Tuesday, January 29, 2013

Jatropha Loves to Fly and It Shows

 January 29, 2013

It is becoming increasingly evident that, in the near-term, acute demand for aviation biofuel is going, one way or another, to result in heavy demand for jatropha and jatropha oil-based fuels.

New deals for SGB in Brazil are confirming the trend.

There, at the head of the pack, well down the track from everyone else as an aviation biofuel – there it is, your friend jatropha.
Really? The blunder crop? Destroyer of D1 Oils? Official Sponsor of “things-that-went-wrong”?
Yep, it’s back.
This time — like Peter Jennings, who embarked on a storied 20-year run as ABC Nightly News anchor after a disastrous and short anchor desk tenure as a 27-year old in 1965 —  it looks like jatropha is here to stay.
All along, it was wrong to blame the plant. A fish rots, as they say, from the head. As SG Biofuels CEO Kirk Haney has pointed out, “jatropha didn’t fail, jatropha 1.0 business practices failed.”
Among them, poor farming practices, poor seed selection, poor site analysis, questionable claims.
“Every product that didn’t use hybrids or some kind of genetics will fail,” Haney told the Digest. ” It’s just impossible to get a high and consistent yield without an improved line. Those who do not have the hybrid vigor will never be successful. They will never see the early flowering, the big fruit clusters — and in the end they will be people who were very good at selling a vision.”
You see, there’s the easy road and the hard road in biofuels.
The former — well, it is not unlike Pleasure Island in Pinocchio where the boys drink beer, smoke cigars and generally make jackasses of themselves. In biofuels there’s the “plant them anywhere, they all grow, they grow wondrously, it’s like free money” wing of the movement.
Then there’s the hard way. In SGB’s case, five years of research, developing a germplasm library including more than 12,000 unique genotypes. Partnering with the likes of Life Technologies. Conducting multi-year client trials in multiple locations with up to 1,500 tested varietals, aimed at selecting out 3-4 winners.
But here’s what you get for all the trouble. In the case of SGB alone, 250,000 acres signed up in various field trial and deployment agreements – including an agreement to trial jatropha with Bharat Petroleum in India with 86,000 acres for first phase commercial deployment following the trials — and a similar 75,000 acre deal in Brazil with a consortium including JETBIO, Airbus, the Inter-American Development Bank, Bioventures Brasil, Air BP and TAM Airlines.

The economics of jatropha-based aviation biofuels

SGB has been relatively cagey about yields – pointing out that they will vary substantially depending on geography, but some time ago they pointed to 350 gallons per acre as a suitable target given effective site selection and cultivation processes. Even 200-300 gallons in cold regions like the United States. That’s a huge improvement over the 60 gallons of oil per acre that soybean produces.
350 gallons per acre and 250,000 acre equates to around 87 million gallons of oil – hardly a dent in the aviation fuel market, but far beyond pilot or demonstration stage. Those are commercial volumes, enough to 3 million passengers from Miami to LAX on Airbus A320s.
The economics are there, once the trial plots have transformed into full-blown deployment. As Haney observed last October at Advanced Biofuels Markets, they have achieved costs of $99 per barrel or less across three continents — “all-in, fully loaded, from buying our seeds, growing, harvest, crush into crude, capex, opex, all of it.” That was a 13 percent discount over Brent crude at the time.
The combination of the right economics, commercial-scale deployment, and an approved pathway to make jet fuel from jatropha oil — in the form of the Hydroprocessed Esters and Fatty Acids” ( HEFA) fuel spec approved by ASTM in 2011 — gives jatropha the lead over a wide range of competing crops, including oil seeds like camelina and carinata, algae-based jet fuels, and a variety of feedstocks that can eventually fit into the proposed alcohol-to-jet fuel spec.

SGB Signs Landmark Deals in Brazil

If there was much doubt about the traction that jatropha is getting, it disappeared this week with the news that SGB has signed landmark agreements in Brazil with Embrapa (Brazilian Agricultural Research Corporation), the country’s leading agricultural research institution, and with Fiagril, one of the country’s leading biodiesel refiners, to advance the development of Jatropha as a next generation energy crop.
“Our agreements with Embrapa and Fiagril validate the market acceptance of our Jatropha hybrids in Brazil and provide a strong platform from which to quickly expand commercial production,” said Kirk Haney, president and chief executive officer. “We look forward to benefiting from Embrapa’s expertise in Brazilian agriculture as we deploy Jatropha projects for Fiagril and other customers.”

The Embrapa deal

SGB’s strategic research partnership with Embrapa will combine the company’s breeding and genomics platform, including the largest and most diverse library of genetic material of Jatropha in the world, with Embrapa’s leadership in the advancement of new technologies that have increased agricultural productivity in Brazil. Embrapa has identified Jatropha as one of the most promising new energy crops in Brazil.
Since its establishment in 1973, Embrapa has generated almost nine thousand technologies, products and services for Brazilian agriculture, along with the institutions that form the National Agricultural Research System. The work has opened new agricultural frontiers, raising productivity and reducing production costs in the field. With that, Brazil has improved food security, promoting conservation of natural resources and the environment and generating income in rural areas.
“We have identified Jatropha as one of the most promising energy crops for the production of oil for biodiesel and bio jet fuel in Brazil,” said Manoel Souza, general director of Embrapa Agroenergy. “The first efforts to deploy the crop in Brazil were plagued by a lack of improved cultivars and insufficient technological expertise. We’re confident that through our partnership with SGB we can quickly overcome those challenges.”

The Fiagril deal

The agreement with Fiagril, the third largest company in the state of Mato Grosso with revenues in excess of US$1 billion per year, includes the establishment of a JMax Knowledge Center near Fiagril’s 200,000 metric ton-capacity biodiesel plant in Mato Grosso — as a complement to soybean cultivation there. The center is a professionally-managed trial where SGB is advancing elite Jatropha adapted to local growing conditions while establishing best agronomic practices to enable successful commercial deployment.

Jatropha and SGB in Brazil

In Brazil, SGB has deployed three JMax Knowledge Centers™, including one in conjunction with a multi-stakeholder initiative including JETBIO, Airbus, the Inter-American Development Bank, Bioventures Brasil, Air BP and TAM Airlines. SGB is working with its partners on a multi-phased program leading to the deployment of intercropped Jatropha plantations in the Central-west region of Brazil for the purpose of bio jet fuel production. SGB’s trials continue to demonstrate the superior performance of its Jatropha hybrids compared to commercial varieties in terms of plant vigor, health, flowering consistency, stress tolerance, seed and oil yield across multiple geographies.
READ MORE: Elsewhere in jatropha, updates from CubaSudanMalaysiaSingapore

The bottom line

It’s profit and cost, in the end. The only green premium is the one you will pay in the form of elevated interest rates and fewer subsidies if you have a green project.
For that reason, jatropha has acquired some fiscal vigor in addition to the hybrid vigor that it has lately acquired.
The crop is miles ahead in terms of at-scale deployment, and the economics look good for that to continue. The crop is likely to continue to be grown in the India, Brazil, sub-Saharan Africa and Central America for some time, if not always. EU and North American growers looking to supply aviation fuels may look to carinata as an alternative, or camelina.
But for now, it’s jatropha in the lead. And it could be something special in the air.

Saturday, January 19, 2013

Enerkem raises $37.5M for landmark waste-to-biofuels plant in Edmonton

 January 17, 2013

The long and sometimes perilous journey to financing Enerkem’s first commercial project appears to have reached the sunny shores of Completionland.

We look at what it took.

In Canada, Enerkem announced that it has closed a $37.5 million financing with Waste Management of Canada Corporation, a subsidiary of Waste Management, and EB Investments for Enerkem Alberta Biofuels L.P.
“We’re glad to see Waste Management and EB Investments strengthen their relationship with us by increasing their direct investment in the Edmonton facility”, noted Enerkem CEO Vincent Chornet. “This is further validation of Enerkem’s business model and leadership position in the market for waste-to-fuels and chemicals.”
At the same time, the company, which is currently constructing its first commercial facility in Edmonton, welcomed its first employees to the Enerkem Alberta Biofuels facility. It will use the City of Edmonton’s non recyclable and non compostable waste to produce 10 million gallons of renewable fuels and chemicals, and will create more than 30 permanent jobs, in addition to 200 jobs during construction.
Site prep at Enerkem's Edmonton (Alb.) first commercial plant, as of May 2012
Site prep at Enerkem’s Edmonton (Alb.) first commercial plant, as of May 2012
The City of Edmonton and Enerkem Alberta Biofuels have signed a 25-year agreement to convert 100,000 tonnes of the City’s municipal solid waste into biofuels annually. The garbage to be used cannot be recycled or composted.
“With plant commissioning expected to begin this summer, it’s exciting to see the facility’s first employees join the Enerkem team and start their technical training”, said Vincent Chornet, president and CEO of Enerkem. “We are impressed by the quality and calibre of the candidates we are attracting as part of our recruitment process.”

The Edmonton, Alberta facility

Type: Commercial
Status: Completed in 2013
Feedstock: Sorted industrial, commercial and institutional waste
Planned Product: Biomethanol, cellulosic ethanol
Expected Capacity: 38 million litres/ 10 million gallons per year
More on the project and the company’s technology in “Trash Spread, Enerkem heads for scale.”

Revisiting the financing

The Edmonton plant was long envisioned as a $75 million capital project — at $7.50 per gallon of capacity, it was on the “capital-light” side as far as first commercial projects in advanced biofuels.
But it was long expected that it would depend on the deep pockets of strategic and equity investors — as opposed to traditional project financing that would be available farther down the road when the technology was considered “proven at scale”.
Last spring, Enerkem filed for an IPO and, within 90 days, withdrew the filing after two rescheduled pricing dates. Company CEO Vincent Chornet noted, in speaking with the Digest last summer, that the company had a full order book, but the price was unattractive.
Enerkem had been the 15th company to file for an IPO in the industrial biotech boom when its F-1 was filed in February.
Among other items on the corporate agenda, the company had been attempting to fund the remaining share of the capital requirement for the Edmonton project. Previously, the project had secured $C23 Million in funding from the the Government of Alberta and the City of Edmonton.
And in December 2011, Waste Management of Canada and EB Investments ULC, each invested C$7.5 million in Enerkem Alberta Biofuels LP, the entity that will own and operate the Edmonton, facility. That left the project $37 million short of its $75 million price tag — and that’s the portion funded this week by WM and EB.
The financing structure was not announced this week, but we expect that, in return for the financing, EB and WM both chose a path with more seniority than ordinary equity – either a debt arrangement, or debt that is convertible to equity, or vice-versa. The financing negotiations could not have been easy – since in the previous deal documentation, both EB and WM were expected to reduce their ownership interest in the Edmonton project to 14.5 percent as other investment flowed in.

Who are EB Investments, by the way?

Waste Management needs no long introduction, but what exactly is EB? It’s a rather mysterious investment vehicle – we’re guessing that the EB stands for “Enerkem Biofuels”. What we do know is that Enerkem chairman Joshua Ruch (also one of three managing members of Rho Ventures — the largest shareholder in Enerkem), is the sole general partner of and owns a 15% interest in an entity that indirectly wholly owns EB Investments ULC.

Where is Enerkem on its timeline to commercialization?

The dates get slippery with first commercial projects, but clearly there had been a hope at one stage that Edmonton would have been completed as soon as late 2011 — and so, by any measure, the project is late. It is now expected to complete construction and begin commissioning over summer 2013.

Next projects

The timeline is looking tight, now, on some other Enerkem projects. A year ago, the Quebec provincial government invested $18 million in grants and $9 million in loans towards the Enerkem/GreenField Ethanol joint venture that will be fed by non-recyclable waste from institutional, commercial and industrial sectors. Its waste-to-fuel portion will produce 40 million liters of ethanol per year while a second-generation cellulosic ethanol unit will bring total plant output up to 200 million liters per year.
Construction of the $90 million facility was expected to begin in the spring of this year — but we are highly unsure as to whether Enerkem can commence the project before completing construction on its first commercial.

Also in the pipeline, a project in Pontotoc, Mississippi which has attracted $130 million in financial support from the U.S. Department of Agriculture (USDA) and Department of Energy (DOE) for a plant and was originally expected to break ground as soon as the end of 2011.

Enerkem’s economics

Enerkem confirms that it can reduce capex costs to $3.50 per gallon for a 38 Mgy facility – bolting together four of its Edmonton 9.5 Mgy modules, or $133 million per facility.
According to earlier analyses of Enerkem’s economics, the plant design is financially feasible at a zero feedstock cost, based on $80-$100 oil.

Enerkem’s product line up

In addition to ethanol, Enerkem can produce:
Around 40 percent of methanol is converted to formaldehyde, and, from there, into products such as plastics, plywood, paints and textiles. Methanol is also used as a solvent and antifreeze, as well as a transportation fuel. According to SRI Consulting, world demand for methanol is projected to grow at an average annual rate of 7.8 percent from 2008 to 2013. Today, methanol is generally produced synthetically from natural gas.
Acetic acid.
It is mainly used for the production of vinyl acetate monomer (VAM), but its fastest growing use is for its second largest derivative, purified terephthalic acid (PTA), which is driven by the demand in polyethylene terephthalate (PET) bottle resins and polyester fibre. According to SRI Consulting, Asia is expected to account for over 57 percent of acetic acid consumption in 2011 and the United States is expected to remain a major player, accounting for an estimated 19 percent of demand in 2011.
Ethyl acetate is used in a variety of coating formulations, such as epoxies, urethanes, cellulosics, acrylics and vinyls. Applications for these coatings are numerous, including wood furniture and fixtures, agricultural, construction and mining equipment, auto refinishing, maintenance and marine uses. Methyl acetate is mainly used as a chemical solvent for cleaning/coatings, and in its high-purity form, as a solvent for the pharmaceutical industry.
First up? Looks like methanol. Back in Q3 2011, Enerkem entered into an offtake agreement with Methanex for the sale of methanol to be produced at Edmonton.  The plant in Edmonton, is expected to initially produce and sell methanol. The plant will subsequently produce cellulosic ethanol from methanol.

The bottom line

Looks like Enerkem is there in terms of the final financing for Edmonton, and the company’s first commercial project is headed for commissioning this summer. Next steps will be the Quebec and Mississippi projects — and scaling up to a 38 million gallon capacity (where capex drops, according to the company, to $3.50 per gallon) may well be next on the agenda.

Wednesday, January 16, 2013

Sugar Rush: Sweetwater, Front Range ink $100M cellulosic biofuels deal

 January 16, 2013

sugarFront Range becomes third ethanol plant in 3 weeks to head for cost reductions, RIN opportunities with advanced feedstocks, technology.

Sweetwater Energy’s deal-flow-a-go-go.

In New York, Sweetwater Energy announced a 15-year commercial agreement with Colorado-based Front Range Energy, to supply renewable sugars for up to 3.6 million gallons of cellulosic ethanol per year during the initial phase of the relationship at Front Range’s current corn-ethanol facility. The agreement has a total potential value in excess of $100 million, and requires a minimal capital outlay by Front Range while stabilizing the company’s feedstock costs.
Sweetwater will use its patented, hub-and-spoke process to convert locally available cellulosic, non-food biomass, such as crop residues, energy crops, and woody biomass into highly fermentable sugar, which Front Range will ferment into ethanol.
The announcement mirrors a deal inked earlier this month by Sweetwater Energy and Ace Ethanol. More about that here. Earlier, Aemetis announced that it would switch over to a combination of grain sorghum and biogas technology in order to access advanced RINs for its ethanol.
“Supplementing our corn with this sugar allows us to displace some of the volatility of the corn market, with the goal of moving a higher and higher percentage of our production to cellulosic.” says Dan Sanders Jr., Vice President of Front Range Energy. “We’ve had great success fermenting Sweetwater’s sugar, and from a business standpoint, we have great confidence in Sweetwater’s management team.”

The corn ethanol fleet diversifies

The original premise in the expansion of the US ethanol fleet was relatively simple. There was one feedstock (field corn), one processing technology (fermentation), and two products (ethanol and distiller’s grains). Growers likes it because it provided an additional market for corn, investors liked the low capital costs and the potential for high returns, communities liked the jobs, and the nation as a whole appreciated the progress on displacing foreign oil and on reducing carbon emissions.
Then along came fuel vs food, the global economic crisis, the theory of indirect land use change, the ethanol blend wall, and rising corn prices. Profits became challenged, the additional market for corn brought protests from the incumbents, and oil companies and the public became progressively less nervous about carbon and more attracted to low-cost natural gas.
For ethanol plants, the answer has been in diversification. Corn oil extraction technology has been universally popular as a quick-payback way to boost revenues and profits, and diversify the product stream.
THere are other options. 10 US ethanol plants have joined early adopter groups or begun the process of switchover to biobutanol — using technology from the likes of Gevo, Butamax, or Green Biologics. POET-DSM is pursuing the cellulosic ethanol add-on module – in this case, instead of varying the end product, they are varying the feedstock. Green Plains Renewable Energy is developing an algae biofuels technology with BioProcess Algae, that will convert excess CO2 and heat into a value-add product. Now, there’s the Aemetis option and the Sweetwater technology.

Driving value: The RIN opportunity

In the case of changing up feedstocks, there are cost opportunities available in switching away from corn. But also, as we have discussed here and here, there is also the opportunity in accessing high-value advanced or cellulosic RINs.
[BACKGROUND: RINs, or Renewable Information Numbers, are the bar codes introduced in the Renewable Fuel Standard that are associated with each gallon of renewable fuel. Each obligated parties must present the EPA, at the end of each year, with its mandated quota of RINs. They may obtain them by buying and blending renewable fuels. They may buy them from producers or other obligated parties. They may buy them from the EPA.]
Currently, corn ethanol RINs cost less than a nickel, advanced RINs sell for $0.45 – so a gallon of ethanol that qualifies in the “advanced pool” (that is, achieves a 50% reduction in emissions compared to fossil fuels) is worth 40 cents more per gallon than a gallon of traditional corn ethanol.
Now, there is the Sweetwater option — which has attracted two plants to date, and we’d expect more to come. In this case, the technology provider assumes the cost and risk of building the facility and sourcing biomass, which is converted into a stream of renewable, cellulosic sugars. Initial modules supply enough sugars to produce up to 3,6 million gallons of cellulosic ethanol per year — and, according to Ace Ethanol CEO Neal Kemmet, makes good economic sense for the ethanol producer.

The Bottom Line

Cellulosic ethanol has always had advantaged economics via the Renewable Fuel Standard – accessing a higher-priced band of RINs, and having a mandate all its own in the form of the cellulosic biofuels pool nested within the Renewable Fuel Standard.
The problem was, the RIN economics weren’t so good that anyone thought it was a slam-dunk to build a cellulosic ethanol capacity — and the mandate only requires obligated parties to blend cellulosic biofuel if, generally, it is available or expected to be available. It doesn’t require anyone to build that capacity.
Where Sweetwater is shredding the status quo is in providing a economically feasible entry-point for ethanol producers to access cellulosic RINs and to manage down the average cost of corn buy swapping renewable sugars for their highest-cost bushels.
How far could it go? It’s early to speculate, but consider this.
In liquefying biomass before it reaches the ethanol plant — Sweetwater is not only changing the feedstock source, it is changing the economics of shipping by densifying the biomass. Cutting the weight will expand the distance over which biomass can be shipped.
POET-DSM has estimated that a 100 million gallon ethanol plant could acquire enough biomass to produce 25 million gallons of cellulosic ethanol. That number could double — and if that is the case, there’s more than 7 billion gallons of cellulosic ethanol available through the impact of this technology, just in the current ethanol fleet.
That doesn’t solve the ethanol blend wall — but it would place a premium on bolt-on technologies that can produce biobutanol or hydrocarbons at current ethanol plants. Making for interesting times ahead both for ethanol producers and the technologists who serve them.
UPM scoop investment for potential France-based biodiesel facility
9 January 2013
Finland-based bio and forestry business UPM has picked up multi-million investment to aid the construction of a biorefinery in France.

The European Commission has awarded a grant of €170 million ($222 million) as UPM earmark a wood waste-to-biodiesel facility based in Strasbourg.

‘This decision is recognition in regard to our knowledge in biofuels development work,’ says head of UPM Biofuels Petri Kukkonen. ‘The technology in this field continues to develop strongly and the experience we have gained from our other biorefinery project in Lappeenranta will help us bring this solid wood-based biorefinery to life.’

UPM believe the final assessment on the new project will take place over the next 12 to 18 months as it researches long-term wood availability and market prices, plus which way the EU will go on amendments to biofuels’ raw material-related directives.

Great Scott! Look up in the Sky! There hasn’t been a hotter sector in biofuels demand than aviation.

Now, flight tests and fuel development has given way to real capacity building. Who’s in the lead to win in this $180 billion sector?

Faster than a speeding bullet…more powerful than a locomotive…that’s the growth and momentum in aviation biofuels. First there were the partnerships, then the fuel R&D, then the flight tests, then the offtake agreements.
And there was the hope — especially at airlines — that strategic investors and lenders would jump into the financing of the first commercial fuel projects. That was, as the saying goes, then.
Now – it’s all about organizing sustainable, affordable feedstock and building capacity. And, airlines providing capital for the first commercial projects — to ensure that capacity building reaches levels in line with the industry’s self-imposed targets:  to stabilize carbon emissions from 2020 with carbon-neutral growth; and to a net reduction in carbon emissions of 50% by 2050 compared to 2005.

The demand data

What does carbon-neutral growth mean, exactly, in terms of biofuels capacity building? The airlines aim for an average of 4 percent annual passenger growth (and hope to do better), and will offset 1.5 percent of that growth through more fuel-efficient planes.
That leaves 2.5 percent growth in capacity to be offset primarily through projects like aviation biofuels. Assuming a 60 percent improvement in lifecycle emissions from switching to advanced biofuels — and global demand of 60 billion gallons — you need 2.5 billion gallons of biofuels in the mix.
Now, targets are targets, financing and building capacity are another thing. And lifecycle emissions may change for selected biofuels. And airlines may achieve more efficiencies from new fleets. And airlines certainly aren’t interested in paying more for carbon-friendly fuel. And yada yada yada.
But 2.5 billion gallons gives the industry a meaningful target to shoot for. Overall, spot prices for jet fuel are running around $3.00 per gallon — meaning that there is something like $7.5 billion in revenue up for grabs in this wave of capacity building.
Let’s look at the trends as the airlines and fuel producers turn to meeting those goals.

Capacity building

Just before Christmas, Neste Oil said it will produce 4,000 metric tons per year of renewable jet fuel using sustainable Spanish camelina oil and used cooking oil under the EU-funded ITAKI project. The three-year project received $13.2 million and will feed into the 2 million ton renewable jet fuel initiative European Aviation Biofuels Flightpath.
Last month, Paradigm BioAviation announced plans to build a $120 Million facility in Bloomington-Normal designed to transform municipal solid waste into green electrical power and alternative liquid fuels for the transportation and aviation industries. Construction is slated to begin in 2014, after completing the zoning and EPA permitting process in 2013. Production of green power will start in 2015, according to the company.
Earlier in December, British Airways committed to a 10-year, $500 million offtake agreement with the GreenSky London facility, and permitting is now underway for construction in East London. GreenSky London — a joint development between British Airways and Solena — will convert around 500K tonnes of locally-sourced waste into 50,000 tonnes of sustainable aviation biofuel and 50,000 tonnes of bionaphtha and biodiesel. The facility will also have a renewable power generating capacity of 40 MW.
In September, Algae.Tec and Lufthansa signed a Collaboration Agreement for the construction of a large-scale algae to aviation biofuels production facility. The site will be in Europe adjacent to an industrial CO2 source. Lufthansa will arrange 100% funding for the project. Algae.Tec will receive licence fees and profits from the Project, which will be managed by Algae.Tec.

R&D partnerships and flight tests

Just before the New Year’s holiday, Popular Science magazine named the 100 percent biofuels-fueled test flight this year as one of its 25 “Big Science Stories Of 2012″. The flight involved a partnership including Applied Research Associates, Chevron Lummus Global, the National Research Council of Canada, the U.S. Air Force Research Laboratory (AFRL), and Agrisoma Biosciences. The ReadiJeft fuel flight took place in Ottawa, Canada using carinata developed by Agrisoma.
In October, a newly formed technology center created by Boeing and Commercial Aircraft Corp. of China (COMAC) has announced that Hangzhou Energy Engineering & Technology, Co., Ltd., (HEET) will conduct the center’s first research project. The project aims to identify contaminants in waste cooking oil, which often is described in China as “gutter oil,” and processes that may treat and clean it for use as jet fuel.
Earlier in October, FAA announced that it will form a Center of Excellence for Environment and Energy during FY-13. The COE will be a consortium of the FAA, university partners, and private industry affiliates selected by the FAA Administrator to work collectively on business and operational issues of mutual interest and concern. Among other topics, the COE will focus on Alternative Jet Fuels Research.
Back in September, JATRO announced a major collaboration agreement with BioJet International – on feedstock development and supply, crushing and refining technology solutions, network integration, logistics and funding efforts.

Policy matters

In November, the US Senate voted 62-37 to repeal section 313 of the annual Defense appropriations bill. Section 313 language, which was offered by Senator Inhofe and adopted in Committee, prohibits DOD from procuring alternative fuels if they cost more than their conventional counterparts. The Committee-passed annual Defense Authorization bill would have blocked efforts to develop a commercial supply of cost-competitive advanced biofuels as detailed in a MOU between the DOD, Department of Energy and USDA.
The same week, the Senate voted 54-41 in favor of an amendment offered by Senator Kay Hagan of North Carolina to repeal section 2823 of the bill. Sec. 2823 would have prohibited the Secretary of Defense or any other official from the Department of Defense from entering into a contract to plan, design, refurbish, or construct a biofuels refinery or any other facility or infrastructure used to refine biofuels unless such planning, design, refurbishment, or construction is specifically authorized by law.
In September, transport minister Peter Ramsauer and US ambassador Philip Murphy signed an alternative aviation fuels development agreement to “make research and development in alternative aviation fuels even more dynamic,” the minister said.
The same week, CAAFI’s executive director told Reuters at the ILA Berlin air show  that the industry is focused on looking at second generation biofuels so as to avoid conflict with food crops when looking to reduce the carbon footprint of air travel. Airbus says the main challenge is figuring out the feedstock that will take advantage of the up to 3.5 billion hectares of land worldwide not suitable for food crop production.

A cautionary tale

In November, we identified NLACM as a problem in an October article, “The Solyndra Effect.” NLACM may sound like a dog trying to get peanut butter off its mouth — but it stands for the “Natural Law of Alternative Commodity Markets” — and can be used to analyze the problem of alcohol-to-jet fuels.
NLACM states that “the value of any intermediate products produced in any process must be significantly exceeded by the value of the end product, or the end product will not be produced.”
ATJ fuels — the Department of Defense wants them badly for its military aviation biofuels program – and yet insiders say that they, and engine manufacturers, are privately wondering why it is so difficult to get samples of aviation jet fuel made from alcohol, so that they advance the certification process. Where are the gallons, given that the science has made so much progress? Well, think of it through the NLACM lens.
1. Produce non-food, advanced biofuels such as cellulosic ethanol worth $4 per gallon ($2.50 ethanol + $0.45 advanced fuels RIN + $1.01 tax credit).
2. Recombine ethanol molecules in a reaction that makes about 1 molecule of jet fuel from 2.5 molecules of ethanol.
3. The value of the total molecule is now about $7 as corn ethanol and $10 as cellulosic ethanol, but only $3.50 as unsubsidized jet fuel.
4. Repeat at high production volumes to achieve “economies of scale”.
5.  Invoke the Defense Production Act to allow direct investment by the military in building a full-scale plant.
6. Shut down the production of jet fuel when less expensive direct conversion technologies enter the market.
7. Sell the plant to someone else, who happily and profitably produces cellulosic ethanol, due to the high cost of cellulosic ethanol feedstock for jet fuel relative to the alternative use of the feedstock as motor fuel.
8. Wonder why the spreadsheet looked so goo

Thursday, December 13, 2012

Algae: Interview with Pioneer


Dr. Benemann
Dr. Benemann speaking to the attendees of an Algal Biomass Organization conference

AIM Interview: Dr. John Benemann

May 5, 2010, by David Schwartz
As pioneers go, in the modern business of algae biofuels and co-products, possibly no one has built a longer record of accomplishment than Dr. John Benemann. Involved in algae biofuels and related research since the early seventies, Dr. Benemann was the Principal Investigator of several U.S. DOE government research projects addressing the practice and potential of algae biofuels, after, and even before, the Aquatic Species Program (ASP) started in 1978, and of its Close-Out Report, after the US DOE ceased funding the ASP in 1996.
With a Ph.D. in biochemistry from the University of California at Berkeley, he has made his mark as a researcher, teacher and consultant in the areas of microalgae products, waste treatment, biofuels, photosynthesis, and greenhouse gas abatement.
But there is something curious about his strong opinions that many in this new industry view as, to be polite, cautionary. So, is John Benemann an algae optimist, as he claims, or a pessimist, as some interpret his lectures at many, he says too many, algae and other conferences?  Is he a lone doubter of the future of algae biofuel, or a realist in the midst of the current surge of enthusiasts? Maybe you, our reader, must decide from this interview, in which he discusses his view of the limitations and unfinished research in this quickly moving field.
Despite what some might consider his throwing of wet blankets, he does come across as a firm believer in algae’s potential. But he doesn’t mince his words and he is definitely not out to win any popularity contests. On the other hand, his sincerity is contagious and he certainly knows this stuff. In the Malcolm Gladwell standard for becoming an expert, Benemann has done his 10,000 hours of practice, many times over.
The Roswell New Mexico site of the Aquatic Species Program
We spent most of a morning recently at the beautiful Claremont Hotel in the Berkeley hills, talking about the past, present and future of that mysteriously fascinating organism.
Q: How do you view the developing algae industry?
A: My view of the algae industry is that it is really a question of moving from high value specialty products to commodity products, whether those commodity products are animal feed or fuel. The high value products, like Spirulina, Chlorella, Haematococcus (for astaxanthin production) or Dunaliella (for beta-carotene), which are all in the nutritional industry, sell from about $10 to much more per kilo, or basically tens to up to a hundred thousand dollars per metric ton. Fuel and feed products, which are both in a similar price range, sell for less than $1000 per ton. So you’re talking about well over an order of magnitude difference in value between the current technology, or at least the current business, and what needs to be achieved in reduction of production costs, if you want to go into algae commodity products.
Q: So how far are we away from having an algae biofuels market, in your opinion?
A: That’s a question I’m very often asked. When are we going to have algae fuels? And my simple answer is: when it happens. And the reason why is, anything that requires research and development means that we don’t know exactly what the answer is. When I say we don’t know, I mean we may know how to do it, but we don’t know what the results will be, otherwise we wouldn’t be doing the research. If we did, it would be just tweaking a little bit of development on an existing process, making it a little more efficient. But at this point there is still a very big gap between where we are right now and where we need to go to reduce the costs to a biofuels level. So, it’s unpredictable. It could happen in three years, five years, ten years. If I had to predict, I would predict closer to ten years than three years; we will need the time to get a reasonable answer.
Q: What do you consider the most valuable accomplishment of the Aquatic Species Program?
A: There was the pilot facility at the Roswell, New Mexico, site, which was basically done by Joe Weissman and his associates. He and I grew up in this field together, starting at Berkeley, and later on at the Aquatic Species Program, and many projects since then. He is the guy who now shows up on the ExxonMobil TV ads. The Roswell facility demonstrated the basic first level scale-up for the technology of growing algae for biofuels. Much research was done in the ASP, on a budget of $25 million dollars, in current dollars, probably more like $50 million. But it would be very difficult in my view to replicate what was achieved there, with such a limited budget, particularly with the knowledge starting at a very basic level at the time. What the ASP showed was that, in principle, it is possible to grow algae for biofuels and other applications. It also showed that a lot of things still need to be done, including achieving high levels of productivity.
Q: If you had extended the program, would you have come down to a much smaller number of strains than you did?
A: The issue of strains in algae cultivation is of course fundamental. It’s the same thing that you have in agriculture. Everything is based on having good cultivars, seeds, which can grow in your particular climatic zone, soil, and other cultivation practices. For example, the rice cultivar that would do well under the cultivation technologies in the Sacramento Delta would not do as well in the rice paddies in India. In microalgae, I’d say it would be even more the case.
Roswell ASP
Roswell ASP partner promoting algae biofuels for ExxonMobile
So each particular production system and location, in terms of the water quality, for example, will require a different strain development effort. And so the strains are going to be eventually what drives the industry, not somebody coming up with a better paddlewheel, or a more clever way of injecting CO2, or some kind of fancy new photobioreactor. Basically, it depends on the organisms. The Aquatic Species Program started that process and moved it forward, but that was still at an early stage.
Q: What do you wish would have been accomplished had the ASP research program continued?
A: I wish that the pilot plant in New Mexico had been operated longer, more extensively, and had been scaled-up a bit. The whole program, where it was in the mid and late 80’s was going along well, but then we had a change of administration. Clinton and Gore came in and they killed renewable energy. They basically had a budget deficit and this was not a priority at the time in the early 90’s, so the budgets went down and at some point the Department of Energy had to make a decision, do we triage or do we try to keep all these programs alive? For various reasons, the Aquatic Species Program was shrunk and they put their money on what they considered the more important effort, which was lignocellulosic ethanol production. As we know, right now that’s still an open issue: what is the best approach? Lignocellulosic ethanol and algae oil production, I would say, are neck and neck in terms of research and development, and likelihood of success.
Q: The collective consciousness of the scientists just prior to the plug being pulled…were you going to look beyond ponds? Were you going to experiment with closed photobioreactors, PBRs? Were there new directions being discussed that you were going to take?
A: The issue of PBRs, of course, comes up many times. Interestingly enough, the Aquatic Species Program started as a PBR program. The first program manager actually had his own patented PBR design which, of course, as to be expected, he decided to start funding. But very quickly it became apparent to us that PBRs could not be used for algae biofuels or large scale production. We did a report on that in 1982, which clearly showed that open ponds were the only plausible approach, and that pretty much put the kabosh to the use of PBRs for biofuels.
The whole issue of PBRs or ponds came up again about five or six years later. There was a company that came in with a proposal for PBRs, and there was again a competitive analysis. Again, a detailed engineering and economics analysis of ponds was published, while and the PBR approach, let’s be nice and say it faded away.
But, ideas don’t seem to ever come to any conclusions, so PBRs for biofuels still are, and are going to be, with us. And they are important in some ways, for example for doing research under controlled laboratory conditions.  And to some extent they will be important in terms of producing the seed culture; just as in agriculture where seed production is much more expensive than the final product.  If you get to a large-scale algae industry, there will be a need for a controlled seed production component, which will require PBRs.
So PBRs have some utility, but you can do some fairly simple analysis and it never makes any sense, to me at least, to talk about commodities in the context of PBRs. And I should mention, by the way, if you look at the real algae industry as it exists today, which is a nutritional industry, 99% of the production is done in ponds and only 1% or so in PBRs. We’re talking about products that are from 10,000 up to 100,000 dollars per ton. So, if you talk about things that are a few hundred dollars per ton, obviously there is a real problem trying to fit those into a PBR.
The ASP Closeout Report issued in 1998
The ASP Closeout Report issued in 1998
Q: In the early days of the ASP, what knowledge was gained in terms of contamination and predators?
A: One aspect of the strain is that it has to be resistant, to some extent at least, to attack by biotic infections, whether they’re grazers or fungal infections, or viral infections. Agriculture is a constant fight of the farmer against diseases, insects, nematodes, whatever you have wanting to eat your plants, there’s an infinite variety. And it is really at the heart of agriculture that we have learned how to deal with those.
In the case of microalgae, we are still working on learning how to deal with them. The Aquatic Species Program really didn’t do very much along those lines. That is really where a lot of experience is required. You cannot judge results from a square meter or even a pond over a few days or a few weeks. You have to really grow algae for years, and many strains of algae, in many different conditions, and learn how manage them. The management techniques, that’s actually going to be one of the proprietary aspects — what to do when you look under the microscope and you say, “Oh oh!  Something’s coming in to eat my algae. What do we do now?”
Q: Some people see you as a bit of a pessimist regarding the future of algae as fuel. Is that a misinterpretation?
A: Well, one person’s pessimist is another person’s optimist. There is obviously a very large range in this field between optimism and pessimism. I would think that I’m definitely on the optimist side, but I can’t quite bring myself to say that we are ready to produce algae biofuels. That if someone will give me some money I’ll do it tomorrow, which of course a number of people are saying. If they are actually ready, then we’ll see what they produce next year. But I think it will take some time to do this, so I’m not an optimist, if optimism is defined as that this is a done deal and we know the answers and we know how to do it and we can do it at a large scale and at a low cost in the next year or two or three.
Now, I think we will be able to do it. Maybe the way I would put it, cautiously, is that we have, so far, not been able to show that it is impossible. Which doesn’t quite mean that it is possible, it just means that there is no good reason why it should not be possible. It all depends on how we define things. Again, and for example, photobioreactors are not, in my opinion, possible as a way to grow algae for commodity products. The numbers just don’t add up.
Photobioreactors, depending on the design, from a few tens to a few hundreds of square meters, means you are talking about hundreds of such reactors per acre. You’re talking about two or three orders of magnitude difference between the scale of a pond versus the scale of a photobioreactor. Remember, each photobioreactor, like each pond, will require piping, valving, inputs, outputs, measurement devices.  The bottom line is that the output is very small compared to the capital and operating costs.
Q: So what do you think is needed most at this point in time to develop the potential of algae?
A: Research and development. And the research has to be mainly on the cultivation side, which includes the harvesting, of course.
Q: And the extraction?
A: Well, the problem there is that, just like the harvesting, the extraction will depend on what you’re growing. If you’re growing one species of algae it may well have a different technology or different approach for extraction than another one, and the quality of the oil could be different. My sense of it is that if you can grow the algae cheaply and get the biomass, we will, hopefully, figure out what to do with it. So extraction is a necessary part of the business, but it can’t be a separate process. It has to be integrated with the whole cultivation and harvesting technology.
Q: So extraction is strain dependant?
A: Yes, of course, at least species specific. If we grow Botryococcus, if we grow Nannochloropsis, if we grow Dunaliella, if we grow Chlorella, each of them is going to be quite different in terms of what will be required to extract the oil.
Q: Is that a function of the rigidity of the cell wall?
A: That’s one important parameter. It also depends on whether they have the oil excreted, like Botryococcus. Another major parameter of interest is how easy it is to break up the cell. So it not only depends on the species, but also strain, and likely will also depend on how you grow the particular strain.
Q: Has your view of algae growing systems changed since the end of the ASP?
A: Not fundamentally, but now we have a lot more tools. They’re getting more and more sophisticated from the genetic perspective. We now have metabolic engineering, the whole gamut of biotechnology tools.  But, still, basically, this is farming, this is agriculture, So we have to grow the algae and see what happens and learn and improve the strains. We will have to domesticate algae, which has not yet been done. We are still using wild types, that is, strains that come directly out of nature without really any significant improvement or even much selection.
Q: So how do you feel about genetic modification?
A: Unfortunately, that’s such a loaded word. Even defining what is genetic modification depends on who you talk to and what their definitions are. Fundamentally there are several issues here. I see no necessity for doing transgenic organisms, where you actually put in foreign genes from some other organism, like for example in agriculture, where genes from other organisms have been inserted into plants for herbicide or insect resistance.
What we are primarily needing to focus on is to try to change the regulatory systems in algae. For example, one that everybody needs to focus on sooner or later, is how to maximize lipid production — both content and productivity. The other one of course is photosynthesis itself and there I see great potential in what we call antenna size reduction, work that I started a number of years ago. Here we want to reduce the amount of chlorophyll or other light absorbing pigments so the cells on the top don’t shade out the cells deeper in the culture. It’s very clear that we need to have genetic tools; that we need to go into the algae to change the regulation of specific pathways. We can’t just expect that we are always going to find the perfect strains by simple mutations or selection, at least in many cases. So we will have to do so-called genetic modifications.
There is a great concern among many people, and I think rightly so, that we need to know the consequences of using these kinds of organisms. Can they spread into natural environments? I think that in this case what we need to do is get the government to pull together a completely independent committee of scientists, experts in topics such as phytoplankton ecology, environmental impacts, etc., to look at the issues of the spread of cultivated organisms. Not only genetic modified organisms, but also so-called non-native strains. What if we isolate an algae here and we want to take it to Hawaii or New Mexico?
Q: Is that an issue for the Department of Agriculture?
A: It will be the Department of Agriculture, Department of Energy, and probably as lead agency the EPA. I think that’s for them to sort out. The algae industry itself cannot be guiding, directing or dictating how this process should be done. The only thing that they should do is to request this. And it takes some time to get these things done and public notices, etc. My personal opinion is that the end result will be a clean bill of health for genetically modified algae, but there may be need for some studies, perhaps even some restrictions like we have for genetically modified crops.
The reason that I do not think there is any fundamental problem is that, in my opinion, even if we wanted to we couldn’t engineer an organism that could survive in nature. Nature is a very harsh mistress and will weed out anything that we domesticate for our own purposes. None of the cultivars of plants that we have domesticated would survive any period of time in nature. At the very best they will revert back to the wild type if they can, and if not they will just disappear. You take a field of wheat and let it go without cultivation for five or ten years and see how many wheat plants are left, you will be surprised if you find more than one or two. So, same thing here. But I think it is a legitimate cause of concern, I don’t want to minimize it. I think people have the right to ask the question. Some people in this industry do not like this question to be raised, but I think it has to be raised and has to be addressed by the government, not the industry, and has to be answered.
I would anticipate that any scientific committee addressing this issue will likely recommend that some research should be done, like looking at persistence of organisms in nature and looking at how such organisms can be tested, to look for spread, and such. The tools are available. A good example is nanotechnology. Nanotechnology right now has a very active program to do this type of preventative research to provide assurance that the products they have coming out are indeed safe. There are still some controversies, but at least it’s a guidepost. The algae industry has to really get in front of this issue, but they cannot do it themselves. They have to let completely independent agencies, maybe the EPA at the request of USDA and DOE, can carry out this kind of process.
Q: Are you actively involved in promoting that, or is this just your suggestion?
A: I suggested this to the Algal Biomass Organization, and there is a committee that is in charge of handling this. I am not a member of that committee.
Q: So where are you putting your attention these days?
A: Being interviewed! Well, I have a lot of different activities. I consult, and I’ve been doing work in wastewater treatment, which is another aspect that a lot of people talk about, but again, it needs some real research and development, and demonstration. To some extent it’s a fairly straightforward thing.
What people don’t understand is that the market for algae for wastewater treatment is quite limited. For very simple reasons, like you need land and where you have lots of people and lots of municipal wastewater, you don’t often have a lot of land. You need good climate, and in the US the permissible climatic regions where you can really grow algae on a year round basis, or at least almost year round basis, is limited, perhaps not much more than 10% of the land area. So I’m not a great believer that you will be able grow algae in Minnesota, but other people have different opinions.
Q: How about the carbon sequestration side of things? Is it the same?
A: Well, that is a misnomer. You don’t sequester carbon by growing algae; you capture carbon dioxide from some enriched source. And then you convert it into biofuel. It is no different from what any farmer does when he grows a crop and for example makes a biofuel out of that.
The CO2 abatement is strictly based upon the replacement of fossil fuel with biofuel. It is not based upon actually sucking out the CO2 from a flue gas or some other source. So that is a little bit of a conceptual problem. People think that by capturing CO2 you are doing some benefit. That is not the case. The benefit can only come on the biofuel side, if you are replacing fossil fuel with a biofuel. And then you have to do the calculations of how much energy went in and what kind of boundary conditions you set on the whole thing, which is the life cycle analysis, or LCA, that many people now are doing.
As you know, there’s a controversy in the case of some biofuels, which basically don’t really have a significant reduction in CO2 emissions, not a positive LCA. We believe that algae can have a significant reduction in CO2 emissions compared to burning fossil fuels but, the way I put it, the CO2 capture side is a necessity, not a virtue. In other words, if you want to grow algae you need to feed them CO2 from an enriched source, such as a power plant.  If you grow crops, they get the CO2 from the air. So, we need to feed algae CO2, but that is not a virtue in terms of we cannot make any claims of reducing CO2 emissions just by capturing CO2 from a power plant.
Q: So what about those who think that power plants will have algae ponds next to them?
A: That’s a different question. The question is can you use that CO2 from the power plant to grow algae? Yes, of course. But the problem with that is how many power plants have that much land available? And how many of those are in areas where you have water available? And how many of those are in areas where you have reasonably good climates. Once you put in those three boundary conditions, you come down to a fairly small number.
And you have further problems. Even if you capture all of the CO2 from a power plant, you are doing it only during the daytime, you are not going to capture any at night. You are going to capture much less in the winter than summer months, at least anyplace in the continental US. And a significant fraction of the carbon is not going to end up in the biofuel, but in other co-products, or lost back to the atmosphere. And, last but not least, you have the issue of how far can you actually pump the flue gas. If you’re talking about wanting to maximize the amount of flue gas used, you’re talking about tens of thousands of acres for one large power plant, and there’s a limit to how far you can even pipe flue gas.
So the bottom line on all of this is that, the way I put it, we cannot help power plants reduce their CO2 footprint to any significant extent. For coal-fired power plants, if we want to be serious about reducing their CO2 emissions, we have to get them to reduce CO2 emissions by 80 or 90 percent, not by the 10 or 20 percent we could do with algae under the best of circumstances. And the circumstances are not very good in most all cases. So, in my opinion, maybe a fraction of 1% of the CO2 emissions from coal-fired power plants will be amenable through algae capture and utilization.
In the case of natural gas power plants, it’s maybe not any better because of the large excess air that is used in most of them, which means the CO2 concentration is actually lower. With coal, you’re talking about roughly 12% CO2 and for most natural gas systems you are lucky if you have 4% or 5%. That makes a fairly big difference in terms of the energy required to just pipe and pump to transfer the CO2. Just a little reality check here. A lot of people haven’t thought it through.
Q: If you had a message to the algal biofuel production industry, what would that be?
A: First of all, I think that one of the real fundamental problems here is that algae is not the Great Green Hope, to put it politically correctly. It’s one of the many things that we have to do, and one of the many things that requires continuous research and development. At this point, I believe it requires more research than development, but those things are overlapping of course.
Anybody who wants to believe that algae are going to somehow replace oil…well, I doubt it. But it’s one of the many things that needs to be done. Algae is only one of many approaches in the biofuels space, which is but one of many things we need to do in renewable energy development.
Algae is an interesting field of research. It has some big positives and some big negatives. A big positive is that research and development can be relatively fast. One week is like a full season for a higher plant. On the other hand, we still have a lot of seasons to go. Another positive is that it can be done on a smaller scale, at fewer locations, compared to higher plant cultivation, where you need lots of replicants, larger scales and many different locations.
The way I look at it, the dimensional space of how many variables we’re dealing with is somewhat less complex than with higher plants, where you are dealing with additional issues such as soil type, moisture levels, etc. The algal pond provides a somewhat more predictable environment than a field crop. So I think that algae culture has some fundamental advantages, including use of brackish or seawater, potential for high productivity not useful for other crops, as well as some significant limitations, such as the need to harvest these microscopic plants essentially on a daily basis from large volumes of water.
In conclusion, what I say to the people who are in this business is: don’t count your algae until you actually have them. It may take longer than you expect. Everything takes longer than we expect. So, be in it for the long haul.  I am. —A.I.M