Biofuels Boondoggle? State's Investment in Switchgrass Doesn't Reap Benefits

In 2007, when state government was flush with revenue, then-Gov. Phil Bredesen channeled $70 million to the University of Tennessee for what was called the Tennessee Biofuels Initiative. The goal was to demonstrate the feasibility of converting what was envisioned to become hundreds of thousands of acres of home-grown switchgrass into cellulosic ethanol for motor fuel processing plants throughout the state that would both boost Tennessee’s economy and help reduce the nation’s dependence on imported oil.

That same year, Congress enacted a Renewable Fuels Standard that called for the production of 500 million gallons of cellulosic ethanol nationally by 2012 as a stepping stone toward 16 billion gallons by 2022. Together with the 14 billion gallons of ethanol that’s already being derived from corn, that would displace more than 20 percent of the 138 billion gallons of gasoline that were then being consumed in the U.S.

But now five years have passed, the $70 million has all been spent, and there’s no sign of a commercial-scale cellulosic ethanol plant in Tennessee anywhere in sight. More than half of the $70 million went toward building a 250,000 gallon pilot refinery in Vonore. A fledgling UT subsidiary, Genera Energy, contracted with chemical giant DuPont to run the pilot plant, which commenced operation at the end of 2009.

Genera also contracted with some 50 nearby farmers to plant upwards of 5,000 acres of switchgrass, and over the course of these three-year contracts, it has (or will by the end of this year’s growing season) accumulated some 50,000 tons of this bulky crop at a cost of $2.5 million.

But instead of feeding the switchgrass into the pilot plant to test its feasibility as an energy crop, DuPont has opted instead to run it on corn plant residue known as stover. And instead of making plans to build a commercial-scale plant in Tennessee, DuPont’s sole commitment has been to spending a reported $275 million on a plant in Nevada, Iowa that’s due to produce 27.5 million gallons a year of cellulosic ethanol starting in 2014 from—guess what—corn stover. So close to $40 million in Tennessee taxpayer dollars have gone to test the viability of DuPont’s proprietary technology for extracting cellulosic ethanol to support a plant in Iowa where it now has 150,000 acres of corn stover under contract with corn farmers there.

Meanwhile, Genera is left with a $2.5 million inventory of switchgrass that’s mostly stocked in huge bales at Vonore and adjacent storage sites. And the growers who committed their land to producing the perennial crop in anticipation of becoming suppliers to a commercial plant are seeing their $50 a ton contracts expire with little alternative use for the switchgrass except as forage.

A DuPont spokesperson is noncommittal on whether a commercial plant in Tennessee is in the offing, but notes that the company’s business model calls for licensing its technology to others rather than running more plants itself. “The Nevada plant is intended to demonstrate that it’s a profitable business... and once we’ve done so we believe there will be a market for it.” The reason for locating in Iowa, she says, is “the ready availability of biomass” (from that state’s 14.5 million corn acreage). All of which leaves one to wonder whether the 50,000 acres of switchgrass with a three-year maturation period that it would take to support a like-sized plant in Tennessee can ever match up with what Iowa and other corn-belt states have to offer. (The irony of the 5,000 acres planted here is that it’s far more than needed for the Vonore pilot plant, which may start testing switchgrass in the year ahead, yet nowhere near enough to support a commercial-scale plant).

When the $70 million Biofuels Initiative state funding ran out earlier this year, UT spun off Genera as a private, supposedly free-standing company. As a send-off, though, the university invested $1.3 million in the venture, which officials say was derived from UT’s share of an ORNL management fee rather than state appropriations. But how long that funding and any other prospective source of revenues or investment will keep it going is anything but clear.

Genera’s CEO from the outset, Kelly Tiller, remains upbeat about its prospects. She’s taken a leave of absence from her UT post as an associate professor of agricultural economics and relocated with her staff of 13 to a Biomass Innovation Park in Vonore from offices on campus. She sees the company becoming a “biomass feedstock supplier” with a unique mastery of the logistics of “Getting energy crops from the farm gate to the plant gate.” The park, in which UT invested $4 million and still owns, represents “the biggest sandbox in the world for giving us a leadership role in being the center for commercialization.” And she points to the federal Renewable Fuels Standard as assuring that a great deal of commercialization will take place.

As matters stand, however, this standard is running smack into what’s known as the biofuels blend wall. This wall is created by the fact that the 10 percent ethanol that’s blended into most gasoline has already been saturated by corn ethanol and is the maximum allowable in most states, including Tennessee. The federal Environmental Protection Agency has blessed an increase to 15 percent, known as E15, for cars made since 2001 that would allow some room for cellulosic ethanol growth. But car makers and gasoline dispensers are fiercely resisting it with warnings of damage to engines and corrosion of underground storage tanks, not to mention the huge cost of new dispenser pumps.

A spokesman for the Tennessee Department of Agriculture, which regulates vehicle fueling, says it has no plans to initiate a change and that a national standard-setting board, known as ASTM, is “still looking at engine performance and durability issues.”

The DuPont plant in Iowa is one of only a handful of cellulosic ethanol facilities going up anywhere in the country, and there aren’t likely to be many more unless and until the blend-wall blockade is broken. So for all the pioneering work that Tiller and her team have done, they may not see it come to fruition for many years ahead. In the meantime, the decline in U.S. gasoline consumption that’s resulting from increasingly stringent engine fuel efficiency standards is expected to accelerate, thus reducing the prospective market.

© 2012 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Comments » 1

troe writes:

An important story Joe. Although analyzing Tennessee's renewable/alternative energy play is complicated it helps to remember the admonition to " follow the money" Check out John C Thorton's involvement with UT, TBI, Genera, and land development around Vonore. The nexis is pretty straight forward and deserves some public spirited investigation.

Worse by many factors than the biofuels bet is the coming solar implosion. As I write players around this state are scambling to prop up the Hemlock, Wacker, and Sharp foundation that was supposed to fuel our new manufacturing economy. All three are being scaled back or abandoned by their corporate masters. Readers probably know about the Wacker "delay" and may have read about Sharp's offer to close or sell it's PV plant in Memphis, but Dow's decision is a little less well known. A reading of Dow's 3Q call with investors spells it out. They are pulling back. Our free press plays a vital role in keeping track of current performance vs past promises. We are fortunate to have it.

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