Joule says “will go commercial in 2017”: solar fuels on the way

March 23, 2015 |

joule-unlimited“Staged industrialization process” beginning; exotic yields from an exotic organism that uses CO2, water and nutrients and secretes ethanol or diesel.

Former Total, Alcatel CEO Serge Tchuruk is now at the helm as the Joule team updates The Digest on the progress in New Mexico.

For fans of the “solar renewable fuels” company Joule, there’s significant news from Bedford: the company has announced that it will undertake a “staged industrialization process”, to culminate in a 1000-acre production plant starting construction in 2017.

Now, you might think that a 1000 acre facility — not much larger than say, a single commercial scale farm, might not be all that significant. But take into account the extraordinary productivity that is expected from a commercial Joule renewable fuels operation.

The Joule system - a scaled process, as of October 2014, in Hobbs, NM.

The Joule system – a scaled process, as of October 2014, in Hobbs, NM.

The company has previously indicated that it could produce up to 15,000 gallons of diesel fuels, per acre per year, and as much as 25,000 gallons per acre per year of ethanol — so think in terms of 15 million to 25 million gallons for this first commercial facility, as an ultimate nameplate capacity.

That technology again — Liquid Fuel from the Sun?

They call it Helioculture — which probably sounds something that worshippers in ancient Egypt practiced. Essentially, it means that Joule has developed a modified cyanobacteria that takes the same inputs as algae or plants — that is, CO2, sunlight and some nutrients including phosphorus, potassium and nitrogen — but instead of producing a plant or a bloom of algae, it secretes transportation fuel, which is then harvested and is ready for use in your car or jet.

Consider that fossil fuels are thought to be the result of ancient algae being processed by geologic forces over 50-60 million years into petroleum. So, basically what you have here is a time machine, producing fuels from the same ultimate inputs, but no waiting around for 60 million years.

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And, you produce the fuels directly for roughly the same price that it costs to dig up petroleum. And you have, ahem, a little more contol over where you produce them.

As the company says: “While most competing technologies require chemical upgrading before use, Joule’s products require no further costly processing before blending directly at fuel depots, resulting in finished products that require no engine modifications. In addition, Joule’s platform does not require arable land suitable for crop cultivation or potable water. This ensures that Joule does not compete with food production and has an overall more positive environmental impact.”

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How do they get those production efficiencies?

Why the extravagant productivity? After all, corn ethanol generates roughly 490 gallons per acre for corn ethanol (and an additional 170-190 gallons per acre for cellulosic biofuels, if corn stover is removed from the same field).

It comes down to the production efficiency of the organism — a set of cyanobacteria that directly produce alcohols and alkanes, rather than producing an entire plant of which only a fraction is converted to ethanol. Plus, the photosynthetic efficiency of the Joule process. As we reported in 2011 from a peer-reviewed article in Photosynthesis Research:

“The solar-to-product conversion efficiency of Joule’s direct, continuous process for producing diesel, ethanol and chemicals is between 5 and 50 times greater than any biomass-dependent process, and gains additional efficiencies by avoiding downstream refining…Joule’s combined advances in genome engineering, solar capture and bioprocessing result in photosynthetic conversion efficiency of more than 7% relative to available yearly solar energy striking the ground.”

We might add that there’s considerable excitement over diesel, and possibly jet fuel too, as drop-in fuels that can be produced by the process — although we expect ethanol to be the primary initial product.

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Costs

Last we have on cost? In the material supplied by Joule for the Digest’s 5-Minute Guides, we have:

Diesel = $0.48/gallon with subsidies ($1.19/gallon without subsidies)
Ethanol = $0.60/gallon with subsidies ($1.23/gallon without subsidies)

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At the time, these were based on targeted productivity of up to 25,000 gallons of Sunflow-E (ethanol) per acre annually — so consider these targets for the future rather than cost structures what would be likely achieved at a first commercial. And, there’s some distance to go before the company’s economics are fully proven out at scale, so let’s consider those an advisory.

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At the time we collected that data from Joule, they indicated that it included both capital and operating costs, 70/30 debt equity, 15 year depreciation, and reasonable interest rates. That’s lower than any other project we are currently aware of on the diesel side.

Commercialization pathway

In 2015, Joule plans to establish a coalition of industrialization partners: global brands with an increasing commercial need for CO2-recycled, carbon-neutral fuels.  These companies will join Audi, Joule’s existing strategic partner, and other collaborators to accelerate the development of carbon-neutral fuels at large scale. Joule will continue to showcase commercial scalability of its systems by expanding its facility in Hobbs, New Mexico and optimizing its process with increasingly productive biocatalysts.

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Meanwhile, Joule has become the first organization to gain clearance from the U.S. Environmental Protection Agency for commercial use of a strain of a modified cyanobacterium for fuel production — in this case, at its Hobbs facility.

An award from Frost & Sullivan

Earlier this month, Joule won the 2015 Technology Innovation Award by Frost & Sullivan. The award, which recognizes organizations addressing unique and critical challenges, was presented to Joule for its ability to recycle waste carbon dioxide (CO2) into drop-in liquid fuels using sunlight.

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“Joule Unlimited Inc. has developed a breakthrough photosynthetic technology that produces drop-in fuels in an efficient single-step conversion process using waste carbon dioxide feedstock and waste brackish water. The company’s unique technology successfully addresses the challenges faced by biomass-dependent processes which are limited in their scale-up potential by variables such as proximity to and supply of feedstock, and a significant amount of arable land,” said Frost & Sullivan Industry Analyst, Priya Sharma.

The new CEO

To usher in its next phase of development, last November the company appointed industry veteran Serge Tchuruk as President and CEO.  Tchuruk, who has deep experience in technology and global business, recently served as Chairman and CEO of Alcatel leading the company’s merger with Lucent Technologies. He also served as Chairman of TOTAL, a leading oil and gas company.

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A conversation with CEO Serge Tchuruk, Executive VP of Corporate Development Tom Jensen, and CTO Brian Baynes.

This past week, the key members of the Joule team took time to visit with The Digest and give an update on progress.

Digest: Serge, you’ve been the CEO of Total, and the CEO of Alltel. Huge companies. Why take on a project like Joule at this stage of your career?

Serge Tchuruk: Why not play golf and sit on boards? I am at a stage when I can choose what I do, and can just can do what excites me intellectually. The first time I heard of [the Joule technology], I don’t believe in miracles so I didn’t think it was possible. it was hard to become convinced. I was convinced but not readily so. Now, I am very much committed to this extraordinary technology, and when you feel that it’s very close to coming to the market, there’s more pleasure in being a CEO than a board member.

I became a board member last fall. When the CEO was leaving, Noubar [Afeyan] came to me, and I thought a lot about it. It seemd to me that, first of all though I ran very large organiztions with 10,000-250,000 people and people might ask, “what are you doing in a start-up type?”, some of the basic management principles are common sense and apply to all. For example, an executive committee to make sure everyone knows what everyone is doing. And one of the things I have learned is the fact that one has to focus.

So now, Joule is getting into industrialization, and this company has started to get into the fuels market. That’s a huge market and it needs transformation, so we do not want to defocus.

When you look at Joule, here’s a company could make fuels in a way that’s competitive with fossil fuels.

Digest: If you look at the Joule patents, the company can produce literally dozens if not hundreds of chemicals with its production organism. So, what’s the outlook for chemicals, for example — something outside the current focus.

ST: Someday we will look at it – it is possible to do. But we want to succeed in what we set out to do, which is a low carbon, if fact a nearly zero carbon fuel. The market is there, and the oil industry is active in trying finding ways to circumvent difficulties in operating a traditional business [rather than developing alternative fuels at an accelerated pace].

Digest: What about the fuel types you have the potential to make? Will the focus be on ethanol, diesel or jet?

ST: One of the good things about our process, is that with small modifications a commercial plant can do ethanol and alkanes, both — and alkanes lead to diesel and jet. We are now developing plants on an ethanol basis, but we are very active in developing diesel.

BD: One of the most significant decisions is whether to become an owner-operator, with all the difficulties of marketing a product into an established marlet — or licensing technology to others? Which way do you expect to go?

ST: So, for the shareholders, we have a number of options — essentially, selling the technology or become a producer of fuel. At this stage I support the strategy of not selling the techology, but rather getting some of the benefit from marketing the product. I know that in oil, it’s complicated, and you have to have logistsics, so in many ways to be getting value out of the process in the fuel market, we probably have to partner. I don’t see us on the corner selling to passers-by.

Digest: Joule is now getting close to a decision on where to locate a first plant. How are you working through those decisions?

ST: We have a dilemma right now. The first plant is important, you have to find the right measure, and there is, yes, proximity to our technology kings, or proximity to an ideal market. We still have not yet decided where the first plant will be located, but one thing for sure in actively trying to find that localization, the carbon penalty is going to get higher, everywhere in the world.

Digest: One of the alternatives to low carbon fuels is sequestering carbon emissions through carbon capture and storage. How do see that option?

ST: When I was running Total, we looked at how could the big oil companies adapt to the upcoming environment, and we looked at many things. When we looked at traditional biofuels and biomass, we were not that much convinced. We also looked at sequestration. Because, as you know, oil companies produce gas or oil from similar geological formations. I have to say, it’s a very heavy investment, it costs a lot to do it, and you’ve got to find the right places. Processing directly CO2 into a renewable fuel seems to be the ideal focus, especially given that, in the economics, even if ignoring the possibility of a carbon tax, we are in the ballpark.

Digest: One of the barriers that has cropped up recently for renewable fuels is the challenge of low oil prices. How do you see the outlook?

ST: Myself, I have tried in the past to guess the oil price and like everyone else, I goofed. But if you look at the experts and the predictions, they say that the depressed market may last 6 months, one year or two years. I tend to be more cautious. It might last longer than what people believe. The power to raise prices higher lies to some extent with OPEC.

Digest: What about your opportunities with jet fuel?

ST: We are getting some ideas from the airlines, and from the potential for CO2 taxes they might face, and those are big numbers. So, it comes down to, ‘do you pretend to have the logistics to bring the fuels in those quanties to market?’ and the answer for all the companies in the sector is ‘clearly no’. So, we have to be reasonable. We need partners who bring what we do not have, and we have to be realistic about it. So we have started to talk, and there is a lot of interest from what we see happening. But we don’t pretend we are going to be Exxon.

Tom Jensen: “We are targeting to produce alkanes go into high blending road and air transport fuels. For sure, there is strong and increasing interest and especially in the aircraft manufacturing industry to enable cost competitve fuels. The combined airline industry have agreed to cap emissions by 2020 and cut them in half by 2050. And they have targeted to realize much of that reduction through low carbon fuels. We are pretty confident that when we team up, such as with Audi or the airline industry or manufacturers, that we will have an attractive solution. How quickly will depend on many different things, but there’s strong interest, yes.

Digest: As we look at partners and partnership, do you look more for distribution or offtake partnerships, or for strategic partners who would also make an investment in Joule?

ST: Ideally we would like partners to be investors in Joule, but there are going to be partners out there who do not want to be directly involved in the technology.

TJ: “If you look at our value chain, in certain areas we are trying to pull in competencies via a coalition of partners, that will accelerate our progress.”

Digest: With respect to the efficiency of the technology, there’s the theoretical limit of the Joule process and there’s the practical reality of how much can be achieved today. How far along are you?

Brian Baynes: If you look at photosynthetic efficiency, light into product, in the common literature when you look at algae or cyanobacteria or terrestial plants you see efficiencies that are quite low, in the low single digits. We’ve pushed it forward a lot. In a paper from a few years ago, our CSO Dan Robertson and his team articulated the theoretical limits of where this technology can go, and you see immediately that we’ve found nice room for improvement. So far, what Joule has achieved in the lab under ideal conditions, and I mean an experiment designed to give the cell every benefit, we are very close to the photosynthetic efficiency limits. In our real reactors, we saw a 100% improvement towards the end of last year, in the last 6-9 months, so we know that we are on the path to achieving our ultimate photosynthetic goals.

Digest: In terms of practical reactors, it it still the vision to have a modular system where you have many replications of one fairly small unit?

BB: That’s still the vision, the modular approach, and we are still proceeding with development work at the facility in Hobbs [New Mexico]. We are looking at a scale-out, rather than a scale-up. We don’t have that stage where we build a demo that is a scaled down version of a commercial sized plant — so there’s no risk in terms of the organism’s performance where you increase the scale [of a fermenter]. Right now, the scale we are working with outdoors, would be exactly the size that would be replicated.

Digest: So, is there production going on right now with modules at Hobbs, the demonstration center?

BB: At Hobbs, we run in semi batch mode, so we run for certain length of time, and if you had been there October through now [March 2015] you would have seen us in running mode, yes.

(The company noted in a public statement in late Februaty: “The first end-to-end scaled production run, which took place in October following two years of pilot testing, produced significant and record-levels of ethanol.  This pivotal event shows that conversion of CO2 directly to carbon-neutral fuels is possible in the near future, which would significantly impact humanity’s ability to combat climate change on a global scale.”)

The Digest’s take?

Here’s the good news. In the whole of the renewable space, there is no renewable fuel with higher productivity metrics than Joule’s.

Like perhaps no other company aside from Algenol, it remains focused on fuels because it has the economics to compete — and also, an astonishing set of positive attributes such as: using non-arable land; featuring CO2 recycling rather than CO2 release in the case of petroleum; having drop-in fuel options including jet fuel for a low-carbon fuel-starved aviation sector; and affiordability, even compared to $50-$70 oil.

Here’s the skeptic’s view. Nothing is going to matter until Joule builds and operates a commercial-scale plant that validates the promise — and even Joule’s investors and many supporters will acknowledge that back in 2012, the company projected:

“The next step is three Alpha plants at 250 acres each. We have identified locations and partners for all three, and those will be announced soon enough. We expect projects to start with the alphas in 2013 and production in 2014. Then a beta phase, with less than a handful of improvements, mostly interim steps on the productivity, and we’ll take that step in 2015. Then, we’ll be at full size in 2016.”

So, there are good reasons for skeptics (i.e. those not in possession of “behind the NDA wall” information) to take a “wait-and-see” approach on those commercialization dates.

Here in Digestville, we continue to be astonished by the progress, astonished by the technology — and we’ll see about those costs and timelines a little closer to realization.

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