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