EthanolProducer is reporting that Prime Biosolutions, designer of E3’s closed-loop technology, is interested in purchasing them. There are still a few sticking points:

“We’ve got a restructuring plan we’re working on but we’ve got to follow the rules of the game,” said David Hallberg, Prime’s founder. “We’re ready to move when it’s time.”

E3 has claimed that mechanical failures have caused the company to stumble during its start-up period. It has since run out of money and has had to shut down entirely. In particular, the article notes:

One year ago a boiler explosion prevented the plant from coming on line fully and it never attained its projected 25 MMgy capacity.

A boiler explosion?! Boiler explosions are serious business. They’re not just financially costly, they’re extremely dangerous. They’re also fairly easy to manage to. Boiler technology is hundreds of years old at this point. While I can empathize that accidents do happen, a boiler explosion is unacceptable on any grounds. My hope is that this is being misreported – I pray that it was only a serious malfunction, not an actual explosion.

But this seems like it might be good news for E3. The article also details some of their financial troubles – apparently Wells Fargo is owed $57 Million. The details seem to indicate to me that the company was not capitalized appropriately to manage such an endeavor. EP is to report a more in depth article in the coming weeks.

2007 has been a rough one for the biofuels industry. In hindsight, it will be noted as a turning point for the industry. There are three big developments that propagated during this year:

• Corn ethanol development stalled due to high corn prices and low ethanol prices. The fallout has been a receding of enthusiasm for ethanol from the financial industry and a second look from the agricultural community (not to mention consumers who don’t like high beef prices).
• Several start-up companies emerged focusing on advanced biofuels like biobutanol or cheap, non-corn ethanol. The kick-off of this initiative was the $387 Million given by the DOE earlier this year to fund several cellulosic ethanol initiatives.
• Real industry movement on electric vehicle systems (Tesla, GM, Ford, Toyota)

2007, however, should be known as a disappointment. We were supposed to have cellulosic ethanol this year. And even now, it’s still a question mark.

What is certain is that something different must be done about the cost of producing fuel ethanol in the U.S. before the U.S. manufacturers flounder. These companies aren’t yet profitable and financially sustainable. They won’t last until the economics of ethanol are fundamentally changed.

Some positive elements of 2007, however, were some great technical breakthroughs, including some new companies, that are focused on taking on different parts of the value chain of biofuels and other chemicals (hydrogen).

2008, I predict, will be a bit more of the same. Big corn ethanol producers will continue to have consolidation and bankruptcies. But new start-ups will begin to gain ground. We’ve already seen RangeFuels break ground on a new facility and others are developing pilot facilities. This will be the most significant legacy of 2008 weather they are ultimately successful or not.

My hopes for 2008:

• A breakthrough (or more testing) on hydrogen production. While there are many detractors, I have a lot of hope for hydrogen – and at the moment, it’s only hope and not promise.
• Real evidence of ethanol demand growth. The softening of pricing and a leveling of fuel demand in December make me wonder weather or not the demand of ethanol has any more legs. The recent energy bill is a help, but not a guarantee.
• A commercial biobutanol effort. It’s still not clear that this product can be made in volume. So I’d like to see, say, a 30 Million gallon /yr facility built to really try and prove it out.
• A really successful test of a carbon sequestration facility (these are in process, but I haven’t heard a big success story).

Posts from this year:

• Amaizing Ethanol IPO
• What’s ADM’s Plan?
• The Biobutanol Pathway
• Hydrogen from Algae (hydrogen pricing analysis)
• Biofuels Essay: Intro / Part 1 / Part 2 / Part 3

Thanks for reading. Have a Happy 2008!

Doug