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Butamax says it wants to deploy the first commercial-scale version of its isobutanol technology at Highwater Ethanol in Lamberton in 2015. Highwater and Butamax said they hope to finalize a deal. As a first step, Butamax said it is installing a corn oil separator needed in the retrofit.
Although isobutanol is being produced in the retrofitted ethanol plant in Luverne that Gevo purchased in 2011, it hasn’t been easy. The Englewood, Colo.-based company has burned through cash — $10 million on operations in the last quarter — as it struggled to ramp up production. The company has said it hopes to break even next year.
Gevo’s initial public offering in 2011 at $15 per share raised $115 million. But the stock has been hammered by bad news, and has traded below $2.50 per share for months.
That company’s experience illustrates a key risk of shifting from ethanol: getting rid of bugs that hamper production. Gevo now says contamination by unwanted microorganisms that forced a temporary production halt is under control.
Patents are issue in lawsuits
Yet another risk is litigation over proprietary butanol technology. Rivals Gevo and Butamax remain locked in federal court battles over patent rights.
Gevo, like Green Biologics, initially hopes to make money selling biobutanol in the chemical market. Yet the market for isobutanol as a chemical building block is a fraction of the market for n-butanol, Slome said.
Isobutanol is approved as a motor fuel, and can be blended into gasoline at higher levels than ethanol without damaging engines. The fuel market is huge, and Butamax says that’s where it’s mainly focused.
“In the long term, once you get to the economies of scale and you get all the bugs out of the process — once you solve all those problems — you probably can compete in the fuel market,” said Ronald Cascone, principal for energy and chemicals consulting at Nexant.
Larry Johnson, an industry consultant based in Cologne, Minn., who helped raise capital for early ethanol companies, said the shift to butanol could be a lifesaver for small, less-efficient 1990s-era plants.
“If we can keep them operating on a different product, that is better than having them shut down,” Johnson said.
In Little Falls, plant size is a concern for CEO Dana Persson of Central MN Ethanol Co-op. Its 21-million-gallon annual output is one-fifth that of today’s largest ethanol plants.
“It becomes more difficult to compete as a small plant — you don’t have the volume,” he said.
Minnesota’s government was deeply involved in supporting the ethanol industry in the 1990s. The state once offered grants to producers, and was the first in the nation to require a 10 percent blend at the gas pump. Butanol makers aren’t getting similar state incentives, but the Legislature this year amended the ethanol law to include biobutanol as a legal gasoline blend.
Minnesota’s agriculture commissioner, Dave Frederickson, was an ethanol supporter when he served as a state senator in the early 1990s. He said the state welcomes innovation in the ethanol industry.
“You have got to keep trying and moving the ball,” Frederickson said. Even so, he predicted that the vast majority of Minnesota’s ethanol plants will continue to make ethanol. “I don’t see a mass exodus from the ethanol industry,” he said.
David Shaffer • 612-673-7090 Twitter: @ShafferStrib