Eight under $70: which biofuels ventures can beat out cheap oil?

January 12, 2015 |

liquid fuels balance 011315 smOil prices continue to show incredible volatility. $106 in June, $50 today. Which biofuels ventures have the pro-formas to make money in a tough market?  The Digest investigates.

We have written it elsewhere that “good companies make money in good markets, but great companies make money in tough markets,” and by most accounts, the $50 oil market offers some tough times for biofuels (though we have pointed out here and here that it’s not all doom and gloom.)

It took “Seven Sisters” to build out the world’s oil economy — are there seven (or more) companies that have pro-formas showing biofuels competitive with $70 oil? Turns out, there are. Plus one other in the “low-cost industrial sugars” arena to keep an eye on.

For sure, there are bound to be other technologies coming along — consider this a “preview of comming attractions” rather than an exhaustive list.

Avello Bioenergy

Cost: $57.50 per barrel (gasoline, diesel)

Stage: Preparing for commercial demonstration

Avello Bioenergy is commercializing proprietary technology in the evolving field of biomass fast pyrolysis. Avello brings a novel and innovative pyrolysis oil fractionation approach to the industry.  Based in central Iowa, Avello is positioned in the center of the fast growing Bioeconomy.

Economic projections indicate products will be competitive in the $50 – $65/bbl oil equivalent range, without subsidies. Assumes $60 – $70/dry ton for feedstock cost.

Cool Planet

Cost: $64.00 per barrel (gasoline, diesel)

Stage: Preparing for first commercial

More on the company.

Cool Planet Energy Systems says that it can produce its drop-in fuels for $1.50 a gallon at a $50 million plant producing 10 million gallons of fuel per year. Feedstock should come from within a 30-mile radius to keep transport costs, and production costs, down. It hopes to be producing fuel at its first commercial plant by mid-2014 but needs investors to get there.

Last August, Cool Planet CEO Howard Janzen, flanked by Louisiana Gov. Bobby Jindal, announced that 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.

Ensyn

Cost: $45.00 per barrel (oil refinery intermediate feedstocks)

Stage: Constructing commercial demonstration.

More on the company. 

Back in April, Ensyn and Honeywell’s UOP announced that their pyrolysis process is capable of producing RTP fuel at scale, a crude oil competitor for a price of $45 per barrel (of oil equivalent). Even more startling, the RTP fuel can be upgraded at the refinery – using a modified (but apparently standard refinery equipment – UOP and Ensyn are being cagey about the exact piece of refinery equipment, but our understanding is that is is widely used, particularly in the US — and we assume its the FCC unit).

The Honeywell’s UOP team is reporting yields in the 70 gallons per ton of biomass range with indications that it can reach 90 gallons per ton over time. Good news on feedstock too- its a relatively agnostic process – back in 2010 at the time that Envergent (the UOP-Ensyn joint venture) received a $25M DOE grant to build a fast pyrolysis and upgrading unit at the Tesoro refinery in Kapolei, Hawaii, they said they would test waste agriculture products, pulp, paper, woody biomass, algae and dedicated energy crops like switchgrass and high-biomass sorghum.

Fulcrum Bioenergy

Cost: As low as $68.88 per barrel (diesel, jet)

Stage: Building first commercial

In November 2012, Fulcrum BioEnergy announced that it has successfully secured commitments and is proceeding toward closing $175 million in financing to fund construction of its first municipal solid waste to low-carbon fuels plant, the Sierra BioFuels Plant and to fund the development of future projects. The project is expected to be completed in 2015. $105 million of the $175 million is the USDA loan guarantee, which the company secured in a conditional commitment in August 2012.

As of now, they’ve have completed permitting, front-end engineering and site preparation activities for their first MSW to fuels plant, located in the Tahoe-Reno Industrial Center, in the City of McCarran, Storey County, Nevada. The Sierra BioFuels Plant will be comprised of a Feestock Processing Facility and a Biorefinery that will convert approximately 200,000 tons of prepared MSW feedstock into more than 10 million gallons of SPK jet fuel or diesel annually.

They’ve have entered into long-term, zero-cost MSW feedstock agreements with Waste Management and Waste Connections, two of the largest waste service companies in North America, and a fuel off-take agreement with Cathay Pacific . The Sierra BioFuels Plant is expected to be one of the United States’ first fully operational, commercial-scale MSW-to-renewable fuels production plants.

Joule Fuels

Cost: $50.00 per barrel (diesel)

Joule Fuels will initially commercialize Sunflow-E, with Sunflow-D for the global diesel market to follow. Unlike biodiesel, a low-concentration blendstock, Sunflow-D is comprised of diesel-range paraffinic alkanes and can therefore be blended with conventional diesel in concentrations of 50% or greater, displacing more oil. Moreover, Sunflow-D is inherently sulfur-free and has a very high cetane value. Sunflow-D is now in development with an ultimate productivity target of 15,000 gallons/acre/year at costs as low as $50/barrel without subsidies.

Licella

Cost: $50-$70 per barrel (biocrude refinery-compatible feedstock)
Stage:
demonstration

More on the company.

Economic modelling by the University of Sydney Engineering Department, based on the results of test runs at the Large Pilot Plant (LPP), indicates that at a commercial scale the Cat-HTR technology can upgrade biomass into BioCrude at a cost that is competitive with existing conventional crude oil production.

As we noted last February: “Licella produces drop-in biofuels from a wide range of biomass — the JV with Norske Skog focuses on wood as a feedstock — and uses a supercritical water-based technology and catalysts to break up biomass and reform it into a drop-in fuel hydrocarbon. The compelling features of supercritical are several:

1. It uses all of the biomass, including lignin. So, higher yields, fewer discussions on how to monetize lignin.

2. It provides all its own process heat and water. In fact, it is a net producer of water — almost unheard of for any fuel technology regardless of feedstock.

3. It produces a far more stable bio-oil than traditional pyrolysis — because the process temperature is set low enough not to break carbon double bonds and create unstable free radicals in the oil — those that continue to react long after the actual processing has finished.

4. It produces a blendable intermediate for traditional crude that works in traditional infrastructure.

5. At scale, it is expected to be competitive with fossil petroleum (using the Tapis [Malaysian] oil benchmark) — yet a scale compatible with known regional timber supplies with no need to transit biomass over long distances at great expense.

6. It has a small physical footprint compared to fermentation technologies because of the continuous flow design, and a processing time measured in minutes versus days.

Mercurius Biofuels

Cost: $50 per barrel (diesel, jet)
Stage:
proceeding towards demonstration

More on the company.

The REnewable Acidhydrolysis Condensation Hydrotreating, REACH, process from Mercurius Biorefining converts C5 and C6 sugars from lignocellulosic forrest or agriculture residues to jetfuel or diesel. The first acid-hydrolysis step converting the biomass to CMF (chloromethyl furfural) intermediate is technology invented at and licensed from University of California, Davis.

The REACH process is a chemical catalytic conversion process which operates under moderate temperature and pressure. The condensation step creates the desired hydrocarbon molecule lengths and the third step is hydrotreating to remove oxygen. CMF is a platform molecule which potentially can be used to derive many other chemicals.

Where is the company in its development? It’s moving towards a demonstration at around 10 ton per day scale, then a 500 ton per day commercial facility. As part of the pilot plant preparation the first step has already been proven to work at 400:1 scaleup at MSUBI, Holland MI. The fuel is penciling out at bench scale at $1.06 per gallon in operating cost, with capex in the $3-$5 range, or $60-$100 million for a 20 million gallon execution.  Recent analysis shows that the REACH process could have a positive operating profit down to $38/bbl crude oil price.

Velocys

Cost: $50-70 per barrel (synthetic diesel and jet fuels)

Stage: Financing first commercial plant

More on the company. 

Velocys has developed Fischer Tropsch (FT) microchannel reactor technologies for the efficient, economical and environmentally friendly small scale distributed production of biofuels via biomass to liquids (BTL) and liquid fuels from gas via gas to liquids (GTL). FT technologies have been around for a long time — what distinguishes these are the relatively small-scale, costing in the millions, not the billions.

For now, with diesel about six times more expensive than natural gas, and nat gas projects generally appearing more financeable through traditional sources than biomass-based fuels projects, expect Velocys to focus on natural gas for now. The first customer likely will be Calumet Specialty Products, a maker of oils and solvents that has said it will install a series of reactors at its plant in western Pennsylvania, where it has access to gas from the Marcellus shale. The project likely will break ground next year.

Depending on the feedstock used, the synthetic diesel and jet fuels produced are economic when oil prices are in the range of $50 – $70/barrel. According to Zeus Intelligence, with natural gas at $3.89/MMBtu, they can produce diesel for US$1.57 per gallon; that’s $65.94 per barrel.

And one more…

Renmatix

Cost: $0.04 per pound (industrial sugars)

Stage: Developing first commercial plant

More on the company.

If Renmatix’ technology works at scale, it’s a new game,” we commented a year ago. “Those are 4-cent per pound sugars they propose to produce. That’s well less than 40 cents per gallon for the feedstock. That’s like getting, say, 100,000 tons per year out of a full-scale Renmatix plant at the something like $20-$30 per bone dry ton of biomass. Plus, they’re talking less than $1.25 per gallon in capital costs.” To put this in context, corn sugars (based on $5 corn) run something like $18 cents per pound, just in terms of the feedstock – let alone the processing to extract them. Those sugars can be fermented by a variety of advanced technologies into all the major fuels and chemicals.

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