Two federal agencies are providing loan guarantees worth hundreds of millions, but the sector still faces funding and technology issues that are challenging its ability to scale-up operations.
The US Department of Agriculture (USDA) will offer a $250 million loan guarantee to develop a commercial biorefinery utilising technology developed by Coskata. The USDA’s guarantee will be the largest ever awarded for a biofuel facility and will allow the sponsors to move forward with the financing of the 55 million gallon per year cellulosic ethanol facility in Alabama.
The loan guarantee essentially allows Coskata to begin raising capital for the facility, said Wes Bolsen, chief marketing officer and vice-president of government affairs. The full capital cost will combine the $250 million with a significant amount of equity from investors.
“For any emerging technology, motivating private investment has always been challenging,” he added. “However, the USDA’s $250 million loan guarantee to Coskata is the largest biofuel guarantee that has ever been issued by a federal agency and is a strong signal to the investment community that advanced biofuels will play a significant role in the country’s long-term energy mix.”
The USDA also made a conditional commitment for an $80 million loan guarantee to Enerkem for the construction of a waste-to-biofuels project in Mississippi that will transform municipal solid waste into ethanol. The project, which will provide 10 million gallons per year initially and is expected to go online in 2012, already received an award of up to $50 million from the Department of Energy (DOE) in December 2009.
“We are thrilled with the resounding assurance that we continue to earn from leading government and private investors,” said Vincent Chornet, Enerkem’s president and chief executive officer.
The USDA will also offer a $75 million loan guarantee to INEOS New Planet BioEnergy to construct and operate a Florida biorefinery capable of producing 8 million gallons per year of cellulosic ethanol, using feedstock from vegetative waste (citrus and agricultural wastes), yard wastes, wood waste and municipal solid waste.
The USDA loan guarantee programme was created under Section 9003 of the 2008 Farm Bill to assist in the development advanced biofuel technologies. The loans fund the development, construction and retrofitting of commercial-scale biorefineries.
Meanwhile, the DOE offered its first loan guarantee for an advanced biofuels facility to Diamond Green Diesel, the proposed joint venture between operator Valero Energy Corporation and feedstock supplier Darling International. The $241 million loan guarantee will support the construction of a 137 million gallon per year renewable diesel facility in Louisiana.
Technology problems halt progress for Range Fuels, despite loan guarantee
But loan guarantees are not the panacea for advanced biofuel companies still facing financing and technological challenges. Range Fuels received a USDA loan guarantee last year and closed an $80 million bond issuance to partially finance the first two phases of construction of its first commercial cellulosic biofuels plant using renewable and sustainable supplies of non-food biomass in Georgia. The company had also previously received a $76 million grant from the DOE. But Range Fuels has significantly scaled back and revamped the project and is seeking additional financing.
“We are hopeful that Range Fuels will be able to work through their technology issues, which I think are at the heart of concerns that have been expressed by folks who are interested in investing but just want to be certain that their investment has a good opportunity for success,” said USDA Secretary Tom Vilsack.
In establishing the Renewable Fuel Standard, Congress set a national goal of producing 36 billion gallons of biofuels by 2022. But in setting the annual targets, the Environmental Protection Agency has acknowledged that advanced biofuel production is not scaling up as quickly as expected, setting a relatively low target of 1.35 billion gallons for 2011.
By. Gloria Gonzalez