February 21, 2008

GreenTech Media

Coskata Hopes to Buck Tradition

It's no secret that distribution has been an obstacle for ethanol.Transporting, storing and selling the stuff have proven difficult. Gasoline blenders haven't mixed in the full 10 percent allowed, in spite of lower prices, and most gas stations still don't carry ethanol.But ethanol companies such as Coskata continue to make plans to increase production. How do they plan to get over the distribution speed humps?In a live chat Thursday, Wes Bolsen, chief marketing officer and vice president for business development at Warrenville, Ill.-based Coskata, said the startup plans to distribute its ethanol using "nontraditional" means, such as through big-box retailers, in addition to continuing to use traditional outlets.He said the company also will work with its partner, General Motors, to grow the distribution infrastructure. "We need more pumps," he said.Still, Bolsen said he expects the market for Coskata's ethanol blend, which the startup plans to market as "C85," will be there."We see the demand as steady and growing," he said, pointing to GM's plans to make half of its vehicles capable of using a blend of up to 85 percent ethanol and 15 percent gasoline. "When we produce ethanol for less than $1 per gallon, consumers will demand this clean and efficient product be in their vehicle."That hasn't happened yet today, even though nearly all cars in the United States can use blends of up to 10 percent ethanol and ethanol prices are 27 percent lower than gasoline prices.The average ethanol price on Feb. 7, the latest date available, was $2.31 per gallon, compared to self-serve regular gasoline prices averaging $2.94 per gallon, according to the Ethanol Market newsletter and the Lundberg Survey.Of course, a price of $2.31 per gallon is a far cry from a price of less than $1 per gallon. Coskata is betting the lower price will encourage more blenders and consumers to buy.The company also hopes branding the ethanol as C85 -- even though it'll be the chemical equivalent of any other E85 blend -- will help. "We think that people might be willing to pay an extra penny or two for ethanol that comes from nonfood-based sources," Bolsen said.Bolsen also gave more details about Coskata's process during the chat.Not all municipal waste can be used as is, so -- as CEO Bill Roe said last month -- the waste would have to be separated before Coskata could use it."We are really looking for the 'organic content,' such as diapers, plastic bags, tires, paper, construction waste, etc.," he said. "The things like metal, concrete blocks and glass don't do very well. So yes, some recycling will still have to take place."The first materials the company will use are likely to be things like wood chips, bagasse and construction debris, which already are collected at central locations, Roe said in January (see With GM Deal in Hand, Coskata Promises $1 Ethanol).Coskata's technology enables it to use low-temperature syngas, meaning a hydrogen- and carbon-monoxide-containing gas at between 100 and 1,600 degrees Fahrenheit, to produce only ethanol, not a mixed fuel, he said.The process does produce some byproducts, however, such as slag, which can be used to make bricks and pavement. From materials such as wood waste, 2 to 3 percent would come out as slag, Bolsen said.And aside from fuel, he reminded chatters that ethanol also can be turned into plastics. Richard Tobey, vice president of R&D and engineering, said in January that the company is considering expanding into bioplastics in the future (see Coskata: Behind the Hype).But for now, Coskata is looking for additional partners to license its technology to make ethanol for fuel.Earlier this month, Coskata announced it had partnered with ICM to design and construct its first commercial plant, expected to make between 50 million and 100 million gallons of ethanol annually, by the end of 2010 (see More Cellulosic Ethanol Will Soon Be For Sale. But Who's Buying?).In January, Roe had said the company would first license its technology to partners and later build its own plants.Bolsen also said Coskata also plans to open a pilot plant or what he calls a "commercial demonstration" plant in the next 12 months. (The company previously said it would deliver fuel to GM from the 40,000-gallon-per-year facility in the fourth quarter of this year.)The company will be announcing the location of the plant `Oin the next month or so," Bolsen said, adding that the plant would be able to use multiple materials to make ethanol.