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January 15, 2008

General Motors Bets on Cellulosic Ethanol Model

Ethanol: Fact vs. Myth

Learn the truth about ethanol...

GM's recent announcement to partner with Coskata Energy to help accelerate the development of cellulose-based ethanol (cellulosic ethanol) should be welcomed news for consumers, environmentalists, policy makers, and all others concerned about the sad state of our nation's energy / economic / environmental and geopolitical affairs.  GM is acting way outside the traditional automaker box with their decision to invest in developing cellulosic ethanol to accelerate the market place arrival of cleaner and cheaper transportation fuels.  The announcement has been met with overwhelmingly positive reviews and widespread coverage, but has also seen some hopeful, well-intentioned skepticism.  This is obviously a development we'll be covering closely in the future, but for now, let's review the Coskata cellulosic process and discuss the historical perspective that helped lead to this development:

Coskata process

CFDC welcomes Coskata Energy to the growing group of companies developing cellulosic ethanol technologies like Range Fuels, Mascoma, KL Design, Virent Energy Systems, Clear Fuels Technology, Blue Fire Ethanol, and Fuel Frontiers.

Why would an automaker support cellulosic ethanol?

The auto/oil conspiracy against alternative fuels has been dead since the Clean Air Act Amendments of 1990 (at least on the auto side) when U.S. automakers helped environmentalists and alternative fuel advocates change the composition of gasoline to include cleaner burning oxygenated fuels like ethanol. EPA announced this week that the reformulated gasoline/clean fuel program is exceeding their expectations to meet clean air and water goals.  The historic and successful clean air/clean fuel legislation of 1990 spawned the first renewable fuel standard (RFS) in the Energy Policy Act of 2005 -- and the U.S. automakers helped. The successful RFS program in 2005 resulted in expanding the RFS in the new Energy Independence and Security Act of 2007 from 7.5 billion gallons to its current goal of 36 billion gallon per year -- and the U.S. automakers helped.  Automakers, and especially GM, have continued to show leadership and support for ethanol by first approving of ethanol's use and performance in their vehicle warranties in the 1980's, producing more cars that run on 85% ethanol (i.e., FFVs) in the 1990's, and now supporting the development of new legislation, technologies, and public/retail E85 refueling infrastructure.

General Motors: pioneering business model and role model

What's in it for GM?  Each time the price of gasoline goes up automaker stocks goes down and car sales go down with it.  This historic trend does not seem to mirror oil company profits.  The high cost of changing emission and mileage technology has the same impact on sales, but automakers have evolved, compromised, and advocated and paid for change on a much larger scale compared to oil companies (e.g., catalytic converters, seat belts, air bags, 30+ 30 MPG models, Flexible Fuel Vehicles FFVs, etc.).  While mandating smaller cars with smaller engines in order to get higher mileage has been a difficult challenge in Washington, D.C. -- changing consumer preferences via Detroit has been even tougher.  Changing the automobile refueling choice to one that is cleaner burning, domestic and has a lower carbon footprint for alls cars, not just the new ones, will have a much bigger impact on protecting the environment and stimulating the economy.  An ever growing majority of industry and government leaders and the public agree with this approach – and energy, the economy, and the environment remain on the top of the Congressional to do list.

GM, Ford and Chrysler have been producing cars capable of running on flexible mixtures of gasoline and up to 85% ethanol since 1990's. There are now six million FFVS on the road that combined could use all of the ethanol produced in the United States.  After waiting 30 years for the oil companies to correspond with an alternative fuel chicken to complement the auto's alternative fuel vehicle golden egg, GM has now taken their vehicle's fuel destiny in their own hands and is investing in the development of alternative fuels.  Role model and business model all wrapped up in one. The public did their part by making sure Congress did their part by passing the Energy Independence and Security Act of 2007.  GM is fulfilling their corporate stewardship and self-preservation role, as well as stepping in an playing the role of some missing stakeholders.  GM's decision to accelerate the development of cellulosic ethanol sets a great example for others in corporate American that are trying to go green -- spend some green and get results.

Clean Fuel Development: Whose job is it?

Who do you think should be responsible for making sure fuels are clean, consumers have choices of ample supplies of transportation fuels, a competitive "free" market is maintained, and technologies to reduce fossil fuel use and crude oil imports are developed?

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Comments

Book Calendar

Please explain to me then two problems with gas stations. There are a limited number of E85 pumps, I think some 785 in the United States. Why isn't this expanding? The second question is why are oil companies opposed to low ethanol fuel blends 5-10% ethanol in all gasoline?

Burl Haigwood

First the good news. E85 stations are expanding at a relatively fast pace compared to the 100 history of gasoline-only fuel pumps and the 240 million non-flexible fuel vehicles vs. 6 million flexible fuel vehicles (FFVs) on the road today. We now have nearly 1,500 E85 stations which you can find at http://www.e85refueling.com, and even On-Star is getting involved. Automakers, environmentalists, community leaders, governors and many non-profits like the CFDC and the National Ethanol Vehicle Coalition www.e85fuel.com are working to improve this situation. Over 95% of the current E85 stations are independent gasoline marketers. Now we just need more willing consumers to help drive the market and convince oil companies the market is changing.

Now the bad news. In my 30 years of observing the oil and ethanol industries, I can assure you oil companies were not a willing participant in the goal to create or protect incentives to produce ethanol, or passing the first renewable fuel standard in 2005, or the larger RFS program in 2007. They simply comply with the RFS law and very often complain publicly (You can search testimony in the Congressional Record) about government support for ethanol saying the “free market” can correct the problem. There is a 30 year public track record that shows no progress or investment into the renewable fuels that are in the market place today. Starting with the Gasohol Competition Act of 1980 and hopefully ending with the provisions in the Energy Independence and Security Act of 2007 (below), Congress has had to continually reinforce the intent of their legislation, and desire of the public, to create a more competitive market place that would include cleaner-burning domestically produced fuels.

According to the Energy Independence and Security Act of 2007 …. The bill prohibits restricting the sale of renewable fuels in franchise agreements and prohibits restriction of renewable fuel pumps, converting existing tanks or pumps, advertising, purchasing renewable fuels from persons other than the franchiser, listing renewable fuel availability on signs or dispensers, and allowing the use of credit card payment. It also allows a franchisee to remove one grade of gasoline, even if three are required by the franchise agreement. This allowance is extremely important as many E85 distributors are replacing either premium or mid-grade with E85. It requires the Department of Energy to issue a report within 24 months on the feasibility of requiring E85 fuel dispensers in regions where flex-fuel vehicles comprise at least 15 percent of all motor vehicles.

The problem is trying to be corrected. Now it’s up to consumers like you to do the rest.

Matt

The partnership between GM and Coskata Energy could be huge. Depending on how fast they can get a large working order plant in place, the faster we get energy from garbage. This could be absolutely huge, think of it fuel from waste the sky is the limit.

TheSUBWAY.com

It's good to hear BP & GM talk about alternative fuels, but 50 years to implement is too long.

http://money.cnn.com/2008/03/05/news/companies/bigoil_hydrogen/index.htm


Perhaps this link will spark more attention:

http://www.chevrolet.com/electriccar/


It is GM's electric concept car the Chevy Volt. If more people begin to demand alternative fuel cars, we should be able to speed the rate at which the technology is developed.

We have started an Investor Forum where Investors can meet and discuss topics like this:

http://investor-forum.thesubway.com/

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