Now that it seems that the mainstream media has finally caught on to the fact that something went terribly awry at Range Fuels, it is time for me to close the book on them. This will be my last Range Fuels story, but I think there is a lesson to be learned here.
Waiting Until The Fat Lady Sang
In the past week, an increasing numbers of stories have covered the Range Fuels affair. The Wall Street Journal’s take was the most high profile coverage:
Vinod Khosla stepped in with his hand out. The political venture capitalist founded Range Fuels and in March 2007 it received a $76 million grant from the Department of Energy—one of six cellulosic projects the Bush Administration selected for $385 million in grants. Range said it would build the nation’s first commercial cellulosic plant, near Soperton, Georgia, using wood chips to produce 20 million gallons a year in 2008, with a goal of 100 million gallons. Estimated cost: $150 million.
In early 2010, the EPA said Range would finally produce some fuel in 2010—but only four million gallons, not 100 million, and of methanol, not cellulosic ethanol. So taxpayers have committed $162 million (along with at least that much in private financing) to produce four million gallons of a biofuel that others have been making in quantity for decades. This politically directed investment might have gone to far more useful purposes.
As some readers wrote to me and noted, the WSJ article reads as a condensed version of an article that I wrote a year earlier called Broken Promises from Range Fuels. Here is a sampling of other recent stories covering Range Fuels’ demise:
The fact that it took an actual announcement from Range Fuels that they were closing the plant to draw this sort of scrutiny is troubling. People are now showing up for the autopsy, but there have been warning signs all along that there was a problem with the patient. Nearly five years ago I wrote an article critical of Vinod Khosla — chief promoter of Range Fuels — for making grossly misleading claims; exactly the kinds of claims that political leaders and the media gave him a free pass on as he lobbied for funding for his ventures.
Khosla wrote articles and delivered speeches in an effort to stir up public animosity against the oil companies, insisting they were were ripping people off and at the same time keeping renewable energy grounded. He declared war on these dinosaurs and their outdated technologies, and he offered up his solution: Silicon Valley know-how promoting companies like Range Fuels (now shuttered), Cello Energy (since then convicted of fraud), and E3 Biofuels (now bankrupt). Not once did I see any mainstream media stories challenging his claims or his credentials for making such claims. Those articles are coming now at a brisk pace, but why did it take this long?
The Media Served as a Vehicle to Promote Hype
In fact, not only were the claims not challenged, the media played a big role in helping establish the Range Fuels hype. Khosla was given a platform in many outlets to promote his companies. There were high profile (and uncritical) pieces on Range Fuels in The New York Times and in Forbes. Discover Magazine published a story on Range called Anything Into Ethanol. Given their previous gushing story on Changing World Technologies called Anything Into Oil — followed by CWT’s bankruptcy, perhaps Discover should stop trying to tell readers about the next big renewable fuel breakthrough. They don’t appear to have reporters assigned to these stories who know how to differentiate hype from reality.
Why should the media have sensed earlier that something was amiss? If they had simply applied the “it seems too good to be true” rule, perhaps some challenging questions would have been asked. I believed something was amiss because their claims ran strongly counter to what I knew about gasification and subsequent conversion into liquid fuels. They ran strongly counter to what I knew about the cost and length of time to build a plant. So I started to raise questions — but I also asked “why the mainstream media has completely missed this story.”
When I started to raise questions that the media should have been raising, people close to Range projected confidence and insisted all was well. Their CEO said that my critiques were “clearly misleading and inaccurate.” One of the engineers working on the project echoed that, calling me “misinformed about the Range Fuels project” and still insisting less than a year ago that “Range Fuels will be the largest cellulosic ethanol production facility in the world when it is commissioned with its final catalysts.” Ironically, he warned me that investigative articles like I wrote “do only harm to the biofuels industry, despite your misguided intentions.”
I tried to discuss technical issues with some of their people. While they projected great confidence, it was like we spoke different languages. I wanted to know about heat and material balances, and they wanted to talk about vision and drive. (That is not an indictment of all Range employees, but they definitely had some people in key positions who didn’t know much about the energy business). I was not the only person who noted a confidence/competence mismatch. I recently saw a conversation relayed that sounded very familiar to me:
I had a discussion with some of the engineers from Range in 2007 about how to adapt physical laws to their reality.
I remember the feeling of being reactionary – cautious and less dynamic among a crowd that had all the self confidence in the world. We were looking at some black stuff in a bearing – smelly – sticky – BUT IT WAS NOT – NOT – NOT TAR!!!
Why not – because their gasifier did not produce tar – because tar would kill the catalyst.
They really had visions – I remember a senior person saying to me “Of course we can change the law of gravity – NASA could put a man on the moon – it is just a matter of money.”
Everything I could say was – STOP – THINK – REFLECT – SEE – USE YOUR COMMON SENSE. All actions that did not at all match with a dynamic and fast moving venture investment – at this stage they where already 2 months behind schedule.
Perhaps it was the confidence that they displayed — even as things were not going as planned — that kept the media from becoming suspicious. Whatever the reason, the media failed to do their job of being more critical of the claims. There was no investigative reporting; the media lapped up the claims. I understand that positive stories sell — and what’s more positive than a miracle solution to our energy problems? But the media has a responsibility to ask tough questions in cases like this. This is especially important when public funds are involved. As this story correctly identifies, if it’s private money, then it’s just business. But when tax dollars are wasted in this way, not only did we throw money away, but people start to get angry (that’s when autopsy stories sell) and the credibility of the renewable energy sector is damaged in the process. The latter is what I sought to avoid, and yet can anyone argue that the sector hasn’t been damaged by such high profile failures?
It isn’t easy to blaze new paths (especially if you don’t recognize what is and is not a new path), and in no way should readers think I am criticizing failure. That’s the nature of research; most things do not pan out. We need people attempting new things, and many of our tax dollars on research are well-spent. But I prefer that my tax dollars are spent on projects that have received adequate due diligence. (Funding agencies like the Department of Energy are also at fault for their failure to properly vet this project). If a billionaire venture capitalist wants to learn the energy business, he shouldn’t be given a free pass to use public funds to learn hard lessons. If he believes his own hype, let him invest his own money and convince fellow private investors.
Despite their claims of a temporary shutdown, I don’t expect that the government will fork over more funds, especially given Vinod Khosla’s recent admission that the technology doesn’t work. (I have to wonder when he realized this, and why more than $300 million had to be spent so he could learn that lesson). I expect there will be a few more stories, but eventually Range will fade from public memory as just another company whose claims didn’t match their capabilities. If history is any guide, the next stage will be the lawyers moving in to see if they can recover any investor money.
But there are still many companies today that are making grandiose claims. That will continue to be the case as long as grandiose claims receive uncritical publicity which can lead to public funding. Companies like Joule Unlimited, Coskata, Bloom Energy, and KiOR come to mind. Three of the four are Vinod Khosla-backed companies, and their claims are similar in style to those made by Range Fuels. That in itself is not an indictment (and I am not suggesting that these companies are frauds), but isn’t it time for the media to start taking a more critical look? (Have a look at the Coskata link to see one of those typical non-critical views that Range Fuels was given). Once more, public funds are being sought and received, and it won’t take many more failures before “renewable energy” is viewed by almost everyone as a scam.
But how do you dig into these companies to separate what they would like to do from what they actually can do? In the next essay, I am going to offer up a primer in the art of performing due diligence on a renewable energy company. I will detail the kinds of questions that should be asked when covering one of these new companies claiming to have solved the energy crisis if they can only get their hands on a few hundred million tax dollars.