Methanol’s Moment: With low prices, and proven process, is meth your new best friend?

September 10, 2015 |

Enerkem-1Methanol is gaining momentum as a low-carbon fuels target, as Enerkem starts producing in Edmonton.

Why methanol, why now? Here, we look at the technology and market rationale for this rising trend.

As we reported earlier this week, Enerkem has initiated methanol production at its Edmonton waste-to-fuels facility, and has raised an additional $115M in financing. One might be wondering, where’s the ethanol?

Yes, Enerkem originally set out to make ethanol from municipal solid waste — and here’s their patent app for the multi-step proprietary process they developed for producing ethanol from methanol.

However, we don’t expect to see much ethanol produced by Enerkem, anytime soon. In a nutshell, though methanol trades at a 24% discount to ethanol in the market ($1.10 per gallon, here, vs $1.45 for ethanol, here), there’s roughly 43% less weight in the methanol molecule. You can produce enough extra methanol per ton of biomass to more than offset the lower price per gallon.

At today’s prices, it’s a losing proposition to convert methanol to ethanol, especially when taking into consideration that you have to run a complex chemical process in order to do so.

Can you distribute it?

But in the world of fuels, it is not always about the inherent value of a given fuel, but the infrastructure in place to deliver energy to the market — so, the utility of methanol has to be taken into account as well as its production price.

Can you distribute it? That’s a question that also comes up with compressed natural gas, to mention a fuel option that’s currently low-cost but not highly fungible.

In the US, the answer is generally has been “no”. Whatever role methanol might have played as a renewable fuel has been played instead by ethanol.

In China, by contrast, there’s a lively market for methanol, generally produced from coal and blended in 5-15 percent ratios with gasoline. And, we may see a methanol market emerging in Israel, where large natural-gas reserve discoveries in 2011 prompted the establishment of the Fuel Choices Initiative, designed to move Israel off crude oil as a transport feedstock, using a combination of natural gas, biofuels, and electric cars.

Our 8-Slide Guide to the Fuel Choices Initiative

You can learn all about Israel’s Fuel Choices Initiative in our 8-Slide Guide, here.

Israel’s Fuel Choices Initiative and methanol

By 2030, Israel aims to replace 70% of its petroleum-based transport fuel demand to alterantives, with CNG and methanol contributing 40% of that shift by 2025.

The easiest option for deploying methanol into the marketplace in large volumes is M15 blends with gasoline, and Oil & Gas Journal this year published results from a three-year study out of Israel that found that “Results of the M-15 pilot test strongly suggest the viability of using M-15 as a conventional transportation fuel in regular vehicles without negative impacts to drivability or emissions.” While the energy density loss is around 3-4 percent, power and torque were comparable, and “compatibility tests were performed for various metallic, elastomeric, and plastic materials used in various parts of the vehicle’s fuel systems as well as at the fueling infrastructure.”

In all, “the vehicles were driven for a total of more than 1 million km (about 621,000 miles) by ordinary drivers under normal, daily driving scenarios in both urban and rural settings.”

In Israel’s case, most of the methanol would come from reforming natural gas — typically, a three-step process and done at scale around the world today. But, as Enerkem demonstrates, there is also the option of producing methanol from muncipal solid waste.

Targeting Israel’s waste

How much waste is there in Israel? At 1 pounds of organic MSW per person, per day, there could be as much as 1.46 million tons of available feedstock.

That’s enough to power a network of 12 standard-scale Enerkem plants, which are prefabricated and replicable. But more than one module could be situated at a given location — so that a project array might include 4-6 sites, based on the distribution of MSW.

Those plants could produce at least 120 million gallons of methanol, displacing some 3% of Israel’s total oil consumption — and Enerkem has indicated that it can get CAPEX costs down to as low as $3.50 per gallon of capacity, at scale. So, that’s a $420 million investment in the conversion technology, and an interesting way also to reduce carbon emissions and landfill diversion.

Other players

In March, we reported that Maverick Synfuels is ready with its Maverick Oasis BG Gas-to-Liquid methanol plant product line. These plants convert biogas from sources such as anaerobic digesters and landfills into higher value methanol, one of the world’s most widely used industrial chemicals.

The DME option

As Robert Rapier observed in the Digest in 2013, “Methanol can be converted into di-methyl-ether, which gets around methanol’s toxicity and corrosivity issues. DME can be used as fuel in either a gasoline or a diesel engine, which makes the potential market huge. DME is a gas at room temperature, but compresses to a liquid under mild pressures.”

The major player in the DME movement is Oberon Fuels, which produces DME from syngas via methanol.

The Oberon production units use various feedstocks—such as biogas (animal and food waste, wastewater treatment, landfills), natural gas, and stranded gas—and they produce 3,000–10,000 gallons of DME per day. The Oberon process cost-effectively converts methane to DME, resulting in stable pricing (not dependent on crude oil), at a price that is competitive with diesel. The modular design can be deployed to remote stranded-gas locations that can be difficult and expensive to harvest, and to industrial operations where our units can monetize waste CO2 streams.

Right now, for Oberon the substantial value lift is concerting methane to methanol, where low-cost natural gas (available in the $3/MMBTU range) can be converted into $19/MMBTU methanol. The math is not quite as rosy in converting methanol to a diesel substitute right now — because fossil diesel is priced at $11.75/MMBTU at this time, and the up-conversion only makes sense if the methanol has no place to go.

The Bottom Line

The market is offering higher rates of return on methanol — and there are reasons to believe that the potential to distribute the fuel is on the rise. Accordingly, while we’ll expect to see Enerkem, Oberon and other companies demonstrate the capability to produce ethanol or DME, and where there are carbon-incentives (for example, in the California market) or constrained avialability of conventiknal fuels, we might see the finsihed fuels — for now, what was intended to be an intermediate product, methanol, may be the right end-stop for some hot technologies.

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