BIOMASS INTEL

Cole Gustafson writing for the Prairie Business Magazine reports that producers have encountered challenges obtaining capital to finance the commercialization of cellulosic ethanol technologies.

In addition to problems on Wall Street following the collapse of the financial markets, cellulosic biofuel producers have lacked standard benchmarks of performance like those used in grain corn ethanol plants (1 bushel of corn yields an industry average of 2.81 gallons of ethanol). Federal loan programs have also not been tailored to the size and scope of next-generation biofuel plants.  All three factors are hampering the advancement of the industry.

Several companies were critical of federal loan provisions that were too narrow or favored specific types of technologies. There is a wide array of potential feedstocks being researched for cellulosic ethanol, but most federal loan programs prioritize feedstocks that qualify for federal assistance.

The amount of loan funding available also is in question.  Federal loan programs require a minimum of 30 percent private capital from commercial lenders or equity.  However, in the present lending market, lenders are reluctant to go this far with unproven technology.  Lenders are cautious following low profit margins that prevailed last year and forced almost a dozen ethanol plants to file for bankruptcy.

Several federal biofuel regulations pose challenges to the cellulosic biofuel industry and are viewed negatively by lenders.

The U.S. Environmental Protection Agency recently indicated that it is strongly considering raising the current limit of 10 percent ethanol in gasoline to 15 percent by mid 2010, pending the results of further ongoing research. The EPA’s expected action would help negate the current blend wall that limits the growth of biofuel consumption in cars that are not flex-fuel.

Proposed EPA regulations to reduce greenhouse gas emissions associated with biofuel production are also a concern for the industry.

More on the story here.