The Biorefinery Project of the Future – Part 4 of 10 – add advanced biofuels

September 27, 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.

In Part I, the product goal is to make and distribute ethanol (butanol is fine too) or biodiesel through the acquisition or construction of a first-generation ethanol (or biobutanol) plant.  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. As well as to begin to establish that eco-system of relationships in our community that will serve us later on, when we add-on riskier and more advanced second-generation features.

In Part II, the Bioenergy Project of the Future began a graduated series of bolt-ons, beginning with the collection of cellulosic biomass. No, we won’t aren’t 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.

Part III: Add renewable chemicals. If we have learned anything from the stories of hot companies like Amyris, LS9, Gevo, Solazyme, ZeaChem, Algenol, or Cobalt Technologies, as well as exciting pure-plays like Segetis, Elevance, GlycosBio or Rivertop Renewables, it is the importance of producing chemicals or other bio-based materials first to generate revenues, before taking the company further down the cost curve and up in scale in order to make competitively-priced renewable fuels.

Part IV,  adding advanced fuels.

In our Bioenergy Project of the Future, it seems like we have built up a lot of capacity and capability without producing much advanced biofuel, but in step four of our project all that has changed. But something else has changed as well. No longer are we producing advanced biofuels “because we can”, as a demonstration of technology. We are demonstrating the power of our network of relationships in the community, and the power of our growing balance sheet. We have built a first-generation production capacity in ethanol or biobutanol, and added in cellulosic biomass which we have begun to process into high-value chemicals.

Now that capacity expands and we begin to saturate some of the market we developed in high-value organic acids, we turn to the fuel market with a capacity expansion effort.

How much capacity?

POET estimates that its cellulosic ethanol capacity is equivalent to 25 Mgy per facility, based on the cost and margins associated with transporting biomass. To process higher volumes, higher prices would have to be offered to offset the increased transportation costs and the increased competition with other users of biomass (at the fringes of our “natural” market). That makes our celluloisc ethanol uncompetitive in price.

The USDA has a slightly different vision, projecting that cellulosic ethanol production at next-generation facilities will average 40 Mgy. Either way, these are small processing plants compared to the 100 Mgy plants that produce first-generation ethanol, much less the billion-gallon fossil-based petroleum refineries. That’s where the offsetting chemicals production will help, by giving us more margin to work with, and our work on developing higher value co-products for our dried distillers grains, and also our lignin, will help ensure we develop parity-priced fuels.

What production technology, and what feedstocks, will we use?

In every case, every decision will be driven by land. In the USDA’s vision, most production capacity will be added in the form of energy grasses and agricultural residues such as corn cobs and stover, and that is where the most work on enzymatic cellulosic ethanol has been done. This is the space where technologies from the likes of Verenium, POET, Qteros, DDCE, or Inbicon all play.

But there are other uses for cellulosic sugars, once they are liberated from cellulose. Amyris and LS9 technology ferments sugars into diesel molecules. Virent uses a catalytic reforming technology to turn sugars into diesel.

But there are other options using gasification as a technology. This is where companies like Coskata and Range Fuels offer options for cellulosic ethanol production.

But there are wood feedstocks more closely associated with some geographies. Mascoma is using a consolidated bioprocessing technology on woods. Zeachem has a hybrid of enzymatic and gasification technologies. And there is the broad range of pyrolysis-based technologies, including Envergent, Dynamotive, that give us options to create bio-oil, bio-gas, and char from wood or agricultural waste.

Our mantra: follow the opportunities in the land in terms of feedstock appropriateness.

Financing

But our most important innovation will be in financing, where we persuade the local country we are located in to issue bonds in support of our project. Why the county-level, rather than looking to the state or the federal government? In our Bioenergy Project of the Future, we work at the county level because that is where we have the most strategic impact, and strategic importance. Rural economic development matters the most to the people affected by it – the towns and farmlands of small and medium-sized counties. What will they see in our Project – not some “fly-in” high technology firm, but a company that has already built strong roots in the community, and is proposing to add more high-paying jobs to the county-level mix.

The economics

40 million gallons in capacity represents, as a base, some $80 million or so in annual additional revenue at the county level. If that fuel were distributed exclusively on a local basis – representing the fuel usage of around 80,000 households – that would keep $80 million circulating in the county that used to leak out to neighboring counties, states and countries in the form of fuel payments. There’s a standard multiplying factor that economists add to that economic activity, and that spells economic revival for the community we are members of.

Summing up

In our Bioenergy Project of the Future, one thing has changed mightily – we have changed from companies developing technologies and taking markets as they come, to companies developing markets, and taking technologies as they come. Through partnerships, we can bolt-on a wide selection of technologies that best fit our feedstock and our market size – but the constant factor is the market, and the community, that we serve with fuel. Our message about home-grown fuels will mean a lot more to the people who drive by the fields every day.

Tomorrow in Part V – adding algae or other CO2-based technologies

In part V of our series tomorrow, we start to add even more exotic technologies when we look at algae-based options, and other CO2 munching technologies that will help us create renewable fuels from the CO2 we are producing as a byproduct, adding economic strength as well as reducing our carbon footprint.

The complete Bioenergy Project of the Future series

PART IX – Adding other renewables is here..
PART VIII – Adding lowest-cost feedstocks is here..
PART VII – Adding cellulosic diesel is here..
PART VI – Adding bioammonia is here..
PART V – Adding algal fuels is here..
PART IV – Adding cellulosic biofuels is here.
PART III – Adding renewable chemicals – is here.
PART II – Adding cellulosic biomass is here.
PART I of the series – Ethanol as a Base is here.

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