Xethanol Can’t Deliver on its Promises

The Xethanol saga continues, but is probably nearing an end. I have written a pair of articles about this, after being initially interviewed by Sharesleuth.com for their article:

Moonshine Blindness

I had indicated my deep skepticism to Sharesleuth reporter Chris Carrey about Xethanol’s prospects. We had a long discussion about their claims, and I told Chris that I did not think they were credible. I wrote two follow-up articles:

Xethanol Story

World’s Worst Businessman

I had written:

While I think cellulosic ethanol will eventually be commercialized, I don’t believe it is going to be by a company who just recently jumped into the game with essentially no experience, and then doesn’t invest heavily into R&D.

I also wrote:

My prediction is that XNL will continue to be a very small conventional ethanol producer, and will offer up a litany of excuses and delaying tactics for why their cellulosic ethanol plant is not up and running.

Well, Fortune Small Business has updated the story, and Xethanol is coming along pretty much as expected:

A biofuels startup can’t deliver on its promises

I was interviewed for this story by Justin Martin, one of the authors. We covered a lot of ground in the interview, including the prospects for cellulosic ethanol, U.S. energy policy, the need for more conservation efforts, and Peak Oil. I did get 1 short mention on the second page of the article when I pointed out that the kind of license Xethanol has can bought for a dime a dozen. I also told him that I thought Xethanol would probably eventually go bankrupt.

Some excerpts from the article:

According to scientists, stock analysts, former Xethanol board members, and competitors interviewed for this story, Xethanol exaggerated its experimental ethanol capabilities. The company’s repeated announcements that it was on the verge of producing large amounts of a new kind of fuel called cellulosic ethanol triggered a buying frenzy for its stock.

If you have read some of my essays on the topic, it should come as no great surprise that the capabilities were exaggerated. In fact, most of the claims that I read about cellulosic ethanol are exaggerated, or best case projections with little grounding in reality. However, even ethanol pitch man Vinod Khosla indicated to me during a phone conversation that he thought Xethanol was exaggerating their claims. (Not that Khosla hasn’t been guilty of doing the same).

Moreover, Xethanol is not close to producing ethanol from anything but corn. Established players in the waste-to-ethanol race, such as Spanish giant Abengoa (abengoabioenergy.com), DuPont (Dupont.com) and a Canadian company called Iogen (iogen.ca), each spend tens of millions a year for R&D.By contrast, Xethanol has spent $239,651 over the past two years. The bulk of the company’s R&D spending has gone to buy licenses for experimental processes developed in various university labs.

It was over this section that I was quoted. I had pointed out that in comparison to Iogen, for instance, Xethanol has spent next to nothing on research. When asked about their licenses, I pointed out that those can be had for next to nothing. My position was reiterated by another source:

“To make themselves look like a tech-oriented company, they’re obtaining licenses that anyone can acquire,” says Barry Borak, a Boston-based energy consultant with financial-services clients such as AIM Investments and Loomis Sayles.

The article is a really good read, and should serve as a cautionary tale for those who invest in things they don’t understand. Cellulosic ethanol is not easy to produce. It is expensive and technically complex, claims to the contrary nothwithstanding. No way was a small producer like Xethanol going to be the first to commercialize it after others have spent tens of millions of dollars and many years in the lab without success. This story turned out the only way it could have turned out: Badly for Xethanol investors.

15 thoughts on “Xethanol Can’t Deliver on its Promises”

  1. Thank god for my Google alert on keyword “xethanol”. 5 hours from your post to my inbox!

    I think I may cut my losses after having read your article. I’d hoped that the new CEO would be more honourable.

    Thanks for your clear, informative post on the Xethanol hype.

  2. What do you know about Broin’s Voyager plant in Emmetsburg, IA? They say they will convert it “from a 50 million gallon per year (MGPY) conventional corn dry mill facility into a 125 million gallon per year commercial scale bio-refinery designed to utilize advanced corn fractionation and lignocellulosic conversion technologies to produce ethanol from corn fiber and corn stover.”

    http://www.broin.com/Broin/Broin_PressReleaseViewer.aspx?prid=68

    It sounds to me like a mix between conventional and cellulosic. The 83% less energy claim is impressive, but you could get close to that by burning the stover for distillation heat (why doesn’t anyone do that already?).

    This has little to do with Xethanol (more like a polar opposite), but I’d like to hear your thoughts. Perhaps even a separate column. Thanks.

  3. The 83% less energy claim is impressive, but you could get close to that by burning the stover for distillation heat (why doesn’t anyone do that already?).

    The main reason people don’t do it is that it is simpler, and probably cheaper at current prices, just to burn natural gas. Boilers that are handling solids are more expensive to operate.

    As for the process, I will try to look at it when I can free up some time.

    Cheers, Robert

  4. The main reason people don’t do it is that it is simpler, and probably cheaper at current prices, just to burn natural gas. Boilers that are handling solids are more expensive to operate.

    All true Robert. In addition, there would be a significant cost in both labor and energy to gather, collect, and transport the stover to an ethanol plant. (The weight of all that stover would be several times greater than the weight of the corn.)

    Burning the stover for energy also means farmers would have to apply more synthetic nitrogen fertilizers to substitute for not allowing the stover to decompose and let its nutrients and energy seep back into the soil.

    There is no free lunch. Farmers can’t keep pulling nutrients and energy out of the soil without replacing them.

    Using both the corn and the stover would be a real case of “mining the soil.” After a few years of not letting the stover decompose, the soil would be depleted unless the energy was returned with fertilizers. And as we all know, virtually all nitrogen fertilizers are now made from natural gas.

  5. Nigel Gamecock writes:

    (The weight of all that stover would be several times greater than the weight of the corn.)

    Quite the opposite.  150 bushels of corn (typical per-acre yield) weighs about 8400 pounds; the yield of stover from that acre would be in the neighborhood of 1.5-2 tons per acre, less than half the grain yield.  The Corn Stover Collection Project determined this (pdf once available but server now off-line, mail me asking for bio98_Corn_Stover.pdf and I’ll forward you a copy).

    Burning the stover for energy also means farmers would have to apply more synthetic nitrogen

    Corn stover has essentially no protein, and thus little nitrogen.  (It’s what’s left after the plant has thrown everything into the seeds.)  It also decomposes quickly and doesn’t contribute much to soil tilth.  So long as the nitrogen, phosphorus and potassium removed from the field is returned somehow (including what goes with the grain), you should be okay.

    Eprida claims to be able to generate both charcoal and ammonia from crop wastes.

  6. On a related note, I was wondering what you thought of the prospects of the new Diversa/Celunol merger to actually deliver cellulose ethanol at a useful scale?

    That’s an interesting development, but I don’t think it gets them any closer to actually delivering economical product at scale. I think what will happen is that the business types like John McCarthy (mentioned in the release) will keep pushing for plants to be built, naively thinking that the kinks will be worked out later. This will lead to massive losses (the bigger the plant, the bigger the losses) until those same business types come to appreciate that the challenges have been underestimated.

    The fact is, cellulosic ethanol is highly dependent on breakthroughs that have yet to be invented. I think I will shortly do a post on this.

    Cheers, Robert

  7. Engineer-Poet said, Quite the opposite. 150 bushels of corn (typical per-acre yield) weighs about 8400 pounds; the yield of stover from that acre would be in the neighborhood of 1.5-2 tons per acre, less than half the grain yield.

    No doubt true once the stover is dry.

    But is the heat value of stover worth the energy to gather it up and haul it to a central point for burning?

    If the value of stover as a heat source was worth the labor of picking it up, wouldn’t have the hundreds of thousands of farmers who lived across the Corn Belt in the 1800s and 1900s collected it to heat their homes?

  8. No doubt true once the stover is dry.

    It dries while standing.  It’s not hard to find studies addressing this question.

    But is the heat value of stover worth the energy to gather it up and haul it to a central point for burning?

    For some values of “central”.  I notice that you didn’t ask for a copy of the report I offered, so you cannot be all that interested in actual data.

    If the value of stover as a heat source was worth the labor of picking it up, wouldn’t have the hundreds of thousands of farmers who lived across the Corn Belt in the 1800s and 1900s collected it to heat their homes?

    The value of picking it up depends on what else they had for heat.  In areas with substantial wood lots, the collection and drying of stover for fuel would not have made sense.  If it was collected for anything, it would have been used for animal feed (either separately or harvested with grain as silage).

  9. I notice that you didn’t ask for a copy of the report I offered, so you cannot be all that interested in actual data.

    I found it on the DOE website, thank you.

    Other questions for you:

    * Doesn’t the loss of the stover expose the soil to more sunlight increasing the evaporation of stored moisture? (A critical factor in the corn growing states west of the Mississippi where dry land farmers sometimes have to rely on banked moisture from two or more rainy seasons to get a paying crop.)

    * Wouldn’t the lack of stover mean an increase in soil loss due to wind and water erosion? Couldn’t all that bare soil be the trigger for another Dust Bowl?

  10. The value of picking it up depends on what else they had for heat.

    E-P,

    Wouldn’t you say exactly the same statement applies to any proposal to use stover to supply thermal energy at an ethanol plant?

    As long as we have natural gas and coal (perhaps enough coal for 250 or more years) what incentive will motivate an ethanol plant operator to send laborers, machinery, and vehicles across millions of acres of corn fields to gather up the stover and haul it back to the ethanol plant?

    Especially when considering that in the past, most corn farmers wouldn’t even bother to walk or drive their horses a few hundred yards to pick up some corn stalks with which to heat their homes on the Great Plains?

  11. Removing all that corn stover, which otherwise is incorporated back into the soil, will have detrimental effects on the productivity of the soil over time.

    This stover, or waste, adds humus to the soil, which also tempers the soil and helps it to hold moisture in. Without it, the soil will dry out, and be less inclined to accept fertilizer applications.

    This stover also is used in low-till and no-till farming operations to cover and tie the soil surface, to keep the soil in place. In other words, to limit soil erosion problems due to wind, and or rain erosions.

    Remember the wind erosions in Oklahoma, Colorado, Kansas, and North Texas during the dust bowl era? With the wrong kinds of weather patterns and limited cover on our nations fields, we could see a repeat!

    Growing our fuel, especially if it totally strips the crop to bare earth, is total nonsense in my mind.

  12. Engineer Poet,

    To use corn stover, I think it would be necessary to have a corn picker that collected both corn and the stover in a single pass and then separated them.

    I think it would also be necessary to leave some of the stover in the field for the reasons Nigel Gamecock mentioned: To serve as a brake slowing wind and water erosion, and to help the soil “bank” water for a future crop.

    If a special corn picker cut the stover off at perhaps 18″ above the ground, the stover left behind in rows would still help collect water by capturing snow in drifts between the rows as it does now.

    It sholdn’t be too hard for a graduate student at one of the major land grant universities to earn his or her PhD by figuring out the optimum amount of stover to leave behind at the harvest.

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