Coskata Refutes Energy Analyst’s Critique, Says It’s On Track to Make Ethanol for Under $1 Per Gallon

The idea that a strain of bacteria discovered at the bottom of a lagoon on the campus of Oklahoma State University could hold an answer to U.S. dependence on foreign oil sounds improbable to many. It certainly does to Robert Rapier. The chemical engineer at Arnhem, Netherlands-based Accsys Technologies published a blog post last weekend arguing that Coskata—the Warrenville, IL, startup that hopes to turn the bacteria into the engines of an industrial process that converts waste gases into millions of gallons of ethanol per year—has wildly exaggerated its claims that the process will eventually yield biofuels at a cost under $1 per gallon.

“Not only is this not the ‘slam dunk’ that is being projected, you probably have a better chance of hitting a blindfolded shot from mid-court than Coskata has of producing cost-competitive ethanol,” Rapier wrote. His post attracted the attention of other blogs that cover the energy sector, including Venture Beat.

But Coskata, which is funded in part by Waltham, MA-based Advanced Technology Ventures, is taking issue with Rapier’s analysis, saying that it’s based on faulty assumptions about the cost of building and operating demonstration ethanol plants versus commercial-scale plants. In a comment responding to Rapier’s post and in a separate conversation with Xconomy yesterday, Coskata vice president and chief marketing officer Wes Bolsen says the company sees no barriers to using its technology, which couples gasification of municipal waste and other hydrocarbon-rich materials with bacterial fermentation of the resulting gas, to produce ethanol for $1 per gallon or less, not counting the cost of the manufacturing facilities themselves. “Yes, gasification plants are expensive to put on the ground,” says Bolsen. “But the production cost is half that of gasoline, and you also have more feedstock flexibility—you can gasify trash, tires, agricultural residues, wood waste, any kind of biomass.”

Rapier’s critique centered around the cost of the demonstration plant that Coskata is building in Madison, PA, on the site of an existing gasification reactor owned by Westingthouse Plasma, a subsidiary of Canadian firm Alter Nrg Corp. The pilot plant, which is expected to begin production next spring, will cost $25 million and is expected to produce 40,000 gallons of ethanol per year. Rapier did some basic math, calculating that the plant will produce 2.6 barrels of ethanol per day, which puts the plant’s capital costs at $9.6 million per daily barrel. On the surface, that compares unfavorably to the capital costs of other fuel production technologies such as oil refineries ($10,000 to $20,000 per daily barrel) or even corn-to-ethanol plants ($20,000 to $30,000 per daily barrel). “The capital costs would have to go down by a factor of 100 before they could even start to get competitive,” Rapier commented.

Bolsen concedes that Coskata’s pilot plant will lack economies of scale. “It is very expensive to do commercial demonstrations; any facility producing under 1 to 2 million gallons per year is going to be unbelievably inefficient,” Bolsen told me by phone today. But it’s misleading to evaluate the economics of Coskata’s technology based solely on the cost of the demonstration plant, he argues. “You can never do your economics off of a demonstration,” he says.

Part of the Pennsylvania plant’s high cost, Bolsen says, is due to the fact that it’s an R&D facility, with two separate ethanol reactors—a membrane separation assembly and a traditional distillation assembly—being built side-by-side. He says Coskata is planning a true commercial-scale facility, with construction due to begin next year, that will cost $400 million and will produce 100 million gallons of ethanol per year. That translates into about $61,000 per daily barrel, or only about twice the capital cost of a corn-to-ethanol plant.

But 100 million gallons per year is a lot of ethanol—and the real question from an outsider’s point of view may be whether Coskata’s anaerobic bacterial fermentation process will work as well on an industrial scale as executives say it’s working in the laboratory.

The company’s technology is different from most other ethanol production techniques, in that it uses synthesis gas or “syngas” as its input rather than corn or high-cellulose corn alternatives such as switchgrass. Most so-called “cellulosic ethanol” technologies, such as the one being developed by Cambridge, MA-based Mascoma (which, like Coskata, has collected a big investment from General Motors), use various enzymes to break down the cellulose molecules in feedstock into sugars that can then be fermented into ethanol. In Coskata’s system, feedstocks such as municipal waste are simply vaporized inside … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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