New USDA loan guarantees, $50 biofuels, Asia, syngas among new biofuels trends, gossip at Pacific Rim Summit

December 13, 2010 |

Advanced biofuels and chemicals leadership gathered in the shadows of Oahu's Diamond Head to relate progress on commercialization, drop-in fuels, chemicals, with a focus on commercialization and research efforts underway in Hawaii with USDA, HECO, the state government, the US Navy and numerous private companies

In Honolulu, much of the leadership of the advanced biofuels and renewables chemicals industries have gathered this week at BIO’s Pacific Rim Summit. With seven of the hottest 14 companies in bioenergy on the presentation docket – plus USDA and DOE and a host of Asian academics and companies – what are the key trends?

1. Wins wanted. Both the USDA and DOE are emphasizing the importance of getting companies to commercial success, with USDA Secretary Tom Vilsack reportedly taking a strong interest in demonstrating progress on biofuels. As DOE’s Paul Bryan put it, “our most important goal is helping these new biorefineries prove commercial viability. The amount of capital needed to achieve the Renewable Fuel Standard targets is well beyond the capability of government, but we can help bring these projects to the point where they have proven that they are good investment prospects for the capital markets.

2. USDA loan guarantees. Rumors have surfaced that new USDA loan guarantees are imminent. USDA officials are tight-lipped, but based on our sources, we are projecting that 2-4 companies are in line to receive new loan guarantees by year end. To date, Sapphire Energy and Range Fuels have received USDA loan guarantee support. If true, the rumors are important – because another expectation sweeping the floor in Honolulu is that the new Congress, in an omnibus spending bill, will take back all unspent DOE loan guarantee funds.

3. Drop In Fuels.
Several sessions have focused on catalytic, thermal and synthetic biology pathways to drop in fuels – a trend in itself. DOE’s Biomass Program chief Paul Bryan, Ron Stolz, the manager of Sandia National Labs Advanced Energy Initiatives, and HR Biopetroleum’s CSO Mark Huntley cautioned that the near-term prospects of drop-in fuels involve blending scenarios. They also suggested that substantial consultation between fuel developers and manufacturers could create a game-changer – rather than having new fuels aiming to meet fuel specs developed around the limitations of fossil feedstocks, developing fuels that optimized the potential of emerging engine technologies. The need to synchronize the roadmap for biofuels with the roadmaps that have been developed for engine technologies was also pointed to.

4. Don’t think advanced, think advantaged. Recently, BP Biofuels chief Phil New gave a speech in which he drew attention to concept of focusing not on advanced biofuels, but advantaged biofuels. He made the point that the industry’s focus should not be on the technical barriers that separates first- and second-generation technologies, but the economic barriers that separates feasible business cases from those yet to prove feasibility.

New was outlining BP’s strategy and rationale for investing in Brazilian ethanol with Tropical Bioenergia, biobutanol with Butamax, and cellulosic ethanol with its Vercipia subsidiary in the US.

But the phrase and the point of view is catching on. Elevance’s Andy Shafer pointed to his company’s “advantaged manufacturing platform” for generating known “molecules from novel processes, and novel molecules that will provide opportunities for differentiation.” The theme of “advantaged” manufacturing processes came up at other points during the day’s proceedings. Looks like a trend.

5. “Oil price parity” targets firming up. More and more companies are talking in terms at $50 to $60 price targets, per barrel of oil equivalent, as their targets for the inflection point where they start the race for scale. As ZeaChem CEO Jim Imbler remarked, “50 percent of new oil production is oil sands – the cost is much higher than punching a hole in the ground. It creates a price-setting mechanism, we believe, at $60 to $70 per barrel where companies that can bring in their product at $50, can see opportunities to make good money.”

6. Gas phase, baby.
Numerous companies are touting potential they see in syngas. A new generation of technologies for anaerobic digestion. Genomatica named syngas one of their three feedstock platforms of interest; ClearFuels has been touting their low-cost, high-performance gasification technologies for companies such as Rentech and Coskata, whose core IP is in the fermentation or catalytic conversion of syngas to fuel molecules.

7.  Public-public partnership. In recent years, there has been much focus on the development of public-private partnerships – consortia for research, cost-sharing for pilots and demonstration projects. At the Pacific Rim Summit, speakers have been touting a spate of public-public partnership. The USDA outlined the scope of its substantial renewable fuels partnerships with the Navy and the FAA. Also, Japan’s Ministry of Agriculture, Forestry and Fisheries presented on the progress of its Biomass Nippon strategy, and its partnerships with Thailand, Vietnam and Indonesia to develop “biomass towns” to encourage planting and harvest of biomass for energy projects. Taiwan is touting partnerships with the Malaysian government.

8. Fuels near, chems nearer. Advanced biofuels companies continue to offer and firm up guidance that they will broadly reach commercial scale in the 2013-14 period – some cellulosic ethanol companies are on faster timelines, some of the advanced platforms such as algae are pointing towards later in the decade. However, renewable chemical companies are offering guidance for commercial-scale executions in 2011 and 2012 – here at the Summit, Genomatica and Elevance were in that time range, with companies such as Rivertop Renewables and Blue Marble Biomaterials also firming up  timelines for 2011 and 2012 that involve completion of step-changes in scale.

9. Asia is in the air. Time and again, companies are pointing to Asian downstream markets, and Asian feedstocks – from palm waste to forestry residues – for both near-term and long-term opportunities. Macro-algae from Asia came up several times in discussion. IP attorney Wang Xioaping warned that, in China, IP infringement remains widespread, the administrative review process is complex, and judgments against offenders to date have not provided sufficient deterrent.

10. The problem with licensing. Companies that are looking to licensing as a strategy may face roadblocks, as they are handing off insurmountable capital accumulation problems to licensees that will be similarly unable to access non-recourse project financing. The short term remedy – think JVs, bolt-ons, co-locations.

11. Creative financing. ZeaChem recently obtained its financing to demonstrate its core technology. It’s path – enterprise zone tax credits. “In enterprise zones, the tax credits often look beyond the technology risk – if you complete construction, the credits flow.” explained ZeaChem CEO Jim Imbler.

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