Fulcrum Promises 75 Cent Ethanol
With plans for advanced biofuels facilities appearing – and disappearing – with some frequency, it can be difficult to evaluate the exciting claims made by companies that analysts kindly refer to as “pre-revenue.”
Here’s one such claim:
Fulcrum’s engineering and technology teams have recently made numerous enhancements to the design of Sierra [CC note: this is a first commercial facility] and to its proprietary MSW [municipal solid waste] to ethanol process. The Company expects these improvements will dramatically reduce its cost to produce renewable fuel to less than $0.75 per gallon at Sierra, down from approximately $1.25 per gallon as previously disclosed. The cost of production at future Fulcrum plants is now expected to be less than $0.50 per gallon, down from $0.70 per gallon as previously disclosed.
Now, 75-cent ethanol is very cheap. Corn ethanol prices are usually about $2 per gal and thus it costs somewhat less than that to make (or not – many facilities are idle as corn costs are high). Chemtex – an engineering firm based in Italy – is now turning on its cellulosic plant in Cresentino. It plans to make ethanol for $1.50 per gal from 10 cent per lb cellulosic sugar.
Fulcrum plans to make ethanol at its plant near Reno, Nevada from municipal solid waste. Its feed costs are known – it will get free trash from waste handling partners including Waste Management. C&EN recently reported on Waste Management’s involvement in this space. The process is: sort waste, shred waste, gasify it, catalyze it to make ethanol, and separate/purify the ethanol. If the feedstock cost is the same as before, we can speculate on which part(s) of the process has been optimized to take 50 cents off the original cost estimate.
The new cost estimates may also just be something the firm has put out to distract from other thoughts/questions about the process and business model. For one, Fulcrum says it has withdrawn its IPO filing. It will proceed with its first plant using project financing (including a $105 million USDA loan guarantee). The other questions are – will the plant actually be built, and will it produce ethanol at all? These are the kinds of questions facing all the players in the advanced biofuels industry.
And as for the promise of 75-cent or cheaper ethanol – industry watcher Erik Hoover of Cleantechdata responds “More cautious language would help everyone.”
Fast Food Fight Over Biofuels
Will the U.S. government’s biofuels mandate increase the cost of your favorite “dollar menu” item?
A trade group of chain restaurants – which includes fast service joints – called the National Council of Chain Restaurants, has put out a report saying that the EPA’s Renewable Fuels Standard will increase restaurant food costs. According to NCCR, the RFS will cause the cost of corn to rise by 27% (according to two studies) or perhaps by only 4% (according to one study).
In addition to mandating ethanol made from corn, the RFS is the mandate driving the new industry of cellulosic ethanol. Biofuels producers of all kinds love mandates. Love is not a strong enough word, actually. I’m not sure what word DuPont would use. It just broke ground on a 30 million gal/year cellulosic ethanol facility in Nevada, Iowa.
But the fast food group argues that the RFS means higher corn costs and higher costs for everything from wheat and soybeans to beef, poultry and eggs. The average fast food restaurant spent just over $180,000 in 2011 on food commodities. Once the RFS is fully phased in, the cost of that food would go up, they claim, by 10% in the worst scenario and 1.6% in the best.
Recently, when the EPA denied requests by governors and members of congress (many representing the cattle and poultry industry concerned about rising costs of feed), it said its own estimates showed corn prices were affected only slightly by demand for ethanol – by about 1%.
The NCCR report contains the following statement:
“Increased demand for corn for use in ethanol will cause corn prices to increase, in the absence of adjustments to the supply of corn.”
But according to the USDA, both corn acreage, and importantly, yield per acre, have soared in recent years due to the additional demand from ethanol:
Corn production has risen over time, as higher yields followed improvements in technology (seed varieties, fertilizers, pesticides, and machinery) and in production practices (reduced tillage, irrigation, crop rotations, and pest management systems).
Strong demand for ethanol production has resulted in higher corn prices and has provided incentives to increase corn acreage. In many cases, farmers have increased corn acreage by adjusting crop rotations between corn and soybeans, which has caused soybean plantings to decrease. Other sources of land for increased corn plantings include cropland used as pasture, reduced fallow, acreage returning to production from expiring Conservation Reserve Program contracts, and shifts from other crops, such as cotton.
Companies that are building facilities to produce advanced biofuels (not derived from food sources) are probably more dependent on the RFS than their corn-consuming counterparts. With corn ethanol selling for $2 a gallon, fuel blenders will likely seek it out even without a mandate. While it would be more comfortable to ignore this food fight, the future of the RFS could make or break the future of advanced biofuels.
[Not surprisingly, the Renewable Fuels Association has issued a response to the NCCR's report]
Energy Crops: the sweet and the sour
Switchgrass, miscanthus, hybrid poplar – these are just the first three plants I think of when I hear the term “energy crop.” But I heard of a new one a few weeks ago when I attended a conference (story fortcoming) about commercializing biobased chemicals and fuels. Let me introduce you to a very big “weed” called Arundo donax.
Arundo donax is a giant reed from Asia. Credit: USDA
While most energy crops produce a few tons of dry biomass per acre, Arundo – a tall bamboo-like reed – can produce several. Like switchgrass, it is a perennial. Like Kudzu, however, it is self-propagating and possibly horribly invasive.
It looks like the huge plant (it’s a weed when it grows where it isn’t wanted, like in California), may become a lot more well-known in biofuels circles. Chemtex will use it, along with wheat straw, in its first commercial facility in Crescentino, Italy. This plant is already humming, and commercial ethanol production is expected to begin early next year.
Chemtex plans to construct another ethanol plant in eastern North Carolina. Through a USDA program intended to promote rural development through the cultivation of energy crops, the company was offered a $99 million loan guarantee to plant “high yielding energy grasses, including miscanthus and switchgrass.” According to a fascinating look at Arundo cultivation – and eradication – by the Associated Press, it looks like the giant weed may also be part of the mix.
Meanwhile, a much sweeter crop, a high-sugar variety of sorghum, may be edging its way into Brazil’s famous sugar-growing regions. Plant biotech firm Ceres, and agribusiness firm Syngenta plant to run test plots of hybrid sweet sorghum destined for ethanol production. The press release says that Brazil’s ethanol industry has created a shortage of sugar cane, and the country views sorghum as a strategic crop.
While Arundo would be harvested just for its biomass, sorghum is usually grown for its seed which is used in animal feed.
Advanced Biofuels Makers Thankful for RFS
I wanted to point your attention to Jeff Johnson’s story today about why EPA will not wave biofuel blending requirements (known as the Renewable Fuels Standard or RFS). Nine governors and many members of Congress, prodded (no pun intended) by livestock producers, had asked EPA to waive the standard saying that ethanol demand was driving up the cost of corn.
What I found interesting is that EPA estimates that waiving the mandate would only reduce corn prices by approximately 1%. This year’s U.S. corn harvest was impacted by drought, and yields plummeted to a 17-year low, Johnson reports.
While the RFS was initially written into law in 2007 to enhance U.S. energy security, it is considered the main policy vehicle driving demand for advanced biofuels. These are biofuels made not from food grain like corn, but from other feedstocks like corn stover, sustainably harvested wood or waste products. These fuels, when commercialized, are expected to help lower the U.S. contribution to CO2 emissions.
The members of BIO, a trade group of advanced biofuels firms and biobased chemical makers, reacted with joy to the announcement.
“EPA has made the right decision and we thank them for making a careful and fully considered analysis,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section. “Earlier studies by researchers at Purdue University, Iowa State University and the University of Missouri’s Food and Agricultural Policy Research Institute showed clearly that a waiver of the RFS would not undo the economic harm caused by the drought.
“However, a waiver of the RFS could have undercut ongoing investments in advanced biofuels. Renewable fuels are a significant contributor to our nation’s economy and energy security, creating jobs and directly reducing reliance on imported oil. This decision allows BIO member companies to continue to deliver innovative technologies to the market to expand our domestic production of biofuels, including fuels from agricultural residues, municipal solid waste, algae and purpose grown energy crops.”
Connecting those themes – the RFS, the drought, and CO2 emissions, NOAA recently reported that man-made climate change was an important contributor to the extent and duration of the 2011 drought in Texas.
Giant Gobs of Algae Coming From Solazyme
Starting soon, oil-producing algae will be replicating at B-horror-movie quantities. Imagine a lab coat-wearing scientist running into the street shouting “300,000 metric tons!” while scores of screaming people run by, pursued by a giant wave of green slime.
But be not worried, the algae in question will be safely confined to fermentation tanks thanks their overlords at Solazyme. And many of those tanks will be in Brazil (so the people would be screaming in Portuguese, I guess.)
Earlier this week, Solazyme says that it has agreed with its sugar-producing partner Bunge to increase the production capacity for algal oils from an original 100,000 metric ton amount to 300,000 metric tons. It seems from the press release that Bunge will have a hand in marketing the tailored oils to the edible oil market in Brazil.
If you happen to live in the U.S. and have a craving for oil derived from algae, you’ll be pleased to learn that another large blob will be coming to Clinton, Iowa, starting in early 2014. Solazyme and its little green workers plan to ooze into the idle Archer Daniels Midland plant formerly occupied by Metabolix’s bioplastics operation. The plant will start out making 20,000 metric tons, but aims to grow to 100,000 metric tons.
Soon You’ll be Thankful for #foodchem Microbes
Cleantech Chemistry dives into the #foodchem carnival this week!
This is a good time to get your Thanksgiving menu planning started. This time of year I use a lot of spices. Have you ever noticed how expensive they are? I’ve paid $14 for two vanilla pods. The problem with vanilla is that it comes from the seed pod of a kind of orchid. Having tried to grow orchids, well, let’s just say I can imagine this is not an easy crop. Also, vanilla is commonly grown in Madagascar. Not exactly a locavore treat.
Natural vanilla. Credit: Shutterstock
I’ve had better luck with growing crocuses, but I’ve not grown my own saffron. Maybe I should, because saffron, which comes from the flower of the saffron crocus, sells for about $2,000 per kg.
Microbiologists and chemists are ready to come to the rescue of cooks (and food makers) who love spices but don’t want to break the bank. One start-up, based in Switzerland, is Evolva. Evolva plans to use biotechnology to make high value ingredients for health, wellness, and nutrition. Two of its first target products are vanilla and saffron.
So far, it’s been a rather quiet company, but its CEO, Neil Goldsmith, came over to Philadelphia this week to talk about the firm to attendees of the first gathering of SCD-iBIO. This group was formed to promote a strong value chain for biobased products in order to commercialize the output of industrial biotechnology.
In the context of the meeting, Goldsmith said the firm’s background in pharmaceuticals (the company started with ideas of supplying the drug market) means it is well positioned to deal in the regulated food industry. As a small company, Evolva has purposely targeted high-value, non-commodity products. Also a the meeting were Solazyme and Amyris. Both are larger and public biobased companies that are targeting the pricey wellness market (personal care and fragrances). Both firms had initially said they would target biofuels.
Evolva says flavor molecules like those in vanilla and saffron can be made much more cheaply by fermentation. Most vanilla-flavored foods are made with synthetic vanilla, a product called vanillin. But natural vanilla is a complex mixture of flavor molecules and Evolva says it can make more than just vanillin. In addition, using sugar as a feedstock helps in an industry looking to avoid synthetic ingredients derived from petroleum.
The stevia plant also contains a number of molecules that produce its characteristic sweetness. Stevia sweeteners, which are derived from the plant, are now a $300 million per year market. The sweeteners are commonly used in beverages, but are pricier than sugar, HFCS, and synthetic sweeteners.
Goldsmith pointed out that the best stevia molecules for use in sweetening beverages (without the characteristic bitter aftertaste of some stevia products) occur in very small amounts in the natural source (the plant). So Evolva plans to make those less-common molecules via fermentation. The implication is that this version of the biobased sweetener could also be made more cheaply than the plant-based version.
Read more:
About making flavors and fragrances with microbes: Sweet Smell of Microbes
What the Election Means for Climate, Energy & Cleantech
Update: Here’s a link to C&EN’s election story – including new House & Senate leaders in energy-related roles.
It’s been a quiet time in cleantech news lately, what with Sandy and the election happening in back-to-back weeks. But the election – and the superstorm – are likely to have meaningful long-term impacts on energy policy. I took a tour around the internets to see what analysts and cleantech-ers are saying in their reaction to the election results.
Though it was past my usual bedtime, President Obama’s victory speech caught my ear when he remarked “We want our children to live in an America . . . that isn’t threatened by the destructive power of a warming planet.”
With Congress still divided, most policy wonks suggest that any energy and environmental policy changes will have to be led by the White House. Things to watch include any movement to block the Keystone Pipeline or push forward with EPA regulations on smog that were delayed due to cost concerns.
Environmentalists have signaled that they will be putting pressure on the President to use national policy to address climate change. Look for Bill McKibben, activist, author and co-founder of climate change group 350.org to be very vocal. He was quoted in three articles I read.
Energy and cleantech activists are pressing for a national renewable portfolio standard that would require power generators to obtain 30% of electricity from renewables by 2030. Nearly 30 states and D.C. have such a standard, the most well-known and successful is California’s, which is headed to 33% by 2020. Wind energy backers will work to return the production tax credit.
The Washington Post points out that Obama recently spoke about upgrading energy efficiency standards for buildings – codes are currently set by state and local governments.
And renewables businesses will be looking for government action that might help them gain financing for facilities or adjust subsidies on competing oil and gas producers. On the other hand, Obama has been pursuing an “all of the above” energy strategy that is likely result in further development of domestic oil and gas (including hydrofracking) resources.
Perhaps most fascinating to me, though also the most far-fetched, is discussion about whether the fiscal cliff, tax reform, and the deficit will drive Congress to think about introducing a carbon tax. Hmmmm…
My favorite takes so far on the election and energy policy:
From the Washington Post: Obama to continue efforts to curb greenhouse gases, push energy efficiency
Politico: Obama’s green cred on the line in second term
Marc Gunther: For green business, blue skies ahead. For climate policy, who knows?
Huffington Post: Ron Pernick on Five Cleantech actions for President Obama
The Daily Climate: The “Flat Earth Five” – House Members and Climate Change
For an international take, check out Click Green, which compares the horizon for climate change action in the U.S. versus China. China will have new leadership in Xi Jinping
MPGs, HEVs, PHEVs Oh My!
It appears that recent efforts to raise miles per gallon on the nation’s auto fleet – spurred by government regulations – have hit an interesting tipping point. As this guest post by my colleague Jeff Johnson points out, both consumers and automakers have learned to love running lean.
Ford’s Ecoboost engine goes farther. Credit: Ford
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Despite the recent bankruptcy of Department of Energy supported vehicle battery maker A123, auto analyst Alan A. Baum stressed last week in a briefing and report that fuel efficient and electric vehicles are here to stay. Driven in large part by new federal fuel-efficiency standards, the average vehicle fuel efficiency for model year 2012 reached 23.6 miles-per-gallon, more than 1 mpg above 2011, Baum says, adding that this is the largest one year mileage jump in five years.In previous years, Baum says, when fuel efficiency increased, sales dropped, but for model year 2012, sales are on track to increase by 10% above 2011 levels to some 14 million units. Baum adds that electric-gas hybrids, coupled with plug-in electric vehicles, are on track to top half-a-million in sales in 2012.
Efficiency conscious consumers, he notes, also have more choices—the number of high efficiency model vehicles has grown from 28 in 2009 to 61 for 2013 model year. Also Baum predicts that automakers will increasingly promote vehicle efficiency to increase profits and sales. He singled out Ford’s Series F trucks that advertise an “Ecoboost” turbo-charging system that adds $1,000 to the cost of the truck but gets more horse power out of a smaller engine. – Jeffrey Johnson
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For those of you who know your way around a torque wrench and want to know how an Ecoboost engine works, I highly recommend Johnathan Gitlin’s guide over at Ars Technica.
Moving to Missoula: Rivertop’s new CEO
The cleantech industry is taking executives to some interesting places lately.
Earlier this month, renewable chemicals firm Rivertop Renewables, based in Missoula, Mont., named Michael J. Knauf as Chief Executive Officer. Mike Knauf is a 30-year veteran of the bioindustrial industry, having held executive level positions with Genencor and Codexis.
Rivertop makes chemical intermediates through oxidation of sugar feedstocks. Its first platform of products is based on glucaric acid. On Oct. 26, the company opened its new labs and semi-works facility in Missoula.
Cleantech Chemistry spoke with Knauf about his new job, and Rivertop’s future plans.
CC: What attracted you to Rivertop?
MJK: Rivertop is a startup with a promising future. Codexis had moved past start-up mode and was starting to form up as a company with products and services and a revenue line. This is a pre-revenue opportunity – it builds on a solid breakthrough technology and was built by a great group of people. It couldn’t be a better opportunity for someone like me – a seasoned – in Montana they might say, grizzled, veteran. It’s really a great fit. I’m hoping my skill set will be what this company needs to propel it forward beyond startup phase.
My mantra is always listen to your customer. We’re are in the process of developing our market strategy – we’ve been talking to customers to really understand their needs. This company’s technology was originally applied to a market pull; a company was looking for a unique polymer and our founder identified glucaric acid polymers to meet their need. Our platform product is glucaric acid and other sugar acids generally broaden the range of applications for the company. The fact that Rivertop was founded on a market need is the key.
CC: What was it like to move to Missoula from San Francisco?
MJK: It’s funny – on a personal note I grew up in a town almost exactly the same size as Missoula. You’ve heard of it – Green Bay Wisconsin, but now Green Bay is maybe three times the size of Missoula today. My wife and I grew up in the same town. We’re so excited to be part of this community. It has a great quality of life and lots of nature. The University of Montana is in Missoula and provides a tremendous amount of cultural richness you wouldn’t find in towns this size everywhere. It’s just plain beautiful. And no, we’re not worried about winter.
And the home we’ve purchased – well, there’s no stoplight between our home and the Rivertop offices and labs. When you’re from the Bay Area… that puts a big smile on my face.
CC: What are your plans for growth – production, product line, partners …?
MJK: So far, we’ve shipped product to a number of customers but we are not in full launch mode. We’ve been producing for customer testing. I’ve just started so I don’t have all the answers all right now. The plans are to continue with our product and market development. In some cases that will take us to partnerships and collaborations – with consumer product companies, chemical companies, and potential manufacturing partners too. We’re working on a detailed strategy that we will roll out when it’s formed up.
One aspect is different that I’m happy to talk about. When it comes to Rivertop versus other companies in the renewable chemicals space, our technology is based on chemistry rather than biology. The R&D timeline and manufacturing cost of capital is considerably less problematic. Biology takes time, chemistry is usually pretty quick. With biology you have to develop the microbe, along with all the aspects of fermentation and recovery of the product. Our chemical process development has been quick, and is well developed for a number of applications; it is a platform chemistry.
We’ll ultimately produce more than glucaric acid, though glucaric acid is a good example of an oxidized sugar with a number of promising applications. It was on the DOE’s original list of biomass derived chemical targets. It’s a platform chemical we can develop with our platform chemistry.
Our primary market opportunity for glucaric acid is the detergent market, which has many applications of interest to Rivertop. Glucaric acid-derived products have long been considered as potential builders for dish and laundry products. With product reformulations, such as to remove phosphates, the detergents can be made more sustainable and better performing – and that plays right into our strengths.
The other markets we are looking at begin with corrosion inhibition for deicing applications. That is an area the team found early on and is fairly far along, we are shipping product to transportation departments in the Mountain states, including Montana.
Right now this new guy says the sky’s the limit, but we have to focus on some particular opportunities.
A123 Systems Files Chapter 11, Johnson Controls to Buy Assets
It looks like it’s pretty much all over for A123 Systems. The advanced battery company announced today that it would file for Chapter 11 bankruptcy in order to reorganize its debts. Johnson Controls, which also makes large-format lithium ion batteries for the auto industry, will purchase facilities and other assets for $125 million. A123 was earlier mulling an offer to sell itself to Chinese auto part maker Wanxiang Group.
A123 Systems makes advanced lithium ion batteries. Credit: A123 Systems
A123 was one of a host of battery, battery materials, and electric drivetrain companies to receive government money as part of the Recovery Act. The goal was to set up a full manufacturing supply chain to for U.S.-made advanced batteries. Those batteries were intended to go into U.S.-made electric vehicles. A123 received $249 million in government grants. It also has shareholders, who will likely lose their investment in the re-org.
Overall, Recovery Act funding for the advanced battery industry totalled $2 billion. A123 Systems stood out – and was most vulnerable to market forces – because it was a tech-driven, pure-play battery company. Unlike Dow Kokam, or Johnson Controls, it has no deep pocketed parent or additional technologies and markets to sell into. (A123 will license back techology for batteries used for stationary storage).
And the market A123 sells into is the hyper-oversupplied market for electric car batteries. As we’ve mentioned recently in this blog, electric cars are selling very, very slowly. A recent article in MIT’s Technology Review says battery production capacity in 2013 will greatly outpace demand with 3,900 MW hours of capacity to serve 330 MW of demand, based on estimates from Menahem Anderman at the consulting firm Advanced Automotive Batteries. Needless to say, many production lines are sitting idle at the moment.
When A123 was still a young firm, it was selling batteries for power tools to Black & Decker. Indeed, when it went public its S1 filing was based on that partnership. The company certainly had its sights set on what was to be a huge automotive market.
But one has to wonder, what would have happened if A123 hadn’t received the “free” money? What if it hadn’t been swept into the government’s big plans to create a new advanced manufacturing industry from nothing?
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