Biofuel or Biofraud? The Vast Taxpayer Cost of Failed Cellulosic and Algal Biofuels
– by Almuth Ernsting, March 14, 2016, Independent Science News
Biofuels consumed today are usually ethanol made from the sugar in sugar cane (or sugar beet) or they may be made from starch in grains. In the US this is mostly corn starch. Alternatively, biodiesel may be made from plant oils such as soybean or canola oil.
Cellulosic biofuels, on the other hand, are biofuels made from crop residues (e.g. corn stover), wood, or whole plants, especially grasses (e.g. switchgrass). Cellulosic biofuels include cellulosic ethanol (made by isolating, breaking down and then fermenting the complex sugars in the cell walls of plants), as well as ‘drop in biofuels’. These biofuels are chemically almost identical to fossil-fuel based kerosene, diesel or gasoline.
In November 2014, cellulosic biofuel company KiOR filed for bankruptcy, having shut down their refinery in Columbus, Mississippi earlier that year. There have been many unsuccessful biofuel ventures of this type, but KiOR’s stands out for four reasons:
1) They had sold the first-ever cellulosic biofuels made in a commercial-scale facility in the US and produced the first cellulosic gasoline ever accredited as such by the US Enviornmental Protection Agency (EPA);
2) They were the highest valued ‘advanced’ biofuel company backed by venture capitalist Vinod Khosla and his company, Khosla Ventures, having been valued at over $1.5 billion when they launched on the stock market. Khosla has been one of the most influential advocates of cellulosic biofuels in the US. Back in 2010, the EPA set a target for cellulosic ethanol, that relied almost entirely on Khosla’s promises about what another company he’d invested in – Cello Energy – could deliver. Cello Energy filed for bankruptcy that same year, after they had been found guilty of fraud;
3) KiOR had obtained a $75 million loan from the State of Mississippi of which they had repaid just $6 million by the time they filed for bankruptcy. The Mississippi Attorney General Jim Hood has described this as “one of the largest frauds ever perpetrated on the State of Mississippi.” He has initiated a fraud suit against former KiOR executives as well as against Vinod Khosla, alleging that they misled investors about the quantities and yields of biofuels they could achieve. A separate class suit has been raised on behalf of shareholders who claim to have incurred financial losses because they bought shares as a result of misleading claims by KiOR executives and Vinod Khosla about the company’s achievements and capabilities.
4) As a result of the bankruptcy proceedings and the fraud suits, information about what went wrong are entering the public domain.
The reasons behind KiOR’s failure are simple: Most of the time, they couldn’t get their technology to work enough to produce biofuels and when they did manage it, yields were far lower than KiOR had claimed. The plant, built to produce 13 million gallons of biofuels a year, produced a mere 133,000 gallons in 2013, sold another 97,000 gallons in early 2014, and then shut down. KiOR had claimed to achieve a yield of 67 gallons from each ton of dry biomass and to be working towards a target of 90 gallons/ton. Yet according to internal documents cited in Mississippi’s lawsuit, KiOR’s actual yields remained a mere 20-22 gallons/ton.
The fraud for which Cello Energy was sued and ultimately convicted involved mislabelling fossil fuels as biofuels for ‘test’ programmes. KiOR on the other hand is alleged to have knowingly misled investors and possibly the Securities and Exchange Commission about the amount of biofuels they could produce and the yields they could gain. Yet similarly hyped claims about ‘advanced biofuels’ are widespread and commonplace on different companies’ websites, in industry magazines and press releases.
A closer look at another cellulosic biofuels company – Red Rock Biofuels – suggests the federal government has not learned any lessons from KiOR or Cello, nor for that matter any of the other failed cellulosic or algae biorefineries. They are still eager to offer grants and loan guarantees on the basis of wildly hyped up claims about unproven technologies.
Red Rock Biofuels: Another KiOR in the making?
On 19th September 2015, the federal government announced a total of $210 million in grants, split evenly between three companies each of which was to build one biorefinery, paid under the Defense Production Act. The three refineries are to produce biofuels for the military. One of the three companies – Emerald Biofuels – has been secretive about their precise feedstock but their technology relies on the same kind of process as conventional biodiesel, i.e. plant oils and animal fats. Their facility (based in Texas) is to be the largest of the three refineries, the technology is proven and already used in several large biofuel refineries worldwide, including for refining palm oil. The other two companies – Fulcrum and Red Rock Biofuels (RRB) – are to build refineries which produce cellulosic biofuels. Here we will focus on RRB, although the technology that Fulcrum plans to use is nearly identical to RRB’s.
RRB was recently acquired by Joule Unlimited, an advanced biofuels companies which has so far focussed on a very different technology and feedstock, albeit at a demonstration rather than commercial-scale. RRB’s technology relies on a process that was invented in Germany in the 1920s. It consists of three stages: In the first stage, fuel (in this case wood, but fossil fuels can be processed in the same way) is exposed to high temperatures under controlled oxygen conditions – called gasification. This turns most of the fuel into a gas that consists mainly of hydrogen and carbon monoxide but still contains many impurities which then need to be removed. The cleaned gas – called syngas – is then put through a series of chemical reactions, using chemical catalysts – a process called Fischer-Tropsch reforming. It is used to create different fuels and chemicals with almost identical properties to ones derived from mineral oil, including jet-fuel.
So far, nobody in the world has successfully operated a commercial-scale plant which gasifies biomass and turns the syngas into liquid fuels using the Fischer Tropsch process, despite decades of Research and Development. The company that appears to have got furthest with this technology was a German firm, Choren.