The first detailed economic costing of a lignocellulosic ethanol process envisaged a process similar in outline to that eventually adopted by Iogen in Canada, where wheat straw was first pretreated with acid before fungal cellulase was used to digest the cellulose for a Saccharomyces fermentation of the liberated glucose (no pentose sugars were included as substrates at that date). Results from laboratory studies were extrapolated to a 25-million-gallon/year facility that was designed to be stand­alone and capable of generating the required fungal cellulase on site (table 5.2).

The calculated factory gate plant was much higher than that estimated for corn — derived ethanol, that is, $3.34/gallon — this cost included raw materials, utilities,

maintenance materials and labor, operating labor and supplies, the facility labora­tory, plant overhead, taxes, insurance, and depreciation but made no estimates for general and administrative, sales or research costs, profit, or any by-product credits or disposal charges. Of this total, 61% was attributed to materials, of which the wheat straw feedstock accounted for 11-12%. The other components of the price estimate and various options for reducing the total were assessed:

• Utilities and capital costs were each 14% of the total.

• Labor costs were 11% of the total.

• A high-cost peptone (proteased protein) nitrogen source was included in the fermentation media; adopting a lower-price product could reduce the cost of the product by 9%.

• The conversion of cellulose to soluble sugars was 45% (w/w basis, calcu­lated on the straw weight); increasing this to 60% could effect a 6% reduc­tion in product cost.

• Reducing the enzyme loading (ratio of enzyme to cellulose) by fourfold could reduce the product price to approximately $2/gallon.

No allowance is made in table 5.2 for capital costs or profit; on the basis of 15%/year of fixed capital for general and administrative, sales, and research costs, a 15-year life expectancy of the plant, and a 48% tax rate, the selling price for the 95% ethanol product would have to have been $4.90 or $4.50/gallon for a discounted cash flow return on investment (after taxes) or 15% or 10%, respectively.12

An independent estimate for ethanol production from corn stover, funded by the DOE for work carried out at the University of Berkeley, California, was first announced at a symposium in 1978.13 Scaling up an advanced process option with cell recycling (chapter 4, section 4.4.1) and converting the postdistillation stillage into methane by anaerobic fermentation to generate a combustible source of steam generation, a total production cost of $3.38/gallon was estimated, again with no allowance for plant profitability at a 14-million-gallon/year scale of production.

The main conclusion was, therefore, that the costs of generating fermentable sugars by enzymic hydrolysis dominated production (i. e., not-for-profit) economics; consequently, any major reduction in the cost of generating the cellulase or increase in its specific activity (or stability or ease of recovery for recycling) would be highly effective in lowering the production costs. Although federal and state initiatives in operation by 1979 offered some mitigation of the high costs of biomass-derived ethanol, the sums were small: for example, under the National Energy Act of 1978, alcohol fuels were eligible for DOE entitlements worth 50/gallon, and 16 states had reduced or eliminated entirely state gasoline taxes on gasohol mixtures, the largest amount being that in Arkansas, worth 9.50/gallon.