The end of commodity crops?

September 23, 2011 |

Will the rise of designer fuels, chemicals and biomaterials put an end to commodity crops (as we’ve known them)?

Will customers vie for value, differentiation, and performance? A new sorghum deal between Constellation Energy and Chromatin may point the way.

Earlier this week in California, Constellation Energy and Chromatin announced a memorandum of understanding to supply of renewable sorghum grown specifically for use as fuel, to two of Constellation’s California power plants.

In anticipation of this, Chromatin is growing three fields of biomass sorghum, a non-food crop that has a high energy content, is adapted to marginal lands, and requires less than half the water and chemicals of field crops such as corn or sugar cane.

First dedicated energy crops at scale for biomass-to-power

The story is attracting a lot of attention because it is, as far as anyone knows, the first at-scale use of a dedicated energy crop for power production. Biomass to power production has been, to date, generally based on the burning of traditional crops, woods and residues – though small-scale testing on energy crops has been going on for some time.

But there’s another aspect here, which will in the long-term prove more important as a trend. Constellation has not partnered with a biomass aggregator or a traditional forestry or crop company. Chromatin is a biotech company, which has been generally known for developing and  commercialized a mini-chromosome gene stacking technology.

Now, Chromatin has applied its own suite of technologies to sorghum feedstocks – including 50,000 different hybrids developed to date, acquired Sorghum Partners, and has developed a broad group of growers through its seed marketing operations – all of which it brings to partners such as Constellation Energy.

“California requires load-serving entities generate 33 percent of their power from renewable sources by 2020. If we can rely more on sustainable biomass to fuel our plants and capture greenhouse gases, we would be taking important steps toward generating the clean power that is the cornerstone of California energy policy,” said Steve Gross, Managing Director of West Region operations for Constellation Energy’s Power Generation group. “We were attracted to sorghum biomass because it offers potentially high energy content, and can be handled in our plants with only minor modifications to our equipment.”

Beyond yield – driving value through performance

But it is more than the story of an energy crop used for biomass-to-power, or a biotech company entering the field of energy crop supply-chain logistics. It is the story of where commodity crops and designer crops are going.

“We are getting 10-12 dry tons per acre,” Chromatin’s CEO Daphne Preuss told the Digest. “And that’s one of the things that’s critical. A lot of people talk yield, yield, yield. But a ton of high quality biomass is better, in terms of high BTUs. Today, our sorghum is expected to have an energy content that is more than 70 percent of coal – roughly equivalent to firewood. Our breeding and crop engineering program is generating new varieties of sorghum that are expected to have an even higher energy content with lower levels of ash and other contaminants. So, we look at this as a system – and ‘what is the value created?’. Sure, yield drives value, but you need to have quality.”

We talked briefly, not only about the BTUs, but a broader range of qualities, including trace materials, ash content, and more. The kind of precision that comes from having a portfolio of thousands of hybrids to choose from.

“There’s this popular idea going around – this idea of being feedstock agnostic,” said Preuss. “When you talk to plant operators, these are engineers who have been running their plants for a long time, in many cases. They have tight specs to make their plants work well. What you hear from them is “maximize this, none of this, I hate it when I have this, this is a deal breaker.” If supplies are limited, they are stuck with what’s available, but with a choice, they know what they want.”

But isn’t that a function of price, too?

“Sure,” said Preuss, “there’s a lot of ‘I will take this at that price,’ but there’s also a lot of ‘I won’t take this at any price.’ It’s knowing what you want, and from there we can go to the set of hybrids in the field, we can say, how’s this one? If its not quite what we want when we go to scale, well, we heard what they wanted, and we go back and optimize it to hit the mark.”

Biotech companies and supply chain management

It suggests an evolution in grower relations.

“We have growers  who are long-standing customers,” said Preuss, “and we have a very close connection. It’s a partnership. We routinely engage growers for our seed production, and through our networks, such as our partnership with Land O’Lakes, the largest grower co-op. We are introducing them to a crop, in a way they haven’t seen it before. In turn, that’s an expertise and a skill set that has value. We can ensure that the crop is grown the right way, so that it stays high value. You have to do it right, you have to watch the process.”

There’s value and rationale, then, for industrial biotech companies, in the business of supply-chain logistics?

“Even if you look at how utilities handle the supply of coal, they don’t get into managing supply chain. We are not looking at building a commodity process, but a high value product that performs, based on growers that are engaged, that have the training and understanding. Some partners want to backward integrate more than others, but a large group of parties are generally never interested in going that far into supply chain, and will pay for that service. That’s routine and easy for us.”

The two plants that will test burn the sorghum biomass are Rio Bravo Poso and Rio Bravo Fresno. Rio Bravo Poso is located in Bakersfield, Calif. and currently uses coal and petroleum coke as a fuel source. Rio Bravo Fresno is located near Fresno, Calif. and now burns agricultural and construction wood waste.

Chromatin’s first field for use at the Rio Bravo plants – 30 acres near El Centro in California’s Imperial Valley – will be harvested in September and October. To produce the biomass, Chromatin has engaged growers experienced in producing hay or forage for livestock feed. Two other fields – with a total of 65 acres in California’s San Joaquin Valley – also are under production to supply the Rio Bravo plants.

Chromatin expects to deliver the first shipments of processed sorghum biomass to the Rio Bravo plants in a few weeks.

In many ways, this kind of activity has been going on for a long time – when we look at how many people, how much effort, for example, Monsanto puts into corn – where the company’s work on supply chain and grower relations is as important in many ways as its development of technology – because of the role of supply chain in assuring that the results of the lab are carried through the field.

But, in the end, corn is a global commodity crop, even if the yields and performance are changing, and even if the traits and improvements that drive that yield and performance involve an array of seed varietals and planting strategies.

Performance driving value, through differentiation? A new role for synthetic biology.

We see something else emerging here – not only in the requirements of biomass power operations, but in the those requirements developed by biorefineries, or in the customers for the products of biorefineries. It is a shift from a focus on cost to a focus on the potential of increasing value by changing performance. But also, a change in a role from simply inproving performance across the board, to developing a suite of characteristics that can be differentially improved.

Harrison Dillon, the president of Solazyme, has talked about this as well, in terms of renewable oils. Visiting with prospective clients who have been dealing with opportunities for performance enhancement that have been eternally limited by the characteristics of crude oil (where variation is limited by choices between say, shale oil or Texas light sweet). “What kind of oil would you like?” Dillon asks. It is a new type of question for a new era.

What’s yo flava?

Indeed, “what kind?” is a question that is beginning to resonate in terms of the product range now available to industrial biotech players. They are making fuels, power, specialty chemicals, intermediate chemicals, plastics, flavors, fragrances, feed, fibers – even cookies. From “there’s a Tiger in your tank” to “tastes great, less filling” – that’s a range of differentiation available not only in the sector, but in the individual, differentiated brand.

In the old days, performance was simply not something where enough value could be created to justify the cost. Synthetic biology is changing that. The time and cost required to develop new high-performance crops is dropping, fast. There is an opportunity to move – in terms of meeting customer needs – from commodity production runs aimed at minimizing cost within a general commodity specification – to campaigns based on individual, or grouped, customer performance characteristics.

Though the logistics can be daunting, there is added value in high-performance, and as biology opens up new opportunities for value capture, and brings down the cost of value delivery through supply chain and engineering – well, that tells you where it might all go. Campaigns as sophisticated and varied as clothing factories – except programmed across bioreactors and fields instead of across the looms. That’s tomorrow, not today – but directionally, the Industrial Revolution drove the loom, and the Digital Revolution in computers and biology may well drive a new level of sophisticated delivery in agrienergy.

The fast crops, the big customers benefit, for now

Which suggests that there is a high premium value in crops that have fast breeding cycles – but also in those which have a well-behaved genetic system.

“In the energy crop space,” Preuss observes, “It’s been crop of the day. A lot of people have suddenly become botanists and scoured the earth for new options. Some of these emerging crops take a lot of time and investment to get the results you need. It’s reinventing the wheel, and I am not sure it’s needed.”

Of course, the other factor is a partner at scale, who “gets it”, and it is intriguing and pleasing to see that Constellation is entering the field in that role – where there is enough scale to invest in relationships and deliver high-value opportunities that improve substantially each year.

Making this MOU between Chromatin and Constellation more interesting than many.

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