GM Signs On with Ethanol Start-up

It sounds like a fevered dream of science: A fuel that costs less than $1 a gallon to create, that's made out of anything from wood chips to your kitchen trash, that takes little water or natural resources. And that's available in volumes large enough to ease some of America's thirst for oil within five years.

But an Illinois ethanol start-up says it has the technology to make such fuels a reality today -- and General Motors Corp. says it's the real deal.

GM unveiled a deal at the North American International Auto Show in Detroit today with Coskata Inc., saying it would take an undisclosed stake in the firm and help develop its ethanol process. Coskata plans to have its first ethanol plant running by the end of the year, with GM as its first customer.

Coskata executives say they'll break ground on a full-scale plant later this year and have it running by 2011, generating 100 million gallons of ethanol annually.

"This is a speed to market play," said Bill Roe, Coskata's CEO. "It's ready today, and we are moving rapidly toward commercialization."

Coskata's technology involves a unique mix of old chemistry and new science to tackle the hurdles biofuels face to becoming a true substitute for fossil fuels. Experts say if Coskata's projections hold up -- goals that federal researchers didn't expect ethanol companies to meet before 2015 at the earliest -- the company has made a historic breakthrough.

"It would be an incredible story if it's true," said Kevin Book, an energy industry analyst with Friedman Billings Ramsey in Alexandria, Va. "This hits on the sweet spots."

GM executives say Coskata's process offers the quickest path to reducing the demand for oil across the globe and breaking the industry's reliance on an increasingly expensive and environmentally unsound energy source.

"We want to change the game," said Mary Beth Stanek, GM's director of environmental and energy policy and commercialization. "We can work around the world to deploy process as quickly as possible."

With oil prices hovering near $100 a barrel and gas prices expected to rise above $3.50 a gallon later this year, biofuel companies would seem to have a golden opportunity for growth. But the biofuels market to date has been driven by government incentives and mandates rather than consumer demand, and 2007 exposed the limits of current technology.

While the ethanol industry hit a record output of 6.2 billion gallons, it also faced its first political backlash. Ranchers blamed the industry for boosting the price of corn to record levels and driving up food costs. Activists in many cities fought new or expanding plants over environmental concerns such as water use, air pollution and safety.

And despite pressure from Detroit automakers and the ethanol industry, growth in filling stations for E85 fuel remained sluggish, with about 1,400 out of 170,000. The Detroit automakers have pledged to make half of their new vehicles E85 capable by 2012, but foreign automakers haven't followed suit, and have successfully lobbied Congress to drop a proposal that would have forced them to make similar changes.

The energy bill signed by President George W. Bush last month reflects those politics. It sets a new target for ethanol production of 36 billion gallons by 2022 -- but requires that 21 billion gallons come from sources other than corn.

A host of start-up firms has been chasing ways to make liquid fuels using "cellulosic" sources -- basically plant matter, from jungle grasses to orange peels -- and new technologies.

But none of those systems are considered commercially feasible today.

Robert Wallace, an engineer who analyzes biofuel production for the National Renewable Energy Laboratory in Golden, Colo., said next-generation ethanol firms face a variety of hurdles, from uncertain costs of raw materials to unproven methods that might prove too costly at large volumes. He said several companies had made claims about their technology, but none had proven fully viable yet.

"You can have all the pieces to a car, but it doesn't mean you have a car," Wallace said. New companies that have small demonstration plants under construction "have to get all the bugs out of running a plant that size before investors start investing."

Coskata is a tiny firm of about 35 people in Warrensville, a suburb of Chicago. Founded in 2006, the company was funded by several venture capitalists who have focused on ethanol and other new energy sources, including tech billionaire Vinod Khosla.

Its process is built around synthesis gas or syngas, a mix of carbon monoxide and hydrogen emitted when plants, wood or other carbon-containing materials are broken down at high temperatures. That type of gas has been used for centuries as an energy source -- it powered gas streetlights in many cities -- before natural gas became widely available.

The real trick at Coskata comes from bacteria, specifically, five varieties the company calls its "thoroughbreds." Found by researchers from Oklahoma and Oklahoma State universities from muck in a waste lagoon, the bacteria naturally generate ethanol and similar chemicals from syngas.

The bacteria are grown on a series of straws as thin as a human hair, made from a filter fabric. The gas flows through the inside of the straws, while water is pumped along the outside, and the straws allow the bacteria access to both. The bugs convert the syngas to ethanol, keep a little for themselves to reproduce, and the water carries the fuel away.

Coskata engineers say their bacteria are about 90% efficient at converting gas -- a rate that leapfrogs the firm over its competitors. The final product costs less than $1 per gallon, about half that of gasoline, including the capital costs of building a full-scale plant.

The system can convert one ton of raw material into more than 100 gallons of ethanol, while competing firms struggle to get 70 gallons a ton, and the U.S. Department of Energy doesn't expect the industry to hit 100 gallons before 2020.

The process has several other benefits. While corn ethanol plants use roughly four gallons of water for every gallon of ethanol, Coskata uses less than a gallon of water. The E85 fuel derived from Coskata's ethanol releases 84% less carbon than a gallon of gasoline. And because its filters are held in large plastic cylinders, the company believes it can easily scale its system to 100 million gallons a year or more.

Coskata plans to have a 40,000-gallon a year pilot plant open by the end of the year, with the first fuel powering vehicles at GM's proving ground in Milford. Before the end of the year, Coskata also plans to break ground on a full-size 100-million gallon plant that it wants to open by 2010. Locations for both plants have not been determined.

GM engineers said Coskata's process has worldwide appeal. Because it can easily adapt to different raw materials and can run cheaply, GM could help the company expand into emerging markets such as China and Russia where growing auto industries are confronted with global warming worries and energy scarcity.

Candace Wheeler, a GM technical fellow, said Coskata's process could even use parts of recycled vehicles.

"We felt this technology was leading edge, that it was ready today, that it was flexible and has the right economics," she said.

Copyright (c) 2008, Detroit Free Press. Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-for the National Renewable Energy Laboratory in Golden, Colo., said next-generation ethanol firms face a variety of hurdles, from uncertain costs of raw materials to unproven methods that might prove too costly at large volumes. He said several companies had made claims about their technology, but none had proven fully viable yet.

"You can have all the pieces to a car, but it doesn't mean you have a car," Wallace said. New companies that have small demonstration plants under construction "have to get all the bugs out of running a plant that size before investors start investing."

Coskata is a tiny firm of about 35 people in Warrensville, a suburb of Chicago. Founded in 2006, the company was funded by several venture capitalists who have focused on ethanol and other new energy sources, including tech billionaire Vinod Khosla.

Its process is built around synthesis gas or syngas, a mix of carbon monoxide and hydrogen emitted when plants, wood or other carbon-containing materials are broken down at high temperatures. That type of gas has been used for centuries as an energy source -- it powered gas streetlights in many cities -- before natural gas became widely available.

The real trick at Coskata comes from bacteria, specifically, five varieties the company calls its "thoroughbreds." Found by researchers from Oklahoma and Oklahoma State universities from muck in a waste lagoon, the bacteria naturally generate ethanol and similar chemicals from syngas.

The bacteria are grown on a series of straws as thin as a human hair, made from a filter fabric. The gas flows through the inside of the straws, while water is pumped along the outside, and the straws allow the bacteria access to both. The bugs convert the syngas to ethanol, keep a little for themselves to reproduce, and the water carries the fuel away.

Coskata engineers say their bacteria are about 90% efficient at converting gas -- a rate that leapfrogs the firm over its competitors. The final product costs less than $1 per gallon, about half that of gasoline, including the capital costs of building a full-scale plant.

The system can convert one ton of raw material into more than 100 gallons of ethanol, while competing firms struggle to get 70 gallons a ton, and the U.S. Department of Energy doesn't expect the industry to hit 100 gallons before 2020.

The process has several other benefits. While corn ethanol plants use roughly four gallons of water for every gallon of ethanol, Coskata uses less than a gallon of water. The E85 fuel derived from Coskata's ethanol releases 84% less carbon than a gallon of gasoline. And because its filters are held in large plastic cylinders, the company believes it can easily scale its system to 100 million gallons a year or more.

Coskata plans to have a 40,000-gallon a year pilot plant open by the end of the year, with the first fuel powering vehicles at GM's proving ground in Milford. Before the end of the year, Coskata also plans to break ground on a full-size 100-million gallon plant that it wants to open by 2010. Locations for both plants have not been determined.

GM engineers said Coskata's process has worldwide appeal. Because it can easily adapt to different raw materials and can run cheaply, GM could help the company expand into emerging markets such as China and Russia where growing auto industries are confronted with global warming worries and energy scarcity.

Candace Wheeler, a GM technical fellow, said Coskata's process could even use parts of recycled vehicles.

"We felt this technology was leading edge, that it was ready today, that it was flexible and has the right economics," she said.

Contact JUSTIN HYDE at 202-906-8204 or jhyde@freepress.com.

-----

To see more of the Detroit Free Press, or to subscribe to the newspaper, go to http://www.freep.com

Copyright (c) 2008, Detroit Free Press

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-for the National Renewable Energy Laboratory in Golden, Colo., said next-generation ethanol firms face a variety of hurdles, from uncertain costs of raw materials to unproven methods that might prove too costly at large volumes. He said several companies had made claims about their technology, but none had proven fully viable yet.

"You can have all the pieces to a car, but it doesn't mean you have a car," Wallace said. New companies that have small demonstration plants under construction "have to get all the bugs out of running a plant that size before investors start investing."

Coskata is a tiny firm of about 35 people in Warrensville, a suburb of Chicago. Founded in 2006, the company was funded by several venture capitalists who have focused on ethanol and other new energy sources, including tech billionaire Vinod Khosla.

Its process is built around synthesis gas or syngas, a mix of carbon monoxide and hydrogen emitted when plants, wood or other carbon-containing materials are broken down at high temperatures. That type of gas has been used for centuries as an energy source -- it powered gas streetlights in many cities -- before natural gas became widely available.

The real trick at Coskata comes from bacteria, specifically, five varieties the company calls its "thoroughbreds." Found by researchers from Oklahoma and Oklahoma State universities from muck in a waste lagoon, the bacteria naturally generate ethanol and similar chemicals from syngas.

The bacteria are grown on a series of straws as thin as a human hair, made from a filter fabric. The gas flows through the inside of the straws, while water is pumped along the outside, and the straws allow the bacteria access to both. The bugs convert the syngas to ethanol, keep a little for themselves to reproduce, and the water carries the fuel away.

Coskata engineers say their bacteria are about 90% efficient at converting gas -- a rate that leapfrogs the firm over its competitors. The final product costs less than $1 per gallon, about half that of gasoline, including the capital costs of building a full-scale plant.

The system can convert one ton of raw material into more than 100 gallons of ethanol, while competing firms struggle to get 70 gallons a ton, and the U.S. Department of Energy doesn't expect the industry to hit 100 gallons before 2020.

The process has several other benefits. While corn ethanol plants use roughly four gallons of water for every gallon of ethanol, Coskata uses less than a gallon of water. The E85 fuel derived from Coskata's ethanol releases 84% less carbon than a gallon of gasoline. And because its filters are held in large plastic cylinders, the company believes it can easily scale its system to 100 million gallons a year or more.

Coskata plans to have a 40,000-gallon a year pilot plant open by the end of the year, with the first fuel powering vehicles at GM's proving ground in Milford. Before the end of the year, Coskata also plans to break ground on a full-size 100-million gallon plant that it wants to open by 2010. Locations for both plants have not been determined.

GM engineers said Coskata's process has worldwide appeal. Because it can easily adapt to different raw materials and can run cheaply, GM could help the company expand into emerging markets such as China and Russia where growing auto industries are confronted with global warming worries and energy scarcity.

Candace Wheeler, a GM technical fellow, said Coskata's process could even use parts of recycled vehicles.

"We felt this technology was leading edge, that it was ready today, that it was flexible and has the right economics," she said.

Copyright (c) 2008, Detroit Free Press. Distributed by McClatchy-Tribune Information Services.