Unbowed by critics, Poet's Jeff Broin pushes productivity at the world's largest ethanol maker, while racing to roll out the next generation of the biofuel.
At the Poet ethanol plant in Chancellor, S.D. two things stand out: the sheer scale of the six corn-storage bins--each 90 feet tall, together capable of holding five weeks' worth of corn for the plant--and the nearly overpowering smell, a yeasty aroma, with hints of something slightly rotten. Even Jeffrey Broin, the chief executive of Poet LLC and an old hand when it comes to fermenting corn, comments on the unusual odor. "It's not normally like this. There must have been some wet distillers grain left out," he says.
Stale odors are the least of Broin's challenges these days. Ethanol companies, of which the privately held Poet is the largest, went from being hailed in the media as green energy heroes in 2007 to being widely blamed for the summer surge in global food prices. Critics, including many Republicans, have lambasted U.S. tax subsidies for ethanol blenders as well as federal mandates for ethanol production.
Broin, 43, dismisses the criticism and the tough economic conditions and denies that ethanol is to blame for higher food prices. "Incentives to produce ethanol have cost the government $4 billion [a year] but saved $8 billion in farm aid," says Broin. "There's a tremendous amount of misinformation being put out by people who want to protect the status quo."
Poet has increased production 35% this year to 1.5 billion gallons of ethanol at its 26 plants--5 of them newly opened--in seven midwestern states. It also produces 3.5 million tons a year of distillers grains, which are used for animal feed. Broin says his company will have revenue of $4 billion in 2008; Poet expects to clear a profit above the ethanol industry's average, though he won't detail how much. He's moving forward with a grand plan to produce next-generation ethanol brewed from crop waste, and eventually move into production of bioplastics and specialty chemicals.
"It's our goal to change the world's energy supply," declares Broin during a tour of Poet's expansive rustic-chic headquarters in Sioux Falls, S.D. "Today we're making ethanol. Tomorrow we'll be biorefiners."
Or soon enough. Broin has directed some of the $50 million he's spent on r&d over the past six years into making ethanol from the stuff we don't eat, starting with corn cobs. In the lab at Poet headquarters a thick reddish-brown liquid churns in half a dozen 2-foot-tall glass fermenters, part of a weeklong experiment aimed at reaching the right mix of enzymes and pulverized corn cobs. By the end of the year production of this cellulosic ethanol will move to an $8 million pilot-scale plant now under construction at an existing Poet site in Scotland, S.D.
"Dozens of companies can make cellulosic ethanol in the lab. Making it commercially viable is the challenge," says Broin. His goal is commercial production by 2011.
Broin got into making ethanol as a teenager in the wake of the energy crisis of the 1970s. His dad, a corn and livestock farmer in southeast Minnesota, decided to try boosting his income by adding an ethanol plant. Broin's family visited a bunch of farmers in Minnesota with ethanol plants and then designed and built one themselves. It took until 1985 to get it up and running, but it produced 125,000 gallons a year.
In 1987, after Broin finished a degree in agricultural business from the University of Wisconsin at River Falls, his family bought a bankrupt ethanol plant in Scotland, S.D. To save on rent, Broin lived in the plant office while he and his two brothers did renovations, using parts they purchased from other bankrupt ethanol plants. Broin welded, cut metal, helped build fermenters and even drove to Idaho during the winter in an old pickup truck to buy stainless steel parts from a refinery gone bust. "We got creative about financing. We convinced banks to take a risk, used [Small Business Administration] loans and state programs for job creation," he says. The Scotland plant began operating in 1988, and by 1991 Broin and his brothers had doubled its annual capacity to 3 million gallons.
The family then started building plants for others under the name Broin Cos. and helped farmers raise funds for investment capital. But the Broins realized the plants were more successful if they managed them as well. "We saw we could make money when others didn't," says Broin. In the mid-1990s the family started investing alongside farmers, building plants and then managing them, too. Today Poet owns only one plant outright and anywhere from 3% to 26% of the other 25. It is often the largest shareholder; 10,000 farmers own most of the rest. Poet gets a management fee, which undoubtedly kept the company in the black in bleak years. Broin says the company has turned a profit every year it's been in business, even in 1996, when corn was at $5 a bushel and ethanol was selling for $1.15 a gallon.
In 2006 Broin bought out his two brothers' share in the business for an undisclosed sum. In March 2007 he changed the company's name to Poet, which sums up the artisanal eco-ambitions of its founders.
That year Poet was one of six companies chosen by the U.S. Department of Energy to build cellulosic ethanol production plants. Poet is getting a DOE handout of $80 million. Broin plans to convert an existing ethanol plant in Emmetsburg, Iowa into a combined corn-to-ethanol and cellulose-to-ethanol biorefinery that will produce 125 million gallons a year, 25% of which will be from corn fiber and corn cobs.
Besides dishing out subsidies, the federal government is helping the ethanol industry with a mandate. Refiners have to increase ethanol consumption from 9 billion gallons this year to 15 billion gallons in 2015. But the mandate shifts in that year to biofuels derived from renewable sources other than corn kernels. That production has to reach 21 billion gallons by 2022. The message is clear: Corn ethanol is not the ideal fuel. Get to work on the next generation.
Poet has a huge advantage over all the venture-capital-backed startups tweaking biological innovations (read "Beaker Fuel") to be among the first to sell cellulosic ethanol or some form of biomass-derived gasoline or diesel fuel. In 21 years of producing ethanol, Poet has continually improved its process; today Broin says that over that time his company has reduced by half the amount of energy needed to produce a gallon of ethanol, from 60,000 Btu of natural gas to 30,000 Btu. (This doesn't include fossil fuels used to make fertilizer, run tractors or haul crops.)
Despite all the research going into cellulosic ethanol, cost remains a formidable hurdle. "Our best guess right now is that at a large-scale [70-million-gallons-a-year] plant you can produce cellulosic ethanol at $2.40 a gallon," says John Ashworth, an ethanol expert at the Department of Energy's National Renewable Energy Laboratory in Golden, Colo. "If we hit all the targets, we're aiming at $1.33 a gallon by 2012." That is supposed to be competitive with oil at $60 a barrel.
Poet already has in place a network that relays 4,000 data points per second from its plants to headquarters, some 50 miles of rail lines built into its plants and 5,000 leased rail cars to transport the ethanol and distillers grain for animal feed. Erik Torgerson, a partner at private equity firm Norwest Equity Partners, which has invested in three of Poet's plants, is optimistic about Poet's move into cellulosic ethanol. "Having that practical experience is so important in making good ideas commercially viable," says Torgerson.
Last year Poet worked with Darrin Ihnen, a South Dakota grain and hog farmer who's also a shareholder in Poet's ethanol plant in Chancellor, on cob collection. Ihnen collaborated with farm machinery maker Case International to fine-tune a corn cob caddie that he pulled behind the harvesting machine to collect the cobs for the cellulosic ethanol. Currently harvesting machines take the kernels off the cobs and shoot the cobs back onto the field, where they get plowed under and break down after a couple years. "For a grower [the cobs] are a nuisance. They get wedged up against the planter," says Ihnen. He figures he can bring in an extra $15 to $60 an acre for harvesting cobs on his 4,000 acres. "If I can get that, I'll take it."
Broin has made research a central facet of doing business. In 2000 Poet researchers discovered an enzyme and designed a process that allows it to convert the starch from corn kernels into sugar and ferment it without using heat. The process, which Poet commissioned Danish industrial biotech giant Novozymes to develop, reduces energy consumption 10% to 15% and increases its yield of ethanol in the fermented mix to 20%, compared with an industry average of around 17%.
