The Waters and Underwaters of March: heard on the floor at World Biofuels Markets

March 16, 2012 |

In the Netherlands, World Biofuels Markets has ended for another year, and after the industry’s grandest get-together, attendees and observers are left to sort out the news, the rumors, the scuttlebutt, and what is in most cases is a bumper-crop of business cards.

Here are some of the themes we picked up on in Digestville as we sort through our notes from the seventh annual WBM.

Can Brazil get its ethanol mojo back soon?

Sugar prices are booming, good news for producers in Brazil, India and elsewhere, but in Brazil it has created, shall we say, a certain reluctance to maximize ethanol production.

Part of the reason for high prices, of course, has been poor harvests, which puts pressure on the revenues. That helps make ethanol production levels, which brings in a lower profit than pure sugar at the moment, the controversial subject that it is in Brazilian policy circles.

To this point, Brazil’s government has been acting cautiously with respect to the broad powers of regulation which they recently acquired over ethanol production. “So far, the impacts from regulation have been relatively benign,” BP Biofuels chief Phil New told the Digest. The government has been working primarily on addressing the prospect of shortages that can come during the between-season period, when sugarcane is not in production due to heavy rainfall – that waterlogged period memorably captured by Antonio Carlos Jobim in his “Waters of March“.

Best comeback – jatropha, via JOil

Jatropha got a boost this week when JOil reported that they were recording an average of two tons per acre of seeds per hectare in first-year harvesting. Now, jatropha generally needs to hit around 5 tons per hectare to make sense financially – so why is this news? That’s a first-year harvest. In times past, typical performance for jatropha was zero production at all in year-one. Early flowering has been a key target for JOil, which also has been working on bringing down overall tree size to reduce harvest time and cost. The company has been working with with a pair of varietals, S1 and S2, in field trials in India, Cambodia, and Indonesia. Following the company’s acquisition of tissue-culturing technology last year, expect that the next wave of releases from the company will incorporate advanced biotechnology as well as tradition hybridization efforts.

Overall, it’s simply good news for jatropha that JOil’s yield improvement efforts are bearing fruit, to coin a phrase. It’s not only good for jatropha’s performance, but its image.

Closest moment to a foodfight

Well, it’s bound to be controversial when you have Energy Victory author Robert Zubrin and Oxfam policy advisor Sander van Bennekom in the main keynote sessions on the same morning. There just isn’t much common ground on food vs. fuel or indirect land use change there. Zubrin delighted the crowd with his typically outspoken remarks – especially when he addressed indirect land use change. On the sidelines, he summed it up for the Digest. “You could invent an amazing vitamin that adds years to your lifespan – think about it, you’re going to eat a lot more food, population is going to go up, and you’re going to get land use change. Everything good for human health creates land use change. Why are we even talking about this?”

Most intriguing technology not often heard about – Kiverdi

Take a couple of companies that have generated huge excitement over the years – for example, the gas fermentation technologies that are at the core of INEOS Bio, Coskata and LanzaTech; and the advanced fermentation technology used by Solazyme to produce renewable oils, via micro algae, from sugar.

What keeps those four companies from owning the Planet Earth between them?

So far, (aside from the fact they they are just building capacity now), Solazyme has not been able to get a reliable, at-scale source of low-cost sugars, limiting their opportunities for world domination in, say, the fuel markets; while the gas fermentation technologies, that can use super low-cost, noxious feedstocks such as industrial off-gases and municipal solid waste, have generally been producing ethanol, and face issues like infrastructure, blends walls and so on.

Now, take something from each. What if you could ferment high-value renewable oils directly from industrial off-gases? That’s the Kiverdi technology. Their target is higher-value chemicals – not unlike Solazyme, although their technology appears to be far less programmable and less likely to produce the longer chain oils that feature in cosmetics, fragrances and flavors, just yet. And it’s early days for an early-stage company. But its just about the most interesting technology in some time to get past proof of concept, and its notable that the company landed a Sustainable Biofuels Award at WBM this year, for “Leader in Bio-based Chemical Industry”.

Gasoline prices

There seems to be an all-out push in the United States to highlight how much the US Navy paid for test volumes of a high-tech fuel based on advanced algal fermentation. For the record, in batch of 20,000 gallons delivered so far, the net cost was around $400 per gallon. Why? R&D expense to develop the fuel to military spec, amortized over 20,000 gallons instead of say, the billions of gallons of a technology delivered at scale.

Senator John McCain of Arizona speculated that the Navy’s biofuels program “will [maybe] be another Solyndra situation,” and said that he planned to introduce amendments to the Pentagon’s 2013 budget to address what he called an unacceptable investment in green fuels at a time of shrinking defense budgets.

For the record, Navy Secretary Ray Mabus said that the Navy would only purchase biofuels in large-scale quantities if and when the fuels were available at commercially competitive prices.

Now, the question there, is, what exactly is a completive price? Down in Washington DC, gas prices have risen to $5.39 per gallon for regular unleaded. With respect to biofuels we know the ethanol content in there is wholesaling for $2.25 per gallon.

And it does raise the question as to why Senator McCain is complaining about an $8 million government biofuels buy, fuel for testing and certification purposes, when gasoline prices have rises $2 per gallon in some markets. $2 per gallon increases, taken nationally, would represent more than $250 billion in added costs to American consumer. Distraction play, anyone?

It wouldn’t be WBM without a rumor about consolidation in the enzyme sector

There’s been a lot of activity in the world of enzymes of late. Notably, Novozymes launched their Cellic CTec3 cellulase enzyme product in recent weeks, while DSM committed an initial $250 million into the POET-DSM cellulosic ethanol joint venture, which was particularly intriguing to observers because, at present, DSM has not announced that it has a competitive cellulase enzyme product ready for market.

Toss in the loss of a CEO and CFO at Codexis and the “what exactly is Dupont going to do?” speculation that surrounds the next moves at Genencor following Dupont’s acquisition of Danisco. Well, you have all the ingredients for a robust rumor mill.

Let’s see if we can summarize the rampant and unfounded speculation. Novozymes acquires Codexis. Novozymes sells off its cellulase enzyme business. DSM acquires Codexis. DSM acquires Dyadic. Genencor acquires Codexis. DSM licenses technology from any of Genencor, Codexis or Dyadic. One of the few theories we haven’t heard is that Lady GaGa acquires Codexis.

All of the speculation. Completely unfounded, in terms of what is publicly known. But not without merit.

IPO’s: Who’s underwater now? Booking tickets for Pamplona, anyone?

Some of the recent wave of IPO stocks are on a comeback right now.

Now, Gevo’s renaissance will likely await the opening of its isobutanol plant in Luverne some time in the second quarter (and some more visibility in the Butmax-Gevo IP war). Codexis is probably deeply underwater until it appoints a permanent CEO and CFO and announces any change in strategy. KiOR will make a comeback after it assembles it full financing for its planned capacity-building drive, and Amyris will likely make a comeback after solving its scale-up issues and restoring guidance to analysts.

But Solazyme, Ceres and Renewable Energy Group have been doing quite well of late.

Since we last published the chart three weeks ago, SZYM is up 22 percent, got a love letter from Jim Cramer, and is back to within 12 percent of its IPO price and is 106 percent up from its lowest.

Over in feedstock world, CERE refuses to lose. It has stayed consistently ago above its IPO price of $13, and is now trading at $14.99, 15 percent above IPO. In biodiesel land, REGI is now trading above the IPO price of $10, up in yesterday’s trades to $10.50.

With CDXS, AMRS, KIOR still trading near their lows, and GEVO a few months from the kind of visibility on isobutanol that retail investors like – it’s too early to say ‘bull market’ but certainly there’s been some fresh oxygen in recent weeks. And, should GEVO switch over successfully to isobutanol at its Luverne facility by the end of June, as expected – we may see the running of the bulls in biofuels just around the time that they generally run in Pamplona on July 7th.

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