How biobased energy, consumer goods will become the biggest vertical in cleantech

July 19, 2013 |

geographies

Adaptability, global growth driving the potential

Biofuels are the quintessential example of the transformation that is taking place within this space. In many ways first generation biofuels have waned substantially in popularity and practicality. “I talk a lot about how people are expecting biofuels to be the same bone yard as the first generation of ethanol and that’s just nonsense,” explains May.

But far from their predecessors, advanced biofuel technologies have several advantages that make them uniquely adaptive, which not only keeps them on the cutting edge of technology, but also increases their attractiveness to investors.

For instance, cellulosic biofuel manufacturers can easily adapt their technology to switch to biogas fuel production by compressing the syngas. Because they have options on the output side, they’re able to adapt to changes in price and demand in the market to ensure they remain bankable and attractive for equity investments.

A perfect example of this kind of adaptation can be seen in Primus Green Energy, Inc. They’ve developed a proprietary process technology that converts biogas into a drop-in fuel, but given the hesitancy felt in the investment space about biomass technology, Robert Johnsen, CEO of Primus decided to refocus the company to reforming natural gas into syngas. Given its low cost, and the fact that it is essentially burned off as a waste at most well sites, Primus is able to capitalize on a readily available yet profitable fuel in order to get the funding they need to scale up.

Johnsen explains: “If we worked with biomass, we’d have to gasify it; same thing with MSW (Municipal Solid Waste). With natural gas, we do gas reforming instead, which results in a syngas that can be run through our system. Down the road we hope to go back and find a rational means to turn our talents, creativity, and capital to the challenge of biomass scale-up while not betting the company on the outcome. ”

The green and black economies will co-exist for a long time to come

The green and black economies will co-exist for a long time to come

These interchangeability sentiments are echoed by May; “If natural gas prices triple or quadruple over time, the natural gas play, or Primus type deals won’t work anymore. But the good news is that their technology gives them the option to turn it into power, chemicals or another gas play as opposed to a fuel play which will make all the difference in the world.”

Yet biofuels technologies have potential that goes well beyond other types of energy. Many renewable biofuels technologies can be adapted to enter whole new markets, like the renewable chemicals space for instance. Since renewable chemicals are high-value products, profits are higher and markets are more stable, making them very attractive for investors. Given consumer demand for these types of products, there’s no doubt that the market is there.

Gregory Manuel, formerly of Amyris Biotechnologies and former Special Advisor for Alternative Energy to the US Secretary of State, expounds on this idea further. “There’s a growing recognition that the level of efficiency you need to achieve in your process to be competitive in commodity chemicals / fuels and it will take more time than originally anticipated.  You can get there, and I think that some will, but in the meantime, companies are turning to smaller and higher value chemicals where positive gross margins are achievable.”

As such, those biofuels companies that are able to tweak existing technology to serve new markets, either on a temporary basis or as a way of expanding their offerings, are far more likely to succeed and will ensure they’re not another dead start-up on the bone pile of first generation ethanol. “Frankly it’s going to force these companies to think creatively. The companies that don’t  will shorten their life-spans dramatically ,” comments Manuel.

Another way biofuels companies in the US are staying profitable is to market their technologies internationally. As Vonnie Estes, Managing Director at GranBio put it, “What is continuing to happen is that a lot of the tech is going to continue to be started and invented in the US and then deployed in other places.”

On the one hand, there are many regions – Asia, Africa, and South America, for instance – that have a lot of biomass that they don’t know what to do with. On the other hand are those countries, such as the UK, where there’s no space for biomass but an interest in using  waste to create biofuels. “So they’re coming to the US and asking what tech there is and what can be licensed,” says Estes.

As a result, many biofuel technology companies are in an enviable position of having the adaptable tech other countries need, and the opportunity to license it at a high price. “The US is best in coming up with the tech because of people willing to take risks. The rest of the world will deploy them,” concludes Estes.

Manuel whole-heartedly agrees. “US companies will only survive if they look more proactively and creatively for partnerships abroad.  Early deployment for companies in the US may happen in fast growing markets like Brazil that have already demonstrated a commitment to cleaner energy.  Deploying outside the U.S. can bring in revenues earlier and precipitate enormous value creation for these U.S. companies. This in turn will allow them to hire more people, increase R&D and deploy further into other economies – The Middle East, China, India.  This begins to look like clean tech scaling v2.0; no longer are invention and deployment tightly bound to the U.S. and Europe, but rather real global arbitrage is taking place- connection innovation, pools of capital and markets to accelerate new technology adoption.”

In today’s Digest, Richard Herbert explores how technology transformation, alternative financing, and consumer demand are driving success for Biobased materials and goods – by following the page links below. 

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