The Biorefinery Project of the Future – Part II of 10 – Add Cellulosic biomass

September 23, 2010 |

The Backstory.

In part I of our series, we outlined the beginnings of the Bioenergy Project of the Future, based on dozens of interviews on the future of technology, policy, rural communities, finance, and the demand for bio-based products and renewable fuels.

We outlined three principles for development: First do no harm. Less is more. Add ingredients slowly and stir.

“We not only have to demonstrate technological prowess in bioprocessing, we have to demonstrate financial and management acumen to all our stakeholders – the community, policymakers, lenders, and customers.

“Too often, a “demonstration” project is a demonstration or a pilot of a proposed processing technology. That’s important, but there’s something more important – building a demonstration of a sustainable feedstock system. And demonstrating the financial strength and risk management that justifies riskier add-ons down the line,.

“That’s where the first-generation biofuel plant comes in. In this phase of the Project – which can be purchased or built – the product goal is to make and distribute ethanol (butanol is fine too) or biodiesel. Ethanol is preferred.”

Part II – Collecting Cellulosic Biomass

In the Bioenergy Project of the Future, you have told us that we will be thinking in terms of a graduated series of bolt-ons, beginning with the collection of cellulosic biomass. No, we won’t yet be adding the capacity to convert that into fuels just yet. That would be getting ahead of ourselves. First, we have to demonstrate that we can build a sustainable ecosystem around the harvest and delivery of biomass.

In some executions, we have an established system for aggregating biomass. For example, municipal solid waste, or wood chips. But we need to ensure that we understand how to effectively sort MSW to isolate the materials we need, and in the case of wood chips we would need to demonstrate that we can build a feasible system that is not exposed to ruinous competition for biomass from existing pulp-and-paper and biomass-to-power assets.

But it is more than that. The USDA, in its Roadmap for achieving the goals of the Renewable Fuel Standard, identifies energy grasses and agricultural residues as the key feedstocks over the next ten years. And in our bolt-on philosophy, we are almost certainly building or acquiring a plant near the current first-generation feedstocks, which dictate a reliance on grasses.

Do we know how to talk with growers about collecting biomass? First of all, we need to learn the when and where of that discussion. We’ll begin that conversation at our own plant, when growers are bringing their first-generation feedstocks for delivery. There can be long lines during the height of harvest season, and our Bioenergy Project of the Future aims to compete not only on price, but on customer service with other customers for corn or soybeans.

“We get to know our farmers,” says POET Corning GM Greg Olsen. “when we talk with them, we make a point to remember the names of their family members, ask about their lives, demonstrate our involvement in the community. If the lines are long, we’ll hand out cokes. It’s funny, but on some days we’ll have donuts piling up here at the office, and its not us just buying for them, they are bringing food to us.”

That relationship is enhanced in other ways, because in the Bioenergy Project of the Future we have done as much local hiring and training as possible. We are active supporters of community projects. We are creating the high-wage jobs that are bringing the college-educated sons and daughters of our farmers back home. We also, in our first-generation ethanol asset, may well be the largest taxpayer in the county, and certainly are likely to be the biggest taxpayer in town. At the POET Corning plant, the team contributed mightily to the restoration of the Corning public swimming pool – which, in a town where air conditioning is a rarity and summers can be brutally hot, is a gathering and focal point for parents and kids.

Our goal? We want our farmers to communicate a positive vibe about working with us. Not just in our one-to-one conversations, but in the conversations during the long winter season when farmers pile up in the coffee shop and swap stories, and exchange ideas. The payoff for us comes when it is time to start collecting a new crop, cellulosic biomass. We have to make believers, because the person who has never harvested cobs is the one who also has to invest in the baling equipment. The fewer believers we persuade, the wider a net we have to cast for biomass to fill our plant, and the more our price goes up because we will have to incentivize farmers by covering the higher transport costs.

We talk so much about yield in biofuels – yield per acre, yield per ton, yield per liter – but in the Biorefinery Project of the Future we have to think in terms of yield per relationship. The higher concentration of belief we create in our project, the lower our costs. Investment in communities pays off handsomely.

Who is going to do our collecting? How much storage do we need? Some of this is being studied by the DOE in an extensive project on biomass logistics. But much of this comes down to the human equation, and understanding the growers. For example, the more we can schedule out deliveries inside three-week windows, as POET Biomass director Mike Roth has been establishing for the 25 Mgy Project LIBERTY plant in Emmetsburg, Iowa, the more we can control our own storage and logistics costs. Perhaps that’s why POET’s 2010 harvest goal of 56,000 tons of biomass was oversubscribed, even at the $40 per ton rate, a fraction of what power plants are paying for wood chips in states that have Renewable Power Standards.

Initially, we’ll use that biomass to replace some of our natural gas, and reduce the price volatility, emissions and risk associated with our base ethanol (or butanol) module. We may even reduce our operating cost in certain market conditions. And we are beginning to build out the base for the collection, storage, contracting, and use of advanced biofuels materials – not on a venture capitalist’s dollars that cost 30 percent per annum, but on lender dollars that go to projects that have strong vision, community roots, and proven technologies.

Does using biomass for our system power beat using natural gas? It can, but it’s not really an investment undertaken for cost reduction, but for learning, and building out our sustainable ecosystem. With a cost around $5 per million BTUs for natural gas, biomass is pricing around $4 per million BTUs (based on a pro-forma 5,000 BTUs per pound), before considering the costs of handling, storage and usage.

But you are proving extra income, and increasing your relationship with your farmers, and keeping money in the community. That power cost you are paying with natural gas – who knows where the money goes, but it certainly doesn’t get deposited at the local bank, increasing that bank’s ability to lend money to farmers for equipment, and process improvements that will eventually reduce your cost. Pus, you are substituting a renewable resource for a fossil resource.

Plus, you are getting started now on the process of building loyalty, and educating your community of growers. In the “get it while you can” culture of so many countries today, farmers might be tempted to rake their entire field of corn stover, and rack up as much in biomass sales and incentives as they can. A mistake. The US has lost half of its historic topsoil through short-term farm management techniques and tactics. in the Bioenergy Project of the Future, you will only buy biomass from your growers equivalent to 25 percent of the stover on their field. That can be safely lifted without causing a loss in nutrients needed for the next crop season.

But you can do something, if you work hard on your technology, to help your farmers on an income basis. You can work hard to make sure in your cellulosic research you can use corn stover as well as cobs. That makes it easier to collect, easier to store (using a baling system), and there’s more biomass that can be lifted that way.

One other thing. Your new best friend, if you are working in a part of the country that does not have a lot of haying activity, will be the company that sells baling equipment. In Emmetsburg, Iowa, as you make the turn towards the POET plant, down the road that growers must take to make deliveries to the plant, you’ll see the shiny-new Woodford Equipment location. It’s an outlet that didn’t exist before cellulosic biofuels, a sign of the indirect economic impact of a project, but also a great convenience for farmers, who now have equipment for sale in their own town, including specialized equipment for baling cellulosic biomass. More about that company and its impact on the local community, from the Emmetsburg News. http://www.emmetsburgnews.com/page/content.detail/id/502557.html?nav=5001

But whether it is POET, or Genera Energy, our our own Bioenergy Project of the Future, the important aspect here is to constantly measure the local economic impact you are having. Sure, people care about climate change, and energy security. But there are no better ambassadors for those concerns than those who are directly and positively impacted by a new job or extra business in their store.

So, we are collecting, storing and combusting biomass and reducing the fossil fuel impact of our first-generation ethanol plant. We are also in the ethanol (or biobutanol) business, and we will bet that the local gas stations will take a strong interest in adding blender pumps, because a blender pump is a sign of a station’s commitment to the community. It’s not just ethanol fuel, you are making community fuel.

But we have far to go. There are higher and better uses for biomass than combustion. We have CO2 emissions from our ethanol plant, and wastewater, and process heat and steam, that can be used, and should be used, and must be used if we are to make our project sustainable. What has been called “waste streams” is really a failure of imagination and gumption, a triumph of short-term opportunism. It’s the hunter-gatherer in us – grab a resource, use what we need, and dump the residue like tossing a candy bar wrapper on a sidewalk. In the Bioenergy project of the Future, we’ll be thinking like the pastoralist, the steward, because you can make products but you can’t make land – though you can enhance it, or revive it, or repair it.

In part III of our 10-part series tomorrow, we will begin to use our cellulosic biomass to better advantage, with another bolt on. But we won’t be making fuels just yet. We have to make a lot, and learn a lot, to make money in that business. To start off, we’ll be making acetic acid, formic acid, ethyl acetate – solvents, adhesives, and organic acids that are building blocks for other high-value chemicals. We’ll also be looking at using another wonderful source of revenue, those dried distillers grains that we produce six hundred pounds at a time every time we process a ton of corn for ethanol.

Why? Chems have smaller markets, but higher prices. But there’s another reason. Chemical companies that we can partner with share the pain of being customers of oil companies. Oil companies – well, they go back and forth on the extent to which they want to invest in biofuels. For chemical companies that have natural gas as their most important feedstock and are slaves to the wild gyrations in natural gas prices, the opportunities in the bio-based economy are more obvious, easier to justify in a board room filled with directors who are mighty tired of having no alternative to oil and gas.

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