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.)
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