By Dr Kapil S Lokare, Special to The Digest
1925 Nobel-Prize winner and Irish playwright, George Bernard Shaw once said, “Progress is impossible without change, and those who cannot change their minds cannot change anything.” Today we need to face the fact that business models and the parameters that surround it are less durable than they used to be in the past. The essential rules of the domain – staying ahead of the curve and for creating and capturing economic value simultaneously were once fixed in place for years, even decades, as companies tried to execute the same business models better than their competition. But in the present day, business models are subject to rapid displacement, disruption, and, in extreme cases, outright destruction.
One may cite numerous examples from various industries but lets leave that discussion for another day. But what’s less familiar is how, precisely, new entrants achieve and capitalize their disruptive power. What enables them to skirt constraints and exploit unseen opportunities and add to the development and well being of the human race? For incumbents, this kind of innovation is notoriously hard. Some struggle merely to recognize the opportunities. Others shrink from cannibalizing profit streams. Still others tinker and tweak – but seldom change – the rules of their domains. Should it be so difficult for established companies to re-innovate their business models? What approach would allow incumbents to overturn the traditional conventions of their industries before others do? Or simply opt for other commercialization strategies such as joint ventures and mergers to last another handful years!
Act I, Scene i…
Globally it has been recognized that there is an urgent need to create paradigm shifting disruptive technology that would help sustain individual economies – with the goal to sustain life on earth. Events such as the 1973-oil crisis or the fuel price panic after Hurricane Katrina including other geopolitical considerations across the globe have sparked an urgent interest in achieving a transition from non-renewable carbon resources to renewable bio-resources.
Soon thereafter mandates followed, such as Renewable Fuel Standard (RFS) was put in place as part of the Energy Policy Act of 2005 and expanded by the Energy Independence and Security Act of 2007 (EISA). The Renewables Directive, also officially known as 2009/28/EC is a European Union directive, which mandates renewable energy use within the European Union. With a more recent, Group of 20 (G20) Energy Ministerial meeting, on 2nd October 2015 centred on access to sustainable energy for all, energy efficiency, investments in energy and renewable energy. Once the legislations were put in place there was an inherent expectation to deliver.
Act I, Scene ii…
One direction to address sustainability was to utilize the pre-existing ethanol technology. Legislations for the E5, E10, and E15 followed across the various global economies. The fact is, ethanol works pretty well as a “drop-in” fuel, when blended with traditional petroleum based fuels. As a matter of fact, Nikolaus August Otto, (inventor of the accordingly named combustion engine) and Henry Ford demonstrated their engines could be run on pure ethanol back in late 1800’s, however as of today, one might want to take a moment to say good-bye to your favorite family car if it is dated pre-1990!
Even at its lowest concentration – the ubiquitous “E10” blend of 10% ethanol with gasoline – ethanol can play havoc with outboards and other “small” engines such as those powering all-terrain vehicles, chain saws and grass trimmers. Recent car makes (pre-2007) can handle only up to E15 with modifications! If you own a flex-fuel vehicle then E100 i.e., 100% ethanol may be utilized.
The question then remains – what percentage of the global population can own or afford to buy a flex-fuel vehicle? The obvious follow up legislation would be then to remove all the “older” car models to introduce the relatively new and efficient models to utilize the gasoline/ethanol blends that have become the de facto fuel for gasoline engines.
Act I, Scene iii…
It is clear that the barrage of technologies including the inevitable blend wall resulting due to ethanol’s hygroscopic nature and the need to deliver has left many start-ups and organizations wondering what direction we should take our future research and development efforts to a sustainable society. In this context, the second direction was – turning to nature for our commodity chemical needs utilizing Clostridia microbe or Escherichia coli bacteria for bio-butanol synthesis. Eventually a number of start-ups and joint ventures flourished since early 2000.
All have targeted iso-butanol over n-butanol production via modifications or developments of the classic anaerobic conversion of lactic acid and calcium lactate developed by Louis Pasteur in 1862 or the ABE (acetone, butanol, ethanol) fermentation process pioneered by Chaim Weizmann during World War 1, to produce cordite (a family of smokeless propellants). Numerous attempts toward the biosynthesis of iso-butanol have been made, yet the concentrations of butanol in the fermentation broth are not satisfactory. A number of strategies have been pursued to reduce the apparent toxicity of butanol to cells, including over expression of heat shock proteins, modification of the cell membrane, and alteration of the cellular stress response.
Despite all the efforts, the best results ever obtained for the ABE fermentations to date are in the vicinity of 20 g/L in butanol concentration from fermentation, 4.5 g/L/h in butanol productivity, and a butanol yield of less than 25% (w/w) from glucose (1.29 gallons per bushel where, 1 US bushel = 35.2391 L).
The claim to fame for most start-ups lies in their niche, which is predominantly in separation technology.
Act I, Scene iv…
We have recently witnessed the exit of high profile and Silicon Valley based Cobalt Technologies, despite its partnerships with ANDRITZ Inc., Solvay/Granbio, Bunge and the US Navy (for the production of jet fuel from n-butanol). It appears that mergers, buyouts and dropouts are now becoming the norm in the renewable fuels and chemicals industry as technologies become more mature and financing scarcer with the drop in petroleum based fuels.
The bio-butanol sector has certainly seen its share of shakeout over the years and the number of start-ups continue to dwindle, for example Green Biologics merging with Butylfuel, Butalco acquired by Lesaffre, Elekeiroz acquiring the technology rights on Coskata’s butanol processes, and Cathay Industrial Biotech abandoned its initial public offering (IPO) plans and currently also idled its bio-butanol production in China. Bio-isobutanol producer, Gevo, has been on the watch-list as the company has been operating at low cash on hand these past several quarters.
With the final truce between Gevo and Butamax, one may keep a closer eye on the deliverables from these two giants in the field. The recent subpar performances in the public markets have certainly scared companies in even entering IPOs, and as a result, many have now been seeking other commercialization strategies such as joint ventures and mergers such as the one between Gevo and its strategic partner Praj Industries, from India.
Tetravitae Biosciences, a spin-off from a research lab in UIUC in 2007, demonstrated in 2010 and acquired by Eastman Chemicals in 2011. However, Eastman has acquired the technology but put it to storage with no immediate plans to practice the technology. Swedish producer Perstorp’s oxo-alcohols unit on Sweden’s west coast which includes a 90,000 tonne/year n-butanol unit and “Whisky fuel” firm from Edinburgh, Celtic Renewables seems to be the only two so far making progress in the right direction. With Korea’s BioFuelChem Co., Ltd. building its IP portfolio, and GS Caltex Co., South Korea’s second-largest refiner, planning to build a 50 billion won (US$44 million) plant to produce bio-butanol. Despite being in the top 10% global producers for ethanol, the Australian progress has been abysmal with bio-butanol.
With major ethanol producers within Australia include Dalby Bio-Refinery and Sarina Distillary in Queensland and Manildra Ethanol Plant in New South Wales, with a combined total installed capacity of 440 ML one would anticipate Australia to be one of the leaders in the field. However thus far only ENEnergy Australia Pty Ltd. has been recognized as the sole performer from down under!
Besides the stringent regulations regarding ethanol use in India and being the top 5% ethanol producers, so far only two players in the butanol sector exist, Laxmi Organic Indistries and Reliance Life Sciences Pvt. Ltd. developing its IP portfolio towards butanol biosynthesis there have been no signs of pursuing bio-butanol in near future. Indian Oil Corp., on the other hand – the nation’s biggest refiner, plans to spend 160 billion rupees ($2.4 billion) to build a plant for producing synthetic ethanol as it seeks to secure supplies of the biofuel to meet mandatory blending norms. It seems the concept of designing a sustainable society has completely gone amiss in the region!
Act I, Scene v…
The blend stock opportunity for n-butanol exceeds $80 billion per year. In principle, butanol can solve two critical problems that exist for ethanol due to its physical properties, first: punching through the 10% ethanol (E10) blend wall and second, eliminating the need for refiners to purchase RINs (renewable identification numbers) from independent blenders – at prices that have recently been many times higher than in past years – bio-butanol can be blended at refineries and transported in existing pipelines (unlike ethanol, which is blended downstream at terminals).
Despite this, the conversion of n-butanol from the more accessible bio-ethanol has remained elusive to commercialization. Obtaining meaningful metrics are a sine qua non for assessing the sustainability of different processes for the production of biofuels in the bio-refinery of the future. It is this inherent “valley of death” between early stage research and commercialization that requires intervention, especially outside the bio-fuels space (sustainable chemicals, biomaterials, fibres etc.). Not to mention the low fuel prices, high feedstock costs and loss of government incentives evident from the free fall in the crude oil prices to less than $60 per barrel from more than $100 per barrel a year ago will determine which start-ups with filter through in the coming years.
It is then evident that the revenue from “drop-in” fuels in bio-refineries is relatively low, however some of the chemicals/biomaterials that may be derived from biomass (ethanol or butanol) are of high inherent value. Therefore, any new strategy towards the development of chemicals/biomaterials from the product streams to create components of high value would be highly desirable as this will help narrow the unfavorable split between the CAPEX and OPEX in operating a future bio-refinery. (Exhibit 1.)
Exhibit 1. A. Value-versus-Volume Curve, B. World Butanol Demand
Act I, Scene vi…
In principle, butanol could be produced via Biomass-to-Liquid (BtL) processes or from petroleum feedstocks. The remaining 2 isomers of the C4 alcohols; 2-butanol and tert-butanol remain under the domain of the petroleum sector with only a select few companies pursuing 2-butanol via the fermentation route.
Companies, such as European – BASF SE, Oxochimie a 50:50 joint venture between Arkema and Ineos, OXEA Corporation, Perstrop Oxo AB, Grupa Azoty, LyondellBasell, while Gazprom Neftekhim Salavat JSC from Russia and Polish ChemPoland seem to be the key role players in the respective regions. American – Eastman Chemical Company, Dow Chemical Company, South African giant SASOL, and Malaysian – Petronas, Farmosa Plastics Group from Taiwan, Mitsubishi Chemical and Asahi Kasei from Japan dominated the butanol market in 2014. National Organic Chemical Industries Limited (NOCIL), Oswal Petrochemicals Ltd. and Andhra Petrochemicals remain the primary role players in India. Saudi Butanol Company (SaBuCo), a joint venture (JV) between three Saudi petrochemical companies: Sadara Chemical Company (Sadara), Saudi Kayan Petrochemical Company (Saudi Kayan) and Saudi Acrylic Acid Company (SAAC), will construct a butanol plant in Jubail, Saudi Arabia. The new plant is touted to be the first of its kind in the Middle East and the biggest in the world.
Acquisitions and expansions are the major strategies adopted by these players to achieve growth in the global n-butanol market. China National Petroleum Corporation (CNPC), Sinopec Ltd., and Yancon Cathay Coal Chemicals among a handful more in their early stage have been the key makers from China. (Exhibit 2)
One may also envision n-butanol production straight from the fermentation broth i.e., catalytic route to valorize ethanol. This would be an ideal situation wherein the fermentation technology produces ethanol from biomass and chemical catalysts carry the ethanol forward to n-butanol, thus the two technologies would compliment each other. In considering the de novo design of any systems that upgrade existing biofuels (such as ethanol to n-butanol to 2-ethylhexanol) it is imperative to design working systems that are relatively inexpensive to keep investments low which is reflected in the pricing of the end product, i.e., a fuel, ethanol to an upgraded fuel, n-butanol as contemplated here.
However, n-butanol (petroleum derived, with prices fluctuations with price in propylene i.e., crude oil) is rather expensive at present – about USD 1250-1350/t versus about USD 650-750/t for ethanol (prices at July, 2015). A simple back of the envelope calculation would suggest the following: with 100% conversion of ethanol to n-butanol the mass yield would be 80%. So potentially USD 700 of ethanol feedstock could be converted to USD 1050 worth of n-butanol. One must remember the RIN credits have not yet been considered in these calculations, further the RIN credits hold true only when the resulting n-butanol is utilized as a fuel additive.
This gives a limited scope for capital investments on improving the conversion while still reducing the product-selling price. A high single pass conversion is desirable as it reduces the size of the plant required and the consumption of utilities.
Exhibit 2. Birds-Eye-View of Global Leaders in Butanol Production. Profiles assigned to the country in which the company or holding is headquartered. Color – Black (Petroleum Derived), Green (Bio-derived)
As for the future one additional transition from the biofuel to the biochemical economy would then be via the ethylene route i.e., dehydration of ethanol to ethylene. The produced ethylene can then be directed, using existing technology from Brazilian Petrochemical Company Braskem technology to equivalent polyethylene (PE) resin or simply green plastic or the BTX route using the Vertimass LLC technology developed at the Oak Ridge National Laboratory. It would be naïve to ignore a possible future joint venture flourishing from the two above.
On a closing note, the obvious question then to the leaders of the industries would be the following: On a comparative note with one of the largest scale commodity process i.e., Haber-Bosch process (named after two people key in its development: Fritz Haber and Carl Bosch) we must then ask a few questions, why did we choose to follow an entirely synthetic route and not use nature’s millions of years of biological evolution to produce ammonia? Why should our research and development efforts then remain focused on human engineered chemical processes and not biological ones?
One must bear in mind that nature has not developed the ability to handle high temperatures; molecular complexity and high temperatures coincidently do not work together (think poaching an egg). Instead of using high-energy conditions, nature prefers to use high-energy species. This is where nature’s unique skills and complexity developed through millions of years of evolution come into play. These are truly important questions that one must ponder upon while we continue to pursue the perfect system to attain sustainability.
Perhaps it is time to pivot and reconsider the business strategy for the bio-based industry and consider how multiple approaches can be utilized if the big picture is really addressing sustainability around the globe.
Dr Kapil S Lokare is a biomass consultant with the Emerging Technologies Division of Lee Enterprises Consulting, Inc., the world’s largest alternative and renewable fuels consulting group. His expertise is in bio-butanol, ethanol valorization to butanol and higher hydrocarbons, lignin (hydrothermal upgrading), biomass upgrading technologies, bio-renewables, and selective deconstruction of biomass. Dr Lokare, who currently resides in Berlin, Germany, may be reached at kapil.Lokare@lee-enterprises.com or by calling Lee Enterprises Consulting at +1 (501) 833-8511.