These are tough times for everybody, including the biofuels industry. The Associated Press has an interesting article about how corn-based ethanol producers are literally struggling to stay afloat. The article notes how shares of leading ethanol producers in the country, such as Aventine Renewable Energy Holdings Inc., Pacific Ethanol Inc. and BioFuel Energy Corp, lost about 95 per cent of their value in 2008. Volatility in prices of corn, the article observes, is mainly to blame.

The article argues the future lies in cellulosic ethanol, but cautions that capital might prove hard to obtain from Wall Street due to the fact that cellulosic industry is still “…experimenting with a broad range of feedstocks….” Well, this is well founded fear, which the cellulosic industry should see as an opportunity and not a threat to their existence. Innovations such as cellulosic ethanol are fraught with anxiety and uncertainty, but such should not be an excuse to stymie progress. The world’s thirst for energy is unquenchable, and every effort will be needed to seek alternative sources of energy such as cellulosic ethanol. Cellulosic ethanol is clean and its production poses little or no threat to the environment.

Research into feedstocks that can be used to produce cellulosic ethanol needs to be intensified. Currently, the raw material of choice to cellulosic ethanol producers is corn cobs. Switch grass is another raw material that’s fast gaining currency in the biofuels industry.

There’s a lot of support for cellulosic ethanol, in form of financial incentives for research and development, and political goodwill, coming from the government. The industry has a friend in President Barak Obama, who has made a personal commitment to invest in new generation clean energy such as cellulosic ethanol. The Associated Press article notes that the Department of Energy in 2007 awarded $385 million to six companies to conduct research and build biomass-to-fuel plants. The Obama administration is likely to increase investment in cellulosic ethanol production.

The current efforts to shore up cellulosic ethanol seem to be bearing fruits. As I noted in an earlier blog post, POET LLC is operating a pilot biorefinery in Scotland, South Dakota. If everything goes well, the company plans to roll out a $200 million cellulosic ethanol refinery Emmetsburg, Iowa, in 2011. And there are more players willing to jump into the bandwagon. They ought not be discouraged to do so. Demand for energy is ever increasing, and whoever invests in cellulosic ethanol will not regret.