So, entrepreneurs have focused on new, "second-generation" methods for making ethanol from such sources as wood chips, grasses, weeds or algae.
Entrepreneurs and investors in the U.S. expect that the growing public skepticism about first-generation ethanol -- a skepticism reflected in the statements of some lawmakers -- may in months ahead generate a more welcoming environment for second-generation alternatives that once seemed wildly speculative. Central to these alternatives are plans to use genetically modified microorganisms to break down cellulose, the chief component in the cell walls of plants, into sugar, and ferment that sugar into ethanol. The end product is known as cellulosic ethanol.
At the leading edge of this trend is Mascoma, a five-year-old biofuels company with big plans for cellulosic ethanol. On Jan. 13, Mascoma announced a deal with Fortune 500 company Valero (VLO) under which the petro-giant will invest up to $50 million in a plant that Mascoma plans to construct in Kinross Charter Township, Mich., and buy the 40 million gallons of cellulosic ethanol a year that the plant will produce starting in 2013.
As Bill Brady, CEO of Mascoma explains it, the deal pushes the Kinross site to the head of a crowded field in the race to become the first facility creating cellulosic ethanol on a commercially viable scale. Mascoma has tested its consolidated bioprocessing technology at a demonstration facility in Rome, N.Y., and says it's pleased with the results there.
A Question of Energy-Efficient Energy
Whether it's in wine, spirits or a potential fuel, ethanol -- C2H5OH -- is what one gets from fermenting sugar. Unfortunately, there isn't a lot of sugar-growing land in the U.S., so most of the ethanol produced here for fuel now comes from corn. And while plentiful sugar can be extracted from corn, it first has to be broken down: Its starches must be separated from other components and then converted through the use of enzymes into sugars, before those sugars can be fermented.
But over the past decade, skepticism has grown concerning the social value of these processes -- and the subsidies necessary to keep them commercially viable. In 2004, Tad Patzek, a geoengineering professor then at the University of California-Berkeley gave an academic voice to this skepticism. Patzek's paper estimated that the cumulative energy used to create ethanol -- the energy expended farming the corn plus energy expended in its post-harvest processing -- is six times greater than the energy it makes available to somebody's automobile.
By 2010, the U.S. ethanol industry was consuming 41% of the nation's corn -- 15% of the world's supply. To many, even former supporters of corn-ethanol production, this level of consumption was just intuitively wrong. In November 2010, former Vice President Al Gore issued a public apology for his own years of support of this industry: "First-generation ethanol, I think, was a mistake," Gore said. He admitted that one of his reasons for supporting early ethanol efforts was political ambition: "I had a certain fondness for the farmers in the state of Iowa because I was about to run for president."
A Last Hurrah?
Corn ethanol, it should be noted, doesn't reduce energy's carbon footprint significantly compared to gasoline, in part because the ground used to grow the corn itself releases carbon with each annual round of planting and harvesting. A Duke University study has indicated that switchgrass and other sources of cellulose -- and thus, ultimately, of ethanol -- that don't require annual replowing and planting are a better option from this point of view.
In December, the lame-duck Congress voted to extend a controversial pro-ethanol tax credit for one year, but it did so amid unusually vociferous expressions of reluctance. Ken Root, writing in The High Plains Journal, said the extension had been enacted against the odds and had the character of a last hurrah.
Andrew Soare, a research associate at Lux Research, summarizes recent developments: "Conventional corn- or sugar-derived ethanol is definitely on the decline. New capacity is not being built, and even the existing capacity of ethanol facilities is not fully employed. This has shifted attention to new ways of producing ethanol."
The Coming Second-Generation Shakeout
Those second-generation methods will themselves soon experience a shakeout, Soare believes. "As developments come closer to [commercial] scale, there will be a big separation between those who have the right partners and technology on the one hand and those who are mostly hype on the other," he says.
Even to optimists, though, it appears unlikely that cellulosic ethanol will be cost effective without public assistance any time soon. The state of Michigan has contributed $23.5 million to the funding of Mascoma's Kinross project, for example. Mascoma is also waiting for final approval of a loan guarantee from the U.S. Department of Energy. Then again, corn ethanol's growth has relied on government assistance as well. According to the Environmental Law Institute, through a seven-year study period beginning in 2002, corn ethanol received total federal subsidies of $16.8 billion. And that doesn't include separate state-level subsidies.
A New Perspective
The political success of second-generation ethanol at this budget-tightening political moment may require a consensus about the generational divide. Says Matheson: "I think people -- and this includes the general public, legislators and the White House -- have a good sense of the differences between the first and second generations of ethanol. Three years ago that would not have been so. Three years ago the differences were less understood, because they were less sharp and less proven."
Brady shares that view and puts the case simply. The pressure on first-generation ethanol "has come about for two reasons: First, because that ethanol is food-based; Second, because it really doesn't produce a large net carbon reduction in the end. Mascoma's cellulosic ethanol solves both problems." Proving it can be commercially successful is the next step.