Moments of Clarity

Corn Squeezin Redux

The President's speech this year resonated yet more energy independence talk.  We here in Ethanol Alley (Midwest) have much to gain and the nation has little to lose from our attack of this once fringe topic.  There are over 115 ethanol plants today and more than 50 under construction. 

Yet, if I wanted to purchase an ethanol (e85) compatible Toyota or Honda, I don't think they have one for me.  Will I be forced to purchase a GM car if I want this option?  How ironic. 

Renewable is Cool

If you have set up a Google Blog Search like I have for "Ethanol Iowa", you'll receive 50-100 pieces of news from around the U.S. covering the topic.  Daily, I read headlines that indicate we're headed in the proper direction.  Today, the Domestic Fuel blog reported that a new ethanol plant will be powered by "borrowed steam" from a neighboring power plant. (Originally repoted by Dan Feldner at the Minot Daily News) I've also recently read about "Saving wind energy by storing pressure in natural underground tanks" that will be used later to spin turbines when the energy is needed.  It's also been widely reported now that cellulosic ethanol is progressing very quickly (making the booze from anything organic vs. just corn), making the "We're not going to have enough corn" argument moot. 

Photo from Minot Daily News Piece

What's most important here is that we're quickly, smartly, and aggressively jumping into this arena with both feet and with full wallets.  Anytime you see the world's most prolific venture capital folks hop in, there's something economically viable happening.  For every 100 ventures funded, there may be 98 failures and 1 moderate success...but 1 will usually be an order of magnitude success (think Yahoo, Google, Youtube, etc.) and that home run will change the way we live forever. 

Yesterday, a great piece called "Eco-friendly Iowans thrive off the grid" appeared in the Des Moines Register.  The story highlights a community that has been off the grid and totally energy independent for years.  The technology exists today to accomplish this feat but costs and small lifestyle adjustments scare most away. 

But what I think we're facing in renewable energy is identical to the switch between 1970's beater cars where a Monte Carlo produced as much pollution as 10,000 Honda civics, and the current standards that barely emit a whiff of pollutant.

Remember when the government began buying (with your own money of course) cars back from people to get them off the road?  Air quality has improved immensely as a result of most 70's era cars being jettisoned.  The same is true for renewable energy powered homes, cars, and lives. We're in the "switchover" mode. Builders will create more and more communities using renewable energy technologies.  First solar and geothermal.  Then they'll add wind and the ability to make one's own ethanol with trash.  We'll be well on our way to never sending a penny to madmen that wish to relieve us of our heads (oh and Chavez too).

Hopefully my kids will read this post someday and think daddy was pretty cool for understanding this process, seeing through the hype about our impending doom within 10 years, and investing wisely in the products and systems that will revolutionize the way humans live.

It's the Transportation

Another nice piece that addresses the major roadblock facing Ethanol / renewable fuel futures popped up today on the wires.

It's not only the transportation infrastructure...but the methods by which transportation is arranged (mostly via phone, yellow pad, and Nextel today). 

A piece of software that brings efficiency to the existing infrastructure...then adapts as more rail, pipe, and truck transport are available would be a wise investment.

Why Iowa? From a CA expat

I thought I'd chime in this topic that was floated a while ago.  I'm not sure who started it...but here's my two blog-cents.  Why Iowa?

1. Agrarian roots seem to give Iowans even long removed from farming a warmth that says, "I've got a pot of coffee on and something in the oven...come in and sit a spell"
2. Neighborhoods still have "marauding bands of kids of various ages" being kids, sometimes doing bad stuff, but mostly just being curious kids.
3. There are few walls and fences.  Neighbors talk, see each other, and interact more.  We did not have this in our former home...and we relish it now.
4. Quality of life.  This is a broad generalization...but the ability to "Pretty much do what you want when you want without having to plan too far ahead" is my definition.  Getting in the car at 5PM and heading into the heart of downtown Des Moines is no problem.  Getting into the car and just getting onto the freeway was a problem where I was from.  I routinely don't remember the last time I got gas, and my wife has halved her petrol usage while doing whatever she pleases.  Everything is just close.
5. Connectivity to a thriving business community.  I have met more people in the greater Des Moines business community in the last 6 months than I met in all of my career in CA.  From top business leaders to venture capitalists...from business blog coaches to branding experts...from renewable fuel experts to ..you get the idea.  If I'm looking to open the door to something, I've got multiple folks lined up with keys and looking to assist me. I hope I can give more back than I've taken.
   
6. Housing.  One can easily procure a 3br, 2ba, 2car garage type home in a very nice neighborhood for $150k.  Additionally, one can find a $80k 2br home and a $500k 5br home.  All of these places could be within the same general area.  At the end of the day the "normal" American progression from starter home...to family home...to big dream home...and everything in between is obtainable. 
7. Weather. I know, coming from CA the cold has gotten to me a little and frozen a few brain cells!  The bottom line is that I enjoy the differences in weather, the rain, the snow (we've only had 1 inch this year so far), and the seasons.  I've written before that weather is such a small part of normal life when you're busy with the family that it really doesn't matter as long as you can do what you want to.  I enjoy sitting around a fire on a cold night as much as I do around a patio table on warm summer evenings.  Also, if you do your own yard work (as I do now), you have a full 3 month reprieve from doing anything!  It's not as cold and snowy here as up north in Wisconsin...and not as temperate as Kansas City.  I think it's just right.

We chose Iowa about a year ago...and it has most certainly chosen to embrace us, welcome us, warm us, and provide us with new friends and opportunities that we never dreamed of.  It's our turn to give back and we're going to make that a priority in 2007 and beyond.

Thank you Iowa...and that's why.

Sage Prediction for Cleantech by Kleiner Perkins

Paul Kedrosky at Infectious Greed posted some great quotes from the prolific VC firm Kleiner Perkins. Most amazing and encouraging to me is line item number 3.  I write about renewable energy/ethanol quite often...thus I'm very encouraged by Ray Lane's prediction.  Bigger than the Internet!  Yes .  It should be...it will be.

Here they are:

The Internet:
John Doerr (1997-2000): "The Internet is the largest legal creation of wealth in the history of the planet."

Mobile
John Doerr (2005): "[The cell phone boom will be] ultimately be more important and will likely offer a larger wave of investment opportunity than the personal computer."

Cleantech
Ray Lane (2006): "This is bigger than the Internet, I think by an order of magnitude. Maybe two. I'm taking the entire energy industry."

How Blue Jeans Saved the World

The latest BusinessWeek has a fantastic piece on the future of cellulosic ethanol production.

Did you know that simple enzymes originally engineered to fade and soften blue jeans are being used to break down bio-matter for quick fermentation into bio-fuels (ethanol, bio-diesel, etc.)?  This is the breakthrough that thwarts the bio-energy defeatists position that "Making ethanol is too expensive and uses up all the corn so there will be no food left for the masses".  Effectively, we'll me making fuel out of anything organic.  That's called freedom.  Isn't it time we used science to solve one of the most vexing issues of our capitalist democracy? (That would be the funding, support, and tacit approval of nations, rulers, and economic systems that promote death, destruction, and terrorism)

Can we really do this?  Can we replace a substantive amount of fuel with bio-products?

Yet if efforts such as Abengoa's can be scaled up efficiently, America's forests, agricultural waste, and 40 to 60 million acres of prairie grass could supply 100 billion gallons or more of fuel per year—while slashing greenhouse gas emissions. That would replace more than half the 150 billion gallons of gasoline now used annually, greatly reducing oil imports. It "will happen much faster than most people think," predicts Michigan State biochemical engineer Bruce E. Dale. "And it will be enormous, remaking our national energy policy and transforming agriculture."

Here's another quote from the article text:

Lynd and Mascoma, however, are dreaming bigger. They have coaxed microorganisms to digest cellulose and ferment the resulting sugar in one bubbling cauldron, instead of in two separate steps. If the system pans out, "it is a game-changer. It will revolutionize the industry," says Lynd. On Nov. 29 the company announced a deal with Tamarack Energy Inc. to develop pilot plants.

Whatever the process, there's no need to stop with ethanol, adds Stanford University biologist Chris Somerville. Butanol and other substances more similar to gasoline offer certain advantages over ethanol. For investors, the beauty is that any of these approaches can piggyback on the corn ethanol infrastructure. "If we did not have corn ethanol priming the pump, it would be too risky for me to invest in cellulosic ethanol," says venture capitalist Vinod Khosla.

The time is now.  Support this any way you can (investment, politics, spending habits, etc.).

It's happening

It was announced today that Broin Companies will build a Cellulosic Ethanol plant here in Iowa. 

The refinery will use not only corn but also the stalk, leaves and cobs that come with the grain. Ethanol from crop waste, grass or other sources holds the key to helping the United States reduce its reliance on petroleum, advocates say. Farmers can only produce enough ethanol from the corn’s grain to replace a fraction of the gasoline that the nation uses, now 140 billion gallons of gasoline annually.

I've been talking about this for a long time and now we're getting tangible movement on it.  The more sources of raw material we can ferment, the more flexible the supply..and the more fragmented the transportation and logistics of this industry becomes.  The logistics piece must be overcome to ensure long term success. 

Cellulosic Ethanol Transformation Begins

As reported in the Venture Beat news site, Mascoma, "A start-up that is trying to become the first commercial developer of cellulosic ethanol - something some environmentalists see as the Shangri La of alternative fuel - will announce tomorrow it has raised $30 million more in venture funding."

This technology will bring the United States to virtual energy independence.  Making fuel from grass, forestry waste, literally any kind of biomass will restore the balance to the corn/other agricultural markets that are temporarily skewed due to massive corn production and high prices.       

More Evidence

From the Farm Futures website:  Transportation Industry Trying to Keep Up With Biofuel

Biofuel plants require transportation of both input and output. The transportation system must support a supply of raw materials into plants as well as a flow of fuel out of the plants. To ease shipping costs of raw materials, the bulk of ethanol and biodiesel plants are situated in the

Midwest

, but demand for biofuels is growing in other parts of the country as well.

"There is a challenge and there will be a challenge as both of these products begin to get more use outside of the middle section of the country," says president of the Iowa Motor Truck Association Scott Weiser. "Several members of our congressional delegation have indicated there needs to be a focus on those issues of infrastructure and transportation if and when we are going to serve the rest of the nation."

Currently, railroads move about 75% of

U.S.

ethanol each year, with the other 25% going by truck, according to the Renewable Fuels Association.

Iowa Soybean Association spokesman Grant Kimberley says the nation's rail system will need to improve to adequately take on an increasing role in biofuel transportation.

"It already is a challenge with just transporting the normal products the railroads transport," he says. "We'll have to be moving more and more renewable fuels that way unless we figure out ways to send this stuff through petroleum pipelines."

Exactly.  Bring some technology and value into this part of the biofuel equation and I think you have  a winner.   

Transportation Solves the Growth Equation

The Des Moines Register's AG Business writer Jerry Perkins hits a home run today in his piece describing a looming Ethanol industry slowdown.  Paragraph two:

Increased costs and delays in ethanol plant construction, transportation bottlenecks in moving ethanol to market, and rapidly rising corn prices all signal that the expansion of the ethanol industry might be cooling, the ISU economists said in a webcast that originated from the ISU campus.

This "slowdown" will bode well for technology solutions that can bring incremental savings on transportation and logistics.  Although plant construction will continue for quite some time, more focus will be placed on gaining efficiencies...and that's the sweet spot for Iowa Tech companies looking to make a big impact. I'm guessing now that multiple billions of dollars have flooded in to plant creation.  Has even $1million gone to technology improvements to lower transportation costs?

Look down the road at a United States with thousands of Ethanol plants instead of hundreds, tens of millions of truckloads of raw materials, by-products, and finished product being moved via an advanced logistics system matching available transport capacity immediately with those who have product to move, a vibrant biofuel technology industry where Iowa is the heart of operations, and a time when foreign oil is a supplement and not a staple. This is the Iowa of the future...I'm right in the heart of it...and loving it.

Kottke on Economic Realignment

Jason Kottke posted a piece on the changing economic forces driving reallocation of corn production.  He points out much of the corn in Mexico is brought in from the US..since it's become too expensive to grow it.  Thank American farming subsidies for that but on to the next issue.   He confronts the looming bidding war between "Americans who want to fill their gas tanks and Mexicans who want to feed their children," and states that, "Odds are the tanks stay fuller than the stomachs." Agreed.  But this is nay a temporary realignment in my opinion.  Corn prices and the massive amount of reallocation farmers are undertaking now (sacrificing soy or other crops to grow the golden money printing crop) will not sustain. 

Scientists know that corn based ethanol production is cheap, quick, and easy...but terribly inefficient.  The transition to cellulosic ethanol production (effectively the same booze made from just about any organic matter) must take over.  That way, we can develop more genetic hybrid crops that grow tall and dense...rather than trying to usurp every bit of arable land to grow a very inefficient crop.

Photo by Bob Elbert/Iowa State University

Iowa State University, among others, is working hard to develop enzymes and other chemical compounds that will facilitate the rapid breakdown of organic matter into basic sugars. On Tuesday, an article came out discussing a 40 year old breakthrough made at ISU that was just "dug up" and is being researched full steam now.  Scientists figured out back then how to cook up some compounds that, "break down the tough cellulose that forms the structure of a plant’s cell walls. Breaking down the cellulose can release the simple sugars that are fermented into ethanol. Making that happen could add some value to Iowa crops or the fibrous co-products of ethanol production."

The bottom line here is that we can genetically engineer the heck out of some grass or ultra dense, super high growing plant instead of using corn.  This will happen, it must.  For now, farmers are just happy to be getting insanely high rates for their corn.  The ethanol plants are virtually printing money by making alcohol.  And, the people of Midwest are trying understand what capturing this moment and not letting go could mean to the region.  It's the heartland's chance to shine. 

It's not nearly as glamorous as Silicon Valley or the Tech Coast...but our own little Ethanol Alley, and if the politicians don't mess it up, we'll be the epicenter of energy independence.  Be warned Mr. Chavez...we're armed with corn cobs and grain alcohol...and we mean business. To the hungry citizens of Mexico, hold on.  It's only a matter of time before we'll replenish our supply.

Ethanol Round Up

The High Plains/Midwest AG Journal published a piece called "Iowa is epicenter for renewable fuel".
Yes it is, for now, let's keep it that way by making education, technology, start up friendly business climate, and fewer political roadblocks the rule of law here in Iowa.

Interesting news from the Biopact blog that Petroleos de Venezuela is creating a joint venture to build 17 ethanol plants in Brazil.  Yes that's Mr. Chavez's country and our uber supplier of oil.  If we do our job and lead this industry and this transformation, we'll be able to license technologies and systems around the globe.  It will be nice to cancel all orders from Venezuela sometime soon.   

Here's a quick piece from the Motley Fool looking at the investment side of Ethanol's boom by examining Verasun and ADM.  The piece also discusses the economic implications of DaimlerChrysler, Honda, and GM making biodiesel and E-85 compatible cars.

Politicians are still clogging up the process of finding a home for another plant very close to our Capitol of Des Moines.  So far, this could be the closet plant to see in action as a metro resident.

I just met Simon Robinson on line who runs the Big Biofuels Blog.  He's based in the UK and his blog has more depth and breadth of bio coverage than most.  I've invited him for Chicken Fried Steak at the Iowa Machine Shed Restaurant and to stay at La Casa de Mitchell's subterranean apartment, wine cellar, library, and cigar lounge.   (That's a basement).

"It is the Chicken Fried Steak That Binds Us"  --Doug Mitchell, 2006

A Key Observation about the "Ethanol Boom"

A piece in the Des Moines Register , written by Anne Fitzgerald called:

Ethanol growth helps spur jobs in wide array of fields

really sparked my interest since I've read conflicting reports about ethanol's ability to create jobs.  In fact, I've heard that it only takes about 13 people to run a $100 million gallon ethanol plant.  Instead of lauding that "efficiency", most have decried ethanol's inability to create "more jobs".  This piece however highlights the diverse background of people that a particular plant in Nevada, Iowa employs.  (In Iowa, it's a long A vs. sin city's home state). 

Here's a quote:
Economists disagree on the ripple effects of an ethanol plant. John Urbanchuk, an economist at LECG Corp., a California-based consultant, says a 100 million-gallon ethanol plant can generate nearly 1,600 jobs across several industries.

This is a very accurate assessment in my opinion.  When you extend the reach of an ethanol plant, you really do touch on a multitude of industry segments, science disciplines, and technologies.

The key piece in the article, and the one that I'm most focused on is the following:

"Call any trucking firm in Iowa and see if they're hiring truck drivers, and the answer will be, 'Yes.' There are a lot of reasons for that, but the biofuels industry is a big part of it."

Each day, thousands of semi-trailer trucks deliver grain and other products to the plants, while tanker trucks and railcars haul fuel to market.

BINGO!!!!  The million dollar observation.  The key component in the ethanol business right now and for the foreseeable XX years is transportation.  This is about the first article I've read that touched on this point.

Getting the supplies in, the by-products and production out are a massive part of the equation.  If someone were to give production facilities the edge in this aspect of their business with a technology platform that reduced transport expense and created the kind of logistics infrastructure that automated much of the process and paperwork around it...I think that would be rather valuable....and fundable...and "growable" into "The logistics platform for the segment". 

e-85

Iowa has 3 new E85 ethanol pumps opening today that brings our state total to 51.  We're getting there.  If you're in Iowa, traveling through, or just have some good old fashioned curiosity, click this link to the news story and you'll find a listing of all pump locations in our wonderful state.

The Heartland

Two things I'd not yet experienced occurred the other day as I was driving from Des Moines to Peoria, IL.

1.  Frozen windshield washer squeegee bucket.
2.  An E-85 ethanol pump

Both are pictured below.  Life is like a cob of corn...you never know what you're gonna get.

Ethanol: Blessing or bane?

Ethanol: Blessing or bane?

That's the title of a great piece from the Chicago Tribune by Greg Burns that appears in the Sun Herald.com on line.
The article brings up the typical pitfalls and possible hiccups in the Ethanol boom...but doesn't really discuss as much of the "blessing" portion in my opinion.  Readers of this blog and Ethanol Alley (soon to be consolidated here), know that I often write about the more important mental paradigm shift from U.S. thinking that we could use biofuels to become relatively oil independent...to we must become so..and how can we become a global leader in biofuel technologies.

Here are some key quotes from the article:

On the surface, ethanol plants look simple. They're basically oversized stills, producing alcohol from corn mash. Grain is ground, mixed with water and yeast, fermented and distilled, just like the moonshine of yore. The alcohol gets blended with gasoline, and the leftover corn mash is fed to cattle.

Since ethanol plants must operate continuously, their operators will "bid whatever it takes to get the corn," Baumel notes. "It's like chickens. They've got to be fed every day."

Many of the hungry new players in the ethanol game look a lot different from the agribusiness giant that overwhelmingly dominated in the past.

More Ethanol Alley

It was an amazing few days for Ethanol news around Iowa. Here's a story of an overturned tanker clogging the roads...most notably..check out the last section about "replacing any plastic pipes underground because the seeping ethanol would corrode/degrade it.  Corrosion is a problem that if solved...will make pipelines possible.  Right now, it's tankers and rail cars.

Our friend Chuck over at Domestic Fuel posted on 89 octane gas at a Hyvee in Iowa...being LESS expensive than the 87 octane NOT blended with ethanol.  This caused me some trauma when I first moved here too.  I hope Chuck found the folks here in Iowa as friendly as I have.

Here we see that the Northern Iowa Railway company received a big chunk of change to build out some of its infrastructure to facilitate smoother operations...sparked of course by the massive ethanol/bio-diesel output increases and continued growth projections.

Of course the political candidates are spewing about how they'll do better to promote biofuels, etc. but I don't believe any of them truly grasp how important this is to our state...and our nation. 

You'll see my blog ETHANOL ALLEY soon offered as a NAV BAR link on this blog.  I will begin posting on this site only within the next few weeks.  If you visit Ethanol Alley, you'll still see all the posts from the past and all future ones there as well.  It's just too much for me to manage 2 blogs and 2 sets of this and that. 

Tom Evslin on Ethanol...and then there's Doug's Opinion

I love reading Tom Evslin's blog.  There's always a fresh perspective to twist your synapses a bit.  He posted a wonderful piece entitled:  Ethanol:  Boon or Boondoggle?  This subject is near and dear to me as I'm smack dab in the middle of Ethanol Alley.  Evslin's piece talks about the science, environmental impact, and efficiency (or lack thereof) of producing ethanol.  I propose that although this part of the discussion is valuable...that the most important piece of the ethanol discussion is the mental shift that the citizens of the United States have undergone in the last 12 months regarding our energy independence. 

The debate has shifted away from "Can we, should we" to "How can we, what technology should we use".  Over a billion dollars of venture capital has poured into my humble Midwest ( that my family and I adopted last October after executing geographic arbitrage to Des Moines, IA from SoCal) and there's no sign of slowing. 

Those that have poo poo'd the inefficiency of corn based ethanol are sitting back now and watching hundreds of millions more gallons be produced from this method.  Additionally, our beautiful and humble state of Iowa is "getting it" by helping the Universities pursue the technologies, methods, and breakthroughs that will likely spawn the next generation of cellulosic ethanol production (making fuel from any plant/vegetable matter like corn stalks, grass, or ground up trees). 

Additionally, home grown Iowa start ups will provide supporting technologies and platforms to solve the other inefficiencies in the process of creating ethanol and getting it to the market place (distribution, logistics, etc.) (Contact me via email directly if this last sentence intrigued you)

The bottom line here is that we've begun the transformation and it will only take a hero to make it happen in a respectable time line.  I had a great conversation with my dad last week (I'm so stoked that my parents live a 12-hour drive away now versus 2500 miles).  During that conversation I found myself again stumping for an icon, a Presidential candidate that will arise and cut through the BS of the political process and promise us a Kennedyesque Man On The Moon Plan (this link contains my revisions to the speech appropriate for this discussion) to become 75% independent within 8 years (if we choose to re-elect him/her).  I'm a pretty fiscally/socially conservative guy...and I find myself passionately begging for a progressive tax levy on all Americans that will create an energy Independence race fund to drive our global dominance in this category.  Every single person I've talked to is in favor of such a levy.  Is this our rallying cause?  Is this the scientific area that the U.S. will dominate in this Century? (Stem cell is too much a political football) Is this my calling to run for office? I think not.  Where's William Katt when you need him?