The race for biofuels parity and scale shapes up as a square dance involving four technologies, with some hybrids in the middle, and a dance with a lass named Sara.
There’s Codexis, Amyris, Gevo, and now Solazyme and KiOR on the way. The rush to public markets for capital to scale up biofuels technologies is on. How’s an investor to parse out all these technologies. For many, it’s a case of “you’re making what, from what, using what?”
Most of all, investors struggle to place all the technologies into some kind of taxonomy, some kind of order. Usually, it is presented as a race to the top – like the climbing of Mount Everest.
Here at the Digest, we think of it as a kind of old fashioned hoedown, a square dance involving four basic types of technologies – competing yet cooperating, all involved in and benefitting from the other’s success, interrelated and yet distinct.
Think of a quadrant – box with four cells (or visualize the one we’ve constructed here with some companies as examples – but keep in mind that these are companies suggested as examples, and represent far from a comprehensive list.
On the vertical axis, you have “fermentation” and “catalytic conversion”, and on the horizontal axis you have “gas phase” and “liquid phase”.
Now what exactly do those categories mean?
(assuming its been a while since college biology or chemistry)?
Fermentation is a means of changing a molecule using organic (living) molecules – like yeast, or e.coli – the magic bugs we write about so often in the Digest. Catalytic conversion is achieving essentially the same end, but using non-organic molecules. Gas-phase vs liquid phase. Well, that’s simpler – that simply refers to whether you are converting a liquid or a gas. So, you can have liquid-phase fermentation, or gas-phase fermentation, or liquid phase catalytic conversion, or gas-phase.
There are some hybrids, and a handful of technologies that fall outside of this Bioenergy Square Dance box or barely fit in. But that’s the basic drill. So, what do we have?
That’s KiOR, for example, ClearFuels/Rentech, Enerkem, Envergent, Annelotech or Dynamotive. They heat biomass into a gas (usually, a syngas consisting primarily of carbon monoxide and hydrogen), and then uses catalysts as the gas cools, to reform the gas into molecules of choices. One of the easiest and most useful? Ethanol. But the catalysis can result in bio-crude oils that can be upgraded (using a system like Honeywell UOP’s hydrotreater) into renewable gasoline, jet fuel, or diesels.
Then, there’s the liquid-phase catalytic conversion
Which is to say, companies that also use an inorganic catalyst to convert a biobased material into a fuel, but do so while the materials are in their liquid state. For example, that’s the route that we use to convert vegetable oils into biodiesel, or on the high-technology, advanced cellulosic biofuels side, the route taken by companies like Virent to produce renewable gasoline, jet fuel or diesel. They call their process aqueous-phase reforming, or bioforming.
Fermentation, both traditional and newfangled
Traditional fermentation of a broth of grains or fruit juices into ethanol is as old as, well, Noah. That’s what winemaking or beermaking is all about, and although industrial ethanol is on a different order of complexity in terms of making things cheaply and at scale, at the heart of it there is a biomass-based broth, and there is a magic bug (traditionally, yeast) that makes the process happen.
Now, cellulosic ethanol is way more complex – because you have to tease out all the sugars trapped in the cellulose, which is (a teency bit) tougher than teasing out sugars from, say sugarcane or corn starch. But at the end, it’s fermentation.
Now, a lot of the companies that have gone public of late have been doing exotic types of fermentation. There are the exotic super-enzymes made by Codexis that will feed into Shell’s portfolio of companies in Brazil and elsewhere(as well as powering other companies on the renewable chemicals side and in other non-fuel areas). There is the magic bug, based on yeast, that converts cellulosic sugars into a diesel-range molecule called farnesene. That’s Amyris. LS9 has a magic bug which does a lot of the same tricks (with some one-step potential), based off e.coli.
Then, there is the fermentation technology which uses a magic bug (among other industrial magic) to produce isobutanol – that’s Gevo – or n-butanol, that’s Cobalt. All of them, are using liquid phase fermentation. Solazyme is one of the more exotic, for they are using growing algae in standard fermentation tanks, and then extracting oils from them. So, not strictly fermentation, but close.
One of the more exotic areas of great interest is the fourth box. That’s gas-phase fermentation. In this case, there’s a magic bug doing organic conversion, but utilizing high-temp gas rather than munching through a broth. LanzaTech, INEOS Bio and Coskata are all in the mix here.
The courts at some stage may well have to figure out if INEOS Bio and Coskata have completely distinct technologies; INEOS says there are trade secret issues. So, we may have two here, or three here. But, in each case, the companies are getting a bunch of traction.
Coskata and INEOS BIO have landed large USDA loan guarantee conditional commitments for their projects in Alabama, and Florida, respectively, while LanzaTech is lighting up the scoreboard all over China with deal after deal for its process for converting waste steel gases to ethanol.
OK, we mentioned it wasn’t quite as simple as four clean boxes, because there are some hybrids. The best-known example is ZeaChem, which uses both liquid-phase fermentation and gas-phase catalysis in its process. In ZeaChem’s execution, they ferment the sugars from cellulose and hemicellulose, and then gasify the otherwise unworkable lignins, from which they get some extra hydrogen for their process, among other byproducts.
Sapphire Energy proposes to extract lipids from algae, and upgrade those to fuels; meanwhile, the residual biomass is gasified to provide power for the overall system.
OK, now that we have divided our world into our four-square-dancing partners – what are the Four Bewares to watch out for, in terms of picking technologies for investment, or other forms of partnership?
The Four Bewares
Need more hydrogen, baby.
Talk to renewable fuels developers and about the only thing they worry about quite as much as financing and the search for low-cost cellulosic sugars – well, that’s low-cost hydrogen, preferably from biomass. Gasification systems, in the old days, always ran short on producing enough hydrogen to really make the conversion back to a hydrocarbon economically efficient.
Did we mention low-cost sugars?
Lots of these processes depend on them – primarily fermentation. From there, it is really a matter of what they can economically ferment. Finding a technology that can tolerate sucrose and glucose is not too hard (though finding one that makes drop-in fuels, that’s part of the Amyris and LS9 magic, and rare). Dextrose – the sugars found in corn – well, that’s your everyday ethanol fermentation scheme (though converting dextrose into isobutanol requires the Gevo magic bug).
But once you get into converting C5 sugars like you find in cellulose and hemicellulose, now you are in conversations with companies like Cobalt, Mascoma, Verenium or Qteros. The good news is that there is a heck of a lot of cellulose, at much lower prices than the more traditional sugars derived from corn or cane. But all those processes are just now going through their scale-up from lab through to commercial-scale; and some of them, like Verenium and Mascoma, are tied up with single projects.
In general, gasification depends less on sugars – basically, you can gasify wood, agricultural residues, MSW, leftover food, leaf litter, tennis shoes, or traffic tickets. You can gasify the planet Earth, given enough energy – though it sorts of obviates the need for renewable fuels.
In the end, driving the cost is the underlying cost of the biomass – and the TRY factor (titer, rate and yield) of the process. Some of the projects that have been moving forward the fastest – like Enerkem and INEOS Bio – are using the (currently) cheapest feedstock of all – municipal solid waste, which you get paid to use in the from of the tipping fee associated with dumping biomass in a landfill. Bio-based projects capture a portion of that fee, and get the MSW for free….for now, in a relationship designed to reduce the need for new landfill sites
Did we mention finance?
Yep, financiers hate first-of-kind technologies with a special passion usually reserved for the Auburn-Alabama game. All these exotic technologies are exactly what you need for the bio-based revolution, and exactly what you need to foster a series of conversations with potential providers of bank debt that are as generally pleasant and productive as talking criminals out of an armed robbery.
That’s where “capital-light” comes in. Basically, you borrow as much as you can of someone else’s infrastructure. That’s power, water, land permits, rail spurs, pipes, biomass aggregation, storage, and so on. Voila Amyris. Also, there’s the route of converting a facility to a new process. That’s Gevo, Solazyme, Cobalt, or Butamax. It’s been estimated that as little as 10 percent of a biofuels project’s actual final cost is the cost of the core technology – so there are opportunities a-go-go for those who seek to find.
Did we mention geography?
Well, not very much so far, but we hate ourselves for doing so. What you need kinda dictates where you have to go. It turns out, for instance, that it is not the case that “only Nixon could go to China,” LanzaTech can too, because that’s where the abundant waste steel gases at popular prices are found.
Need very clean, abundant, not-ruinously-priced sucrose for your magic bug? Bem vindo ao Brasil – welcome to Brazil, as they say at the Sao Paulo international airport to every planeload of biofuels developers coming through.
Need wood? Start singing “Georgia on my Mind,” or heading north by northwest.
Need a great, US domestic source of waste at affordable prices and at scale? Call 1-800-WASTEMANAGEMENTISINVESTINGINTHISSPACE.
And so on.
The Digest’s Take – Dancing with SARA
Everyone’s said it – there’s no silver bullet in biofuels, but maybe there’s a silver buckshot. In the end, it comes down to matching feedstocks with economically viable processes. Any viable process will have its day in the sun; any process that matches up well with a sustainable, affordable, reliable, available (SARA) source of biomass – that’s a winner.
So, swing your partners for the do-si-do – there are many turns around the dance floor to come, and no clear winners on the floor. We’re pretty sure that that winners, when they come, will be somewhere in our Square Dance Box. And all of those winners will have SARA somewhere on their dance card.