General Motors, the United States Department of Energy and other investors have flocked to Mascoma in an effort to increase ethanol production. The Cambridge, Massachusetts ethanol manufacturer had a week of big news that included a partnership with GM as well as an additional round of venture capital. These investments show the potential for ethanol as a fuel source outside of the corn-rich Midwest.
Mascoma has signed an agreement with General Motors to supply testing facilities for the automaker’s growing FlexFuel vehicle line. The ethanol producer benefits from GM’s concern that FlexFuel trucks have few places to refuel throughout the United States. Both sides have claimed that the 3 million GM FlexFuel vehicles in operation cannot be served by the 14,000 E85 stations in operation. A natural offshoot of this partnership would be ethanol stations at GM dealerships and additional efforts to increase fuel supply.
The addition of $61 million in loans and equity to Mascoma helps the company refine its process of turning nonfood materials into fuel. The Department of Energy is providing $25 million dollars in grants to Mascoma as part of the federal government’s effort to make ethanol a viable alternative to gasoline. Marathon Oil Company is supplying $10 million in equity to help Mascoma expand its operations into two New York production facilities. Marathon has invested millions of dollars into similar companies in the Midwest and holds a stake in two facilities capable of producing 220 million gallon of ethanol.
The rush to Mascoma by major investors in the ethanol industry involves several factors. The concern by GM that FlexFuel vehicles will not fly off their dealerships is a shrewd move by a major company to rationalize a wise investment. GM has already invested in ethanol producer Coskata and it would not be surprising if more money is pumped into growing ethanol companies.
Mascoma’s process of gassification and chain reactions using wood chips and agricultural waste eases concerns that ethanol equals increased food prices. The perfection of the ethanol manufacturing and distribution process through substantive investments to Marcoma and Coskata will make ethanol more affordable. The question that consumers and political leaders need to ask is if ethanol is merely a messy, inefficient replacement for traditional gasoline instead of a cure-all for America’s energy problems.
