Crossing the chasm to scale: S2G goes commercial with bioglycols

June 18, 2016 |

BD TS 062016 smThey call it the Valley of Death, but it’s a complete misnomer. It’s the “nearly impassible Khumbu Icefalls” of Death — filled with chasms, crevasses and painful progress towards the summit in the far distance.

But some make it through. They might have final scale-up and commercial success still to achieve — Everest still ahead of them, with the pitiless Death Zone and the nights on bottled oxygen and negotiating the Hillary Step on a brain starved of oxygen. But still, get through the Icefall and you’re well on the way.

So it’s a milestone worth marking when news arrived from Tennessee that S2G BioChemicals completed a five-week commercial production campaign of fossil-free, bio-based glycols at the Pennakem plant in Memphis. The campaign produced industrial-grade sugar-based glycols from natural, non-food waste. We first reported on the commencement of the run here, in April.

S2G? That’s Mark Kirby’s company — along with a talented crew that hangs its shingle in Vancouver, British Columbia.

His defining passion? Mountain biking, which is not a bad proxy for building a company from start-up to scale-up. Some downhill, but an awful lot of uphill. Grinding it out, goal-oriented. Sunshine or rain. Keeping it lean and finding the occasional opportunity to take a draft from a strategic partners, er a fellow biker, ahead of you.

Most guys that make it to the summit — that log the hard yards on a mountain bike, talk about mentors and colleagues. The ones that help you push yourself. That’s another common point with the advanced bioeconomy: there’s too much transformation required, across disciples, and too much capital required, to do it alone. It may not always feel like a team sport — there are a lot of lonely moments in start-ups — but it definitely is not a solo sport.

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“Among the people I consider as a mentor is Louis Dionne,” Kirby recalls. “He was an outsider who joined Praxair through acquisition and who unfortunately passed away at a young age due to ALS. I started my career at Praxair and found Louis to be very different from typical big company executives. He was brash and unafraid to make changes that shook up the established order and as such stepped on a lot of toes. He taught me how to initiate and manage change. He also taught me how critical it is to understand the politics of large organizations, which can sideswipe and kill start-ups more surely than technical challenges. And I have worked with any number of talented and inspirational leaders in the Cleantech community. For example, Denis Connor, who recruited me to join QuestAir Technologies, was excellent at building and motivating a leadership team.”

A milestone worth noting

So, Kirby’s crew hit a big milestone this week. Of course, as any mountain biker will tell you, there’s another hill ahead after surmounting this one. But, why a big deal, this one? Here are the most important to-knows.

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First, the molecule. Glycols are a drop-in replacement for chemicals used in resins, PET/PEF plastic drink containers, cosmetics, and more.

Second, the break-even works now, even in this era of low cost oil, as CEO Mark Kirby told the Digest.

Third, there’s been a massive pay-off for a company that really, really, really understood their process and the reactions therein, having run a pilot since 2012.  The typical experience is that when you get to commercial-scale there are a lot of issues. The unexpected occurs. Cue the blame game, shareholder suits, and a form of grief all throughout the industry perhaps best expressed in Casey at the Bat:

Oh, somewhere in this favoured land the sun is shining bright,
The band is playing somewhere, and somewhere hearts are light;
And somewhere men are laughing, and somewhere children shout,
But there is no joy in Mudville—mighty Casey has struck out.

Kirby once told The Digest that the industry needed a few more wins “There have unfortunately been some notable failures that have tainted the waters,” he said. “Starting new processes is challenging. As such, S2G has spent a lot of time reviewing commercial & pilot experience to ensure we understand yield, cost, scale-up and control of our process. Yes, investors need patience, but projects need to perform.”

So, that worked out in this case.

It can take months, if not years to get things worked out. Even Pennakem, which runs a similar but not exact-same process, noted that S2G really understood their process well, the kinetics and the interfaces, and the process was up and stable within a week. So, the partners could confirm the chemistry, and produce commercial-grade product and will be used in real products going forward.

Lessons learned from headwinds and adversity

It’s not easy getting company through to this stage. Low oil prices haven’t helped. Keel-overs by some high-flyers make it tougher. But you learn a few things from tough times, as Kirby explained.

“Most lessons are learned through adversity. I would say the most important learning for a start-up is a sense of urgency. Small tech companies need to move quickly, reacting to changing market conditions, technology issues and partner needs. Sometimes that is as simple as working through the weekend to hit a milestone, but it may also mean doing what it takes to get that second or third program funded and under way just in case there is a delay in your primary program. Or it may mean quickly making tough decisions regarding staffing to conserve cash.

“Usually, crisis are brought on by circumstances outside of your control: a change in the executive leadership at a partner, problems with a partner’s technology or a new technology such as shale gas changing the competitive landscape. Some can and should be anticipated. In other cases, it is a matter of reacting quickly rather than hiding your head in the sand.

The Pennakem relationship

“Pennakem had some time available, and essentially we rented, took over , introduced our catalyst and our process conditions,” Kirby said. “And Pennakem as our partner —  they have done a lot of start-ups and it was very satisfying to work with them. So what we have now is a well understood process that is scalable and high yield and produces a good quality drop in product.”

OK, those catalysts. How exotic are they. Found only on alternate weekdays deep in the wilds of Neptune?

“No, said Kirby. “The catalysts are commercially available. It’s a trickle bed catalytic process, and  the process lends itself to scaling up and is continuous. So, no barriers there.”

What do you use a glycol for, anyway?

Bio-glycols can be used as a drop-in replacement for common petroleum-based chemicals currently used in a wide range of consumer and industrial products such as resins, PET/PEF plastic drink containers, cosmetics, pharmaceuticals, coolants and antifreeze. Much of the volume were sold to an industrial resin plant; sample quantities of pharma-grade propylene glycol (PG) was reserved for select glycol customers.

How do they do it?

S2G BioChem has a conversion technology based on catalytic hydrotreating that transforms cellulosic sugars to a mix of biochemicals, primarily ethylene and propylene glycol.

Tail on the dog

Finally, it comes down to C5 sugars. As in, here’s an excellent home for them. For those newer to the world of sugars, they come in several varieties. C6s include glucose and dextrose. So, your typical cane or corn sugar. But there are C5s, which can be found in cellulosic sources.

And, here’s a challenge.

“We are now looking for sources for cost-effective C5s,” Kirby told us. It sounds like the Search for Spock. “We have examined many samples and sources. Pulp mills, cellulosic ethanol, we can handle most of them, some are better than others in terms of cleanliness. Bottom line, we’vedone work with the leading developers in biomass fractionation technologies and what we’re anticipating and counting on is the roll out where these biomass fractionation technologies will be commercialized. We are the tail on the dog. We are looking for the C5s but there need to be viable uses for the C6 and lignin.”

The good news. They’ll take the kludgy stuff. “We’ll take extremely crude dark black unrefined C5s,” Kirby notes. “We know to clean them up.”

Also known as sugar conditioning, which sounds like a fleet of personal trainers at a spa for sugar molecules, but it comes down to using established industrial techniques that select, isolate and remove ash and carbohydrate components as well as reducing color for industrial or food-grade product specifications.

It’s ben a feedstock odyssey, in some ways. A few years back, we reported that S2G was  looking to set up a sugarbeet-based facility in southern Alberta. They thought they might source beet from 20,000 more acres, bringing local production close to the 50,000 acres that was farmed in 2008, but had fallen to 24,000 acres by 2012.

Next steps

The big challenges will be in moving from campaign mode to a permanent commercial installation. They’re

in negotiation on a commercialization agreement, as you will not be surprised to read. It’s another one of these nameless “Fortune 100 brand management companies” that like to stay in stealth mode as long as possible and keep their brands — not their sourcing of ingredients — at the forefront.

And, there’s Pennakem itself, which might commercialize with S2G.

All to be revealed by year-end, we hear.

The scale?

Think 10-15K tons per year, and a $25 million project, to start, to get initial supplies into the market. Then, scale up to 50,000 tons of C5 input and a $100 million capex bill. Typical construction timeline of a year and a half including start-up — so, look for a commercial-scale continuous operation by the end of 2018, and but check back in case that gets accelerated or delayed.

The partner will want all of it, but expect S2G to hold some supplies back for the spot market, to optimize the economics.

Reaction from the stakeholders

We have a couple of “pleased and delighteds” to share. Why not be proud, dudes?

“S2G bio-glycols have identical performance to petroleum-based materials, yet they generate far less greenhouse gas emissions,” said Jeff Plato, Director, Corporate and Business Development of S2G. “S2G looks forward to its products being integrated into the value chains of multi-national consumer and industrial product companies who want to curtail petrochemical-use and provide more sustainable products for their customers.”

“We are extremely impressed with the seamless integration of S2G’s innovative, high-yield bioconversion process into our existing chemical production infrastructure,” said Tom Waldman, President of Pennakem. “The combination of S2G’s innovative process and Pennakem’s 75 years of manufacturing expertise using biorenewable feedstocks will lower costs and could catalyze the demand for sustainably and economically produced bio-based glycols.”

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