An ethanol pump. (image: 3dphoto.net via flickr.com)

Last week POET, the nation’s largest producer of corn-based ethanol, announced that it has substantially reduced the cost of producing cellulosic ethanol from corn cobs and that it will be able to compete with gasoline within two years, according to an article published by the Washington Post on Wednesday. This comes as exciting news not only for the cellulosic ethanol industry, but also for the renewable fuels and biofuel industry in general, as POET’s technical advancements might be successfully applied to the production of a wide range of biofuels. Of course, the new production method will have an effect on traditional heating oil and gasoline production (and prices) as well.

Today POET generates 1.5 billion gallons of corn-based ethanol a year—more than one quarter of the 5 billion gallons produced annually in the United States. The company’s new pilot plant, which has been operating for a year in Scotland, South Dakota, has cut the cost of making corn ethanol from $4.13 a gallon to $2.35 a gallon, mainly by reducing capital costs and using an improved “cocktail” of low-cost enzymes. In addition, POET claims that the company can use a byproduct called lignin fuel to power the cellulosic plant and provide 80 percent of the energy needed by a conventional corn-based distillery making twice the traditional amount of ethanol.

According to POET Chief Executive Jeff Broin, the new advancement means that cellulosic ethanol has become a real contender in the energy market. “Two years ago I would have told you this was a long shot,” Broin said. “Now I’ll tell you that we will produce cellulosic ethanol commercially in two years.” The more efficient production model means that one acre of land can yield 480 gallons of corn-based ethanol a year and 55 gallons more from processing cobs, leaves, and husks.

POET’s plan to produce cellulosic fuel commercially follows a similar announcement made by BP earlier this month. According to the fuel giant, BP will work with Verenium, a cellulosic ethanol developer, to produce grass-based ethanol in the United States. Cellulosic ethanol is usually made from natural, non-food feedstocks, such as sugarcane bagasse and wood products. The fact the cellulosic ethanol does not cut into food supplies (as corn-based ethanol often does, leading to the need for more farming—and deforestation—in other countries) may help to ease tensions between fuel producers and environmentalists. Plus, the relatively high oxygen content of cellulosic fuel makes it an attractively clean alternative to fossil fuels; cellulosic biofuels may reduce greenhouse gas emissions by as much as 86 percent over fossil fuels (while, at the moment, corn-based fuels reduce greenhouse gases only by 19 percent).

No doubt a great step forward for the ethanol and biofuel industries, the technological advancements introduced by POET still do not ensure that the United States will meet the congressional mandate that refiners use 16 billion gallons of cellulosic ethanol a year by 2025. According to Broin’s most recent estimate—which takes into account POET’s new technology—the United States will be capable of producing roughly 10 billion gallons of cellulosic ethanol a year in the foreseeable future.

How will advancements in cellulosic fuel affect the oil industry? At the moment, Broin has been pressing the Environmental Protection Agency to relax rules limiting the amount of ethanol that can be mixed with regular gasoline, hoping to increase the limit from 10 percent to 15 percent. Today oil companies can sell a product known as E85, a mixture that contains 85 percent ethanol. While E85 service pumps are still rare, most standard vehicles can run off of an ethanol-gasoline mix without any problems (whereas most vehicles aren’t designed to run off of ethanol alone).

To compete with fossil fuels, biofuels like ethanol must be produced relatively cheaply, with costs not exceeding $1 per gallon on a volume basis. “If you can’t chin that bar, you’re not going to be able to compete in the long run,” says Philip New, chief executive of biofuels at BP. As HeatingOil.com reported in September, ExxonMobil has stated its plans to grow green algae to fuel commercial vehicles; Chevron has unveiled the world’s largest carbon-sequestration project in Australia; and, in recent months, Valero, Marathon, and Sunoco have all made purchases that put about 7 percent of the U.S. ethanol business in the hands of the oil industry.

Video: Dr. Mark Stowers, VP of Science & Technology at ethanol-producer POET, discusses the advances behind the company’s dramatic recent cost breakthroughs.

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