Praxair expands Louisiana CO plant to better supply biofuel producers

In Louisiana, Praxair, Inc., a wholly-owned subsidiary of Linde plc, has announced the completion of a major investment project at its Geismar, Louisiana facility, bringing a new plant online that will increase carbon monoxide supply to customers in the Geismar area.

The plant incorporates a new carbon monoxide purification train with more than 13 million cubic feet per day of capacity. This facility is part of a much larger investment that Praxair has embarked upon in Louisiana and the US Gulf Coast and leverages proprietary technologies to improve the overall efficiency of the site and maintain its long-term reliability and competitiveness.

This latest investment further strengthens Praxair’s ability to reliably serve the increased demand from customers, ranging from world scale refineries to technology leading biofuel companies.

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Minnesota’s ethanol industry contributed $2.31 billion to state’s GDP in 2018

In Minnesota, the state’s ethanol industry contributed $2.31 billion to the state’s gross domestic product (GDP) in 2018, according to a new study by ABF Economics.

In 2018, the study said, Minnesota’s ethanol producers produced 1.27 billion gallons of ethanol, 3.8 million tons of dried distiller’s grains with solubles (a high-protein animal feed) and 283 million pounds of corn oil (which is used for biodiesel production).

This in turn, the study said, generated $6.9 billion in gross sales for Minnesota businesses and supported 20,137 jobs in 2018. Furthermore, according to ABF Economics, Minnesota’s ethanol industry contributed $1.74 billion in household income and paid $204 million in state and local taxes last year.

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Indonesia’s PLN to convert 122MW of power production to crude palm oil

In Indonesia, Reuters reports that the national utility PLN is switching three of its diesel-fueled and one of its gas-fueled power plants to crude palm oil which together will produce 122MW of power for Papua, East Kalimantan and South Sulawesi. The four plants currently consume 190 million liters of fossil fuel which will now be crude palm oil by the end of the year with conversion trials currently on going. For most of its diesel-fueled power plants, PLN had already switched to B20.

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Calgren Dairy Fuels injects bio-RNG into Southern California Gas pipelines

In California, Southern California Gas Co. and biogas producer Calgren Dairy Fuels announced Feb. 14 that renewable natural gas produced at Calgren’s dairy digester facility in Pixley, California, is being injected into SoCalGas pipelines. The project marks the first time that carbon-negative renewable natural gas produced from cow manure has been injected directly into SoCalGas’ natural gas system. In August 2018, SoCalGas began receiving renewable natural gas into its system from CR&R, Inc.’s anaerobic digestion facility in Perris, California. The renewable natural gas from that digestion facility is already being used to fuel about 400 waste hauling trucks.

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Kinder Morgan to boost Argo infrastructure to help reduce ethanol glut

In Illinois, Reuters reports that in an effort to slow falling ethanol prices as a result of a supply glut and in response to ADM flooding the benchmark Argo terminal since late 2017, Kinder Morgan will expand its barge-loading capacity to help increase the flow of ethanol towards coastal markets with higher prices. The number of barges able to load will be at least doubled, perhaps as soon as the end of the year, and the company will also invest in additional 50,000-barrels of storage at its nearby Stony Island facility.

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Brazilian H2 February ethanol prices jump more than 10%

In Brazil, Platts reports that hydrous ethanol prices surged to $562.7/cu m during the first half of February, an increase of more than 10% from the second half of January and the highest seen since November 1 due to retailers failing to pass on lower gasoline prices to consumers. As a result, drivers chose to fill up with more hydrous ethanol than gasoline. During the week ending February 17, the ethanol parity was 63.26%. Typically, a parity of below 70% will see drivers choose ethanol over gas.

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PNNL calling on algae industry and academia to partners on DISCOVR project

In Washington, the Department of Energy’s Pacific Northwest National Laboratory is calling on algae industry partners and academic researchers to help find the best algae strains for biofuels and bioproducts to reduce the cost of producing bioenergy from algae feedstocks. PNNL and its partners in this effort are offering private and academic collaboration opportunities.

PNNL leads the DISCOVR project, which stands for Development of Integrated Screening, Cultivar Optimization and Verification.  Along with PNNL, Los Alamos National Laboratory, the National Renewable Energy Laboratory, and Sandia National Laboratories comprise the DOE lab consortium sponsored by DOE’s Office of Energy Efficiency and Renewable Energy.

The goal of the call for collaboration is to solicit algae strains, tools and techniques from the algae community to further boost algae productivity. This call gives industry and academia an opportunity to partner with the four national laboratories in DISCOVR, as well as AzCATI.

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Malaysia hoping diplomacy with France will ease palm oil tensions

In Malaysia, the Borneo Post reports that Malaysian and French officials are set to meet to discuss palm oil in an effort to better understand the product’s opportunities and challenges. Malaysia is trying to head of implementation of the French Parliament’s ban on palm oil for biodiesel from 2020. The French Environment Ambassador is set to visit the country in order to look into the sustainability of production while the French and Malaysian Parliamentary Friendship Group as well as Malaysia-France Business Council meeting in March are expected to be opportunities for information sharing and dialogue on palm oil.

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Changing of the Guard

With the news that Matt Carr is leaving his post as the Executive Director of the Algae Biomass Organization, it’s beginning to feel like a real changing of the guard is taking place on the watchtowers that surround and advanced the bioeconomy.

It was only a few months ago that long-time RFA CEO Bob Dinneen stepped into an emeritus role as a senior advisor and Geoff Cooper was appointed RFA’s new CEO. And some time next month Brent Erickson will give up his role as the head of BIO’s Industrial and Environmental Section. Between these three, there’s more than 60 years of experience in the advanced bioeconomy’s trade associations.

We also note that the long-time head of REG Life Sciences, going back to LS9 days, Steve del Cardayre, went on a sabbatical in recent months; and we’ve seen some of our longest-serving CTOs like Virent’s Randy Cortright move over to new organizations and new roles.

It is because, to a great extent, that the bioeconomy is not organized like the old petroleum-based economy — with giant companies, stifled for innovation, grinding down the costs and grinding down the competitors, in a grasping oligopoly. Instead, there are hundreds of companies and technologies vying for their day in the sun, not through predatory influence and the competitive advantage expressed in economies of scale created through government fiat over the years, but through technological innovation and improvement. Case in point, the Navy paid $25 a gallon for renewable fuels  early in this decade and by 2016 the Navy made a huge 70 million gallons by of a biofuel blend at $2.07 per gallon. “That’s the story, that’s the success,” said Navy Secretary Ray Mabus at the time.

But our love of innovation has not made a generation of science projects — in the past two years, more than 1 billion gallons of advanced biofuels, chemicals and materials projects have been built or are under construction around the world, and hundreds of first-generation ethanol and biodiesel plants are operating at scale today. Ethanol is priced at less than $1.50 a gallon today, a third of what it cost a decade ago.

Yet, the bioeconomy is not shrouded in secrecy, run by cabals and created on the back of predatory railroad dealings as the petroleum refining industry was. There is a great difference between the openness of the supports that renewables receive and the nearly-invisible yet massive supports that petroleum receives. This industry has been built not only to deliver a different product, but to do business differently, and everyone will benefit by the world these gentlemen and their colleagues have built.

They are not risk-takers, but risk-minimizers, and because they are so focused on minimizing the risks, they are generally very good at taking the outsized risks associated with transformation of the world’s energy supply chain. An app is a wonderful thing, but it is built on packet-switching, on the internet protocol, on the innovations in co-axial and digital cable, and ultimately on the railroad deals of the 19th century that, at no cost to industry, built the right-of-ways, the very distribution system for the bits and bytes you are reading now, to reach you at a nominal cost of energy and time. Yet, this industry has been forced to struggle to obtain the same supports — in building out an affordable, reliable, available and sustainable supply-chain — that petroleum received, that the internet received, that the railroads, the airlines and the auto manufacturers received. These leaders have labored hard to assure that supply-chain and to assure, in del Cardyre’s case, that the technology would be affordable to deliver.

This then, is the type of economy and body politic they have developed — open, clean, renewable, protective of our environment, an affordable path to a new economy, using today’s infrastructure, something that auto manufacturers can work with in their existing designs and that astonishes local mechanics when they see how clean the engines are, and how long they last. They have supported energy independence with every effort they have made — not just energy independence for Americans, but energy freedom for all. And they have supported the men and woman in uniform by giving them affordable, renewable fuels that do not have to be purchased from forces who oppose our national aspirations, and which assure us of a supply of affordable fuels no matter what happens in the international oil markets. Our soldiers and sailors know that funds to cover spikes in energy prices, which almost invariably come at times of international crisis, are routinely taken out of funds earmarked for training and readiness.

These four men — and countless men and women who have labored beside them — have made friends for the bioeconomy, and helped assure that there is a business for the bioeconomy, by building coalitions and making friends for industry. The story of the bioeconomy is one of partnerships for progress — policymakers, strategic customers and investors, bankers, researchers, consumers, auto manufacturers, environmentalists, farmers, urban interests, and more. All of these have to come together to create legislation like the Farm Bill and to develop and deploy technology. policy requires advocacy and partnership requires a medium and that is the work that associations do.

When I was a boy growing up in faraway Sydney, Australia, the great hall at my school which was used for assemblies and other important occasions had an inscription in classical Greek upon the back wall as a a memorial to schoolboys who had served in the Great War. When it was my turn to study that language and learn to translate that phrase, I discovered it was from Pericles’ Funeral Oration, and said:

Famous men have the whole earth as their memorial. It is not only the inscriptions on their graves in their 5 own country that mark them out; no, in foreign lands also, not in any visible form but in people’s hearts, their memory abides and grows. It is for you to try to be like them. Make up your minds that happiness depends on being free, and freedom depends on being courageous.

I have often thought back to that idea that famous men have the whole earth as their memorial, those leaders still among the living and those who have passed on. There’s something powerful and true in that — the world is what we have made it, and our leaders have guided and exhorted us to make it so, for good or ill. There’s nothing but good in the advanced bioeconomy, and there’s nothing but good in the world that will come to be because of this set of technologies when they are sustainably deployed at scale, and for that we have much to thank from this quartet.

We’ll miss some favorites like Bob Dinneen’s annual In/Out list, Matt Carr’s insidious ability to find new opportunities for algae in industry and policy supports seemingly underneath a blueberry muffin or a leaf blowing down Pennsylvania Avenue, and Brent Erickson’s outward cool under fire, visionary leadership and his amazing abilities (parenthetically) as a portrait painter.

At the Algae Biomass Organization

Matt Carr transformed ABO into an organization representing the full universe of opportunities made possible by advanced algae cultivation, with an impressive range of new members coming on board to participate in the group’s outsized impacts:

  • • ABO’s membership now includes five of the largest domestic algae producers. 
  • • New corporate members that have joined over the past year represent some of the most significant points in the algae value chain. These include providers of food and nutrition products that can be made with algae, advanced engineering firms, providers of algae-based water treatment systems, laboratory systems and automation, biofuels and more.

Matt leveraged the growth in membership diversity into supporting some remarkable policy wins, including:

  • • An active and strong bipartisan Congressional Algae Caucus – this group of lawmakers has become an active advocate for annual appropriations that support important research and projects across the algae value chain to the benefit of ABO members and the industry. These funds are expected to exceed $40 million in 2019.
  • • An engaged Interagency Algae Working Group – a group coordinating federal algae R&D efforts that includes the Departments of Commerce, Energy, Agriculture, Heath and Human Services, the National Science Foundation, and the Environmental Protection Agency.
  • • A transformation of carbon capture policy – An update to the 45Q tax credit will allow algae and other biological forms of carbon capture utilization to take advantage of this valuable incentive for the first time.
  • • A Farm Bill that supports algae farming provisions in the latest Farm Bill that will assist the algae industry include a new Algae Agriculture Research Program at USDA, and language directing the Department to develop crop insurance tools for algae production – with the potential to deliver millions of dollars of value annually to the algae industry.
  • • The launch of the Future of Algae for Food and Feed Initiative – With the launch of the Future of Algae for Food and Feed (FAFF) initiative, a huge step was taken toward addressing barriers to widespread adoption of algae food and feed ingredients. The FAFF also laid the groundwork for new partners – and new funding streams – for this important work.
  • • A successful Algae Biomass Summit, with a strong program shaping up for 2019 in Orlando – The Algae Biomass Summit has become the most important algae industry event. The 2018 Summit featured its strongest business program to date, including a new Products & Markets Track, Algae Product Showcase, and algae-focused menu, and attracted nearly 200 first-time attendees. The 2019 Summit is shaping up to be even better.

Over at BIO

Brent Erickson arrived at BIO on March 17, 2000, following highly-regarded staff positions in the U.S. Senate and trade association world.  Brent came here to head up the then newly-created Industrial and Environmental Section (IES).

As the first and only Industrial and Environmental Section  leader, he helped establish the fledging industrial biotech sector as a key part of the biotech business community.  He started the BIO World Congress on Industrial Biotechnology from scratch over 15 years ago, and today it is the premier event for the industrial biosciences sector.  He helped found the Journal of Industrial Biotechnology in 2005, and has served since then as its consulting editor.  He has been a tireless advocate for our industrial biotech sector, with a series of impressive advocacy wins under his belt — not the least of which were the passage of the Renewable Fuel Standards in 2005 and 2007.

Prior to joining BIO, Erickson held several highly-regarded staff positions in the U.S. Senate and at the American Petroleum Institute (API) in Washington, D.C. Following his departure from BIO in the spring, Erickson expects to start BioInsights Consulting LLC, a boutique consulting company to serve companies innovating in biotechnology.

Over at RFA

Dinneen was with RFA for more than 30 years, including serving as the organization’s president and CEO since 2001. During his tenure, Dinneen led the industry and achieved a number of landmark legislative and regulatory victories for ethanol, including passage of the original Renewable Fuel Standard (RFS) in 2005 and significant expansion and extension of the RFS program in 2007. Dinneen also played a crucial role in the creation of the reformulated gasoline and oxygenated fuels requirements; securing the RVP waiver for E10; working with states to adopt bans on MTBE; and multiple extensions of the ethanol blender’s tax credit and secondary tariff on imported ethanol, among other important victories.

“For more than three decades, I have had the privilege of working for an industry whose mission inspires me, a Board of Directors that supports me, and an organization that exemplifies the highest degree of professionalism, creativity, and competence,” Dinneen stated. “I have borne witness to phenomenal growth, seen rural economies transformed and gotten to know and work side-by-side with the people who made this industry the success it is today. Every day I am thankful for our accomplishments and still enthusiastic to tackle the challenges ahead. Without a doubt, I have been truly blessed.”

“But 30 years is a long time and I believe now is the right time for new leadership, new ideas, and new energy at the helm of the Renewable Fuels Association. I am going to keep working at RFA in a different capacity but with the same goal: to assure RFA and the industry I care about so deeply continue to grow and realize their full potential,” Dinneen continued. “At the very least, I have great confidence that under Geoff’s leadership, the RFA will develop into an even more effective and authoritative voice for the U.S. ethanol industry, and that may be my greatest blessing.”

RFA Chairman Mick Henderson said, “Bob has spent most of his professional life dedicated to this industry, and for that we will always be grateful. He has worked tirelessly on our behalf for 30 years and in that time, there was never any doubt that we could count on Bob to fight for us every day. The industry simply would not be what it is today without Bob’s direction and leadership over the past three decades.”

Over at REG Life Sciences

Prior to joining REG Life Sciences (then LS9), Dr. del Cardayre spent 9 years at Codexis and Maxygen, where he was directly involved in the development, application, and commercialization of technologies for the engineering of biocatalytic processes for the pharmaceutical and chemical industry.

Steve published extensively on the application of evolutionary engineering of biological systems, focusing primarily on the engineering of whole cell biocatalysts.

But it was the work on REG Life Sciences that he’ll be known for, for some time to come.

First, there was the astonishing possibilities that flowed from proving out the concept that you could have a one-step process and produce a fuel or a chemical, instead of a fat, from sugar. It seemed like a crazy idea when Jay Keasling, Chris Somerville and George Church sketched out the idea on a napkin.

You could do it with chemical intermediates and also with an expensive hydrogenation step in there — but, one-step? It seemed astronomically difficult and ambitious, and yet del Cardayre and his team proved it out on the bench, and later in 1000 liter fermebters, and ultimately in a demonstration at scale in Okeechobee, Florida. The oil price debacle had dimmed the prospects for renewable chemicals and fuels for a while, but California’s Low Carbon Fuel Standard has been strongly driving demand, and now ExxonMobil and REG Life Sciences are engaged in some serious work aimed at commercializing the technology, and now Clariant is part of that effort aimed at moving from sugars to biodiesel. More about that here. http://www.biofuelsdigest.com/bdigest/2019/01/23/exxonmobil-teams-with-reg-and-clariant-to-evaluate-waste-based-cellulosic-sugar-production/

If it comes to fruition — you can thank del Caryre and his team for the heaviest part of the lift. They were like the first, second and third stages of the Saturn V rocket — you might have not seen then on the lunar surface when the moonshot became a reality, but they were the vehicles for reaching orbit and translunar injection, the heavy lifters, as Dean Acheson put it, “present at the creation”.

The Bottom Line

These days, the Ave Atque Vale is usually transmitted via digital words upon a digital page — in the the thank-ee’s and press releases of the information age. In this case, we’ll have much more to look at than the words of thanks and the digital praise. Wherever there is openness in business, innovative thinking, partnerships for technological progress using biotechnology, and sustainability in the materials and energy we use in our world, there’ll be something in there of Carr, Dinneen, Erickson and del Cardayre.

They have much left to give and accomplish in all the things they will do in the years to come — but we owe them a debt of gratitude even now that is easy to measure and difficult to repay.

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The Expert Witness: The Digest’s 2019 Multi-Slide Guide to Bioeconomy Litigation

Lee Enterprises Consulting is the world’s largest bioeconomy consulting group with over 100 subject matter experts (SME’s) in all areas of the bioeconomy.

Wayne Lee, CEO of Lee Enterprises Consulting offers this illuminating overview of what bioeconomy litigation is, what makes a good expert witness, and more.

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Eni teams with RenOils to collect UCO for biodiesel production

In Italy, Eni and RenOils, the Italian national vegetable and animal oils and fats Consortium established in 2016 to ensure the correct management of the collection, transport, storage, processing and reuse of vegetable oils and animal fats, signed a collaboration agreement to promote the recovery of used vegetable oils.

Eni currently makes use of approximately 50% of the used cooking oil available in Italy and, in part thanks to RenOils-member regeneration companies, will extend its capacity to produce high-quality biofuel from this waste in the company’s bio-refinery in Venice, at Porto Marghera, and soon also in Gela.

A letter of intent was signed today by Giuseppe Ricci, Eni Chief Refining & Marketing Officer, and Ennio Fano, President of RenOils. It also includes information and environmental education campaigns to convey the benefits of reusing oil to produce fuel as an alternative to fossil fuels and awareness-raising projects for trade associations and consumer and environmental associations.

The goal is to increase collection and proper disposal, since used oils from households are currently wasted almost entirely. Around 75,000 tonnes of waste food oil were collected in 2018, almost exclusively from the food service and industrial sectors, which represent just 25% of oil produced in Italy, which in turn totals around 280,000 tonnes per year.

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Cortus Energy teams with Swedish Biofuels to produce bio-jet from forest waste

In Sweden, Cortus Energy AB (Publ) and Swedish Biofuels AB (SB) have agreed in a preliminary agreement about cooperating with the goal of during 2019, jointly projecting a first commercial plant for production of bio-jet fuel based on forest raw material and alcohols for the Arlanda airport needs.

Initial contacts around land, logistics, fuel and licensing has been taken during the winter. Cortus and SB’s joint facility for bio-jet fuel will be first of its kind and with a great global market potential. SB’s bio-jet fuel now complies with current standards jet fuel, and it has been successfully tested by the US and Swedish defense forces and for civil aviation over the past ten years.

In addition to green jet fuel, the plant will be able to produce other valuable products such as liquid transport fuels and chemicals. The technology planned for the plant is a combination of Cortus WoodRoll® process and SBs catalytic process for bio-jet fuel. The WoodRoll® process converts wood into synthesis gas which, along with alcohols, is the raw material for SB’s catalytic process for green jet fuel.

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Record molasses prices boosts Philippine ethanol price to $1,165/cu m

In the Philippines, Platts reports Sugar Regulatory Agency data shows record molasses prices pushed domestic ethanol prices to $1,165/cu m during the first half of February. Molasses prices rose to $194.85/mt during the first half of the month bringing ethanol prices to an equivalent of $0.83/liter. Sugar prices also rose during the period to $588.2/mt, leading to equivalent ethanol prices of $0.54/liter. Landed CIF Philippines ethanol was $454.67/cu m during the period but the national blending policy limits the amount of imports in order to support the domestic industry.

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Green Earth Institute aims to produce green chemicals from oil palm waste in Malaysia

In Japan, Green Earth Institute plans to start producing high value chemicals— alanine and valine—from oil palm waste using its technology in a Malaysian trial by 2022 with hopes of partnering with companies such as Sime Darby. Empty fruit bunches will be used but also palm trunks. GEI, started in 2011 with funds from the University of Tokyo and Malaysia’s PNB Group, says it needs about 100,000 metric tons of palm trunks for a commercial facility to be profitable.

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Brazilian sugar mills seen being more responsive to sugar and ethanol prices

In Brazil, Reuters reports that Louis Dreyfus believes flexible sugar mills that can easily switch between sugar and ethanol will likely make the shift faster this next season than in previous seasons, leading to “dramatic” shifts in production of either product as mills become more pragmatic in their decision making. Alvean believes that sugar prices are already at the tipping point where the heavy focus on ethanol production may start to shift, predicting a small surplus during 2019/20 while others are expecting a small defict.

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Circular Economy Mapping Tool for Wales launched

In UK, commissioned by WRAP Cymru, Anthesis has developed this user-friendly Circular Economy Mapping Tool for Wales – a useful resource for those operating within the Welsh bioeconomy; particularly food and drink producers and processors. It provides an interactive, visual representation of the extent of Wales’ thriving bioeconomy, plotting where different types of businesses are located across the country and where there are clusters. There are also multiple options to find out much more.

Users can:

  • Explore the number of businesses by industry, region and employee band size
  • Get an understanding of major waste types and quantities, according to business activity
  • See the economic projections for employment, Gross Value Added (GVA) and turnover to 2030 for the sector.

The tool is intended to assist WRAP Cymru in driving greater collaboration between the many organisations that Wales’ bioeconomy is comprised of.  It is hoped that it will act as a starting point for facilitating synergies that will allow for more efficiencies to be achieved; ultimately, increasing the circularity of the Welsh bioeconomy.  It provides businesses with the ideal opportunity to further enhance their understanding of the space that they are operating in, and to build useful connections.  For example, bakeries could look to establish relationships with breweries that might want to turn excess bread into beer.

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McGill University researchers produce methanol from ethanol using sunlight

In Canada, Science magazine reports that researchers from McGill University have developed a method of producing ethanol from methanol by using sunlight. Using gallium nitride nanowires “spiked” with magnesium as a catalyst, following successful results producing benzene from methane gas using the same technology, they were able to absorb UV rays from sunlight, negatively charging their coils that rips water molecules from methanol, creating methyl carbene. Those methyl carbene molecules then combine with methanol to create ethanol.

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Republicans furious EPA chief rejected proposal to cut ethanol blending

In Washington, Reuters reports that the acting administrator of the Environmental Protection Agency rejected a staff proposal last December that would have cut the biofuel blending mandate, a move that has enraged Republicans and threatened their votes in the Senate confirmation hearing that would make the acting administrator the permanent one. The proposal sought to cut ethanol blending to 14.3 billion gallons per year through 2023 when the Renewable Fuel Standard expires from the current 15 billion gallons.

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Risks in the Climate Finance Markets

By Michael Newman, Chief Operating Officer, Parhelion Underwriting Inc.

Special to The Digest

Risks often act as barriers to investment and trading in the climate finance market – the systems designed to reduce greenhouse gas emissions such as the Renewable Fuel Standard (RFS), California’s Cap & Trade and Low Carbon Fuel Standard (LCFS) – because Federal and State programs have created areas of uncertainty. The risk of invalidation of credits and the political pressures that threaten to repeal the legislation worry market participants – but insurance risk capital can be used to mitigate these concerns and in fact already works successfully in several markets. One example of this is in the California program, where “buyer liability” has created a price differential between carbon offsets depending on the level of risk associated with them. By removing this risk from both offset buyers (typically refineries and utilities) and sellers (project developers), insurance adds certainty to the market because it’s a guarantee with investment-grade A+ security.

Similar solutions are available in Federal RFS and State LCFS markets, allowing refiners, producers, marketers and other parties that assume RIN invalidation risk in sales contracts to offer clear title. For refiners incurring significant RFS compliance costs as regulated parties, RIN insurance reinforces their due diligence programs at relatively small additional expense. For biofuel producers, using insurance adds liquidity to the market, leveling the playing field and facilitating deals that might not otherwise be possible.

But the role of insurance in Climate Finance Market isn’t limited to the risk of invalidation and revocation. Buyers of long-term, fixed price offtake of RINs and LCFS credits often look for a “reg out” clause – they want to be able to cancel their purchases of RINs if the RFS2 or LCFS is repealed.  There is a common risk factor: the fear of buyers that the programs will not be in place when credits are delivered to them, leaving a worthless commodity at a later date; and the seller being unable to truly represent their cash flows as dependable, and a significantly lower likelihood of raising the debt capital needed to build out large, efficient projects.

The revenue generating capability of many renewable fuel facilities would be negatively affected if one of these programs is eliminated, but if both happened to be eliminated at the same time it would mean certain death to the industry – so we have created a pool of insurance capital that underwrites the continued existence of the RFS and LCFS markets.

The climate finance markets are big (the size of the RIN market is $6 billion while the LCFS market currently sits at $2.3 billion and is expected to grow to $10.5B by 2030), but the insurance industry is even bigger. It takes that level of capital to ensure market liquidity and at Parhelion, we use the capital in the global insurance and reinsurance industry to take the risks that other forms of capital (debt and equity) can’t or won’t take.

The Problem of Invalidated RINs in the Renewable Fuel Standard

Under the Renewable Fuel Standard, the EPA imposed a “buyer beware” approach to the purchase and sale of RINs. This creates a liability for any buyer of RINs, making them responsible for purchases of invalid RINS, even if it’s done inadvertently.   The liability includes the replacement cost of invalidated RINs as well as civil fines and penalties imposed by the EPA. The EPA has prosecuted millions of US$ worth of fraudulent RIN transactions, yet fraud continues to be a significant risk – and it’s a risk that is not covered by standard property and liability insurance policies; neither are RINs considered “goods” under the Uniform Commercial Code (UCC), so the Code’s warranty provisions do not apply.

The EPA sought to address the potential for fraudulent RIN transactions by encouraging third-party verification of the generation of RINs, the Quality Assurance Program (QAP) under which third-party auditors evaluate producers of renewable fuel to certify they were in fact producing the required product in compliance with RFS regulations.

The success of the QAP, though, has been limited. Only about 12% of all RINs are Q-RINs because the process is expensive and numerous administrative steps are required for any party replacing RINs, claiming an affirmative defense to an alleged civil violation, requesting corrective action, and notifying EPA of the existence of a potentially invalid RIN (PIR) – so market participants have relied on other risk management strategies: only purchasing RINs from parties who have long established and trusted trading relationships; implementing their own auditing processes or only purchasing ethanol-based RINs. This development hurt smaller renewable fuel producers and reduced the RIN market’s overall liquidity.

A recently-introduced solution to this problem is to insure the risk, creating a risk-free RIN known as a Platinum-RIN. The insurance can be bought by any of the parties in the transaction, enabling biofuel producers to increase the number of buyers they can sell to; and allowing marketers that assume RIN invalidation risk in sales contracts to offer clear title. For refiners incurring significant RFS compliance costs as obligated parties, Platinum RIN insurance reinforces their due diligence programs at relatively small additional expense.

The beneficiary of the insurance is the owner of the RIN, the policy Loss Payee. First-party fraud is excluded – so a fraudulent party will not be able to make a claim – but the policy has a ‘Multiple Insured Clause’ which means that even if the original insured is responsible for the fraud, a separate and unrelated third party (usually the obligated party) can still benefit from the coverage and be paid as the Loss Payee.

The pricing reflects the relative exposure to loss: firstly, between RINs and Q-RINs (a Q-RIN can be insured at a reduced cost); and secondly, between fuel types (D3 to D7).

The policy is underwritten by first-class insurers, so it’s a guarantee with investment-grade AAA security, completely removing the invalidation risk and the associated civil fines and penalties. The coverage matches the invalidation triggers defined in the RFS regulations, eliminating the invalidation risk over a three-year period by replacing the insured RINS at future market prices. The program, managed by Parhelion Underwriting, is flexible: policies can be purchased by any participant and the coverage travels with the covered RIN and, although Q-RINs can be insured at a discounted rate, there’s no requirement for a QAP and the Platinum-RIN can be a cost-effective alternative to a Q-RIN.

Parhelion Underwriting is a Lloyds, London-backed risk finance company specializing in risks impacting investment in clean energy and climate finance markets.

 

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Biogas Business: The Digest’s 2019 Multi-Slide Guide to Biogas Conversion

Lee Enterprises Consulting is the world’s largest bioeconomy consulting group with over 100 subject matter experts (SME’s) in all areas of the bioeconomy.

Terry Mazanec, a member of Lee Enterprises Consulting offers this illuminating overview of biogas, what it’s good for, scale, bio-methane, what to do with it, key players, and more

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