Subsidy Magnets

From AutoGreenBlog

Output of cellulosic ethanol will surge starting in 2013, according to the U.S.' largest corn-based biofuel production firm, Poet LLC.

Poet says 2013 marks the start of commercial-scale cellulosic ethanol production in the U.S. and predicts its lone facility will "open the floodgates" for the advanced biofuel....

As Poet exec Greg Hartgraves points out, production of cellulosic ethanol is expensive and that means those floodgates need to be helped open with federal monies. Without an energy policy mandating its production, U.S. firms are likely to shy away from the cellulosic biofuel, he said.

Duh.  It's a substitute that is both less effective (lower btu per gallon) and more expensive that what it is supposedly substituting.   I am just floored at the number of investors who are putting money up on the come with an expectation that somewhere down the road they can convince the government to subsidize them.  Poet knows this plant is uneconomic but has built it anyway, probably hoping to extract promises of support from candidates in the Iowa caucuses.  Kleiner Perkins did the same think with Fisker Automotive, making early stage investments that could only be bailed out by future political largess.  As Ayn Rand would say,the aristocrats of pull.


  1. Mercy Vetsel:

    Funny, if not so sad. The very irrationality of the project becomes evidence for the importance of government involvement.

    WHY must we build an ice palace in the middle of the desert? Because no one else would do something so irrational. Therefore if we don't do it, no one else will.


  2. Smock Puppet, Piloting The Economic Seas Betwixt Scilla and Charybdis:


    >>> the aristocrats of Bull.

    Glad I could fix that for you.

  3. DrTorch:

    I'm so ready to go Galt.

  4. Anon:

    "I am just floored at the number of investors who are putting money up on the come with an expectation that somewhere down the road they can convince the government to subsidize them."

    It is pathetic that they are right often enough to make this a profitable strategy.

  5. Ted Rado:

    Many years ago, I calculated that if all the corn grown in the US was converted to ethanol, the GROSS production would be 1.2 Million BPD gasoline equivalent. The NET production would be virtually nil, due to energy consumption in its production. We also run up food costs and cause starvation.

    I then looked into cellulosic ethanol. The sustainable production of cellolose is estimated to be about one billion tons per year. This will produce over 3 million BPD gasoline equivalent GROSS. The energy required to collect switchgrass etc is very high due to its low bulk density. Also, if ALL the cellulose (corn stalks, etc.)is collected rather than plowed under, soil replenishment suffers. Capital cost of a cellulose ethanol plant is reported to be about five times that for corn ethanol. Thus, we will cause all sorts of environmental problems to produce little, if any, NET gasoline equivalent at high cost.

    The USG shows delightful imagination in dreaming up stupid and absurd engineering projects. The USG should be renamed "Comedy Central".

    As an engineer, I cringe when I see what the pols do in the alternative energy field. Are there no competent people in the DOE or are we all being seduced by the USG handouts? The huge USG subsidies then go on to corrupt R&D and business people. We are becoming a nation of prostitutes hired by the USG. What and idiotic mess!

  6. Dan:

    Corn-based ethanol makes little sense from an economic or energy standpoint. Government funding should be canceled. The big problem is Iowa's first-in-the-nation caucuses. The caucuses' prominence encourages politicians to keep subsidizing corn ethanol. Primaries and caucuses should be on a rotating basis so that different states get the first ones each year and no single local issue gains an overweighted sense of importance due to voting geography. McCain was one of the few candidates, I believe, who had the guts to tell Iowans he'd cut ethanol subsidies.

    The more interesting biofuel is being developed by companies that are finding ways to turn algae into fuel. It's unclear if this will eventually be possible on a large enough scale to make an impact, but algae makes a lot more sense than corn ethanol for a number of reasons, especially because it takes a lot less energy input to produce and it can be done on land that's pretty much useless for anything else (swamps). Obviously, there's no loss of food from this either, as there is for corn. Some airline or other has already flown a commercial jet in a test flight powered by algae fuel.

  7. Xmas:

    Doesn't ethanol replace MBTE? (In the 5-10% mixes, not the E85 BS)? I mean, MBTE isn't so nice.

  8. Ted Rado:


    Ethanol was originally supposed to replace MBTE. Only a small amount is needed as an antiknock agent, as compared to using it as a fuel. That small amount is feasible, whereas the huge amount needed for motor fuel is not.


    Algae has its own set of problems. For example, one paper I read suggested growing it in huge plastic bags for ease of harvesting. I have not seen any analysis of the TOTAL cost of biofuels from algae. I have not personally studied the mass and energy balance for fuels from algae. From what I have read, I suspect it is nonsense along with other biofuels.

    As always, ideas without numbers are meaningless. Almost ANYTHING is theoretically possible, but very few are technically and economically feasible. Gasoline from CO2 is a good example.

  9. TruthHunter:

    People in general aren't aware that ethanol is to some extent a byproduct.

    The dried yeast has a high nutritional value(in some ways higher than corn) that
    is suitable for fish food. Fish farm effluent has a high fertilizer value.
    Even the carbon dioxide from fermentation can be used to enhance greenhouse production.
    Is it a valid business model without subsidies?

    Cellulosic ethanol may not produce as useful a byproduct, lowering the advantage
    of Switch Grass over corn.

    Much of the profit from a barrel of regular oil comes from the byproducts that are more profitable than gasoline and diesel.

  10. A Critic:

    " It’s a substitute that is both less effective (lower btu per gallon) and more expensive that what it is supposedly substituting. "

    Don't worry. It's not that bad. It's a whole lot worse.

    One commenter touched on the biggest problem here (in America and the world) - which is the depletion of the soil. The use of an expensive and inefficient fuel is pure folly. Destroying our means to support life is pure madness. I recommend reading "Topsoil and Civilization" for an interesting take on the history we are repeating. We will likely see our first famine in the next three decades.