Poet, the largest corn ethanol producer in the United States, announced this week that it has cut the cost of cellulosic ethanol coming out of its Scotland, S.D., pilot plant by about 40 percent. Is cellulosic ethanol on its way to becoming commercially viable and cost competitive? During today's OnPoint, Jeff Broin, CEO of Poet, discusses his company's progress in the production process of cellulosic ethanol. He gives his take on his industry's ability to meet the short-term targets of the federal renewable fuel standard and discusses the viability of algae-based fuels.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Jeff Broin, CEO of Poet, the largest corn ethanol producer in the U.S. Jeff, it's nice to see you.
Jeff Broin: Great to see you and we're thrilled to be here today on the first anniversary of the startup of our cellulosic pilot plant in Scotland, South Dakota.
Monica Trauzzi: Well, congratulations for that and on this first anniversary your company is announcing that you've managed to bring down the cost of the cellulosic ethanol coming out of that pilot plant. What kind of numbers are we talking about here and what does this progress mean for the industry moving forward?
Jeff Broin: Well, Monica, we've had some great progress. We've been able to drop the cost per gallon, and this is an all-inclusive cost, from about $4.13 a gallon down to actually just over two dollars, about $2.35 a gallon. So, we've made tremendous progress. We also are planning to take that down even further to about two dollars a gallon by the start up of our project Liberty in 2011.
Monica Trauzzi: Is the product now at a price that you would consider commercially viable and cost competitive or is there still a lot of work that needs to be done to make this a competitive product?
Jeff Broin: Well, we continue to make progress and, again, with the two dollar number we're talking about out about two years, we certainly will be competitive with gasoline, no question. Not quite competitive with grain-based ethanol, but very competitive with gasoline. And so we're very excited about that.
Monica Trauzzi: So, how do you get to that $2 figure?
Jeff Broin: We have made some great progress so far in many different areas. We've lowered raw material costs. We've lowered enzyme costs. We've dropped energy costs. We've lowered capital costs by about 40 percent since we've started the project and there's continued opportunities for process optimization, fermentation optimization, and lowering capital costs even further. So there are just a lot of opportunities to make this process better. The great thing about cellulosic ethanol and grain ethanol as well is that they're biological processes. Biological processes can be almost infinitely improved. So, just as we're still improving the grain-based process after 20 years, we will, for the next 20 years, be improving the cellulosic process.
Monica Trauzzi: As the economy improves, however, are you at all concerned that you might not be able to drop that price any lower?
Jeff Broin: We are real confident. One area that we're certainly can drop the price lower is enzyme costs. Our enzyme partner, Novozymes, is committed to continuing to drop that cost and so that's a piece of the puzzle. And, in addition, just based on our 20 year track record of continually improving processes, we're fairly certain we can move that price down.
Monica Trauzzi: The cellulosic industry has hit many roadblocks, especially over the last year. We've seen some companies suffering pretty dramatically as a result of the economic downturn. How has your company been impacted by the downturn?
Jeff Broin: Well, Monica, we've been very diligent in our risk management processes and procedures. We have held fast to our 20-year game plan of being ready for difficult times and we have just been able to come through this in very good shape.
Monica Trauzzi: There's been a lot of talk about whether the industry can meet the mandates set out in the 2007 energy package. Are the short term goals feasible for your industry? I mean what tweaks do you think need to be made to that mandate?
Jeff Broin: You know, I think that the industry, longer term, will be able to meet it. You know, when the government picked a number out of the air, whether or not the technology could be mature by that time was really a crap shoot. But I really think that the industry, long term, will be able to be, at some point, above that number; short term, probably a little below it.
Monica Trauzzi: Algae-based fuels have been getting a lot of attention recently, especially from the oil industry. Is it hype or is there promise there for that technology?
Jeff Broin: Well, you know, I liken algae to what cellulose was 25 years ago. It was a real exciting sounding idea that took a lot of time to become mature and ready for the market, ready to be commercial. Algae, I think, is very similar in that it's got great promise, but it will be many years, perhaps decades before we see volumes of algae-based fuels created in this country. That's my opinion.
Monica Trauzzi: So, you're not concerned that you're going to see competition from algae anytime soon?
Jeff Broin: I'm not concerned and I hope that Congress and others realize that it's an opportunity, but we need to look at it realistically that it will take quite a bit of time to become a reality.
Monica Trauzzi: So, you would support funding from Congress going towards that technology?
Jeff Broin: I think, without question, had Congress not put some funding into cellulosic ethanol 25 years ago we wouldn't be where we are today. So I think certainly it's something they should look at.
Monica Trauzzi: In his new book, "Our Choice," former Vice President Al Gore expresses skepticism about the future of the ethanol industry and the role that ethanol will play in our energy policy. Has the momentum behind ethanol decreased over the last couple of years and do you think that we're going to continue to see government support behind the expansion of your industry?
Jeff Broin: Well, I think, that without question there's probably not been enough effort on the ethanol side driving us forward and I think there have been a lot of forces out there trying to protect the status quo and they're going to spend a lot of time and a lot of money to slow this industry down. As far as Mr. Gore, I think, quite frankly, he needs some updated information. He simply does not understand the facts. And just as we are out here in Washington today getting the facts out and working very hard through both energy and through Poet to get those facts out there, we need to make sure that they're communicated clearly and effectively to everyone on Capitol Hill and elsewhere, to Al Gore and others.
Monica Trauzzi: EPA may push off a decision on whether to raise the ethanol blend limit for ethanol and gasoline to 15 percent, but the decision is expected sometime soon. If EPA grants the petition for 15 percent ethanol, what would the immediate impacts be on your industry or would there be immediate impacts?
Jeff Broin: E-15 is going to be critical in order for us to finance plants going forward, especially cellulosic plants, so it's critical that we move that blend wall. You know, today the market really is full, so there's no market for cellulosic ethanol. So it's critical that that blend wall is moved and, in effect, the EPA who wants cellulosic ethanol is now standing in the way if they do not move forward, moving from E-10 to E-15. I think that they understand that and I think the EPA will make the right decision and I think that they will decide that biofuels are good for the future of this nation and they're good for the environment and that we need to move to E-15.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.
Jeff Broin: Thank you.
Monica Trauzzi: And thanks for watching. We'll see back here tomorrow.
[End of Audio]