* EPA cuts cellulosic ethanol target for second year
* Cellulosic ethanol costs much more than corn-based fuel
* Study says price-viable cellulosic ethanol years away
(Recasts, adds more details about cellulosic ethanol)
By Timothy Gardner and Tom Doggett
WASHINGTON, June 21 The dream of making a green
motor fuel from switchgrass or wood chips got kicked down the
road for a few more years after the U.S. government on Tuesday
slashed its proposed mandate for next-generation biofuels.
For the second year in a row, the Environmental Protection
Agency cut the amount of cellulosic ethanol that must be mixed
into motor fuel.
Next year, only 3.45 million to 12.9 million gallons of
cellulosic biofuel will have to be mixed into the country's
gasoline pool by fuel blenders, far below the original goal of
500 million gallons. EPA slashed the target for this year to 6
million gallons from the 250 million gallons required in the
renewable fuels standard Congress passed in 2005.
Cellulosic ethanol is made from grasses, wood chips and
agricultural waste, which environmentalists and consumer groups
say is better than using a food crop such as corn to make the
Cellulosic has been envisioned as a key part of boosting
the amount of renewable fuels used in the United States.
Congress had mandated that 36 billion gallons of biofuels
should be used in the United States by 2022.
Congress has mandated corn ethanol would top out at 15
billion gallons by 2015, and that is on track. The EPA on
Tuesday proposed increasing the use of corn-based ethanol to
13.2 billion gallons next year, matching what Congress
But cellulosic is supposed to keep growing every year until
it reaches 16 billion gallons by 2022. So far it has failed to
live up to expectations.
The revised mandate could affect companies working to
develop cellulosic including Solazyme SZYM.O, CleanTech
Biofuels (CLTH.PK), Coskata Inc, and KiOR Inc, which recently
filed with the Securities and Exchange Commission to go
The main problem is the cost of producing cellulosic is
still high and it may be years before that can brought down to
compete with corn-based ethanol.
MAGIC FORMULA ELUSIVE
Second-generation biofuel producers must rely on expensive
enzymes. So the ethanol industry must depend largely on the
corn crop, fueling criticism the business is driving up food
"They've been looking for the magic formula for a cheap
enzyme that will break down the cellulose but they're still far
from it," said Rick Kment, an ethanol analyst at Telvent DTN.
Enzymes used to make cellulosic can cost up to $2 per
gallon. When the costs of building and maintaining
biorefineries, labor, and transportation are added to the
enzyme costs, cellulosic is far more expensive than gasoline.
In addition, the available amount of research and
development money for advanced biofuels has fallen.
A new study this month concluded there is an 11-year gap
between wood-based biofuels production and its commercial
"Major technical hurdles will likely disrupt
commercialization for most of the technologies under
development," said Bruce Schiamberg of the Schiamberg Group,
the co-author of the study.
But the EPA was hopeful. "The agency remains optimistic
that the commercial availability of cellulosic biofuel will
continue to grow in the years ahead," EPA said.
About 11 percent of all motor fuel used in 2012 will come
from biofuels, up sharply from about 8 percent this year, the
With ethanol output this year expected to total 13.5
billion gallons, ethanol producers already exceed the 2012
target of 13.2 billion gallons. This year's corn-based ethanol
use target is 12.6 billion gallons.
U.S. senators voted overwhelmingly last week for an
amendment to end the support payments and the tariff wall that
protects the ethanol sector. The amendment is far from coming
The EPA will take public comment on its proposal through
Aug. 11, and then finalize the renewable fuel standard in
(Additional reporting by Ayesha Rascoe; Editing by
Marguerita Choy, Lisa Shumaker and David Gregorio)