INSIDE: RAMPANT BRANDING AND REBRANDING IN THE BUSINESS NOVEMBER 2010
Step into Tomorrow
Today The San Diego Algae Culture Flourishes
Page 28
Plus Legislating an
Incentive for Biobased Chemicals
Page 24
AND Financial Advice for Project Developers Page 32
www.biorefiningmagazine.com
INSIDE: RAMPANT BRANDING, AND REBRANDING IN THE BUSINESS NOVEMBER 2010
Step into Tomorrow
Today The San Diego Algae Culture Flourishes
Page 28
Plus Legislating an
Incentive for Biobased Chemicals
Page 24
AND Financial Advice for Project Developers Page 32
www.biorefiningmagazine.com
INSIDE: RAMPANT BRANDING, AND REBRANDING IN THE BUSINESS NOVEMBER 2010
Step into Tomorrow
Today The San Diego Algae Culture Flourishes Page 28
Plus Legislating an
Incentive for Biobased Chemicals Page 24
AND Financial Advice for Project Developers Page 32
www.biorefiningmagazine.com
CONTENTS |
NOVEMBER ISSUE 2010 VOL. 01 ISSUE 03
20
INDUSTRY
Marketing the Market Why branding strategies prevail in biorefining BY BRYAN SIMS
24
28
POLICY
ALGAE
Legislating an Incentive
An Algae Scene Worth Seeing
How BIO proposes building the biobased chemicals market BY ERIN VOEGELE
San Diego’s algae hub revealed STORY AND PHOTOS BY LUKE GEIVER
CONTENTS DEPARTMENTS 4 Editor’s Note
Too Little? BY RON KOTRBA
6 Advanced Advocacy Where’s the Beef? BY MICHAEL McADAMS
7 Industry Events
Upcoming Conferences & Trade Shows
CONTRIBUTION
9 Legal Perspectives
More Uncertainty as GMO Issues Heat Up BY ANNA J. WILDEMAN
10 Business Briefs
32 Financial Advice for Project Developers
Funding a biorefinery means more than getting capital BY ROBERT BAILEY
People, Partnerships & Deals
12 Startup
Biorefining News & Trends
8 Talking Point
Ethanol Water Usage: How Much? BY DAN STEPAN
NOVEMBER 2010 | Biorefining | 3
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EDITOR’S NOTE
For ages it seems, ethanol groups have been pushing for the U.S. EPA to authorize higher blends of ethanol. When I was senior writer for Ethanol Producer Magazine nearly two years ago, I followed this issue pretty closely. Knowing the potential liabilities OEMs could face in warranty costs if extensive testing isn’t completed, documented and validated, I have always been a proponent of making sure rigorous testing is completed. So when EPA announced its conditional E15 waiver in October, stating the agency approves E15 for 2007 and newer vehicles, I thought it was a good first step in what could otherwise be a long, drawn-out waiting period. The agency expects the 2001-’07 approval later this year or next. The Renewable Fuels Association’s Bob Dinneen has gone on record saying, “EPA’s scientifically unjustified bifurcation of the U.S. car market will do little to move the needle and expand ethanol use today. Limiting E15 use to 2007 and newer vehicles only creates confusion for retailers and consumers alike. America’s ethanol producers are hitting an artificial blend wall today. The goals of Congress to reduce our addiction to oil captured in the renew-
TOO LITTLE? RON KOTRBA, EDITOR RKOTRBA@BBIINTERNATIONAL.COM
able fuel standard cannot be met with this decision.” Some associations are sure to dislike the ruling, but for ethanol advocates to express dissatisfaction for what is a step in the right direction is, to me, confounding. The issues of contention about the conditional waiver include confusion at the pump, misfueling, air quality violations, OEM warranty issues and more. How, I wonder, can ethanol advocates then be in support of blender pumps—and all of the potential liabilities that could arise from them—and not this measure? Clearly the blend wall must come down to create any domestic market demand for cellulosic ethanol. I see this first step as a conservative but prudent approach by EPA to give ethanol advocates what they ultimately want.
FOR MORE NEWS, INFORMATION AND PERSPECTIVE, VISIT BIOREFININGMAGAZINE.COM/THEBIOREFININGBLOG
CONTRIBUTING WRITERS Anna J. Wildeman, attorney with Michael Best & Friedrich, authored this month’s Legal Perspective column, “More Uncertainty as GMO Issues Heat Up,” which delves into the touchy global debate on using genetically modified organisms for advanced biofuel applications.
4 | Biorefining | NOVEMBER 2010
In the Talking Point column titled, “Ethanol Water Usage: How Much?” Dan Stepan, senior research manager at the Energy & Environmental Research Center, cautions would-be advanced biofuel producers that process water consumption, especially for ethanol, must be reduced to fulfill two simultaneous goals: energy security and continued existence.
Author of “The Billionaire’s Little Black Book,” Solutions Radio broadcast host and financial advisor Robert Bailey wrote this month’s featurelength contribution article, “Financial Advice for Project Developers.”
EDITORIAL EDITOR Ron Kotrba rkotrba@bbiinternational.com ASSOCIATE EDITORS Erin Voegele evoegele@bbiinternational.com Luke Geiver lgeiver@bbiinternational.com Bryan Sims bsims@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com
ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Sam Melquist smelquist@bbiinternational.com
PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com
SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Chip Shereck cshereck@bbiinternational.com Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Gary Shields gshields@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com SUBSCRIBER ACQUISITION MANAGER Jason Smith jsmith@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com
Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Biorefining are $24.95 per year in the U.S; $39.95 in Canada and Mexico; and $49.95 outside North America. Subscriptions can be completed online at www.biorefiningmagazine.com or subscribe over the phone at (701) 746-8385. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (701) 746-8385 or service@bbiinternational.com. Advertising Biorefining provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Biorefining advertising opportunities, please contact us at (701) 7468385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Biorefining Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to rkotrba@ bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.
Please recycle this magazine and remove inserts or samples before recycling COPYRIGHT Š 2010 by BBI International
NOVEMBER 2010 | Biorefining | 5
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ADVANCED ADVOCACY
Where’s the Beef? A collective effort in Washington needed as leadership changes BY MICHAEL McADAMS
L
ast month I mentioned the importance November has to the advanced biofuels industry. As I write this, we are just days from a national election that holds far-reaching implications not only for the future of our nation, but for our industry as well. In the weeks leading up to this important event, we have heard a very vocal White House talk about its commitment and work to further develop advanced biofuels. In fact, the President spent one of his entire weekly addresses on the national importance of investing in clean energy, saying, “There is no industry with more potential to create jobs now, and growth in the coming years than clean energy.” Another message from the White House stressed “policies that will catalyze the tremendous potential of renewable domestic biofuels.” But then there was the Rolling Stone interview in which the President noted, “One of my top priorities next year is to have an energy policy that begins to address all facets of our overreliance on fossil fuels.” The “Ah-ha” moment—many of you may remember the Wendy’s Hamburgers commercials in the 1980s in which a gray-haired grandmother stubbornly inquires about the meat behind the larger-than-life advertising. I would be remiss not to take this opportunity to borrow that line from Clara Peller and ask the White House, “Where’s the beef ?” In January 2009, we welcomed President Obama to the White House amongst one of the largest crowds in the 6 | Biorefining | NOVEMBER 2010
history of any Presidential Inaugural in almost “rock star” fashion. Initially the new administration attempted, in what I would describe as a frenetic pace, to address an extremely broad array of issues, from pumping money into the economy via the American Recovery Act, to tackling health care and climate change, and reforming the financial system. But it was the $800 billion American Recovery Act that turned Washington into a near carnival-like atmosphere. Every conceivable person with an idea for “clean energy” descended on the town to attempt to sell his idea or equipment to create “green energy” jobs in America. It may be years before we know just what the return on investment is from the billions of dollars spent by the U.S. DOE and other agencies in this space. But the advanced biofuels industry got pennies, not dollars, when compared to electric vehicles, transmission initiatives under the banner “smart grid,” and a whole host of ideas aimed at reinventing the electric industry. That had many in Washington referring to the DOE as “all electric all the time.” Even as Congress turned its attention to offshore drilling, and introduced separate pieces of legislation to convert American’s automobile fleet to utilize electric vehicles as well as a significant push for conversion to natural gas, there was little political capital spent on ensuring the advanced biofuels industry had the means necessary to get to the all important commercialization phase. That is a real shame for a nation, and a White House, looking to strengthen our energy and economic security.
So now what? The “Ah-ha” moment looking ahead. What are we likely to see and how should we react? In my judgment, it is difficult to think that some of the tax provisions will be revisited in the lame duck session of Congress that begins Nov. 15. If, as pundits suggest, the Republicans take back the House and close the gap in terms of number of seats in the Senate, will there be any interest in continuing on the path laid down by the Democratic leadership prior to adjournment? Or are they simply going to say we have a new mandate and push many of the outstanding issues into a new session of Congress? Are budget issues now really the primary concern and, if so, does that mean extending or creating new tax credits or programs? If the Republicans do take over the House, all the committee chairmanships will change. Already there are discussions as to who would take some of the most coveted slots and who would staff them. This looks to me to be new territory for the industry. We will need to define what it is we are and what type of difference we can make with more limited resources. This will take a collective effort across all of the biofuels industry. The segmented approach will NOT deliver the goods. Next month, I’ll take a look at the new legislators in Washington who will lead our policy discussion into 2011 and 2012. Author: Michael McAdams President, Advanced Biofuels Association (202) 747-0518 mmcadams@bhfs.com
EVENTS CALENDAR |
Southeast Biomass Conference & Trade Show November 2-4, 2010
Hyatt Regency Atlanta Atlanta, Georgia The Southeast Biomass Conference & Trade Show is one of three distinct regional offshoots of Biorefining and Biomass Power & Thermal’s International Biomass Conference & Expo. The program will include more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance. (701) 746-8385 www.biomassconference.com/southeast
Seattle to Host Regional Biomass Show 1/10
As the birthplace of grunge and the Mecca of coffee and rainy weather, Seattle will host BBI International’s Pacific West Biomass Conference & Trade Show, Jan. 10-12, at the Sheraton Seattle Hotel. Four panels centered on biorefining are sure to pique some interest. Biorefining technologies are helping breathe new life into the struggling pulp and paper industry. With a focus on local and regional projects, one panel, titled, A Game Changer: Energy Production in the Beleaguered Pulp and Paper Industry, will feature speakers with expertise in capitalizing on pulp and paper waste streams. An estimated 500 pulp, paper and paperboard manufacturers do business in California alone, equating to great biorefining potential. The world is waiting for an economically effective process for growing, harvesting and converting algae into advanced biofuels and biobased chemicals, and the West Coast may have a solution. With an abundance of R&D algae work underway, the West Coast provides a glimpse into the future of algae including efforts devoted to strain characteristics, genome sequencing, harvesting methods and others. The Algal Research, Development and Commercialization in the Pacific West panel will include insight from leading university-based algae specialists on the current state of algae development, along with successful strategy approaches in use today explained by some of the leading algae industry developers and producers. From a value proposition, some argue that regional biomass supplies are best used as inputs for advanced biofuels and biobased chemicals refining, not simple combustion for heat and power. In Converting Woody Biomass and Ag Waste into Biobased Fuels and Chemicals: Our Progress, some of the region’s most involved biorefining players will discuss the enhanced value biorefining can bring to biomass feedstock, how utilization of forest residues for biorefining applications can specifically improve woodland health and human safety, decrease reliance on foreignsourced crude oil, and increase energy security. Finally, recycling and collection strategies have been optimized over time but the rapid accumulation of MSW continues to stress landfills. Costly and hazardous incineration, landfill and burying methods can no longer be ignored. This fourth panel, Attacking a Growing Municipal Solid Waste Problem via Biorefining, will highlight the importance of turning this liability into a value-added feedstock by discussing conversion processes, such as gasification, to produce a suite of products that are needed for economic stimulation and environmental stewardship.
International Algae Congress 2010 December 1-2, 2010
Congress Centre, The Planetarium Amsterdam, Netherlands This fourth event is expected to attract 200 people from more than 40 countries. Focus will be on development, technologies and political issues in the world’s growing algae industry. The event is organized by DLG Benelux, subsidiary of Germany-based DLG e.V. +31 (0)348 484002 www.algaecongress.com
International Biomass Conference & Expo May 2-5, 2011
America’s Center St. Louis, Missouri The International Biomass Conference & Expo is the biomass industry’s largest, fastest-growing event. Plan to join more than 2,500 attendees, 120 speakers and 400-plus exhibitors for the premier international biomass event of the year. (701) 746-8385 www.biomassconference.com
International Fuel Ethanol Workshop & Expo June 27-30, 2011
Indiana Convention Center Indianapolis, Indiana The FEW is the largest, longest-running ethanol conference in the world. Focused on commercial production of grain and cellulosic ethanol, operational efficiencies, plant management, energy use and near-term research and development, the FEW will attract 2,500 attendees. (701) 746-8385 www.fuelethanolworkshop.com NOVEMBER 2010 | Biorefining | 7
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TALKING POINT
Ethanol Water Usage: How Much? Why water consumption in advanced W biofuel production must improve bi i BY B Y DAN STEPAN
W
ater is the most critical limiting resource throughout the world. Sustainable supplies of good-quality water are needed for energy production, growing and processing highvalue crops, industrial manufacturing and expanding populations. Water has been a key issue in biofuels production since the ethanol boom. Water issues relate to locating production plants where adequate supplies of water exist, high consumptive uses of water during ethanol production, and the large volume of water needed to grow the crops used to produce the biofuels. I have sorted through data and information from readily available water/ biofuels studies, many of which present conflicting information and tend to show certain biases, depending on the author or organization, and have made some calculations of the amount of water that it takes to drive a new flex-fuel vehicle down the highways and byways of America. Just for instance, let me rework the calculations here to avoid the common biases that can sneak into them. Let’s assume that regular 87 octane gasoline has an energy content of 115,000 Btu/gallon compared to that
8 | Biorefining | NOVEMBER 2010
of 84,600 Btu/gallon for ethanol. E10 gas and E85 then contain approximately 112,000 and 89,000 Btu/gallon, respectively. If we assume that our flex-fuel vehicle gets 20 miles per gallon (mpg) burning regular gasoline, then, based on the energy content of the fuel, we can expect 19.5 mpg with E10 and 15.5 mpg with E85. It takes around 1.5 gallons of water to refine a gallon of gasoline from crude oil and around 3 gallons of water to process corn to make 1 gallon of ethanol. Oil exploration and production also consume water—around 2 gallons per gallon in Petroleum Administration for Defense District 2 (Midwest). Published values for the amount of water to produce a gallon of ethanol vary widely depending on where you grow corn, but where I live, USDA Region 7 (North Dakota, South Dakota, Nebraska and Kansas), the amount of water, less precipitation, to grow the corn is around 324 gallons/gallon of ethanol. It follows, then, that there is the equivalent of 3.5, 36, and 278 gallons of water used in the production of a gallon of gasoline, E10, and E85, respectively. Driving the same flex-fuel vehicle uses the equivalent of 0.18 gallons (23 ounces) of water for each mile driven on gasoline compared
to the equivalent of 1.8 gallons of water for E10 and 18 gallons of water per mile for E85. That’s 216,000 gallons of water a year using E85, assuming you drive 12,000 miles a year, and the equivalent of two years of typical household water use for an average family of four. So when we consider domestic biofuel production—especially next-generation biofuels—to reduce our dependence on foreign oil, we also need to consider its impact on our water resources. Without fuel, life is inconvenienced. Without water, life ceases to exist. Let me assure you that I recognize these numbers vary according to where you live and drive. The take-home message is that we, as a society, tend to overlook the value of water until we have either too much (flooding) or too little (drought), which has led us to the current water crisis. Crisis, however, brings new opportunity, but we need to be ever cognizant of the inextricable link between water resources and energy production, including first- and second-generation biofuels. Author: Dan Stepan Senior Research Manager, EERC (701) 777-5247 dstepan@undeerc.org
LEGAL PERSPECTIVE |
More Uncertainty as GMO Issues Heat Up Why the U.S. government should take a stand on GMOs for advanced biofuel applications BY ANNA J. WILDEMAN
I
n recent months, the U.S. Supreme Court, a U.S. District Court from the Northern District of California and the European Commission have had their say about how genetically modified organisms (GMOs) should be regulated. Additionally, several U.S. and even some local jurisdictions have chimed in. As more governments weigh in, one thing is clear: without effective mandates from the federal government and consistency between the U.S. and EC, the composition, structure and jurisdiction of this particular regulatory framework will become more and more uncertain as time passes. This uncertainty and the patchwork of regulations discussed below does not bode well for the rapid deployment of an advanced biofuels industry that does, and will continue to, rely heavily on innovative biotechnology and GMO products to develop alternatives to petroleum-based fuels. The jurisdiction question—who regulates what—is an essential element to this discussion. In the U.S., three federal agencies have some jurisdiction over GMOs: the USDA, the U.S. EPA and the Food and Drug Administration. Each agency regulates a different aspect of GMOs, as pesticides, seeds and plants and food, respectively. However, federal regulation of GMOs is not comprehensive, which has left the door open for state and local regulation on the same issues. Minnesota, for example, requires permits be issued prior to any release of certain genetically engineered organisms; Mississippi requires aquiculture facilities to have a cultivation and marketing permit for any aquatic plants or animals that have
been genetically modified; and the Texas Department of Agriculture has a regulatory division to oversee biotechnology programs—but it has only a vague mission to “promote the safe development and use of genetically engineered plants,” which allows the department to evaluate risks by “reviewing applications and requiring adequate safeguards before allowing controlled experiments to be conducted within the state.” Further, at least three counties in California and the town of Montville, Maine, have enacted outright bans on the production and cultivation of any GMOs. Although an argument could be made that some or all of these regulations are preempted by the federal regulatory scheme, that argument will be challenged until there is a more comprehensive federal scheme. This relative cornucopia of regulations is only the domestic side of the story. Earlier this summer, the EC recommended a proposal that would grant individual European Union member states the right to determine if GMO crops can be cultivated in their country. While this proposal could be of great benefit for crop imports into the EU, it sets the stage for fierce debate between the regulated community and environmentalists, as well as between member states’ governing bodies. As it stands, the EU is divided over this issue, with many countries issuing blanket prohibitions on GMO cultivation, and others appearing more open to the concept. If the EC proposal is approved, it could mark the beginning of even more regulatory chaos within production agriculture, and most importantly, within the framework aimed at regulating advanced biofuels feedstock production.
Admittedly, the legal al frameworks discussed above relate largely to GMOs as seeds and crops. However, innovators hoping to develop commercial-scale plantbased advanced biofuel production facilities face an uncertain future. As noted above, the Texas Department of Agriculture Regulatory Division’s charge to “review applications” and require “adequate safeguards” is extremely vague and, in all likelihood, will be applied broadly to ensure there is some form of regulation, however undefined, on siting advanced biofuel production facilities that rely on or generate GMOs. Earlier this month, a report published in the journal BioScience indicated that scientists working to develop cellulosic biofuels, among other things, are feeling the pressure of the regulatory uncertainty. Authors of the report called for regulatory reforms to make scientific developments less risky and uncertain, without which this industry may come to a bumpy, if not screeching, halt. Work is underway at several land-grant research institutions to provide accurate scientific information to inform the debate on GMO use in advanced biofuel production. At this point, it is up to the federal government to take a position on GMO production and use in the context of advanced biofuel development, not only to help the industry survive, but to facilitate the government’s stated goals of reducing or eliminating this country’s reliance on imported fossil fuels. Author: Anna J. Wildeman Attorney, Michael Best & Friedrich (608) 283-0109 ajwildeman@michaelbest.com
NOVEMBER 2010 | Biorefining | 9
BUSINESS BRIEFS People, Partnerships & Deals
Chinese industrial investment conglomerate Henan Investment Group and biorefining technology company Chempolis Ltd. signed an agreement to conduct a feasibility study on developing a biorefinery pulp mill project together. Depending on the outcome of the study, a more formal agreement may follow. Henan Investment Group is a state-run company with existing nonwood pulp production and expanding paper production in Henan province, China. “In Henan, large amount of pulp mills are to be closed due to environmental pollution,” says Esa Rousu, president and CEO of Chempolis. The business delegation was lead by Henan province Vice-Governor Zhang Dawei. Henan, with a population of 100 million, is a strong agricultural province and currently the biggest producer of wheat in China.
SOURCE: AVANTIUM
name YXY. The pilot plant is expected to become operational in the first quarter of 2011. The facility will produce several tons of YXY building blocks a year to support product development. Avantium is collaborating with industrial partners such as NatureWorks, a subsidiary of Cargill, and Teijin Aramid to develop novel materials on basis of its YXY building blocks. Avantium collaborates with DAF Trucks, a Paccar company, on the development of YXY fuels. The company expects to use YXY building blocks for the production of green and recyclable materials such as water and soft drink bottles, carpets, textiles, high-performance fibers, coatings and plasticizers.
Let it Flow Avantium scientists use a Nanoflow unit for catalysis research to develop biobased YXY building blocks.
Avantium has begun construction of a pilot plant at its Chemelot site in Geleen, Netherlands, to produce biobased molecular building blocks as basis for green materials and fuels. Avantium has developed a novel and proprietary catalytic process to convert carbohydrates into furanic building blocks under the brand 10 | Biorefining | NOVEMBER 2010
Algenol Biofuels Inc. celebrated the opening of its new biofuels and green chemistry lab and R&D facility in Fort Myers, Fla. The 40,000-square-foot facility houses an advanced algae biology, engineering, carbon dioxide and green chemistry laboratory, as part of the larger Lee Integrated Biorefinery. Algenol received a $10 million incentive grant from the Lee County Board of Commissioners to build the lab. The facility will house Algenol’s advanced biology and engineering laboratories and operations. An adjoining 4-acre outdoor R&D area and 36-acre outdoor commercialization area will hold the company’s proprietary photobioreactors, the containers that generate ethanol from algae, saltwater and CO2 using Algenol’s patented Direct to Ethanol technology. The company has begun work on related projects such as using its ethanol and other green chemicals as a replacement for petroleum in plastic and chemical building blocks.
Genomatica recently announced that William H. Baum has joined the company full time as executive chairman and chief business development officer. Baum Proven Leadership will lead GenomatiGenomatica’s new executive chairman ca’s strategic partnerand chief business ships with leading development officer Bill Baum played key chemical producers, roles in joint ventures users, feedstock supwith the likes of BASF, Dow, DuPont, pliers, brands and Bayer and Cargill. retailers. He brings more than 40 years of global experience in the chemical space. Most recently, Baum was executive vice president, business development, at Verenium, and was part of the biofuels deal team working with the Galaxy BP/Verenium joint venture, which concluded BP’s recent acquisition of Verenium’s cellulosic biofuels business. Previously, Baum was vice president of global sales and marketing with International Specialty Products, one of the leading producers in the world of 1,4-butanediol (BDO), where he led the sales and marketing of BDO and other higher value BDO derivatives. Bill has led or had a key role in generating $500 million in strategic partnerships over the past 10 years, including two joint ventures and research collaborations with BASF, Bunge, BP, DuPont, Dow, Syngenta, Cargill, Bayer and DSM.
The Canadian Green Chemistry and Engineering Network has acknowledged the environmental stewardship of The Woodbridge Group by presenting it with the inaugural Ontario Green Chemistry and Engineering Award, presented to organizations based in Ontario that have made significant contributions to the field of green chemistry and engineer-
BUSINESS BRIEFS |
ing, including the technical, economic, human health and environmental benefits. The Woodbridge Group accepted this award from the Chemical Institute of Canada and the Ontario Ministry of the Environment, during the International Union of Pure and Applied Chemistry 2010 Conference on Green Chemistry. Robert B. Magee, Chairman and CEO of The Woodbridge Group, said in his speech, “On behalf of our scientists, our engineers and our dedicated workforce, it is my pleasure and distinct honor to represent them and accept the first Green Chemistry and Engineering Award ever offered.”
Lignol Energy Corp., the cellulosic ethanol and biorefining tech company, announced that its subsidiary, Lignol Innovations Ltd., has developed process innovations that represent a breakthrough in organosolv pretreatment performance resulting in improved efficiencies and enhanced economics of Lignol’s biorefinery technology platform. Since acquiring the original Alcell pretreatment process, the company has been working on enhancements to improve efficiency and economics. This work has culminated in the development of a significant process modification, which has recently undergone operating campaigns in Lignol’s pilot plant in Burnaby, British Columbia. The patent-pending process, AlcellPlus, builds on the proven attributes of Lignol’s core process designs while providing the potential for lower capital cost, and reduced operating costs.
Petrobras and Novozymes have entered an agreement to develop a new route to produce second-generation biofuel from sugarcane bagasse. The agreement covers the development of enzymes and production processes to make secondgen lignocellulosic ethanol from bagasse in an enzymatic process. It is estimated that bagasse-to-ethanol technology can increase the country’s ethanol production by some 40 percent without having to increase the crop area. Novozymes is already carrying out research on enzymes to convert bagasse to cellulosic ethanol in order to make the process commercially viable. Since 2006, Petrobras has been carrying out research on integrated biochemical processes for converting sugarcane bagasse to ethanol.
INEOS Bio’s first commercial project in the U.S. has secured key permits to build its waste to bioenergy facility in Indian River County, Florida. The INEOS Bio joint venture has obtained its final air permit and environmental resource permit from the state of Florida, its wetlands permit from the U.S. Army Corps of Engineers, and a final environmental assessment finding no significant impact from the U.S. DOE. The BioEnergy Center will be developed entirely within the existing footprint of a former agricultural processing facility. The center will generate 8 MMgy of third-generation bioethanol from biomass including yard, wood, agricultural and vegetative wastes. The center will also generate 6 megawatts of renewable electricity. At the heart of
the INEOS Bio technology is a patented anaerobic fermentation step, through which naturally occurring bacteria convert gases derived directly from biomass into bioethanol. The Indian River facility is scheduled to begin construction in fourth quarter of 2010 and begin production in 2012.
Chemrec AB, a provider of gasification technology used in pulp and paper mills to produce renewable low-carbon fuels, announced it has been chosen by AlwaysOn as one of the GoingGreen Silicon Valley Top 100 winners. Chemrec was selected by AlwaysOn industry experts spanning the globe based on a set of five criteria: innovation, market potential, commercialization, stakeholder value and media buzz. Inclusion in the GoingGreen Silicon Valley Top 100 signifies leadership amongst its peers and gamechanging approaches and technologies that are likely to disrupt existing markets and entrenched players. Winners were selected from thousands of domestic and international green technology companies nominated by investors, bankers, journalists, and greentech industry insiders. The AlwaysOn editorial team conducted a rigorous three-month selection process to finalize the 2010 list. “Our gasification technology can transform the pulp and paper industry to biorefineries, providing the world with sustainable motor fuels reducing greenhouse gas emissions by 95 percent,” says Max Jonsson, CEO of Chemrec. SHARE YOUR INDUSTRY BRIEFS To be included in Business Briefs, send information (including photos and logos if available) to: Industry Briefs, Biorefining, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also fax information to (701) 746-8385, or e-mail it to rkotrba@bbiinternational. com. Please include your name and telephone number in all correspondence. NOVEMBER 2010 | Biorefining | 11
STARTUP
Biorefining News & Trends
The Amazing Checklist
Neste Oil has already done a lot, but the Finnish company has only just begun Take a look at Neste Oil’s list of accomplishments, and you’ll see what it takes to succeed in the renewable energy industry. Develop a biobased diesel fuel from vegetable oil and waste food chemically similar to existing diesel—done. Build a demonstration facility that includes drying of biomass, gasification, gas cleaning and Fischer-Tropsch catalysts testing, and do it successfully—did it. Start construction of the world’s largest renewable diesel facility near Singapore—did that too. But it’s the latest addition to that list that makes the Finnish firm one of the leaders in renewable diesel development. After the success of its joint-venture demo facility in Varkaus, Finland, Neste Oil and partner Stora Enso have embarked on the construction path again. “We are now in the phase where we verify our technology,” says Lars Peter Lindfors, head of technology and strategy for Neste Oil. “At the same time we are making profitability calculations, developing business models and looking into financing of a production-scale unit.” The plan is to build a commercial biorefinery to produce renewable diesel at one of two locations, Porvoo or Imatra, Finland. To do
so, the JV has begun the year-long process to assess environmental impacts. The assessment will include input from residents, associations and organizations interested and close to the project sites. The sites were chosen based on raw material availabilOut in Front Neste Oil is a global leader in the renewable diesel sector. ity and the possibility of each city to utilize While Lindfors doubts there will be any the heat-energy gener“obstacles” along the way with the enviated at the biorefiniries. The facility, which ronmental impact assessment, he also says would cost roughly $700 million according Neste has not decided on a site, and will not, to Matti Lievonen, CEO of Neste, would for roughly a year. Still, even to consider implement the same technology used at the adding another commercial facility is an acVarkaus plant. “In the demo plant,” Lindfors complishment in itself. Add this one to the says, “we have been able to produce high list: Assess the feasibility of another location quality hydrocarbon wax and condensate in for another renewable diesel plant instead a once-through process, starting with drying of worrying if the process will work or be the biomass (forestry waste) and carrying economical—check. it through gasification, reforming, washing steps and Fischer-Tropsch.”
A Good Enzyme Getting Better
New research is keeping hope alive for the next best enzyme The pursuit for the perfect mix of enzymes and microorganisms is far from over. Steen Riisgard, head of the Danish superpower Novozymes Inc., the enzyme producer that has made several corn and cellulosic ethanol producers’ dreams come true, recently told European policymakers that technology (Novozymes’ in particular) is past the research stage and ready for deployment. But that isn’t stopping the U.K.-based Biotechnology and Biological Sciences Research Council from continuing the search for the next best enzyme cocktail or method to access C5 and C6 sugars. A team from Cambridge University, also a member of the BBSRC, has found a way to make a simpler version of the molecule xy12 | Biorefining | NOVEMBER 2010
BY LUKE GEIVER
lan, one of the main components of lignocelluloses. “The aim of our research was to understand both how the plant makes this molecule and then to see if we could produce a plant with a simplified version of it,” says Jenny Mortimer, one of the members of the research team. “The idea is that if this molecule is simpler, it will be easier to break down to make sugars, to make biofuels.” To find a simpler version of the molecule, the team turned to Arabidopsis, a plant commonly used within labs and which Mortimer says is generally understood and, more importantly, that lacks two enzymes responsible for making xylan complex in some plants. “We managed to identify the gene responsible for making the xylan so complicated,” she says.
PHOTO: NESTE OIL
BY LUKE GEIVER
STARTUP |
The team ran tests on the Arabidopsis plant to test stem strength to see how a less complex xylan-based plant would compare to a typical energy crop. They did it in a peculiar way. Mortimer says the team knew the engineering department had the capability to test the strength of items such as steel beams, and after a little tweaking, the engineering department was able to test the strength of the plant stems using the same system, and the results showed that the plants with simpler xylan molecules were nearly as strong as plants like miscanthus or willow. Now the team is working with other groups to see if breeding plants with these traits is possible, and Paul Dupree, lead researcher on the team, says this work could make cellulosic ethanol production more possible now that we know more about what makes plant deconstruction so difficult. The work of the Cambridge team, while important, isn’t enough for the BBSRC though. The center has also joined an EU-
funded project along with several other groups called DISCO, aimed at developing more efficient and economical enzymes to produce cellulosic ethanol. The project is tapping into a library of more than 4,000 microorganisms that produce a number of different enzymes. Already, the DISCO project has pinpointed a number of promising organisms, most of which have come from the library housed at the Budapest University of Technology and Economics, with positive enzyme activity. Along with the BUTE library, Kristiina Kruus, director for the project, says that the “answer could literally be lying in the soil, in an undiscovered and uncharacterized microorganism.” For the tests, the project is using spruce chips from paper-making, wheat straw from farming and waste bran from milling as potential feedstock to test the enzymes on. Research progress made by DISCO and the xylan-testing team from Cambridge demonstrates that in the enzyme world, a good thing can always get better.
Searching for Economic Sustainability
Missouri biodiesel producer uses grant to explore feasibility of second-gen process BY ERIN VOEGELE Upgrading, even replacing, its first-gen biodiesel plant with advanced processing is on the minds of executives at Dexter, Mo.based Global Fuels LLC, a 3 MMgy continuous flow biodiesel refinery. The company is conducting a feasibility study to evaluate producing synthetic drop-in or green fuels. Global Fuels Plant Manager Jason Harris says they are also looking at biochemicals and green energy production. The study is being supported by a $48,833 grant awarded by the Missouri Department of Natural Resources in August. The existing biodiesel plant is currently operating, but not at full capacity, says Harris, mostly due to the expired biodiesel tax credit and a drop in demand. The feasibility study will compare the various second-gen technologies currently available for implementation. “What we hope to accomplish is to find a technology out there that is sustainable without subsidy,” Harris says. “Given our current industry, where we are at with the $1 subsidy being lapsed, and the market being overproduced, it’s just something for us to look at for long-term stability.” Global Fuels is looking at a wide range
of technologies. “We’ve looked at several different companies that are on the mark and either ready to commercialize or are still in pilot facilities,” Harris says. “We are looking at gasification, pyrolysis, fermentation— we hope to get it narrowed down by the end of the study.” The company is also investigating locally available biomass sources. “We hope to end up with a technology to utilize some of the biomass that is produced within Missouri,” Harris says. “We’re trying to keep an open mind and unbiased opinion starting out. We don’t want to concentrate on one feedstock because that really narrows your study. We want to keep it open and broad, that way we get a chance to look at everything. We’re a highly agricultural area, a lot of agricultural residues and forest residues.” Other possible feedstock are municipal solid waste, construction waste, and manure. “We are looking at the whole spectrum,” Harris says. The official timeline for the study required by the grant is one year. However, Harris notes that Global Fuels is working under an accelerated timeframe and expects
New Approach Global Fuels has plans to replace its existing biodiesel plant with a second-generation biorefinery.
to finish the study within six months. While Global Fuels intends to operate its existing biodiesel plant during the feasibility study and construction of a new facility, the plant’s long-term fate is unclear. According to Harris, a retrofit of the existing facility isn’t very likely. “Depending on what technology we go with, the secondand third-generation fuels—the synthetics or the greens—the processes by which you produce those are so much different than the transesterification process that there wouldn’t be a whole lot of the existing line utilized,” he says. “Just mainly the company’s building and the tank farm structure.” A final determination on whether the biodiesel plant will continue to operate will be made later. “After everything is up and running, we’ll make that determination.”
NOVEMBER 2010 | Biorefining | 13
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STARTUP
Unintended Discovery
Conversion of biomass to biofuels and biobased chemicals often requires using strong acids or other harsh and expensive compounds, but a team of Iowa State University researchers discovered a simple yet effective technique to produce high-value saleable biobased chemicals that can have many applications. Supported by grants from the Iowa Energy Center, the research aims to produce sugar derivatives from cellulose such as wood chips while studying reactions in alcohols at high temperatures and pressures, according to Walter Trahanovsky, ISU chemistry professor and lead researcher on the project. After early experiments produced the expected sugar derivatives, he says, the team focused on breaking down glucose—the monomer of cellulose— using a supercritical fluid conversion process, in which the fluids are heated under pressure until their liquid and gas phases merge. When analyzed using nuclear magnetic resonance spectroscopy, significant yields of ethylene glycol and propylene glycol were found with low molecular weights. “NMR allows us to see things that other people maybe didn’t see if they were using gas chromatography,” Trahanovsky says. “It was a surprise to us.” Depending on conditions and amount of cellulosic biomass used, according to Trahanovsky, the conversion process approximately yielded a 2:1 ratio of ethylene glycol to propylene glycol. The patent-pending process also produces alkyl glucosides and levoglucosan, which can be converted into glucose for ethanol production and other applications. “We’ve done mostly batch reactions on a lab scale, but we’re trying to develop a continuous process, which should be appealing to scale-up and use on an industrial level,” Trahanovsky says. An advantage to using the supercritical fluid pathway is that the
PHOTO: BOB ELBERT, IOWA STATE UNIVERSITY
How ISU researchers produced useful biochemicals from cellulosic material BY BRYAN SIMS
Creating Value ISU’s Ronald Holtan, left, and Walter Trahanovsky use high-pressure vessels to make high-value chemicals from biomass.
process doesn’t use expensive reagents such as acids, enzymes, catalysts or hydrogen. It is also insensitive to impurities in the biomass, Trahanovsky says. “That’s really one of the differences between what we’re doing and a lot of the biological work that’s going on with enzymes, because the enzymes are pretty sensitive to impurities whereas this technique, by and large, is not,” he says. Uses for ethylene glycol include automobile antifreeze, polyester fabrics and plastic bottles. Propylene glycol has many applications, including food additives, solvents in pharmaceuticals, moisturizers in cosmetics and as a coolant in liquid cooling systems. Though demonstrated under batch reactions on a lab scale, progress is underway to develop a continuous process to make it amenable for industrial-scale applications, says Trahanovsky. “There’s a significant amount of work to be done before it can be commercialized.”
Algae Policy Teaser Combine policy support and algae for a positive result
14 | Biorefining | NOVEMBER 2010
entrepreneurs and government agencies working to accelerate the development of algae-based fuels.” The bill will now enter debate in the Senate, and for anyone who’s had an eye on Congress’ ability to pass a biofuel-based bill in the past year, the fact that one regarding algae made it through the House may only be a good sign in theory. But, if you’re an algae supporter or developer, time and effort spent on positive policy shows real support is there for algae, even if it’s only alluded to. —Luke Geiver
PHOTO: LUKE GEIVER, BBI INTERNATIONAL
What does a recently passed U.S. House of Representatives bill mean for algae? Parity, for one thing—or at least the allusion of it. The bill, the Algae-based Renewable Fuel Promotion Act cosponsored by Rep. Harry Teague from the algae friendly state of New Mexico, and Rep. Brian Bilbray of California, will alter the tax code for cellulosic biofuels and, in doing so, make algae eligible for a cellulosic biofuels tax credit. Mary Rosenthal, executive director of the Algal Biomass Organization, says the bipartisan support in the House shows an unmistakable message “to the hundreds of companies, scientists,
Eligibility Pending A new bill aims to make algae eligible for the cellulosic biofuel tax credit.
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First Things First
Why securing EPCs, locking up long-term feedstock and off-take agreements are critical for cellulosic ethanol projects BY BRYAN SIMS Terms like “guarantees,” “performance” and “return on investment” are just a few watchwords the investment community adheres to when it comes to financing biorefinery projects. As far as cellulosic ethanol project development goes, BlueFire Renewables Inc. holds firm to these same principles. The Irvine, Calif.-based company announced three milestones necessary for bringing online its 19 MMgy facility in Fulton, Miss., by securing an off-take agreement with Tenaska BioFuels LLC for the purchase and sale of its ethanol. It later signed a 15-year contract with Cooper Marine & Timberlands to lock up its agricultural residue feedstock supply and, then, in early October, the company selected Wanzek Construction, a wholly-owned subsidiary of MasTec Inc., to build the $296 million facility, which includes a $100 million biomass power plant. Selecting the right EPC can make or break a cellulosic ethanol project, according to BlueFire CEO Arnold Klann. “Without having a lump sum turnkey contract from an EPC contractor that basically guarantees
the price, schedule, performance under the contract and provides liquidated damages to back-stop those guarantees, you’re not going to be able to get financing,” he says. The same can be said about securing long-term feedstock and off-take agreements for ethanol, although these contracts can sometimes be the most challenging to finalize even without DOE-backed funds, Klann notes. “For feedstock agreements, especially for ag residue contracts, you don’t have a credit-worthy or deep-pocket supplier that’s going to gather material and guarantee supply during the life of a loan,” he says. “Conversely, you have to have someone buying the product and guaranteeing some kind of price matrix that matches feedstock costs because of conversion efficiency.” Securing feedstock, ethanol and EPC arrangements like these before breaking ground on a cellulosic ethanol project aren’t new priorities but, according Klann, they were pegged especially high for his company because BlueFire is the recipient of loan guarantee funds through the U.S. DOE. If the company hadn’t secured the arrange-
$296 million
TOTAL PROJECT COST $100 million
BIOMASS POWER PLANT COST Big Investment Compared to first-gen ethanol plants, BlueFire’s 19 MMgy cellulosic ethanol biorefinery— indeed, most advanced biorefinery projects—will cost big bucks.
ments, funding may have been delayed or, worse, stripped. By not securing feedstock, off-take and EPC agreements prior to building a plant, the odds of obtaining any type of funding are slim to none, regardless of having a DOE loan guarantee or not. “Right now, if you’re not in queue to get a loan guarantee then you have to create a contractual model that is much more rigorous to get any type of funding from the outside,” he says, adding that the company also applied for a USDA loan guarantee as a fallback measure. “Commercial banks and equity players want to see security of the cost estimates that you have for building the facility. They want to see the security that you actually have revenue streams coming in to pay off the debt.”
The 3-year Algae Timeline A group of major airline companies, airports and Rolls Royce have joined Sustainable Use of Renewable Fuels, a consortium that says it intends to develop a microalgae-to-fuel process and have a commercial production facility up and running in only three years. SURF is a project between U.K.-based Cranfield University, Airbus, British Airways, Rolls Royce, Finnair, and Gatwick Airport. The plan is to continue work being done on the campus of Cranfield to grow and process algae, and eventually, move that work to the sea. In fact, the consortium joined with Cranfield for that specific reason. The university’s Sea Green Project is aimed at rapidly growing algae in the ocean, and, according to Naomi Stanford-Jones, Cranfield’s executive of corporate communications, British Airways, Rolls Royce and the others will all provide help in business and technological decisions for the project. Maybe the Sea Green Project will make algae a reality. Either way, we’ll know in three years. —Luke Geiver
PHOTO: CRANFIELD UNIVERSITY
Big players with huge things to say about tiny algae
Go Team SURF team members will provide industry knowledge and general business practices. NOVEMBER 2010 | Biorefining | 15
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STARTUP
Cracking the Blend Wall U.S. EPA approves conditional E15 fuel waiver BY ERIN VOEGELE
During a milestone announcement, U.S. EPA Assistant Administrator for Air and Radiation Gina McCarthy stressed that the agency is not requiring the use of E15, rather it is opening up the possibility for fuel retailers to begin offering the fuel. “This decision is about allowing the use of gasoline blended with E15 ethanol by the appropriate vehicles to use where and when E15 becomes available,” she says. Most stakeholders seem to agree that the situation is less than ideal. In fact, the National Association of Convenience Stores has spoken out urging its members to exercise extreme caution when deciding whether to offer the fuel. This attitude has nothing to do with E15 itself, rather the NACS notes that EPA approval of the fuel does not negate the many federal laws and restrictions that are in place regarding the sale of fuels. According to the NACS, retailers may make themselves vulnerable to many liability issues and legal repercussions if they supply E15 before other laws and regulations are updated to safeguard the sale of E15. While the current situation may be less than ideal, the EPA’s actions do reflect an important first step in opening the market to allow for greater use of ethanol-blended fuels. In the short term, the fuel waiver approval is expected to help spur investment in commercial-scale cellulosic ethanol plants. “It provides confidence to investors that the U.S. government is going to continue to increase our use of renewable fuels,” says Wes Bolsen, Coskata Inc.’s chief marketing officer and vice president of government affairs. “Right now, Coskata is looking to start building our first commercial plant, so of course it helps in the sense that it gives investors additional confidence.” That extra confidence should be created later this year when EPA approves the second portion of the wavier for 2001 though 2006 cars and light-duty trucks, he says.
Blending up Potential Blender pumps could offer a simple solution to overcoming E15 concerns by making E10, E15 and E85 available at a single pump.
Glenn Nedwin, executive vice president of technical enzymes at Genencor, a Division of Danisco, agrees. “Once the second decision comes, then it is going to get much more attractive for investors because we now see there is growth potential in the industry,” he says. “With an open market now, we will definitely see more investment coming.” However, the E15 approval is only one step in the right direction towards increasing the use of ethanol. “This is a first step,” Bolsen says. “We see this E15 waiver as a first step in a bigger plan to get to very high volumes of cellulosic ethanol.” The big question now is what the second step might be. “What is our plan?” says Bolsen. “Do we have the enduring policy to start putting in the infrastructure, meaning blender pumps and [flex-fuel] vehicles? What is the strategy? Is it E15, then E20, then E25, or are we talking about a much bigger plan?” According to Bolsen, it will be important for all relevant ethanol industry stakeholders to form a coherent plan in order to actually get higher volumes of fuels in the market. “[We need to] put together an entire industry stakeholder plan, and by that I mean not just producers, but everyone from station owners to the national petroleum refiners,” he says. “How do we all work together on a transition plan to meeting our mandate and reducing our dependence on foreign oil?”
Transforming Waste into Value With $1 million from the New Zealand Ministry’s Waste Minimisation Fund, Crown Research Institute Scion plans to build a pilot plant to demonstrate its biosolids conversion technology. Company spokeswoman Christl McMillan says the technology combines the benefits of biochemical and thermochemical processes into a single hybrid system using a thermal deconstruction process to cook and break down the biosolids. The technology can produce nutrients, such as nitrogen and phosphorus; biobased fuels and chemicals, such as acetic 16 | Biorefining | NOVEMBER 2010
acid, organic acids, ethanol or bioplastics; and methane for electricity production. “The plant is currently being prefabricated offsite with installation and commissioning expected to take place in January,” McMillan says. “The pilot plant will be portable, allowing its application at multiple sites into the future.” Scion is partnering with the Rotorua District Council on the project, and will use about 5 percent of the city’s waste biosolids. The final objective of the two-year project is to develop a design for a commercial-scale facility, which
PHOTO: SCION
New Zealand project aims to turn solid organic wastes into biochemicals, energy
Put to Use Biosolids, such as those produced at the Rotorua District Wastewater Treatment Plant, are byproducts of sewage treatment.
McMillan says could be under construction by 2013. —Erin Voegele
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1000
10 500 5
500 5
Biofuel
Bio Material
1000
10 500 5 0
0 Bio Material
15
1000
10 500 5 0
0 Biofuel
SOURCE: LUX RESEARCH
15
Thousand Tons
Asia Thousand Tons
South America
Biofuel
0
0
Bio Material
Biollion Gallons
Biofuel
1000
10
0
0
Biollion Gallons
15
Thousand Tons
15
Biollion Gallons
Europe Thousand Tons
Biollion Gallons
North America
Bio Material
Ready for Growth Of the four major global regions, North America possesses the largest biofuel production capacity while Asia has the most biomaterial capacity today.
Moving on Up
Report: Advanced biofuels and biomaterials production poised to explode into global market within next five years BY BRYAN SIMS Despite billions of dollars in financing, countless government incentives and a graveyard of failed startups, increased volumes of biobased fuels and biomaterials are expected to flood the marketplace in the next five years, according to a report published by Lux Research titled “Biobased Fuels and Materials Through 2015: Growing Capacity Past a Drop in the Bucket.� The report forecasts that by 2015 global biofuel capacity will grow 7.8 percent annually to 53 billion gallons, while biomaterials are on pace to grow at a 17.7 percent per year clip to reach 8.1 million tons.
Technological advances focused on algae oil and biobutanol development are expected to fuel global growth in biofuels to 78 billion gallons of total capacity while, on the biomaterials side, capacity is anticipated to climb to 10.5 billion tons, with much of the volume expected to come from succinic acid and ammonia producers. Deeper corporate involvement in either industry could fuel massive growth, particularly for biomaterials where it could bring total capacity up to 12.4 million tons by 2015. Biofuel capacity would also benefit from increased corporate investment, and could expand to 65 billion
gallons in the next five years, the report states. It also notes that global ethanol capacity will rely heavily on government regulation. A U.S. increase in the national blend limit to 15 percent should open up more demand for the fuel additive by bringing the forecasted capacity to 43 billion gallons by 2015.
NOVEMBER 2010 | Biorefining | 17
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$111M (12%)
Energy Exploration and Production
$92M (19%)
Power Generation
$97M (20%)
Energy Utilization
$86M (18%)
Transportation
$36M (8%)
Agriculture
$14M (3%)
Forestry, Wood Products and Pulp & Paper Products
SDTC’s current investment into 195 projects is $478M
$42M (9%)
Waste Management
0
$20
$40
$60
$80
Dollars (Millions)
$100
$120
SOURCE: SDTC
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Notable Portfolio SDTC-supported projects contribute technology solutions to major economic sectors in Canada, reducing costs while increasing productivity and competitiveness.
Algae from Where? A Canadian company discovers new algae strain, finds perfect partner BY LUKE GEIVER Imagine standing on a rocky shoreline, high cliffs littered with pine trees jut toward the sky, waves are crashing in, seagulls fly overhead and at your feet you find a piece of algae, a microorganism that come to find out is 60 percent more efficient for biofuel production than most other strains. What would you do? The scene may sound far-fetched but for Ocean Nutrition Canada, a giant supplier of Omega-3 fatty acids, a similar situation happened. During a research screening process aimed at finding applicable microorganisms that may aid in Omega-3 fatty acid supplements, ONC found a strain of algae that is not only 60 percent more efficient, but is also heterotrophic (able to grow without sunlight). They found it in, of all places, the Bay of Fundy, a large body of water located between New Brunswick and Nova Scotia. What ONC did next might make that algae strain, which they’ve named ONCT18B, something we hear more about in the near future. The Sustainable Development Technology Canada organization is the Canadian version of the U.S. DOE, and ONC chose to partner with SDTC to further develop the strain. At nine years old, SDTC has worked on roughly 195 projects, helping clean tech companies across the valley of death, says Rick Whittaker, chief technology officer and vice president of investments for SDTC. The organization currently has $478 million invested in its projects, not to mention the private capital the organization helps participating projects find. “We’ve got just over a billion dollars,” Whittaker says, “and that is leveraged up by two- to three-times 18 | Biorefining | NOVEMBER 2010
by the private sector.” Whittaker also says SDTC has a program called “follow on funding,” which helps companies identify additional investors. Fortunately for the Halifax-based Omega-3 fatty acid supplier, Whittaker’s organization doesn’t just supply funding. The SDTC he says “takes good ideas and proven designs through the pre-commercialization stages of development to scale-up, so that when they get done with us, they land in the market.” The organization is housed within a government body but staffed with private sector people, “to make it industry friendly, speak industry language, have solid business plans,” he says, adding, “a solid business plan will drive market uptake.” And if all that isn’t enough, SDTC doesn’t require repayments of the financial contributions it provides to funded projects through the SD Tech Fund, a $550 million fund that supports late-stage development and pre-commercial demonstration of clean technology. ONC has virtually everything required to make an algae project a success, Whittaker says, including the right algae strain, a production process already existing at their Omega-3 plants, and a business model that can bring the product to market (look to their partners on the project—UOP LLC and Lockheed Martin, among others). So if you find a new strain of algae or have a novel technology, what should you do next? For starters, pretend you’re on a rocky shoreline somewhere, maybe even a large body of water between two Canadian provinces.
STARTUP |
Sidestepping Lignin’s Challenges
Targeting lignin-free macroalgae for advanced ethanol production Former hippy counterculture haven Berkeley, Calif., is home to Bio Architecture Lab Inc., a company working to convert weed—seaweed, that is—into secondgeneration biofuels and chemicals. The one-step process, known as consolidated bioprocessing, uses a microbe to break down sugars in seaweed to convert them into common metabolites, which can then be converted into a wide range of biobased products, such as ethanol and isobutanol. One major benefit of the seaweed used by BAL is that it contains no lignin, says CEO Daniel Trunfio. Breaking down lignin is a very complete and expensive process, he says. By working with a ligninfree feedstock, the company has managed to sidestep one of the more significant impediments faced by second- and thirdgeneration biorefining processes. Trunfio says BAL’s technology is
flexible, allowing for production of a Seaweed Facts wide range of fuels and chemicals from seaweed. “Ultimately, I would like to see Fastest growing plant on earth our company be seaweed agnostic,” he says. “You bring a seaweed to me, tell Known cultivation methods me what products you want us to make, No fertilizers and we will.” BAL recently formed a strategic No lignin partnership with Norwegian energy giApproximately 50 percent sugar content ant Statoil, under which Statoil will fund Sustainable biomass source research, development and demonstration projects for conversion of seaweed Environmentally beneficial to ethanol. If successful, Statoil will Low greenhouse gas footprint also fund commercialization activities in Norway and Europe. BAL has also SOURCE: BAL CEO DAN TRUNFIO formed an isobutanol research partnership with the Advanced Research Program Agency-Energy and an ethanol research partnership with the Chilean government. —Erin Voegele
Coming to a Home Near You Why biobased materials continue finding their way into consumer goods Consumer product manufacturers are discovering that the time is right to capitalize on existing manufacturing technologies while using available supplies of biomass like soybeans and corn to replace current petroleum-based products, or to reduce demand on resources such as wood. These strategies fit in with overall sustainability targets for emerging companies like Corn Board Manufacturing Inc., which entered into a licensing agreement to utilize a cornbased structural composite technology developed by researchers at the University of Illinois Urbana-Champaign. CBMI’s primary product, trademarked CornBoard, is a version of wood composite board that uses corn stover. The composite is prepared by mixing the fibrous corn component with a polymer matrix, laminating the mixture and applying heat and pressure, according to CBMI CEO Lane Segerstrom.
“We chose corn-based materials because it’s a readily available biomass we can take and do something with right now,” he says. “That’s what makes it so attractive.” Due to its flexibility, CornBoard isn’t limited to being a wood composite board replacement. But it’s also being developed into a variety of products, including its line of Zea Home Outdoor Furniture Collection, kitchen cabinets, door cores and a full line of longboard skateboards called “StalkIt Longboard.” Meanwhile, Cargill intends to use Momentive’s Niax silicone L-670 surfactant in conjunction with its soybean oil-based BiOH polyols to reduce the use of petroleum-based polyols from which polyurethane foam is traditionally made. Replacing standard silicone surfactant with Niax L-670 surfactant in formulations using Cargill’s natural oil-based polyols increases foam’s biobased content by up
to 30 percent over current levels, which can result in enhanced foam properties and processing methods. Cargill, which has been using its soybean oil-based BiOH polyols in foam manufacturing since 2005, sees in coming years a steady climb in more products incorporating the biobased material in various consumer products, according to Yusuf Wazirzada, business unit leader for Cargill Biobased Polyurethanes. “We are actively promoting the viability of soy-based foams because of the environmental benefits they offer, without sacrificing quality,” he says. “The market presence has grown significantly in the past few years and we see potential for even more growth in the future.” —Bryan Sims
NOVEMBER 2010 | Biorefining | 19
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INDUSTRY
Market Penetration NatureWorks' biobased polylactide production facility, located in Blair, Neb., can generate approximately 300 million pounds per year of its Ingeo brand biopolymer resins for a variety of plastic and fiber applications. PHOTO: NATUREWORKS LLC
20 | Biorefining | NOVEMBER 2010
INDUSTRY |
Marketing the
Market How marketing a branding strategy may give companies a leg up on the competition BY BRYAN SIMS
When people think of biofuels, the first thing that usually comes to mind is ethanol and, perhaps with it, a roll of the eyes. Mention a chemical
like biobased levulinic acid and one may expect a reaction of puzzlement with raised eyebrows. Such a chemical is not likely to ever become a household name compared to, say, corn-based ethanol. Nevertheless, some biorefining companies are recognizing that to heighten visibility of their products, they should consider, or perhaps reconsider, implementing a clear branding strategy within their marketing campaigns. By leveraging a branding strategy in a marketing campaign, particularly with diverse media at their fingertips, advanced biofuel and biobased chemical companies also have a chance to educate consumers and potential or existing customers
on the benefits of their products and services— a feat first-gen biofuel producers weren’t really able to successfully capitalize on in the prime of their growth period. “It’s a definite change in mindset now, not in just the general public, but also in government,” says Al Novak, alternative energy manager for Emerson, a global automated process control supplier to a variety of industries, including biobased fuels and chemicals. “Government is looking at how to adjust subsidies, tax credits or funding to take into account the new dynamic of the market, where it isn’t just about corn-based ethanol anymore.” Colorado-based cellulosic ethanol developer Range Fuels selected Emerson as its primary automation and process control contractor for its 100 MMgy cellulosic ethanol and methanol
NOVEMBER 2010 | Biorefining | 21
INDUSTRY
plant under construction near Soperton, Ga., where it will use wood waste as feedstock. Emerson also teamed with Dynamic Fuels to help bring the 75 MMgy renewable diesel plant in Geismar, La., online. In a move intended to showcase its innovation and engineering expertise with Range Fuels, Emerson rolled out a 30-minute television commercial under the “It’s Never Been Done Before” marketing campaign. Created by Chicago-based marketing Providing Exposure agency DDB, EmerPartnering with son first launched its companies like Emerson can heighten “Consider It Solved!” visibility of an advanced campaign biofuel and/or biobased marketing chemical producer, in 2002. Emerson later says alternative energy extended the campaign manager Al Novak. for another seven years in March, subsequently renaming the campaign under the new designation, “It’s Never Been Done Before.” Regarding the ad with Range Fuels, Novak says, “It was a mutual marketing campaign. Companies like Range Fuels have enough to worry about with the underlying process technology. They may not have a lot of expertise in large-scale project execution or process control, and those are obviously things we can help them with and remove some of the risk when they get to execute a project or build a plant.” According to Novak, the advanced biofuels market is one that the company has been keeping a close eye on for three to four years to potentially offer its services to. “We’ve recognized advanced biofuel as an emerging sector that we definitely want to be engaged in,” Novak says, adding that Emerson is the only nonproducing, or technology developer, member in the Advanced Biofuels Association. Novak says the company also has engaged between eight and 12 advanced biofuel developers in the ABFA as potential candidates for partnerships similar with Range Fuels. “We’re keenly interested in its success,” he says. Though an aggressive marketing campaign seems to work for Emerson and Range Fuels, the time may not be right for
22 | Biorefining | NOVEMBER 2010
PHOTO: NATUREWORKS LLC
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Downstream Machine INGEO biopolymer resin pellets shoot into a bag at NatureWorks' production facility in Blair, Neb.
“A lot of companies realized they couldn’t get financed in the concept of just being a pure ethanol play because of the bad press,” he says. “By rebranding, the primary reason was to open the mindset of the investment community as they’re now recognizing there’s a much broader market out there.” What’s in a Name? The company initially went Irvine, Calif.-based advanced with its previous company name biofuel developer BlueFire Reduring corn-based ethanol’s newables rebranded its company Refocus BlueFire Renewables name in August to better reflect Inc. CEO Arnold Klann growth period when investor interest peaked. “We ended up callthe all-encompassing products says renaming a to better ing our company BlueFire Ethaand services it will market. For- company reflect the overall scope of business is nol mainly because ethanol in the merly BlueFire Ethanol Inc., the to reaching company works to deploy tech- critical name attracted attention,” Klann domestic and nology for manufacturing a suite international says. “It’s like giving kids primary colors as opposed to muted colof biobased chemicals and fuels, customers. ors—you have to be in their face, including cellulosic ethanol, biodiesel, synthetic fuels and biojet fuel utilizing so to speak.” Another reason why BlueFire Renewa concentrated acid hydrolysis technology originally developed by Arkenol Fuels LLC. ables chose to rebrand its company name, A primary impetus behind the company’s Klann says, was to create exposure into inrebranding and name change, according to ternational markets under the umbrella of CEO Arnold Klann, was to move beyond a true biorefining company. “If you think advanced biofuels exclusively, such as cel- about Thailand or Europe, their primary lulosic ethanol, in order to attract equity focus on fuels is diesel,” he says. “It’s not investment. necessarily gasoline as their infrastructure all companies with similar strategies. They place varying degrees of importance on finding, or refining, particular company names, process technologies and products to increase recognition of the products they intend to offer.
INDUSTRY |
and their cars aren’t designed to run on ethanol. The rebrand should open up that market for us as a result.”
Bio'D'efining Process Technology Depending on where an advanced biofuel or biobased chemical company sits in its development cycle and financial position, some companies may prefer to focus their capital resources on refining their process technologies to scale rather than marketing a branded technology. However, some companies, such as Biofine Technology LLC, say having a brand or trademarked name attached to a process technology is what helps establish potential licensing ventures once commercial deployment nears. “You have to define the technology you’re selling,” says CEO Stephen Fitzpatrick. “You sort of sell the whole concept along with the core technology.” The company’s core conversion pathway, called the Biofine process, is derived from a contracted version of the word “biorefinery.” Fitzpatrick says the process can convert virtually any biomass feedstock that contains cellulose into four main intermediate products: levulinic acid, formic acid, furfural and ligneous char. The company is targeting production of ethyl levulinate as the “basis for advanced biofuel,” he says. If a biobased chemical developer wishes to enter the commercial marketplace, equal effort would have to be put into filing for patents to build an intellectual property wall around the branded technology. In other words, patent protection backs the name a technology developer puts on its processes, which can be an attractive selling point. “A branded technology encapsulates what a technology is selling, what it’s all about,” Fitzpatrick says. “It’s extremely important to have a brand name and have it relate, certainly in this business, to a certain technology or set of IP.”
line of biobased polylactide (PLA) under the brand Ingeo, used as a biopolymer material in variety of plastics and fiber applications. The company manufactures PLA from dextrose in Consumer Appeal plant material through Marketing a bioproduct downstream to retailers fermentation. Natureand to consumers is imperative for biobased Works’ primary cusproduct manufacturers tomer is ultimately the like NatureWorks LLC, product manufacturers according to Steve Davies, director of that opt to use Ingeo public affairs and biopolymers, which are marketing. then offered to consumers in the retail sector through various products. But in order to reach its consumer base, the intended results of an aggressive marketing campaign, if pursued, can sometimes get lost in the fast-paced business-tobusiness (B2B) market. “When branding is done in the B2B space, it’s more of a trademarking strategy
that never survives beyond the first step,” according to Steve Davies, director of public affairs and marketing for NatureWorks. “For us, it was critical to get the environmental credentials across what we’re selling, and that’s what’s critical to the brand-owner for making the consumer sale.” When marketing a biobased product such as Ingeo, NatureWorks puts a tremendous amount of attention into developing and improving upon the environmental credentials, or “ecoprofile,” in order to better communicate to retailers and its customer base the renewable advantages Ingeo carries. Davies says, “That’s why it is critical to us, even though we’re in a B2B space, to brand our product so that it can be tracked downstream to the final user, so they know the pedigree of what they’re buying.” Author: Bryan Sims Associate Editor, Biorefining (701) 738-4974 bsims@bbiinternational.com
Downstream Marketing Since 2003, NatureWorks LLC, a Cargill joint venture, has been marketing its
NOVEMBER 2010 | Biorefining | 23
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POLICY
24 | Biorefining | NOVEMBER 2010
POLICY |
Legislating an
Incentive What one organization proposes to spark greater biobased chemicals production BY ERIN VOEGELE
Tax credit programs have long supported the biofuels industry. The
massive build-out of first generation ethanol and biodiesel plants in the past 20 years can be largely attributed to tax incentives that helped these industries stand toe-to-toe with their petroleum counterparts. As the biofuels industry moves to second- and third-generation development, tax credits will continue to play a significant role. An initiative being led by the Biotechnology Industry Organization aims to build similar support mechanisms into the tax code for biobased chemicals and materials producers. “We’ve seen a pretty good body of federal policy developed to help commercialize biofuels and next-generation biofuels,” says Matt Carr, BIO’s managing director of policy. “I think there is a pretty wide appreciation for the benefits of biofuels, and I think members of Congress understand why we should invest in biofuels.” Carr notes, however, that biobased chemicals and products have not historically received the same level of appreciation. As a result, policy support for these sectors is lacking. “One particular area where this is true is in the tax codes, where we have a number of biofuels tax incentives—but really nothing in the renewable chemicals and biobased products space,” Carr says. Generally speaking, biobased products and chemicals are competing with well-established petrochemicals. “In order for new alternatives to really break into the market, federal policy
plays a key role,” Carr says. “That is why BIO has chosen to pursue a tax credit for renewable chemicals and biobased products.”
The Proposal The proposal developed by BIO, along with the input from several industry partners, would create a 30-cents-per-pound tax credit for biobased products made via the chemical or biological transformation of feedstocks. The credit would increase to 36 cents for qualifying products made by small producers that manufacture less than 5 million pounds a year. The proposal also offers a higher tax credit for qualifying cellulosic or algae products. A partial tax credit would be made available to biobased products that meet the requirements of the USDA’s BioPreferred program, but are not chemically or biologically transformed, as well as biobased products manufactured from byproducts of a fuel process that have been further transformed chemically or biologically. The production tax credit would not apply to food, feed or fuel materials. “I think we have a pretty well developed proposal,” Carr says. “We’ve taken pains to work with the industry to make sure it will work for a wide variety of business models and have also consulted with government offices and agencies, experts and academics. “I think what we put together is a very well-crafted proposal, but it’s really just a starting point for conversation,” he NOVEMBER 2010 | Biorefining | 25
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POLICY
ting the advances of industrial biotechnology into the chemical industry could be paralyzing. What is at stake for the U.S. is leadership in the industrial biochemicals business, and along with that goes new jobs and ecoPolicy Professional Outreach Leader Technology Titan nomic impacts.” Matt Carr, BIO's BIO Director of Policy Karl Sanford, managing director of Rina Singh has been Genencor’s vice Brian Tockman, direcpolicy, is helping aggressively working to president of technology tor of strategic sourcing at spearhead educate lawmakers on development, says a development of a the benefits of a production tax credit for Segetis Inc., also points out production tax credit for production tax credit for biorefiners would allow that it is important for the biobased products and the biorefining industry. his company to bring chemicals. products to market tax proposal to clarify what sooner. constitutes a qualified product in terms of biobased continues. “I think we have to make sure content. This is necessary to ensure that the credit works for a wide range of busi- the treatment of intermediates is consistent ness models. The key concept here is that with the treatment of other biobased chembiobased products are a tremendous driver icals and materials, he says. “We see this proof green jobs. We want to incentivize ad- posal as a bridge, not a permanent aspect of ditional production at existing commercial the industry,” Tockman says. “We see it as a facilities, and the construction of new fa- booster shot—a temporary booster shot— cilities. To do that, the credit needs to apply until the industry has the scale to compete to all qualifying advanced products, and also with petroleum-based incumbents.” work for companies that might not have a According to Metabolix CEO Richlot of profit against which to apply a tax ard Eno, the tax credit proposal needs to credit. We’ve requested that the incentive be include a refundable tax credit since many refundable or available to companies that biorefinery startups will require time to bemight not have a tax liability in the early come profitable. “The refundability aspect years.” That mechanism, he says, is similar of the proposal will allow the businesses to those that have been developed to sup- to realize benefit of the tax credit immediport startups in other renewable energy ately,” he says. sectors, such as wind and solar. “It would be a refundable investment tax credit, as an The Political Environment option to the production tax credit,” Carr The current political climate does pose says. a challenge to getting the proposal in front According to Karl Sanford, vice presi- of Congress, Carr says. “I think it’s going dent of technology development at Genen- to be tough to get anything done for the cor, there are four key elements his company remainder of this year,” he says. “We’ll thinks should be included in a final tax bill. continue to work, and I think there is still a Due to the large capital investments that are strong interest, a bipartisan interest, in dorequired in the biorefining sector, Sanford ing something further for green jobs and says that scope of the tax credit needs to renewable energy. We’ll continue to talk to be proportional. He also says that the time- members of the Ways and Means Commitframe for which the tax credits are avail- tee and the Finance Committee, looking for able needs to be long enough to allow the opportunities. If we don’t see something new sector to establish itself. In addition, before the election, there’ll be a new cohort Sanford notes that the tax credit should be of folks that we may have to educate and limited to new and developing bioproducts, bring up to speed. I’m confident that as we and also be feedstock agnostic, he says— educate lawmakers, we are developing new not limited to lignocellulosics. “I believe champions. It may take time, but we’ll get that a well-planned tax credit is imperative there.” for our sector,” Sanford says. “Without fedCarr says it’s not just the policy envieral assistance, I think the hurdles for get- ronment posing challenges right now, but 26 | Biorefining | NOVEMBER 2010
the fiscal climate is too. It’s particularly difficult to find a way to fund new expenses. “It’s really about how do you pay for something?” Carr says, adding that, realistically, the proposal may have to wait for the next Congress to be addressed. “There will be a primary focus on cutting the deficit and spending. It will be a tough environment in which to propose additional spending, but we’ll continue to educate lawmakers to understand and appreciate the long-term benefits of investment in this sector and the job growth potential. We’ll leave it to Congress to make the decision where money is best spent, but we feel like there are few better investments than those in renewable chemicals.” The main obstacle to the proposal is political in nature, not philosophical, Carr says. “Hopefully, we’ll see the economy turn around and a desire in Congress to reinvest in the future economies and revitalize U.S. chemical manufacturing jobs,” he says. “When we get to the point when Congress is ready to do that, I think the opportunity will be there.”
Building Support BIO has been working aggressively to educate lawmakers on the benefits of the proposal, says Rina Singh, BIO’s director of policy, who noted that the education component of the initiative is extremely important. “The process of educating Congress members about renewable chemicals and biobased products has been very beneficial,” she says. BIO’s educational messaging has focused primarily on the benefits of job creation, retaining manufacturing facilities, increasing economic growth and maintaining U.S. leadership in the biotech sector. The energy security implications of the tax credit are also important to note, Singh says. Increased biochemical production will reduce reliance on petroleum feedstocks, thereby reducing dependence on foreign countries. Biochemicals are also likely to lead to more price stability, she says, adding that recent volatility in oil prices has translated into volatile prices in the chemical sector. “Renewable chemicals can give companies a more reliable, predictable and stable supply chain,” she says. “The history for developing this tax credit is very much focused on the U.S.
POLICY |
1,100
950
800
700
CHEMICAL JOBS IN THE U.S. (in thousands)
600 PLASTIC JOBS IN THE U.S. (in thousands)
19 90 19 91 19 92 19 93 19 94 19 95 19 9 19 6 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 0 20 5 06 20 07 20 08 20 09
500
Turning It Around A production tax credit for biobased products and chemicals would help spur employment in the U.S. chemicals sector. SOURCE: BIO
60
Dollars (billions)
50
40
30
ORGANIC CHEMICALS
20
PLASTICS
20 07
5 20 0
20 03
01 20
19 99
7 19 9
5 19 9
3 19 9
19 91
19
89
10
Bring It Back Home The production tax credit would not only benefit the U.S. biorefining sector, it would also reduce foreign imports, bringing economic growth back to the U.S. SOURCE: BIO
and impacts to the U.S. bottom line,” Singh says. Outreach efforts to date have focused on bringing representatives of industry to Washington to build support for the proposal. Bringing high-ranking CEOs from the biorefining sector to speak to lawmakers about the tax credit is not only a great networking opportunity, Singh says, it’s also going to pay dividends.
Taking Action Carr says those who want to help support BIO’s tax credit initiative can start by reading the organization’s white paper on
the value of renewable chemicals. They can also contact their congressional representatives and encourage them to invest in alternatives to petroleum. The same thing can also be done on the state level by working with state development agencies, and Carr notes that the biorefining sector should encourage those agencies to look for opportunities to attract investment and new development into their states. Economic development agencies should also be encouraged to advocate on behalf of the tax credit and its economic development possibilities. “The key is really to work at the
grassroots level, and eventually I think the message will resonate here in Washington,” Carr says. Representatives of both Genencor and Segetis have traveled to Washington with BIO to advocate on behalf of the tax credit. “I was pleased to visit with many members of the California Congressional delegation and their staff where we received some overwhelming support for the biobased tax incentive,” Sanford says. “They emphasized the need for scoring any proposals under the ‘pay for’ rules, which in this Congress is a prerequisite for getting a champion to step forward and move the legislation.” Lawmakers’ engagement and enthusiasm for what biobased chemicals can do, both in terms of bringing chemical manufacturing back to U.S. soil and environmental benefits, is directly tied to education, Tockman says. “My feeling is that giving Congress a more clear understanding of those macrobenefits would give them additional reason to support the specific issues of the tax credit, because they would understand that propelling this industry forward achieves so many important goals for the U.S.” While speaking with federal lawmakers is important, Tockman says that some of Segetis’ most productive relationships have been with the local offices and staff of these senators and congressmen. Local staff in these offices then need to be very engaged in these initiatives because they can feel the direct benefit of these policies in their local communities, he says. “You have to engage the Hill, but you also have to engage local offices and staff,” Tockman says. “BIO members are working hard with this Congress to underscore the importance of enacting a tax credit that will help our industry grow—providing new jobs, economic opportunities and an alternative to petroleum-based products,” Sanford says. “Genencor remains committed to working with the 112th Congress as well to ensure that U.S. policy and tax code keeps up with the pace of innovation.” Author: Erin Voegele Associate Editor, Biorefining (701) 850-2551 evoegele@bbiinternational.com
NOVEMBER 2010 | Biorefining | 27
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ALGAE
Counting the Clicks Sapphire Energy’s sophisticated algae strain counting system makes a “clicking” sound every time the system detects that a strain has evolved.
28 | Biorefining | NOVEMBER 2010
ALGAE |
An Algae
Seeing Scene Worth
How researchers in San Diego, a city boasting one of the world’s largest algae development clusters, are creating tomorrow today STORY AND PHOTOS BY LUKE GEIVER Here is what we know about algae: it’s often green and always loaded with potential. Its growth rate of 30 to
100 times that of terrestrial plants is alarming. And the whispers that once told us microalgae, an organism much smaller than the size of a pinhead, could change the way we think about filling our tanks and fueling our planes get louder—much louder. Apparently the city of San Diego was listening from the start, and now the idea of growing, harvesting and tweaking algae, or anything that has to do with it, represents a topic the city is not shy about touting. “It seems simple to me,” says Jason Anderson, vice president and executive director for CleanTech San Diego. “But that may be because it is something that San Diego does so well.” And that may be an understatement. In the city and surrounding area alone, there is a mix of more than 30 algae-based research centers, laboratories, startup companies and well-established players. For all the touting and talk by the city on algae development, for all the time spent in the university labs or the high-tech facilities work-
ing to find the perfect strain or the best growing method, there is one thing, of all the things that we don’t know, that we especially want to know: When? For all the talk of a “green bullet” that can ignite our energy independent future and squash any debate over food, land or air, that question of when might our algae dreams come true is what everyone wants to know. After all, if we can find out what some celebrity in Asia is doing at this exact minute by reading a tweet, or if our latest technological device can be outdated the day after we buy it, why can’t we get a solid guess as to algae’s arrival? The answer is complicated, as Tim Zenk, vice president of corporate affairs for Sapphire Energy, says. “This isn’t software— this is changing the world type stuff.” Although one guess as to a scaled-up, economical path to algae utilization—two months, two years, 20 years, never—might be as good as the next, the scene in San Diego is unveiling the one thing we really need to know about that slimy green sludge with all the potential, and it has nothing to do with time. To begin, look at the University of Cali-
NOVEMBER 2010 | Biorefining | 29
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ALGAE
fornia-San Diego’s Scripps Institution of Oceanography. Greg Mitchell, research biologist and senior lecturer, along with his team, work with algae every day. The team represents a small part of the scene in San Diego, a group of well-groomed, intelligent speaking individuals who have answers for just about every algae question one might have. “We are working on breakthroughs that will take us to large-scale production,” Elizabeth Trentacoste, a graduate student working with Mitchell, says on a portion of the university research. Another member working with Trentacoste, R. Cameron Coates, says that one of the unique traits the lab possesses “is the ability to analyze samples with a high degree of accuracy using tools that are standard to organic chemistry.” When it comes down to biofuel components, Coates says, “It’s analyzing those compounds and figuring out the genes and the enzymes that are required to make those.” Although some of the work at UCSD may sound familiar—a good idea relating to algae and a university that spends money to explore that idea—be assured it is different. Mitchell’s team has already worked with General Atomics in a phase one development project, and Mitchell’s work sets the UCSD facility apart. Mitchell focuses on how many photons are used in photosynthesis and the quantity of biomass that is actually produced. “While people are running really fast inside the labs to make strains that are elite, sooner or later they are going to come to the physiology lab (UCSD’s) to see how they perform,” Mitchell says. “The industrials are going to need to know performance of their organisms and they’re going to need to have models that predict performance. They aren’t going to go out there willy-nilly with a strain and say ‘Hey, I hope it works.’”
The ‘Best’ Application While Mitchell and the others at Scripps may meet the smart-speaking, serious and passionate researcher standards we expect from such a highly touted lab, the San Diego Center for Algae Biotechnology just up the street from Scripps (literally) is a bit of the same—but different. Led by Stephen Mayfield, director of the SD-CAB, the team 30 | Biorefining | NOVEMBER 2010
Showing the Way Stephen Mayfield, a founder of Sapphire Energy, has started SD-CAB, the San Diego Center for Algae Biotechnology, and with it, a new research effort on algae genes.
also works with algae 24/7 but is headed in a different direction. Mayfield’s crew, also a mix of researchers and grad students, is working to understand algae genes. “For many, many things that we are going to do, whether it’s lipid composition or growth rate or salt tolerance, all of those we can get without ever understanding what the gene is,” Mayfield says. “Just by selection, we can take 10 million of these guys and put them through selection and some volunteer will step forward and say, ‘I’ll survive in salt.’” If that gene can be understood, however, Mayfield says, “You can get there much quicker.” The place where SD-CAB’s genetic work might go isn’t just about biofuels either. Along with the incredible research facilities, the multitude of options or “places” that algae may end up is just another part of the scene San Diego is revealing. Already, a large pharmaceutical company has approached Mayfield on the possibility of an
algae-based pill used for vaccinations. The idea, he says, is that “if you make these (the pills) with algae, then instead of 100 bucks a dose, we might be at one buck a dose.” An algae company, Kent Bioenergy, just down the street from General Atomics (also literally), is in tune with the idea of other algae uses that don't involve biofuels. After starting in the fish business and now operating as a large algae harvester, Kent Bioenergy is looking into wastewater treatment. “Although the attraction of biofuels is really compelling as a business,” says Barry Toyonaga, chief business officer for Kent, “we actually think cleaning water might be the first order of business because, in the process of learning how to deal with vast amounts of water on different types of sites, we’ll learn a lot about what it takes to do larger scale installations for fuel productions.” For Toyonaga and his team, treat-
ALGAE |
To Be Continued The San Diego laboratory remains the prime research engine driving Sapphire’s algae development, even with four other research locations up and running.
ing wastewater via algae purification and extraction offers a prospect that they’ve already tested at a landfill site with significant results. Following work that turned a dark brown sludge from the landfill into an almost clear, almost drinkable solution, Toyonaga says they have already been approached by China and India. The success of the wastewater treatment process however is making the future for Kent difficult. “We are at the multifork in the road,” Toyonaga says. “The company can’t go down 10 paths at once.” If Kent Bioenergy is undecided on which path to take the algae ride, there are others in San Diego who have no doubt where they will end up. Sapphire Energy knows exactly what it wants to do. “You solve the most difficult things first and move to the easy stuff later,” says Tim Zenk, vice president of public affairs. Fuel, whether renewable diesel or jet fuel, is Sapphire’s main focus. “If you can crack this
market,” he says, “all the others will fall in place.” And Sapphire isn’t thinking small scale. One of the founders of the company, Mike Mendez, vice president of technology, says that in the beginning they approached the company’s future with a certain perspective. “If you couldn’t see our footprint from space,” Mendez says of that early company motto, “then why even bother.” Mendez says now Sapphire has taken algae from a kind of black magic or folklore species to something that is a daily routine.
New-Age Approach The scene in San Diego, where the laboratories are filled with beakers of green algae (most of the time), the university hallways are sprinkled with algae experts, and companies in the business proliferate, might be best summarized by the setting in the lobby at Sapphire’s headquarters. A surfboard imprinted with the company’s logo leans against a wall, and security guards in dark
blue uniforms stand watch. The view from one boardroom window shows brushes of the San Diego landscape’s sprawling valleys; and from the other, a small section of a lab unit scattered with miniature algae ponds and beakers, and more beakers. But beyond the surfboard, the guards and the labs lies the equipment that demonstrates to anyone with questions about algae everything they need to know. In the middle of the facility is a large room, fully equipped with stainless steel refrigerators, countertops, large-screen televisions, Wii consoles, fancy couches, everything, it may seem, that has nothing to do with algae. Overhead a mix of current music pumps through the speakers and in the lab it’s no different, there’s music and a lot of bodies concentrating on algae strains. Zenk says the large room in the middle of the facility is for those long nights when the workers need a break before heading back into the lab. And that’s it, that’s what San Diego is showing us about algae. Like everything else, everybody might have a different take on “when” algae might fulfill its promises. But, if you think not knowing when is reason enough to dismiss that “green bullet,” then look at that large room in the Sapphire headquarters. Its whole purpose is based on the presumption that a worker will want to spend all day researching algae and, after a break, will want to return to that work. They’ve made an algae facility a home away from home, and it’s working to turn that folkloric species into a reality, even during those long nights. Kent Bioenergy doesn’t know what the future holds either, but they know they want to get there with algae. And if a city’s effort isn’t enough, if algae activity and commitment isn’t equal to achievement, then look at Mayfield, one of the founders of Sapphire, that promising facility working around the clock with algae. For Mayfield, who’s back in the lab working again on algae at SD-CAB, “There is a lot of room for a lot of Sapphires.” When, who knows, but if one had to guess, San Diego or other cities like it might be good places to continue watching for answers. Author: Luke Geiver Associate Editor, Biorefining (701) 738-4944 lgeiver@bbiinternational.com
NOVEMBER 2010 | Biorefining | 31
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FINANCE
CONTRIBUTION
Financial Advice for Project Developers While biofuel producers are passionate curious people, many are not financially savvy―but this can be fixed BY ROBERT BAILEY You may begin to notice large oil companies like Exxon Mobil and Shell advertising alternative sources of energy such as algae. Make no mistake, these public relations expenditures are serious commitments. Large global corporations are fully aware of their leadership role in the quest for energy. Looking ahead to integrating biofuels, they expect to work with their business peers. So let’s begin by addressing the gaps between the entrepreneurial producer and the corporate producer and prospective funders in advanced biofuel projects.
32 | Biorefining | NOVEMBER 2010
At this time, biofuels producers tend to be operating startups and expansions. They must constantly balance feedstock supplies, methanol and other processing ingredients, equipment costs, labor and technology costs. Some companies have intellectual property and proprietary or patented technology. These often have attorney, legal filing and marketing costs. And, in some cases, just like the big energy companies, biofuel producers run PR campaigns to convince business partners, municipal and state regulators (and politicians), along with
the general public, that biofuel processing is a safe, positive community business. The costs of doing business are, of course, offset by contracts for purchase, ideally with strong profits margins. Where it is feasible, small next-gen biofuel operations, or patented processes, may become scalable and may require significant financing. The bridge between the processor’s entrepreneurial mindset and the corporate money mindset is the business plan. That plan must address the specifics and the character of the biofuel business.
FINANCE |
The three most frequent holes in business plans that I have seen are in documentation, references and capital. Often the biggest hurdle is getting the client to understand that funding is a process. Obtaining funding from a corporate entity, a private equity fund, a wealthy individual, a hedge fund or any other large-scale funder is not like going to the bank to sign for a loan. The funding process works through unfamiliar investment and business questions toward a common objective between the investor and the borrower. And building Trusted Advisor a solid business plan Financial advisor is the first step in the Robert Bailey says there’s more to project funding process. finance than sourcing Biofuel produccapital. ers are sometimes frustrated when they are told that the hard work they poured into their plan is either insufficient or needs realignment. However, the business plan is a reflection of one’s business model. It is also a reflection of how the principle (and the management team) thinks. There are some situations producers seeking investment want to avoid at all costs. On more than a few occasions I have seen funders entertain themselves when they read an exit strategy that discusses only success. In the world of energy investment, a plan that says “we won’t fail” is not viewed as cute or clever, but as junk. We might think of the funding process this way. If the business plan is the bridge to tens, possibly even hundreds, of millions of dollars, the capital broker is the guide. A good capital broker provides the client with a global perspective on biofuels and the details of securing financing that help the producer’s business in several ways. For example, the broker can help the producer by
incorporating public policy drivers into the business, and keeping current on relevant policy changes during the funding discussions. Big investors are always looking for insights on supply-side incentives (producer) and demand-side incentives (buyer) for production and distribution of biofuels. A number of producers look to Europe and see coherent, long-term economic and energy policies that are helping both producers and end-users of biofuel. This is no time for envy. The consensus among my colleagues is that despite the lack of a broad national policy in the U.S., recent federal and state measures demonstrate a keen understanding of the economic value of sustainable long-term policies for biofuels.
ing rules for trading the renewable identification number (RIN) credits. Traders like Steve Skrinar, a RIN trader at OceanConnect in White Plains, N.Y., are perhaps most keenly aware of the economic potential of biodiesel. One of Skrinar’s tasks is aggregating RINs owned by small producers. This year, he says, the price for biomassbased diesel RINs has ranged from as low as 15 cents to a high of about 60 cents a gallon. Biomass-based diesel producers earn 1.5 RINs per gallon. Larger energy companies, including major oil companies, will buy and sell the credits to offset gains working with RIN brokers like Skrinar. Originally seen as an administrative tool, RINs are now a value-adding benefit that also pushes producers
Successful producers acknowledge that their company requires more than money. There are numerous nonmonetary resources that serious funders are able to supply with capital, such as additional feedstock sources, distribution sources, engineering improvements, management technology and other business and scientific support.
In 2010 Congress may have chosen not to renew the $1 per gallon federal tax credit for biodiesel production, as well as the renewable diesel credit. But this seems to have sparked other actions. In addition, industry observers suggest that Congress will, in fact, reestablish the federal tax credit for production. On Oct. 13, the U.S. EPA increased the allowable ethanol content in fuel to 15 percent. The small sounding change is a 50 percent increase (upon unconditional approval). And in the meantime, other efforts have been introduced that support biomassbased diesel production. To its credit, EPA has now addressed the economics of biomass-based diesel within RFS2 by creat-
to compete on an economic basis. “This is a relationship business, it moves fast, and the RIN credits have a shelf life of about two years,” says Skrinar. “Any time the EPA alters a reg or approves a fuel type, it may open a new door for producers,” he says. Just as valuable in the marketplace are exemptions from state taxes. Rhode Island, for one, has a demand-side incentive that exempts producers from the state’s 32-centper-gallon fuel tax. This permits locally produced biomass-based diesel to compete with its petroleum-based cousin. On the demand side, some states and municipalities are mandating blends for biofuels. Min-
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biorefining or its advertisers. All questions pertaining to this article should be directed to the author(s). NOVEMBER 2010 | Biorefining | 33
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FINANCE
nesota, for example, requires a 5 percent biodiesel blend. In July, Mayor Michael Bloomberg signed legislation requiring 2 percent biodiesel in home heating oil by October 2012 in New York City. Alan Weber of Marc IV, an advisor to the National Biodiesel Board, thinks biodiesel producers may borrow from sophisticated farmers who use commodity futures as a hedge against risks. Familiarity with commodity markets, suggests Weber, will especially benefit operations selling into overseas markets. It may take some time for individual producers. But the commodities data for biofuels are ready. Some longtime farm price observers are identifying correlations between feedstocks, agricultural-based biofuels and petroleum fuels. The Jacobsen is a 100-plus year-old company that began by compiling a report on agricultural data from Midwest farmers. Ryan Standard is The Jacobsen’s associate editor. He says his group is tracking the relationships between agricultural products and energy. The correlations between feedstocks, biofuels and the broader energy markets, he says, are closer when biofuel production levels are high. In the foreseeable future monitoring commodity price relationships may become a bestpractice for management. All of this should signal the expanding awareness of biofuel as an industry. That prospect has spawned plenty of wouldbe lenders eager to get in on the game. Their claims, however, often exceed their capabilities. Many candidates for funding expect 100 to 103 percent financing. These levels of funding are intended to cover the capital request, as much as 18 months interest reserve, carrying costs such as fees and expenses of reviewing, writing and positioning the project, and in some cases legal and transaction fees, like the brokers. Such demand is fed by a maze of opportunist
34 | Biorefining | NOVEMBER 2010
brokers, some who charge staggering upfront open-ended commitment fees ranging from $25,000 to $1 million or more. In my experience, funding from large upfront fees tend not to fund. These are the fees that state Attorneys General warn against. These offer unspecific consideration. They may be demands for payment prior to receiving documentation or references. More exotic systems promise access to useless or worse, fraudulent, instruments. There is a further weakness. Funding a successful biofuel project is not necessarily related to money alone. Successful producers acknowledge that their company requires more than money. There are numerous nonmonetary resources that serious funders are able to supply with capital, such as additional feedstock sources, distribution sources, engineering improvements, management technology and other business and scientific support. If the company aspires to supply the global markets, there are cultural and currency issues to be addressed. The hint is: locate a broad-based funding source. This can bring any company’s potential to reality and requires solid documentation, references and capital. The documentation required for funding includes verifiable information on the project leader’s experience and credentials both in the energy field and in general business management. It includes proof of ownership or lease rights of use, and access to feedstock and facilities. Moreover, fully committed contracts for offload of the biofuels product catch any investor’s attention. If you want to secure funding, a sound exit strategy demonstrates the team’s capacity to manage the unexpected. References tend to include the professional members and elements of the team, both on the business and energy sides, as well as vendors, subcontractors and licenses. One of the pieces most frequently
missing from even the better business plans is a “Plan B.” Too few producers have a backup plan. There is simply too much volatility not to address how the company would manage changes in supply and price of feedstock, chemical inputs, machinery, labor, distribution and land. With regard to capital, there are costs for getting a project funded. Consider upfront fees. Lots of people have paid them, and have been burned. But, in the right place, they serve several specific purposes for the investor—mainly they show a commitment to the funding process. There are also reasonable fees used to demonstrate the borrower’s willingness to commit to the funding process and to share genuine expenses. Sometimes these are staged fees ranging from as little as $500 to $7,500 for a review and critique your project. Ideally, this will lead directly to funding. Getting a professional review of your project is an investment that may be worth the price. Making such decisions is part of the job of the borrower. It is not easy. In the next stage you are likely to meet face-to-face with someone close to the investor. If you feel positive about your mutual ability to achieve the funding needs, two things will happen. There will be expenses to be covered—by you. And you will be working harder than you ever imagined making your business into something a larger entity or substantial investor will seriously consider for funding of tens of millions of dollars, or more. This time, however, you will be well prepared. Author: Robert Bailey Financial Advisor, Trusted Advisory (646) 472-5213 rbailey@trustedadvisory.com
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