8 billion gallons of new cellulosic biofuels capacity is mandated for 2016-2019 – here’s a sneak peek at technology that could transform the economics.
With ethanol trading at $2.53 per gallon for the October contract on the Chicago Board of Trade, fans (and stakeholders) of cellulosic ethanol have reason to be hugely excited by the news that POET closed its loan guarantee for the 25 million gallon Project LIBERTY plant at Emmetsburg, Iowa.
Especially given that last November the company revealed that it was producing cellulosic ethanol at $2.35 per gallon, “capex, opex and no subsides,” and that the company expects to be at $2.00 when Project LIBERTY opens in 2013. That’s down from $6.00 per gallon when the pilot in Scotland, SD first opened.
Now, RBOB gasoline is trading at $2.66 per gallon for the same period – so, on the BTUs, ethanol fuel needs to reach $1.80 per gallon to have the same energy equivalence. Yes, there’s the price of carbon to consider, and there are RINs.
But we have far to go in creating the low-cost renewable energy systems that drive powerful industrial economies.
The Next Wave
Which is one of the reasons why engineers and executives alike are starting important discussions about what the second generation of cellulosic ethanol plants are going to look like. The first generation designs that will come out in the 2012-15 wave will be functional – and transformative compared to the prices per gallon that were being achieved in 2007-2010 – but not as profitable or viable as their operators would like them to be. As is always the case in manufacturing.
On the conference circuit this year, there is a tremendous amount of focus on getting steel into the ground and making first generation of cellulosic biofuels a reality. So, there is talk about financing, and policy, and building out the supply chain. As it should be.
Discussions about the 2016-2019 cellulosic biofuels fleet of manufacturing sites – what they will look like, and how they will change – are less common. Yet the second generation is where the big gallonage will happen.
In 2015, the Renewable Fuel Standard calls for 20.5 billion gallons of renewable fuels – that’s 15 billion gallons of corn ethanol and 5.5 billion of everything else, a lot of which will be expected to be biodiesel, renewable diesel, and possibly some Brazilian sugarcane ethanol.
By 2019, that number has jumped to 28 billion gallons – 8 billion gallons of capacity added to the system in those three years. At 50 million gallons per plant (and that’s on the high end – POET is looking at 25 million gallons per plant, in its current plan), that’s 160 new biorefineries.
Certainly there’s no reason to believe that industry is not capable of constructing at that rate, considering the pace of construction during the 2006-2008 ethanol boom.
But there will have to be a transformation shift in the enthusiasm of investors, which means a transformational shift in the economics that will further de-risk the scale-up.
Delivering pretreatment inside the feedstock
One of the most transformative cost shifts we have heard about in a long time – one at a very early stage, but ready for that 2016-2019 period, comes from Agrivida.
Now, if you’ve been following the story of Syngenta’s Enogen corn this year, that will be helpful in communicating what AgriVida is up to.
Enogen is that recently approved, transgenic corn, grown specifically for biofuels production, containing corn amylase – a special set of enzymes that activate at the dry-grind mill, after the corn kernels have been harvested. Those enzymes begin the pretreatment process – essentially, they soften up the corn.
What makes that process transformative is that the enzymes are grown by Mother Nature as the crop grows. No need to grow them in a fermentation tank, using (say) fossil fuel inputs. No need to transport the enzymes to the processing plants. Pre-treatment costs come down, perhaps dramatically, plus enzyme loads.
OK, that’s first generation corn ethanol. What about cellulosic biofuels – can the same thing be done with corn stover?
That’s what Agrivida is up to.
“We are expressing all the cell wall degrading systems in the plant,” explains Agrivida CEO Michael Raab, “as the core part of our technology. We can control the activity of those enzymes so that in the plant we can express all the enzymes in dormant form. After harvest, we activate the enzymes in the material, so you don’t have to pretreat in the same way. It makes the process lower temperature, with a moderate PH, and takes out a lot of capital costs and those high costs of dilute acid pretreatment. Also, we really reduce the enzyme loading.”
Now, AgriVida is no fly-by night company. Its investors include Kleiner Perkins Caufield & Byers, Prairie Gold Ventures, DAG Ventures, Presidio Ventures, NorthGate Capital, and incTank Ventures, and its programs are supported by grants awarded by the National Science Foundation, the U.S. Department of Energy, including an ARPA-E grant, and U.S. Department of Agriculture.
So, what kind of transformative savings are we looking at?
“We use costs that are talked about publicly, for example the $2.35 per gallon figure that is frequently talked about., and within that there is $0.50 in enzyme cost and $0.60 for pretreatment when it includes capital depreciation. With our system, we would be in the $1.55 to $1.65 range,
taking out $0.40 in enzyme cost and $.30 in pretreatment.”
OK, Raab has my attention now. Combined with any improvements in feedstock costs, that definitely begins to bring cellulosic biofuels (made from corn stover, in this case), into the kind of cost ranges that get investors excited.
It’s the goal that BP Biofuels chief Phil New has been setting for his team, and by extension for the industry. His focus, he says, is not to make advanced biofuels but advantaged biofuels.
So, where is AgriVida in terms of timing?
“We are currently making three enzyme plants that will provide majority of that savings. In 6-9 months we’ll pick a leading candidate. from there, we’ll be working with the major corn seed producers, and we already have a deal with Syngenta, to integrate their corn lines. We also have the regulatory process because the grain will be used for animal feed, that can be anywhere from 4-6 years because the USDA will have us do a number of field trials at different sites and increase the acreage each year. Also, we’ll be bulking seed in those years, and we have to generate the seed to cross it into different lines. We’ll be ready in that 2015-17 period and we don’t see the industry running away before then.”
Corn stover great – what about other cellulosic crops?
“In our feedstock roadmap, we are working on corn stover, sorghum, and switchgrass. There’s
no reasons why our process wouldn’t work in trees, miscanthus or cane, but we selected those three, for reasons of focus, and because a lot of the accompanying technology for transgenic plants are fairly well implemented in those. We’ll build it out in other crops later.”
“The processor would get a license, because in this case it would be integrated with their overall design because, for example, they would have the opportunity to process at low temperatures, or less than 100C, and take advantage of lower cost pretreatment. From there, we would work with growers to contract grow and supply to the processor.”
Always working with the processor?
“The model is very crop dependent. The easiest case if where the processor is vertically integrated – as you see in the case of sugarcane, where the mill owner also owns the plantation. There, it’s easiest to partner with producers – they grow, harvest, and we get a royalty. With crops like corn, the system is far more complex, and we are having discussions with the seed companies, the growers as well as producers to find the right fit. But cellulosic processing tends to be composed of sophisticated groups of companies, even now, working cooperatively together.”
The Bottom Line
So, there’s a look at the future – part of what we are identifying as a move towards an integrated “system of systems” to produce advanced biofuels at scale, involving a highly sophisticated coordination between all companies along the supply chain.
The good news is that there is substantial financial promise in the model. A reduction of between 70 and 80 cents per gallon by changing the feedstock and feedstock prices is, as they say, not nothing. That’s a third.
Big shift, worth keeping in sight as the industry goes through the necessary agonies of building out its first generation integrated biorefineries.