Hello,

We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not a subscriber? Subscribe now for unlimited access to online articles.

Sustainable Energy

A Lifeline for a Cellulosic-Biofuel Company

$100 million in new funding will keep the woodchip-to-gasoline company Kior afloat, for now.

Cellulosic biofuels could reduce oil imports and greenhouse-gas emissions, but companies haven’t been able to commercialize them.

Yesterday Kior, a company that turns wood chips into gasoline and diesel fuel, announced that it had raised $100 million, which should be enough to keep it in business for another year or so and help it build a new biorefinery. The funding is a lifeline for a business that just a couple of months ago looked close to failure. But the company, which operates the largest U.S. refinery for converting cellulosic biomass into fuel (see “Kior ‘Biocrude’ Plant a Step Toward Advanced Biofuels”), is still a long way from being profitable.

Cellulosic biofuels could, at least in theory, reduce oil imports and greenhouse-gas emissions, and the U.S. Congress has required fuel companies to buy billions of gallons of it. But in spite of this mandate, very little is produced. Although dozens of companies have trotted out lab-scale technologies for breaking down recalcitrant biomass and turning it into fuel, they’ve struggled to commercialize these systems, in part because it’s been difficult to raise funds to build large refineries and in part because the methods often fail to perform as well at a large scale as they do in the lab. (For example, one company, Range Fuels, found that its system became clogged up with tar.) As result, the government mandate has repeatedly been waived (see “The Death of Range Fuels Shouldn’t Doom All Biofuels” and “The Cellulosic Industry Faces Big Challenges”).

Kior itself has run into technical difficulties that have kept it from running its huge biofuel plant at full scale. The plant is designed to produce 13 million gallons of fuel per year and started producing its first fuel—diesel—in March 2013. The company said it would ship a total of 300,000 to 500,000 gallons by midyear, but it only managed to ship 75,000 gallons. The shortfall in production resulted in lower-than-expected revenue and a loss of $38.5 million in the second quarter, up from $23 million for the same quarter a year before. With little revenue and high costs, some analysts started to worry that the company would run out of money.

The $100 million investment buys the company time, and by some measures it’s making good progress, says Mike Ritzenthaler, a senior research analyst at Piper Jaffray. For example, he notes that production levels are increasing, and the company looks on track to produce a million gallons of fuel by the end of the year. Kior also has the advantage of making gasoline rather than ethanol, the market for which is saturated in the United States.

But big challenges remain. If Kior hopes to break even and eventually turn a profit, it needs the economies of scale that come from even bigger refineries, and building those will require more funding. Funding for cellulosic plants has been particularly hard to come by, since investors are reluctant to take a risk on the new technology.

AI and robotics are changing the future of work.  Learn from the humans leading the way at EmTech Next 2019.

Register now
More from Sustainable Energy

Can we sustainably provide food, water, and energy to a growing population during a climate crisis?

Want more award-winning journalism? Subscribe to MIT Technology Review.
  • Print + All Access Digital {! insider.prices.print_digital !}* Best Value

    {! insider.display.menuOptionsLabel !}

    The best of MIT Technology Review in print and online, plus unlimited access to our online archive, an ad-free web experience, discounts to MIT Technology Review events, and The Download delivered to your email in-box each weekday.

    See details+

    12-month subscription

    Unlimited access to all our daily online news and feature stories

    6 bi-monthly issues of print + digital magazine

    10% discount to MIT Technology Review events

    Access to entire PDF magazine archive dating back to 1899

    Ad-free website experience

    The Download: newsletter delivery each weekday to your inbox

    The MIT Technology Review App

  • All Access Digital {! insider.prices.digital !}*

    {! insider.display.menuOptionsLabel !}

    The digital magazine, plus unlimited site access, our online archive, and The Download delivered to your email in-box each weekday.

    See details+

    12-month subscription

    Unlimited access to all our daily online news and feature stories

    Digital magazine (6 bi-monthly issues)

    Access to entire PDF magazine archive dating back to 1899

    The Download: newsletter delivery each weekday to your inbox

  • Print Subscription {! insider.prices.print_only !}*

    {! insider.display.menuOptionsLabel !}

    Six print issues per year plus The Download delivered to your email in-box each weekday.

    See details+

    12-month subscription

    Print magazine (6 bi-monthly issues)

    The Download: newsletter delivery each weekday to your inbox

/3
You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.