California Ethanol + Power to build first sugarcane ethanol plant in North America

At a time when state and federal agencies are investing cap and trade funds to promote the “next big thing” in renewable biofuel, Sugar Valley Energy – North America’s first sugarcane ethanol biorefinery project – stands quietly on the brink of a billion-dollar financing package.

The promise of government incentives has spurred a growing number of petroleum refiners across North America to pursue plans to convert facilities that produce renewable fuels from waste and vegetable. All that glitters isn’t gold, of course. According to a study released in early January 2022 from consultancy Cerulogy, due to policy and feedstock constraints it is likely U.S. refiners and biofuel companies will reach less than half the renewable diesel production projected by the U.S. government for 2025.

Sugar Valley Energy (SVE) is a tale of vision and perseverance. Far from representing a new technology, low-carbon sugarcane ethanol production has a vital role in meeting California’s emission reduction goals and to bridge the gap until gasoline powered cars and engines no longer represent the lion’s share of transportation-related pollution.

The SVE project represents a model public-private partnership that has advanced through more than a decade under the leadership of California Ethanol + Power. It represents an intersection of narratives that touch upon public policy, finance, energy, and environmental sustainability.

Governance/public policy

• It started in 2012 with a visionary and abiding decision of the Imperial County government to invest Agricultural Benefit Program funds into the project. Program goals include:
  • Mitigate economic impacts of farmland conversion to solar power facilities
  • Provide loans as “seed funds” for projects that sometimes haven’t panned out
  • Promote stewardship, protection, and enhancement of agricultural lands within Imperial County
  • Support programs or projects that increase agricultural industry employment opportunities within Imperial County
•  For the County, the payoff is expected to be significant; operations of the project will further represent more than $440 million annually in economic activity and approximately $39 million/year in recurring taxes and public revenue in the County.
• Sugar Valley Energy will create a viable and stable economic market for approximately 48,000 acres of sugarcane production, and support more than 2,400 permanent jobs (not including construction jobs).
• At the state level, former Governor Brown’s Office of Business and Economic Development recognized the higher historic unemployment and economic hardships faced by Imperial County and signed on in 2013 with tax incentives for the project.
• The state Treasurer’s office has programs to invest in advanced energy projects and supported the project with its sales tax exemption program.
• At the federal level, the Dept. of Energy has a loan program identified to research and promote cleaner advanced fuels.
• SVE recently entered into a research partnership with JBEI to take its basic chemistry to the next level and develop even more advanced biofuels using the sugarcane residue from the plant.

Energy future/technology

• Low Carbon Fuel Standard (LCFS) – even with an electric vehicle mandate, millions of existing vehicles on the road will need to run cleaner to meet our goals. This will require strategies such as increased ethanol blends in gasoline.
• Ethanol import picture – the nation’s first sugarcane ethanol production facility, and the project is 100 per cent scalable from an agricultural and greenfield perspective in California.
• SVE helps ensure California has a resilient supply of alternative green energy sources and complements the state’s Renewable Portfolio Standard.
• In addition to ethanol, the project will also produce advanced bioelectricity and biogas that will be sold to the marketplace.
  A long-term agreement is in place with a CHS, Inc. to market the ethanol and other off-take agreements in process.

Environmental sustainability

• Using products locally – land use allocation for sugarcane means less agricultural products leaving the valley on trucks to be processed; lowers VMT and emissions.
• Diesel emission reductions in the region will be realized through project design features calling for trucks to use natural gas, and diesel motor conversion program for sugarcane field farming equipment.
• The sugarcane crop has a high capacity to sequester carbon from the atmosphere.
• The SVE campus includes new public wastewater treatment infrastructure with excess capacity available to support economic development in the region.

Finance

• Certified Green Bonds and the worldwide marketplace of projects using green bonds.
• Worldwide private equity markets for energy and infrastructure projects.
• Tax-free municipal bonds for the power island portion of the project
• Investment grade bonds for ethanol facility.
• The finance team consists of Royal Bank of Canada Capital Markets, Citi, Baker Tilley, and others working in concert to bring the project to fruition this year.