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Qteros: Back from the Dead?

Cleantech Chemistry HQ got an interesting e-mail yesterday. It stated that Qteros, an industrial biotech start-up of yore, has resurfaced. The firm had officially closed down earlier this year “because of adverse market conditions.”

Qteros’ technology was – and is – based on what the founders call the Q microbe. This critter is a two-in-one biofactory. It chomps down on biomass and also ferments the sugars into ethanol. It seemed that the firm’s microbe was well regarded, but the path to commercialization was murky. Cleantech Chemistry earlier reported that the firm was regrouping and maybe looking for a buyer.

That buyer, it turned out, was to be three of the company’s original founders. The firm was a tech spin off of the U. of Mass. Amherst. Original COO – and now CEO – Stephan Rogers of Amherst says “Having examined all the research, we now see an immediate pathway to commercialization with the current technology. The company is going to pursue a new and different, less capital-intensive business model. Part of our strategy to quickly get to market is to partner with others who have deep experience in microbial research to help us jump-start the process.”

Also at Amherst and still on the company’s scientific advisory board is Susan Leschine, who discovered the Q microbe. Qteros’ connection to the school will remain very cozy, it appears from the press release. It seems that the developers will move in with fellow researchers and will not seek out their own lab or office space until sometime in mid 2013. So it may be a little while before we hear more about the road forward.

 

The Year in Cleantech IPOs: Horrible!

There is no other way to say it. This year has been a terrible one for cleantech firms hoping to access the public markets to fund commercialization. Investors seem to be allergic to the very idea of owning stock in a cleantech firm.

Cleantech Chemistry thinks that one might still squeak through before the end of the year – SolarCity just slashed its offering price and number of shares and may now raise $92 million in an upcoming IPO, down from an initial expectation of $151 million. New York Times Dealbook blog has the details. [Update: CC was correct - SolarCity is live and trading up]

SolarCity is not pushing some obscure technology – it buys industry standard solar panels, and leases them to residential homeowners. This business model has become a common way for homeowners to get around the high up-front costs involved in generating their own power.

Should SolarCity decide instead to withdraw its IPO, it will join a long list of cleantech firms that had second thoughts this year including BrightSource Energy (solar), Enerkem, Fulcrum Bioenergy, Coskata, Elevance, Genomatica (all biofuels and biochemicals), and Smith Electric Vehicles. (Hat tip to Cleantech Group for helping with the list).

The good news is that many of these firms are successfully raising money from private investors including venture capitalists, corporate partners, bankers, and the Federal Government (sometimes in combination as when a loan guarantee is offered from DOE or USDA).

Two firms did go public in 2012, though both raised less money than originally hoped. Ceres, a plant biotechnology company focusing on proprietary energy crops, and Enphase, a maker of a new type of solar inverter, clipped their wings a bit but made it out of the gate.

Moving to the New Year, the true effect of a lost year for IPOs may be mainly one of image. True believers will continue to invest in cleantech firms, but for the general investing public, it seems that the bloom is off the rose for pre-commercial companies in the sector. That means fewer stakeholders to help spread the risk of new technologies, and increasing competition to appeal to deep pocketed private investors such as chemical firms and oil and gas giants.

Fulcrum Promises 75 Cent Ethanol

With plans for advanced biofuels facilities appearing – and disappearing – with some frequency, it can be difficult to evaluate the exciting claims made by companies that analysts kindly refer to as “pre-revenue.”

Here’s one such claim:

Fulcrum’s engineering and technology teams have recently made numerous enhancements to the design of Sierra [CC note: this is a first commercial facility] and to its proprietary MSW [municipal solid waste] to ethanol process. The Company expects these improvements will dramatically reduce its cost to produce renewable fuel to less than $0.75 per gallon at Sierra, down from approximately $1.25 per gallon as previously disclosed. The cost of production at future Fulcrum plants is now expected to be less than $0.50 per gallon, down from $0.70 per gallon as previously disclosed.

Now, 75-cent ethanol is very cheap. Corn ethanol prices are usually about $2 per gal and thus it costs somewhat less than that to make (or not – many facilities are idle as corn costs are high). Chemtex – an engineering firm based in Italy – is now turning on its cellulosic plant in Cresentino. It plans to make ethanol for $1.50 per gal from 10 cent per lb cellulosic sugar.

Fulcrum plans to make ethanol at its plant near Reno, Nevada from municipal solid waste. Its feed costs are known – it will get free trash from waste handling partners including Waste Management. C&EN recently reported on Waste Management’s involvement in this space. The process is: sort waste, shred waste, gasify it, catalyze it to make ethanol, and separate/purify the ethanol. If the feedstock cost is the same as before, we can speculate on which part(s) of the process has been optimized to take 50 cents off the original cost estimate.

The new cost estimates may also just be something the firm has put out to distract from other thoughts/questions about the process and business model. For one, Fulcrum says it has withdrawn its IPO filing. It will proceed with its first plant using project financing (including a $105 million USDA loan guarantee). The other questions are – will the plant actually be built, and will it produce ethanol at all? These are the kinds of questions facing all the players in the advanced biofuels industry.

And as for the promise of 75-cent or cheaper ethanol – industry watcher Erik Hoover of Cleantechdata responds “More cautious language would help everyone.”

Fast Food Fight Over Biofuels

Will the U.S. government’s biofuels mandate increase the cost of your favorite “dollar menu” item?

A trade group of chain restaurants – which includes fast service joints – called the National Council of Chain Restaurants, has put out a report saying that the EPA’s Renewable Fuels Standard will increase restaurant food costs. According to NCCR, the RFS will cause the cost of corn to rise by 27% (according to two studies) or perhaps by only 4% (according to one study).

In addition to mandating ethanol made from corn, the RFS is the mandate driving the new industry of cellulosic ethanol. Biofuels producers of all kinds love mandates. Love is not a strong enough word, actually. I’m not sure what word DuPont would use. It just broke ground on a 30 million gal/year cellulosic ethanol facility in Nevada, Iowa.

But the fast food group argues that the RFS means higher corn costs and higher costs for everything from wheat and soybeans to beef, poultry and eggs. The average fast food restaurant spent just over $180,000 in 2011 on food commodities. Once the RFS is fully phased in, the cost of that food would go up, they claim, by 10% in the worst scenario and 1.6% in the best.

Recently, when the EPA denied requests by governors and members of congress (many representing the cattle and poultry industry concerned about rising costs of feed), it said its own estimates showed corn prices were affected only slightly by demand for ethanol – by about 1%.

The NCCR report contains the following statement:

“Increased demand for corn for use in ethanol will cause corn prices to increase, in the absence of adjustments to the supply of corn.”

But according to the USDA, both corn acreage, and importantly, yield per acre, have soared in recent years due to the additional demand from ethanol:

Corn production has risen over time, as higher yields followed improvements in technology (seed varieties, fertilizers, pesticides, and machinery) and in production practices (reduced tillage, irrigation, crop rotations, and pest management systems).

Strong demand for ethanol production has resulted in higher corn prices and has provided incentives to increase corn acreage. In many cases, farmers have increased corn acreage by adjusting crop rotations between corn and soybeans, which has caused soybean plantings to decrease. Other sources of land for increased corn plantings include cropland used as pasture, reduced fallow, acreage returning to production from expiring Conservation Reserve Program contracts, and shifts from other crops, such as cotton.

Companies that are building facilities to produce advanced biofuels (not derived from food sources) are probably more dependent on the RFS than their corn-consuming counterparts. With corn ethanol selling for $2 a gallon, fuel blenders will likely seek it out even without a mandate. While it would be more comfortable to ignore this food fight, the future of the RFS could make or break the future of advanced biofuels.

[Not surprisingly, the Renewable Fuels Association has issued a response to the NCCR's report]

 

Energy Crops: the sweet and the sour

Switchgrass, miscanthus, hybrid poplar – these are just the first three plants I think of when I hear the term “energy crop.” But I heard of a new one a few weeks ago when I attended a conference (story fortcoming) about commercializing biobased chemicals and fuels. Let me introduce you to a very big “weed” called Arundo donax

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Arundo donax is a giant reed from Asia. Credit: USDA

While most energy crops produce a few tons of dry biomass per acre, Arundo – a tall bamboo-like reed – can produce several. Like switchgrass, it is a perennial. Like Kudzu, however, it is self-propagating and possibly horribly invasive.

It looks like the huge plant (it’s a weed when it grows where it isn’t wanted, like in California), may become a lot more well-known in biofuels circles. Chemtex will use it, along with wheat straw, in its first commercial facility in Crescentino, Italy. This plant is already humming, and commercial ethanol production is expected to begin early next year.

Chemtex plans to construct another ethanol plant in eastern North Carolina. Through a USDA program intended to promote rural development through the cultivation of energy crops, the company was offered a $99 million loan guarantee to plant “high yielding energy grasses, including miscanthus and switchgrass.” According to a fascinating look at Arundo cultivation – and eradication – by the Associated Press, it looks like the giant weed may also be part of the mix.

Meanwhile, a much sweeter crop, a high-sugar variety of sorghum, may be edging its way into Brazil’s famous sugar-growing regions. Plant biotech firm Ceres, and agribusiness firm Syngenta plant to run test plots of hybrid sweet sorghum destined for ethanol production. The press release says that Brazil’s ethanol industry has created a shortage of sugar cane, and the country views sorghum as a strategic crop.

While Arundo would be harvested just for its biomass, sorghum is usually grown for its seed which is used in animal feed.

Advanced Biofuels Makers Thankful for RFS

I wanted to point your attention to Jeff Johnson’s story today about why EPA will not wave biofuel blending requirements (known as the Renewable Fuels Standard or RFS). Nine governors and many members of Congress, prodded (no pun intended) by livestock producers, had asked EPA to waive the standard saying that ethanol demand was driving up the cost of corn.

What I found interesting is that EPA estimates that waiving the mandate would only reduce corn prices by approximately 1%. This year’s U.S. corn harvest was impacted by drought, and yields plummeted to a 17-year low, Johnson reports.

While the RFS was initially written into law in 2007 to enhance U.S. energy security, it is considered the main policy vehicle driving demand for advanced biofuels. These are biofuels made not from food grain like corn, but from other feedstocks like corn stover, sustainably harvested wood or waste products. These fuels, when commercialized, are expected to help lower the U.S. contribution to CO2 emissions.

The members of BIO, a trade group of advanced biofuels firms and biobased chemical makers, reacted with joy to the announcement.

“EPA has made the right decision and we thank them for making a careful and fully considered analysis,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “Earlier studies by researchers at Purdue University, Iowa State University and the University of Missouri’s Food and Agricultural Policy Research Institute showed clearly that a waiver of the RFS would not undo the economic harm caused by the drought.

“However, a waiver of the RFS could have undercut ongoing investments in advanced biofuels. Renewable fuels are a significant contributor to our nation’s economy and energy security, creating jobs and directly reducing reliance on imported oil. This decision allows BIO member companies to continue to deliver innovative technologies to the market to expand our domestic production of biofuels, including fuels from agricultural residues, municipal solid waste, algae and purpose grown energy crops.”

Connecting those themes – the RFS, the drought, and CO2 emissions, NOAA recently reported that man-made climate change was an important contributor to the extent and duration of the 2011 drought in Texas.

Giant Gobs of Algae Coming From Solazyme

Starting soon, oil-producing algae will be replicating at B-horror-movie quantities. Imagine a lab coat-wearing scientist running into the street shouting “300,000 metric tons!” while scores of screaming people run by, pursued by a giant wave of green slime.

But be not worried, the algae in question will be safely confined to fermentation tanks thanks their overlords at Solazyme. And many of those tanks will be in Brazil (so the people would be screaming in Portuguese, I guess.)

Earlier this week, Solazyme says that it has agreed with its sugar-producing partner Bunge to increase the production capacity for algal oils from an original 100,000 metric ton amount to 300,000 metric tons. It seems from the press release that Bunge will have a hand in marketing the tailored oils to the edible oil market in Brazil.

If you happen to live in the U.S. and have a craving for oil derived from algae, you’ll be pleased to learn that another large blob will be coming to Clinton, Iowa, starting in early 2014. Solazyme and its little green workers plan to ooze into the idle Archer Daniels Midland plant formerly occupied by Metabolix’s bioplastics operation. The plant will start out making 20,000 metric tons, but aims to grow to 100,000 metric tons.

 

What the Election Means for Climate, Energy & Cleantech

Update: Here’s a link to C&EN’s election story – including new House & Senate leaders in energy-related roles.

It’s been a quiet time in cleantech news lately, what with Sandy and the election happening in back-to-back weeks. But the election – and the superstorm – are likely to have meaningful long-term impacts on energy policy. I took a tour around the internets to see what analysts and cleantech-ers are saying in their reaction to the election results.

Though it was past my usual bedtime, President Obama’s victory speech caught my ear when he remarked “We want our children to live in an America . . . that isn’t threatened by the destructive power of a warming planet.”

With Congress still divided, most policy wonks suggest that any energy and environmental policy changes will have to be led by the White House. Things to watch include any movement to block the Keystone Pipeline or push forward with EPA regulations on smog that were delayed due to cost concerns.

Environmentalists have signaled that they will be putting pressure on the President to use national policy to address climate change. Look for Bill McKibben, activist, author and co-founder of climate change group 350.org to be very vocal. He was quoted in three articles I read.

Energy and cleantech activists are pressing for a national renewable portfolio standard that would require power generators to obtain 30% of electricity from renewables by 2030. Nearly 30 states and D.C. have such a standard, the most well-known and successful is California’s, which is headed to 33% by 2020. Wind energy backers will work to return the production tax credit.

The Washington Post points out that Obama recently spoke about upgrading energy efficiency standards for buildings – codes are currently set by state and local governments.

And renewables businesses will be looking for government action that might help them gain financing for facilities or adjust subsidies on competing oil and gas producers. On the other hand, Obama has been pursuing an “all of the above” energy strategy that is likely result in further development of domestic oil and gas (including hydrofracking) resources.

Perhaps most fascinating to me, though also the most far-fetched, is discussion about whether the fiscal cliff, tax reform, and the deficit will drive Congress to think about introducing a carbon tax. Hmmmm…

My favorite takes so far on the election and energy policy:

From the Washington Post: Obama to continue efforts to curb greenhouse gases, push energy efficiency

Politico: Obama’s green cred on the line in second term

Marc Gunther: For green business, blue skies ahead. For climate policy, who knows?

Huffington Post: Ron Pernick on Five Cleantech actions for President Obama

The Daily Climate: The “Flat Earth Five” – House Members and Climate Change

For an international take, check out Click Green, which compares the horizon for climate change action in the U.S. versus China. China will have new leadership in Xi Jinping