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How California sugarcane could become the next energy crop with Dave Rubenstein
105 Plays2 months ago
When you think of ethanol, you probably think of corn: at least in America, where corn ethanol has become a common addition to everyone's gas tank. This week, we speak with Dave Rubenstein who's trying to change that by growing sugarcane in California's Imperial Valley. Anthony, Amy, and Karthik discuss the economics of ethanol, long term opportunities in sustainable aviation fuel and chemicals, the challenges with water, and more.
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Transcript
Introduction to 'Innovation Matters' Podcast
00:00:10
Speaker
Well, hello and welcome to the Innovation Matters podcast ah brought to you by Lux Research. I am your host, Anthony Schiavo. I am joined here by my two colleagues, Karthik Selvaramanian and Amy Harris. And we are super delighted to be joined by Dave Rubinstein.
Dave Rubinstein's Background and Industry Insights
00:00:27
Speaker
He is the current president and CEO of California Ethanol and Power, which is a really interesting organization we're going to be talking all about today.
00:00:38
Speaker
He also has a background in ah the chemicals industry and ammonia, which is be often the subject of discussion on this podcast. Only the most ah interesting of of chemicals gets discussed on this podcast. And he has a very, very long list of credentials here, which I won't read out. But Dave, thanks so much for coming on the podcast. We really appreciate it. Yeah, glad to be here. Thanks for the opportunity.
00:01:02
Speaker
So I wanted to start a little bit with your your background, how you got sort of involved in California ethanol and power, you know maybe from coming from your chemicals background, but but but what really sort of attracted you to that opportunity or made you want to jump into something like like ethanol? Yeah, interesting background was that yeah I was in the chemical business since I you graduated college.
00:01:30
Speaker
and um ended up building our company called Pacific Iso Products. We were the largest industrial ammonia distributor in the Western United States. And I was able to successfully sell that to air gas, the big industrial planet.
00:01:45
Speaker
And during that time, um some of the farmers, growers, folks from Imperial County were looking to get on this ethanol ah bandwagon. They saw corn ethanol started to take off. And they had ah the idea of, well, instead of doing corn, why don't we do sugar cane like they do in Brazil?
00:02:05
Speaker
So they were kind of going down that route of sugar cane versus corn. And they had the University of California, Riverside do a study around it to see, you know, can you grow sugar cane in Imperial County at big scale? And it was very favorable. And at that point, as I was saying, I was selling my business and I saw this as another
Journey to CEO of California Ethanol and Power
00:02:25
Speaker
opportunity. I didn't really want to get into the corn ethanol business. I saw that market kind of going big and a chance for a bubble on that, um where I saw the opportunity was the sugar cane, which is ah just a more yeah efficient feedstock to go into the product. So that that was the background behind it. I guess, how did how did you become the the CEO? like Were you recruited into that role, or is this something that you you know were involved very early on? How how did that come to be?
00:02:55
Speaker
Yeah, originally was um there was a gentleman that was pulling all this together, the project developer. ah He was really the president's CEO, and and I was brought in just simply to get the offtake agreements together since I had relationships with a lot of the major refineries at that at that time. so I was actually came in as a chief operating officer.
00:03:14
Speaker
and but i will Well, will write a book or we'll do a movie someday about the the evolution of me within the organization and and how it got there. It wasn't necessarily a a path that I originally envisioned for myself, but I was the original i was the first ah investor into the project and I ended up bringing a lot of friends and family. And so um I was kind of forced into that role, but um one that, you know, ah I knew that I was capable of doing and you know happy to get there and yeah make sure our investments continue on the right track. Before we open it up, because there's a lot to to kind of unpack here and discuss, so I think our American audience will probably have a at least a passing familiarity
California Ethanol Market and Regulations
00:03:57
Speaker
with ethanol. right It's the thing that's 10 percent in your gas or whatever. and kind of Maybe that's all you really know about it. um and our are Maybe our broader European audience might not be as familiar.
00:04:09
Speaker
Can you talk just a little bit about what ethanol is, how it's made, and in particular the differences between corn ethanol and sugarcane ethanol, at least from a production standpoint, and why that distinction matters, sort of how what you guys are trying to do in California ethanol power is different as you sort of hinted to, ah different from the established corn ethanol production?
00:04:36
Speaker
Yeah, if i if I can, let's maybe bring this back um to California yeah to be a little bit more you know micro look at this. you that the The great country of California, you know the fifth largest economy in the world, 40 million people, lots of vehicles, lots of gasoline being used. So in California, 10% of the gasoline needs to be blended with ethanol.
00:05:01
Speaker
and It's the the oxygen that that goes in there and it replaced other previous chemicals that were found to be cancer-causing or groundwater pollution and blah, blah, blah, you know all this stuff that goes with it. so If you look at size and scale, California has roughly 13 billion gallons a year of gasoline being used, which at 10 percent means 1.3 billion gallons or so of ethanol is required required within the state.
00:05:28
Speaker
And if you look at it from a market size, ah there's only a couple ethanol producers in the state, I think maybe knocking on the door of maybe 200 million. So you could see that you know over a billion gallons a year needs to be brought into the state to meet this demand.
00:05:44
Speaker
um
00:05:47
Speaker
Where the benefit has come is that you know California has what's called a low carbon fuel standard.
Comparing Ethanol Sources: Sugarcane vs. Corn
00:05:53
Speaker
A lot of other states have now jumped onto that bandwagon after California went through all the you know the legal battles associated with that, but now you see you know Oregon, Washington, New Mexico, and other states coming online because they saw that it was an opportunity to lower the carbon intensity of the fuel and bring down emissions within the state.
00:06:15
Speaker
So where we see it is that the carbon intensity is is an enormous um benefit to this project. So if you're doing when you when you do a ah carbon pathway, ah you look at all the inputs that go to you know growing that corn all the way to the tailpipe of the cars that are burning that ethanol in the gasoline blend.
00:06:39
Speaker
ah Same with the sugarcane. So we went through a process to get our carbon intensity evaluated with the state. And we have a rating of 22.44 CI score, carbon intensity. um comparing Comparing that to corn ethanol, it's around 70, 75 CI score. So you can see it's significantly lower. People ask, why is that? And I'll give you just a couple examples. One is,
00:07:06
Speaker
you know We're going to build roughly a 75 million gallon a year ethanol facility. um We need about 50,000 acres of sugarcane to support that facility. um If it was a corn ethanol plant producing that much volume, you would need roughly 150,000 acres of of land to support that facility. So just um the overall footprint of the project is significantly lower.
00:07:30
Speaker
And then people say, well, you know where's where's Brazilian ethanol and imported Brazilian ethanol into California is roughly 45 to 50 CI scores. So you can see where you know half of that.
00:07:43
Speaker
And people ask why, and some of the reasons is that you have to grow the sugar cane and in Sao Paulo, and then you have to get that ethanol into the Port of Santos. You have to ship it into the golf course Gulf Coast or into California. So a lot of transportation around that and things like that. So those are some of the some of the the things that go into figuring out what the but the intensity of those fuels are.
00:08:06
Speaker
you You made a ah point earlier that it's more efficient to use sugarcane. And I guess, you know, you already touched on land use as as one angle of that. And maybe we're getting too much into the sort of the discussion around the farming. But I'm i'm curious if you could just expand on that a little bit more.
Sugarcane Efficiency in Ethanol Production
00:08:23
Speaker
um Is there a particular advantage to sugarcane in the Imperial Valley as opposed to anywhere else, either in California or, you know, and another part of of the US?
00:08:37
Speaker
Yeah, you know so it's ah two two different processes to get there, right? So with the sugar cane, you actually have the sugars available to you and you're just fermenting them and taking them to the ethanol, where corn, you have to do you know another process, you have to cook it, you have to get the sugars up and out. So it's a little bit of a different process. I think we're the key for us is that we're also physically located in the state.
00:08:59
Speaker
So there's less transportation, there's less logistics, there's less worrying about, you know you know, rail transportation and the offloading and things like that. So there's benefit around the the actual location of the facility.
00:09:11
Speaker
I want to come back to something you said earlier as well. um You mentioned California has a low carbon fuel standard and this makes it, this I guess drives a demand for ethanol. And I'm i'm wondering how you see at the same time, the I think the auto industry is also transitioning towards electric. And so what do you see as the long-term and short-term role of ethanol during this transition?
Ethanol's Role Amid Electric Vehicle Rise
00:09:36
Speaker
Yeah, that's a great question. It comes up every day. And, you know, um looking looking at, you know, you could go to the California Energy Commission and you could see kind of the use of fuel, you know, over the years, right? There's good information around that. And even with the with the introduction of electric vehicles, and I think I don't have the exact numbers, but let's just say California is, I don't know, 8% or 10%
00:09:59
Speaker
you know, electric vehicle fleet at this point, you still see the gasoline being about the same as it was prior to that. So um I don't see a silver bullet in that. Personally, I think that you will always have of fossil fuel based vehicles um because you have to worry about range. you know You can't drive from San Diego to San Francisco on a single charge. um So there's you know range anxiety and things like that. So at the end of the day, I think there's going to be kind of a mix of it. And then again, if you look at California, 40 million vehicles on the road
00:10:35
Speaker
to transfer all those into electric vehicles. I don't see that happening anytime soon. And you know one step further on that is that I don't think we have the elect the the electricity infrastructure to support that as well. So I think i think even if even if they the California vehicle market went to 50% gasoline, 50% electric, hydrogen, whatever you want to do, you know you're still looking at a 600, 700 million gallon a year ethanol market in the state.
00:11:04
Speaker
Yeah. you know I'm definitely a bit of an electric vehicle. Well, I don't want to say booster because I think there's still a lot of problems with vehicles in general. But the thing you said that really stuck out to me is the grid in California where it is sort of, I mean, especially in the last maybe five years between the wildfires and various other climate events has just gotten really challenging and really expensive. I
Ethanol in Sustainable Aviation Fuel and Chemicals
00:11:27
Speaker
think rates in California for electricity have gone up substantially.
00:11:31
Speaker
how, though I guess, you know, I still think for personal vehicles is still something of a near term to medium term opportunity. And I know when we talk to our clients, they're in innovation roles, they have this long term focus, and they're really interested in two particular sort of emerging applications.
00:11:49
Speaker
One is sustainable aviation fuel, bio-based aviation fuel. And the other is using ethanol for chemicals. You can dehydrate it, I think, to make ethylene and then make polyethylene. You can do a number of other things with it. So I'm curious, maybe starting with SAF first, because I know that's something that I think you have been thinking about in this this role and this organization.
00:12:16
Speaker
um Yeah, I guess what's your view on the long-term trajectory of something like SAF and where do you see ah California ethanol and power fitting into that?
00:12:30
Speaker
Yeah, we've looked into it pretty hard, and we're actually talking with the major ah companies that could actually you know bring these technologies to market. So we're talking with all of them right now. the way we see The way we see our first project, Sugar Valley Energy, is one that's kind of a campus. It's an energy campus.
00:12:48
Speaker
right We'll make the ethanol. The ethanol could then go to the the transportation vehicle market. But if we were able to find the right partners, because it's capital intensive, but if we found the right partners to put an alcohol to jet production facility on our site, which we have space for, it could be really it could be really compelling. Because what what we can offer is that, one, we could guarantee the feedstock from the farm all the way to the flange of the new equipment that needs to then convert that alcohol into SAF, and there's a renewable diesel um component that comes off of that as well.
00:13:26
Speaker
So it takes away the the risk in terms of feedstock. It takes takes away the risk in terms of building in California, since we're fully permitted, ready to go. And it's a two-hour drive to San Diego and four hours to LAX. So the market's there. So we think we could bring ah kind of a nice ah infrastructure around that if somebody wanted to take that technology go one step further. And really, at the end of the day, for us,
00:13:49
Speaker
you know We see it that it it ah quiets down the the comments that you know f ethanol into gasoline market is going to go away. We say, well, it doesn't matter. us we We have a feedstock, an extremely low carbon feedstock that could help ah diversify into SAF or into the chemical market, as you said.
00:14:09
Speaker
And you know one one step further on that, too, is you know with corn ethanol, and I'm not putting down corn in any way, shape, or form. I think that's ah it's a much-needed chemical throughout the United States, and it is.
00:14:22
Speaker
But when you have a 70 CI score, for instance, and then you're mixing, and then you're going to SAF, you're adding another 10, 15 points of CI for that process. Now you're starting to knock on the door of what jet fuel is already. So a lot ah lot of those facilities are going to have to tap into a carbon sequestration type of mix, you know pipeline, whatever, to get their CI score down to make it work.
00:14:50
Speaker
and you know are Our discussion with folks is you know we we don't need to tap into a pipeline and get rid of it. We we actually have a biogenic CO2 that can be actually bottled and sold. um We already have a low CI score. And if in fact somebody decides they want to bury our CO2, it just takes our numbers down even further, which makes it a more attractive scoring for the for the aviation community.
00:15:15
Speaker
This is maybe more of a technical question, but um you mentioned that, so the ethanol you're producing now is is ready to go for blending with with gasoline, but in order to make it suitable for aviation fuel, there there's a second process that needs to happen. Is that correct? Can you talk about what needs to happen there um and what maybe the challenges are in and um creating the,
00:15:40
Speaker
Sorry. In particular, I'm curious about the cost because you know Alcohol the Jet is not a cheap process. and We've seen you know some of these trials in Europe with SAF have you know noticeably tacked on to the cost of the ticket. so I'm curious as to just what you're seeing as you know presumably these companies are coming to you and saying, hey, we have this great technology.
00:16:04
Speaker
for SAF, you should totally let us build a thing at your site and give us all your feedstock for free or whatever because we're going to make a billion
Capital Expenditures for SAF Conversion
00:16:12
Speaker
dollars in you know five years or whatever. so I'm curious as to kind of where where you see the state of the technology in particular. so Just to be clear, so we have not built our facility yet. right we're We're fully permitted, we're ready to go, so we're not making ethanol yet. but and you To your point, yes.
00:16:27
Speaker
what we've What we've looked at, and we've and we're we're modeling this out right now, we're and we're knee deep into it right now, we're looking for updated pricing and and and ah with the CapEx and OpEx associated with that. So the way we're looking at it is if 50% of the alcohol we make is then made in the SAF, or if we went to 100% of our ethanol going in the SAF, we're looking at both of those. So it's not cheap. um to give you rough idea. it's a there's There's some balances here, right? well we'll We'll already have the pad. We'll already be permitted. We're have <unk>re really producing steam and electricity and and certain things that, for instance, a Greenfield project wouldn't necessarily need. But to give you a sense of it, we're probably looking at about a $250 million dollars CapEx cost um bolted onto the facility to be able to convert that ethanol
00:17:18
Speaker
into um that combination of SAF and renewable diesel. So it's pretty it's it's not cheap. If I may ask, I was just curious, because if I'm not mistaken, ethanol to jet is more mature than, let's say, methanol to jet. And so I was just curious to hear your thoughts on what you're seeing in terms of methanol to jet development and how that's going to impact the ethanol to jet fuel business, if at all.
Technological Advancements in Ethanol to Jet Fuel
00:17:46
Speaker
Yeah, no, that's that's a good question. and And to be totally frank with you, I really don't know much about the methanol side of the world. um you know I see that you know i see that you know folks are trying to do you know fatty oils and you know soybean and things like that to go to saff, which I think is great. um But you know we've we've talked with European airlines.
00:18:10
Speaker
that that's an issue. right you know Soybeans is considered a food, so you have you have issues there. um There's only so much animal fat in the world. I keep eating my hamburgers and my steaks to and make certain things moving forward, but you know I can only eat so much. so you know I think in order to meet the the demand, they have to find other ways to get there. I think the alcohol to jet sounds like it's the right path because making alcohol is relatively easy. It's a distillery. So we're watching what Honeywell ULP is doing. We're watching what Lanza Jet's doing. We're watching what Jibo is doing. So once they get that commercially proven and financeable, it's got to be financeable.
00:19:02
Speaker
um you know there's an opportunity to bolt on and they can move very quickly into a facility like ours, right? They don't have to start from scratch. They don't have to worry about getting a pipeline to get the CO2 out to get the score down. So I think we just make it for an easier path.
00:19:17
Speaker
It's interesting, too, is you know when we're talking with some of the domestic airlines, LA, where we're producing, I mean, you have major international airports between you know San Diego, Palm Springs, Ontario, Burbank, Orange County, Long Beach, LAX. So the amount of fuel is enormous, and that doesn't even talk about yet the the military base around. you know you have all central naval air station where the Blue Angels practice every every ah every winter to you know Camp Pendleton and you know the military bases throughout all of California and Arizona. So you can see that there will always be a demand for it. And speaking of the demand side, I wanted to know more about, and I think this goes back to one of the earlier things you mentioned in terms of your location in Imperial Valley because of sourcing the material.
00:20:10
Speaker
And one thing I notice, especially when it comes to anything bio, so in this instance, bioethanol, is that a lot of people have concerns about food security because they're concerned that, you know, what you're making is going to produce ethanol and not food.
Partnerships with Farmers for Sugarcane Production
00:20:24
Speaker
And I want to eat, as as you said. And of course, the second thing also is that, okay, you're not producing ethanol, but the big issue is that Farmers and people in the agri business don't understand what's going on with the feedstock. So they're not willing to maybe give out agri waste. So feedstock management, inventory, transportation is a big challenge. um And on top of that, you have the regulatory aspect, where they don't understand what's going on. And so they can subsidize it incentive wise, the producer to you know allow off takers to take it at a good price.
00:20:57
Speaker
So while you are located strategically, ah what do you see or what do you think should happen in other regions for this to become a more simplified process for adoption? Yeah, I think in particular when we think about the chemicals industry, that's something that's not really located in California. So I'm curious as to how um you're thinking about that sort of interregional interaction there as well. But go ahead.
00:21:21
Speaker
Yeah, the week so taking it back one step. So the way we looked at it was, yeah how do we how do we bring a benefit to the local agricultural community that's going to support this facility? And what the way we looked at it was like, we you know what what's their biggest worries? Well, their biggest worries are, if I plant something today, am I going to be able to harvest it in the next 6, 9, 12 months? And am I going to be able to make a profit off of that? yeah Do I cover my costs? Do I make a profit off of it?
00:21:50
Speaker
um And that's what the farmers have to deal with every single year. right um in In our case, the way we looked at it was to say, look, we're going to grow this sugar cane. We could grow this sugar cane on marginal land. So it's land that that it's not capable of growing lettuce and onions and things like that. So it's it's land that is, it's it's it's ah they're growing typically forage crops on it that are feeding dairy cows and you know cattle and things like that. so you know It's alfalfa, it's Sudan grass, it's things like that. so um we're not We're not getting into that food versus fuel issue. um Lord knows we didn't we don't need any more sugar in this world. so we think there's there's ah Under US Farm Bill, you can't grow sugar cane to turn it into table sugar. There's quotas and allocations and all kinds of things that don't allow you to do that. so so Our sugar cane is only being grown specifically to go into the make the alcohol.
00:22:47
Speaker
The farmers are excited because right now, um you know they they're growing alfalfa. and And I would say there's probably about 150,000 acres. There's about 500,000 acres of land that's growable in that area. About 150,000 of it's being used to to grow this alfalfa feedstock. it Half of that's going to export, be it the Middle East or Asia to feed, price prize cattle, you know around the world. So a lot of it's being exported as it is. And it gets very competitive. You know, those farmers are competing against people growing alfalfa in Brazil and Mexico and everywhere else. So our proposition to them is, look, this is how we're going to do this. We own the sugarcane. We're going to pay you guaranteed rent. We're going to cover the cost of growing this and harvesting it. And we will guarantee you a profit per acre. So they're not at risk any longer.
00:23:43
Speaker
And what what what helps us out is that it guarantees our feedstock. We control the inventory and we control the price. So that means the the front end of the plant's running just smooth as smooth as silk and everything's working through. The farmers are excited. They're going to make probably three times as much profit per acre as they were doing alfalfa, and they have zero risk. So um that's the model that we're putting together around this. we think We think that could be translated into other areas that you could grow a sugar cane.
00:24:16
Speaker
I'm not really sure if it could get into corn and other places like that, but you know this is the way we see it for this particular product. I want to circle back or I want to dig in more on this. I am curious before we get into that how you see the chemical side
Interest from Chemical Companies in Ethanol
00:24:32
Speaker
of this. Is this something that I know there's a lot of interest in SAF right now. You talked about the conversations you're having. Do you see similar interest on the ethanol to chemicals front or is that not as maybe not as
00:24:47
Speaker
sort of aggressively pursued by those players, or how are you seeing that that part of the equation, and where do you think that fits in in the long-term strategy? Yeah, we've we've talked with um some of the major chemical companies about this. We're under NDA, so I won't say any names in particular.
00:25:05
Speaker
um But they have started to look at it. um you know As we all know, you know all bird's shoes, right they're using they're using that process for the soles of their shoes. right They're using sugarcane up and all out of ah of Brazil to do that. yeah So we see we see that we see that going in that in that direction. um The conversations that we've had to date, it still circles around price.
00:25:29
Speaker
um I think everybody wants to get to a you know a very green product, but nobody nobody wants to pay that cost to do it. So you know people want our ethanol, for instance, at the lowest price possible, but you know they got to realize there's a $250 million dollars you know process add-on to it to get to where you need to be. And somebody's got to pay for it.
00:25:52
Speaker
you We've talked with a major international airline, as an example, too, where um you know we said, look, our credits the credits produced can be spread over more gallons and you know deeper into the stack and you know it could bring benefit to it. But somehow they're just stuck on that they don't want to pay anything more than 50 cents per gallon for the jet fuel they're currently paying, which you know I think there's just a just ah some miscommunication there and and folks got to realize that you know what's the value and what are they willing to pay and how does that match up with the credits that are available for it? Yeah. So speaking of credits, and I'm circling back around, you had this pitch, you know kind of the farmers, we said, look, we're going to increase your profits, we're going to be more stable. For us, we're going to get the stable feedstock. It sounds like a great business model,
00:26:40
Speaker
Why hasn't anyone else done it in California? Because the credits have been in place I think since 2007, at least that's when the renewable identification numbers came in and there's been certainly more adoption of ethanol since the mid-2010s. You know, it's now 2024.
00:26:59
Speaker
Why now? Especially because you can imagine, you know, in the Obama era, this is when some of those, we didn't have good electric vehicle options, right? 10% of the fleet was not electric vehicles. So why now? and And why hasn't this really been a thing up until this point, in your view? Yeah. So when we first got going, the interesting thing was, you know, we talked to some of the big oil companies and they'd be like, you know,
00:27:26
Speaker
Same question. So they're quite honestly, if we could make sugar, um there's more money to be made in sugar. But we can't as I had mentioned before with the US Farm Bill and and and things like that. So I think some people just don't fully understand it. um I think people from you know we've and we're taught we're you know We're in discussions with a number of companies and we could talk about you know the excess biomass we're going to have and things like that. We could talk about that here in a minute. But you know some folks are like, well, man California, we you know we can't, you know just getting permitted in California, you know it's just a threshold that people can't just envision. So what we try to explain to them is we've already covered that. You don't have to worry about that. that The location and the permitting is already in
Regulatory and Economic Challenges in California
00:28:10
Speaker
place. So I think that that scares a lot of folks off.
00:28:13
Speaker
um And where we're ah where we're located, Imperial County is the southernmost tip of California, just above the Mexican border, obviously. And we're on the eastern side of the state. So it backs up to Yuma, Arizona. um It's one of the largest counties in the state. um The population is relatively low. It's less than 200,000 people in that massive county. ah But it is also one of the worst economically performing counties in the country, not just the state, but the country.
00:28:44
Speaker
The unemployment rate is typically over 20%. The poverty rates usually about 25%. It's just a ah it's it's it's a zone that the California, the the state really wants to try to improve on. So so with that, you know the state's been you know very ah welcoming to us. they they're they're theyre you know We've got some tax benefits from them and things like that associated with job creation. So they you know they structure it right right. There's no free money. It's you structured around jobs and creation and things like that.
00:29:14
Speaker
But um you know I think it's just that people don't know about it. And when people start to realize, they're like, wow, this is a pretty good spot, especially to physically locate. So going back to what you were saying, yeah we we could do the ethanol, yeah we could do SAF, we could do chemicals, and all of a sudden it's like, wow, we could be physically physically located in the fifth largest economy in the world, and we don't have to worry about too much transportation to get it to those major markets.
00:29:41
Speaker
We've talked a lot about and Imperial County and the Imperial Valley, right? And the location there.
Addressing Water Issues in Imperial Valley
00:29:49
Speaker
One of the things about the location is it draws water from the Colorado River, right? and It's part of this broader Colorado River basin. We've seen this big drought in the last couple of years. I think this year in particular, things got a lot better. But water has become this very high profile and very contentious issue. I know the farmers there in general say, look, this is actually a very efficient use when we grow
00:30:15
Speaker
food in California and this part of the the state, it's an extremely water-efficient way of producing whatever it is we want to produce. Obviously, we're consuming a lot of water, but we're producing a lot of water along with it because of the environment, because of the quality of soil, because we have a year-round growing season, all these things.
00:30:34
Speaker
i just I'm curious as to how, first of all, you just see the issue of water evolving. I know this is maybe very good contentious. um And is there a water component to this, especially I know alfalfa can be very water intensive in particular, you mentioned that. So how are you how are you thinking about water and water risk and water opportunity and in the Imperial Valley?
00:30:57
Speaker
Yeah, so you know it ah Imperial County has been yeah know on the map since your early 1900s. So there's actually second on second on the river right after Native American Indians. So with the ah you know the the law of the river, um they're entitled to you know water rights before you know anybody that came on afterwards, be it metropolitan water district, be it the state of Nevada, Arizona, you know whatever. So they've never had an issue with getting the water that they need to grow the crops that they need.
00:31:28
Speaker
Now, you're you're absolutely right. um Water is an issue. um I think the farmers and the community have said, look, we just got to be more ah you know more efficient with this. you know We got we gotta to kind of work through this. So um instead of just you know just dumping as much water on the land that that you wanted to, it's it's more measured. So in our case, you know we'll use the same amount of water as the alfalfa that's currently growing. We think it brings a better economic um ah footprint to to the to the growers, to the community. um It brings economic and and new new tax base with us producing stuff in that county versus shipping that alfalfa to.
00:32:09
Speaker
whatever, Saudi Arabia. So I think there's opportunity around there. The other thing that we've looked at is um drip irrigation. So you could actually, um if you want to do the CapEx on it, it's about $1,500 per acre, and you could put drip irrigation in, and it's really beneficial. It would reduce the water usage by 25%, 30%.
00:32:31
Speaker
it would reduce the amount of fertilizer you need, which means your CI score comes down. And we found that we found that with that you know that specific watering at the root, you'll probably get 15, 20% more yield per acre. So it's actually a win-win. So our goal is to ah eventually get drip irrigation put in throughout to reduce that water usage and just um continue to try and you know just be more efficient.
00:32:57
Speaker
And then there's also other, you know, you when you work with, you know, colleges like Louisiana State University, it just has a big sugar cane program. You know, they're working with different variations of seed that, you know, perhaps use less water or less pesticides, things like that. So the goal would be to continually improve the crops that we're growing to be, you you know, you use less water and just be more efficient around it. The good news too is one step further on this is that A lot of water is left in that sugar cane when it gets processed through our plant. So we could reclaim a lot of that water and we'll have a wastewater treatment facility on site that could clean that up. So a lot of that water could be used to run the facility. We won't need a lot of fresh water for that process. So there are there there are ways to be efficient with this and to to to really make it so it's beneficial to the community.
00:33:50
Speaker
And just speaking of the Colorado River, so you know that you know all the all the ah all the folks on the river are trying to you know build up that inventory. and You know, we, you know, typical news cycles in the United States, right? You hear about the worst case scenario, but you know nobody really talked about Lake Mead going up 25, 30 feet over the past year versus, you know, when you heard heard about, you know, almost down at the bottom. So, you know, it it is healing and, you know, hopefully we'll continue to get good rains to support that. And hopefully we, yeah you know, we can work with it and work with mother nature to make things happen.
00:34:25
Speaker
To this point on efficiency, I wanted to ask you if this is something that you are going to implement or do you see other plants going to
Biomass Electricity Production at the Facility
00:34:33
Speaker
implement? Because um water of course is an issue and California also has a lot of sun. And when it comes to producing anything, we also look at low carbon power as the best way to you know reduce your carbon emissions for producing bioethanol.
00:34:49
Speaker
And so are you looking at implementing an agri-voltage project or something like that to you know conserve water as well where it's implemented while producing low carbon power at the same time? Are you seeing other people doing it? And are there challenges also from the regulatory aspect in implementing that agri-voltage plant? Because I know that It's very murky in defining whether the land's primary uses for agriculture or for energy use, and then you know state authorities tend to deny these projects because they believe that the project is not actually being used for crop production than for energy production. so Is that something that you're planning to implement or are you seeing others implement? so We're fully permitted, so you know everybody knows what we're going to be doing. um
00:35:35
Speaker
So, and we'll be creating our own electricity. So the process that we have is you grow sugar cane, you bring it into the plant, squeeze the juice out, you ferment that, you turn that on the alcohol, right? Like a distillery. The remaining, that vegetation is called the gas. The gas is then taken to a boiler. We'll have a onsite power island that that'll be the fuel to create the electricity and steam to run the plant. So we won't use natural gas. We won't be using coal.
00:36:04
Speaker
It'll be a a biomass base load green power plant supplying enough power to take care of us. And there'll still be some exportable um megawatts that we could send out the door. So we could send that to the grid is a good green base load electric load.
00:36:23
Speaker
When it comes to the distillery process, you have this this material coming out at the bottom called Vanass. So Vanass is um roughly 90 to 94% water, and the rest is solids. So the water gets cleaned up and reused, as I had mentioned. And then the solids are separated. You have organic and inorganic.
00:36:46
Speaker
right So the the inorganic material could actually go back to the fields as a soil amendment, reducing the amount of fertilizer we need um because it's nutrient rich, you just go back out the door. And the organic material will go through an anaerobic digestion process to create pipeline quality biogas. So that biogas, a portion of it we're going to use to run our vehicles. So instead of running the trucks on diesel, bringing the cane into the plant, we'll run it on renewable natural gas.
00:37:15
Speaker
and So that's great for the community. The rest could go in a pipeline, which runs right along our property line, could go into the gas pipeline and you go into the California market. The electricity, by the way, is also, we're we're permitted to take that excess electricity and put it into the grid. We already um have the permissions to do that. So everything's ready to go in that sense.
00:37:37
Speaker
um So, I think I answered your question around around that. And just one other aspect about, you know, we're we're hoping that there's going to be grants and things like that to pay for the CAPEX to do the drip irrigation, but we're already starting to mess around with it, that we we did 30 acres. We did a new planting about a year ago, and we did it on 30 acres, and we put drip irrigation in for that. So, we're actually seeing how that works in real time.
00:38:03
Speaker
versus just the the reports that we've gotten from our advisors who have done drip irrigation in Peru and other parts of ah Africa.
Public Perception and Community Education on Bioethanol
00:38:11
Speaker
I want to touch on sort of one last thing, as we maybe have a little bit of time left. You know, you already mentioned your pitch to the farmers. And I guess my question is, how do you think the broader public will respond to this? um You know, ethanol, I think there's always been some maybe some skepticism but also some positive it's kind of always been a little bit mixed you know you mentioned headlines earlier and i think you'll see these headlines where it's like bioethanol is actually not sustainable at all and then you'll see you know other headlines kind of in the other direction so i think there's always been some confusion you know around the broader public around what this really represents
00:38:54
Speaker
doesn't help that there was like Ren fraud and all these other things you know a lot sort of a shaky history of like 2g ethanol so there's been all these things I guess I'm just curious is how are you thinking about this is this something that you you feel the need to talk to the broader public about are you really just focused on talking to the farmers in the em Imperial Valley and the ah community in the Imperial Valley, um given that there's already this big market for ethanol and bioethanol, just how are you thinking about these these broader issues of perception and positioning yourselves? Yeah, that's that's a ah great point. and And it comes up all the time because um
00:39:30
Speaker
sometimes people ask questions, they they really don't want to hear the answers. right So you know at the end of the day, folks folks that need to know or want to know or are incentivized to know, that you know I think we're the right answer for them. um I think we have good opportunities.
00:39:47
Speaker
um it you know i it's you You can't try to you know educate everybody about it. But you know I was in the ammonia business before, and it was amazing that yeah know everybody was kind of giving up on ammonia, but now all of a sudden it's like you know something that everybody's thinking about. So you know how do I look at it? I look at it that Listen, whoever wants to talk about it, we'll we'll mention it to them. And we have ah and an enormous amount of information that we've put together to get us to where we're at right now. I mean, we're on the verge of getting this thing financed, as I said, off-take agreements, the you know the permitting. I mean, everything is done. We're ready to go. so
00:40:24
Speaker
um You know, we're happy to talk to folks about, you know, we'll even go to schools and talk to students about it. We think it's a good opportunity. It's it's a clean fuel. it It doesn't mean that we shouldn't use fossil fuel. um It means that this is part of the mix that goes into making gasoline better. And, you know, why not? I'll give you one um little side story.
00:40:48
Speaker
I was talking with ah an Uber driver once that was taking me to the airport and he he told me how he he yeah he got rid of his his brand new vehicle because he wanted a ah used SUV that he could use E85 fuel in. And the reason for it was because you know California's gasoline was five bucks a gallon.
00:41:08
Speaker
And if he had an E85, he could go to the E85 pump for $2.50 a gallon. And even though he lost range for that tank of gas, he was still coming out almost $1,000 a month better by using that vehicle. So I think it just brings options and optionality, and it brings opportunity. And you know it's really for folks to figure out you know what's best for them.
Conclusion and Podcast Promotion
00:41:33
Speaker
All right. Well, Dave, I think this has been a great conversation. I just want to thank you for coming on. The people can find you. They can check out California Ethanol and Power. You guys are online. You have a lot of great media presence. So I'm sure our clients who are interested can can reach out and learn more.
00:41:50
Speaker
To our listeners, I will say, if you like our podcast, please like our podcast and follow and subscribe. That stuff does help us out. We do appreciate it. And yeah, it just remains for us to say thank you so much to to Dave. And hopefully we'll chat again soon once you get this facility up and off the ground. And ah we can learn how things are going and and what bumps you've run into along the way, because I'm sure it will be you know there's always unexpected challenges. but But Dave, thanks so much for coming on. We really appreciate it. Thank you.
00:42:21
Speaker
Innovation Matters is a production of Lux Research, the leading sustainable innovation research and advisory firm. You can follow this podcast on Apple Music, Spotify, or wherever you get your podcasts. If you want more, check out www.luxresearchinc dot.com slash blog for all of the latest news, opinions, and articles. so