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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.

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 .

 

Smith Electric Vehicles Wants Investors, Cheaper Batteries

There aren’t very many electric vehicle companies in the world. One of the few was founded way back in 1920. Which makes it older than most cleantech firms by at least eight decades. But like many hip, tech-driven, venture-backed start-ups, Smith Electric Vehicles is planning an IPO.

A Smith Electric Vehicle truck delivers Staples products. Credit: Smith Electric Vehicle

Smith manufactures medium-duty delivery trucks – often called box trucks – used for delivering stuff. The trucks are much bigger than the kinds of passenger cars that come to mind when someone says “electric vehicle” – they need 20 times the battery power of a Nissan Leaf, for example. But they use similar types of batteries as their tiny cousins.

As President Obama noted in his speech last night at the Democratic National Convention, high tech battery manufacturing has been part of the U.S.’s push into advanced manufacturing. He mentioned “thousands of Americans have jobs today building wind turbines, and long-lasting batteries.” I’m assuming by “long-lasting” he’s talking about the big rechargeable li-ion battery packs meant to power electric vehicles.

In large part to make those jobs possible, several battery manufacturers got significant government support from Recovery Act spending. Factories are indeed manufacturing advanced batteries. But as C&EN reported back in February, the electric passenger car market is moving more slowly.

At the time, Smith’s CEO Bryan Hansel was plenty happy about the glut in big batteries. “It’s tremendous for us that supply is coming up—we’re ahead of the demand curve and so we benefit from oversupply in the short term,” he says. “It drives down cost and helps drive demand for our products, and we can then be a bigger customer.”

But with the IPO coming, business and technology risks in the battery industry cast a bit of a shadow on Smith’s operations. The company is shifting to batteries made by A123 Systems, a pure-play technology firm whose own stock chart looks like a downhill ski slope. And it’s not just A123. I also saw in Smith’s SEC filing that a related risk is “the recent bankruptcy filing by Valence Technology, Inc., or Valence, which produces the battery systems for our U.K.-produced vehicles.”

Also in the filing, Smith explains that it is depending on decreasing the costs of its electric drivetrain in order to make a gross profit on its truck sales. As of now, the company loses money on each sale. If the battery makers cannot be profitable, it will be hard for Smith to be profitable.

But that is not to say anything is hopeless. The value proposition to fleet operators to switch from diesel trucks to all-electric ones is promising. The whole supply chain is going to depend on developing and scaling-up the production of cost-effective batteries.

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

Metabolix: the Post-ADM Update

It’s been a very busy summer, but I had a chance to catch up with Rick Eno, the CEO of Metabolix, last week. Metabolix makes a bio-based plastic that it calls Mirel, though chemists call it a polyhydroxyalkanoate polymer (PHA). We last heard from Metabolix in January when its commercial-scale partnership with Archer Daniels Midland dissolved.

The breakup was a significant blow to the company in terms of growing its business and selling Mirel to customers. The partnership with ADM was based around an ADM-financed production plant capable of making 50,000 tons of Mirel per year. Unfortunately, sales ramped up slowly and ADM said the market was too risky.

Since the breakup, Metabolix has decided to launch the biodegradable Mirel bioplastic under its own nameplate, says Eno. It has transferred inventory from ADM, and brought over all the business operations. Still, the company needs a production partner.

“Since Mirel was exclusive to ADM for so long, [after the breakup] we did get inbound calls and we also reached out to potential partners to establish potential manufacturing,” Eno told C&EN. He says that rather than try to sell enough Mirel to keep a huge plant busy, he’s now looking for something closer to a 10,000 ton per year scale.

“We’ve narrowed down a large number of potential opportunities to four. Now we’re looking at engineering detail for integration of our manufacturing technology to the partners’ asset sets,” Eno reports. “We’re deeply evaluating a short list of manufacturing options.” Without ADM to center the business, Metabolix can look outside the U.S. – for example, to be closer to customers. In fact, the firm has opened a sales office in Cologne, Germany to be close to the European market.

As Alex Tullo wrote in his recent cover story on biodegradable plastics, an important market niche is in organic waste handling – specifically in municipalities where organic waste is separated and hauled to composting facilities. Eno suggests this is both a good niche for PHA, and also a great reason to be in Europe where people rigorously sort their trash.

Eno followed up on his January comments that the company would look to higher-value markets that really require biodegradability, rather than try to compete with cheap and plentiful petro-based plastics. He said the company is focusing on agriculture and horticultural markets – for things like biodegradable plastic mulch; the consumer market for compostable bags and similar products for organic waste diversion; a broader packaging market; and a marine and aquatic segment where it is important that plastics biodegrade fully in oceans and streams.

The breakup with ADM somewhat ironically boosted Metabolix’s cash position (for some rather complicated accounting reasons). That will be a big help, because the company is still developing its upcoming portfolio of bio-based C3 and C4 chemicals, using different PHA molecules than Mirel uses as an intermediate. Example target chemicals are gamma butyrolactone and acrylic acid. The C4 program is the farthest along and has reached 60,000 liter fermenters in scale-up. Eno says the chemicals program has netted “significant partner interest.”

Also helping to pay the bills is a government grant backing the company’s efforts to put the bio-based plastic platform into purpose-grown plants. In a recent advance, Metabolix and its research partners have reported a new way to increase polyhydroxybutyrate (PHB) production in sugar cane.

So there you have it – Metabolix is still moving along. The next time we will hear from them, Eno says, it will be because they have a new production partnership to announce. Stay tuned.

Trending in Liquid Fuels

I’ve never had an automobile that ran on anything other than gasoline. Sure, sometimes I buy the high-octane stuff, and nowadays my go-to fuel has 10% ethanol in it. Someday soon it may have 15%. But I’m old school. If I were more cool, I’d be filling up on trendier stuff – perhaps some home-brewed diesel from vegetable oil, for example.

Actually, french fry grease drivers are also getting to be passe these days – its so hard to keep up! According to former Pennsylvania Governor (and our first Homeland Security head) Tom Ridge, methanol is the way cool fuel. Or so he contends in an OpEd in today’s New York Times.

Sprint car drivers run on methanol. Maybe you will to. Credit: Ted Van Pelt (cc)

This idea is pretty timely for me, as I was thinking of trading in my Mazda for a sprint car. If Ridge’s idea gets traction, I won’t have to – I’ll be able to fill up with the way high octane stuff without needing to upgrade my ride. He points out that just as a normal car can run on ethanol (or be cheaply converted to run on ethanol) the same is essentially true for any alcohol fuel. It takes way more methanol to go the same miles as on the same amount of gasoline, but worry not, it’s cheap. The bottom line? Methanol can be made from (say it with me)  clean-burning, domestic natural gas.

This thread continues neatly over at the Department of Energy, where $30 million in grants will go to projects to make it possible to fuel a car on compressed natural gas (those tanks are too big, bulky, and pricey to use now, but can be improved).

And in the same press release, DOE says it will make available $14 million to explore making transportation fuels from algae.

Meanwhile, on a recent drive through Eastern Pennsylvania I again pondered the meaning behind a billboard on Interstate 81. “Future Site of the Nation’s First Waste Coal to Clean Transporation Fuels Plant.” Questions that came to mind were “what is waste coal? how do you make transporation fuels from it? that sounds like it would be expensive? and are my tax dollars paying for this?”

Anyway, that pilot plant, which was originally slated for operation in 2006, was never built. Cost over-runs and difficulty arranging the neccesary financing (at last count the cost was around $1 billion) seem to have made that idea a trend of the past.

 

A New Year for Biofuels

Fuel blenders are finding that the New Year is bringing a few changes to their business. Before Congress adjourned for the holidays, it opted not to renew the subsidies for putting corn ethanol into gasoline. Though the subsidy had become a fact of life – and added up to $6 billion last year – the fall of the corn regime was not unexpected.

This morning, NPR tried to answer the question of whether anybody would notice the difference, and according to their expert, energy economist Bruce Babcock at Iowa State University, most likely no one will. You can review the segment on the NPR website.

I don’t yet have a number for 2011 production of corn ethanol, but 2010 was a record year, according to the Renewable Fuels Association. U.S. refineries produced 13.23 billion gallons of the stuff. So bear that number in mind for my next item…

Totally aside from and unrelated to the generous corn ethanol subsidy that no longer exists, the EPA still requires the blending in of biofuels in its Renewable Fuels Standard, now in its second edition (RFS2). For 2012, EPA says blenders must include 8.65 million gallons of cellulosic biofuel* in their fuel mix. That will be equivalent to .06% of all renewable fuel produced in 2012. RFS2 says blenders will need to use 9.23% of renewable fuels in their blends in 2012 – most of that will still be corn ethanol.

EPA is tracking 6 cellulosic biofuel projects that are supposed to produce in 2012, and that is how it came up with the number. This is what EPA published at the end of December:

KL Energy Corp. is the only facility in the United States currently generating cellulosic biofuel RINs. American Process Inc., Fiberight, and ZeaChem all anticipate completing construction on their production facilities in late 2011 or early 2012 and plan to begin producing biofuel soon after their facilities are complete. INEOS Bio and KiOR are targeting April 2012 and mid 2012 for the start-up of their respective cellulosic biofuel production facilities. The variation in these expected start-up times, along with the facility production capacities, company production plans, and a variety of other factors have all been taken into account in projecting the available volume of cellulosic biofuel from each these facilities.

There are a couple of other projects in the works that are likely to be RFS2 candidates, but not this year. Poet has received a conditional USDA loan guarantee and is building a co-located plant (with corn ethanol) in Emmetsburg, Iowa – scheduled for completion in 2013. DuPont now has full ownership of what used to be DuPont Danisco’s cellulosic project. No word yet on when that plant will be constructed, but it will be in Nevada, Iowa.

*Edited 1/4/12 to state cellulosic biofuel rather than cellulosic ethanol. EPA anticipates that the largest cellulosic fuel producer will be KiOR, which will be making biodiesel and gasoline from cellulose at its plant in Columbus, MS. KiOR is the only project of the six planning to make anything other than ethanol.