For years the stock answer to when cellulosic ethanol produced from plant materials or wood will arrive has been the same. When asked, industry officials and insiders have consistently said it will be four to five years before commercial production becomes viable.

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Not anymore. The future is now for cellulosic ethanol.

Roughly 300 million gallons of planned commercial-scale cellulosic ethanol plants are in various stages of planning and development across the country, according to Nathan Schock, a spokesperson with Sioux Falls-based POET, although financing hurdles may slow or derail some of those projects.

Several companies, including Coskata Inc., DuPont Danisco Cellulosic Ethanol, Iogen Corporation, Lignol, POET and PureVision Technology, announced in June at the International Fuel Ethanol Workshop and Expo in Denver that they have already produced cellulosic ethanol from demonstration plants or will do so within the year. Most are processing about 1 ton of material into ethanol daily. From that ton of biomass, they are producing between 70 gallons and 85 gallons of biofuels. Commercial production is expected to follow by 2010 or 2011.

Coskata officials said at the workshop that the company is so confident in its production system it has decided to start licensing its proprietary technology later this year. Coskata’s process is far more robust than originally estimated because the company can process cellulosic feedstock from agricultural sources, urban land waste, forests and a variety of manufacturing waste materials. Company officials also said once the process is perfected, ethanol from cellulosic sources would become price competitive with gasoline without any federal tax credit.

POET is already producing cellulosic ethanol from corn cobs at a pilot-scale plant in Scotland, SD. A 25 million gallon cellulosic ethanol plant will be added to POET’s existing grain ethanol plant in Emmetsburg, IA, by 2011. The company also plans to add cellulosic ethanol production to other existing grain-to-ethanol plants and license the technology to other companies. POET, the world’s largest ethanol producer, is currently working with agricultural equipment manufacturers and farmers to find the best way to harvest cellulosic feedstock.

“POET’s cellulosic ethanol goals depend on a steady supply of a reliable feedstock: corn cobs,” said Scott Weishaar, who is leading POET Biomass, a new division of the company that was announced at the Fuel Ethanol Workshop.

STUDY FINDS LARGE-SCALE CELLULOSIC PRODUCTION POSSIBLE

A study released earlier this year by the U.S. Department of Energy’s Sandia National Laboratory found that large volumes of cellulosic biofuels could be produced from already identified biomass sources and resources without displacing crop production. The study, which was sponsored by General Motors, indicated that even without incentives cellulosic biofuels could potentially compete with gasoline with oil prices of between $70 and $90 per barrel by 2030, given the expected accelerated development of technology and feedstocks.

The report also found that the needed investment in cellulosic biorefineries would be comparable to that needed to expand domestic oil exploration and production to similar levels. It noted that building the needed transportation and distribution infrastructure presented a challenge, but was still possible.

“The future of cellulosic ethanol is a realistic route to energy independence,” Joe Skurla, the president and CEO of DuPont Danisco, said in a prepared statement earlier this year. “More importantly, it also shows that our industry will contribute significantly to a low carbon transportation sector and the new green economy.”

ECONOMY, TECHNOLOGY NOT HOLDING BACK PRODUCTION

Representatives from ethanol-related companies and enzyme businesses were asked to identify the most important constraint holding back the development of cellulosic ethanol during a panel discussion at the Fuel Ethanol Workshop. Interestingly, no one mentioned technology or the national recession as constraints to cellulosic ethanol.

Several responded that consistent federal policy was needed, mentioning the lack of a national renewable energy policy in the United States. Federal programs supporting biofuels production typically have to be reauthorized frequently because of pending sunset clauses. Many policy provisions, such as management of renewable identification numbers, grants and blend levels, often also have not been defined or are highly variable.

POET officials said the most important constraint is the blend wall, abdicating for the ethanol industry to be allowed access to another 5 percent of the fuel market through higher ethanol blends like E15. Without that additional market, both the grain-based and cellulosic ethanol industries would face a serious pending oversupply situation, according to ethanol experts. Ethanol companies advocate more rapid installation of blender pumps and more progressive federal regulation that permits higher ethanol blend rates in excess of the current 10 percent level.

Some ethanol-related companies also say that current economic conditions are constraining the commercialization of their processes.

LONG-TERM SURVIVAL WILL REQUIRE SELF SUFFICIENCY

For the industry to survive long term, some industry insiders believe it cannot continue to depend on variable federal subsidies, grants and other favorable policies that mandate increased renewable energy use. Others argue that the playing field should be leveled, pointing out that the oil industry, which ethanol is competing against, is one of the most heavily-subsidized industry in U.S. history.

While providing important support to the industry during its developmental phase, others argue that ethanol subsidies may actually prove to be detrimental to the industry in the long run. The industry’s goal is to develop independent systems that are economical without governmental assistance.

Last year as the crisis in U.S. financial markets unfolded, businesses across the country complained that debt capital had dried up and was virtually unattainable. Surprisingly, cellulosic ethanol projects have been able to secure reasonable levels of financial capital. Most panel members at the workshop mentioned new investments and the growth of their firms in the last year.

The long-term future of cellulosic ethanol is not yet clear, but the moving target of when large-scale production and commercialization will occur at least appears to be on the horizon.

Gustafson is a professor and biofuels economist in North Dakota State University’s Department of Agribusiness and Applied Economics and is co-director of NDSU’s Bioenergy and Product Innovation Center. He can be reached at cole.gustafson@ndsu.edu.