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Advanced Biofuels: pipedream or solid investment?

I read with much amusement this week two dueling editorials about advanced biofuels; one from the Wall Street Journal and the other - a reaction piece – from Biofuels Digest. One was pr0 and one against, I’ll let you strain your brain figuring out which was which.

Editorial boards have plenty of information to pick from to illustrate a variety of contentions – from advanced biofuels are a “march of folly” paid for with “an invisible tax paid at the gas pump” to biofuel as wise investment not just for government, but for companies like Shell and BP. Evidence for the former view: Range Fuels, which absorbed both grants and loans before succombing to the perils of scale-up engineering last week. Evidence for the latter would include Mascoma‘s joint venture with Valero Energy to build a 20 million gal per year cellulosic ethanol plant in Michigan. Valero will foot a good portion of the estimated $232 million bill to construct the facility.

The crux of the problem, as Cleantech Chemistry and many others have observed (including the National Academies) is that the type of advanced biofuels (i.e. fuel not made from food-like feedstocks such as corn sugar) called cellulosic ethanol has not achieved scale to date. (There are other, more lifecycle concerns, as well). Biofuel Digest editors point out that the larger proportion of advanced biofuels scaling up now are of a different sort- like biodiesel for example. In short, they point out there are multiple roads to get to the same place.

The Wall Street Journal, to its credit, does not politicize its arguments – it rightly notes that Range Fuel’s support came from programs created by the Bush administration. Meanwhile, Biofuels Digest points out that the CapEx on the Mascoma plant pencils out to $11 per gal of ethanol for the first phase. The plant may produce up to 80 million gal per year, however, and all the usual promises of cheaper production through scale are supposed to apply.

Qteros Regroups

Last Friday, press reports began to circulate that cellulosic ethanol start-up Qteros had fired its CEO John McCarthy, laid off a bunch of staff, and may be for sale. I was intrigued as I had written a bit about the company in the past, and realized, in retrospect, that I hadn’t heard much about it lately.

In fact, it appears that Qteros is in a bit of a huddle and may change the scope of its future plans. I asked the new CEO, Mick Sawka, formerly the company’s senior vice president of engineering and commercial development if he could update me. By e-mail he replied that “Qteros has reduced its staff and John McCarthy has stepped down as CEO. … Based on our data and that of our strategic partner, Praj Industries, we remain confident that we have one of the best process and economic routes to cellulosic ethanol production. Under our new leadership we continue to develop our process.”

Praj Industries is an Indian firm focused on engineering for biobased ethanol. It wants to expand into cellulosic feedstocks.

The partnership was announced early in January, just a day before the firm disclosed it had raised $22 million in the first part of a C round of venture capital funding. At that time, the firm implied it planned to get more investments and proceed to commercialization. It sounds like the scope of the firm’s plans may have narrowed a bit. Cleantech Chemistry will keep an ear out for more information.

I wrote about Qteros’ former CEO John McCarthy back in February of 2010, when he had just taken the helm. Two other firms, Mascoma (also in cellulosic ethanol) and Segetis (in bio-based chemicals) had brand new CEOs at the same time. In all three cases, the new CEO’s were experienced hands who were brought in to guide the biobased firms to commercialization.

Qteros is not the only one of the three that has been quiet this year. Segetis’ most recent press release came out Feb. 14 and is about a deal with Method (a household cleaner firm) to develop a tub and tile cleaner made from bio-based molecules. Meanwhile, in September, Mascoma filed for an IPO worth up to $100 million – though it has not yet begun selling stock. Both firms have the same CEOs as they did when I wrote about them in 2010 –  Atul Thakrar is at Segetis and William J. Brady is still in charge at Mascoma.

 

DuPont’s Cellulosic Plans

DuPont has been digesting its acquisition of Danisco for a while now, and has sent out an update about what used to be called DuPont Danisco Cellulosic Ethanol – now shortened, as you might guess, to DuPont Cellulosic Ethanol. In a press release, DuPont says the effort will now be led by Steven J. Mirshak, who will scoot over from his position as president of DuPont Tate & Lyle Bio Products.

Field day visitors check out switchgrass at a farm in Vonore, Tenn. Credit: UT Institute of Agriculture, P. McDaniels

The firm is still planning to build a cellulosic ethanol plant in Nevada, Iowa. Like another Iowa cellulosic ethanol plant being built by corn ethanol producer Poet, DuPont also is pushing a parallel effort to gather up the corn stover needed as a feedstock. It is a part of something called the Stover Collection Project, with Iowa State University.

Meanwhile, back at the ranch, otherwise known as DuPont’s demonstration facility in Vonore, Tenn., the company “continues to make advancements” in preparation for scale-up, though we don’t learn what those are. Nearby, DuPont partner firm Genera Energy (which is connected to the University of Tennessee) is harvesting test fields of switchgrass. Genera held a recent field day where the company showed visitors the switchgrass varieties as well as the equipment used to harvest them.

We here at Cleantech Chemistry will be monitoring  progress toward large-scale production of cellulosic ethanol. As a recent report from the National Academies has pointed out, the U.S. is way, way behind  where it is supposed to be this year in producing the stuff.

Epic Fail: Solyndra files for bankruptcy

While you were at lunch, the nascent cleantech manufacturing industry in the U.S. collapsed.

Actually, that’s not quite true, but it is true that Solyndra will file for bankruptcy. This is a big deal – Google News lists 85 news outlets covering the story. Solyndra is famous for its stylish, glass tubular, CIGS-powered, solar rooftop modules. And for raising vast amounts of venture capital. And for getting a $535 million Department of Energy loan guarantee. And for filing for, and later cancelling, a planned IPO in late 2009.

Solyndra’s success in raising money was an early indicator that venture capitalists had turned to so-called cleantech industries, taking some of the shine off of internet and technology-based start-ups. It was the first company to benefit from the DOE’s loan program, part of the 2005 Energy Act.

But cleantech — particularly solar — has been looking a bit less shiny lately. Earlier this month, Evergreen Solar filed for bankruptcy protection, and its filing shows that the firm does not plan to emerge in anything like its current form. Evergreen also received government largess, getting more than $50 million in support from the state of Massachusetts.

Both Solyndra and Evergreen had proven technologies and they had the financial resources to scale up their manufacturing. Compared to many segments of cleantech, this sounded like a pretty good risk for investors. However, both technologies were based, at least in part, on solar module designs that minimized the use of polysilicon. That was smart at the time, because polysilicon supplies were very tight, and shortages threatened to choke the life out of (traditional) solar manufacturing. That was back in 2007-8. But by the end of 2008, chemical makers made plans to ramp up their manufacturing of polysilicon. The stuff was fetching record prices, after all, and it’s made from sand.

Beginning in 2009, polysilicon manufacturers like Hemlock Semiconductor (owned in part by Dow Corning) and Wacker Chemie began doubling, tripling, quadrupling etc their polysilicon capacity. Billion dollar plus-sized polysilicon plants in the US also won government support. By late 2009 there was an overabundance of polysilicon and an oversupplyof modules in inventory, crushing prices.

Firms like Solyndra and Evergreen had raised money and started scaling up manufacturing right as solar modules became a commodity. Chinese manufacturers at that point had their eye on making solar modules for close to $2 per watt. It was not a good time to have a technologically distinct – and more expensive – solar product.

In 2010-2011, European countries – especially Spain – cut back on solar subsidies. Germany has trimmed them as well. All solar makers were busy cutting costs amid strong competition, especially from China, and selling into a market with constrained demand.

Looking at the subject from a distance, it seems that polysilicon makers and their ambitious and steep increases in capacity are what doomed the non-polysilicon players. Materials suppliers, not just of polysilicon, but of also of polymer backing sheets, UV protecting films, and metal pastes, are doing very well selling into the photovoltaic market.

But government bets on cell manufacturing technology have not paid off. It is not clear yet how much of the loan gurantee Solyndra leveraged into actual financing. Still, Congress will likely have a great deal to say about lessons learned from Solyndra.

Cleantech Stocks Get Thumbs Up

Given the stock turmoil today and yesterday, recent earnings reports from IPO’d cleantech firms may be flying under the radar for most people. And to call them “earnings” reports is a bit generous, too; they are really “losses” reports, but that is to be expected for early-stage technology firms.

Solazyme's Algenist skin products - Analysts are buying it, and other cleantech stories

Still, its worth noting what analysts are saying about companies like Amyris, Gevo, KiOR, and Solazyme and what the firms reported for the second quarter. While I was mulling a post on just this subject, Jim Lane, over at Biofuels Digest got his post up yesterday covering the first three companies. So I’m giving a hat tip to him and suggesting that you go over there and read his summary.

But if the heat and the stock swings have you too worn out to do that, the short take is that though Amyris and Gevo posted results that were not as strong as expected, analysts following the firms are still enthusiastic about the stocks. KiOR will release it’s second quarter results next Thursday. The important pieces that analysts are looking for is whether the companies have a realistic plan for increasing scale (whether they use their own, or other company’s capital to do so). They also want to get a sense of where revenues will come from in the short term, for example, from product sales or off-take agreements from reliable customers.

Yesterday, Solazyme reported revenues of $7.4 million, which beat the expectations of analyst Laurence Alexander of Jefferies & Co. He had predicted $6.0 million. Most of the revenues came from R&D funding but the company has begun generating sales of its skin care line, called Algenist, made from an algae-derived tailored oil. Alexander says that the Algenist launch will turn out to be larger than expected, meaning more revenues, and thus, less operating losses, into the future.  In addition, he notes that the company will deliver 283,000 liters of fuel to the U.S. Navy and the contract calls for up to 550,000 liters. He’s put a Buy rating on the stock.

Cleantech Chemistry recently posted an interview with Cameron Byers, Solazyme’s senior vice president & general manager of fuels and chemicals about how the company plans to make money.

Algae and Water Energy

Could the energy cost of moving water sink the burgeoning algae industry?

C&EN recently checked in with a number of leading algae-growing firms to learn more about their current plans for profiting from the prolific green slime. Though eventually many hope to make money in the large market for biofuels, most firms say that other products like chemicals and high-protein fish food will go first.

Water World. Cellana's marine algae ponds are in Hawaii. Credit: Cellana

Building large-scale algae-growing systems is still too expensive to make fuels profitable. The key to bringing down costs is in the engineering of the infrastructure. A recent study by researchers at the University of Texas at Austin looked at the energy costs of moving water into and around algae-growing systems (Environ. Sci. Technol., 2011, 45 (13), pp 5861–5868).Researchers Cynthia Murphy and David Allen presented a startling conclusion:

Energy output in the form of algal biodiesel and the total energy content of algal biomass are compared to energy inputs required for water management. The analysis indicates that, for current technologies, energy required for water management alone is approximately seven times greater than energy output in the form of biodiesel and more than double that contained within the entire algal biomass.

Seven times greater?

Ouch. Like any model, this one began with a host of assumptions. Importantly, the model did not assume that algae farmers would be using fresh water, but did assume algae would be grown in open ponds (except for the inoculation vessels). In fact, the main problem is not the water itself, but the need to move it around from place to place.

First water from various sources (saline, fresh, reclaimed from the facility) needs to be obtained and pumped into the inoculation area and the algae pond. More water would be added to compensate for algae removed, evaporation and other “leaks” from the system. Evaporation would concentrate salts in the pond, and may require compensating amounts of fresh water for “blow down.” Cleaning after each growing season would require removing the water and replacing it.

In addition, energy would be required to remove water from the harvested algae, and then to return that reclaimed water to the system. The researchers also included in the model the embodied energy of the plastics used to contain the algae in ponds (and the lifespan of the plastics).

There is no way, of course, to compare the assumptions in the model to any particular firm’s proprietary growing system. But I did pose the question of water energy to the companies I spoke with that use open ponds.

Cellana’s CEO Martin Sabarsky said, “Water is a big issue. It’s an issue for biofuels generally. You have to deal with it on the backend too. We’ve developed and are continuing to optimize cost effective technology to handle water issues at the back end including dewatering. “

And Sapphire President Cynthia Warner commented, “It is true that to optimize the process and get costs down, you have to minimize water movement, maximize efficiency. Using sophisticated equipment is key.”

Q&A With Solazyme

C&EN first wrote about leading algae firm Solazyme in 2009. At that time algae firms were gathering up venture capital funding and perfecting their technologies for growing the green slime. Many were targeting biofuels markets, but some firms had additional markets in mind.

Solazyme’s algae live in large fermentation tanks and eat sugars, which are transformed into algal oil – a type of vegetable oil. The company went public in late May, and raised $227 million from investors.

We checked in with Solazyme to find out more about its business model, and the types of markets it is targeting with its oils. Cameron Byers, senior vice president & general manager of fuels and chemicals gave us a closer look.

C&EN: I first spoke with Solazyme back in early 2009 – it seems like forever ago in algae time. Even then, the firm was targeting specialty chemicals, food, and cosmetics in addition to biofuel.  How did that diverse product strategy affect your ability to attract investors and business partners pre-IPO?

 Byers: Producing a diverse range of products is not just important, it is what our technology platform was designed to do in-line with our business model. The markets served by conventional oils – petroleum, plants and animal fats – represented an opportunity of over $3.1 trillion in 2010, an attractive potential market for investors. Solazyme’s custom oils can address each of these markets, providing both an environmentally and economically sustainable solution.  As an example, Solazyme recently announced a joint development agreement with The Dow Chemical Company to develop of a new class of algal oils tailored for optimized performance and cost in dielectric insulating fluid applications. Dielectric fluids alone represents a 500 million gallon market.

Continue reading →

… and it’s a Go for Poet’s Cellulosic Project

Yesterday Poet Energy announced that it has a conditional DOE commitment for a $105 million loan guarantee for the cellulosic ethanol plant it plans to construct in Emmetsburg, Iowa. That’s two days after I posted (below) that the company was waiting on just such an outcome. Thanks for reading my blog, Steven Chu!

Poet has been working with DOE to secure more funding for this plant, which will be co-located with an existing corn ethanol plant owed by the company. In 2007 it received a grant from DOE that was supposed to help out through the first years of design and construction. It appears that the details for that plant haven’t changed – it will produce 25 million gal a year from corn cobs, leaves, husks and some stalks.  It is scheduled for completion in 2013.

Following these projects requires a fairly strong memory. When I first wrote about the project in 2009, it was to see what had happened since the 2007 grants were issued. Poet’s project was looking like a pretty sure bet. But clearly the loan guarantee was a necessity – Poet was originally going to have the plant running this year, but was waiting on more financing.

What’s interesting is what the company has been doing in the meantime. A few numbers give you a sense of the scale of a cellulosic ethanol plant. Poet built a 22-acre holding area – called an integrated stackyard – just to store the biomass delivered by farmers.  The collection has begun – 85 farmers brought 56,000 tons of biomass to the site last year. That’s less than one-fifth of what the plant will use up in one year.

Farmers will glean about 20-25% of the waste biomass from their fields to feed the mill. Each acre would provide 1 ton of biomass. To provide the yearly allotment for the plant would require 300,000 acres of harvested corn farmland.  Poet has been working with soil scientists to study the impact of the gleanings on soil quality – and so far have found it to be “consistent with good soil management.”

It’s Stop and Go for Cellulosic Ethanol

Another Independence Day has come and gone, and it seems the U.S. is no closer to figuring out the role that cellulosic ethanol might play in promoting energy independence. At least, that is the theme expressed in a recent article in the Des Moines Register.

How now, corn cob? Credit: Poet

Dan Pillar outlines the strikes against the industry: EPA continues to down shift its expectations for cellulosic ethanol production – from a 2005 goal of 100 million gal this year to, last month, 6.5 million gal for the year. Large biorefineries  – comparable in output to corn-based ethanol - were supposed to come online this year, but have not, Pillar notes, due in large part to concerns by financiers over the future profitability of ethanol.

One example of a project on hold is Poet, a leading corn ethanol producer that is still waiting on a loan guarantee from the Department of Energy for its cellulosic operation. And politically, ethanol has been increasingly unpopular. The corn version has been blamed for increasing the cost of corn, and long-treasured subsidies are eyed for the chopping block. And the next-generation cellulose players might lose support in Congress as budgets get trimmed. One program that is at risk would help pay farmers to gather corn stover and corn cobs to feed Pilot’s plant.

Cattle farmers, already incensed at the rising cost of feed corn, are also not pleased at the possibility of losing access to harvested corn fields for grazing. Meanwhile, strategies for economically providing the “waste” agricultural materials to cellulosic ethanol plants have long been a logistical hurdle for making the next-gen ethanol plants economical.

Is cellulosic ethanol having problems financially, politically, and logistically, all at the same time? Perhaps, but though plans have slowed – and some may be in limbo – one big loan guarantee may tip the balance. Meanwhile, DuPont Danisco Cellulosic Ethanol said last week that it had acquired land for a commercial scale refinery in Nevada, Iowa, to be fed by corn stover. While it gets ready for construction, DDCE is working with Pioneer Hi-Bred, DuPont’s seed company, and Iowa State University to figure out how to work the corn stover harvesting, storage and transportation side of things.

Intermediates Start-ups Star in Green Chemistry

Genomatica and BioAmber have been named as two winners of the Presidential Green Chemistry Challenge Awards. This is a good week for the renewable intermediate chemicals industry. (You can see the full list of awardees here.)

Start-ups have been moving on to the winners podium beginning in 2009 with Virent, a catalyst-focused bio-fuels firm. Green chemicals and fuels firm LS9 popped onto the list in 2010. But having two tech start-ups in 2011 suggests that these new companies are taking on a larger share of the attention paid to green chemistry by policy makers.

Historically, winners of the Challenge Award have been larger concerns like Proctor & Gamble, Eastman Chemical, Dow Chemical, and Cargill. In contrast to those diversified companies, renewables start-ups must see their green chemistry succeed in the market or they will go out of business.

Knowing this, C&EN tracks with interest statements from start-ups about plans for scaled-up facilities, strong corporate partnerships, and estimates of cost-competitiveness with petroleum-derived chemicals. It can’t be all about the technology. Likewise, the discussion about the award to Genomatica on the EPA’s website encompasses the technology itself, the many environmental benefits, and the possible low-cost manufacture of the company’s bio-BDO. I’ll peel off just the green bennies from the discussion in this quote from the award:

“Initial lifecycle analyses show that Genomatica’s Bio-BDO will require about 60 percent less energy than acetylene-based BDO. Also, the biobased BDO pathway consumes carbon dioxide (CO2), resulting in a reduction of 70 percent in CO2 emissions. Fermentation requires no organic solvent, and the water used is recycled. Furthermore, the Bio-BDO fermentation process operates near ambient pressure and temperature, thus providing a safer working environment.”

For BioAmber, a company in the midst of scale-up plans for bio-based succinic acid, the award focuses on how the firm’s product can enter the marketplace. “BioAmber’s economic advantage has given a number of chemical markets the confidence both to use succinic acid as a substitute for existing petrochemicals and to develop new applications for succinic acid. Succinic acid can replace some chemicals directly, including adipic acid for polyurethane applications and highly corrosive acetate salts for deicing applications. BioAmber has also made it economically feasible to (1) transform biobased succinic acid into renewable 1,4 butanediol and other four-carbon chemicals; (2) produce succinate esters for use as nontoxic solvents and substitutes for phthalate-based plasticizers in PVC (poly(vinyl chloride)) and other polymers; and (3) produce biodegradable, renewable performance plastics.”