The Class of 2011

Will these biofuels projects make the expected steps towards commercialization?

There was a strong response to yesterday’s Top Story about technologies that were  approaching make-or-break milestones in 2012. But what about 2011, asked some? What are the five key sectors where we have major milestones?

IPO-ville

After the success of the Codexis, Gevo and Amyris IPOs, all eyes have turned to Solazyme, which filed its initial S-1 last month and revised it last week. By summer, we’ll know a lot. By year end, we should know everything we need to know. Is the IPO window still open. Has Solazyme demonstrated to the public markets sufficiently that they have the capacity (and the production rate) to commercially deliver on all the offtake contracts that have been announced? Solazyme’s IPO, and progress, will define the year for biofuels.

Loan guarantees.

Cellulosic ethanol. INEOS Bio, Enerkem, Fulcrum and Coskata have landed conditional loan guarantee commitments from the US DOE and USDA. Can they close them – and can they close the loans that will be backed by them – before any US government action on deficit-reduction shuts down the programs? Can companies like POET and Abengoa that have received term sheets from the DOE, convert those into conditional commitments and closed loans before the rug is pulled from underneath the program.

For the 10 companies that have reached at least the term sheet stage in the loan guarantee process, this is their make-or-break milestone for this year in terms of commercializing their technologies. They all say they require the LGs?

What if they melt away under deficit pressure? POET says it will not build its Project LIBERTY plant in Emmetsburg absent a loan guarantee. We’ll know by the end of summer where we are in this second biggest milestone of the year.

Waste-based biofuels.

The hottest area for progress in biofuels commercial-scale project development, has been in waste-based biofuels. That is, converting negative-cost municipal solid waste to ethanol. It is the technology that pencils out the best, economically, for cellulosic ethanol, and wins the broadest support as a feedstock (even diehard corn-haters are generally happy with MSW-based biofuels). Plus, the feedstock contracts come with very long terms – enough to make even the most risk-adverse banker smile.

Will MSW-based biofuels realize their promise, in the near-term. Two bellweather projects are scheduled for completion this year. The 10 million gallon Enerkem project in Alberta (not the same as the Pontoco, Mississippi project that is subject to a DOE loan guarantee). and the 6 million gallon Fiberight demonstration project in Blairstown, Iowa.

International cellulosic ethanol.

Will cellulosic ethanol continue to spread its technology beyond the world of US companies and a handful of important EU players such as TMO Renewables and Inbicon? Two important pilots are scheduled to complete this year. Woodland Biofuels in Canada, and the St. 1 Biofuels project in Finland. Scandinavia and Canda have been big supporters of advanced ethanol projects – thir faith will be rewarded if these projects come online by year end and hit their operational cost and production targets.

Algae.

No sector of biofuels evokes more passionate support, capital investment, and heavy skepticism than algal-based biofuels. Three projects in 2011 should tell us a lot about whether the cynics are right to be cynical, or whether fortune will smile on the optimists. They are the Aurora Algae demonstration in Kurratha, Australia; the Phycal pilot, and a demonstration scale algal farm in Florida using the Algenol technology.

If all three projects are up and running and hitting their numbers by year end, that will be a strong pointer that algal companies will be launching commercial-scale projects by no later than mid-decade.

Big numbers have been bandied about with respect to nearer-term projects using Algenol’s technology, so any success in launching that demonstration by year-end will have a profound impact on algal fuel projections of a billion gallons in capacity by mid-decade.

We only have to wait weeks, not months, in the case of Aurora Algae; its Western Australia project opens in the first half of May, and its six ponds will be fully operational within the month, producing samples of biomass for evaluation by prospective customers for nutraceuticals protein, fuel and food. We’ll begin to know by mid-year if Aurora will be a candidate for one of the next IPOs – if their production data and offtake contracts continue to line up and pile up, this is a hot candidate for the next IPO, alongside companies like LS9.

The Digest’s Take

So there we have it. A big year for IPOs, algae, MSW-based biofuels, and the expansion of cellulosic ethanol in Canada and Finland.

Our expectations are strongest with Solazyme’s IPO and the Enerkem project in Alberta – those are “priced to move”.

Hopes are high for the algal projects to hit their marks, and cellulosic ethanol pilots to launch.

On loan guarantees and Fiberight – we are hopeful if not expectful. Our fears are based not on project merit but in the risk that loan guarantees will be zeroed out, or other project finance will prove too expensive for the projects to bear.

Creative financing will prove as key as novel technologies, for sure, and the best news is that none of these answers are “five year away”; we only have weeks or months to wait.