EPA Finalizes 2012 RFS; Also, Where’s My Hoverboard!?

The dust has settled on the holidays, and my presents have been neatly divided into the “Keep” pile and the “For the love of God, I made a list, why didn’t they stick to the list!?” pile. The EPA issued its Renewable Fuel Standards, and I know what wasn’t under its tree: 490 million gallons of cellulosic ethanol. The 2012 RFS calls for 8.65 million gallons of biofuels produced from non-food sources be blended into U.S. transportation fuels in the coming year, less than 2% of the 500-million gallon target the Energy Independence and Security Act of 2007 (EISA) envisaged would be produced in 2012.

I’m not going to belabor the point; the fact that technology has struggled to bring down the cost of extracting sugar from plant wastes is not news to anyone, and there is no shortage of talent and cash being thrown at the problem. I’m merely making a point about managing expectations and setting realistic goals. EISA called for 250 million gallons of cellulosic biofuels in 2011,  the EPA in late 2010 revised it to 6.6 million gallons, and as of June 2011 0 gallons had been available (EPA says data on the rest of 2011 is incomplete).

The good news is large-scale cellulosic biofuel facilities are going to begin coming online in 2012.  And missed targets shouldn’t overshadow innovation.

Complex supply chains are still developing, government policies remain uncertain, and costs still need to come down significantly. But it’s a step in the right direction.

Looking ahead, the EISA anticipated 3 billion gallons of cellulosic biofuels would be produced in 2015. In the spirit of unmanaged expectations, I’m going to assume by then biofuels will be powering the hoverboards Robert Zemeckis promised me when I was 6 (and will be on my 2015 Christmas list).

Company Snapshot: OPX Biotechnologies

OPX Biotechnologies, a Boulder, CO-based industrial biotechnology firm, achieved several crucial milestones with its acrylic acid production platform in 2011. Here’s a CliffsNotes  version of my interview with company CEO Chas Eggert:

  • Big name chemical industry partnership to help advance to commercial-scale? Check. In April, OPX signed a JDA with Dow Chemical, the largest U.S. producer of acrylic acid and the second-largest globally. Dow brings to the table know-how, a path to market, and (soon) front-end expertise in sourcing sugar thanks to its Mitsui & Co. ethanol-to-polyethylene project in Brazil.
  • Proven cost advantage:  OPX has already demonstrated at pilot scale that it can produce acrylic acid for 70 cts/lb, 20% less than current prices. This cost advantage will  widen as OPX advances its technology  and as ethane-based olefins production in the U.S. tightens propylene availability, Eggert says.
  • Big, existing market for first product? Yes. The global market for acrylic acid is around 8 billion lbs annually and valued at $10 billion, Eggert says. Demand is growing 2%-3%/year, with developing regions showing growth at around 5%/year. Superabsorbents, paints and coatings, and adhesives are the largest consumers; acrylic acid is also used in home and personal care and construction applications, he adds.
  • Timeline: Eggert says OPX and Dow are planning to begin a demonstration-scale unit in the first half of 2012. If certain milestones are achieved, the two companies would move to commercial-scale. Eggert hopes to have the first commercial-scale unit come online in 2015, using corn sugar in U.S., cane sugar in Brazil, or dextrose in Asia or India. Location, timing, and size would ultimately be determined jointly with Dow, he adds.
  • Technology: OPX’s organism produces 3-hydroxypropionic acid (3HPA), which can be catalytically dehydrated to acrylic acid. Its Efficiency Directed Genome Engineering (EDGE) technology enabled the company to identify genes that control microbial metabolism and implement genetic changes more quickly than conventional genetic engineering.  “The EDGE technology enabled us to achieve high rates and yields from our organism,” Eggert adds.
  • Competition is out there, but still in the rear-view mirror. The outlook for sustained high propylene prices is driving other firms to pursue biobased acrylic acid from a variety of routes. Cargill was working on a 3HPA process for a number of years, but was ultimately unsuccessful in getting sufficient yields, sources say, and put the intellectual property into a licensing deal with Novozymes. Meanwhile, Nippon Shokubai (Tokyo)  and Arkema are working on glycerin-to-acrylic acid processes. Metabolix (Cambridge, MA) is working on leveraging its polyhydroxyalkanoate expertise to produce acrylic acid, while SGA Polymers (South Charleston, WV) is looking into a conversion based on lactic acid.
  • Future targets include acrylamides, fatty acids. The EDGE technology is not specific to acrylic acid, Eggert says. “We chose acrylic acid because of high demand and the attractiveness of a biobased route.” Potential future targets include acrylamides and chemicals based on fatty acids. The company is also working on a synthesis gas to fuels process with some support from the U.S. Department of Energy.
  • Financing climate favorable for some, icy for others. OPX recently raised $41.2 million to help it move through to demonstration-scale production.Money appears to be available for firms that have promising technologies and actionable business plans. A report, released recently by Lux Research (Boston), says venture funding in biobased chemical and materials hit a peak of $806 million in 2010 and is on pace to match that in 2011.

Notable 2011 funding rounds. Source: Company reports.

Others seem to be having a much more challenging go of it.  TetraVitae Bioscience (Chicago), a producer of biobased n-butanol and acetone, was acquired in October by Eastman Chemical. Market sources have suggested TetraVitae was having trouble raising funds.  Draths (Lansing, MI) laid off almost all its employees in October, shortly after being acquired by Amyris (Emeryville, CA).  Draths had been developing a purified terephthalic acid production process based on biobased muconic acid.

  • IPO Market: Hot or Not? Eggert’s expects companies looking to raise funds by going public might have a tougher go at it than those who began trading in the first half of the year. “Successful IPOs like Gevo, Amyris, and Solazyme generated a fair amount of momentum,” Eggert says. “But the market has changed in the second half of the year, and public market investors are more reluctant to invest in early-stage firms.” Companies like BioAmber, Myriant Technologies, Elevance Renewable Sciences, and Genomatica  have all registered to go public since June.

 

No Revenues, No Problem! Thoughts on Coskata’s IPO Filing

Last week Coskata became the latest biofuel/biochemical maker to file for an initial public offering (IPO). The biofuels producer hopes raise $100 million to help fund its Boligee, AL cellulosic ethanol facility, which will use the company’s gasification and fermentation platform,  as well as ongoing development efforts.

The filing included by-now familiar figures on the addressable market and risks, so I pulled out a few noteworthy points:

  •   “We are a development stage company and have generated limited revenue.”

They were not kidding, but in all fairness their sales history is not the weakest among biofuels IPOs (table). Coskata  posted $250,000 in revenue for its fiscal year ended December 2010, and joins a growing list of biochem/biofuel firms looking to go public with little or no commercial sales.

Those that have launched, namely Codexis, Amyris, Gevo, and Solazyme, were posting sales figures in the range of $38-$83 million. Four of the seven yet to launch have generated less than $1 million in sales in their latest fiscal year.   Many revenue streams are dominated by government grants, with limited to zero product sales.

  • Fuels First!

Biochemical efforts are taking a backseat to biofuels. Several companies, like Elevance or Gevo, have decided to target biochemicals either before fuels or concurrently. Ideally, this strategy delivers a quicker route to commercial sales, higher margins, and meaningful volumes (instead of being a drop in the bucket in the behemoth fuels market).  It also gives companies an opportunity to bring down the cost of cost of production—ultimately facilitating a smoother entry into fuels.

Coskata gives its biochemicals pipeline an addressable market of $100 billion. The company  is collaborating with Total Petrochemicals on a microorganism that can produce propanol, a precursor to propylene. Total is working separately with IFP Energies Nouvelles and Axens to develop an optimized technology to dehydrate alcohols.  Coskata expects to expand its efforts into four-, five-, and six-carbon chemicals, and has demonstrated in the laboratory that it can produce propanol, butanol, butanediol, hexanol, organic acids, and certain fatty acids.

  • Going it Alone

Coskata expects its Boligee plant to be funded by a combination of IPO proceeds, cash on hand, and $88 million in debt financing through the USDA’s Biorefinery Assistance Progam. The first phase of the project will produce 16 million gals/year in 2013. Modular expansions will add 62 million gals of annual capacity in 2015.

Source: Coskata.com

The estimated cost of the facility was not disclosed, although a comparably-sized cellulosic biorefinery project announced recently by Mascoma and Valero is expected to cost $232 million. Mascoma and Valero have signed a definitive agreement to form a jv to build and operate the 20 million gals/year facility at Kincross, MI. Funding will include a “significant financial commitment” by Valero and an $80 million DOE grant. Mascoma filed for an IPO in September.

Coca-Cola Picks Its Partners for 100% Renewable PET

My Tuesday prediction that Gevo would be Coca-Cola’s partner of choice for biobased PET packaging over Virent was half right (or half wrong). It turns out the beverage giant has chosen both to develop a route to biobased para-xylene, the missing link to get Coca-Cola’s PlantBottle from 30% renewable to completely renewable (Virent’s people saw the post but were quite friendly to me anyway).

Coca-Cola says it vetted 30 potential partners for the project, but eventually chose Gevo, Virent, and Avantium, a Dutch company working on poly-ethylene-furanoate (PEF). Avantium says PEF is a fully recyclable biobased compound with the performance properties required to replace PET. I don’t know that much about Avantium or PEF, but certainly will pay more attention.

Gevo’s process involves converting isobutanol, which the company will begin producing at large-scale in 2012 as it begins rolling out its retrofit technology for ethanol plants. Virent’s process uses catalysis instead of fermentation.

Coca-Cola is already selling bottles with 30% renewable content, thanks to  MEG produced from Brazilian sugarcane.  A viable, scalable biobased route to para-xylene, which together with oxygen makes up the rest of the bottle, has eluded the chemical industry. Nonetheless, Coca-Cola has been adamant that it wants its PET supply chain to be completely renewable. Its first target was for 2020, but v.p./commercial product supply Rick Frazier said at a press conference this morning it could be a reality as soon as 2015 (but acknowledged it would ultimately depend on the partners’ progress).

The announcement was quite gentlemanly, as Avantium, Gevo, and Virent CEOs stayed on message that they are pleased such a large consumer product company has confidence in their respective technologies and is making a “serious” (although unspecified) investment in biobased materials. Coca-cola says it will not pass on any additional cost it may incur on to the consumer.

I guess we’ll be drinking sugar from bottles made of sugar sooner than originally planned. Considering Coca-Cola’s market penetration, this will be more than a ripple in the global PET supply chain.

 

 

DuPont Investor Day: Snapshot of Danisco-Integrated Industrial Biosciences Unit

Investor day provided an opportunity  for DuPont to showcase its revamped Industrial Biosciences division (and keep the message positive following recent cuts to its 2011 guidance). The $7 billion acquisition of Danisco solidified industrial biotech as a key element of DuPont’s growth strategy, and the Monday/Tuesday event offered a couple of  insights into expectations and strategy:

  • DuPont expects its Industrial Biosciences unit to be one of its fastest-growing businesses, with the highest margins:

  • Bioisoprene has been resurrected! Actually I didn’t know it had been suspended. But I’m happy it’s back. Apparently Danisco stopped fermentation work on the $50-million Goodyear collaboration in early 2011 because it had safety concerns about handling the flammable gas at its Palo Alto facility. DuPont, however, has the relevant experience to work safely with such materials; the fermenters have restarted and construction of a pilot plant could begin in 2012. DuPont says bioisoprene could be a platform to access the multi-billion dollar C5 chemicals market.
  • Unfortunately no new biofuels  projects were revealed. The company will break ground on its previously announced 25 million gal/year cellulosic ethanol facility at Nevada, IA sometime in mid-2012. The status of the ethanol-to-biobutanol retrofit project I reported on last week [Butamax (Sort of) Announces Commercial Project…] was not clarified by Industrial Biosciences president Jim Collins, who said the ethanol producer in question (Highwater Ethanol) has “signed up to kind of be our first conversion.”  I’m hopefully getting an interview with Butamax (DuPont’s biobutanol jv with BP) in January, so maybe I can report on a definitive agreement after the holidays.

  • DuPont believes that combining its engineering and advanced materials capabilities, Pioneer’s ag expertise, and Genencor’s bioprocessing and protein engineering know-how “under one roof” gives it an edge over all others in the space. This may be true, but I’d argue DSM has some compelling synergies of its own.

  • The $130 million in synergies expected to result from the Danisco deal will likely be achieved in 2012—a year ahead of schedule.
  • The Industrial Bioscience unit is expected to post 2011 pro-forma sales of $1.1 billion, mostly from sales of bioactives like detergent enzymes.
  • The segment’s addressable market is big ($50 billion) and diversified:

  • Chemical companies are more concerned about my personal safety than my own grandmother. DuPont chair and CEO Ellen Kullman opened Day 2 presentations by asking attendees to hold on to the handrails while walking using the venue’s marble staircases. Shell Chemicals likes to make sure everyone knows where the exits at their events, in case of a fire. I’m a fan of this trend, and hope more  chemical companies take an active interest. Why hasn’t Dow Chemical reminded me to check my tire pressure? Or BASF told me I need to wear a heavier coat? Where’s the love?

Coca-Cola Set to Announce Renewable PET Partner?

Coca-Cola says it will announce Thursday a partner for the development of its next-generation PlantBottle, the beverage giant’s renewable polyethylene terephthalate (PET) packaging.

The company is already selling PET bottles with 30% renewable content by using monoethylene glycol (MEG) made from Brazilian sugarcane ethanol. Its partner has never been publicly disclosed, although it’s widely assumed to be India Glycols, the only producer making renewable MEG at sufficient scale to supply Coca-Cola’s needs (2.5 billion PlantBottles were sold in 2010).

To get to its 2020 goal of using 100% renewable PET, Coca-Cola needs to find a plant-based source of para-xylene in order to produce a renewable source of purified terephthalic acid (PTA), the other 70% of PET.

Assuming Thursday’s revelation involves developing a viable route to PTA,  there’s a short list of characters. Toray has made 100% renewable PET using para-xylene its development partner Gevo produced from isobutanol. Since Gevo is bringing two commercial-scale isobutanol projects online in 2012,  smart money might be on Gevo/Toray. Sasol has already called dibs most of Gevo’s initial volumes for its own solvent business, so Coca-Cola might not be rolling out too many PlantBottles in the near-term. But then again, we’re a long way from 2020.

On the other hand, Virent Energy Systems recently unveiled a biobased para-xylene process and is operating a 10,000 gallon/year demonstration plant at Madison, WI. It hopes to reach commercial-scale production by the end of 2014, also comfortably within Coca-Cola’s time-frame. And while they might not be as close to commercialization as Gevo, a recent $46-million funding round suggests their technology, management team, and business plan are compelling.

Coca-Cola may be accelerating its timeline after PepsiCo’s March announcement that it had developed the world’s first 100% renewable PET bottle. And kudos here to PepsiCo for even bothering with renewables after dumping money into polylactic acid-based SunChips bags, only to have the supposedly green consumer decide that, although they do want to save the environment, having to deal with slightly noisy food packaging was a deal-breaker.

Anyway, I digress. PepsiCo did not disclose where it was getting either its MEG or PTA, but again I suspected Gevo (the company’s results for its first quarter noted it  had provided sample volumes of biobased para-xylene to multiple “international brand owners” for the production of a 100% plant-based bottle made from PET).

News worth noting (and why)

Some notable announcements, and why I care:

●  Sundrop Announces Biofuels Plant
Sundrop Fuels says it plans to build a $450 million-$500 million cellulosic biofuels facility at Alexandria, LA. The 50-million gals/year project will be the first production facility for Sundrop, which uses gasification technology to convert forest waste into “green gasoline.” The company’s process blends hydrogen-rich natural gas with biomass, producing gasoline with a hydrogen/carbon monoxide ratio appropriate for current combustion engines. Why I care: That’s a lot of money. And the company’s original investors include respected VC firm Kleiner Perkins Caufield & Byers. And they are using ExxonMobil’s methanol-to-gasoline technology, which is already in use at large scale.
●  Rivertop Nabs DOT Contract
Rivertop Renewables (Missoula, MT) says it has won a contract to supply 110,000 gallons of biobased corrosion inhibitor for Montana’s Department of Transportation. Financial terms were not disclosed. Rivertop’s technology uses chemical oxidation methods to produce glucaric acids. The company is currently building a 100,000 lbs/year semi-works facility at Missoula. Why I care: I like supply contracts (because I like success stories).
●  LS9 Delivers 1 m.t. of Mystery Ingredient to P&G
LS9 has increased its capacity to produce biobased fuels and chemicals from 1,000 liters to 20,000 liters at its South San Francisco, CA pilot-scale plant, enabling it to deliver 1 m.t. of an unspecified ingredient to strategic partner Procter & Gamble (The companies have been collaborating since 2009). LS9’s technology can produce a range of biochemicals, including fatty acids, fatty esters, fatty alcohols of different chain lengths and branching, linear and branched alkanes, alpha and internal olefins, and some aldehydes, as well as biodiesel and jet fuel. The company is currently retrofitting an Okeechobee, FL plant with a 135,000-liters fermentation vessel, which will come online in the first quarter of 2012. Why I care: LS9’s investors include asset management behemoth Blackrock. And everyone loves a good mystery.

●  Verdezyne Starts Adipic Pilot Plant
Verdezyne (Carlsbad, CA), a renewables start-up backed by BP and DSM, has started pilot-scale manufacturing of biobased adipic acid.   Adipic acid is a key precursor to nylon 6,6 , polyurethanes, solvents and resins. Why I care: Verdezyne says it is the first to produce biobased adipic acid at this scale, but it probably won’t be alone for long.  DSM announced in October that it had added adipic acid to its list of target biobased products, with commercialization feasible in about five-plus years (Despite DSM’s earlier investment, the company told me recently that its development efforts are completely separate from Verdezyne’s). BioAmber added adipic acid to its targets in March, and Rennovia has been increasingly visible with its chemo-catalytic process. Genomatica has intellectual property in adipic acid as well.