizers rise in price, farmers will seek more organic inputs. This will further restrict ethanol makers’ access to feedstock.

    So in the future, large-scale operations like this are fated to go belly-up, and biofuel operations will be local and small-scale. See if I’m not right.

  4. Matt h20–

    The Chinese are planting not one, but two, one million hectare jatropha plantations in Indonesia alone.
    The Indians recently announced another one million hectare plantation in addition to all the others scattered everywhere.
    That qualifies as millions.
    As to jatropha’s virtues, it may or may not work, it will have to be tested by the market. I like that it is not tilled every year. There is less soil erosion etc.
    On yield, it is worth pondering that jatropha has never been selectively bred, until the last few years. What if through breeding yields double? Not so crazy, look at corn yields. We are now planting the same amount of corn acreage as we did right after WWII, despite a much larger population, Much higher yields are the reason why. You can thank ag achools and persistent farmers for such radical increases in productivity.
    Jatropha is a hardy plant, and does not require the best cropland. For best yields, it probably needs water, and that may be a problem. But in tropical climes, it seems like a reasonable choice.
    I would say it beats sugar.
    Farmers nearly always require co-ops to sell profitably. I hope such co-ops become introduced in Third World countries. I will concede that in the Third World, government means oppression and corruption. But that is government, not the jatropha, we are talking about.

  5. One question to ask for Jathropha.

    Is nitrogen fixation really a good thing?

    Since N2O, the primary emission from nitrogen fertilizer decomposition, is nearly 300x more potent than CO2.

    The GREET model, acts like nitrogen fixation doesn’t exist.
    http://greyfalcon.net/n2o.png

    _

    Anyways, taking the assumption that
    1. SugarCane is similar in yield/efficiency to PalmOil.
    (I’ve seen both give about 6000liters/hectare/year. Okay so Palm Oil would be higher.. but there are GHG consequences associated with that)

    Here’s a chart of how much biomass the world could yield, assuming the yields/efficiencies were as high as sugarcane.

    http://greyfalcon.net/biolimits.png

    _

    Another thing to consider, GreenFuels, is in a similar predicament.

    http://greyfalcon.net/algae4

  6. “mechanical failures”

    I’m really not buying that excuse. It’s invariably a scapegoat for when the business model is faulty. Sure mechanical things break, but they also get repaired. If their business model is so good, one failure should not be a stopper.

    The free energy people also use the “mechanical failure” excuse.

  7. Starting up biological digesters is a difficult business, takes months till an efficient biomass gets established and there are many false starts. I have personal experience with these things in Wastewater treatment plants. There are many mechanical breakdowns during startup.

    Cattle manure is not in demand in agriculture, it is a pollutant that has to be expensively treated and disposed.

    Having said that, I think we have grown out biological energy since the use of horses for pulling carts. We are not going back. Hydrogen cells or electric batteries are more perfectible.

  8. Would anyone be interested in this:
    http://www.bess.unl.edu/

    “The BESS model is a software tool to calculate the energy efficiency, greenhouse gas (GHG) emissions, and natural resource requirements of corn–to-ethanol biofuel production systems. The model provides a “cradle-to-grave” analysis of the production life-cycle of biofuels from the creation of material inputs to finished products. The model parameters can be set by the user to achieve the highest accuracy in evaluating a single corn-ethanol biorefinery and its surrounding feedstock crop production zone. The model equations and summary reports are unalterable, providing the characteristics needed to serve as certification software to evaluate the environmental impact of biofuels for industry advancement.”

    RBM

  9. Grey Falcon–

    Concerns about environment are very justified, with nearly any type of energy production, or any lifestyle.
    To be honest, I know nothing about nitrogen fixing, or even what it is.
    It just stands to reason that a tree that in planted once, and not tilled and fertilized every year is less destructive or labor- and energy-intensive than corn crops.
    It may be that with PHEVs, we can so radically reduce our oil demand that we “never” need biofuels. There may be huge leaps made in heavy oil extraction too.
    RR has done work here that strongly suggests a reasonable scenario is PHEVs and a somewhat bolstered electrical grid is do-able. We can gain incremental energy boosts increasing solar, geothermal, wind, and nuke power.
    With a PHEV-biofuel model, I suspect we can go a long, long way to energy independence, and a much cleaner and more prosperous world.
    Your projections about fossil oil demand in 2030–– do they anticipate widespread introduction of PHEVs?
    This is a classic mistake of most models — they do not anticipate market reactions to the price signal.
    At $100 a barrel, the world will use less, not more, fossil fuel every year. Check out the 1980s, and the global reaction to higher oil prices back then. There was an 11 percent reduction in demand, and demand did not recover for a full 10 years — when oil was cheap again.
    We have much better technology at our disposal today (although politcial leadership remains feeble). China is especially annoying — they have fixed and subsidized gasoline prices there. Now, that is weak leadership.

  10. robert–

    your reaction/thoughts on biomass process thru anaerobic means producing nat gas equivalent; CNG then used for general auto use[now in use for fleets of cars, buses, trucks-and growing]. not a total solution, but perhaps more likely than fermentation and infrastucture problems inherent with ethanol.
    i reference 11/27/07 ALTenergy item-BIOPACT report on salzburg AG nat gas auto service.

    also much fleet NG activity from cleanfuels[symb CLNE] and auto,bus,truck NG activity worldwide[westpr/cummins symb WPT-TSX]. also NG anaerobic mfg by environmental process[symb EPG].

    convert portion of petroleum use to biomass NG

  11. Nitrogen Fixation is a process used by some plants to acquire biologically useful nitrogen through symbiotic relationships with bacteria growing in their roots which convert gasious N2 nitrogen from the air (which is chemically inert) into more reactive form that the plant can use. Soybeans and Peanut can fix nitrogen (so can Jatropha) but most crops, like corn, can’t.

    As to whether it’s a good or a bad thing to grow a crop that can fix nitrogen, the up side is less fertlizer application, and lower input costs. The downside is the energy the plant is spending supporting nitrogen fixing bacteria is energy that isn’t going towards higher yield. Whether it’s a plus or a minus depends on the cost of synthetic fertilizer. As the cost of organic fertilizer seems likely to increase in the future, being able to transfer this trait into non-nitrogen fixing species is an area of active research in the biotech community, although honestly, we’re no where near doing it.

    From the chemistry of how nitrogen fixation works, I don’t see how it could be generating greenhouse gasses.

  12. ==From the chemistry of how nitrogen fixation works, I don’t see how it could be generating greenhouse gasses.==

    Pretty much the fixed nitrogen decomposes. As it decomposes, the primary emission is N2O, aka Laughing gas.

    Over one third of all N2O comes from agriculture.

    N2O is 296x more potent than CO2.

    Now if you want a more technical answer, check this:
    http://greyfalcon.net/n2ostudy

  13. I hadn’t heard of that at all previously, but it does make sense. I’d still tend to think species that are able to fix their own nitrogen are a step in the right direction.

    Unless there are other reports showing N20 is released in greater quantities from a field of soybeans than a field of rice that’s been saturated from nitrogen fertilizer, nitrogen fixation should still be a net benefit both from a cost standpoint and because a significant fraction of applied nitrogen fertilizer is lost to run-off, so the overall amount of bio-available nitrogen added to the system should be less.

    Still, as I’ve just clearly demonstrated my knowledge here is limited, so I could well be completely off base.

  14. j. said: “Cattle manure is not in demand in agriculture, it is a pollutant that has to be expensively treated and disposed.

    j.

    An Amish or sustainable organic farmer might disagree with you, although the Amish farmer isn’t likely to see your post. 😉

    My grandfather ran a dairy/corn farm in the 1940s and 1950s and the manure from his dairy barn supplied the majority of his annual fertilizer needs.

    I realize that modern, industrial farms don’t do that, but things will change as synthetic nitrogen fertilizers made from fossil fuels become more and more expensive and scarce.

    Going back to the kind of farm my grandfather ran and that the Amish run today, will become a necessary part of agriculture in the future.

    Cattle were meant to eat grass anyway. The best way of using their waste is to let them graze on real grass, and to let the cattle naturally scatter their waste across the pasture, where it will decompose and provide the nutrients for more grass.

    Regards,

    Gary Dikkers

  15. Robert said: “I had high hopes for E3 Biofuels, but I was pretty frank when people wrote and asked the question of why more ethanol plants didn’t go the E3 route. Simple. It makes the plant more complex and more expensive, and it wasn’t a proven technology. And it still isn’t.”

    Robert,

    As you and I have said repeatedy, the ultimate test of the dubious proposition that making corn ethanol produces more energy than it consumes will come when the ethanol industry demonstrates they can make ethanol without any fossil fuel inputs.

    Unfortunately for corn-based Big Ethanol, the E3 failure supports our contention.

    One has to believe that the “equipment failure” is just a mask for their realization that the laws of thermodynamics caught up with them.

    Best,

    Gary

  16. I used to think that venture capitalists, freed from corporate bureacracy were somehow smarter than us corporate types. No more.

    E3’s bankruptcy is just the first in a long line of coming bankruptcies for alternative fuel ventures. It is as if VCs believe that money and positive thinking can overcome basic laws of thermodynamics and economic markets.

    I am evaluating a VC proposal. (Can’t go into details but you would know the name of the company if I told you.) The proponents want to dazzle us with BS and sophisticated economic analysis. But they make some egregious errors.

    One they assume their project starts up, on time, on budget and runs AT capacity on day 1 and continues to operate 365 days a year for 25 years. They sell their product into a premium margin – which remains throughout the life of the project. At full production, they would command a 30% market share (as if their competition won’t react to them). They heavily leverage the project and claim project returns on only the equity portion, as if they could borrow all the money they wanted. They don’t account for physical inventory. (Although they include financial working capital.) Their cost projections reflect 2004 prices and don’t account for nearly doubling of costs in the last 2 years. Their permitting schedules are hopelessly optimistic. The project schedules allow no time for decision making (gaining shareholders approvals, etc.).

    If you read the press releases on this company you would think they were God’s gift to the dim witted energy industry.

    My guess is that E3, Range Fuels, Choren (please don’t count that liquid O2 in our energy balance), and others are similarly optimistic about their assumptions. Crap happens – you better try to quantify it in your plans.

  17. Cattle manure for feedstock or fuel is a non-starter because farmers will need to keep that for fertilizer, if not now, then in the near future.
    The two aren’t mutually exclusive as you imply. Anaerobic digestion converts only a part of the available organics into biogas – a lot of it remains. The remains are less likely to cause odors and is typically easier to handle.

    Anaerobic digestion also does not destroy any of the fertlizer value in the manure, it merely converts some of it into different forms, suah as the organic nitrogen -> ammonia.

    So in the future, large-scale operations like this are fated to go belly-up, and biofuel operations will be local and small-scale. See if I’m not right.
    I think you are wrong, but hey, that’s just my opinion. We’ll see…

  18. I think RR hits the nail on the head when he points to the complexity of the E3 system. What happens if one of the components fail? What happens if the digesters produce a lot less gas than was expected?

    I would propose to improve things by getting rid of the ethanol:
    1. Feed the corn to the cows.
    2. Put the manure in an anaerobic digester.
    3. Use a microturbine to convert the biogas to electricity.

    If you really wanted to produce a fuel, clean-up the biogas and liquify to LNG.

  19. My UNL grad student/ruminant technician/neighbor/ has said from what he knows the boilers were having problems with the methane they boilers were using.

    So either this is a new application for the boiler – or not and the boiler provided wasn’t per spec.

    If the first is the case, then this is a technical hurdle with unknown solution time line.

    If the second then the time line is somewhat known – however long the lawsuit takes.

    Hope that makes sense. If not blame the messenger 😉

    RBM

  20. Greentech Media has some more on potential “mechanical errors”.
    here

    They say a boiler exploded (last spring, that is) and that it all comes down to problems in the ethanol refinery part of the facility. All according to people “involved” in the project.

    Guess, it all comes down to complexity and over-optimistic assumptions.

  21. Benny – lots of companies and governments have made announcements. According to people actually involved in the planting that I’ve spoken to, however, we’re talking about hundreds of thousands of hectares that have actually been planted worldwide. I’m not relying on press releases.

    Also – we’ve been trying to get people to plant jatropha for about 10-15 years, and the plant science research has been going on for 5-10.

    It still hasn’t taken off.

    I remain skeptical.

  22. I'm in the Anaerobic Digester (AD) business with very advanced but technical simple improvement to USDA-EPA AgStar designs. Even the old AgStars work well if they are properly treated and maintained (which has been the big problem to date – too much non-automated farmer involvement required in older systems). I know most of the people involved with E3 development and operations.

    E3's business model is sound. Their anaerobic digesters for manure-to-Methane Biogas worked well, and the final Biosolids byproduct (soil amendment-fertilizer) is easy for row corps to absorb. It can also be applied with old style manure spreaders at low tractor HP vs. knifed=in anhydrous at much higher cost.

    The E3 Canadian boilers for the Ethanol process had their exhaust hooked together. The damper on 'B' didn't close, or wasn't closed, when the techs purged and started up 'A'. Hence, gases collected in the top of 'B' and blew up damaging the conjoined stack and dampers arrangement, distorting the structure's walls and wrecking the fire brick.

    The boilers stack-damper design and purge controls, repair delays, and then mind-numbing, sputtering lawyers killed the E3 project.

    The plant design and concept was ideal for energy-to-Ethanol-fertilizer recycle. It would have helped to have a higher output AD digester system; i.e.: biogasusa.com (AADS), but what they had was working quite well until the Canadian boiler tech blew it up..!!!

    This technology and concept will appear elsewhere soon, but Ethanol and Butanol plants with multiple cellulosic+biomass feedstocks to their AD systems will also need to be in the 100MM GPY range to compete with the big boys.

    AD Biosolids (soil amendment-fertilizer) have almost no odor, per se, and have all the nutrients of raw manure + other Biomass constituents, also providing equally nutritive irrigation water that is very low in BOD and can be sent to a WWTP or aerated and sent to a river if irrigation in not feasible.

    Let the blame fall where it belongs, poor boiler exhaust design and "pilot error" by the button-pusher in charge at the time of boiler startup.

Comments are closed.