Two cellulosic-ethanol companies, Iogen and Alico, have canceled plans to build plants in the United States, according to Earth2Tech.
Iogen, which originally had planned to build a $350 million plant in Shelley, Idaho, instead chose to build a plant in Saskatchewan, Canada, according to the Canadian Press earlier this month. The Idaho plant had been expected to produce 18 million gallons of ethanol per year using agricultural residues including wheat straw, barley straw, corn stover, switchgrass and rice straw.
On the other hand, Alico this week said it is halting its ethanol efforts entirely. The company had planned to build a plant capable of churning out up to 13.9 million gallons of ethanol from yard, wood and vegetative wastes annually.
New Planet Energy later said it is taking over the project and still expects to begin production this year.
Both projects had qualified to negotiate for funding from the U.S. Department of Energy in February.
Biofuel cancellations aren’t new, as a series of ethanol plants have been canceled in the last year (see Poet Cancels Ethanol Plant, Another Ethanol Plant Gets Cancelled, Biofuels Get Funding as an Ethanol Plant Gets Cancelled and Ethanol Margins Suffer).
But Rick Kment, a biofuels analyst for DTN Research, said Iogen and Alico represent the first cellulosic-ethanol companies to pull their plans.
Companies that are developing ways to make ethanol from nonfood materials such as wood chips, switchgrass and corncobs have tried to distinguish themselves from starch-based ethanol made of corn and sugarcane amid questions about the fuel’s environmental benefits and impact on food prices (see Cellulosic Firms Match Coskata’s Ethanol Claims, More Cellulosic Ethanol Will Soon Be For Sale. But Who's Buying? and Corn Prices Drive Gulf Ethanol to Cellulose).
Kment said the news is a sign that investors are lumping both types of ethanol together.
“It doesn’t really surprise me that we’re starting to see some shaking out of [cellulosic ethanol],” he said. “One reason is because of the weak investor interest in ethanol produce. It doesn’t matter [to them, at this point,] if it’s corn-based or cellulosic-based.”
The other reason for the pullbacks is that companies are reevaluating some of their anticipated production costs, particularly the costs for their feedstocks, and finding that they are likely to be higher than previously expected, he said.
Growing, harvesting and transporting the materials to the plants could be energy-intensive and expensive, given the rising cost of petroleum, he said.
“If they budgeted, let’s say, $30 per ton of feedstock for a swtichgrass plant, and now it’s at $50 to $60 per ton due to the cost of growing, harvesting and transporting the product, that really can significantly change the outlook of the industry, especially when you’re in the first stages of planned development.”
Still, the plants that are being canceled are still in the planning or early-development stages, he said.
“Now is a very easy time to back out and the only cost they have is the consulting and permitting costs, so they don’t have a whole lot of construction or plant [equipment] involved in the venture at this point,” he said.
The economy in general, as well as the uncertainty around the U.S. presidential election, isn’t helping biofuels, Kment said.
The energy bill passed in December requires the United States to use 36 billion gallons of ethanol in 2022. With more than half coming from nonfood biofuel, it’s always possible that standard could shift under a new presidential administration, he said.
While more early-stage cancellations could well be on the way, Kment said the industry is still growing production overall.
“Right now, plants that are in production really seem to be focusing more on cash flow than on profitability, and a lot of them continue to be cash flowing,” he said. “A lot of [established plants] are still doing relatively well because they really don’t have a lot of debt. We’re seeing a little backing off in [new] production, but we’re still seeing a growth in production.”