What’s My Feedstock Worth? A primer for measuring bio-value

The unused fraction problem

We mentioned above the CO2 fraction that existing ethanol fermentation processes create — that’s a product of how yeast converts sugar to alcohol, and you see it in action every time you pop a champagne cork.

The bioeconomy is replete with processes that extract value only from a portion of the feedstock. Sugar cane processing doesn’t do anything with the bagasse leftover except burn it, and they generally spread vinasse on fields to add some fertilizing value. Pulp & paper processing doesn’t generally use lignin except to burn it (although Borregaard converts it to vanillin), and that can be a third of the feedstock or more.

No process, or lousy economics with existing processes at scale?

Well, welcome to the advanced bioeconomy — the search for new processes that unlock value.  In this quest, you’ll take on Valley of Death failure risk, potentially huge R&D costs that hopefully are offset with grants and partner co-investing, there’s the cost and risk or scale-up, there’s commodity price risk (especially, unexpected NLACM issues), market barriers, policy risk if there’s support for the bioeconomy at a policy level, regulatory risk (such as, getting the fuel certified, a plant permitted and so forth).

There’s also the thermodynamic problem, which has to do at the end of the day with how much energy you have to put into certain feedstocks to convert them — and you can easily end up with a process that costs more in energy than energy is created. That can be just fine in some cases — after all, it’s well worth using electric or fuel energy to produce mechanical energy — you consume more fuel or power energy than you get back in mechanical energy when you are running a car, but the usefulness factor has to be considered.

The list goes on — and it is daunting enough that very few feedstock owners actually develop a process. They generally have used one already out there, and improved it along the way. They have left process development up to companies specializing in that.

The thermodynamic challenge

To cite an example, you can do the math as we’ve outlined and come up with a theoretical fuel value of $120 for a ton of pure carbon dioxide — not exactly gasoline value, but it’s not nothing, and might look tempting if you have some extra CO2 in a process somewhere. But CO2 is notoriously energy intensive to convert to anything — what’s known as the bond energy is high, and generally it’s a task that generations of engineers have happily left to plants while they focus on more tempting targets like hydrocarbons or carbohydrates. Clearly plants use CO2 to make carbs — so there’s value in there, but all processes are subject to the thermodynamic test, and that’s another barrier in realizing the full value from a feedstock.

The Amortization challenge

One of the most daunting issues is realizing the full value of your feedstock occurs when you have to build out your own process, and you are competing against producers who have amortized the cost of their production facility, and you haven’t. Most oil refineries in the US have long ago amortized the value to the refinery’s construction — though they are still amortizing their ongoing improvements. Even many first-gen biorefineries are approaching that point if they are on 10 or 15-year amortization schedules.

For an advanced process, the capex can be anywhere from $4 to $15 per gallon of nameplate capacity for a first commercial plant, and over 15 years of amortization that will add $0.28 to $1.00 to every gallon of fuel produced.