Hot Biorefinery Projects of the Future, and Now: Canada in Focus

October 4, 2011 |


Imperium, Rentech, Enerkem outline major advanced biofuels projects for Canada, Canadian feedstocks; XTL presented as strongest option for near-term scale.

In Canada, biofuels leaders and technologies representing projects and technologies in Canada, China, and the US gathered for the annual Biofuels International event in Calgary.

A gathering of key technologists, financiers, feedstock developers, as well as policy makers, looked closely at opportunities for advancing Canadian biofuels and bio-facturing.

Dr. Murray McLaughlin, chair of the Industrial and Agricultural Policy Committee of BIOTECanada, said “Canada is focused, bioindustrial options are here, consumers demand change, and that creates a path to market for sustainable chemistry and biofuels.”

Peter Ryus of the Roundtable on Sustainable Biofuels outlined a “proposal for Canada”, to identify areas of overlap between RSB and locally relevant regulations, create a comparison report, and develop tools for Canadian operators to meet sustainability goals. Ryus said that the proposal, which is expected to be jointly backed by RSB and a major industry sponsor, would help accelerate the adoption of sustainability standards in Canadian biofuels.

Making global project development work: Rentech CEO Hunt Ramsbottom

In a keynote address, Rentech CEO Hunt Ramsbottom outlined the company’s plans to develop its Olympiad project in western Ontario, producing renewable diesel and jet fuel from a 1.3 million tons of wood that have been awarded by the Canadian government to the project, as the government attempts to restore economic activity to a region devastated by cutbacks in the pulp & paper industry, as well as accelerate its move towards sustainable fuels.

Ramsbottom said that companies looking at international expansion generally ask themselves four questions before proceeding: is there a need?; is the local environment welcoming?; does the company have the time and resources”; can the company afford to miss out?” He encouraged international project developers to fully understand and develop partnerships with federal, state, and local officials, the local community, offtake customers, and environmental community.

He said that Rentech’s screening, scoping and development phases would last more than two years before all the financing, permitting and partner-building activities were completed, and said that the key piece in the project, a proposed award of up to C$200 million by the SDTC, was still going through due diligence.

Ramsbottom aid that a catalysts for the project on the Canadian side were the recognition that the pulp & paper industry had been decimated by changes in global demand and was unlikely to return, leaving large numbers of communities, once tied to the pulp & paper industry, without an economic driving force for jobs. He also noted that the Olympiad project would create 23 million gallons of fuel per year with a 121 percent reduction in greenhouse gas emissions on a lifecycle basis, and would employ up to 1,000 workers during the construction phase.

Financing: Alberti Advisors principal, Doug Cameron

In commenting on trends in financing advanced biofuels technologies, Alberti Advisors principal Doug Cameron said that, for seed and Series A rounds, investors generally looked for strong IP, deeply credible, passionate founders; exciting, big disruptive ideas; and clearly articulated, deeply though-out business models. Cameron said that early-stage investors were comfortable with technology risk, but were uncomfortable with market, regulatory or government risk. In raising series B and series C rounds, he said that later stage investors would look for deeply credible management teams, proven technologies at the pilot or demo scale, a well-articulated business model, and the presence of strategic investors to provide market access and technology validation. He said that investors at these stages were comfortable with commercialization risk, but uncomfortable with regulatory risk.

New 100 mgy renewable diesel, jet project: Imperium Renewables CEO John Plaza

In outlining Imperium Renewable’s plans for its Biorefinery of the Future, Imperium CEO John Plaza said that his company would shift, in its next phase of development, towards drop-in fuels with a proposed 100 million gallon facility in Washington state, build on land adjoining the company’s 100 million gallon biodiesel facility. Plaza said that the company would remain committed to its biodiesel business, which has been profitable since Q4 2009 and is running at near-capacity, but was unlikely to expand because of the stronger long-term demand for renewable diesel and jet fuels. Plaza also said that working capital for first-generation biodiesel was extremely hard to obtain at commercially viable rates.

“Lipids are important,” Plaza commented, “but to really get into the millions of barrels, it is going to be about carbs.” Plaza said that US military demand for aviation and marine fuels could reach 125 million gallons per year, or the entire output of his proposed facility, and Plaza strongly encouraged attendees at the conference to “recognize that the middle level distillates have more demand for replacement than the lighter cuts like gasoline.”

Plaza said that his company is targeting a construction cost of $3 per gallon for its proposed project, and hailed the recent agreement by the EPA to OK Canadian feedstocks for the purpose of RIN credits.

Plaza said that the company had been investing in the development of its technology with PNNL since 2010, and its alcohol-to-jet technology would convert alcohols from the beer column, not requiring the distillation and finishing process to be completed in making ethanol, which would reduce the cost of the alcohol stage of the process.

Bond financing: Stern Brothers MD John May

In financing, Stern Brothers managing director John May said that the majority of advanced biofuels projects were obtaining debt ratings of BBB to single B, which indicated the presence of material technology risk, and that the non-investment grade ratings were substantially increasing the cost of capital for early stage ventures that were unable to secure loan guarantees. May said that the “DOE loan guarantee program is probably dead for biofuels for the foreseeable future,” but held out hope that the USDA program would continue to issue loan guarantees so that debt and equity could be raised for the projects.

Absent an expansion of the loan guarantee program, May pointed to the potential for insurance companies like AIG to issue technology risk insurance, which could replace loan guarantees with commercial projects. He noted that, while such products had already begun to emerge in renewable sectors such as wind, which had relatively stable technology platforms, the due diligence that would need to be undertaken was, as with the loan guarantee programs, potentially substantial.

May added, in a discussion panel with Rentech CEO Hunt Ramsbottom and Alberti Advisors principle Doug Cameron, that strategic investors were critical but that the partners had to have strong balance sheets if they were to be expected to add weight to the financing options for the emerging technologies.

The panel discussed the concept of technology risk in some detail. Cameron noted that “technology risk” was a term used by “many flavors of investors,” for different purposes, and in some cases as a unassailable reason not to invest when the investor was simply not interested in the technology’s market opportunity. He said that venture capitalists understand and are comfortable with technology risk, which they expect to solve by hiring leading scientists and engineers with the funding that VCs will provide. But he said that, increasingly, some VC and investors “simply don’t like or understand technology, are looking for a sure thing,a nd use ‘technology risk’ as a means to say no.”

Ramsbottom said that technology risk was applied by certain prospective investors for some Rentech projects, even though the underlying Fischer-Tropsch process had been sued successfully, in South Africa, for more than 45 years to make renewable fuels. He said that the market had simply become much more conservative about risk in general over the past 4-5 years, noting “they may hide behind technology risk, but some of these investors don;t want to take any type of risk.”

Waste-to-biofuels: Enerkem VP Marie-Helene Labrie

In presenting progress on Enerkem’s projects in Alberta and Mississippi, Enerkem VP for Governmental Affairs, Marie-Helene Labrie said that the company looked for markets where there was effective government support all through the project from R&D, pilot & testing, commercial demonstrations, and full scale commercialization, noting that a “suite of government policies” are needed to foster new commercial industries as opposed to simply making investments in long-term R&D and assuming that market forces would ensure the development of new industries.

Labrie said that a suite of policies should include mandates, capital programs such as investment tax credits, production incentives for the early stage of industries to make them competitive with fossil fuels while still at small scale, infrastructure support, and R&D tax credits to continue to foster reinvestment in process improvement.

The new oilseed platforms: Linnaeus CEO Jack Grushcow

In outlining opportunities for oilseeds in Canada, Linnaeus CEO Jack Grushcow said that camelina offered the strongest oilseed opportunities in the north. He cited the large acreage potential, the short growing season required, the drought tolerance characteristics, its compatibility with convention farm machinery, its value as a rotational crop, and the few insects that targeted the plants. The major opportunity, he said, was that its genetic potential had just begun to be tapped.

The bull market in biodiesel: REG marketing chief Jon Scharingson

In looking at the growth potential for biodiesel, REG marketing chief Jon Scharingson said that REG expected the North American biodiesel market to reach 1.28 billion gallons by 2013, up from an expected 800 million gallons in 2011, and up from a low of 311 million gallons in 2010. Scharingson said that with RIN prices at $3 per gallon, and uncertainty over the biodiesel tax credit for 2012, he expected a very strong 4th quarter for producers as blenders sought to maximize their gallons while the tax credit offered opportunities for lower prices. Imperium Renewables CEO John Plaza said that the disappearance of the tax credit would make US biodiesel exports to Canada more difficult, and could result in stronger domestic production opportunities.

XTL, the path to scale: Accelergy CTO Rocco Fiato

A major trend emerging from the conference was a broad agreement on the strong potential for XTL fuels – that is, fuels that combined both fossil and biomass inputs, to provide the opportunities for massive scale in the near-term. Accelergy CTO Rocco Fiato outlined his company’s XTL technology and updated delegates on a 1 billion gallon per year XTL project, using both coal and biomass elements, which he expressed confidence would receive Chinese approval. Fiato said that the combination of using coal as a feedstock to provide low-cost energy inputs, and to dial in biomass inputs or use bio-based CO2 remediation (such as growing algae from waste CO2 as an alternative to ammonia-based fertilizers) represented the right approach for providing new domestic sources of energy at affordable costs in the near term.

Fiato criticized coal projects that used the current generation of carbon-capture systems, saying that the current technologies imposed a 25 percent parasitic load on the process, and doubled the cost of electricity.

The Biofuels International conference, co-produced by the Digest, continues today in Calgary with presentations from Ricardo, Agrisoma, Inbicon and Catchlight Energy, as well as provincial showcases including spotlights on projects in Ontario and Alberta.

Category: Fuels

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