Who's Got The Ceetoh Moves? - Part 1

Corn based ethanol has become the Goldilocks of the transportation fuel world: evoking "who ate my porridge?" cries from the world's hungry and poor.

Not to worry Little Bear, the US Energy Bill just signed into law by President Bush provides new financial incentives for cellulosic ethanol (which we'll abbreviate as"Ceetoh" henceforward). The thinking behind the energy bill presumably was that sufficient Ceetoh incentives will cause corn based ethanol to lose some of its grip on food prices, as well as increase the total ethanol production potential.

In this post, we'll address how fast that shift from corn- to cellulose-based feedstock might reasonably come about. In a subsequent post, we'll address which businesses or inventors are are positioned to create the hoped-for Ceetoh capacities.

As a result of the new US Energy Bill incentives for ethanol, more investors will be chasing the Ceetoh startups from now on in, which means US Department of Energy contacts and grant choices will get a great deal of attention. But laws and grants and investors are only the most currently visible parts of the Ceetoh equation. Much more is at stake.Ceetoh production has two basic modes: bugs and thermo-chemical attack, or some combination thereof. Specifically, variations on Thermoanaerobacter pseudoethanolicus (pictured) are going to be corralled in processing/fermentation reactors to consume wood breakdown products for our alcohol needs. Alternatively, huge amounts of heat, acid, and electricity will be thrown to the wheels of alcohol commerce, with as-yet unevaluated consequences to the environment. The specter of genetic modification of both feedstock organisms and bugs is yet to be grasped by the public at large. Both of these possibilities involve patents, of course, some of which are held by entities not presently involved in Ceetoh processing designs.

Initially, Ceetoh processes will consume cellulosic materials from naturally propagated trees (logging residues in some cases, whole trees in others), and from agricultural byproducts. Eventually Ceetoh feedstocks will include non-food fuel crops such as switch grass and wood from plantation trees cultivated and managed specifically to optimize the efficiency of Ceetoh processing operations.

Because natural forests contain the highest amount of cellulose per hectare, and because the infrastructure and labor force needed for logging and chipping exists where significant harvests are already underway, regions already known for their forest products are likely to dominate initially in Ceetoh feedstock provision. Equally important, presently forested acres don't generally offer much potential for food crops. Little Bear only need be concerned if his den is dug up by the road builders and chippers.

Live by big tracts of private forest land? National forests nearby? Better hug those trees hard, because the Ceetoh chippers are coming. It's just a matter of time.

The Ceetoh production operation is in essence a chemical- or pharmaceutical-like enterprise. It's important to approach the long term opportunity by seeing it in that context. The progression to commercial scale up will, generally speaking, be like any other chemical manufacturing process - following the R&D; path from bench-scale laboratory proof of concept studies, to pilot plant construction and testing, to pre-commercial engineering and cost analysis, to value engineering and final design, through construction, commissioning, and de-bottlenecking, and finally to full scale commercial operation - a timeline we might reasonably expect to span 10 to 12 years in total.

As final Ceetoh process design stages are entered into by the competitive businesses, all of which had different starting points, some inventor/designers may encounter lawsuits over patents, technology licensing, and so on. Delays of several years may result for those so encumbered, with some players having to drop out as a result.

Other prospective causes of Ceetoh plant delay or failure are likely to include (believe it or not): failure to consider, in the earliest design stages, the potential for greatly increased operating energy costs in the future, a tendency to optimize process yield and overlook waste generation in the race to demonstrate proof of concept and to thereby attract investors or granters; the failure to plan adequately for air and water discharge permitting requirements and make reasonable allowance for capital cost of pollution controls; failure to adequately consider water availability under drought conditions; and, adverse community response to use of genetically modified organisms, to extensive forest clearing, to odor, to water pollution, or to prospective respiratory exposures of emissions from scaled up facilities.

The aforementioned risks are anticipated because the talent base for planning, designing, and building Ceetoh plants is likely to be dominated by engineers and business managers who learned their skills in the era of almost-free water, seemingly endless, cheap energy, and an approach to environmental permitting that treats it as an obstacle rather than as a means of protecting the common good - investors included. The latter philosophy has been increasingly prevalent in recent years, but can not necessarily be expected to remain so after 2009.

Ceetoh process designs which approached stages in the "de-regulatory" era of the Bush Administration, then, could be at risk in a future where compliance with and enforcement of environmental laws and regulations are taken seriously - or not, if extensive exemptions are granted in the name of "Energy Security". This race is impossible to call, in other words. Investors typically prefer certainty in such matters; so this aspect is particularly critical to resolve as soon as possible.

Finally there is the matter of forest certification. Can you imagine the arguments around proposals to clear debris from old growth timber falls to feed the Ceetoh chippers?

Do we envision a social preference for Ceetoh made from sustainably managed acres of forest land? Which certification regimes will be accepted by green fuel consumers? This will be most interesting to watch unfold.

All the above items considered, then, the final design shakeouts and large scale construction of multiple, competitive Ceetoh facilities, built in tandem with long term contracts for sustainable feedstock sources, is likely to be experienced no sooner than 2020.

This is a significantly more conservative estimate than that cited by Jeremy in his recent post "Biofuels: Once More into the Fray." The incremental difference of 5 years is owing to our presumption that ag economists are unlikely to be familiar with the cited aspects of the construction of chemical processing facilities and are likely to have overlooked some of the other life cycle issues mentioned.

That said, later this week we'll post a summary of today's major Ceetoh players - that's Part 2.

Update, Christmas Day, December 2007 - The Ghost of Christmas Future:: adding to the short term feedstock issue list...

Just as widespread North American scale up of corn-based ethanol making in 2007 led to "unanticipated" increases in food prices, impacting nations outside of the US, it is plausible that reclaimed waste paper and cardboard will result in increased wood fiber prices in the future owing to use of forest product waste materials as Ceetoh feedstock. Those increased prices - prospectively caused by government incentives enact in 2007 - would have ripple effects on the pulp and paper industry and its customers.

The fact that both fine and corrugated waste paper accumulate at the highest rates in dense urban environments, and that these materials can be collected in bulk using existing infrastructure and service arrangements, means that existing recycling service providers are well positioned to be Ceetoh feedstock sources, allowing urban Ceetoh plants to generate ethanol right where it is most needed by consumers, and keeping the ethanol distribution footprint to a minimum. It would be surprising, therefore, if entrepreneurs are not already working on waste paper supply contracts for this purpose.

The tertiary impact of making ethanol from waste paper would be to make the production of new paper products with high recycled content less profitable. Don't be surprised if a few years out that "minimum 20% recycled content" labels start to disappear.

And, of course, whether this is a good thing or a bad thing is a value judgment. One thing we'll wager is that no one involved in the new US energy bill gave any of this a thought.

We can already hear it:- "who'd have thought this would happen?"

Image credit::JGI MIcrobes, Thermoanaerobacter pseudoethanolicus