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Bluefire Ethanol (BFRE)Stock (Energy Industry, Manufacturing Industry)
 Recent growth in the ethanol market has greatly increased demand for corn. Farmers can't produce enough to meet this demand, which has led to higher corn prices - and higher food and ethanol prices. Cellulosic ethanol (ceetol) made by Bluefire has a major advantage over corn-based ethanol, in that it does not depend on food prices or on the capacity to produce a single agricultural product. Bluefire is receiving Department of Energy funding to build its refinery, which helps to offset the hefty installation cost of $5.00 per gallon for a 55 million gallon per year facility. Without such funding, it would be very difficult for Bluefire to make ethanol cost-competitive with other fuels, much less turn a profit. The U.S. government is also supporting national development of commercially viable cellulosic ethanol through research grants and subsidies to the tune of $1.18 per gallon. These subsidies are meant to help ease the transition to ethanol by paying for research into higher efficiencies and cheaper methods of production. Bluefire faces infrastructure challenges, however, as the world's current dependence on oil makes a transition to ethanol very difficult. The company competes with other ethanol producers, including Verenium, Verasun Energy, and Pacific Ethanol. [edit] Business and FinancialsBluefire Ethanol produces cellulosic ethanol (ceetol) using Arkenol Technology, which takes any cellulosic feedstock, like wood waste, agricultural leavings, and municipal waste, and converts it to ethanol using acid hydrolysis to break the cellulose down into sugar; the sugar is then turned into ethanol using conventional fermentation and distillation techniques. Bluefire was incorporated in March of 2006.
[edit] Bluefire is the Exclusive North American Licensee of "Arkenol Technology"Bluefire does not use its own technology to make cellulosic ethanol, it licenses the technology from another company, Arkenol, Inc. The steps involved in Arkenol Technology are relatively simple:
This process is expensive to set up, with a 55 million gallon per year plant costing about $5.00 per gallon to build. Once built, however, the process uses so few inputs that each gallon of ethanol costs only $0.50 cents to make[2] - much cheaper than competitors like Verenium, who use processes that cost around $3.00 per gallon[3]. Since Bluefire is the only North American licensee of this technology, it faces little competitive pressure from similarly priced processes. If Arkenol loses its patent or if another company designs technology based on the Arkenol process, however, it could open the floodgates to price competition for Bluefire. Furthermore, there are other processes to refine ethanol in the research and development phase. If any of them achieve a level of efficiency similar to the Arkenol process, Bluefire's market advantage would be at risk. Finally, if Bluefire has a falling out with Arkenol and loses its ability to license its technology, the company will be left stranded without a production technology. [edit] Trends and Forces[edit] Bluefire is Dependent on Legislative Support to Achieve Profitability - and the Government is DeliveringIn October of 2007, Bluefire announced that it would receive funding from the U.S. Department of Energy to the tune of $40 million to build its second cellulosic ethanol refinery, with a capacity of about 17 million gallons per year, in California[4]. The "Arkenol Technology" that Bluefire uses costs $5.00 per gallon installed, a hefty price considering that the average price of ethanol hovers around $2.00 per gallon[5]. Since continuing operations for the "Arkenol Process" only cost around $0.50 per gallon[6], it's the installation costs that hurt profitability, so the $40 million grant allowed Bluefire to stabilize its balance sheet during the company's start-up phase. Without the grant, however, Bluefire's facility would have no hope of being profitable, illustrating the company's dependence on government aid to be feasible. Fortunately, the DOE grant is not the only support Bluefire has to rely on:
[edit] Rising Commodities Prices Make Cellulosic Ethanol a More Attractive Fuel SourceSince the Energy Policy Act of 2005, ethanol has been pushed as the next big biofuel. With oil prices shooting up in recent months, reaching $100/barrel at the New Year, consumer and government demand for alternative fuels has been increasing. As oil prices have risen, however, so too have corn prices; as an example, ethanol company VeraSun Energy's average payment for a bushel of corn rose from around $3.32 in the second quarter of 2007 to $4.60 in the new year[10]. Rising corn prices, aside from making ethanol much less cost-efficient, cause prices for many other foods to rise - corn is a major animal feedstock, forcing meat prices up, and high-fructose corn syrup is found in pretty much every mass-produced food product. Corn prices haven't just shot up on their own, however; petroleum is used as a corn fertilizer, making corn's price directly related to oil's price. Furthermore, demand for corn went through the roof because of the emerging ethanol market; it was the increased production of corn-based ethanol, demanded by the Energy Policy Act of 2005, that led 20% of all corn produced in the U.S. to go to ethanol production in 2006 - a rate that was surpassed in 2007[11]. Bluefire's cellulosic ethanol isn't food-based, and doesn't use oil in its production, making it a much less volatile source of energy. [edit] Without a Shift in the Auto Industry, Cellulosic Ethanol is Just a Good IdeaCurrently, American cars can run on a mix of 90% gasoline and 10% ethanol, though there isn't nearly enough corn-based ethanol being produced at the moment to meet this capacity. Part of the goal of the government's support of ethanol is to increase ethanol production and use to a scope well beyond that of the standard 10% blend. E85, a blend of 85% ethanol and 15% gasoline, is the big hope for the biofuels industry, as its use would greatly reduce greenhouse gas emissions and help to meet the new energy standards that have been placed on the U.S. through the Energy Independence and Security Act - all while greatly increasing demand for sustainable, non-food biofuels. There are, however, a number of blockades to the widespread adoption of E85 in the U.S.:
Without solutions to these obstacles, ethanol and cellulosic ethanol have no hope of being considered "replacements" for petroleum. [edit] The Positioning of Bluefire's Production Plants on Landfills has Numerous AdvantagesBluefire positions its production facilities right on landfills, in order to take exploit certain cost advantages.
There are 1,600 landfills around the United States, and Bluefire can adapt its refinery set-up to work with most of them[15]. Furthermore, Bluefire has stated that it wants to expand its reach globally, and with countries like India and China throwing away more and more trash every day, there are a huge and growing number of landfills that Bluefire could use. With so many possible refinery sites, Bluefire's potential to expand is much greater in scope than many competitors. [edit] CompetitionBluefire competes with other biofuels manufacturers, though its closest competitors are cellulosic ethanol companies.
[edit] Notes
Bluefire Ethanol profiled local ABC evening news, July 23, 2008 |
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