Canergy taps Beta Renewables for 25M gallon advanced biofuels project in California

Energy cane for California’s Imperial Valley?

Canergy lines up Beta, CHS, Certis as partners for greenfield low-carbon fuel project slated for 2016 opening.

In California, Canergy announced that it has selected Chemtex and Beta Renewables for the development of their 25 million gallon per year cellulosic biofuels facility to be located in the Imperial Valley of California. Construction of the new facility is targeted to begin in Q1, 2014 pending successful completion of permitting and financial activities. The facility is expected to be operational in 2016.

Canergy is an advanced biofuels company based in California that is focused on the productionof ultra-low carbon intensity ethanol from sustainable non-food energy crops and innovative cellulosic technology. This first facility in California will utilize energy cane, an EPA approved cellulosic pathway, as its primary feedstock, is targeted to be operational in 2016 and will assist California, through obligated parties, to meet both RFS2 and LCFS requirements.

The Imperial Valley and sugarcane

California’s Imperial Valley has nearly 500,000 acres of some of the world’s most productive irrigated farmland. An unrelated venture, California Ethanol & Power, which has also targeted the development of five sugarcane ethanol plants in the Imperial Valley commencing in 2015, comments:

“Sugarcane has been successfully grown in California’s Imperial Valley for decades. The soil is relatively rich with deep alluvial clay loam and, with the availability of irrigation water due to the Imperial Valley’s priority allotment of water from the Colorado River basin, is well-suited for farming. In fact, the area is recognized as one of the most productive agricultural areas of the world.

“Due to the dry climate, intense sunlight, and irrigation, Imperial Valley sugarcane can be planted and harvested year round, unlike Florida, Louisiana and Texas, where rain limits the harvesting season to six months.

“The University of California Riverside and the Desert Research & Extension Center conducted a research project to evaluate twenty-two commercially grown varieties of sugarcane for suitability to the Imperial Valley. The results were impressive: The research trials produced sugarcane varieties with average yields of 47 tons of millable cane per acre per harvest.”

It’s been more than two years since CE&P has reported substantial progress towards its launch dates — but it did ultimately attract Kleentek, a division of Certis USA ( well-known crop protection company developing herbicides and pesticides) to the region. The Kleentek Division of Certis U.S.A had been active in Louisiana and Florida sugarcane circles for some time, and provided to CE&P a number of seed sugarcane varieties, and performed sugarcane propagation and growing services.

Canergy has also partnered with Kleentek and will contract local growers in the Imperial Valley for energy cane feedstock and straw for their year round cellulosic ethanol production. Energy cane is the highest yielding of all dedicated biomass crops allowing for the most efficient use of land and water. Energy cane is an unique biofuel feedstock due to their high concentrations of sugars from juice and high amounts of cellulosic fiber from the same crop.

A win for Beta Renewables

Beta Renewables’ PROESA technology will be used to convert Canergy’s energy cane feedstock, bagasse and residual cane straw, to produce cost-competitive cellulosic ethanol. This technology is being used today at the world’s first commercial-scale cellulosic ethanol plant in Crescentino, Italy, which started operations in December 2012, and also will be used in a series of plants to be built by GranBio in Brazil.

“Chemtex and Beta Renewables are pleased to have been selected by Canergy for their project. Large scale commercialization of cellulosic ethanol projects is taking off and this is an important project for California to support its drive towards lower carbon footprints,” said Guido Ghisolfi, President of Chemtex and the CEO of Beta Renewables.

The CHS partnership

Tim Brummels, Canergy’s CEO, said, “We are excited to be moving this project forward. California is the country’s largest retail gasoline market and this first project’s biofuel will facilitate obligated parties compliance with California policy directives to reduce their carbon footprint through 2020. We have completed extensive research and have concluded that PROESA Technology is both ready now and is the most advanced and competitive cellulosic platform in the marketplace today. We are also excited to have CHS Inc., a leading global energy, grains and foods company, working with us as a development partner in the project.”

John Litterio, Director of Renewable Fuels Marketing for CHS, said, “Our financial strength, logistical expertise, risk management services and 30+ years of biofuels experience will help position Canergy to reach more markets with its ultra-low carbon intensity ethanol and achieve the best possible netbacks. We are proud to be the exclusive marketer for Canergy and to continue providing strong marketing connections for both first and second generation ethanol producers.”

CHS is a Fortune 100 global agribusiness owned by farmers, ranchers and cooperatives across the United States. It supplies energy, crop nutrients, grain marketing services, livestock feed, food and food ingredients, along with business solutions including insurance, financial and risk management services. The company operates petroleum refineries/pipelines and manufactures, markets and distributes Cenex brand refined fuels, lubricants, propane and renewable energy products.

The Bottom Line

“Can”-ergy or “Cant”-energy? It all comes down to feedstock, feedstock, feedstock.

If Canergy can sell in the energy cane model to growers in the Imperial Valley, and realize good returns for growers while keeping the costs within the lines that Beta has established – the project can be a winner on the economics, and certainly offers an attractive, California-based option for meeting California’s Low Carbon Fuel Standard as well as the US Renewable Fuel Standard via cellulosic ethanol.

We’ve seen numerous examples of the US Renewable Fuel Standard and the California Low Carbon Fuel Standard driving innovation — Aemetis’ conversion to milo and biogas being a textbook example. Here’s another.

It’s an open question, alarmingly, whether US political leaders will continue to support the wave of innovation by maintaining the Standards in the face of bitter opposition by oil companies — and a surprising pivot by several environmental groups against the Renewable Fuel Standard, primarily over corn ethanol.

Accordingly, we’ll be looking carefully at Canergy’s capital formation efforts amidst policy headwinds. If they are successful in raising the cash for the greenfield project and succeed in getting the contract farming commitments at affordable per-ton prices — they can be expected to go far.