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18 Apr 2011 09:04:04

A $2 fuel vs. a $5 chemical

"Why make a $2 fuel when you can make a $5 chemical?" asks Cobalt CEO Rick Wilson, whose company was branded in the public eye as Cobalt Biofuels for several years, but has morphed towards "Cobalt Technologies" (its original name) and is squarely focused on the market for renewable chemicals for the time being. By any name, it's a hot company, ranked #14 in the world in this year's 50 Hottest Companies rankings.

"I'm not saying that any of the companies, including us, should not be pursuing fuels. The markets are huge and the molecules work. But the country has got all its priorities screwed up. Here we are chasing fuels, which is the hardest problem to solve, instead of incentivizing or supporting companies to get into business by solving some of the easier problems first, like chemicals or other bio-based products?"

"Significant cost advantage," says Wilson. "That's key. Over the years, I think we all have looked at a lot of new bio-based businesses and wondered where that significant cost advantage will come from."

OPX Biotechnologies CEO Chas Eggert agrees. "Equal performance, and lower cost. That's the secret of success," Eggert remarked. Earlier this week, Dow Chemical and OPXBIO announced that the two companies are collaborating to develop an industrial scale process for the production of bio-based acrylic acid from renewable feedstocks.

Both CEOs agree that the path to cost competitive advanced biofuels runs first through the garden of renewable chemicals. Not only because they are sold at higher prices. They are made in smaller volumes. That means smaller commercial scale plants, lower capital costs, and faster returns for investors for who, time is money. Where fuel-centric companies are raising hundreds of millions for their commercial-scale plants, OPX, for example, is raising just $35 million in its series C round, which takes the company through completion of its demonstration-scale plant.

But there's one other advantage. That's the breadth of technical collaboration and opportunities to share cost on critical technologies. "That's where the Dow partnership comes in, said Eggert. "They are the largest acrylic acid producer from propylene, and have very strong chemical foundational knowledge, and the relationships in place for market development. Here's a benefit to us: neither Dow nor we feel that we need to raise and invest for the consuruction of a demon plant. Instead, we'll use standard contract fermenters to make hydroxypropionic acid, (3-HP), then Dow already has the bioacrylic conversion from 3-HP at pilot and demo scale."

Scale? For OPX, their 100 million pounds (equivalent of 14 million gallons) biorefinery is expected to be cost-competitive with 350 million pound propylene-based systems. The market price? 70 cents per pound, or right on $5 per gallon.

Wilson agrees that co-location is critical. "We are compelled to co-produce and co-locate," Wilson told the delegates, "by the opportunities for efficiencies in sharing power, water, feedstock aggregation, land, and in accelerating projects with faster permitting. But that doesn’t mean that fully integrating a bioenergy project into a pulp & paper operation is the optimal strategy. Co-location can produce faster results."

"At our company, we produce n-butanol, normal butanol. That's been produced for a long time, through the complex ABE process, using a lot of different traditional feedstocks. But the feedstocks are increasingly cost prohibitive. The usual barrier to using advanced microorganisms to produce biobutanol has been the rate of fermentation. In our process, we have dramatically overcome that, and accelerated the fermentation rate. Our fermentation time is four hours, compared to 72 hours with the ABE methods. So we have the opportunity to use low-cost feedstocks such as bagasse and wood biomass, to large-value markets where we have a significant cost advantage.

"Some of you know that there is normal butanol and isobutanol. Isobutanol, which is made by companies like Butamax and Gevo, has a higher octane rating and generally makes a better fuel blendstock. The advantage of normal butanol is that you can take normal and isomerize it, but you can’t take an isomer and normalize it. So, with n-butanol, you have advantages as a platform for a wider variety of chemicals.

"For us, we like wood, bagasse and glycerol as feedstocks. We see costs there in the $60 per ton for wood biomass, $40 for bagasse and $20 for glycerol. Those change, but there's a significant enduring advantage compared to the cost of sugarcane or corn, which are well over $200 per ton. That’s lower than the cost of crude oil, but when you take into account the amount of energy you can access in corn or cane, the cost advantage can be minimal unless you have very high oil prices sustained for a very long time.

"The markets, for us," said Wilson, "are the $7 billion n-butanol market, for acetates, acrylates, and glycerol esters, where the current pricing is $2300 per metric ton. Compare that to diesel or gasoline, both under $1000 per ton. Also, we have the OXO derivatives, such as butyric acid or 2-ethyl hexanol. That's a $9 billion market trading at $2600 per ton. There are also the butene derivatives, such as isobutene, a $17 billion markt trading at between $1200 and $1500 per metric ton. There are paints, solvents, plasticizers, paint dyes, stabilizers, preservatives and more in those markets.

"The markets are very small, compared to the fuels markets, where you have $250 billion in jet fuel, $980 billion for gasoline and $1040 for diesel. Those are a great story, but its hard to make money, and the first goal of any company should be to make money. The cost of making petroleum-based butanol is around $1230 per metric ton. We can make it from corn at $1200 per ton, cane at $1170 per ton. But when we look at wood, our cost drops to $800 per ton; or $650 per ton from bagasse, or $380 from glycerol.

Over at OPX Bio, the market is acrylic acid, which is now at $8 billion and growing 3 to 4 percent per year. Acrylic acid is a key chemical building block used in a wide range of consumer goods including paints, adhesives, diapers and detergents. Later on, the company hopes to commercialize a new technology, converting syngas to fatty acid esters, in work funded by ARPA-E. Other partners will be signed by OPX to work that technology up to scale.

As far as path to scale, Wilson is insistent that you have to build demonstration-scale plants before going to commercial scale, despite the wealth of data that has emanated from their first pilot-scale plant. "Learning what we have learned in our pilot – about sterility, handling, the operational protocols, and all those issues, not just fermentation, as we have stepped up from 60 ML bench, to 10 liter batches, and now up to 154 gallon, 267 pound per day continuous pilots, it really makes you wonder how people convince investors to go directly from pilots to commercial-scale. I think you have to demonstrate the technology at some reasonable scale-up. So we'll be operating a 470,000 gallon per year demonstration by Q1 2012, and we'll begin signing MOUs for offtake in 2012 for our first commercial plant, which will have a 10-50 million gallon capacity.

"Yields? We are at 87 gallons per dry ton of biomass," Wilson confirmed, "and we make 15 gallons of acetone. Geography? We are expecting to develop our demonstration in the US at a location to be announced shortly. We are looking at opportunities in India and Brazil for a first commercial plant."

Although the companies are racing more against the clock than each other, Metabolix, NatureWorls, Elevance, Genomatica, Rivertop Renewables, Segetis, Verdezyne, GlycosBio and Blue Marble Biomaterials are just a few of the players developing commercial-scale renewable chemicals as their primary focus. Companies like ZeaChem, BlueFire, Aurora Algae, Amyris, Gevo and Solazyme have a hybrid, multi-product focus that includes products on the chems side.

Three of the leading renewable chemicals pioneers – Genomatica, Myriant, and Segetis – have made major announcements in February, signaling that a long-expected surge towards commercialization may well now be underway.

In Massachusetts, Myriant Technologies and Davy Process Technology (Davy), a Johnson Matthey company, signed a memorandum of understanding covering the use of succinic acid as a bio-derived feedstock for the production of butanediol, tetrahydrofuran and gamma-butyrolactone.

The MoU covers two areas of co-operation between Myriant and Davy, first the non-exclusive testing and approval of Myriant's product succinic acid as a feedstock to the Davy process and second an exclusive joint development agreement with the purpose of integrating the Myriant bio succinic acid technology with the Davy butanediol technology to minimise the cost of recovery and purification of the succinic acid for the production of bio Butanediol.

Davy developed its butanediol technology based on maleic anhydride feed and has licensed more than half a million tons of annual production capacity of varying mixtures of butanediol, tetrahydrofuran and gamma butyrolactone over the last 15 years. That Myriant development is interesting news, especially the Davy angle. As the incumbent player, Davy knows BDO well, so this week's news validates that they are taking the bio-based future.

Over at Genomatica, they might have been gnashing their teeth just a little bit, considering that they havehas been developing a single-step process for bio-BDO, with a goal of demonstrating that they can beat petroleum-based processes on cost. More steps equal more costs – that's the Genomatica view.

But they're hardly crying over spilt milk at Genomatic HQ, because Waste Management and Genomatica announced a strategic joint development agreement to research and advance Genomatica's technology and manufacturing processes to enable production of intermediate and basic chemicals from syngas made from municipal solid waste.

Under the agreement, Genomatica will create proprietary, specially-designed organisms and complete manufacturing processes to efficiently and economically convert syngas into chemical products. Genomatica’s patents, intellectual property and technology platform should facilitate further refinement of organisms and processes to allow chemical production from syngas produced from locally-available waste with varying characteristics.

Biological production of chemicals would provide another potential use for any syngas produced by or for Waste Management through anaerobic digestion, gasification and landfill gas. Meanwhile in California, Segetis established a new partnership with Method Products, Inc., a manufacturer of home cleaning and laundry products, to use their bio-based materials in a variety of Method's products moving forward. The first products with these ingredients will hit store shelves next month. Powered by its Javelin Technology, Segetis' is providing bio-based molecules for Method's products that offer performance and replace fossil fuels that are commonly found in cleaning products. In all – combined with an acceleration towards commercialization over at OPX Biotechnologies that we outline later in this report – its a heady period for renewable chemicals. We can't wait to see what these companies come up with next.

This article was written by Jim Lane, the editor of Biofuels Digest and originally appeared on the World Biofuels Markets website.

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