Answers for your Questions about biofuels, renewable chemicals, bioproducts and sustainable agriculture.

rp_QA.jpgAmazing questions get asked at ABLC — and except for attendees, you generally don’t hear them, or the answers. Let’s change that.

With great sessions at conferences, delegates are usually keen to get a hold of the powerpoint decks. But how do you get a hold of the great Q&A that follows the presentations — or the pertinent questions that get left unanswered when sessions run out of time?

At ABLC this year, we had an avalanche of great questions that we saved — hundreds of them. Here we present 30 of the best — with the answers included. On R&D, Policy, Feedstocks, Production & Commercialization, and Downstream Markets, Infrastructure, and Finance.

Mythbusting

Q. Can you share examples about “busting myths about cellulosic ethanol? How can we help?”

A. Myths include cost-competitiveness, and sustainability of agricultural residues (they can be lifted sustainably). More importantly, that they are “fantasy fuels” or that the lack of gallonage compared to RFS targets somehow proves them unsuitable. If cellulosic volumes are small compared to targets, it is because plants are building small first commercials — the breakout in volumes is through licensing and would happen after they are proven at scale, from a technology POV, after the supply chain of biomass  is proven to work at scale, and after RFS policy uncertainty is resolved. The most important myth, howvere, is contained in your question. It is the myth that all cellulosic fuels are ethanol. They’re not — more than a dozen fuels can amd are being made from cellulosic streams — DME, biodiesel, renewable diesel, jet fuel (kerosene), high-performance jet fuels, butanol, propane, methane and more.

Q. Cheap and abundant oil & gas in the US. Cellulosic life cycle under attack. Corn ethanol not popular. EPA delays may not node well. republican take-over of Congress. In light of this, why bio and how do you convince policymakers?

A. As cheap and adundant as oil & gas are currently, it remains a finite source, with a volatile price record, controbutes heavily to greenhouse gas emissions, and we still import a heck of a lot of it. Why bio? Energy diversification is sound policy, and bio is developing affordable, scalable technologies that require fleet modification at most (sometimes, not even that), rather than complete infrastructure replacement.

Policy

Q: What do you define as “credible RFS policy”?

A. A credible policy is one that a) lasts for a defined period exceeding 10 years, so that technologies have an opportunity to get to first commercial and cost-compettitveness; and are technology and feedstock agnostic, so that legislation does not preclude more advantageus routes that are discovered by scientists.

Q. Since the demand for biofuels exists so strongly in the aviation industry already, are tax credits going to need to be a permanent institution for companies that produce aviation biofuels?

A. No, credits always go away, and should.

Q. If RFS is contributing to policy uncertainty, why not reform it and remove that problem. Or, why do advocates of RFS decry policy uncertainty?

A. Those who favor RFS reform and those who oppose it differ over a) whether legislative relief is feasible and b) whether administrative relief is feasible. No one believes that RFS is perfect legislation, but many feel the risks far outweigh the opportunities in a legislative path — not to mention any delays from administrative rulemaking that would come after legislation. Meanwhile, others feel that the EPA is too much of a problem to leave RFS untocuhed, and feel that perscriptive, unambiguous legislation could solve “the RFS mess” without craeting a need for further rulemaking.

Q. What are thoughts about increasing incentives for cellulosic ethanol?

A. On the whole, project developers favor investment tax credits, and like production tax credits. But what they really like, even more than having more tax incentives, is refundable or tranesferrable tax credits, so they are easier to monetize early in the life of a company.

Q. Will investment tax credits, production tax credits be extended. If yes, when? What about biodiesel tax credits?

A. Generally, tax credits have lately been extended in the end-of-year session, at the earliest, so they have become retoracive, for the most part. Most tax credits are likely to be extended, as they are a popualr part of legislative packages — how much longer, anyone’s guess.

Finance and feasibility

Q. The timelines to justify a 30 year plant, can we hope to balance long-term feedstock prices with long-term fuel sales prices?

A. Innovative grower contracts are already being tied to fuel prices, and we can expect more of that in the future.

Q. Crowdfunding under the JOBS Act is still in rulemaking. How would a bio-company use current crowdfunding methods?

A. Here’s the good news. You can use existing crowdfunding platforms, there are many of them, and companies raised $2.6B in 2012 – the latest year we have hard data for. The bad news? The average company raises $1,300.

Q. How does the investment criteria for crowndfunding differ from angel investors so that they can require a return so much lower than angel investors? 

A. Generally speaking, it comes down to supply, demand. and risk The average investment is $80 in crowdfunding – that changes the expectations dramatically.

Q. Are family offices focusing on “sustainable investing” as they key driver rather than financial return?

A. Sustainability means environmental, social and financial returns – a/k/a “triple bottom line”. So, the best way to think of it as not one or the other, but that some family offices have focused on additional selection criteria in addition to “acceptable financial return”.

Feedstocks, agriculture and supply chain

Q. Does growing feedstocks on marginal land replace forage crops and therefore affect feed prices?

A. Feed prices are driven by a) demand, b) the availability of other sources of feed (as opposed to forage crops) and c) crop yields. Generally speaking, rising crop yields rising and new sources of feed appearing can be expected more than offset and land use change from forage land to energy crops.

Q. How do oil seeds compare to corn, stover, and switchgrass re: cost of production?

A. On an energy basis, corn starch is the most affordable feedstock right now. It’s early days with energy crops such as switchgrass — but they can be expected to produce fuels competitive with fossil fuels when they (and the biorefineris that use them) are both at commercial scale. Oil seeds are generally more competitive at this time in higher density fuels such as diesel and jet, and the chemistry is less complex.

Q. What about the Tilman approaches that evaluates low-impact, high-yield crop mixes?

A. Generally speaking, it’s tougher to do grower education and get grower adoption — but naturally, producers would love nothing more than higher yields and lower environmental impacts.

Q. If yield are slightly lower for switchgrass on marginal vs high-quality land, what are the comparable results for corn and soy on marginal vs high-quality land?

A. The Corn Refiners Association has good state-by-state stats here.

Q. Is there any rule of themub for what we mean by “drought/heal tolerant”? 

A. Not yet. Claims and results vary.

Q. What about paper mill waste? Does that work?

A. Some companies like Chemrec have focused, to date without going to commercial scal, on using black liquor from pulp & paper mills. It remains a prized potential feedstock.

Q. With plants that are engineered to have less lignin, what about resistance to insects and diseases?

A. The focus os research is reducing lignin to a level which improves processing without a negative trade-off in terms of plant yields because of pests and disease. ANything that makes it to market will have checked off positively when it comes to that trade-off.

Infrastructure

Q. What about flex-fuel vehicle distribution and E85 pumps? What infrastructure is needed?

A. Generally, the acute need is flex-fuel vehicles that can tolerate higher blends of alternative fuels. Blender pumps that allow consumers to dial in blends like E85 “sweeten the pot”, but are expensive and generally the vehicles have to come first to establish the market.

Q. What’s more valuable to customers? “Drop in” or “new to world”

A. There’s nothing more powerful in terms of developing a customer relationship than showing them a drop-in replacement molecule that is cost-advantaged and is green. However, in terms of furls and chemicals, we would be thereby limiting ourselves, to some extent, to the types of chemicals that can be produced at low cost from petroleum refinery feedstocks such as ethylene, propylene, benzene, toluene, xylene, butene and a natgas feedstock such as methane? That’s why we have the chemicals we have — because they can be made from oil & gas intermediates and meet perfomance needs. Long-term, what will matter are the performance needs and the costs — and biorefineries will have their own intermediates that they make easily and cheaply, and will likely evolve their own novel molecules where they can compete on cost and performance most effectively.

Processing technologies

Q. DuPont has focused on high-value products. Cellulosic ethanol is low value. Does this work?

A. Given that DuPont is going to license it’s technology, it certainly is producing a high-value product.

Q. How much could a switch from ag residues to MSW save in feedstock costs?

A. Depends on the yields, prep and preprocessing costs, and local feedstock costs, of course. But, assuming same yields from the two feedstocks, the benefit could be something like $100 per ton, in moving from a $75/ton ag residue stream to a -$25/ton stream (zero cost, plus a tipping fee, for MSW).

Q. Some producers have struggled to process baled cellulosic feedstocks; how can the facilities handle source separation and uncleared MSW streams. Worth the risk?

A. Companies such as Enerkem have shown that MSW can be handled at scale, and lab results for some technologies indicate that MSW works for them. The big issue is variability — no two shipments of MSW are the same. So it all comes down to pretreatment and preprocessing. Companies that have strong IP here, yes it’s worth the risk to access the lower-cost feedstock.

Q. Does the Enerkem process allow for reasonable equity returns if there are no tipping fees?

A. Depends on your definition of “reasonable” — but our understanding is that a) tipping fees are widely available and for some time, so projects will go to those sources and b) yes, technologies could return a profit without them, though obviously lower. Though, keep in mind that a $25/ton tipping fee translates into just a $0.35/gallon shift in cost.

Q. What kind of gasification is Enerkm using for the MSW?

A. Enerkem uses a bubbling fluidized bed gasification reactor.

Q. Sugars to diesel? What’s the ball park number for cost per gallon? Efficiency?

A. Probably the best numbers right now come from Amyris, which has a theoretical of 30% yield — generally, long-term aim by producers is around 85% of theoretical.  Costs? Last we saw ( a year ago), production costs for farnesene of $3.50 per liter. That’s fanesene, not farnesane (an alkane suitable for diesel), but its a reasonable proxy to start with.

Downstream markets: Aviation

Q: Isn’t it a wonderful conincidence that just when bio-jet needs financing, conventional jet prices come down so the airlines can afford to finance it?

A: If airlines are in a position of higher cash flows, that will likely stimulate upgraes and expansions of their fleets, rather than investmetns in bio-jet — but they do have more options now, the airlines, than before. On the other hand, they want cost-competitive fuels, not green premiums — so the crush-down in fuel prices has made it tougher on fuels, especially high capex fuels that need high prices to amortize capital expaenses against.

Q. Is there any effort to grow castor for the airline industry?

A. As we wrote in January 2012, “Evogene announced that it is establishing Evofuel, a wholly owned subsidiary, to focus on developing seed for advanced second-generation feedstock for biofuel. Included in the activities that are being transferred from the parent company to Evofuel is the development and commercialization of castor bean varieties for Brazil as well as the biofuel research and development activities located in Israel. In addition to its activity for development and of advanced castor bean seed, Evofuel intends to broaden its activity to additional potential feedstocks for the biodiesel, biojet and bioethanol markets.

Q. Are airlines looking for feedstock-specific initiatives or feedstock-agnostic? Are non-agro feedsrocks like algae going to have a slightly difficult path to utilization?

A. Airlines insist on sustainable feedstocks — so they are not feedstock-agnostic so far as that goes. Genrally, they are positive about algae although the costs which are coming down, will need to come down further.

Q. What is the potential size of the market for biojet? How many gallons?

A. 60 billion gallons, worldwide, based on 100 percent replacement. 30 billion, based on 50 percent blends.

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