Financing Bioeconomy Ventures: Pt. 6 – Pilot Plant Site Assessment and Validation of Experimental Data

By Lorenz Bauer and Charles Loos, Lee Enterprises Consulting
Special to The Digest

Investing in new bio-economy technologies involves the inherent perils associated with building new plants and introducing new products into existing markets. However, one avoidable peril is basing decisions on poorly planned research and development programs. An outside evaluation of the experimental plan and validation of the data by skilled reviewers with commercial experience can reduce risks and increase the likelihood of success. The review should include a visit to the developer’s pilot plant, observation of key data collection steps and a thorough examination of the documentation and calculation methods.

Fact checking has become a common term in today’s news. In our experience, we have seen occasional examples of outright fraud. In one case, a sample that was collected under observation during the morning was surreptitiously switched during lunch in order to hide a contamination problem. Much more common are well-intentioned misinterpretations when developers lack the expertise to critically analyze their own work. This is one reason that a substantial number of projects end in financial failure under a cloud of legal proceedings.

Investment decisions are often based on experimental data provided by developers without much of a track record. Developers have a vested interest in presenting the most optimistic picture based on laboratory and pilot plant data. Proponents of a technology may take shortcuts in experimental design and data interpretation to reach critical milestones and obtain further funding. They may not understand the limitations of the data they provide.

One issue that arises is how to address the failure to recover 100% of materials from an experiment. This raises the question of where’s the leak? It is a common mistake to normalize data to 100%. This is not a sound engineering practice.

“A goal without a plan is just a wish.” – Antoine de Saint-Exupéry

A technical review should start with an understanding of the development plan including the critical path and research and experimental approaches. There needs be a clear statement of the tasks required including enough detail to determine the timing and likelihood of success. The developers should address technical obstacles and risks with likely mitigation strategies. Required infrastructure and staffing should be evaluated including identifying suppliers, partners and customers.

It is always prudent to stage investments and to monitor progress throughout the course of a project. Intermediate milestones with well-defined criteria for success will allow go-no decision gates that can minimize losses in case of difficulties.

An independent estimate of the costs of developing a technology can greatly increase the chances of achieving a target before funding becomes a problem. Such a review will also insure that the funding provided is being spent wisely and not being shifted to outside projects and interests.

Safety and Operability

Developers must understand the hazards associated with their work. Process health, safety and environmental aspects are critical. Developers need to meet all the permitting and safety requirements for both their pilot plants and potential products. Risk mitigation mechanisms should include both engineering solutions and financial solutions such as liability and business insurance. Expensive test facilities can be shut down over issues with waste disposal or a lawsuit stemming from an accident.

Experimental facilities are at the heart of development programs. The developer often has proof of principle data. However, a commercial process needs to operate continuously and it is important to review pilot plant design in light of adaptability to commercial-scale operation. Operability limitations of the equipment may also limit the pace of development work: a piece of equipment is not very useful if only operational a few days a month. It is important to assess how many experiments can be conducted in a reasonable time frame.

Data Analysis

Determining the quality of test data requires appropriate analytical methods. Proper data analysis can often cost more than actual operation of the pilot plant. Sampling methods, frequency and quality are often key determinants of data quality. Also, the methods used for subsequent analysis must provide sufficient information to monitor the process. Outside laboratories are often needed for some analysis, particularly regarding product quality. They can also provide independent validation of internal methods. An experienced reviewer can determine if the approach used by the developer is likely to yield sufficient information to evaluate the process.

Calculation methods need to be reviewed in detail. Ideally the reviewer is given access to both the raw data and calculations in order to identify key assumptions and any gaps in the experimental data. The material balance of the experiments needs to confirm conservation of mass. Are all missing materials considered to be light gases? Is the data adjusted to show 100% recovery?

There is a tendency to report the best data without showing contradictory results from similar experiments. A result that cannot be repeated is not valid. We know instances where plants have been licensed based on preliminary data which later turned out to be incorrect. Needless to say, this caused significant financial losses and damage to the proponent’s credibility.

Test Facility Location & Construction

Construction of a lab and/or pilot facility is an expensive step for proponents of new technologies. Yet the success of research and development depends on the ability to conduct relevant experiments in a timely fashion. Many pilot plants have failed to ever produce useful data due to a poor choice of location. Proponents must determine what utilities are available, and if significant site preparation is required. Are there limits on the amount and types of materials that can be stored? For example, the cost of a truckload of gas is much lower than purchasing smaller tanks. Are there potential issues with waste disposal? Is the site accessible to key staff so they can be available when needed? Involving an experienced facilities developer can insure that the process goes smoothly and that delays are minimized.

Visit the Plant

Nothing cuts to the truth faster than a visit to the pilot plant or test facility. Paradoxically, you may not know what you are looking for until you see it. At the site the test apparatus becomes tangible, three-dimensional, and open to all the senses. The investigator’s intuition and previous experience fully activate, triggering anything from confidence to that nagging feeling that “something isn’t right here.”

Intuition aside, the wise investigator pursues the following three objectives on a site visit:

Verify Conservation of Mass and Energy: regardless of the complexity or proprietary nature of the production process, mass and energy must be conserved. At the site, every single input and output to the black box process is visible. This includes obscure vents, drains and chemical feed lines. Make enough notes and sketches for a complete mass-balance analysis later. Mass in must equal mass out!

Energy balances are a bit more difficult, but do what you can to collect temperatures, phase states and the quality of the materials going in to and out of the process.

Atoms are also conserved and though the detailed chemistry of the process may be unclear, red flags should fly if the process seemingly creates or destroys atoms. Gather data about the chemical composition of the materials going in and out of the process, including those obscure vents and drains.

After visiting one pilot plant we couldn’t reconcile the mass balance, and the apparent creation of hydrogen atoms in the process. Our pointed questions to the proponent finally revealed they were secretly adding water to the process, which radically downgraded our confidence in both the process and the proponent.

Determine Who Holds the Knowledge: who holds the key knowledge of how the process works? Is there a single guru who keeps the secrets close? Or is the knowledge widely distributed among the proponent’s team members? The site visit is a chance to interview the team and find out. Insist on interviewing technicians, operators and engineers, in addition to managers. Ask open-ended questions. We consider these interviews just as important as the physical inspection of equipment.

If only one person truly understands the process, consider what happens if that guru becomes disabled, leaves the company, or makes unreasonable demands going forward. This happened in one case where the software developer for a robotic system left leaving the owner with hundreds of thousands of dollars’ worth of useless equipment accumulating interest expense.

Check Craftsmanship and Housekeeping: is the test apparatus clean, well-built and neatly finished? Or is it a duct-taped and wobbly contraption reminiscent of a middle-school science fair project? Is wiring neatly routed, tie-wrapped and labeled, or is the wiring a spaghetti-bowl horror?

Are the tool cribs and parts rooms neat and organized? Are the fire extinguishers and first aid kits up to date? When was the last time the instruments were calibrated? Nobody expects white-glove perfection in a test facility, but craftsmanship, cleanliness and organization speak volumes about the professionalism of the proponent’s team.

Conclusion

Visiting the pilot plant and validating experimental data are critical parts of evaluating a potential investment. Many engineering companies assign this work to young engineers with limited commercial experience. It is better to involve people with years of actual research, development and commercial experience with both successful and unsuccessful projects. An experienced evaluator can save substantial amounts of money in the long run.

The next article in this series addresses front end engineering design and loading evaluation as part of engineering design assessment.

About the Authors

Lorenz Bauer, Ph.D., is a chemist with over 30 years of experience in catalysis, oil refining, chemical production and biomass conversion. He is an independent consultant affiliated with Lee Enterprises Consulting. An inventor of 25 patents and author of over 20 publications, he is Six-sigma black belt trained in project management and analytics. Larry’s projects have ranged from food additives, off gas treatment, upgrading unconventional feeds and waste recycling. Most recently he worked on fast pyrolysis of biomass and upgrading products to fuels and chemicals.

Charles Loos, P.E. is a member of the Lee Enterprises Consulting. He has 35 years of experience in the power industry with skills in engineering, operations management, startup, project development and environmental permitting. He was responsible for the EPC contracting process at power development companies. Whether a wood-fired project in timberland, or an industrial cogeneration plant, he excels at judging the suitability of a proposed plant site, with due consideration for technical, operational and environmental factors.