Biofuels Stakes Rise for GM and the Nation
May 02, 2008

By Dale Buss

With its second major equity investment in a biofuels startup company in the space of five just months, General Motors is moving front and center in what may become a pivotal global economic development of our time: the rapid rise of the cellulosic-ethanol industry.

GM’s announcement on Thursday that it has made an equity investment in a Boston-based company, Mascoma Corp., is a bookend to its January deal to help fund Coskata Inc., based in Warrendale, Ill. The two companies, partially nurtured by academics, use two different processes to yield similar crucial results: the production of ethanol for fuel from non-grain, essentially waste sources.

Mascoma’s single-step cellulose-to-ethanol method is called Consolidated Bioprocessing, which uses cellulosic biomass such as woodchips and switchgrass in a formula that lowers costs by limiting additives and enzymes that are brought into other biochemical processes. Mascoma expects to begin producing ethanol later this year at a demonstration plant under construction in Rome, N.Y.

Coskata’s process leverages proprietary microorganisms and efficient bioreactor designs in a three-step conversion process that can turn virtually any carbon-based feedstock into ethanol, ranging from old tires to landfill plastic to biomass. GM just announced that Coskata is building a 40,000-gallons-a-year demonstration plant near Pittsburgh.

“Taken together, these technologies represent what we see as the best in the cellulosic ethanol future and cover the spectrum in science and commercialization,” GM president Fritz Henderson said at the Mascoma-venture announcement in Washington, D.C., on Thursday. “Demonstrating the viability of sustainable non-grain based ethanol is critical to developing the infrastructure to support he flex-fuel market.”

Corn in the Crosshairs

In announcing its partnership with Mascoma, GM made good on the promise it suggested at the time of its Coskata announcement -- that it would be supporting additional biofuels ventures. It makes a lot of sense for GM to spread its bets this way. In doing so, GM seems to be replicating an approach that it has taken very recently by striking partnerships with two lithium-ion battery makers, each of whom is engaged simultaneously in a crash project to develop the heart of the propulsion system for the Chevrolet Volt plug-in hybrid that GM plans to introduce in 2010.

But coming through on its cellulosic-ethanol promise looks even better to GM executives today than they could have predicted just several months ago. That’s because rapidly escalating food prices across the world are being blamed partly on the worldwide demand for corn-based ethanol that may be competing increasingly with food demand for corn – and that is being promoted by U.S. policy. So instead of being perceived widely as a savior from high gasoline prices, corn-based ethanol now is being vilified.

So, promising cellulosic-ethanol technologies that don’t rely on grain-based raw materials – such as those developed by Coskata and Mascoma – increasingly are seen as solutions to the problem that have no downside.

In fact, under a deal that is being negotiated to help Congress deal with the Farm Bill, the federal tax credit that subsidizes the corn-ethanol industry might be trimmed from 51 cents to 45 cents a gallon and a new subsidy, worth as much as $1.01 a gallon, would be created for ethanol made from biomass and other non-crop sources. (Meantime, the funds saved by trimming the corn-ethanol subsidy isn’t being used for a better fuel but to help offset the cost of a package of tax incentives for horse racing, timber and other industries.)

Moonshot Mentality

GM, of course, leads the auto industry in offering vehicles that can run on either ordinary gasoline or E85 – a blend of 85 percent ethanol and 15 percent gasoline – or any combination of the two. The expectation as GM and its competitors have fielded more flex-fuel vehicles is that they would be running mainly on corn-based ethanol.

Nowadays, however, there’s so much activity on the anti-corn-ethanol bandwagon that the cellulosic side can’t help but notice the contrast. “We’ve made it clear that we’re not in the position of bashing corn ethanol for all the world’s ills,” said William Roe, Coskata’s CEO, “but we do believe there is an emerging generation of biofuels that solves the food-fur-fuel question.”

Roe said that the approach being taken by Coskata and other biofuels startups “are solutions that really should have been in place decades ago, but we’ve been asleep at the switch. And there is a hustle afoot now to see if we can fix this thing.”

In fact, Roe said that he and his counterparts at Coskata are fielding more questions about whether they could actually move faster toward commercial volumes of their cellulosic ethanol. But he said “there’s no magic elixir” and that among the obstacles to accelerating the flow of their brew to fuel pumps is whether the nation really can come up with enough biomass and waste materials to feed large-scale production.

There’s another thing that Roe may be hoping for but still doesn’t see developing: a national and political will to dramatically elevate the importance of quickly developing significant supplies of cellulosic ethanol.

“It would be wonderful to see someone in government saying let’s treat it like a moonshot and as the most important thing to national security and pull out all the stops,” Roe said. “But that isn’t what we’re seeing and hearing at the moment.”

Photo by Patrick Kling for GM
General Motors President Fritz Henderson (left) and Mascoma Corp. Chairman and CEO Bruce Jamerson announce a strategic relationship to develop cellulosic ethanol using Mascoma's single-step process of converting non-grain materials into low-carbon fuel.

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