Cool Planet to invest $168M in Louisiana – stealthy biotechnology heads for scale

| August 25, 2013

The complete Cool Planet story. What is it? Why transformational? What are the next steps?

New venture will convert wood waste to gasoline

In Louisiana, Cool Planet Energy Systems CEO Howard Janzen, flanked by Louisiana Gov. Bobby Jindal, announced the company will build three bio-refineries in Louisiana with a capital investment of $168 million. The project will consist of modular biomass-to-gasoline refineries in Alexandria, Natchitoches and a site to be determined. Cool Planet will create 72 new direct jobs, averaging $59,600 per year, plus benefits. Additionally, LED estimates the project will result in 422 new indirect jobs, for a total of 494 new jobs. The company estimates 750 construction jobs will also be created by the project.

cool-planet

Its not hard to see why everyone has been excited — sometimes laced with skepticism — about Cool Planet. With claimed operating costs of $1.00 to $1.15 per gallon, and adding another 13 cents or so for the capital costs (amortized over 15 years) – well, you get the picture. It’s drop-in, renewable gasoline, in prospect, for about half the price of the incumbent fossil fuels.

Now those claims were built around – to some extent, an emerging feedstock, miscanthus. That was the secret sauce in reports of 4,000 gallons per acre yields for production of renewable gasoline,

Ahem, there’s been a change.

Now, Cool Planet will harvest wood waste and forest byproducts to make gasoline at its initial commercial-scale facilities in Louisiana. Each bio-refinery will be capable of producing 10 million gallons of high-octane, low-vapor pressure gasoline for strategic distribution through existing market channels and for blending at Louisiana refineries.

What we don’t know at the moment is how the change in feedstock will impact the economics. Those 4000 per acre yields were based on the 25 ton per acre yields that Repreve cites in its website. From a processing company’s point of view — as long as the process yields are the same, and the acquisition cost is the same, the economics will be the same. We’ll be standing by on that.

The Cool Planet system

The technology is based on the principles of pyrolysis but is not your Dad’s pyro system – not by a long shot.

For those less familiar with pyrolysis, think of cooking dinner on a stove. When you heat up food biomass in a skillet, you are driving off the water and beginning to dehydrolize the biomass – in short, taking off some hydrogen and a lot of oxygen – and it browns and blackens as the carbon ratio comes up and the chemistry begins to change.

At higher temperatures and lower pressures, biomass is converted to a soup of volatile gases which, if cooled, would have thousands of different molecules that, when cooled down to liquid form, continue to react with each other – hence, why pyro oils have struggled with stability. You start with one soup, then you get another as all the reactions take place. The larger the chamber, the more unpredictable reactions – hence why pyrolysis systems have had tough issues scaling results from bench to commercial scale.

The Cool Planet idea is essentially one of sequestration. Instead of running the biomass over one magic catalyst in a fluidized bed reactor, and then trying to do something with the resulting pyro oil, Cool Planet’s systems is based on a series of reactions.

Heat biomass into a gas, pass over a catalyst, cool into a soup of liquid molecules, pull off the ones you need (e.g. the gasoline-range molecules); then repeat the process numerous times, with different temperatures and pressures at each reactor “station” and unique catalysts, until you have converted all the volatile gases into gasoline-range molecules. You are left with a residual bio-char, which can be used as a soil enhancement material to boost biomass yields.

“The biomass fractioner is fundamentally different than flash pyrolysis, Cool Planet CEO Mike Cheiky told the Digest, “because we fundamentally deconstruct biomass in an orderly fashion, to preserve as much bond energy as possible. By decomposing in orderly process, we dig deeper into the fragments, and this gives us the freedom to prices the carbon in any way we want.But I don’t want to fixate on one process. What we are discussing today is just one of many process pathways, and we are not wed to any specific way; we have the flexibility to do that. In your normal VC set up, if your technology doesn’t work, you’re done and they sell off the parts – think of Range Fuels as an example. We are on a mission, not about a process.”

Costs

The company says it will have a very low CAPEX system, commencing with its fourth-gen design available in 2013, which it projects will have a CAPEX of $2 per installed gallon of capacity, and will move down in future releases. The company says that, based on the yields it is achieving – and depending on local labor costs – it expects its 40 million gallon reference industrial-scale plant to produce renewable gasoline at $1.00-$1.15 per gallon, and based on biomass market prices in the 60 cents per gallon range.

Financing

As of June, Cool Planet Energy Systems had closed on $29.9 million of its anticipated $100 million D-series financing to build its first commercial biofuel production facility. Its patented thermo-mechanical process uses small, modular facilities to take “the plants to the biomass instead of bringing the biomass to the plants.” The company currently operates a pilot facility in Camarillo.

Timeline to scale

Cool Planet will begin construction in January 2014, with the first site at the Port of Alexandria beginning operations in late 2014. Construction will begin on the second bio-refinery at the Port of Natchitoches by the summer of 2015, with a completion date in the summer of 2016. The third site is scheduled to come online in late 2016 at a Louisiana site to be determined. Cool Planet also will establish a regional office at the Port of Alexandria, where the City of Alexandria plans to make more than $500,000 in infrastructure improvements.

Business model and deployment

The company’s business model calls for developing 400 of the micro-refineries across the U.S. in the next decade. Major Cool Planet investors include BP, Google Ventures, Energy Technology Ventures (GE, ConocoPhillips and NRG Energy), North Bridge Venture Partners, Shea Ventures and the Constellation division of Exelon.

So, what’s the scale up plan? Cool Planet says that it intends to mass produce refining equipment, are built in modules on moveable skids, a flexible modular open architecture system, which makes the roll-out faster and field-upgradable.
Cool Planet is on its third generation design now, and expects to have its first mass producible plant open in the September period, producing what it calls 400,000 gallon per year sub-scale systems, and is expecting a fourth generation design by Spring 2013.

Processing technology

Using a proprietary process, Denver-based Cool Planet also will market biochar, a byproduct of the refining process that will be used as an agricultural supplement to boost water retention and reduce carbon released from crops. This process makes Cool Planet’s overall production cycle a carbon-negative process – meaning the project will achieve a net reduction of greenhouse gases.

The process also generates value through biochar production, which can be returned to the soil, enabling fertilizer and water retention for increased crop productivity and more robust plant health. The process can be carbon-negative, removing up to 150 percent of the carbon footprint for every gallon used, reversing the consequences of fossil fuels.

Scale

Cool Planet’s production plants will be 100 times smaller than a typical oil refinery, but the company’s largely prefabricated systems can be moved near concentrated biomass sources, reducing transportation costs and increasing efficiency. Those savings will enable the company to produce gasoline that’s competitive with oil refineries at prices as low as $50 per barrel while eliminating the need for government fuel credits or subsidies.

Reaction from Louisiana

Gov. Jindal said, “These bio-refineries are great news for Alexandria, Natchitoches and our entire state. For decades, Louisiana’s oil and gas leaders have teamed up with our remarkable workforce to pave the way in energy production for our nation and the world. Because of our constantly improving business climate, abundance of resources and dedicated workforce, we are now setting the pace for innovative new technologies that harness Louisiana’s renewable energy resources and supply advanced fuels to meet our nation’s energy demands.

LED began working with Cool Planet on potential Louisiana locations in September 2012. To secure the project, Louisiana offered the company a competitive incentive package that includes a $750,000 Economic Development Award Program grant to offset infrastructure costs, along with the services of LED FastStart® – the nation’s No. 1-ranked state workforce training program. Cool Planet also is expected to utilize the state’s Quality Jobs and Industrial Tax Exemption programs.

“Cool Planet’s decision to invest in Central Louisiana reinforces two important messages,” said President Jim Clinton of the Central Louisiana Economic Development Alliance. “First, Central Louisiana is a great location for making things. And second, Central Louisiana is emerging as a national leader in high-tech biomass and renewable energy applications. We are very pleased to welcome Cool Planet to Alexandria and Natchitoches, and we look forward to their continued growth in the region.”

Reaction from Cool Planet

“Cool Planet chose Louisiana for multiple reasons, including abundant renewable feedstock supply and a business-friendly attitude toward innovative companies like ours,” Cool Planet Energy Systems CEO Howard Janzen said. “The support we have seen here enhances our unique distributed production model, which envisions locating small bio-refineries near biomass sources to keep both operating and capital costs low. Our goal is to have operating and capital costs that are competitive with conventional oil industry gasoline production costs.”

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