Courtesy BlueFire Ethanol
BlueFire Ethanol's construction site is ready to break ground in Fulton, Miss. China's biggest electric company, China Huadian, has agreed to provide financing and engineering services for the project.

BlueFire Ethanol, one of the competitors not chosen this year to receive U.S. Dept. of Energy loan guarantees to build an advanced biofuels plant, is taking its cause abroad. Last month, the cellulosic ethanol producer attracted China's largest electrical utility, China Huadian Engineering Co. Ltd., which has 75,000 megawatts of generation capacity and $51 billion in assets.

This past September, alternative-energy companies were waiting to hear who would win the loan guarantees. When two of his competitors—Abengoa Bioenergy Kansas and Poet Biorefining— each received more than $100 million and his firm received nothing, BlueFire CEO Arnold Klann had "nothing nice to say" about the application experience.

"They only gave guarantees to two biofuels projects," says Klann, "and I think our technology is more advanced." In October 2010, Irvine, Calif.-based BlueFire signed an engineer-procure-construct contract with MasTec Inc.'s subsidiary Wanzek Construction, Fargo, N.D., for a turnkey plant worth $296 million. The Fulton, Miss., plant wrapped up its first phase this past July, but the site's been vacant since then because funds dried up.

Previously, DOE had granted $88 million for the BlueFire project, whose peak building phase is projected to create up to 800 construction jobs. The new DOE-funded plants—Hugoton, Kan.-based Abengoa and Emmetsburg, Iowa-based Poet—are now the first commercial-scale U.S. cellulosic fuel plants being built.

Despite recent controversy over DOE's loan program, U.S. Energy Secretary Steven Chu says America must keep pace in "a race to develop clean renewable-energy sources to compete in a global clean-energy market with countries like China." Chu says this even as BlueFire, one of the firms DOE passed over, is in a pending deal with China Huadian.

Ethanol producers are boosting construction activity to meet the U.S. Renewable Fuel Standard, a federal order that requires oil companies to use 16 billion gallons of cellulosic ethanol by 2020. That translates into more than $100 billion in construction activity over the next eight years if U.S. producers add the capacity needed to meet the mandate.

"It's a tremendous undertaking," says Carl Micke, vice president of construction management in the Appleton, Wis., office of Poyry Engineering, Helsinki, Finland.

Cellulosic ethanol is made from non-food-based feedstocks, such as corn stover, switchgrass, rice straw or municipal solid waste. The so-called "next generation" alternative fuel is touted as a savior of sorts by the ethanol industry, which is often accused of driving up the price of gasoline and world foodstuffs.

Unlike corn-based ethanol, cellulosics hold up against environmental criticism, and leading companies say they can produce the fuel for about $1.50 a gallon. But the cellulosic construction landscape is littered with failed projects, scared investors and hesitant design-build firms. Dozens of companies have mounted demonstration projects that couldn't scale up—they worked technically, but not economically—and now they're gone.

"Everybody wants to be the first to build the second project," Klann explains. "None of the engineering companies want to take any of the risk, and most technology companies are underfunded, so it's a conundrum."