January 16, 2008


Ethanol Minus the Corn: ATV's Bill Wiberg on Coskata and Its Big Deal With GM

Switching the nation's vehicle fleet from gasoline to biofuels such as corn-derived ethanol could reduce the nation's dependence on foreign oil, which is why President Bush wants the U.S. to produce 35 billion gallons of alternative fuels by 2017. But there are a couple of big problems. So much of the nation's corn supply already goes to producing ethanol that it's driving up the price of food. And it turns out that the energy bound up in corn-based ethanol is almost entirely offset by the energy required to grow the corn and process the fuel. So biofuels are looking like a fool's bargain-unless someone can find a way to make them cheaply, using less energy, from something other than corn.That's precisely what Warrenville, IL-based Coskata hopes to do. The company, which says it has developed an inexpensive way to make ethanol from almost any hydrocarbon-rich material, from switchgrass to wood chips to demolition waste, came out of stealth mode with with its pedal to the metal on Sunday, using the Detroit Auto Show as a stage to announce a research and development partnership with General Motors. The struggling automaker says that by 2012, half of the cars and trucks it manufactures will be 'flex-fuel-capable,' meaning they'll run on E85, a blend of 85 percent ethanol and 15 percent gasoline, or any mixture in between. Fueling those vehicles will take a huge supply of ethanol, and GM CEO Rick Wagoner said GM's partnership with Coskata, as well as an undisclosed equity stake it took in the company, will help ensure that supply.I got the skinny on Coskata yesterday from Bill Wiberg, general partner at Waltham, MA-based Advanced Technology Ventures, which arranged Coskata's top-secret Series A funding round in 2006 alongside Khosla Ventures of Menlo Park, CA, and GreatPoint Ventures, a seed fund started by the founders of Cambridge, MA, cleantech company GreatPoint Energy. Wiberg says ATV became interested in the ethanol production technology Coskata is developing mainly because it doesn't depend on corn, with its high sugar content.'One of the things that's really unique about Coskata is their ability to handle a wide variety of feedstocks at the front end,' says Wiberg. 'It's not just that you're getting away from corn. You could use corn stover, municipal waste, rubber tires-anything that can be gasified using commercially available processes.'In fact, if you look at the nifty Flash diagram at Coskata's website and you're a keen reader of Xconomy, you'll see right away that the first half of Coskata's process is exactly the same as the waste gasification technology being commercialized by Boston's Ze-Gen and similar startups. Gasification companies simply dump waste into huge pots of molten iron, where it's instantly vaporized and siphoned off as 'syngas,' a mixture of hydrogen and carbon monoxide.Ze-Gen plans to sell its syngas to electricity producers. But Coskata has come up with a novel way to use the gas: it feeds it into a specially designed bioreactor, where a proprietary strain of bacteria living on tube-shape membranes ferments it to make ethanol and water. Once distilled, the result is 99.7 percent pure ethanol.Wiberg says the idea of building a company around the syngas-eating bacteria was brought to ATV in early 2006 by seed fund GreatPoint Ventures, which had been working on the idea with researchers at Oklahoma State University and the University of Oklahoma. Todd Kimmel, an entrepreneur in residence at ATV, took on the project, assembling a technology and management team headlined by vice president of engineering Dick Tobey, a 28-year veteran of Dow Chemical, and CEO Bill Roe, who had spent 29 years with Nalco, the world's largest maker of industrial water-treatment chemicals.The company operated in secret for more than a year and a half. 'Given how much discussion there is about the problems with corn-based ethanol, there didn't seem to be a lot of advantage to coming out publicly to describe what we are going to do differently,' says Wiberg. 'We didn't want competitors borrowing or mimicking the approach. But there comes a moment when you've made sufficient progress and you really do need to engage strategic partners and raise additional capital, and at that point it makes sense to go public.'The prospect of the GM partnership provided the moment, says Wiberg. 'GM is a really interesting and important partner for Coskata for two reasons,' he says. 'First, GM has a lot of experience in biofuels and they've looked at a wide cross section of the available ideas. The fact that they chose to partner with Coskata is an excellent validation of the technology. The second is that if you look at what it will take to change the ethanol market in the U.S. and take full advantage of the flex-fuel vehicles and create a distribution network for E85, a small company is not going to make that happen. The weight of a company like GM can make a huge difference.'GM says it plans to use ethanol from Coskata to power test vehicles at its Milford Proving Grounds in Michigan by the fourth quarter of 2008. Right now, though, Coskata is only producing ethanol in small batches of 150 liters, according to Wiberg. The key to the company's success will be showing that its technology can be replicated on a scale large enough to make the syngas process cheaper than producing ethanol from corn, which currently runs at about $1.70 per gallon. Coskata hopes to get its cost below $1.00 per gallon.The company has biology going for it. 'The microorganisms they have developed produce predominantly ethanol, whereas other approaches to converting syngas to ethanol tend to produce an array of products,' says Wiberg. 'That leads to the economic advantage they have and the favorable energy balance. If you make ethanol from corn, you get back 1.3 units of energy for every unit of energy you put in. For Coskata, the number is 7.7.'So maybe we're better off feeding the corn to the cows, after all.