The Credit Crunch: Yet Another Pitfall for Ethanol

The financial crisis will likely hurt the cleantech sector in more ways than one — access to capital, more risk-averse investors, the need for cheaper power, and declining oil prices. But one industry could be particularly hard hit: ethanol. Bluefire Ethanol CEO Arnold Klann, who previously told us that the company is trying to scale up to 20 waste-to-ethanol plants in just a decade, tells Reuters that the pullback from bank lending could slow down their plans inover the long term.

First-generation corn ethanol plants have hit tough times due to the rise in corn prices, the storms this summer, and a reduction in both political and public good will. Quite a few plans for ethanol plants have been delayed or downright canceled. But for the next generation of cellulosic ethanol, which in its early stage has been prohibitively expensive, this credit crunch could spell some real problems.

Cellulosic ethanol has been produced in labs and on a small scale for some time. The problem has been getting those nascent technologies at a scale large enough at a cost cheap enough to justify production. A company like Canadian Iogen has been producing cellulosic ethanol for years, and only just shipped a small 50,000 gallon commercial order to Shell. Particularly startup companies that need to raise capital to make the transition to production could face some really tough times.