SqueezedFresh.com's look at SuperCorn

Of all the hydrocarbons and simple sugars that can be made from biomass, or recovered from fossil reserves, gasoline, diesel and natural gas remain the most important end-products and are likely to remain so for some time to come. Into that mix comes the advent of biofuels, and in recent years the arrival of what are variously termed “second-generation” or advanced biofuels.

Though markets for intermediates and fuels such as methanol, propylene and ethylene are considerable, range into the billions,  as high as $25 billion in the case of propylene, the market for gasoline is measured in trillions of dollars, not billions. According to the Energy Information Administration, global liquid fuel consumption in 2008 was 85.43 million barrels a day at a US refiner averaged cost of $94.68 per barrel, or $2.95 trillion.

The biofuels market today is small - no more than $40 billion, or less than two percent of the total liquid fuels market, and not much more than the market for ethyl propylene. Talk about biofuels is all out of proportion to its market size.

Biofuels have four basic economic drivers: energy independence, climate change remediation, economic development, hedging, and the search for fuels that are lower in cost or in price volatility.

These are linked. As US House Speaker Nancy Pelosi said in urging her colleagues to pass the climate change bill: “remember these four words for what this legislation means: jobs, jobs, jobs, and jobs.” Pass it they did.

The science of biofuels — the growing of biomass feedstocks and the conversion of biomass to power and fuel depends on a turbulent, fast-changing set of technologies. We have seen manifest changes in the projected yields per acre of candidate feedstocks, the efficiencies and yields in conversion from biomass to fuels, and the cost of components and systems.

There are numerous competing approaches including transesterization, fermentation, acid hydrolysis, enzymatic hydrolysis, the Fischer-Tropsch process, gasification and pyrolysis to name a few. The outlook for the industry depends, then, not only of the future of feedstocks, but the future of the conversion technologies.

The future of policy is a factor as well. We have seen biofuels mandates constructed in Germany and then watered down, and the same in England. We have seen a great upheaval around the issue of “food vs. fuel,” as nations debate the optimal division of land between food production and feed production. To some extent, the debate is a canard, for “food” in the sense of vittles at supermarkets available for purchase is the complex result of both food crop and energy inputs. There are but five cents of corn in a $4.20 box of Kellogg’s Corn Flakes.

In addition, ideas about the markets for biomass are changing. Bioplastics, feed and nutraceuticals are under discussion at advanced biofuels companies like Virent, Solazyme, PetroAlgae, and Coskata. Fuels of the future will compete for feedstock with the green chemicals of the future that will also use those feedstocks, made by companies that also have interest in carbon footprint amelioration.

The outlook for biofuel demand, at this time, is generally controlled by national mandates — such as the Renewable Fuel Standard in the United States which mandates 36 billion gallons of biofuels by 2022, and the Renewable Transport Fuel Obligation in the UK. Mandates have been established in numerous European countries, as well as smaller mandates in some Asian countries, such as an E10 and B5 mandate in India and an E3 mandate in Japan. Brazil, which does not have a biofuels mandate, distributes ethanol at a heavy discount to gasoline and ethanol has now passed gasoline as the dominant fuel in that country.

The outlook for biofuels technology is much clearer now than in the past. Today, the vast majority of biofuels — primarily in the US, Brazil, Argentina and Western Europe — are produced from food crops such as corn, sugarcane and soy using fermentation into alcohol or transesterization into biodiesel oil.

However, numerous pilots and demonstration projects for conversion of cellulose and waste residues (agricultural, forest, municipal and animal) are underway or under construction. Producing ethanol via enzymatic hydrolysis are Iogen in Canada, plus Range Fuels, KL Energy, and ZeaChem in the United States. Qteros and Mascoma will produce ethanol from cellulose using a proprietary microbe. BlueFire Ethanol will produce simple sugars and ethanol from landfill waste and ag residues using acid hydrolysis. Coskata and Range Fuels will produce ethanol from cellulose using gasification. Dynamotive will produce bio-oil and bunker fuel from residues using fast pyrolysis. Virent, Amyris Biotechnologies and LS9 will produce a drop-in replacement for diesel fuel (“green diesel”) from sugarcane using proprietary, genetically modified microbes.

All these projects, which range from 10,000 gallon per year pilots to 100 Mgy commercial demonstrations, are expected to be in the market by 2011, and are producing from 40 to 135 gallons of fuel per ton of biomass (Biofuels Digest). Where does this leave us in terms of commercial viability?

A key question is the long-term value of carbon credits. At an emission price of $30 per ton of CO2, this adds about $33 cents per gallon to gasoline. Here is usually a premium for gasoline of 10 percent above the crude oil price (NYMEX 2009). So a world of $100 oil will leave us with a long-term “break-even” target of $2.94 for wholesale biofuels. That’s $118 to $397 per ton of biomass. If oil or carbon credits go north of $100 per barrel and $30 per ton, that changes the outlook.

Companies like Coskata are guiding their investors on the basis of $1 per gallon wholesale, for renewable fuels. So there is plenty of margin to work with in a future that has a significant role for biofuels.

Two limiting factors are the amount and price at which biomass can be sustainably recovered. The US Department of Energy estimated that 1 billion tons of biomass can be sustainably harvested in the United States – that’s enough for 40 to 135 billion gallons of fuel, or between 20 and 70 percent of US fuel consumption today. Europe has less land and biomass available in comparison to fuel consumption, while Latin America and Africa have enough raw biomass that they could conceivably become energy self-sufficient given enough capital and time.

One wild card is the question of algae. PetroAlgae has been reporting a haul of 60 tons of biomass per acre per year at its Fellsmere pilot plant. By contrast, corn farmers in the US average 4.2 tons of biomass per acre.  Although algae requires more labor and supervision than, say, corn or soybeans, the prospect of converting up to 40 percent of the biomass to fuels and the remaining 60 percent to feed, power and intermediates for the production of renewable chemicals and nutraceuticals, is a potential disruptive force in the fuel and feed markets. Further, algae, though water-intensive, does not require the use of arable land. Aurora Biofuels is targeting “$1.30 at the gate” as its wholesale production cost for algae biodiesel by 2013, and though production volumes are not expected to exceed 1 percent of the US fuel supply before the late 2010s, the prospect of algae fuels at parity is a real one.

Other high-yield feedstocks are under investigation and trial, particularly research on jatropha, camelina, switchgrass and miscanthus. These have yields in the 200-700 gallon per acre range, well below algae but generally superior to first-generation feedstocks. For now, sugarcane ethanol has the lowest cost of mainstream biofuels feedstocks, with yields in the 500-800 gallons per acre range.

Though the economics of biofuels appear to be improving, the use of large tracts of land for energy crops has raised questions about the impact on food prices, carbon-storing fallow land, and sustainable development. Significant work is underway to measure the impact of energy crops on global land use and crop prices, with a special focus on the impact on overall emissions. The US EPA and the state of California both attempted an analysis of international indirect land use change from biofuels, but the results divided the scientific community regarding the robustness of available data on land use change.

The mandates that are in place – 10 percent biofuels by 2020 in Europe and around 15 percent in the US by 2022, plus the E10 mandate in India and the majority market share enjoyed by ethanol in Brazil, suggests that biofuels will command 10 percent or more of global market share in the early 2020s. That’s north of 100 billion gallons per year. If land use change issues are resolved (such as with a rapid expansion in high-yield algae production), fuel producers prevent waste residues from becoming high-price commodities, capital markets recover to supply more than $250 billion in plants and equipment, and the pilot-scale technologies prove out at commercial scale, the outlook is rosy indeed for bioenergy.

Solazyme’s been on a strong run throughout 2008 and 2009, recently announcing that it closed a $57 million third round of funding. $45 million of the round had previously been announced. Funds were invested by Braemar Energy Ventures, Lightspeed Venture Partners, VantagePoint, Roda Group, Harris & Harris and Solazyme chairman Jerry Fiddler.

Solazyme, which was ranked #6 in the Hottest 50 Companies in Bioenergy for 2008-09 said that it will be developing markets in the high-end cosmaceutical and pharmaceutical sectors as well as continuing to make progress towards making biodiesel and jet fuel at commercially viable costs.

The company utilizes a unique “grow in the dark” algae cultivation strategy, in which the algae is fed plant waste cellulosic and other cellulosic materials that contain sugars - the food is used in lieu of sunlight and CO2 to provide energy that algae convert into lipids.

In April, Life Cycle Associates, the same consultant that performed lifecycle greenhouse gas calculations for the California Air Resources Board, completed a field-to-wheels assessment of Soladiesel, the company’s algae-based biodiesel using the Argonne National Laboratories GREET model. LCA found that Soladiesel’s full lifecycle greenhouse gas (GHG) emissions are 85 to 93 percent lower than standard petroleum based ultra-low sulfur diesel (ULSD).

Additional testing by the National Renewable Energy Laboratory found that Soladiesel also generates a 30 percent reduction in particulates, a nearly 20 percent reduction in carbon monoxide and and a nearly 10 percent reduction in THC.

Recently, BlueFire Ethanol announced that algae-to-energy pioneer Solazyme is testing sugars produced through BlueFire’s process, for compatibility with its renewable oil process.

Elsewhere, Solazyme has been reported to be on the warpath towards cheap sugar. Recently, CTO and co-founder Harrison Dillon said that the company would be at parity with $80 oil by 2012/13. CEO Jonathan Wolfson said earlier this year thhat he expected the company to be at 100 Mgy in production at that time.

Algenol has been in the news heavily in the past week, with reaction to their announced partnership with Dow Chemical. Most reaction has been positive; some continues to be skeptical.

Dow Chemical announced that it will partner with Algenol Fuels to build and operate a 24-acre Texas-based algae biorefinery demonstration farm that will produce ethanol at a target cost of $1 per gallon.

The facility will be constructed at the Dow facility in Freeport, and will make ethanol that can be used as a base for the production of a variety of green chemicals. Dow is expected to concentrate on the development of bioplastics. The test plant is expected to employ 300 people.

Georgia Institute of Technology, the National Renewable Energy Laboratory and the Membrane Technology & Research are partners in the project, which is targeting production of up to 140 gallons of algae fuel per day, or 51,000 gallons per year at a yield of 2,120 gallons per acre.

The companies are jointly seeking a $25 million DOE loan guarantee.

Last February, Biofields CEO Alejandro González Cimadevilla said that the company is targeting  2 billion gallons of ethanol from algae by 2020 using the Algenol process. The company said that it considered 15 other locations in Mauretania, Algeria, Spain, and the US, before settling on Sonora because of its 328 days of annual sunshine and 3.75 million annual tons of CO2 emitted by local power plant CFE.

The company said that it has purchased 22,000 hectares of unproductive land, and Gonzalez said that he will produce 250 Mgy by 2013, building off the recycling company, Grupo Gondi, founded by his father Luis Gonzalez Diez. Gonzalez has recruited Mateo Lopez, a former Mobil Oil senior construction executive in Mexico.

The company secured an exclusive license for the Algenol technology until 2013 when the company reaches its 250 Mgy target. According to CNN Expansion, the company has invested $30 million to date in the project, which is reporting yields of 6900 gallons per acre at its Sonora site. The company is said to be hiring 1500 temporary and 350 permanent workers and commenced construction in December.

PetroAlgae was most recently in the news with expansion of their international sales staff to 28 people. Licensing commenced earlier this spring with an Asian deal focused on China and part of southern Japan. The company’s model farm is 12,500 acres and produces 60 Mgy of fuel and as much or more value in proteins, according to company execs.

In all, PetroAlgae added nine representatives in North America, South America, Europe, Asia, and the Middle East.

The new team members bring experience from BP, ConocoPhillips, Cargill, Trinity Industries, Merrill Lynch and Syngenta. The company has grown to an employee base of 115, up 28 percent from the 90 staff that company has on the payrolls in December.

“The company now has virtually all of the elements in place to meet its goal of bringing its micro-crop technology to market this year giving PetroAlgae the first-mover advantage in a multi-billion dollar renewable-fuels market,” said PetroAlgae Chairman Dr. John Scott.

An update on PetroAlgae’s progress appeared in the Digest last month, in which the company said that it believes it is the closest company to commercialization of micro crops as a biofuel, will complete its microcrop demonstration farm in Florida this year and will commence booking revenues from technology licenses this year.

PetroAlgae management said that it is in discussions with customers in China, India, Japan, Italy, Portugal, Spain, Germany, the UK., Singapore, Finland and the U.S. In March, the company announced that GTB Power had signed to use or sublicense PetroAlgae technology to construct and operate ten facilities in the China, Taiwan, and the Japanese island of Yonaguni.

Chairman John Scott said in a statement to shareholders that “PetroAlgae’s business model is designed to generate revenues from licensing its technology (production systems, micro-crop strains, process controls, etc.) to those with the capital and market know-how to become high-volume producers. We consider our model to be the lowest-risk path to market-strength in what can be a high-risk, emerging industry. We are selling the tools that will allow producers to operate with maximum efficiency in a price-sensitive, competitive environment.”

The company has refocused its position around a broader group of micro-crops — including macroalgae, microalgae, diatoms, micro-angiosperms, and cyanobacteria that can be harvested daily, making maximum use of land, water and energy, and requiring water, nutrients, carbon dioxide and sunlight, and non-arable land.

“We select the best microorganism for each specific location, indigenous to the region,” said Scott, “and then apply our distinct proprietary processes to scale from a microorganism to a high output-producing micro-crop.”

The company revealed that it is generating 40 grams per square meter per day production levels - equivalent to 400 kilograms of biomass per hectare per day, and that the company’s process can now convert carbohydrate content as well as lipids into fuel.

Aurora leapt into the news this spring with a projected $1.30 cost for algae in its second-generation technology, due in 2013. The company completed an 18-month pilot earlier this year, and the company’s VC backer Jim Long of Gabriel Venture Partners recently told a group of biofuels execs at Biofuels: Science and Innovation that algae was “the focus” at GVP as far as biofuels.

“What attracted me to Aurora?” asked CEO Robert Walsh. “They get that cost matters in a commodity business. There’s boom and bust, you have to get the cost down”. Which explains why Aurora is going the open-pond route, because photobioreactors are cool, but they’re not yet cost effective for fuel production, being employed primarily at this stage for production of high-price nutraceuticals and for bioremediation.

The bottom line? Aurora is “highly confident” that it will reach targets of 6,000 gallon per acre yields and a cost of $1.30 per gallon” of algal fuel “at the gate”, in its second generation of evolution. The company recently completed an 18-month first generation trial of its open-pond system, and said that results were consistent with its second-generation goals.

“The cost of fuel is in the feedstock,” Walsh adds. “About 80 percent of it. That’s where you have to focus. With algae, you have to get a good dominant species, and no GMO,” and confirmed that Aurora has made breakthroughs in extracting oil from algae without passing through a drying stage, bypassing the most expensive and energy-intensive part of the algae production process.

The company is targeting biodiesel, seeing that the price differential between finished biodiesel and algal oil more than justifies the incremental step. Development will be in the US and overseas, with a “couple of sites” under investigation now, according to Walsh. For now, the company has raised $20 million which will carry it through the completion of a demo-scale 10-20 acre pond system by 2010.

Aurora plans to be cost competitive with fossil fuels. “$1 per gallon subsidies? We’ll take it if we can get it, but we’re not planning our model on it.”

Sapphire gained instant attention when it raised a stunning $100 million, and participated in the initial algae-based jet test with Continental last December. The combination were factors in propelling Sapphire to a #2 ranking in last December’s 50 Hottest Companies in Bioenergy list. The company has been fine tuning its process in recent months, while increasing the pace of its commercialization schedule.

The company has indicated it will be at 1 Mgy in production by 2011 and 100 Mgy by 2018.

The company’s process starts with molecular biology where Sapphire engineers traits into strains that are considered good candidates for producing the oils are consistent with sustainability objectives.  Once these strains have met the criteria Sapphire has established for an ” industrial organism”, the strain is then transferred to Sapphire’s New Mexico R&D center where it is put through real world conditions to prove commercial viability.

The industrial strains will be grown in open ponds until they mature.  At this time they are harvested and de-watered (4 to 15 days depending on conditions) and oil is extracted and purified into Green Crude.  The Green Crude then is refined.

Tim Zenk of Sapphire said, “Sapphire Energy is investigating a number of methods for use of biomass, including anaerobic digestion.  We are striving for a closed loop system which keeps our energy costs low.  We like anaerobic digestion because we can use the solid biomass, after extraction, to generate methane which would turn a turbine, generate electricity and CO2.  The CO2 is then recycled back into our pond system and off-sets the additional CO2 requirements.  We have not yet settled on what the balance between this solution and others may be, however we hope to resolve those questions in the next couple years.”

After a quiet start to the year, closed system photobioreactor pioneer Solix Biofuels completed its $16.8 million Series A capital funding that added Shanghai Alliance Investment to its group. Proceeds will be used to finance construction and commencement of operations at the company’s Coyote Gulch Demonstration Facility, which will be operational by late summer 2009. I2BF Venture Capital, Bohemian Investments, Southern Ute Alternative Energy LLC, Valero Energy Corp., and Infield Capital also invested in this round.

Solix COO Dr. Bryan Willson said that the company is currently at around 2500 gallons per acre, and said that the company is on track to achieve cost parity with $80 oil in 3-4 years.

The company has launched a third-generation of its bioreactors, a 20-meter system that integartes CO2 delivery and increase surface area. The system is water-supported to reduce cost. A fourth generation of photobioreactors is now under development. Willson said at the recent Biofuels: Science and Innovation conference in San Francisco that the problem with contamination of open-pond algae systems had not, in his opinion, been yet overcome.

The Air Force, Navy, DARPA and the Defense Department have all been sponsoring projects or looking at algal fuel acquisition. DOD has two projects - one led by General Atomics and the other by SAIC, which have a goal of producing $3 fuel. The Air Force has been at work in the Boeing-led jet fuel certification process. Most recently, the US Navy’s Mid Atlantic Coast section said it is looking to put out RFPs for 30-year contracts to produce biomass and/or fuel on Navy property.

Also, the Obama Administration announced the launch of the Advanced Research Projects Agency-Energy (ARPA-E), modeled after the Defense Advanced Research Projects Agency (DARPA), which was authorized by Congress in 2007 and funded through the $400 million from the American Recovery and Reinvestment Act.

ARPA-E will develop new energy technologies that offer significant progress toward reducing imported energy; reducing energy-related emissions, including greenhouse gases; and improving energy efficiency. DOE will offer individual awards of $500,000 to $20 million based on eight-page “concept papers” that briefly outline the technical concept, which would lead to grants, cooperative agreements, or Technology Investment Agreements, with the latter two most likely because of the need for substantial interaction between ARPA-E and the awardees. Concept papers can be submitted to DOE from May 12 through June 2. The full solicitation is here with a reference number DE-FOA-0000065.

Finally, the Administration established a framework for development of renewable energy projects on the US outer continental shelf.

Low-cost leader Aquatic Energy first came to wider attention this spring when unveiling details of its demo stage project as well as sharing data from its first-gen efforts with an open-pod algal biomass pilot.

The company said at the time it is preparing to expand from a “couple of acre” pilot in Lake Charles, to an 30-acre demonstration project that will feature the company’s 1-acre open-pond system that is yielding 2500 gallons per acre without using an external CO2 source.

CEO David Johnston said that the company is able to support its yields with more than 70 percent of its CO2 coming from ambient CO2 in the atmosphere, with the remainder generated from the natural gas burned in the last stage of the algae drying process. The company said it is generating 32-34 tons per acre of algae biomass for the animal feed market, with a goal of 40 tons of meal per acre in the proposed expansion.

The company said it has funds identified to take it through the demonstration phase, but expects to raise $32 million for a 617-acre commercial-scale expansion, which will generate 1.5 Mgy in algal fuel and 24,500 tons of algae meal.

Johnston said that the 617 (250 hectare) acre size is the minimum scale necessary for a stand-alone operation. The company projects that it will reach 5000 hectares in production by 2016.

Johnston, a veteran of the Maryland biodiesel business, said he selected Louisiana because its rainfall exceeded its evaporation rate, giving him access to free water, plus the wide availability of lands formerly used in rice cultivation, which has the clay soil base, low cost and zoning and infrastructure for aquaculture.

“Water is the biggest factor,” he commented on the site selection process for open ponds. Interestingly, the use of clay soils allows the venture to proceed without using fixed structures or plastic liners on its ponds. Algae-to-energy pioneer John Benemann has commented on the impracticality of plastic liners, with cheap liners requiring too much repair and expensive liners making open-pond projects economically unfeasible.

Johnston also commented that he had looked at several alternative states that had extensive salt-water resources, but that no state environmental agency had seriously entertained permitting a project that would have the potential to leach extensive amounts of salt water into the soil.

The main attraction in terms of algal fuel development outside of the US,  Seambiotic, a global leader in the development and production of marine microalgae for the nutraceutical and biofuel industries, reappeared in the headlines this past month via an agreement with NASA Glenn Research Center to develop an on-going collaborative R&D program for optimization of open-pond microalgae growth processes.

“Under a Space Act Agreement, NASA is partnering with Seambiotic USA to model growth processes for microalgae for use as aviation biofuel feedstock,” said Prof. Ami Ben-Amotz, Chief Scientific Adviser to Seambiotic. “The goal of the agreement is to make use of NASA’s expertise in large-scale computational modeling and combine it with Seambiotic’s biological process modeling to make advances in biomass process cost reduction.”

Under the Agreement, NASA Glenn and Seambiotic USA will work together to improve production processes and to study and qualify algae oil from alternative species and production processes as candidate aviation fuel at NASA’s test facilities.