Ethanol for the Future; GM, Illinois Firm Seek to Boost Production

By THOMAS CONTENT

Warrenville, Ill. — General Motors is hoping to jumpstart widespread production of next-generation ethanol through a partnership with a startup Illinois biofuels firm, Coskata Inc.

The promise of less-costly ethanol and the ability to produce it from a variety of sources — from garbage and used tires to wood chips and hay — prompted GM to announce Sunday it has taken an equity stake in Coskata.

“Alternative fuels from a variety of new sources and raw materials is coming faster than a lot of people realize,” said Bill Roe, chief executive of Coskata.

Coskata sought a major global partner such as GM to help it move quickly to bring a form of ethanol to the market that’s much more cost-effective. In the race to develop new fuels, Coskata thinks its technology is ready.

“This is a speed play,” Roe said.

The firm, which started less than two years ago and has 35 employees, has significant venture capital backing and plans to open a 100 million gallon a year ethanol production plant by 2010. Wisconsin “is in the running” along with a handful of other states for that plant, said Wes Bolsen, vice president of business development.

The company is exploring partnerships with other major companies, and the pulp and paper industry would be a good fit because wood chips and the parts of trees not used to make paper would make suitable feedstocks for cellulosic ethanol, Bolsen said. Other potential partners could be waste-disposal companies that operate landfills, or national big-box retailers that may be considering selling alternative fuels.

Hurdles ahead

Many hurdles remain to powering more of the nation’s cars and trucks with home-grown ethanol. Mary Beth Stanek, GM director of environment, energy and safety, says the company has helped open 300 new stations nationwide in recent years, but the E85 blend of ethanol is sold at only 1,400 gas stations, 1% of all the filling stations in the nation.

Wisconsin has 73 filling stations selling E85.

Ethanol has been the target of criticism from a variety of sources in part because it’s produced from a food crop. Also, cars that run on ethanol get 25% worse gas mileage, on average.

GM was attracted to Coskata by tests demonstrating the company’s ability to produce ethanol for less than $1 a gallon, GM executives said. That means that blend of renewable fuel could sell for about $2 a gallon, one-third less than current gasoline prices, Stanek said.

Of GM, Roe said, “They are not taking a passive role and waiting for this to happen. They are actively engaging, and investing.”

GM already makes 400,000 cars and light trucks a year that are capable of running on E85. Stanek said that by 2012, half of the new cars and trucks sold by GM will be capable of running on either gasoline or E85.

GM, which last year made headlines with its announcement concerning development of plug-in hybrid electric vehicles, wants to give alternative fuels a boost as well. GM is researching everything from all-electric cars to hydrogen fuel cells to hybrids, Stanek said.

“We’re working on all of them,” she said. “But the biggest near- term play, one that will have the biggest near-term impact on energy, is certainly biofuels.”

Fast track

The announcement comes less than a month after Congress included a renewable fuels standard as part of an energy bill that requires new cars and trucks to dramatically boost their gas mileage over the next 25 years.

With oil prices above $90 a barrel, gasoline price above $3 a gallon and growing concern about global warming, automakers are wasting no time highlighting “greener” technologies, whether at last week’s auto show in Los Angeles or the Detroit car show that opens this week.

Ford Motor Co. last week announced that it has developed a direct- injection engine technology, dubbed EcoBoost, that can boost fuel economy by 20% and reduce global warming emissions by 15%.

That new federal fuel standard requires that 36 billion gallons of ethanol be sold in the year 2022, up from nearly 5 billion gallons in 2006. The law also requires that most of the biofuels be made from sources other than corn and soybeans, a key ingredient in biodiesel.

The Coskata team, with GM’s backing, is in the running for federal Department of Energy grants designed to speed development of cellulosic ethanol. That is the same grant program for which Park Falls-based Flambeau River Papers is seeking $30 million in federal funds. Flambeau envisions an $84 million demonstration project that would convert biomass into energy for the mill as well as cellulosic transportation fuel.

They are among several projects across the Upper Midwest looking to take the lead on next-generation biofuels.

In Escanaba, Mich., papermaker NewPage Corp. has signed an agreement with Chemrec AB of Sweden to work together to possibly build a biorefinery that would use waste wood from the pulping process to make biodiesel or ethanol. That would create 200 jobs in the Upper Peninsula, Michigan Gov. Jennifer Granholm said last year.

State benefits?

GM conducted in-depth reviews with more than a dozen companies before deciding on Coskata, said Candace Wheeler, a research fellow in alternate fuels at GM. Madison-based Virent Energy Systems wasn’t among them, but “is in the running” as GM evaluates further partnerships, GM’s Stanek said.

Virent says its technology can make “green gasoline” in the laboratory. The company has generated millions in venture capital and has received venture capital investments from Honda and Cargill and has a five-year joint development agreement for alternative fuels with Shell Oil.

What set Coskata apart? “We feel their process is ready now,” said Wheeler, of GM.

Bowen said Coskata will announce the location of a pilot plant within the next month.

Wisconsin is not in the running for that facility, but the company has had good contacts with state officials about the potential siting of a full-scale plant, capable of producing 100 million gallons per year of fuel. Coskata hopes to announce the location of that plant this fall.

Coskata says its technology would gasify the feedstocks and then use a microorganism, licensed from Oklahoma academic researchers, to convert that material into ethanol. The process uses far less water than the “moonshine” fermentation process used most often to make ethanol today.

Word of the GM-Coskata partnership comes two months after governors of Illinois, Wisconsin and Michigan announced sweeping plans to boost the production of biofuels, particularly next- generation biofuels, by 2025 or 2030.

Paper link

The paper industry is a logical partner because papermaking use only parts of the tree. Thanks to the paper industry, it’s possible for Wisconsin or Michigan “to be the next Iowa for ethanol production,” said Richard Tobey, Coskata vice president of research and development.

“Farmers and foresters are going to be the next oil sheiks in the new economy,” he said. “What’s wrong with that?”

JSOnline.com See www.jsonline.com/links for an animation that describes the ethanol production technology.

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