Rennovia’s demise, the Triple Rule, and the pursuit of sustainable nylon in a world of low oil prices

March 9, 2018 |

In California, Rennovia has ceased operations, after the company failed to raise sufficient financing from investors and/or strategic partners to advance its pilot-scale technology to first commercial production.  The bulk of the IP assets have been sold and the company’s physical assets are currently in liquidation.

The company had developed what is widely considered to be transformative catalyst and process technology — and Rennovia’s demise illustrates some trends in bio-based chemistry that are worth focusing on.

The Race for Biobased

We reported back in 2013 that Rennovia had produced, and shipped to a prospective partner (who presumably turned out to be ADM), samples of the world’s first 100% bio-based nylon-6,6 polymer, under Rennovia’s RENNLON brand, made from Rennovia’s renewable monomers, RENNLON adipic acid and RENNLON hexamethylenediamine.

It was exciting stuff. Production costs for Rennovia’s bio-based AA and HMD were projected to be 20-25% below that of conventional petroleum-based AA and HMD, with a significantly lower per-pound capital cost. Additional projected benefits included an 85% reduction in greenhouse gas emissions compared to conventional petroleum-derived AA, and a 50% reduction in GHG emissions compared to conventional petroleum-derived HMD.

ADM steps up

The results did not go unnoticed for long at all. In early 2014, ADM committed to a $25 million equity investment in Rennovia. The partners said that the first products would be the nylon intermediates adipic acid and hexamethylenediamine (HMD). ADM’s investment would support research and development programs and continuing operations.

It was a time of a high engagement level for ADM in renewable chemicals ventures. ADM’s senior VP for R&D, Todd Werpy, said at the time: “We are committed to continuing to identify novel technologies that provide high yields and low conversion costs,” said  “We believe that the new technologies being developed by Rennovia, coupled with ADM’s strength in manufacturing, will help us to deliver competitive products that complement our growing portfolio.”

And ADM had announced a JV with CIC Holdings and Chemanex PLC to build and operate a processing facility near Colombo, Sri Lanka, to manufacture bio-based superabsorbent polymers. These products are commonly used in food packaging, personal-care products and various industrial applications. ADM was to the majority owner of the venture and will market the plant’s production of ADM’s BioSAP brand superabsorbents.  And ADM was engaged in supporting Solazyme commercial operations at ADM’s Clinton, Iowa.

The world of adipic acid

You want green nylon? You may need renewably produced adipic acid. Who was in the nylon hunt back in 2014?, A bunch of companies like Ashai Kasei, BASF, DSM, Dupont, Honeywell, Huntsman, Koch, Lanxess, and Rhodia. And smaller companies such as Rennovia, Genomatica, BioAmber and Verdezyne.

Adipic wasn’t the only way. There’s butadiene, generally thought of as a path to polybutadiene rubber (PBR) and styrene butadiene rubber (SBR), two types of synthetic rubbers used globally to replace natural rubber. But also a key intermediate chemical used by INVISTA for the production of adiponitrile (ADN), which in turn is a critical intermediate chemical used in the manufacture of nylon 6,6. And Genomatica, LanzaTech and even Global Bioenergies were looking at butadiene.

But here was the pitch for this drop-in replacement. There was the carbon benefit, and the financial benefit.

What happened?

Oil prices crashed, and the risks associated with new technology were still there but the forgiving margins had gone with the wind. The carbon benefit was there, but the financial benefit had wilted, and we found out quickly how much the carbon benefit was valued by partners — it was a nice to have, even a must-have, but the relentless focus was on payback. Many companies moved into “wait and see” mode, and that has pushed smaller renewable chemicals companies into the brink of the abyss, and more.

Consider this timeline that we saw some years back from Rennovia.

They would move fast, but they never moved as fast as they hoped, and they weren’t able to move fast enough to survive. Let’s look at how that happened.

The 2015 mini-plant

In July 2015, we reported good news from Johnson Matthey Process Technologies and Rennovia. They had started-up a mini-plant for production of glucaric acid from glucose, after signing a collaboration in March 2014 to develop and commercialize production technology for bio-based glucaric acid and adipic acid.

But then we started hearing a lot more by 2015 about “Rennovia’s 1,6-HDO is a platform intermediate to several commodity chemicals with over $20 billion market value, including hexamethylenediamine (HMD), adipic acid, and caprolactam. Rennovia has successfully combined its bio-based AA and HMD to produce 100% renewable nylon-6,6.” We were hearing more about platform technologies and multiple potential molecules and less of a drumbeat about cost reductions.

But the team was still on a fast track. As we reported in 2015, the completion of key piloting activities and the development of a 1,6-HDO commercial design package are anticipated by the end of this year.  And Rennovia was in active discussions with a number of potential strategic partners to support the commercialization of 1,6-HDO and downstream products.

The partner base was broadening, too. We reported in May 2016 that Rennovia and Stora Enso announced a joint development and license agreement to cooperate on bio-based chemicals development. Stora Enso was targeting new markets and developing novel products as it transformed into a renewable materials company, the agreement is a logical step for the company.

The 2017 licensing deal

ADM did step forward with more support and we reported in February 2017 that Johnson Matthey and Rennovia had signed a license agreement with Archer Daniels Midland Company to provide catalyst and process technology for catalytic production of bio-based glucaric acid.

The Unbearable Heaviness of Gravity

Milan Kundera wrote about the Unbearable Lightness of Being, the longing for significance in our lives which so often eludes us. But in the biobased world, there is significance all around almost everything that the industry does. Significance in process technology development, significance in financial innovation, significance with respect to carbon. The industry is replete with significance and there’s nothing unbearably light about it.

There’s an unbearable lightness of the capital stack, however. Or as you might describe it, the unbearable heaviness of gravity as capital starvation and deployment roadblocks bring high-flying ventures in fuels, chemicals and materials crashing back to the ground.

The Math of Deployment

Consider this rough guide to the costs of getting to scale. We’ve averaged this as a rough rule of thumb from a number of ventures we’ve seen, and included both the costs of a specific stage of scale-up (e.g. a small commercial demonstration) and the costs of keeping a company running during that development stage.

(Note to readers: These are for illustration purposes only — as costs will vary widely based on the volumes that are “commercially viable” for a given technology and the cost of the underlying feedstocks that drive those break-even points and the scale. We’ve taken into account the availability of early-stage non-dilutive capital via R&D grants, and the later stage availability of debt.)

Here’s the takeaway. An industry that can invest $500 million per year is going to be able to support quite a few bench-scale investigations of promising technology. Moving to pilot stage, either industry must triple its investment or companies will start falling by the wayside.

We generally don’t hear about capital starvation at this point. Just enough technologies don’t end up working well enough at the bench scale to progress to pilots and demonstrations. The viable companies can generally access capital — especially as more strategics get more interested in technology at this stage.

The Triple Rule

But then, there’s the demonstration step. Again industry has to nearly triple its investment, or companies go by the wayside. And investment has to triple again to take companies to commercial-scale. Consider it a rough Triple Rule, which is to say that unless industry is piling in the money, we start to see really interesting and transformative companies withering on the vine, unable to reach scale and eventually running out of money for operations. Triple, triple, triple leads to roadkill, roadkill, roadkill.

Boom times help — when biobased in in vogue, that helps. When oil prices spike or supply crunches, that helps. When oil prices crash, when strategics consolidate, when margins are tough in the main-line business whose cash-flows provide the capital for innovation — those are crucial factors, on the negative side.

All of those are in play right now. Though oil prices have crept up, they are in the 60s and edging towards the 70s, not in the 90s edging towards $100. Meanwhile, consolidation in the face of tough times for the agri-giants is all around us and we hear every day about ADM’s interest in Bunge, Bunge’s exit from the sugar trade and renewable oils, a travel freeze at Cargill that has stretched from weeks and now is measured in months as that company slashes costs.

Capital becomes very hard to come by. It becomes a cruel form of musical chairs, and now the music has stopped for Rennovia.

But biobased goes on, and the race for biobased nylon goes on — and we continue to see companies reaching scale via the butadiene route and that may in the end prove to be the technology path that wins out.

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