Standing amid test tubes and fermenting machines in POET's laboratory in Sioux Falls, company research and development chief Mark Stowers gives an upbeat report on the pilot plant.
"We started up on November 18 and already we've been making cellulosic ethanol and we're very, very excited," said Stowers.
POET isn't giving any tours of the pilot plant, located in the town of Scotland some 60 miles southwest of here. It makes ethanol from corn cobs, about 20,000 gallons a year.
Stowers say the Scotland facility is basically a large version of the system initially developed in this laboratory.
"We have a great sense of urgency here, this is an important national problem that we see, solving our energy challenges," said Stowers.
That sense of urgency was elevated this year when oil costs surged, pushing gasoline prices to painful new records. Oil and gas prices have collapsed in the last few months, but POET CEO Jeff Broin said the lessons of those high prices remain. He said the U.S. must find a substitute for petroleum.
"Ethanol is the answer, we can replace gasoline," said Broin.
Broin believes cellulosic ethanol can be a big part of that. Most ethanol produced today is fermented from corn. Cellulosic is made instead from plant or tree fiber, like the corn cobs POET uses.
Sugar is extracted from the fiber then fermented into ethanol. It's a more complex and expensive process than using corn. Broin said his company has made some production breakthroughs, which lower the cost of making cellulosic ethanol.
"The question is, 'Can you make it profitably?' I believe that we will," he said.
“Ethanol is the answer.”Jeff Broin
Broin won't talk specifically about the breakthroughs. In general, though, he said the company has found ways to extract more ethanol than they could in the past from each ton of plant material.
Next year, POET plans to start construction of a full-scale commercial-sized cellulosic ethanol plant in northwest Iowa. Broin said production will be more than 1,000 times that of the pilot plant, some 25 million gallons a year.
"Our prediction today is that in five to eight years it will be competitive with grain based ethanol," said Broin.
That prediction will test the 'five years away' joke. Even the strongest backers of ethanol have their doubts.
Earlier this year Minnesota Congressman Collin Peterson, who chairs the House Agriculture Committee, was quoted by Reuters saying he wasn't sure "cellulosic ethanol will ever get off the ground."
Iowa State University's Bruce Babcock has studied the issue. He said one of the biggest problems facing the industry is collecting the plant material needed to make cellulosic ethanol.
He said unlike corn and other grains, right now there's no system in place to pickup and deliver that biomass to central collecting points.
"This biomass that were talking about, is scattered over hundreds of millions of acres across 30 states," said Babcock. "It's very costly to try to figure out how we're going to gather all that material up into concentrated piles enough to process it."
Officials at POET say they're working on the issue. They've been meeting with farmers and machinery manufacturers to set up a collection method large enough to supply a cellulosic plant.
Iowa State University's Bruce Babcock said another big question facing cellulosic is something the ethanol industry is sensitive about: food prices. Corn-based ethanol has been criticized as one of the factors which sent food prices sharply higher this year.
Babcock said his research shows that probably won't happen with cellulosic ethanol, for two reasons. He thinks crop waste will supply a good part of the production. And he believes few grain acres will be diverted to things like switchgrass to supply cellulosic production.
"Pretty simple economic question: can the farmer make more money growing food crops or biomass crops? And the evidence seems pretty clear that food crops will win that competition," said Babcock.
Babcock said another big unknown in the cellulosic industry is how much money the federal government will spend on it. So far it's given hundreds of millions of dollars to companies like POET to help finance cellulosic ethanol plants. Babcock believes it could cost billions more to make cellulosic a true competitor in the fuel marketplace.