Cellulosic Ethanol is Going Backwards

In last month’s article Where are the Unicorns?, I discussed the fact that the commercial cellulosic ethanol plants that were announced with great fanfare over the past couple of years are obviously running at a small fraction of their nameplate capacity. In fact, April was a record month for cellulosic ethanol production according to the EPA’s database that tracks this information, but that meant that at least 8 months into the learning curves for these plants actual production for that month was only about 6% of nameplate capacity.

May’s numbers are now in, and the situation has gotten worse. After reporting 288,685 gallons of cellulosic ethanol in April, May’s numbers only amounted to 114,018 gallons. This is only about 2.4% of the nameplate capacity of the announced commercial cellulosic ethanol plants. If we use year-to-date numbers, the annualized capacity is still less than 3% of nameplate capacity for facilities that cost hundreds of millions of dollars to build. Let that soak in. POET alone spent $275 million, with U.S. taxpayers footing more than $100 million of that bill. Abengoa reportedly received $229 million from taxpayers for its project. For this (plus however much that was spent by INEOS), the combined plants are running at an annualized capacity of 1.7 million gallons of ethanol, which would sell on the spot market today for $2.6 million.

We can conclude from this that the three companies with announced commercial cellulosic ethanol facilities — INEOS, POET, and Abengoa (NASDAQ: ABGB) — are finding the going much tougher than expected. I believe that the costs to produce their cellulosic ethanol are higher than the price they will receive for the ethanol. This is the sort of monthly cash drain that led to the shutdown of everyone else that ever tried to produce cellulosic ethanol commercially.

I would note that a 4th company – Quad County Corn Processors (QCCP) – issued a press release in April claiming that they had produced a million gallons of cellulosic ethanol. If that is true and reflected in the EPA’s database, that would essentially account for all of the reported cellulosic ethanol produced in 2014 and up to April 2015 – which was 1.01 million gallons in total. Thus, either they are exaggerating, or the others produced no cellulosic ethanol (or for whatever reason did and didn’t report it to the EPA, unlikely given the very generous tax credits).

I suspect that INEOS has given up trying to produce cellulosic ethanol (their press releases have certainly dried up), and I suspect that the others aren’t too far behind. And there will be more tax dollars that have been flushed down the drain in pursuit of cellulosic ethanol, which companies have tried to produce economically — without success — for more than 100 years. It seems that those who do not learn history waste a lot of taxpayer money repeating it.

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