What Price Feedstock?

Last week, Digest readers around the world rated feedstocks for the Advanced Bioeconomy. In a 200 million ton scenario, we wondered, which feedstocks are the best bets — and at what price?

We say relatively novel because some of them exist in our everyday world — woody biomass for lignocellulosic conversion, or the residues (animal, crop, industrial, municipal or forest) of today — but would be new to advanced biorefining. Others are novel crops — typically, inedible — never grown in large quantities before and generally intended to support advanced fuels, chemicals and materials — as opposed to the needs for food and forage.

Recently, we asked readers where they thought feedstocks in this volume would come from, and what they would expect to pay for them when they arrived. We intended this to be a demand-side look at the advanced bioeconomy — a companion to supply side forecasts such as the DOE’s Billion Ton Report, which looks at how much growers could be counted on to provide at given prices.

In all, respondents foresaw an $11.352 billion feedstock bioeconomy, at $57 per ton for advanced feedstocks — based on reaching that 200 million ton scale.

Let’s look at the responses, in terms of feedstocks and pricing, and then we’ll look at the caveats, many of which were supplied by readers with their answers.

Feedstocks

By a comfortable margin, woody biomass was the star of this report — with readers projecting that 20% of the tonnage will come from forest reserves — and another 13% from forest residues including slash, trimmings, sawdust, mill waste, and presumably including beetle-killed pine. Overall, one-third of the advanced bioeconomy is expected from the forest. 66 million tons in our 200 million ton scenario.

Residues of other kinds are also expected to provide bulk quantities. Besides the afore-mentioned forest residues, 43% of the tonnage is expected to be aggregated from society’s waste — primarily from crop residues such as corn stover and sugarcane bagasse, but also including quite a bit of municipal solid waste (32 million and 26 million tons, respectively), in our scenario.

The remaining 24 percent is expected to come from novel crops — energy crops such as sweet sorghum and switchgrass, novel oilseeds such as carinata or jatropha, or aquatic crops such as micro- or macro-algae. In all, 46 million tons representing anywhere between 5 and 23 million acres of new cultivation depending on the feedstock and yield mix.

Pricing

Pricing, as could be expected, is highly varied depending on feedstock type — residues coming in at low rates, existing reserves such as woody biomass near the media, and novel crops costing at the higher end.

The low-cost leader is not unexpectedly municipal solid waste, although respondents rejected the idea that these feedstocks will be available in the long-term and large quantities at negative costs — they settled out at a low but still positive $12 per ton. Industrial residues such as carbon monoxide and CO2 were expected to come in around $32 per ton, while forest residues came in at a higher but still below-media rate of $43 per ton.

Animal residues were expected to be far cheaper than they are today. As a group, they were pegged at $56 per ton, or 3 cents per pound. That’s a fraction of the market cost for choice white or yellow grease. Perhaps reflecting the readers sense that the sources for these residues are to some extent tapped and that the difficult-to-process brown greases, which can be available at nominal or even negative cost today, could be the future for the industry at these volumes.

Woody biomass clocked in at $63 per ton, generally on the high side of where we see timber prices today (in the $25-$35 range in the Southeastern US, per ton). Forest prices for, as an example, southern pine, are substantially depressed compared to 10 years ago owing to some extent to a collapse in demand fueled by the demise of newsprint — and respondents appear to be very cautious about expectations that prices would remain in the 20s and 30s if advanced bioeconomy does indeed draw tens of millions of tons from the forest.

At the higher price levels — $71 per ton for new energy crops, $112 for aquatic crops and $126 for novel oilseeds. While the DOE Billion Ton Update saw significant resources available in the $60-$80 range for energy crops, the DOE’s price scenarios have crept up over the years as more and more is known about the complexity of handling novel crops. We have to wonder what the respondents are thinking about when expecting 6 cent per pound biomass for novel oilseeds and aquatic crops. Only 9 percent of respondents expected prices for these crops at about 15 cents per pound — which could represent the triumph of hope over experience.

The Digest’s Take

Given the willingness to pay, we’re not sure of the role that aquatic crops will play at the volumes that respondents expect them to. We don’t see 15 million tons of aquatic crops available at $112 per ton any time soon, ourselves. And oils and oilseeds seems to us to have far more value in the marketplace than the respondents allow — though they may well be relating these prices back to energy prices, rather than on the energy + carbon incentive structure that supports, for exsmple, biodiesel today.

In the world of woody biomass, we see the prices lower ourselves, though perhaps not at today’s $25 per ton bargains. And we see industrial residues such as CO2 available at nominal costs for some time — in a world of paying for CO2 sequrestration, not many are looking at carbon-capture-and-use as a revenue source as must as a cost-and-pain avoider.

On the plus side we also see upside with municipal solid waste — in our view, the 26 million tons of MSW that respondents see in this scenario could well be acquired in long-term contracts at zero cost. The cost of pre-processing MSW into usable fluff may well be the driver for the respondent’s cautionary approach on MSW price.

Overall, funny enough, when you put together the overs and the unders, 200 million tons at $56 per ton doesn’t seem actually too far off, in our view. If we combined expectations of lower tonnage and far higher prices for oils and aquatic crops, together with lower prices and higher volumes for woods and municipal residues, the result is not dramatically different. We came up with a $59 price running a different scenario, thus.

As Churchill said, “there’s someone who knows more than anyone, and that’s everyone.”

Reaction from respondents: cautions and skepticism

Some readers were cautionary about the timelines, which were not given expressing that their view would radically shift of looking at, say, today vs 2030. As one reader observed, “A lot will depend when the 200 Million tons are envisioned, in a period of 10 years or 20 years.” We left it to the respondent to imagine for themselves when they though 200 million tons would be required for the advanced bioeconomy and to project accordingly, but clearly some readers preferred a more prescriptive approach.

One reader added: Likely, use of 200,000,000 Tons would take every bit as much time to develop the feedstock as to build out the facilities. MSW certainly has the least moving parts to coordinate to effectuate a significant supply as it is already being collected and moved into ‘collection/disposal’ venues. The issue becomes as much ‘policy’ insuring that utilization of this usable fraction of MSW becomes reasonably available rather than continuing to be taken to landfills or otherwise not as beneficially disposed.

Fantasy fuels. One reader notes, “Aquatic crops are very small college projects.” Although I am sure companies like Cellana and Earthrise would object.  And one reader adds, “Our client base is in the algae industry, with given pilot testing and forward projections we see a sizable increase within the industry. Market pricing has been offset by reductions in both CAPX and OPEX costs.” Another added that there was “no need to use industrial waste with high level content of CO, and CO2”. Another said, flat-out, “CO is not likely to be an industrial residue unless it is a minor component in a gaseous mixture.” We’re quite sure that one will get the thumbs down from LanzaTech and others.

It’s the woods, baby. A reader writes, “Wood is the only existing crop with the logistics infrastructure in place and the inventory capacity that is underutilized.” Another adds skepticism on energy crops and industrial residues: “Not sure about Industrial residues or new energy crops. Of those indicated above, there is an abundance of these wastes that are costing town, cities and municipalities plenty of money to pay for the collection and transfer of these wastes mainly to landfill. Many of these waste streams are available at no cost so the towns, cities etc, are happy to be rid of them and the cost and the problems of disposal.”

Gotta be economical. One reader cautioned, “Advanced feedstocks must compete on a cost basis with conventional renewables. There may be SOME leeway for RIN value, but not enough for most of those listed above.

You’re all kidding yourselves. “200 million ton is almost mission impossible,” writes one reader. “World’s largest biomass users are pulp mills and the biggest ones use 1 million ton of biomass. It has taken decades to build that supply.” We’d point out that US ethanol producers use 140 million tons of grain and the ethanol infrastructure was built-in a decade or so — but clearly this reader is calling on Tom Cruise when it comes to advanced feedstocks.

You’re forgeting some stars. One reader notes “Agave can yield up to 100 tonnes of dry biomass per hectare per year, on marginal semiarid dryland, with VERY little water input,” adding that the EBI is assessing agave since 2010 . Another reader adds, “I think the future will require steady, assured supply for consistent long-term grid power fuel. desert sorghum would be great to grow in hostile environments,  no food or forestry products, we should leave that alone. and I think that whatever biofuel that is produced, it should go into storage for a rainy day.”

It’s not just volumes, it’s conversion yield. A respondent notes, “While an energy crop like switchgrass can produce more volume of biomass than corn stover per acre, its sugar to alcohol conversion yield is much less. The best enzymatic hydrolysis results apply most favourably to corn stover lignocellulose.

Prices

False assumptions. “There is a huge false assumption out here that tipping fees will result in revenue.  When plants are built, rarely do tipping fees continue but in fact the producer end up paying for feedstock. A company is SW Kansas has been paying $100/ton for corn stover.” ANother adds that “There is a false assumption that everything is free.” Although another respondent disagrees, stating that “Municipal waste has to be with negative costs. it is service for citizens.”

How much water content? One respondent noted. “One should also specify that it is bone dry biomass or at least dried biomass. The cost of harvesting, drying and the cost of the nutrients required to produce aquatic crops will make that feedstock more expensive than that from the other sources.”

You can’t compare them! One reader complains that “This is an impossible comparison unless all costs are on a comparable basis (e.g., bone dry ton, or $/ton of extracted cellulose, BTU content, etc.). Further, they aren’t interchangeable in most processes, making the comparisons greatly skewed.” Another reader stated, “Guessing pricing w/o a specified energy content is not very meaningful. Energy crops look to be homing in on 18 MJ/MT dry basis.” Another readers in some ways supports that standard energy content valuation, stating that “A standardised valuation method of feedstock should be accepted by all and used by all to limit expectations of feedstock supplier/producer. Else, the bioeconomy will forever be left in their mercy.”

Where are you paying? “The critical question is what would you pay at the throat of the reactor, not at the gate of the biomass producer. Except for the fats & oils, in most cases the feedstock cost is not the major barrier, but except for fats & oils, prices will have to be VERY low to compensate for the cost of overcoming those other barriers.” Another respondent added, “It should be defined if the cost is at mill gate or at the source. Difference can be 100%.My figures are at mill gate.”

Loose specs and tight specs. A reader notes, “Oilseeds and aquatic crops would likely have tighter specs and therefore give better yields. They would price up to capture this value.”

Residues will win if everything else is high. A respondent avers that the “High cost of most feedstocks will give the advantage to MSW and algae type systems.”

Did we mention agave? “Agaves [are] already documented to provide sugars at sub 10 cents per pound,” says one reader.”

How much are we talking about?  A reader notes that “ Animal residues and novel oil seeds availability is questionable.”

What’s the scale of the refinery? “[Price] largely depends what is the unit size of the biorefinery. The smaller it is the cheaper the biomass,” says one reader. We’re confused by that. Do small refiners pay a different price for crude oil than large refiners?

The deal structure matters. One respondent asserts, “In Africa, where much arable land still remains to be cultivated on a commercial-scale, the actual cost of corn stover feedstock supply can be offset, or mitigated by agreement on the ownership and use of the actual grain harvest. Money will be invested in the harvest and supply development, but payment for land use and stover product may be negotiated on the fair exchange of the grain harvest.”

Forget fuels, chemicals and materials, we need power. One reader suggests that “let’s not get the horse before the cart, first we need sustainable, renewable,non polluting electricity.”