Wood Bioenergy | a Hatton-Brown publication

Financing is currently the biggest hurdle to building the first generation of pilot scale and industrial cellulosic ethanol plants, say two industry CEOs in a recent Minnesota Public Radio interview. According to Arnold Klann, of BlueFire Ethanol, which is trying to build a cellulosic ethanol plant, “What we’re hearing from all the lenders, and we’ve talked to over 50 of them, everybody wants to be first to finance the second project,” says Klann. “No one wants to be first to finance the first, and that’s what everybody’s faced with right now.”

There are multiple companies out there right now looking to build cellulosic ethanol plants utilizing various technologies, Klann said. “Each one has different barriers, but fundamentally the least common denominator in all those barriers, whether they’re technical or whatever, is the financing.”

Several small, pilot cellulosic plants are currently operating but nothing on an industrial scale. Klann said lenders aren’t willing to finance them because they’re not sure a large facility will work. Klann said the obvious funder of last resort is the federal government. The Department of Energy has a program to guarantee up to 80 percent of a bank loan for a cellulosic plant, but so far DOE hasn’t approved any loan guarantees for cellulosic construction. Even with the benefit of a federal loan guarantee, banks might still consider cellulosic ethanol too risky.