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A123 Systems Files Chapter 11, Johnson Controls to Buy Assets

It looks like it’s pretty much all over for A123 Systems. The advanced battery company announced today that it would file for Chapter 11 bankruptcy in order to reorganize its debts. Johnson Controls, which also makes large-format lithium ion batteries for the auto industry, will purchase facilities and other assets for $125 million. A123 was earlier mulling an offer to sell itself to Chinese auto part maker Wanxiang Group.

A123 Systems makes advanced lithium ion batteries. Credit: A123 Systems

A123 was one of a host of battery, battery materials, and electric drivetrain companies to receive government money as part of the Recovery Act. The goal was to set up a full manufacturing supply chain to for U.S.-made advanced batteries. Those batteries were intended to go into U.S.-made electric vehicles. A123 received $249 million in government grants. It also has shareholders, who will likely lose their investment in the re-org.

Overall, Recovery Act funding for the advanced battery industry totalled $2 billion. A123 Systems stood out – and was most vulnerable to market forces – because it was a tech-driven, pure-play battery company. Unlike Dow Kokam, or Johnson Controls, it has no deep pocketed parent or additional technologies and markets to sell into. (A123 will license back techology for batteries used for stationary storage).

And the market A123 sells into is the hyper-oversupplied market for electric car batteries. As we’ve mentioned recently in this blog, electric cars are selling very, very slowly. A recent article in MIT’s Technology Review says battery production capacity in 2013 will greatly outpace demand with 3,900 MW hours of capacity to serve 330 MW of demand, based on estimates from Menahem Anderman at the consulting firm Advanced Automotive Batteries. Needless to say, many production lines are sitting idle at the moment.

When A123 was still a young firm, it was selling batteries for power tools to Black & Decker. Indeed, when it went public its S1 filing was based on that partnership. The company certainly had its sights set on what was to be a huge automotive market.

But one has to wonder, what would have happened if A123 hadn’t received the “free” money? What if it hadn’t been swept into the government’s big plans to create a new advanced manufacturing industry from nothing?

LanzaTech: Now experimenting with CO2

It’s not too often that I get a press release with a New Zealand embargo time. Waste gas to fuels and chemicals firm LanzaTech got its start in New Zealand, but is currently headquartered in Illinois. Still, the company’s larger projects are all in Asia, and being on the opposite side of the world from Cleantech Chemistry blog HQ is not a problem for them.

Yesterday (which is today in New Zealand), LanzaTech CEO Jennifer Holmgren spoke to a conference of oil refiners in New Delhi. In her remarks, she announced that the firm has a new joint development agreement with Malaysia’s national oil company Petronas.

The two firms will work to produce chemicals from carbon dioxide – the first one being acetic acid. LanzaTech already has two facilities that make ethanol from CO. In all cases, the CO or CO2 comes from waste gases. LanzaTech’s proprietary microbes ferment the gas into various end products. The Petronas deal will get its CO2 from refinery off gases and natural gas wells.

Earlier this year, the venture arm of Petronas contributed to LanzaTech’s third round of venture funding. And it seems the two companies have been in cahoots ever since.

C&EN profiled LanzaTech this summer.

And there is another cleantech firm that aims to make acetic acid – Zeachem. Zeachem is building out its plant that will produce acetic acid – as well as ethanol – from hybrid poplar grown in Oregon.

A Graphic Illustration of the Target on the Back of the Chemical Industry

Several days ago I received an e-mail from the press office (press person?) at the Energy Information Administration (EIA). At the time I looked at it, thought “hmm… interesting” and set it aside. Been thinking about it off and on since. The crux of the information was this graphic:

 

 

 

 

 

 

 

 

 

 

 

 

A few thoughts that came to mind immediately were 1) Wow, look what a monster recession did to our industrial energy consumption and 2) That brick-colored stripe is rather tall.

The other two categories of energy consumers aside from industry are residential (people at home), commercial (businesses) and transportation. In 2011, industry was responsible for over 30% of total energy consumption, according to the EIA. Transportation is approximately a similar amount, and residential and commercial users split the rest.

The more I thought about it, though, the more I reflected on basic chemicals’ place in the lifecycle of a finished good – maybe a shampoo, or a carpet or a car – and the chunk of energy use it represents. A branded goods manufacturer that does a lifecycle analysis – say to measure energy use or emissions – would no doubt zero in on chemical inputs as a large contributor to its overall footprint.

Of course, mining and agriculture have their own energy footprints, as shown in the graphic. Obtaining any raw material will bring energy baggage with it.

The graphic also reinforced a message that my C&EN colleague Alex Scott recently wrote about in the magazine. He attended an event in Brussels called the Global Chemical Industry Sustainability Summit. In his report, he writes that chemical industry representatives were chided for their “business-as-usual model” and told that other industries, including customers of the chemical industry, were beginning a trek toward zero targets for things like oil use and CO2 emissions. Should someone hold a similar event in the U.S., this illustration might appear in the presentation.

 

SoloPower, Gevo: Can a capital-light strategy save cleantech?

I wish I could be in Portland, Oregon today to watch SoloPower start up its first production line of thin film CIGS solar panels. The company says it can manufacture in a continuous process to make its solar material in strips as long as one mile.

The company asserts that its thin, flexible modules are a good fit for building-integrated solar, especially in locations where heavier, traditional glass panels cannot be installed such as on warehouse roofs. The modules are certified to an efficiency rate of 9.7 to 12.7%.

But it’s not so much the technology itself that is interesting, but rather SoloPower’s business model and whether it can succeed in selling what it admits is a premium-priced product while the traditional silicon modules continue to drop in price, taking down many efficient producers with them.

SoloPower is already having to bear up under scrutiny because it will be able to tap into almost $200 million in DOE loan guarantees, under the same program that was behind the Solyndra kerfuffle. NPR did a nice job this morning interrogating SoloPower CEO Tim Harris. Read or listen to the short piece here.

NPR rightly points out that Solyndra was backed by $1 billion in private funding and accessed half a billion dollars in its own DOE loan before going bankrupt. But SoloPower doesn’t have a billion bucks to lose, and perhaps that is a good thing.

Instead of comparing SoloPower to Solyndra I’d like to compare it to Gevo, a maker of biobased isobutyl alcohol (what it calls isobutanol). Both firms are pursuing a capital-light strategy.

SoloPower’s first production line will have a small eventual annual capacity of 100 MW. So far, it has spent only its own investors’ dollars. Gevo, a now public company, is spending somewhere around 25% to one-third the cost of a new fermentation plant by converting existing corn ethanol plants.

When a company that has a technology without a track record wants to build its first large plant, it faces financing risk on top of technology risk. Range Fuels built a shiny new plant in Georgia to make ethanol from wood chips. But since the technology did not work upon start-up, Range could not pay its monthly loan overhead, and the factory was repossessed by its financing bank and sold at auction (Range also had a DOE loan guarantee).

Early this week, Gevo told investors that it had stopped making isobutyl alcohol at its facility in Luverne, Minnesota. Instead, it turned the switch back to ethanol. Gevo’s plan to convert an ethanol plant in Redmond, South Dakota is on hold. The company said though it successfully made isobutyl alcohol in Luverne, to reach its target run rate would require more work. Meanwhile, both locations can still produce ethanol.

Though Gevo’s investors weren’t happy with this news, Gevo has given itself plenty of time to fix its problems, saying it would reach its target run rate in 2013 (it could take a year and still make this deadline).

Reducing a company’s financing risk doesn’t do much to reduce its technology risk – or in SoloPower’s case, its market risk – in either the short or long term. But it may help a company last beyond just the short term. Given the pitfalls of technology scale-up, that could make all the difference.

And More Coming in Biobased Chemicals

I’m very pleased my story about biobased chemicals commercialization occupies this week’s cover, not because it sports a lovely image of poplar trees but because it’s Rudy Baum’s last official issue as Editor In Chief. Not that he’d ever toss his back issues of C&EN, but if he ever decided to clean out his home office I know he’d sure keep the Sept. 17 issue.

Anyway, I’m already off topic – sorry about that. The biobased chemicals story was fun to write because it’s a nice change of pace from the normal “experts say commercialization will take five to 10 years” concept. This one features actual photos of actual facilities making actual stuff.

One thing that is an issue in tracking this industry, and is only hinted at in the story, is that any report of upcoming capacity is based on company announcements, and there are promising product areas that just aren’t at that stage yet. (while some announcements may be a bit … premature). Luckily the wonderful C&EN online team made up a Google Map which I can update periodically.

Biobased acrylic acid is one product area that is not yet at the commercial announcements phase. OPX Bio and partner Dow recently presented an update on their two track effort towards scale up and commercialization. You can examine the details on the OPX Blog. And we’ll certainly be watching the BASF, Cargill, Novozymes effort.

I’d love to hear your thoughts about what else should appear on the map – whether it’s happening now or soon. Put it in the comments section or drop me an e-mail .

 

Algae Ponds: the lovers and the haters

This week’s issue of C&EN includes some news from algae-based biofuels firm Sapphire Energy. The company is reporting its first harvests of algae biomass from a large, outdoor algae farm in New Mexico.

Sapphire’s outdoor raceway ponds in New Mexico. Source: Sapphire Energy

Sapphire has grown and gathered 21 million gallons of algae biomass totaling 81 tons. Eventually, the plan is to make a kind of crude oil from the algae. They grow the stuff in very large outdoor ponds. According to the press release, “the cultivation area consists of some of the largest algae ponds ever built with groupings of 1.1 acre and 2.2 acre ponds which are 1/8 of a mile long.”

You’d think that the promoters of algae for biofuels would be clinking glasses filled with spirulina-enhanced juice at the news. But you’d be wrong.

In fact, a trade group of algae firms calling itself the National Algae Association says the kind of ponds used by Sapphire – known as raceway ponds (you can see why looking at this image) – will not scale up commercially. Instead the NAA supports the development of photobioreactors (PBRs for short). Similarly, algae researcher Jonathan Trent, writing in a New Scientist magazine piece that also appears in Slate is arguing in favor of photobioreactors. Specifically, Trent says PBRs should be deployed offshore. I’ll quote from his article where he summarizes the raceway/PBR tradeoffs:

There remains the question of how and where to grow the algae. A few species are cultivated commercially on a small scale, in shallow channels called raceways or in enclosures called photobioreactors (PBRs). Raceways are relatively inexpensive, but need flat land, have lower yields than PBRs and problems with contamination and water loss from evaporation. PBRs have no problems with contamination or evaporation, but algae need light, and where there is light, there is heat: A sealed PBR will cook, rather than grow, algae. And mixing, circulating, and cleaning problems send costs sky high.

Trent doesn’t mention what industry analysts complain about the most. When it comes to algae, though PBRs might be the best bet, they require too much capital expenditure for the equipment.

Meanwhile, Solazyme, which started life as an algal fuels firm but now is manufacturing oils for use in skin cream and other high value applications, grows its algae in a third way – its algae live in bioreactors, but in the dark. They eat sugar and make oil. Is there a best way to commercialize algae for fuels and chemicals? Is there any way? It seems that it is still too early to tell.

Switchgrass Bait and Switch

Sometimes when you dig a little on Google News you find fascinating nuggets in local news of the topics that we cover here at C&EN. A great example is in Knoxville’s alternative newsweekly Metro Pulse.*

They grew the switchgrass. Now what? Credit: University of Tennessee

Newshound Joe Sullivan digs into what ever became of $70 million that the state of Tennessee spent in the flush days of 2007 to start up a switchgrass and cellulosic ethanol industry in the state.

The good news on the project is that the promised 250,000 gal per year cellulosic ethanol plant did open, in Vonore, Tennessee. The bad news is that it has not been using any of the switchgrass grown on 5,000 surrounding acres. The switchgrass part of the project involved the University of Tennessee Institute of Agriculture. The state figured switchgrass would grow great there. And it seems to have been correct.

Sullivan reports that more than half of the $70 million project money went to build the pilot plant. But corporate partner DuPont (now DuPont Cellulosic Ethanol) has used the pilot plant to test and demonstrate its ability to make ethanol from corn stover. Corn stover is a feedstock that is available in huge quantities…. in Iowa. As it happens, DuPont’s first commercial-scale cellulosic ethanol plant is in Nevada, Iowa, and is set to come online soon.

C&EN has mentioned the Vonore plant a half dozen times (including in a previous post on this blog). The move away from switchgrass escaped our attention, but it is an important development for the UT folks and the farmers they have been working with.

So what will happen to the 50,000 tons of switchgrass that were harvested by Vonore-area farmers? Read the story to find out.

* Edited 8/28 to correct reference to Metro Pulse

The principles of “inherently safer” processes or experiments

The U.S. Chemical Safety & Hazard Investigation Board released a video a couple of weeks ago on “Inherently Safer: The Future of Risk Reduction.” Although the video stems from CSB and National Research Council investigations into the BayerCropScience explosion in 2008, the principles of inherently safer processes can also be applied to research-scale experiments.

As outlined in the video, those principles are:

  • Minimize – reduce the amount of hazardous material in the process
  • Substitute – replace one material with another that is less hazardous
  • Moderate – use less hazardous process conditions, such as lower pressure or temperature
  • Simplify – design processes to be less complicated and therefore less prone to failure

“It’s not a specific technology or a set of tools and activities, but it’s really an approach to design and it’s a way of thinking,” said Dennis Hendershot, a consultant with the American Institute of Chemical Engineers Center for Chemical Process Safety, at a 2009 CSB meeting. “The safety features are built right into the process, not added on. Hazards are eliminated or significantly reduced rather than controlled or managed.”

The video goes on to say that the goal of inherently safer process design is not only to prevent an accident but to reduce the consequences of an accident should one occur. A research lab experiment gone wrong, of course, is unlikely to affect the surrounding community in the way that a manufacturing incident might. But research lab incidents have cost millions of dollars and caused personal injuries in the form of lost eyes, hands, and fingers; burns and other unspecified injuries; and deaths of several researchers (for more, see the Laboratory Safety Institute’s Memorial Wall).