The future of ethanol as a cost-competitive product that can thrive without government subsidies may lie in new technologies based on production from cellulose rather than corn including agricultural waste such as corncobs, wheat husks, stems, stalks and even leaves.
The key, analysts say, is the use of specially engineered enzymes designed to break the waste material into its component sugars that are then used to make ethanol. Major chemical companies active in the field include Dow Chemical, DuPont and Cargill.
Jim Matheson, general partner at Flagship Ventures in Cambridge, Mass., says a “perfect storm” of needs, new technology and growing public demand for alternative energy make cellulosic ethanol a good investment.
“The drive for energy independence, the need to get away from petroleum-based products, environmental concerns and a quickly developing technology converge to make cellulosic ethanol a good investment,” he says. “I think there’s potentially a little froth in clean tech but it will be a major issue in the 2008 election and the money will follow. I think in four or five years, the capital to support the technology will be in place.”
Flagship Ventures has invested in Mascoma, a cellulosic ethanol producer that received a $14.8 million award from the state of New York to build and operate a biomass-to-ethanol demonstration plant in Rochester, N.Y. The plant, expected to be running late this year or early 2008, is designed to operate on a range of New York State agricultural and forest products including paper sludge, wood chips, switch grass and corn stalks. But Jerry Taylor, an analyst at the Cato Institute in Washington, D.C., is skeptical about ethanol’s ability to ease the nation’s dependence on oil. He says a gallon of ethanol costs more to produce than a gallon of gasoline and corn- or cellulosic-based ethanol won’t lead to energy independence.
Flagship Ventures’ Matheson says new technology will cut the cost of cellulosic ethanol and make it competitive with gasoline.
“The Cato Institute’s criticisms are fair today,” he says. “But I don’t think that will be an informed opinion three to five years down the line.”
Ethanol made from corn and other grains soon may be seen as the first generation of the fuel if new production methods are successful – a good thing because the Cato Institute says ethanol could completely replace gasoline only if all the farmland now in production were devoted to corn and 20% more cropland could be found and planted to the crop.
R. James Woolsey, vice president of Booz Allen Hamilton and director of the Central Intelligence Agency under President Bill Clinton, says alternative energy is a key element in national security, climate change and consumers’ wallets.
“The United States has to move to energy that doesn’t depend on the Middle East or add to global warming,” he says. “Driving a plug-in hybrid car would cost about a penny a mile while a gasoline-powered car costs about ten cents a mile. Clean energy has the possibility of reducing costs by an order of magnitude.”