Jeremiah 29:11

Is this the same stuff?

Super ethanol is on its way
The next generation of this biomass fuel could be cheaper, more plentiful and arriving sooner than you think.
By Steve Hargreaves, CNNMoney.com staff writer
June 22, 2006: 5:30 PM EDT
NEW YORK (CNNMoney.com) –Cellulosic ethanol, the biofuel that differs from corn-based ethanol in that it can be made from pretty much any organic matter, has made an impression among people who matter.

Alan Greenspan, the revered former chairman of the Federal Reserve with a big distaste for irrational exuberance, recently sang its praises before a Congressional hearing on energy security. Greenspan said cellulosic ethanol is the only alternative energy source that could be produced in enough volume to make a dent in gas usage.

"You'll get an awful lot of investments [into this technology] coming in, especially if the numbers make sense, which I think they do," he said.

And last month Goldman Sachs (Charts), the world's largest investment bank, poured $27 million into Iogen, a Canadian-based biotech specializing in ethanol made from cellulose.

It used to be thought that this fuel, which some argue has the potential to replace more than two thirds of all gasoline used in the U.S., was decades away from commercial viability.

But high gas prices, a touch of technical innovation, and a healthy dose of capital may move that date up.

"There are a lot of people who think the technology is there," and could be competitive even if oil prices return to $30 a barrel, said Greg Bohannon, a managing partner at Greenrock Capital, a California-based private equity fund that focuses on renewable energy. "Why would Goldman Sachs invest in a company that's not going to be commercially viable for 10 years?"

Chances are, they didn't.

Beyond corn
Most ethanol currently produced in the U.S. is made from corn kernels.

Its benefits have been well documented in the press, especially since gasoline prices reacheda record average of $3.06 a gallon last September, and haven't fallen much since.

Ethanol is clean burning. It's renewable. And it costs about a dollar a gallon to produce. Existing cars can run on 10 percent ethanol with no modifications, and they'd need only about $100 worth of tinkering to be 85 percent ethanol powered. And, perhaps most importantly, it's domestically produced.

But there are a few major problems with corn-based ethanol.

First, it takes a lot of energy to make it. According to the Department of Energy, most studies put the ratio as low as 1:1.4 - meaning that for every one unit of energy spent, only 1.4 units of ethanol energy are created. Indeed, there are some camps who believe producing corn-based ethanol actually results in a net loss of energy.

Second, an expensive infrastructure would need to be built if people started using mostly ethanol in their vehicles, since ethanol is water soluble and the existing pipelines and filling station equipment for gasoline are not completely water tight.

Third, there's not enough corn available. John Ashworth, a biomass expert at the Department of Energy's National Renewable Energy Laboratory, said corn could only supply about 12 to 18 billion gallons of ethanol a year, or about 10 percent of the nation's 140 billion gallon-a-year gasoline habit.

After that, ethanol would start to run up the price of corn, raising the cost of everything from eggs to Coca Cola. Of course the same problem would emerge with ethanol made with sugarcane or soy or any other food crop.

Wood chips to the rescue
Cellulosic ethanol has all the advantages of corn-based ethanol - there is no difference in the ethanol, only in the way it's produced.

But unlike corn-based ethanol, cellulosic ethanol can be made from a variety of things that might otherwise be considered waste – sewage sludge, switchgrass, plant stalks, trees, even coal – virtuall