Cellulosics: India goes huge

From India this week we reported that the government will invest $74.8 million in a second generation ethanol plant using crop residues as feedstock. The facility will be located at the Indian Oil Corporation (IOC)’s oil refinery in Panipat where the government is also investing heavily to upgrade production capacity and achieve higher standards. The plan is in line with the government’s new goal of achieving 22.5% ethanol blending in large part thanks to increased 2G ethanol production from crop waste.

How it happened

The key driver? The Indian government’s decision, after many years of hemming and hawing about its renewable fuel ambitions, to push through towards a 22.5% ethanol blending mandate and a B15 biodiesel blending target. That’s up from a hit-or-miss 10% ethanol blend target currently in place.

The concern for years is that India’s sugar industry could not supply sufficient ethanol, or meet targeted prices, or that food-vs-fuel concerns would erupt over the diversion of too much sugar to the energy sector.

Hence, a focus on second-generation feedstocks, and ultimately a focus on ensuring that Indian-based, second-generation technology would be available, and robust.

To that end, we reported in July that the national government was preparing to release its new policy to support biofuel production from non-conventional feedstocks in an effort to boost ethanol blending above 22% and biodiesel to 15%.  Anticipated feedstocks included bamboo, rice straw, wheat straw and cotton straw — as opposed to molasses, conventionally used at the present time. Already the government announced in December 2014 that it would deregulate ethanol feedstocks to allow others to be used but this new policy was expected to give that shift a major push to attract investors. And has it ever.

$2.25B in investment coming

The result of the activity by the government? In August, we reported that the biofuels industry is set to invest $2.25 billion in new projects over the next few years to build up the industry’s value towards $7.5 billion by 2022 thanks to the new policies coming into place that will boost production of cellulosic ethanol and biodiesel. A subsidiary of Bharat Petroleum Corporation announced it would build a 300,000 metric ton biofuel plant, Praj said it would build multiple biorefinery projects valued at $142 million, CVC Biorefinery will set up two projects in Gujarat and Punjab while Munzer Biofuel will set up a biodiesel plant in Mumbai.

Changing the pricing mechanism

By August, we reported that the new policy was imminent.  And one component was key — a new way of pricing ethanol, which is regulated in India.

We reported progress early last month when the government finally approved a new ethanol price methodology, and the markets got a surprise when the government signaled that it would cut the linkage between ethanol and crude oil prices. And significantly higher than prices announced in December 2014 that weren’t enough to encourage mills to boost production.

Meanwhile, Indian Oil picks Praj

Also last month, we reported that Indian Oil Corporation selected Praj as its technology partner for setting up multiple 2nd Generation bio-ethanol plants based on indigenously developed technology. Indian Oil will be setting up three such 2G bio-ethanol plants, using ligno-cellulosic biomasses as feedstock.

Speaking at the time about the collaboration, Pramod Chaudhari, Executive Chairman, Praj Industries Ltd., said, “It is a great honor for us to be chosen by Indian Oil to become their technology partner in multiple 2G bio-ethanol projects in India. We have prepared ourselves to execute 2G ethanol projects over INR30 billion in two-three years.”

Indian Oil’s ambitions

The announce is a culmination of years of evaluating new technologies at Indian Oil.

Originally, there had been a lot of work at IOC around a jatropha-based biodiesel strategy. But by 2012 we were reporting that the company was reviewing its commercial biofuel strategy in light of questionable results from jatropha investments.

Nevertheless, there was substantial progress on refining jatropha oils, and in 2013 we reported that IOC successfully developed and commercialised a technology to co-process non-edible vegetable oil in the existing Diesel Hydrotreating units of a petroleum Refinery to make biodiesel.

Beyond road transport, there was aviation. We reported in 2012 that IOC working with Airbus, Kingfisher Airline and UOP to conduct biofuel test flights. Also, IOC had signed pacts with Canadian universities and Pratt & Whitney to further their ambitions to join the growing group of countries pursuing bio-avjet.

The search for new feedstocks

For quite some time, IOC has been casting a wide net in search of new technologies that would unlock loads of ethanol from something besides sugar. Back in 2011, we reported that In India, LanzaTech is talking with Indian Oil and Jindal Steel on how they can  leverage their resources to implement a commercial scale ethanol plant using LanzaTech’s technology to process waste gases from a Jindal steel mill. The fuel ethanol produced by the plant would be blended into Indian Oil’s gasoline pool.

By 2012, LanzaTech opened an office in India to help partners Indian Oil and Jindal Steel & Power set up an aviation fuels demonstration scale plant. In the arrangement, IndianOil would provide the facilities, Jindal would provide the industrial off-gases, and LanzaTech would supply the technology. But we have yet to see the definitive project plan.

Coal even came into the picture. Last year we reported that IOC planned to team with Celanese to build a 1 million metric ton per year of synthetic ethanol production capacity in the eastern town of Paradip. Petroleum coke will be the feedstock for the facility.

The increasing focus on cellulosic ethanol

In 2011, we reported that IOC had signed a memorandum of understanding with the government’s Department of Biotechnology to set up a Centre for Advanced Research on Bioenergy that will develop second and third generation biofuels at a cost of $11.6 million over the next five years. The costs were split evenly by the two organizations.

Praj’s technology reaches fruition

A long, expensive and trying effort at Praj to break through on cellulosic ethanol technology finally paid off with successful demonstration in the past two years, and now the announce of government as well as commercial support.

A key element now is finance. We reported last month that Praj is looking to team up with private equity funds to co-invest in the green fund it will set up to support customers developing second generation ethanol plants. The company announced the fund as well as the development of 10 2G facilities by the various national oil companies. The fund is meant to help reduce risk for the oil companies while giving Praj an opportunity at managed exposure to the projects they build and install.

Projects begin to appear

Bharat Petroleum was one of the first through the gate, with an announce last month that they will build a $75 million second-generation ethanol plant using MSW and agricultural waste as feedstock in Kochi, where it will be located at the BPCL-Kochi Refinery.

And now, we have the Indian Oil project in Panipat.

Isobutanol, too?

And it’s worth noting that Praj’s ambitions aren’t limited to cellulosic ethanol. There’s isobutanol, too. Praj signed a memorandum of understanding with Gevo last year wherein Praj will undertake to license up to 250 million gallons of isobutanol capacity for sugar-based ethanol plants over the next ten years. As we noted at the time, “that’s a pretty strong affirmative although 10 years could be read as “not tomorrow, bub.”

Gevo added: “The data generated at the Luverne plant and in the labs in Denver continues to support ultimate, optimized isobutanol production costs that would support EBITDA margins for isobutanol of $0.50-$1.00 per gallon. In the fourth quarter, Praj Industries, a global leader in process engineering and equipment manufacturing for the ethanol and brewing industries, conducted extensive due diligence at the Luverne plant, and has confirmed these cost projections.”

All about Praj’s technical journey from Conventional to Advanced

This Multi-Slide Guide to Praj will do the trick.

The Bottom Line

The 22.5% ethanol and 15% biodiesel blending mandates are historic wins for renewable fuels — and great news for the companies that have been working to bring their technologies to India, or developing them there. Praj, of course, but think Algenol, Gevo, and LanzaTech too.

Now come what former BP Biofuels CEO Philip New used to call “the hard yards of commercialization” — the translation of ambition into steel in the ground. The good news, the oil companies are investing, the government is providing not only funding but the mandate support. Now, it is a matter of deploying technology — and, most importantly, building the supply chain for the feedstock.