2017 October Ethanol Producer Magazine

OCTOBER AUGUST 2017 2017

OPPORTUNITY

TO BUILD Healthy Investment Risk Propels Industry Forward Page 18

Funding: The Best-Suited Source Page 24

HPLC Expanded Page 32

ALSO

Maximized Microorganisms

Page 38

Ethanol’s Next Generation

Page 42

www.ethanolproducer.com

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CONTENTS

OCTOBER 2017 VOLUME 23

DEPARTMENTS 8

AD INDEX

9

EDITOR'S NOTE

10

VIEW FROM THE HILL

FEATURES INVESTMENT

It’s All in the Risk

How to make tough decisions and who to include in the process

By Lisa Gibson

Measured Change

By Tom Bryan

Ethanol: Gasoline on Steroids for Motorcycles

By Bob Dinneen

11

EVENTS CALENDAR

12

GLOBAL SCENE

13

ISSUE 10

Biofuels Have Central Role in Low-Carbon Economy

By Bliss Baker

18

JACOB SAILING, REDSTOP

Evaluating Options

A guide to finding the optimal funding pathway for a project

By Keith Loria

24

EQUIPMENT

CLEARING THE AIR

Innovation in the Lab

The Message is Clear: We Must Create Demand

By Dave VanderGriend

14

BUSINESS BRIEFS

50

MARKETPLACE

FINANCE

Ethanol plants are optimizing the use of HPLC data

By Susanne Retka Schill

32

BBI INTERNATIONAL

BIOTECHNOLOGY

Engineering and Evolution

Advancements in yeast strains target yield, robustness

By Lisa Gibson

38

DUPONT INDUSTRIAL BIOSCIENCES

PEOPLE

The ‘Cool’ Fuel

Ethanol industry sells itself to young people on environmental, economic benefits

By Ann Bailey

ON THE COVER Flint Hills Resources in Fairmont, Nebraska, is adding Fluid Quip Process Technologies LLC's bolt-on Maximized Stillage Co-Products system to its 125 MMgy ethanol plant.

PHOTO: JACOB SAILING, REDSTOP

Ethanol Producer Magazine: (USPS No. 023-974) October 2017, Vol. 23, Issue 10. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

6 | Ethanol Producer Magazine | OCTOBER 2017

42

NEBRASKA ETHANOL BOARD

CONTRIBUTION

46 PROJECT DEVELOPMENT Scaling Up Without Wall Street

A firsthand account of how Alliance Bio-Products developed its technology

By Daniel de Liege

CLEANER PROCESS

CLEANER FUEL

CLEANER AIR™

Lactrol® PhibroXact™ PhibroPen® PhibroAC™ PhibroClean™

Renewable Higher Blends Consumer Choice

Reduced Smog No Aromatics No MTBE

The goal of your plant is to maximize yield day-in and day-out. In order to achieve this goal you need to have a solid foundation, starting with the cleanest plant possible, which is what the suite of products from the Phibro Ethanol Performance Group can help provide. Backed by decades of industry experience and the state-of-the-art Ethanol Performance Diagnostic Center, the Phibro Ethanol Performance Group delivers high-quality products that are safe, effective and all suitable for use under FSMA.

Antimicrobials • Process Aids Cleaning Products • Yeast

To put the Phibro Ethanol Performance portfolio to work for you, contact your Phibro sales representative or call 1-877-203-1911.

Phibro Animal Health Corporation • 300 Frank W. Burr Blvd., Ste 21, Teaneck, NJ 07666-6712 • 800-223-0434 • EthanolPerformanceGroup.com ©2016 Phibro Animal Health Corporation. Lactrol, PhibroPen, PhibroXact, PhibroClean, PhibroAC, and Cleaner Process, Cleaner Fuels, Cleaner Air are trademarks owned by or licensed to Phibro Animal Health Corporation or its affiliates.

VOLUME 23 ISSUE 10

ADVERTISER INDEX EDITORIAL President & Editor in Chief Tom Bryan tbryan@bbiinternational.com Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Lisa Gibson lgibson@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

ART Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Raquel Boushee rboushee@bbiinternational.com

PUBLISHING & SALES CEO Joe Bryan jbryan@bbiinternational.com Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Sales & Marketing Director John Nelson jnelson@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Circulation Manager Jessica Tiller jtiller@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

EDITORIAL BOARD Ringneck Energy Walter Wendland Little Sioux Corn Processors Steve Roe Commonwealth Agri-Energy Mick Henderson Pinal Energy Keith Kor Aemetis Advanced Fuels Eric McAfee Western Plains Energy Derek Peine Corn Plus Mike Jerke

2018 International Fuel Ethanol Workshop & Expo 2018 National Ethanol Conference AB Biotek AgCountry Farm Credit Services BetaTec Hop Products Bion/Soliton CTE Global, Inc. D3MAX LLC DRLG Tools LLC EISENMANN Corporation Fagen Inc. Fluid Quip Process Technologies, LLC Foundation Analytical Laboratory Growth Energy Hydro-Klean LLC ICM, Inc. Iowa Central Fuel Testing Lab J.C. Ramsdell Enviro Services, Inc. Leaf - Lesaffre Advanced Fermentations Louis Dreyfus Company Mole Master Services Corporation Nalco Water Natwick Associates Appraisal Services Phibro Ethanol Performance Group POET LLC R.S. Stover StoneAge Vertex Railcar Corporation WestAgro Executive Brands

16 51 17 11 20 34 52 26-27 45 21 14 3 15 2 35 37 22 23 4 31 48 49 40 7 5 36 29 28 41

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge for anyone outside the United States. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. 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 866-746-8385 or service@bbiinternational.com. Advertising Ethanol Producer Magazine 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 Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to sretkaschill@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 2017 by BBI International TM

8 | Ethanol Producer Magazine | OCTOBER 2017

EDITOR'S NOTE

Measured Change Our industry’s growth narrative is rich with stories of expansion and diversification, usually occurring in waves between tides of high and low margins and available cash reserves. In this month’s cover story, “It’s

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

All in the Risk,” on page 18, Managing Editor Lisa Gibson reports on the industry’s recent wariness of technology investment risk, particularly when the paybacks are longer-term.

We learn how prudent investment decisions should be made with external and internal factors in mind, while considering a project’s long-term impact on the facility, its personnel and its stakeholders.

Our coverage of capital projects continues with “Evaluating Options,” on page 24. In this story, Keith Loria reports that ample funding opportunities exist for producers looking to finance projects. It’s simply a matter of finding resources that fit the bill. While paying for smaller projects with cash is not uncommon, plants with low or no debt may opt to take some on to finance a major construction project. The cost and duration of a technology installation matters, too, as fast-build, quick-payback projects are more likely to get done without lenders. Incentivized loans and grants are good options for projects with longer ROIs, while capital and equity funding sometimes make sense for plant expansions. The story also explains how to raise project capital through the federal EB-5 program, which allows foreign investors to back projects in exchange for green cards.

On page 32, we turn from capital to calibration in “Innovation in the Lab,” by Susanne Retka Schill. In this story, Schill explains how the high-performance liquid chromatograph (HPLC) is playing a much bigger role in plant operations than it used to. Using HPLCs to calibrate operations — daily or biweekly — is now an industry best practice, as producers strive for higher rates of production consistency and accuracy. While other process monitoring technologies exist, perhaps even superior ones, the versatility and functionality of HPLC machines have made them ubiquitous in ethanol plant labs. Now, plants are pushing HPLC utilization to new heights, tweaking methods, experimenting with testing parameters and generally asking the equipment to do more.

While an HPLC monitors fermentations, yeast make them happen. In “Engineering and Evolution,” on page 38, Gibson reports that, until recently, yeast innovations had been infrequent. Now, however, with arrival of genetic engineering, cell mating and natural evolution, yeast science has come alive with new strains, new methods and new players.

Finally, be sure to check out our page-42 story about efforts to get young people interested in ethanol. “The ‘Cool’ Fuel,” by Ann Bailey, reminds us that today’s students, scholarship winners and interns are tomorrow’s industry leaders.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US:

TWITTER.COM/ETHANOLMAGAZINE OCTOBER 2017 | Ethanol Producer Magazine | 9

VIEW FROM THE HILL

Ethanol: Gasoline on Steroids for Motorcycles

By Bob Dinneen

Ask motorcyclists to describe a perfect ride and they’ll likely say a beautiful day, an open road and lots of engine power. Ethanol might not bring the

sun, but it can bring the power. Automotive engineers describe ethanol-blended fuel as gasoline on steroids.

Every motorcycle manufacturer endorses the use of 10 percent ethanol and consumers are keen for choices at the pump beyond conventional gasoline. Consumer choice at the pump and the numerous benefits of fueling with ethanol are the crux of why RFA continues to participate every year in the Sturgis Motorcycle Rally. For the ninth consecutive year, RFA partnered with the Buffalo Chip Campground to host the annual Sturgis Motorcycle Rally, held in August and now in its 77th year. It was the first Sturgis rally for all motorists to take advantage of a permanent fueling station, installed earlier this year at the Buffalo Chip Campground.

The station was donated by RFA and offers 93 octane, 10 percent ethanol.

As Buffalo Chip Owner Rod Woodruff said during the Sturgis event this year, using ethanol is “like jet fuel for your bike. …

Personally, I have used ethanol in all my bikes and cars ever since it started being sold and never had any issues. I was happy when they came out and started to get people aware that the rumors were not true. The truth of the matter is ethanol is plum good.”

Indeed, ethanol truly is “plum good,” helping reduce our nation’s reliance on petroleum, clean our air and boost local

10 | Ethanol Producer Magazine | OCTOBER 2017

economies. But there continues to be a lot of misinformation about ethanol, perpetuated by Big Oil, which loses market share if consumers have a choice at the pump. They claim ethanol is responsible for everything under the sun, except the truth. Here are some key facts for motorcyclists to know: • Ethanol is cheaper: Ethanol continues to be a discount to gasoline, providing the least expensive octane on the market, along with serving as a gasoline extender.

• E10 is available: Ten percent ethanol is not being replaced with 15 percent ethanol at retail stations. E15 is an option at retail stations that choose to offer it. E10 is available at all stations offering E15.

• E15 is not approved for use in motorcycles: E15 is clearly identified by an orange and black label on the pump. The label specifies approved users and there has not been a single reported case of consumer misfueling since E15 was approved more than five years ago.

Consumers benefit from being able to choose the cleanest, lowest-cost and highest source of octane on the planet, and motorcyclists especially like the extra power ethanol provides. So enjoy the open road with 10 percent ethanol for your motorcycle.

Author: Bob Dinneen President and CEO Renewable Fuels Association 202.289.3835 bobd@ethanolrfa.org

EVENTS CALENDAR 2018 National Ethanol Conference February 12-14, 2018 JW Marriott San Antonio San Antonio, Texas The National Ethanol Conference (NEC) is the most widely attended executive level conference for the ethanol industry. Since 1996, the RFA’s NEC has been recognized as the preeminent conference for delivering accurate, timely information on marketing, legislative and regulatory issues facing the ethanol industry. In 2017, 1,000 industry leaders and professionals attended the NEC, representing 38 states, the District of Columbia and more than 14 countries. Networking and business development have been the leading factors promoting attendance since the NEC’s inception.

202-315-2466 | www.nationalethanolconference.com

2018 International Fuel Ethanol Workshop & Expo June 11-13, 2018 CenturyLink Center Omaha Omaha, Nebraska

Relationship lending for all your financial needs

Focused solely on agriculture, the Agribusiness and Capital Markets department of AgCountry Farm Credit Services has the experience and expertise to be the complete solution for all your financing needs.

From its inception, the mission of this event has remained constant: The FEW delivers timely presentations with a strong focus on commercial-scale ethanol production— from quality control and yield maximization to regulatory compliance and fiscal management. The FEW is the ethanol industry’s premier forum for unveiling new technologies and research findings. The program covers cellulosic ethanol while remaining committed to optimizing existing grain ethanol operations.

866-746-8385 | www.fuelethanolworkshop.com

2018 National Advanced Biofuels Conference & Expo June 11-13, 2018 CenturyLink Center Omaha Omaha, Nebraska Colocated with the International Fuel Ethanol Workshop, the National Advanced Biofuels Conference & Expo is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels, including cellulosic ethanol, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products.

866-746-8385 | www.advancedbiofuelsconference.com

Please check our website for upcoming webinars

www.ethanolproducer.com/pages/webinar

877-811-4073 • www.agcountry.com

white (transparent) logo

Proudly serving customers across all facets of agriculture

GLOBAL SCENE

Biofuels Have Central Role in Low-Carbon Economy

By Bliss Baker

What a difference a year makes.

In 2016, the global community was flush with enthusiasm for collective action on climate change coming out of the ratification of the Paris Agreement. A total of 195 world leaders, including from traditional holdouts India and China, enthusiastically signed on to the agreement as being in their national interest.

Leaders were taking these positions not just out of concern for the welfare of the global climate, but in acknowledgment of a new normal for international trade and economic growth.

For years, the private sector and experts from nongovernmental organizations had been signaling the shift in the global economy away from historically favorable investments in fossil fuels to growing opportunities in renewables. These predictions are now being borne out in the real world as private sector investment and employment growth transition from fossil fuel to renewable energy technologies.

The International Energy Agency reported that between 2014 and 2016, upstream oil and gas investment dropped by 44 percent, while investment in new renewables-based power capacity remained the largest area of electricity sector spending in 2016.

In terms of employment, the International Renewable Energy Agency reported in its most recent annual review that current trends project the number of people working in the renewables sector could reach 24 million by 2030, compared to 9.8 million in 2016. It estimates this job growth in renewables would more than offset anticipated fossilfuel job losses over the same period.

This economic transition is taking place despite the fact that global fossil fuel subsidies continue to be more than twice as large as those for renewables.

While these encouraging figures show how far energy generation from renewables has come, they also highlight a stark reality about the lack of ambition in how biofuels are treated in comparison to other renewable technologies. In sharp contrast to the progress made in integrating renewable technologies elsewhere, the global transport sector has the lowest renewable energy share of any sector, even though it represents 25 to 30 percent of global emissions.

Where policymakers from advanced economies have set ambitious renewable targets aimed at other technologies, and taken the steps necessary to achieve them, the same can no longer be said for biofuels.

12 | Ethanol Producer Magazine | OCTOBER 2017

The same countries that showed policy leadership in establishing the industry have recently adopted a shortsighted approach that threatens to undermine the progress that has been made to date.

Notwithstanding these setbacks, the overall outlook for the industry is extremely positive.

Nongovernmental organizations ranging from the IEA, the Organization for Economic Cooperation and Development, IRENA and the United Nationsâ&#x20AC;&#x2122; Food and Agriculture Organization have reviewed real-world biofuels production data and assessed the challenges countries will face in maintaining growth while transitioning the global economy to a low-carbon future. They have concluded that to achieve their climate targets and generate long-term economic growth, governments will need to integrate measures to tackle climate change into regular economic policy.

As the only commercially available and immediately dispatchable low-carbon transport fuel alternative to crude oil, biofuels are the obvious choice for countries to affordably slash transport sector greenhouse gas emissions and drive economic growth. Given that global blending capacity is nowhere near its full potential, biofuels will have a vital role to play in enabling the transition to a sustainable, low-carbon global transport sector.

To achieve these objectives, it is crucial that governments avoid introducing any barriers to free trade and commit to increasing the ambitiousness of policy frameworks that are proven to be successful.

This reality is already being recognized, with more than 60 countries having launched biofuel programs and set targets for blending biofuels into their fuel pools.

Given the demonstrated success of the industry to date, and the growing number of independent studies concluding that biofuels are fundamental to sustainable growth and the global transition to a lowcarbon economy, now is the time for policymakers to drop the timidity and be ambitious.

Itâ&#x20AC;&#x2122;s no longer just an opportunity. Itâ&#x20AC;&#x2122;s a necessity.

Author: Bliss Baker President, Global Renewable Fuels Alliance 647.309.0058 info@globalrfa.org

CLEARING THE AIR

The Message is Clear: We Must Create Demand

By Doug Durante

The U.S. Environmental Protection Agency hearing in August on the proposed volume obligations for 2018 under the Renewable Fuels Standard left me noticing several things. First of all, it was night and day from previous years when the anxiety level was through the roof and there was a near hysterical plea to give us the maximum volumes we are entitled to under the law.

There was a civility to this year’s proceedings that clearly was a result of the conventional biofuel category being proposed at the maximum 15 billion gallons for the second consecutive year. While other feedstocks are not precluded from being used in this category, corn has proven to be the most cost-effective and efficient source. The climb to get to 15 billion was a gradual journey that was delayed in some years, but the fact is, we are at the maximum demand pull we can expect for corn ethanol from the RFS. Now that we are here, it’s somewhat like being a kid at Christmas when all the hype and build-up have passed: Now what?

That’s where we find ourselves — there are no more presents under the tree. The guaranteed market for 15 billion gallons has been achieved and anything we do beyond that volume will have to be a result of true market-driven demand. And frankly, if the RFS goes away or is altered in some way, even that base is not ensured. With many of our commodities at the breaking point in terms of cost of production, it’s on us to develop new markets and make the case for our value. It is unlikely the Farm Bill will provide any relief. Even if Congress can pass another five-year authorization, it is unlikely there will be assistance for ethanol.

But that’s OK. We know ethanol can compete as a high-octane, low-carbon fuel that is attractive to automakers and the petroleum industry alike, but they are not going to hand it to us. And we need to put all the hype about electric vehicles in perspective. It’s one thing to recognize a trend, but it’s another to overreact and assume ethanol must take a back seat in terms of being a clean fuel. The internal combustion engine is going to remain the dominant force for some time as electric vehicles struggle to crack a 5 percent share of the market.

It is time to get creative, sort of like drawing up a play in football where we have a half dozen options to score. Certainly, the need for higher-octane fuels is paramount. Even if there is a relaxation of fuel economy standards, the trend line for efficient cars is pointing up. Corn ethanol has been shortchanged in its ability to reduce carbon emissions.

At the Urban Air Initiative, we are working with the California Air Resources Board and other California agencies to ensure they are receiving the most up-to-date information possible. We supported a workshop recently where we were able to present the latest data on corn's carbon sequestration value, which is key in reducing our carbon footprint.

We also know ethanol can reduce emissions, including harmful particulates that are major health threats and ozone precursors.

Interestingly, the EPA under new administrator Scott Pruitt recently announced it is sticking to the ozone control schedule of the Obama administration and it is on us to get them to see that ethanol reduces every criteria pollutant in the mix that forms ozone.

But none of this works if we don’t get the regulatory barriers removed at EPA that limit the volume of ethanol that can be added to gasoline. Expanding our markets gives the current administration more tools to meet its very clear objectives of boosting the economy, increasing domestic energy supply, and creating jobs. It is on us to understand the science of fuels and emissions and use that to grow beyond the RFS. Author: Dave VanderGriend President, Urban Air Initiative CEO, ICM Inc. 316.796.0900 davev@icminc.com

OCTOBER 2017 | Ethanol Producer Magazine | 13

BUSINESS BRIEFS Pinnacle, hth join Minnesota Bio-Fuels Association Environmental engineering firm Pinnacle Engineering Inc. and contractor hth cos. have joined the Minnesota Bio-Fuels Association as vendor members.

Pinnacle provides environmental and engineering services to ethanol plants nationwide. “Pinnacle’s mission is to provide comprehensive solutions to complex environmental engineering problems,” says Steve Schleicher, vice president of Industrial Services at Pinnacle. “We’ve taken this service approach to the ethanol industry and supporting the Minnesota Bio-Fuels Association’s efforts to represent and promote the renewable fuels industry in Minnesota is an integral part of our service.” Based in Minneapolis, Pinnacle also has offices in Rochester, Minnesota; Omaha, Nebraska; Bismarck, North Dakota; and Billings, Montana.

Apart from the ethanol industry, Pinnacle also serves the environmental needs of railroad, industrial, commercial, utility and manufacturing clients.

Hth’s services for the ethanol industry include mechanical insulation, scaffold erection, hydro blasting, vacuum trucks, mechanical work such as pipe fitting, welding and pump repairs and confined space rescue.

“We chose to join the Minnesota Bio-Fuels Association as an added resource for us in fulfilling the needs of both our current customers and future customers,” says Mike Freese, president of hth cos.

14 | Ethanol Producer Magazine | OCTOBER 2017

People, Partnerships & Projects

Keller elected as first US Grains Council chairwoman Deb Keller, a farmer from Clarion, Iowa, was elected U.S. Grains Council chairwoman Aug. 2 at the organization’s 57th Annual Board Keller of Delegates Meeting in Vancouver, Washington. In accepting the chairman’s gavel, she also made history as the first female selected for the role in the organization’s nearly 60-year history.

USGC says Keller’s experience as a strong advocate for trade will amplify the council’s mission of developing markets, enabling trade and improving lives.

“Thinking ahead, I see so many areas for growth, but I also see challenges that will take much time and patience to see through,” Keller says. “After working with our delegates, the board and our staff both internationally and domestically, I know we can be successful together.”

Keller has served as lead of USGC’s Rest of World Ateam, chair of the Iowa Corn Promotion Board, and as a member of the National Corn Growers Association’s Research and Business Development Action Team.

She earned a bachelor’s degree in agronomy from Purdue University and has farmed in Wright County, Iowa, for more than 25 years.

BUSINESS BRIEFS¦

Wyatt joins USGC as global strategies coordinator Kathryn Wyatt has joined the U.S. Grains Council as global strategies coordinator in the Washington, D.C., office.

Wyatt In this role, Wyatt will work with the USGC global strategies and trade policy teams and offer vital administrative support for USGC’s overseas marketing programs.

“Katy brings a strong administrative background and a proven passion for international programs,” says Kurt Shultz, USGC senior director of global strategies. “She will fill a key role in supporting our international marketing programs.”

Before joining USGC, Wyatt gained experience working on the MasterCard Foundation’s 2017 Young Africa Works Summit and on publicizing success stories for the Canadian International Development Agency’s program in Ethiopia. Wyatt previously worked as a teaching assistant and administrative support officer with Dalhousie University in Canada.

Wyatt attended Dalhousie University and earned a bachelor’s degree in economics and international development, as well as a master’s degree in economics.

ACE presents industry awards at annual conference The American Coalition for Ethanol Fischer Durante presented awards Aug. 15 during its annual conference in Omaha. The awards and their recipients are: • Merle Anderson Award: Doug Durante, Executive Director, Clean Fuels Development Coalition • Grassroots Award: Siouxland Ethanol LLC in Jackson, Nebraska • Paul Dana Marketing Vision Award: Bosselman Enterprises, based in Grand Island, Nebraska • Legislative Leadership Award: Sen. Deb Fischer, R-Neb.

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INVESTMENT

Itâ&#x20AC;&#x2122;s All in the

RIS K

The ethanol industry has been conservative on risky investments since its most recent downturn, experts say. But innovating, expanding and diversifying are important and can be done prudently.

By Lisa Gibson

18 | Ethanol Producer Magazine | OCTOBER 2017

INVESTMENT

LAYING THE LOOP: Glacial Lakes Energy LLC in Watertown, South Dakota, installed a $19 million rail loop — with a tank farm and dual loadout station — earlier this year to expedite ethanol loading. The rail loop also allows the plant to switch from manifest freight to unit car trains.

PHOTO: GLACIAL LAKES ENERGY LLC

OCTOBER 2017 | Ethanol Producer Magazine | 19

INVESTMENT Events from the past tend to affect how people forecast the future, says Robert Sauer, director of CFO Systems LLC.

Thatâ&#x20AC;&#x2122;s particularly true of the ethanol industry, as producers try to look forward and make decisions about investments into new technologies or expansions for their plants.

The industrywide period of tight cash flow around 2014 is still fresh on some minds, deterring from bold risk taking.

Justin Mentele, manager at K-Coe Isom, says grain prices were high then and there was plenty to worry about. â&#x20AC;&#x153;We as an industry got stuck in the fact of no investment is worthwhile if gains arenâ&#x20AC;&#x2122;t shortterm. These are by no means bad metrics to look at, but if theyâ&#x20AC;&#x2122;re the only metrics we look at, weâ&#x20AC;&#x2122;re missing the point.â&#x20AC;?

Thereâ&#x20AC;&#x2122;s some great technology out there that can take the industry to a whole new level, Sauer says, but the price tags are

large so the risks could be, too. â&#x20AC;&#x153;I think if youâ&#x20AC;&#x2122;re a plant trying to improve your results in the next couple of years and wondering what you can do to do it, and what you can control, I think your options are to probably take some risks â&#x20AC;&#x201D; some somewhat significant risks â&#x20AC;&#x201D; otherwise youâ&#x20AC;&#x2122;re going to get what the market keeps giving you in a commodity world.â&#x20AC;?

Shying away from risk is hurting the industry, Sauer says. But he also cautions that if a plant chooses to make an investment in a new technology, expansion, etc., it has to be the right one.

Post-2014, producers arenâ&#x20AC;&#x2122;t interested in investing if the payback period is longer than two years, Mentele says. â&#x20AC;&#x153;We always need to be good stewards of cash for the owners, by all means, but not having a year or two-year payback period doesnâ&#x20AC;&#x2122;t mean that I kill the idea for a project. â&#x20AC;Ś To truly evaluate whether or not we should invest, we have to look much, much deeper.â&#x20AC;?

Factors to Consider

While return on investment and the payback period should be the first â&#x20AC;&#x201D; and, again, last â&#x20AC;&#x201D; factors to consider when making an investment decision, Mentele outlines other internal and external components that come into play, too.

Markets are likely the largest external factor to consider and theyâ&#x20AC;&#x2122;re impacted by government, regulations, supply, demand, etc. Ethanol is dependent on both domestic and international markets. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve had more supply than demand lately in ethanol, so weâ&#x20AC;&#x2122;re leaning pretty heavily on the foreign markets,â&#x20AC;? Mentele says.

Domestically, producers need to look at both federal and state-level regulations for ethanol markets. Internationally, major destinations include China and Brazil, but that could change â&#x20AC;&#x201D; Brazil recently approved a 20 percent tariff on U.S. ethanol volumes above 600 million liters (158.5 million gallons) per year. Producers are starting

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20 | Ethanol Producer Magazine | OCTOBER 2017

UNDER CONSTRUCTION: Flint Hills Resources in Fairmont, Nebraska, invested about $50 million in Fluid Quip Process Technologies LLC's bolt-on Maximized Stillage Co-Products system. The process will add a high-protein feed to the 125 MMgy plantâ&#x20AC;&#x2122;s products stream and enhance oil yield.

PHOTO: FLUID QUIP PROCESS TECHNOLOGIES LLC

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INVESTMENT ate and maintain any new equipment that comes along with the investment.

Company perception is important, too. Get an idea of what opposition the investment could face. “We all know that anything we do that has a negative perception — either in the industry or in our communities — takes years and years to make better,” Mentele says. Figure out what the hot-button issues might be and get ahead of them.

The Decision Tree

REVENUE-READY: United Wisconsin Grain Producers LLC in Friesland, Wisconsin, started up its Fluid Quip Process Technologies LLC Maximized Stillage Co-Products system, which includes this protein dryer, last year. The investment adds a high-protein feed to the 60 MMgy ethanol plant’s product offerings, and enhances oil yield.

PHOTO: JACOB SAILING, REDSTOP

to explore new markets with unknown risk.

“What’s scary and fun at the same time is that there are a number of energy markets that leaders of the ethanol industry have worked with and we’re starting to get into,” Mentele says. “And we don’t really know what those risks are.”

Legal and vendor risks should be considered, too, Mentele says.

22 | Ethanol Producer Magazine | OCTOBER 2017

Internal risks revolve around people. “I think we look at these a little less in-depth than we do the external risks,” Mentele says.

“We look at these haphazardly.” Consider the people working in the plant. What do they want? Let them in on the discussion.

“If nothing else, they may see an issue that we don’t.” It’s also important to determine if the plant has the people who can oper-

Deciding whether to make a significant investment is all about communication, says Ron Pagel, business development manager for Power Engineers Inc. It’s crucial to make sure all players are at the table and have a say in the decision from their unique points of view. “We all have essentially the same goal, but different perspectives,” he says. “We all come at it with our preconceived notions driving our decisions.”

For example: A finance representative will want longevity; a marketing person will want salability; a manager or operator wants to make as much product as possible; a maintenance employee wants to ensure he or she can repair any new equipment properly; construction staff wants to be able to build the new system without taking the plant offline; and a safety representative

INVESTMENT wants to make sure it’s safe. Bring them all in on planning, Pagel emphasizes. A wellrounded capital projects team can determine how to execute projects to benefit everyone.

Plants don’t have the depth of personnel they once had, Pagel adds. Ten or 15 years ago, plant staffs included someone to handle projects, but they’re running thinner today and putting an entire project on one person’s plate isn’t feasible. “A team environment makes more sense. You can split the load.”

And with an all-inclusive project team, the plant owner has all the pieces of the puzzle, and the details make sense from all perspectives. “When everybody’s on board, that’s when you pull the trigger and say, ‘Here’s the construction date.’”

If the whole team evaluates the risk and still determines the investment is worth it, it offsets some of the angst moving forward, Pagel says.

Diversification

Often, an investment decision revolves around diversification. And it’s a good goal, Mentele and Sauer agree. Downturns like the one that hit the ethanol industry around 2014 are cyclical, but it’s unknown how long a downturn will last, Sauer says. Diversification in a downturn is a “monstrous advantage,” he adds.

“I think it’s right to be cautious, but there are some new markets that can really change some of the ethanol plants’ revenue streams,” Sauer says. “From a CFO’s perspective, that’s a really strong reason to try to counsel these plants to get into some markets.” Of course, new markets come with risks and maybe their own downturns.

“But if I can diversify away from being so dependent on ethanol, I think that’s a wise strategy.”

But diversification doesn’t always mean simply a new revenue stream, Mentele says.

“With investments, we always talk about diversifying because we have a different revenue stream. However, what we don’t pay attention to is that the revenue stream is still within the same group of business that we have.” Don’t go outside the wheelhouse and invest in hotels, Mentele says, but look at new products and new locations. “Within the plant that I have, what other revenue streams can I have that can open up new and different markets to allow us to have some synergies within what we already do?”

Looking Forward

to miss the mark more times than not. We have to be better at identifying what we believe future trends to be, to make the right decisions for our companies. … We have to be much better forecasters.”

Investments generally aren’t “sure things,” Sauer says. But not making investments, and doing nothing, is a risk, too.

“Sometimes the best thing you can do to secure your plant’s future is to take some risks,” he says.

“In anything we do, there’s risk,” Mentele says. “But if we can set a realistic model that’s forecasting what we believe is going to happen in the future, yes, we still may get it wrong, but we’re going to be a whole lot more comfortable with the fact that we did what we thought was best for our company and for our owners. If you look back at all those different impacts the proper way, you’re going to be very happy with your decision.”

Author: Lisa Gibson Managing Editor, Ethanol Producer Magazine 701.738.4920 lgibson@bbiinternational.com

“We are good historians,” Mentele says.

“We’re very good at saying, ‘This is what happened in the past, so this is what I’m going to do.’ And the problem is, in today’s world, if we’re looking back to identify what we’re going to do in the future, we’re going

OCTOBER 2017 | Ethanol Producer Magazine | 23

FINANCE

Evaluating OPTIONS

Funding options are generally best-suited to specific types of projects. The money is out there –– producers just need to figure out which source is the right fit for them.

By Keith Loria

A myriad of choices exists for funding an ethanol project in 2017. While ethanol

companies most likely are familiar with all the different financing options, deciding which works best for their specific projects can be a challenge.

Multiple factors need to be considered, but it should start with a review of the plant’s current leverage and available capital, in terms of the overall direction the board intends to take with

24 | Ethanol Producer Magazine | OCTOBER 2017

the facility, says Connie Lindstrom, senior biofuels analyst for Christianson PLLP. “Planned future growth may indicate a need for more equity investment, or a decision with regard to reinvestment of profits versus dividends to owners,” Lindstrom says. “On the other hand, when considering a technology upgrade to boost productivity at a plant with low current debt, taking on long-term debt may be more appropriate.”

Continued on page 28

FINANCE

EB-5 ENERGY: Location, job creation and debt serviceability made Dakota Spirit AgEnergy in Spiritwood, North Dakota, a great candidate for the EB-5 Program.

PHOTO: BBI INTERNATIONAL

OCTOBER 2017 | Ethanol Producer Magazine | 25

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OCTOBER 2017 | Ethanol Producer Magazine | 27

QUALIFIED CANDIDATE: Aemetis Inc. used the EB-5 program to develop and construct its ethanol plant in Keyes, California. EB-5 is a nontraditional equity source, but can be explored for certain qualified projects.

PHOTO: AEMETIS INC.

Continued from page 24

Another consideration is timing — the anticipated lifecycle of the project, as well as urgency. “Quick-turnaround technology projects require cash or similar short-term financing, whereas an investment with a long depreciation cycle is obviously going to need long-term financing or even a round of equity raising,” Lindstrom says.

In general, specific types of funding can properly suit specific projects. This

28 | Ethanol Producer Magazine | OCTOBER 2017

month, Ethanol Producer Magazine lays out a list of financing options, detailing when they might make the most sense.

1. Loan Incentives

The ethanol industry is mature, with many plants carrying either no or low longterm debt. For a plant in this situation, Lindstrom says improving leverage by taking advantage of a loan incentive is the best way to go.

“Particularly for projects that will replace one power source with a ‘greener’ power source — a project like that may not immediately have a large impact on earnings, so it makes sense to finance this type of project with an incentivized loan,” she says.

2. Capital and Equity Funding

Jamey Cline, business development director at Christianson PLLP, says capital

FINANCE

and equity funding are best for a project that’s going to actually increase the earnings base for a plant, like an expansion or increased revenue from coproducts.

“Investors will get a return on the capital they’re putting back into the business, and cash flow isn’t tied up in debt repayment so it can be used to fund the necessary increased costs of expanding: more feedstock purchases, higher labor costs, and so forth,” he says.

3. Grants

When an ethanol project is considering going the grant route, the key is to always take the time to research local, state and national grant opportunities as part of the funding package.

“Common grants available in the industry right now often relate to energy efficiency improvements, increased bioenergy production, or carbon-lowering technologies, but economic development grants are

also potentially available,” Lindstrom says.

“Ascertaining eligibility, a sound approach, well-qualified partners, and a detailed application provide a good base to start with the grant process.”

4. EB-5 Program

Another option, which might be considered nontraditional, is the EB-5 program. It attracts eligible foreign investors in exchange for green cards. Kraig A. Schwigen, president of CMB Regional Centers in Rock Island, Illinois, says EB-5 works best in combination with other sources of financing, and its role in any project is determined by the total number of new jobs that will be created.

For Dakota Spirit AgEnergy in Spiritwood, North Dakota – a project CMB helped fund – three immediate considerations determined that EB-5 funding was the best route: project location, net job creation and ability to service debt and repay.

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But it can be challenging to jump through all the right hoops for the program, Lindstrom says. “EB-5 funds have to generate at least 10 jobs — and many of the projects currently underway in the industry are efficiency improvements. Those kinds of projects may not generate any jobs at all.”

“EB-5 is not right for every project nor is every project right for EB-5,” Schwigen says. “It is important to remember that individuals investing through EB-5 are seeking immigration to the U.S. so this is an investment unlike a traditional investment.

Done right, EB-5 can do great things. Done wrong, EB-5 can lead to great harm as immigrant families can be uprooted from their new home due to the failures of others.”

Still, a number of ethanol producers have had success with EB-5, specifically with projects that include a new plant, or a plant expansion that requires a lot of equity. Aemetis Inc. used EB-5 funding for its ethanol plant in Keyes, California, after

FINANCE

WHAT IS THE EB-5 IMMIGRANT INVESTOR PROGRAM? Congress created the EB-5 Program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. It is administered by U.S. Citizenship and Immigration Services. Under the program, entrepreneurs — and their spouses and unmarried children under 21 — are eligible to apply for a green card (permanent residence) if they: • Make the necessary investment in a commercial enterprise in the U.S. • Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.

The program is known as EB-5 for the name of the employment-based fifth preference visa that participants receive.

SOURCE: U.S. CITIZENSHIP AND IMMIGRATION SERVICES

initially raising equity by selling part of its business. “After the 2008 financial crisis, the availability of capital for biofuels plants shrunk considerably,” says Eric McAfee, Aemetis CEO. “We were able to arrange senior debt financing out of Canada, but we lacked access to equity financing due to concerns about the regulatory enforcement of the federal Renewable Fuels Standard.”

Through EB-5, Aemetis raised $35 million from 70 foreign investors, and then another $50 million from 100 investors.

“We were motivated by the fact that the entire financial system stopped and this was the mechanism to get foreign investors into our project and avoid the crisis that was happening domestically,” McAfee says.

“It’s a significant legal and regulatory bur30 | Ethanol Producer Magazine | OCTOBER 2017

den to prepare a project and get approvals.

It’s time consuming and expensive, and we spent several years going through the process and it technically took six years to raise the money.”

McAfee says equity capital remains difficult to obtain because of multiple uncertainties, with a large concern now being low oil prices. “It’s the right way to go when you have an operating plant with a profitable history and you want to expand,” he says. “You also need a management team that’s willing to travel. You need at least one senior person who is going to spend a significant amount of time in Asia, the Middle East and Europe. And third, you have to be willing to invest a long period of time in staffing, legal and other costs.”

Money is Out There

In the past few years, plants have used capital to fund projects, holding less in reserve. But the number of plants seeking grants and loans for projects has increased, too.

“At one point, our Biofuels Benchmarking program showed nearly a quarter of participants with zero or near-zero longterm debt obligation,” Lindstrom says. “So I’d say the trend overall is not one particular type of financing for projects over another, but rather the trend is to fund more projects period; to start doing some assessment of aging assets, in terms of the long-term viability of the business; and taking the plunge into stretching out that viability with projects of all kinds of financing.”

1990

Author: Keith Loria Freelance Journalist freelancekeith@gmail.com

YOUR

TRUSTED PARTNER

SINCE

1851

The important thing for ethanol companies to realize is there is money available for ethanol projects. There are grants out there, lenders are looking to lend and equity investors are interested in the ethanol marketplace.

“Sometimes the financing opportunity even comes to you first, or at the same time as the project,” Lindstrom says. “Opportunities to fund portions of projects with grants are a good example of this. But it’s important to remember not to put the cart before the horse, and take the time to perform the due diligence to determine if a project will be beneficial to the bottom line before undertaking any project. A grant may seem like ‘free money,’ but it’s not free if the project it’s intended to fund doesn’t pull its weight on the balance sheet.”

GETTING THE RIGHT PRODUCT TO THE RIGHT LOCATION, AT THE RIGHT TIME

www.ldcom.com OCTOBER 2017 | Ethanol Producer Magazine | 31

N

EQUIPMENT

INNOVATION IN THE LAB

Ethanol laboratories use HPLCs to find issues early in fermentation, but increasingly have been using the data for process optimization.

By Susanne Retka Schill

High-performance liquid chromatography (HPLC) is the workhorse of the lab, each day analyzing multiple samples used to monitor fermentation and identify key compounds that could indicate contamination. In the early years, the analyses were primarily used to spot trouble early on, when corrective steps could be taken easily.

Today, operators also are using the data generated to fine-tune the process.

Plus, as the ethanol industry has matured, lab managers are being asked to do more; the new yeasts and enzymes

being introduced require accurate baseline data for comparisons during product trials; different compounds are being tracked; and interest in monitoring fusels in fermentation is heightened.

Thus, consistency and accuracy is front and center in the life of the ethanol lab.

That can be a challenge in an industry where many lab workers have learned their skills on the job.

Kristi Plack, chief operating officer at Bion Analytical, works with lab managers to calibrate equipment, keeping it precise and optimized. Practices vary greatly, she says, from calibrating daily to only calibrating when a column or a mobile phase is changed. She admits that her lab’s practice of calibrating for

every run isn’t a feasible approach for an ethanol plant, but she recommends at least a couple times a week. “The big thing is, you want to be consistent.”

Bion Analytical, based in Sioux Falls, South Dakota, makes standards — known solutions that are used for calibration and validation. Calibration is done with one standard and the validation should be done with another with a different lot number, she says. “You know the known value of your validation standard; you should see the validation standard randomly above or below the known value.” If not, it’s time to begin checking into possible biases. Having a notebook for each HPLC helps with troubleshooting. Was a mobile

LAB WORKHORSE: Ethanol labs run multiple samples through HPLCs each day, monitoring fermentation to spot potential problems early, but also to optimize the process.

PHOTO: SHIMADZU

32 | Ethanol Producer Magazine | OCTOBER 2017

EQUIPMENT

EQUIPMENT phase changed? Was the column cleaned on schedule? “You think you’re going to remember things like that, but you don’t.”

An Apt Analogy

High-performance liquid chromatography has a language of its own. Jim Mott, field technical support supervisor for HPLC maker Shimadzu, has an apt description for how HPLCs work. “It’s so silly it actually works,” he says with a chuckle.

“There’s a fire at a very small zoo that only has elephants, deer and rabbits. To protect the animals, the zookeepers open the gates and let them run through the forest. The forest has a fence so the animals must pass through the forest. A zookeeper is stationed on the other side to count the animals as they exit the forest.” The trees represent the stationary phase — the column. The sample is the animals and the fire is the mobile phase forcing the animals through the forest. “The rabbits are going to be able to squeeze through small spaces, the deer need a bit larger space and the elephants need the biggest space. The result is that the rabbits

come out first, followed by the deer, then the elephants. The interaction between the animals (sample) and the trees (stationary phase), as they are being forced through the forest, causes the different species to be separated. The zookeeper (detector) quantifies the results of the separation.”

For an ethanol plant, an HPLC is a relatively cost-effective and quick way to monitor the primary molecules of interest — the starches being converted to sugars, the sugars being converted to ethanol and other compounds that indicate how well things are proceeding.

There may be instruments that are more precise and accurate, Mott says. “There are better ways to separate and measure carbohydrates, but then you might not see the ethanol. Other technologies may be more expensive or more well-suited for a research lab.” The HPLC, as commonly configured for the bioethanol production lab, is a good compromise for a lab that must process multiple samples a day. “The analysis time is typically 25 to 30 minutes per sample,” he says. “And they are usually pulling between

four to 10 samples per fermentation, and many plants have four to eight fermenters in process. There are samples coming in all the time.”

New Applications

“Most people use HPLC to monitor fermentation,” says Mike Smith, group leader in biofuel technical service at Novozymes. “They use it to see if someone missed an addition, for example. Say an operator forgot to add urea or GA (glucoamylase); you pretty much have 24 hours to take corrective action.” Forgetting to add yeast or stalled fermentations are increasingly rare, he says.

Now, plants are taking it to the next level. “Innovators are using HPLC data to optimize their performance. For example, they might start measuring five hours before drop to see if they are maximizing their fermentation time.” Another would be looking for peak glucose at around 10 hours and then bringing that peak down. “You can time your GA,” he explains. Some producers are looking at fusels — compounds

TRACKING FERMENTATION: Plant operators study the chromatograms produced from multiple samples, monitoring the conversion of carbohydrates and sugars into ethanol through time, watching lactic and acetic levels closely to ensure bacterial contaminants are within tolerances.

The DP4+ peak can confuse operators.

It includes carbohydrates, goes down during fermentation, and back up at the end because of nonfermentable compounds.

PHOTO: NOVOZYMES

produced by stressed yeast that become inhibiting if levels get too high â&#x20AC;&#x201D; with their HPLC, he adds, but they have found the gas chromatograph to be better for that job.

The next step for those wanting to get more out of their HPLC, Smith says, is to learn more about the science behind the data. â&#x20AC;&#x153;I would like people to look at actual

chromatography. What those peaks are and what they arenâ&#x20AC;&#x2122;t. I think thereâ&#x20AC;&#x2122;s a lot of misunderstanding on what the DP4 peak is, for example.â&#x20AC;?

Mott explains DP stands for degree of polymerization, but it can be thought of as dextrose polymers. â&#x20AC;&#x153;If you think of glucose being the primary fermentable sugar, malt-

ose is DP2 â&#x20AC;&#x201D; two glucoses linked together.

DP4 is four.â&#x20AC;? That peak on the chromatogram is referred to as DP4+, since it actually can be a mix of DP4 to DP40, an aggregate of many carbohydrates. As the starches get broken down to smaller pieces, they become fermentable sugars and the starch peak gets smaller. What becomes

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EQUIPMENT

confusing, however, is that the DP4+ peak doesn’t disappear at the end of fermentation. Some think it means lost yield, but it could be other interfering molecules.

Testing Parameters

HPLC EXERCISE: HPLCs get a workout in an ethanol laboratory, running multiple samples. Larger plants, or labs like this one at Novozymes, deploy more than one to keep up with fermentation monitoring.

PHOTO: NOVOZYMES

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Mott has been experimenting with different parameters to see if making tweaks to HPLC methods might help give better results. He presented his work at the International Fuel Ethanol Workshop in June in Minneapolis. He has run experiments comparing the typical operating conditions recommended by manufacturers for column temperature, length of the column, different acidic levels in the mobile phase and the flow rate.

“When looking at fermentation samples where other materials are interfering, changing temperatures can give you a cleaner view of what you’re interested in,” he says. When using standard solutions for the experiments, it wasn’t clear which temperature value was best. “It looked like carbohydrates early in the chromatogram preferred lower temperatures and the organic acids and alcohols liked higher temperatures, but you have to find the best single temperature for the analysis. With ferm samples, there was a definite improvement around maltose as the column temperature increased. Looking at 70 Celsius column temperature, you seem to get a cleaner separation of the carbohydrates from some of the interfering secondary metabolites.”

Temperature adjustments might also be helpful in analyzing other compounds in the carbohydrate area, such as fructose or trehalose.

With greater interest in tracking fusels, Mott also experimented with a shorter column. Fusels can be detected with the same HPLC operating conditions used for fermentation monitoring, but the analysis time can be long, up to three hours. “Since fusels elute after ethanol, a long column may not be needed for adequate analysis,” he says. “Using the same hardware with a 150-millimeter column (where a 300-mm column is mostly used for fermentation monitoring) will cut the analysis time in half. Increasing the flow rate by up to 50 percent will further shorten the analysis time without detriment.” He’s been able to

get all the detectable fusels within 50 minutes, he reports, a big improvement over the potential three hours with standard parameters.

Fusel analysis is a more frequent question these days, Mott says, along with concern over residual carbohydrates at the end of fermentation. “I’ve seen instances where the carbohydrates are pretty well consumed, and [the plant labs] may identify the wrong peak glucose or maltose.”

As long as the HPLC is in good condition, the retention times for the various peaks don’t change.

Education has been a big part of Mott’s mission since Shimadzu began supplying HPLCs to the ethanol industry back in the early 2000s. “We used to say they build ethanol plants where the corn grows, and not where there is an immediate supply of trained chromatographers.” Bringing in people with university-level training in fermentation isn’t always economically feasible, he admits, but he’s seen plants take people with minimal science background and turn them into effective lab technicians and managers.

“It’s been interesting to see how people progress,” he says. “I’ve been around some of these plants since the day they were first started up and have seen the same lab manager be on site ever since.

They go from being very green — saying ‘I’m not quite sure why I’m standing here and doing this’ — to asking very intelligent questions, based off 10 years of experience.” They can look at a chromatogram and decide whether it’s quality and reproducible data. If it isn’t, they are asking how to test and find the problem. “I’m proud of them. It’s taken a great deal of effort on everyone’s part. Now that they’re asking good questions, that’s cool.”

Author: Susanne Retka Schill Freelance Journalist retkaschill@yahoo.com

OCTOBER 2017 | Ethanol Producer Magazine | 37

BIOTECHNOLOGY

ENGINEERING AND

EVOLUTION Advancements in yeast optimization are gaining momentum. New companies are entering the space and veterans are improving their processes.

By Lisa Gibson

Yeast strains used in the ethanol industry have remained largely static — even genetic engineering for favorable traits has taken hold widely just in the past few years. Now, multiple companies provide

upgraded strains and continue research on further improvements, while even more enter the market. Some, meanwhile, are going a step further to isolate and breed new strains.

“Yeast has been stagnant,” says Peter Halling, vice president of commercial biofuels for Novozymes. “But there has been a lot of development in the past few years.” Earlier this year, Novozymes announced it will begin offering yeast strains to the ethanol industry, in addition to its well-known enzyme offerings. It’s a natural progression for a company with extensive experience in microorganisms, Halling says. “We’ve been playing in this space for more than 40 years. We know this by heart and we believe we have something to contribute.”

Pauline Teunissen, a DuPont Industrial Biosciences scientist, says yeast has, indeed, remained the same for quite some time.

When genetic modification proved a viable pathway to achieve desirable traits, the industry had to wait for regulatory approval. “It means you also have to deal with DDGs that are derived from genetically modified yeast,” Teunissen points out. Engineering and evolution go hand in hand to modify yeast, she says, and a large team at DuPont is dedicated to exploring all avenues. “There are a lot of different areas that we are focusing on and using a lot of different techniques to do so.”

New and Existing Strains

DuPont is one of many companies that engineers yeast strains, mating different types of yeast to take advantage of certain properties, Teunissen says, adding that DuPont’s team also makes use of natural evolution techniques. “Natural evolution is using a strain you already have or a ‘new’ strain from a culture collection and then expose the strain to the conditions you want the strain to perform in — for instance, if you want a thermotolerant strain, you subject a strain to high temperatures — and then go to multiple rounds of selection to obtain a strain with improved properties,” she says.

OPTIMAL ENGINEERING: Scientist Pauline Teunissen is part of a large team at DuPont Industrial Biosciences working to engineer yeast strains for optimized ethanol production.

PHOTO: DUPONT INDUSTRIAL BIOSCIENCES

38 | Ethanol Producer Magazine | OCTOBER 2017

BIOTECHNOLOGY

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BIOSIMULATION: Bioreactors simulate ethanol fermentation under commercially relevant conditions.

PHOTO: NOVOZYMES

Matt Richards, director of application technology for Lallemand Biofuels & Distilled Spirits, says Lallemand uses a mixture of classical biology techniques — cell mating, directed evolution, screening and isolation of strains from environments with desired properties — and advanced metabolic engineering techniques to develop yeast with desired traits for the ethanol industry.

Novozymes is taking a different approach. With a partner Halling declines to name, the company is using a unique breeding platform on a number of new strains the ethanol industry hasn’t seen before, he says.

“That gives us the opportunity to not only go in and tweak the individual strain, but also to really look at a much broader portfolio of strains and select the ones that are unique and provide a different performance compared to what you see today.” The technique will involve Novozymes’ enzymes, also, he says, leveraging the synergies to deliver an optimal solution.

Novozymes has customers using its C5 yeast for cellulosic ethanol, but now plans to get into the starch-based ethanol market, offering strains for commercial processes next year. Raízen in Brazil uses the C5 yeast to make ethanol from sugarcane bagasse. Halling says the starch-based ethanol yeast is being tested by potential customers now.

The Main Objectives

Yeast modification can be done for multiple reasons, but one of the main goals is ethanol yield optimization, both Halling and

Teunissen say. DuPont has a strain that accomplishes this by reducing the number of byproducts of yeast. “We’ve been able to develop a yeast that can increase ethanol yield up to 3 percent,” Teunissen says. The pathway introduces three enzymes to the yeast that reroute the carbon around alcoholic fermentation, thereby producing less carbon dioxide. The next step in the research is to reduce byproducts even further, she says. Lallemand also aims to reduce byproducts for increased yield in its yeast offerings, focusing on glycerol, Richards says.

Engineered yeast can increase corn oil yield and upgrade coproducts, too, Teunissen says. “Are there certain enzymes you can express in the yeast that help generate certain coproducts?

“There are different ways you can look at yeast engineering for lots of different reasons,” she says, adding improving stability and robustness toward common stressors in the ethanol production process is another main goal. Halling and Richards say it’s a major component of their research, too.

Dennis Bayrock, global director of fermentation research in the Phibro Ethanol Performance Group and adjunct professor at the University of Minnesota, outlines two main concerns in yeast tolerance and robustness: vitality and viability. “When yeast viability and vitality are optimized, the yeast population as a whole can outcompete bacterial contamination for nutrients and growth,” he says. “The yeast are better able to tolerate the organic acids produced by bacterial contami-

BIOTECHNOLOGY

nation, survive process upsets at the plant, and better handle stressful conditions at the plant.

“In general, genetic engineering of fuel ethanol yeast strains have — up to now — focused primarily on yeast production characteristics — some of which include native production of amylases, native production of cellulosic enzymes, reduction in glycerol production and utilization of both C5 and C6 sugars,” Bayrock adds. While these characteristics are important to ethanol production, yeast modifications focused on tolerance to high temperatures, organic acid, fusel stress, osmotic stresses and other stressors represent the next opportunity for improvement, he says.

“The next evolution of [genetically modified] yeast will need to better incorporate aspects of yeast viability and vitality to raise the fuel ethanol industry to the next level of production.”

Many ethanol producers also would like to see yeast with an increased capacity to handle solids, Halling says. “We ask our customers what their main pain points are. Our hope is that we’ll be able to provide different

types of yeast for the specific visions of the customers. That doesn’t mean we produce 200 strains; it means we look at the market needs, the customers’ needs, and tailor our portfolio to match that.”

For the Future

With this momentum behind yeast optimization, the future looks bright for a facet of ethanol production that hasn’t seen much change. And this could be only the beginning. Bayrock says future engineering could help with yeast nutrition, oil extraction, urea reduction, phytic acid hydrolyzation, digestibility of phosphorous in distillers dried grains, or increased membrane protection. In the far future and with much more research, he adds, perhaps targeting and triggering production and activation of desired enzymes could be an achievable goal.

Richards says he predicts further improvement to byproduct reduction. “As more producers and innovators focus on conversion of corn fiber to higher-valued products,

I would also predict that the development of yeast strains will keep pace to allow for utilization of all sugars present in fiber, as well as to allow for more economical breakdown of the corn fiber.”

But the efforts taking place now to improve yeast production characteristics have the capacity to increase profits at existing fuel ethanol plants, Bayrock says. DuPont, Lallemand and Novozymes are on the front lines of that research, and are ready to ramp up to go much further.

“We’ll hopefully take the industry in a new direction and take performance to a new level,” Halling says.

Author: Lisa Gibson Managing Editor, Ethanol Producer Magazine 701.738.4920 lgibson@bbiinternational.com

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OCTOBER 2017 | Ethanol Producer Magazine | 41

PEOPLE

The ‘COOL’ FUEL

Multiple trade groups and ethanol companies offer internships, contests and events to get young people interested in biofuels. The next generation is drawn to ethanol's environmental and economic benefits.

By Ann Bailey

The ethanol industry is for Training Besides conducting a marketing camyoung people who want to be paign about the variety of jobs available in one of the “cool kids,” says John the ethanol industry and the positive enCaupert, executive director of vironmental benefits of ethanol, Caupert the National Corn to Ethanol says NCERC has a successful internship that attracts young people. “[We Research Center in Edwards- program have] a line of young people, the 20-someville, Illinois. The biofuel’s “hip” fac- thing crowd, the true millennials, wanting tor needs to be communicated to potential employees, he says. In fact, the NCERC is in the midst of a marketing campaign to get the word out that biofuels are cool.

The recent addition of a young millenial to NCERC’s staff at Southern Illinois University Edwardsville has given Caupert a new perspective on the industry, he says.

“What I’ve come to realize is the coolness of being involved in an industry that’s creating jobs, that’s good for the environment, that saves you money at the gas pump, and the list goes on and on,” he says.

to get involved in what we do at the National Corn to Ethanol Research Center.”

Whether the candidate is a student who can work 20 hours a week, someone looking for an internship, a student seeking graduate school research work or a college graduate seeking full-time employment, NCERC has an internship available, Caupert says. The center has between four and 10 spots available all the time.

The NCERC biofuels internships are funded through a $10 million U.S. Department of Labor Trade Adjustment As-

sistance Community College and Career Training grant awarded in 2014. NCERC, which has a pilot plant, works with Southern Illinois University Edwardsville and its Lewis and Clark Community College on the Building Illinois Bioeconomy program.

“What BIB does, is it takes this four-year university that we sit on at SIUE and our research center here at NCERC and it links up the activities here with four other community colleges across our state,” says Courtney Breckenridge, BIB project manager. “The areas we focused on with the grant were bioprocess and biofuels and water management.”

Students studying for jobs in the ethanol industry who are enrolled in systems classes, for example, gain experience working on a boiler system at NCERC’s pilot plant. Then, when they’re closer to completing their degrees, they are placed in a facility where they complete a short,

ETHANOL EDUCATION: Megan Grimes, with the Nebraska Ethanol Board, mans an ethanol information booth at the 2016 Nebraska State Fair.

The NEB has multiple programs, contests and events that help attract young people to the ethanol industry.

PHOTO: NEBRASKA ETHANOL BOARD

42 | Ethanol Producer Magazine | OCTOBER 2017

OCTOBER 2017 | Ethanol Producer Magazine | 43

PEOPLE

nol industry and plants, money is tight and they don’t necessarily have the time and they may or may not have the resources to put the people through hands-on learning they need.” Ethanol plants and industry venders need capable, job-ready, qualified applicants and NCERC can supply that, Caupert says.

“If there is one kind of takeaway from these programs, it is we’re filling the jobs of today and preparing for the jobs of tomorrow,” Breckenridge says.

ing, process technology. These are the folks who have a two-year degree in process technology, complete an internship here and go straight out into the industry as a process operator. This year, we expanded it. We have added interns who have had degree fields such as accounting, public relations, you name it.”

Caupert encourages ethanol plants and venders to offer internships, and strongly encourages them to take on interns with backgrounds in business and communications. “I would encourage commercial ethanol plants, venders to those ethanol plants, to look very closely at their day-today workloads and activities, and I bet they would discover where an intern can do a fantastic job,” Caupert says.

NCERC says interns need to learn the skills required for the job, but they also need to master soft skills, such as getting along with co-workers, deductive reasoning and critical thinking. “We spend a lot of time, a lot of research, a lot of effort on soft skills training,” Caupert says.

NCERC also has marketing programs targeted at preschool and K-12 students, Breckenridge says. For example, the center partners with Head Start, doing activities with children and informational sessions about the biofuels industry with their parents.

The Right Fit

Growing an Industry

SYSTEM SPECIFICS: Process operations technology students practice process control skills on a Siemens training system during a class at the National Corn to Ethanol Research Center in Edwardsville, Illinois, with instructor Paul Kuebrich.

PHOTO: NATIONAL CORN TO ETHANOL RESEARCH CENTER

unpaid internship. “NCERC is kind of the glue that connects these very strong classroom programs and fundamental training,” Breckenridge says. Students are willing to do unpaid internships because they’re able to actually operate equipment, not simply job shadow or work in an office like they do in many internships, she says.

Marketing

The most effective way NCERC spreads the word about its internship program is word-of-mouth, Caupert says. The interns tell others about their positive experiences. Another strong selling point is the success former interns have securing fulltime jobs.

“Word-of-mouth and success speak volumes,” Caupert says. “The word is out there that this is the place (to do internships), if you want to gain hands-on experience that will lead you to a real job, real quick that pays real well.”

Because NCERC staff have the training, time, resources and experience needed to make the internship experience successful, he suggests ethanol plants or industry venders contact the center when they are seeking a certain type of employee, rather than offering an internship themselves. “We respect the fact that for venders to the etha44 | Ethanol Producer Magazine | OCTOBER 2017

Meanwhile, NCERC can vet potential workers and eliminate from the job pool people who might not be suited for employement in the ethanol industry, Caupert says.

“The industry is not for everyone. We can weed them out, saving time and valuable resources for that commercial facility that otherwise expended some time, effort and resources on someone who is maybe going to be less than a desirable employee in the long run.”

In addition to the technical jobs, NCERC recently added intern positions in business-oriented jobs. “Up until about a year ago, our internships were very STEMoriented (science, technology, engineering and math),” Caupert says. “They were science – so chemistry or biology, engineer-

The Nebraska Ethanol Board, meanwhile, works to attract young people to the ethanol industry through events such as the FFA state convention and the Nebraska State Fair, as well as appearances at the children’s zoo, says Luke Miller, NEB public information officer.

The NEB also sponsors a contest in which high school students submit a twominute video that features an aspect of the ethanol industry. “It’s anything to do about the ethanol industry; how things are processed, or a plant in particular,” Miller says.

“It’s kind of open-ended for them as long as it’s about ethanol.” Students can win a grand prize of $1,000, a second-place prize of $600 or a third-place prize of $400, he says.

Like NCERC, the NEB also offers internships to college students. Interns help promote ethanol at events and go out to middle schools and high schools to talk about ethanol. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s really important to grow the industry,â&#x20AC;? Miller says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re not content to let things sit as they are. We want to make sure we have a thriving industry here in the state. The most important thing we can do is to bring in new people. A lot of these ethanol plants are in rural areas that a lot of students around the state grew up in and might be interested in returning to. We want to make sure they have the right information and tools so they can do that if they want to.â&#x20AC;?

The Nebraska Corn Processors Ethanol plant in Cambridge, Nebraska, has provided young people with an opportunity to return to their hometown, says Jan tenBensal, a member of the Cambridge Economic Development Board and the Nebraska Ethanol Board. The plant employs 35, but its ripple effect has added other jobs in the town, too, he says. â&#x20AC;&#x153;The young people are able to build their houses in town and have good paying jobs, and itâ&#x20AC;&#x2122;s just a win-win for us,â&#x20AC;? tenBensel says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re very thankful for that plant.â&#x20AC;?

Itâ&#x20AC;&#x2122;s important to see the benefits of ethanol through the eyes of the young people the industry is trying to attract, Caupert says. â&#x20AC;&#x153;I think what weâ&#x20AC;&#x2122;ve done is, someone marketing to these young folks that by working in the ethanol industry, it truly is service. Some people choose to serve in the form of wearing a military uniform. This is another form of service. Youâ&#x20AC;&#x2122;re serving your nation in the form of generating fuel that enhances our energy independence, cleans our environment, adds to our fiscal sustainability, lessens our dependence on foreign oil.â&#x20AC;?

Author: Ann Bailey Freelance Journalist anntbailey@yahoo.com

COLLEGE COOPERATION: Lewis and Clark Community College instructor Paul Kuebrich (right) works with a student on a training skid unit at the schoolâ&#x20AC;&#x2122;s N.O. Nelson campus in Edwardsville, Illinois.

PHOTO: NATIONAL CORN TO ETHANOL RESEARCH CENTER

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LUC DEBOER DRLGTOOLS COM OCTOBER 2017 | Ethanol Producer Magazine | 45

PROJECT DEVELOPMENT

LAB WORK: Peter Cohen, director of research for Alliance BioEnergy Plus Inc., works on the Alliance Bio-Products cellulose-to-sugar prototype.

Alliance BioEnergy is the parent company of Alliance Bio-Products, which is developing a CTS process and hopes to have an 8 MMgy plant operating next year.

PHOTO: ALLIANCE BIO-PRODUCTS

Scaling Up Without Wall Street

Alliance Bio-Productsâ&#x20AC;&#x2122; chairman provides a detailed account of hurdles cleared and decisions made in the development of the companyâ&#x20AC;&#x2122;s cellulose-to-sugar process.

By Daniel de Liege

CONTRIBUTION: The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

46 | Ethanol Producer Magazine | OCTOBER 2017

PROJECT DEVELOPMENT Securing funding for new technologies can be extremely difficult: There’s no guarantee of a profitable end result; the landscape is constantly changing; and new advancements could quickly scrap years of research and millions of dollars invested. Biofuels and cellulosic etha-

nol can be particularly challenging, as there are advancements in different approaches every day. But the space still faces issues with creating scalable technology that can produce biofuels at a cost affordable to both the producer and the consumer.

Alliance BioEnergy Plus Inc., the parent company of Alliance Bio-Products, has learned a great deal about giving and receiving funding for emerging biofuel technologies. That’s particularly true with the company’s cellulose-to-sugar (CTS) process, which is starting to see some progress. While it can be challenging for startups to commercialize emerging technologies, it’s not impossible.

Corporate Overhaul

I first learned about the CTS process in October 2012, when a Melbourne, Florida, startup named Carbolosic LLC secured the worldwide exclusive license to a patent from the University of Central Florida.

At that time, the CTS process was merely a lab-scale way to conduct chemistry capable of pulling useful sugars and lignin from cellulosic materials, using mechanics and dry catalysts. Carbolosic’s grand plans for this young technology were limited by the lack of a committed partner with the funds or ability to execute them. This is where Alliance BioEnergy first came into the picture — the company made an equity investment in Carbolosic.

Within weeks, Carbolosic requested additional funds. But with nothing to show from our initial investment, we insisted on

For us, forfeiting control wasn’t an option — we didn’t come this far to just hand it over to a boardroom of suits in New York.

- Daniel de Liege Chairman, Alliance Bio-Products

implementing some controls and policies before investing in the second tranche. By February 2013, Carbolosic had depleted the second round of funding and hadn’t built, scaled, optimized or advanced the process, which violated the policies and procedures introduced just months before.

In the spring of 2013, we were left with a choice: pull the plug on this promising technology, or overtake the company and restructure the commercialization plan. Since the technology still showed great potential for industries promising significant growth, we chose the latter.

The resulting corporate overhaul meant replacing management and the board of directors, negotiating out of several deadend leases and contracts, and developing a new funding plan to commercialize the CTS process.

At this point, several well-known Fortune 500 companies were spending billions exploring “economically viable” cellulosic conversion technologies. Increased demand for sustainable options led the U.S. Department of Energy and the U.S. Department of Agriculture to issue grants and loan guarantees to almost any company that applied. One by one, these mammoths stumbled and withdrew from the market altogether, leaving taxpayer-funded scrap heaps in their wake.

Beyond the cellulosic world, highly publicized, government-backed failures in solar, wind, batteries and other renewable industries occurred almost daily — taking a toll on consumer confidence and hope for the rapid development of commercialized sustainable energy.

Shallow Pool

What’s a startup to do when competing in the shallow funding pool for new technology? We learned quickly that if you want DOE funds, you either need to be well-versed in this area, or spend thousands of dollars on grant writing, lobbyists, legal and accounting services, and infrastructure, only to have a chance at winning the prize. Then, even if you win, it takes years to navigate the process, and there’s no guarantee you’ll advance to the next round. A small company with a promising technology can’t spend that kind of time and capital without a guaranteed return on investment. Failure would be devastating.

This tough decision often pushes small companies to look to Wall Street funding — but there are many attached strings with this option. Either they want total control and the lion’s share of any upside, or a project so de-risked that a local bank would issue a loan with a signature. For us, forfeiting control wasn’t an option — we didn’t come this far to just hand it over to a boardroom of suits in New York. De-risking was exactly what we needed the funding for — CTS is a new technology, after all. We needed to build a pilot plant and laboratories, staff them with PhDs and engineers, and spend several years scaling and optimizing, as well as putting the whole process together for a commercial application. Either way, it was a losing proposition.

It normally takes between nine and 14 years to take a new chemical process from

OCTOBER 2017 | Ethanol Producer Magazine | 47

PROJECT DEVELOPMENT

SYSTEM SCALE-UP: Alliance Bio-Products hopes to have a commercial facility operating in 2018. Pictured is the prototype reactor for the company's cellulose-to-sugar process.

PHOTO: ALLIANCE BIO-PRODUCTS

lab to commercialization, but since this was a mechan-catalytic process, we knew that time would be cut in half, at least.

But this would still take tens of millions of dollars to accomplish, so our only option was to look to friends, family and people we knew had invested in higherrisk projects.

Keep it Close to the Family

Our first goal was to structure an investment vehicle allowing us to raise smaller amounts of money from more people. We settled on using a public company and holding a private placement raise. This way, we could control how much of the equity we issued, and raise funds only as needed. We didnâ&#x20AC;&#x2122;t want to go the route of a reverse merger or buy a shell, so we immediately filed an S-1 registration and began the process of taking our company public. After several months and multiple government filings, we emerged as a publicly traded company in February 2014. This allowed us to start fielding investments from people we knew, and we quickly raised several million dollars and began developing and scaling the CTS process.

With the funds in hand, building a pilot plant that could help us speed up the lab-to-commercialization process was our first priority. By early 2015, we had built Ek Laboratories near Orlando.

This wholly owned subsidiary of Alliance BioEnergy housed our pilot plant and analytical laboratories. We hired Richard

48 | Ethanol Producer Magazine | OCTOBER 2017

PILOT PROCESS: Alliance Bio-Products is hoping to purchase a shuttered ethanol plant that would be retrofitted for its cellulose-to-sugar process. Pictured is the CTO system on a pilot scale.

PHOTO: ALLIANCE BIO-PRODUCTS

Blair, the technology’s inventor, and surrounded him with PhDs and engineers to optimize and scale it. Each time we needed more funding, we could open a new private placement and expand our shareholder base through new and existing connections.

Alliance Bio-Products is in the process of purchasing a recently closed bioethanol plant in Vero Beach, Florida, through a mixture of debt and equity.

The equity portion of the investment is being done through a 506(c) filing under Alliance Bio-Products. The filing is still open for investor consideration to reduce as much debt as possible. Once the purchase is complete, the plant will be retrofitted with the CTS process and is expected to be producing 8 MMgy in 2018.

Ultimately, we accomplished what the giant companies couldn’t with all the government and Wall Street funding at their disposal, and are well on our way to providing a commercialized solution for the increased sustainable energy demands.

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