Cellulosic Ethanol Production

According to JP Morgan Analyst Marc Levinson, ". . . there is no prospect of producing this much [36 bgy] biofuel from corn in the United States."

That's why the Energy Bill also mandates the production of cellulosic ethanol, a fuel that can be made from the cellulose of many plants, rather than competing with corn. It's the stuff Bush is referring in to when he talks so enthusiastically about switchgrass--though it can be made from many sources.

The Energy Bill requires that 3% of ethanol be derived from cellulosic sources by 2012, and 44% by 2022. That means, by my estimates, we'll need to produce 405 million gallons of cellulosic ethanol in 2012 and 15.84 billion gallons in 2022.

I'd consider that a heck of an opportunity, especially since construction only recently began on the first cellulosic pilot plants in the nation. This is truly a ground floor opportunity.

According to consultants McKinsey & Co., "If the 2022 mandate is met, it could let corn ethanol producers reach a production ceiling that does not threaten food prices, while providing them and cellulosic producers revenues of about $50 to $70 billion."

Of course, I believe the cellulosic industry will be the biggest beneficiary. But, until recently, the industry was shrouded in doubt about whether or not it was profitable, how much it actually reduced lifecycle carbon emissions, and even it could be produced on a mass scale.

Now, reports are coming out that ease all those fears.

Bill Caeser, an analyst from McKinsey & Co. says cellulosic ethanol can become commercially available by 2015. And POET, a private ethanol company, hopes to be making commercial amounts of it by mid-2012.

Caeser also said cellulosic could boost the percentage of energy from ethanol in US transportation fuel to about 16% by 2022, up from current levels of about 3% from ethanol made from corn. That could save the United States 1.5 million barrels of oil per day.

You see, ethanol does not contain as much energy per gallon as gasoline, so its contribution to energy supplies is often measured in energy content rather than volume. Some have even said that it takes a gallon of gasoline to make a gallon of biofuel.

But a new study from plant scientist Ken Vogel found cellulosic ethanol actually has positive net energy yield. In a study for the federal government's Agricultural Research Service in Nebraska, Vogel calculated all the energy that went in to producing cellulosic ethanol.

According to Vogel, the study included, "the energy used to make the tractors, the energy used to make the seed to plant the field, the energy used to produce the herbicide, the energy used to produce the fertilizer, [and] the energy used in the harvesting process."

His results?

For every unit of energy used to grow the feedstock, Vogel says he could get almost 5.5 units worth of ethanol. That's even more efficient than making ethanol from corn.

And cellulosic ethanol emits far less carbon dioxide, the main greenhouse gas, than corn-based ethanol. Cellulosic emits 80% less carbon dioxide than regular gasoline, while corn-based ethanol emits only 20 % less.

With so many benefits, there's got to be an investment opportunity.