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Vinod Khosla and Western Milling Form New Ethanol Producer

23 June 2006

Western Milling, California’s largest grain milling company, and Khosla Ventures, a venture assistance and venture capital firm led by Vinod Khosla, one of the top venture capitalists, have formed a new ethanol producer, Cilion.

Cilion will operate modular, standardized 55 million gallons per year ethanol plants that intend to be cheaper and greener than standard corn-to-ethanol plants, substantially reducing the need for fossil fuels in ethanol production.

Cilion plans to have 8 plant units in production by 2008 for a total of 440 million gallons per year capacity. The first three plants are expected to be in California.

Cilion is intended to leverage the ethanol production, grain handling, logistics and feed expertise of Western Milling and the company-building and financial expertise of Khosla Ventures.

Our technology and years of experience will allow our plants to have an energy balance advantage that is 2X that of gasoline. In addition we expect a greater than 90% reduction in petroleum use. The bottom line is that Cilion will be able to produce environmentally friendlier ethanol in California at a lower cost than ethanol produced in the traditional Midwest corn ethanol plants and delivered to California.

When fully operational, ethanol produced by Cilion is expected to be price competitive per mile driven with gasoline even if oil prices drop to $40 per barrel, assuming normal gasoline distribution margins.

—Kevin Kruse, Western Milling President

California Governor Arnold Schwarzenegger recently issued Executive Order S-06-06 establishing targets for the use and production of biomass products. The executive order called for California to produce a minimum of 20% of its own biofuels by 2010 and 40% by 2020. Of the 900 million gallons of ethanol currently consumed in California, only five percent is produced in California.

Cilion will be able to single-handedly produce all of the ethanol that the Governor has ordered for 2010, based on current consumption. Governor Schwarzenegger wants twenty percent of all ethanol consumed in California to be homegrown, and we are confident that Cilion can achieve that goal in its first three California plants, comprising four 55 million gallons per year units, that will be operational by early 2008.

—Vinod Khosla

Khosla, one of the founders of Sun Microsystems, has become an ardent proponent of ethanol as a strategic solution. (Earlier post.) Khosla’s involvement with Cilion puts him indirectly in competition—once again—with Microsoft CEO Bill Gates, who has invested in another California-based ethanol company, Pacific Ethanol.

Khosla is also co-chairing the ballot initiative to get California to add an oil extraction tax, the proceeds of which will fund the development of alternative energy solutions. The initiative has made it on to the November ballot. (Earlier post.)

June 23, 2006 in Ethanol | Permalink | Comments (18) | TrackBack (0)

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Comments

In a couple of years Knosla and Gates –backed companies will smo-o-o-othly move from corn grain ethanol to corn stalks cellulose ethanol on same facilities.

Fuel alcohols are best produced close to the feedstock growing area. California does grow some corn of its own but volume is peanuts compared to the Midwest:

http://www.ncga.com/03world/World2002/production.htm

From a technical perspective, a better option would be to convert the sugar into butanol since that can be transported in existing pipelines, thus avoiding the expensive rail/road transport across the country to blending facilities in e.g. LA county. N-butanol's octane ratings and energy density are also much closer to those of gasoline than are ethanol's.

California could choose to focus on biodiesel production based on farmed algae instead of ethanol. Large parts of the San Joaquin valley are extremely flood-prone anyhow (cp. New Orleans), so why not flood them deliberately and productively? The Salton Sea is another potential venue. A local source of truly sulphur-free diesel with low PM emissions would permit the use of NOx store catalysts in LDV/MDV applications, giving Californians another high fuel economy option and a measure of energy independence.

Unfortunately, logic has little to do with energy policy because then the US would not maintain tariffs on sugar and ethanol at a time of impending shortage. Khosla appears merely to have latched on to the CA farm lobby, which understandably just wants a piece of the current federal subsidy action, i.e. corn ethanol.

Rafael -

While on the surface it may appear that Khosla has hitched up to the corn lobby wagon, if you dig further, he advocates solutions far beyond that - both from technical and market perspectives.

Having seen his presentation on Ethanol, in fact, he is a big advocate that corn is NOT the way to produce the fuel. Take a look at the previous post mentioned by Mike (and written by me - figured I'd put in the disclaimer), and Khosla's presentation (available on his Khosla ventures website) for more on that angle.

Perhaps something to consider - in his quest to implement a far reaching vision of energy independence, he's putting his money where his mouth is in the only currently monetizable fashion? This may, in fact, lead to future investments in more technically advanced means of fuel production, per that vision.

We need to encourage the production of use of alternatives that minimize the use of fossil fuels. As long as we are using crops and processes that are heavily subsidized, like corn and ethanol, it will never be settled whether or not we are truly using a renewable process or a process that minimizes fossil fuels.

The way to encourage a wide range of alternatives and settle on those which have the highest possible EROIE is to tax all fossil fuel inputs to all alternatives. This will affect oil refining, oil shale, tar sands, ethanol, butanol, solar, wind, etc, etc.

Otherwise, we will be trying to pick winners, which Khosla does, while engaging in debate and analsyis that will always be subject to distortion by those who seek to profit from these alternatives.

Khosla is putting money where his mouth is but he also trying to pass an initiative which will put the proceeds from oil taxes where his pocket book is.

He claims that he has a process with a 2 to 1 energy return. Perhaps he can pull that off. But is it good enough? Tax carbon inputs and eliminate subsidies and then let the market, not politicians and lobbyists, decide.

Are there many acceptable reasons why we would produce grain based or celluosic ethanol instead of butanol?

Butanol has better energy content (105 000 btu/gal vs 84 000 btu/gal for ethanol. It is non-corrosive, 6 times less evaporative than ethanol and 13.5 times less evaporative than gasoline, can be transported in existing gasoline/oil facilities and can be used in existing ICE vehicles without modifications and without changing the performance. It seems to have all the advantages as a gasoline replacement and/or additive to diesel fuel.

The latest EnerGenetic and ChemLac process yields about 2.5 gallon n-butanol/corn bushel which is equivalent to ethanol yield and reduces production cost from $1.50 to $0.85/gal.

Joe -

thank you for the rejoinder. I'll keep an open mind on Mr. Khosla's ventures. I suppose I would have just preferred to see a VC invest in the next big thing rather than the current one.

Harvey -

the EEI process is new and currently the only published one that claims to achieve adequate yields. Others incl. ADM are working on processes of their own, based on alternate sets of bacteria, in part because then they own the patent. Low yields and competition for the product by the chemical industry has limited the various butanol isomers to second-tier oxygenates up to now.

The other issue is that biological processes never produce perfectly pure compounds. Along with the n-butanol (with a slight banana odor) you get butyric acid (with a pungent sweat aroma). You can convert the butyric acid to n-butanol in a petrochemical process using hydrogen, which the EEI process also produces. As long as the end product does not have a strong smell (especially a bad one), marketing it as a fuel should be possible. After all, gasoline and diesel aren't exactly Chanel No. 5, either.

Me, I kinda like the smell of gas :) But t-butanol would be much sweeter.

According to bp stats, Ethanol has captured 0.15 % share of Worlds energy, if things go this fast, they may hit 1 % share soon.

Rafael:

Do you think that Dupont + BP (+ others) can find ways to eliminate n-butanol bad odors and make economical use of n-butanol processing main by-products? If they do (and I have no doubt that they will), cellulosic n-butanol could be a much better end-product than ethanol.

Do you have detailed comparison on how clean both products burn in ICE vehicles and/or ICE equippped PHEVs?

Cilion. Is that pronounced sy-lion or silly-on? The difference could be a propaganda nightmare.

Harvey -

I agree, BP and Du Pont would not be pursuing butanol if the product had an insurmountable odor problem.

Butanol combustion chemistry is described here, search for "butanol combustion":

http://www.gfcombustion.asso.fr/index.php?langue=en&page=ecm.php&item=ecm

The only people that I am aware of that have recently published on the use of butanol as an automotive fuel are EEI, the folks who came up with the new high yield-process. You need to decide for yourself how much credence you lend to their claims.

http://www.butanol.com

Other links:
http://www.ars.usda.gov/research/publications/publications.htm?seq_no_115=165507
http://www.biocrawler.com/encyclopedia/Butanol
http://www.energeneticsusa.com/pages/1/index.htm

This last one is a useful start for the layman, Find In Page "butanol" a few times until you get to the portion giving more detail. RVP means Reid vapor pressure. Butanol's is lower than gasoline's, which means evaporative emissions from the fuel system would be lower in summer. In winter, you typically want a somewhat higher RVP to avoid running an overly rich air-fuel mixture while the engine is cold.

Gasoline is a blend of hydrocarbons, each with its own evaporation temperature. Hence, fuel evaporation does not cause noticeable step changes in in-cylinder pressure during the intake and compression strokes. Neat fuels do, which means engines don't run quite as smoothly on them. They may also exhibit higher HC and CO emissions. Therefore, butanol-based fuels should also feature significant amounts of other compounds, such as butyl esters which may be derived from butanol.

Fuel composition also influences global reaction kinetics and hence, the instantaneous rate of heat release. Hydrogen, CNG, gasoline and diesel differ markedly in this respect and require specially adapted engines for optimal combustion. Unsurprisingly, automotive fuels are standardized to fairly tight tolerances that refiners/blenders have to meet in order to leverage the existing distribution infrastructure and sell to the general public. The beauty of butanol is that its properties are so close to those of gasoline that it can be blended in just about any proportion.

The flip side is that the fuel cannot significantly improve engine-out NOx, which is then primarily a function of combustion chamber geometry, combustion management (ignition, EGR rate) and engine operating point (torque, speed). Note that in stiochiometric operation, the three-way catalyst will anyhow clean up HC, CO and NOx once it hits its light-off temperature range (250-300 deg C).

Summary: I'd expect emissions similar to gasoline operation. Engine-out NOx values may differ by a few percent, HC and CO could vary by a little more. No SOx emissions at all, though, since biofuels don't contain sulphur.

As I stated elsewhere, the CARRIER FUEL does not really matter, it is the PRIMARY FUEL that is important. It is not very clear from the story if the PRIMARY FUEL is grain (food, bad idea) or waste (good idea). Sounds as if it is grain, though.

As far as CARRIER FUELS go, we have a vested interest in staying with the tried and trusted, i.e. hydrocarbons. Hence my belief that G-F/T is the way to go.

If someone wanted to promote one particular method,
it might be better to do something constructive to promote it
rather than just put your views on here in CAPITAL letters.

Rafael:

Thank you for the details on butanol combustion vs gasoline. We may hear much more about it in the next two years. Cellulosic betanol may be one of the best alternative liquid energy source if it can be economically produced.

If DuPont & BP are planning to convert an ethanol plant to Bio-Butanol in England, could you describe the procedure and expected amount of money to accomplish this feat?

Hey guys, you seem to be the "Scientific Type". How come I can mix my own E Fuel with 2% Gas, run it in my car, 50 degrees cooler and no noticable polution, no modifications, about the same mileage and power band, and I cannot get any attention? Seems to me that this would stop the war, put farmers back to work and put a big dent in Global Warming.

Seems like every one is interested in the Money, no one reads this. By

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