Tuesday, August 10, 2010

Next-Gen Ethanol

The next generation ethanol is supposed to be based on cellulosic technologies, that is, the use of non-food plants or plant parts for ethanol production. This means chopping up and pre-treating corn stover, wheat straw, wood chips, switchgrass or some other non-edible organic matter and than mixing in some fermentation catalyst. Progress has been slow on this front even though a number of companies have been hard at it for years - namely Poet, Abengoa, Blue Fire, the DuPont Danisco partnership, among others.

Last week I caught up Logos Technologies, which is in partnership with Edeniq to build a pilot refinery that is capable of producing up to 140 gallons of ethanol per day. The project is supported by one of the DOE grants made in December 2010. Logos and EdeniQ received a $20.4 million grant.

So far about a dozen people have been hired between the two partners. The project remains in the design phase, but is considered on schedule. The construction step is expected to begin before the end of 2010. The entire project from design to operation is expected to take three and half years. The design is intended to accommodate multiple feedstocks, including corn stover, wood chips and switchgrass, all of which are available in California where the pilot project is located.

Logos had been working on its own cellulosic project that is intended to be a so-called “drop-in biofuel,” that is a fuel that could be transported in the existing oil and gas transportation infrastructure. DARPA (Defense Advanced Research Projects Agency) is providing support for that project through a $19.6 million grant made in April 2009.

The Logos-Edeniq pilot project will not produce a fuel that can be transported in existing infrastructure. I suspect that means that whatever success the project achieves, its application will likely be local in some sort of closed-loop operation that allows a waste producer, such as a lumber mill, to use some of its wood chips for on-site energy production.

EdeniQ, Inc. has financial support from BP (BP: NYSE) and the private equity fund Kleiner-Perkins. Some sort of success from this or another cellulosic ethanol project using EdeniQ’s proprietary “chopping, pre-treating” process could be the basis for a sale of EdeniQ. Unless the IPO market improves, but then do not expect to get a bite as a minority investor.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

$BP #Energy

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