Jeff Broin knows his way around a corn field. The 44-year-old CEO of Poet, which is the largest ethanol producer in the world, grew up in Minnesota on a family farm. He lives in Sioux Falls, South Dakota, and Poet’s 26 ethanol plants are scattered across the midwest.
Broin also knows his way around Washington, which he visits about once a month. Smart move. Without an array of subsidies and mandates from a farmer-friendly Congress, no one would invest in corn ethanol.
Which doesn’t mean that Broin is satisfied with the status quo–to the contrary, he’d like more help from the powers-that-be in your nation’s capital, which is where we met last week. We talked about the subsidies, about the challenge of competing with Big Oil and about Poet’s big plans to make cellulosic ethanol from corn cobs.
“While the corn cob is a very small item, it can have a very big impact,” Broin says. “We have the potential to replace gasoline in this country with ethanol.”
Sound familiar? You may recall that the ethanol industry boomed in the mid-2000s, then went through a shakeout last year as corn prices rose and gasoline prices fell. Poet, which has been around since the late 1980s, is more than a survivor: It makes about about 1.5 billion gallons of ethanol a year,roughly 10% of the total made in the U.S.
Corn ethanol remains controversial, as debate continues over whether it delivers much in the way of environmental benefits. That’s not my topic today. (If you want to know more, here are links to coverage of a recent paper in Science magazine by Tim Searchinger, Dan Kammen and others, a populist attack on ethanol from journalist Jeff Goodell and a study from the Yale Journal of Industrial Ecology [PDF] that concludes that “corn-ethanol systems have substantially greater potential to mitigate GHG emissions and reduce dependence on imported petroleum for transportation fuels than reported previously.”)
But even critics of corn ethanol agree that what are known as next-generation biofuels, including cellulosic ethanol, are worth investigating, and cellulosic is what Broin is selling these days. Specifically, Poet wants a loan guarantee from the Department of Energy so that it can build a conmercial-scale, cellulosic ethanol plant, dubbed Project Liberty, in Emmetsburg, Iowa. The DOE awarded the plant an $80-million grant in 2007, but it will cost about $200 million to build, and Broin says he can’t borrow the rest of the money without the federal backstop.
In return, Poet is promising a breakthrough: Its new plant will make ethanol from corn cobs. Corn cobs are plentiful (they are usually left on fields today, presumably because corn cob pipes aren’t selling like they once did), they obviously aren’t a food source and using them to make ethanol will bring added revenues to farmers. What’s more, a byproduct of the cellulosic refining process is lignin, which can be used to power 100% of the corn-cob plant and 80% of the nearby conventional grain-based plant, reducing ethanol’s carbon footprint. Yet another byproduct, a vegetable protein known as Dakota Gold, is sold for animal feed. Eventually, Broin would like to put corn-cob cellulosic plants next to existing grain ethanol plants to exploit the full value of the corn harvest.
Put simply, this is an ethanol plant that even Al Gore—who has gone from corn-ethanol booster to critic—might be learn to love.
Last week, after a year of operating a pilot corn-cob plant in Scotland, S.D., Poet delivered some good news. It said it has reduced its expenditures on energy, enzymes, other raw materials and equipment, bringing its per gallon cost of cellulosic ethanol down from $4.13 to $2.35. Poet intends to drive costs below $2 a gallon by commercial start-up in 2011, making cellulosic ethanol cheaper than gas.
“Two years ago, I would have told you this was a long shot,” Broin said. “Today, I’d tell you that we will be able to make cellulosic ethanol at a competitive price.”
You’ve got to take Broin’s claims seriously because of his track record. He began making ethanol in a small plant with his father in 1987, in part because they saw an oversupply of corn.
Corn, he argues, remains abundant, brushing aside claims that ethanol production drove up food prices. “We’ve been awash in grain my entire life,” he said.
Today, Poet employs about 1,500 people. The company remains privately held, owned by the Broin family and by 11,000 farmers who are also suppliers.
Some of its growth has been funded by you and me. Corn ethanol has benefited from a tax credit now worth $0.45 per gallon, as well as tariffs that discourage imports, including cheaper and environmentally-preferable sugar cane–based ethanol from Brazil. (The only purpose of the tariff is to prevent Brazilian growers from capitalizing from a tax credit aimed at American farmers, Broin says.)
Two years ago, Congress gave the industry another boost—a mandate that renewable fuels be mixed into the gasoline supply, requiring usage of 10.5 billion gallons this year, which will rise to 36 billion by 2022, 21 billion gallons of which are supposed to come from cellulosic sources.
And what are we getting in return? Less dependence on imported oil, a healthier rural economy, farm jobs and more environmental benefits all the time, says Broin. Poet, for example, is working with a company called Magellan to see if they can build a pipeline to lower the greenhouse gas impact of transporting ethanol to the east coast.
“Ethanol is trending towards zero greenhouse gas emissions,” Broin says.
The other reason Broin says he needs help is that his big competitor—the oil industry–has enjoyed huge subsidies for years. He’s right about that. According to a recent report from The Environmental Law Institute, which looked at subsidies between 2002 and 2008,
Fossil fuels benefited from approximately $72 billion over the seven-year period, while subsidies for renewable fuels totaled only $29 billion.
The ELI report didn’t factor any of the costs of national defense into its estimates. Then again, coal and oil produce lots more energy than solar, wind and ethanol, so if you compare them on a subsidy per-unit-of-energy, more money flowed to the renewable sources.
By the way, Broin had one more item on his wish list for Washington: He wants an increase in the so-called blend wall, to allow up to 15% of the gasoline sold at the pump to come from ethanol. Right now the blend wall is set a 10%. The current rules “essentially reserve 90% of the market for oil and let ethanol and oil fight over the remaining 10%,” Broin says. “If you don’t move the blend wall, there won’t be a market for cellulosic ethanol.”
Poet has made a short documentary film about its plans for cellulosic ethanol that you can watch here. For a more balanced view, here is some background info on biofuels from the Natural Resources Defense Council.