16 “Red Hot Devil” Questions about biofuels, chemicals, bioproducts and the new agriculture, answered

Your toughest questions, the Red Hot Devils — impossible to ignore, and hot to handle. Here we present 16 of the best, answered.

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?

Here are 16 of the best from ABLC 2015.

Policy and messaging

Q. With declining petroleum prices and ample petroleum supply, what message resonates with policymakers and the Administration that will disarm opponents of advanced biofuels and encourage growth and certainty for the advanced biofuels industry?

A. The messages of energy security, emissions and economic opportunity still resonate with legislators; though domestic production of fuels has increased, the US is expecting still to import a third of its fuels this year, and that number can and should come down, and be as sustainable as possible. To the extent that there are issues with the Renewable Fuel Standard in Washington DC, they revolve more around infrastructure challenges that impact ethanol, and high costs that impact advanced biofuels. The message that would resonate is that “infrastructure is being solved and costs are coming down, fast,” but that is more about delivery than messaging.

Q. What solutions are there to challenges to the Renewable Fuel Standard such as: sinking gasoline demand, overly optimistic biofuels targets (especially, initially), and 2012’s drought-driven rise in corn prices.

A. Right now, gasoline demand is rising, not falling, but energy efficient engines, more competition from new fuels, and electrification of the fleet is expected to cause gasoline demand to fall. The solution there is more vehicles that can tolerate higher blends, and more drop-in fuels. With optimistic biofuels targets, the EPA is empowered to waive down “misses” on cellulosic biofuels roll-out targets, and has done so, and it’s not a huge problem so long as there is a market for the capacity that is built. With corn prices, the solution is a diversified set of feedstocks so that price pressures, whatever the cause, in one sector do not cause disruptions in the market as a whole.

Q. One commentator has observed the “friggin’ huge gulf” between biobased fuels and chemicals – fuels have far more policy support, but more and more companies are opting to make chemicals and nutritionals in the short term. Is there a gulf and how can it be addressed?

A. Fuels, no question, have more support in the form of mandates. Ideally, chemical uses would be a way to comply with the RFS without making chemical makers into obligated parties, same as the aviation sector. Having more ways to fulfill RFS requirements through opening new markets is a good idea. As far as grants and R&D support, the playing field for early-stage projects has been substantially leveled in recent years; in terms of state and local support for commercial projects, states are generally strong in their support for chemical projects, although it is fair to point out that fuel volumes and plants are generally larger and therefore attract more support and attention based on economic impact.

Financing

Q. Why will VC funds accept the need for ~$200M in risky clinical trials but cannot understand $200M to build non-risky production facilities?

A. VCs will accept technology risk all day long, but they hate policy risk, so that’s one reason. Secondly, the returns on large-scale capital projects do not meet their hurdle rates, and don’t fit the VC model. They prefer earlier-stage investments in companies, rather than projects.

Q. Are there Family Offices that have arisen from farmer’s co-ops. Are co-ops a possible funding source?

A. Co-ops are a tremendous funding source, and farmers were the backbone of first-gen ethanol investing in many cases in the US. In general, they require much lower technology risk levels than we see today — they’re good for the 10th commercial more than the first commercial, so to speak.

Q. How do you convince VCs to make investments in an industry that has a much longer time horizon than they are accustomed to and where the capex requirements are an order of magnitude higher than their current level?

A. First, VC investment timelines are driven by fund lifespan, not by “expectation” and they are more tolerant of long-timelines than, say, most corporate investing that requires 3-year payback. But 12-15 years is too much for just about everyone — and the solution is to direct research coming out of labs in a more comprehensive fashion, so that companies are spinning out of labs at a much more advanced stage of development, so that the timelines can be crushed. For VCs, also, it is helpful if there is a set of strategic acquirers willing to take companies early than the IPO market.

R&D

Q. How do you handle conflicts of interests with labs that are tied in with universities, and also are operating process demonstration units for outside clients?

A. Strong agreements that create firewalls where needed, and protect all parties with appropriate non-disclosure agreements.

Q. My bioenergy research center works with renewable fuels, chemicals and petroleum-based industries, Is there a better way to work with the petroleum industry, who own significant biofuels industries, to promote and develop clean renewable fuels?

A. The answer generally lies in innovation. The solution to a generation of not-sufficiently-interesting technologies is a generation of more interesting technologies. Petroleum companies, by and large, are supportive of any liquid transportation technology that a) provides a competitive return on capital and b) fits their business model. BP, Shell, Koch FHR, and Reliance Industries for example, are developing significant technologies, and a large number of other oil companies are deeply involved in technology development. One area they are not highly experienced in is agricultural risk — so working through that is another priority

Feedstock

Q. To address the feedstock availability and storage problems, what plans are there to develop new sources of soluble sugars?

A. Industrial sugars are a technology believed to be on the way. Companies like Renmatix, Beta Renewables, American Process, Sweetwater Energy, Comet Biorefining, and Proterro represent a new generation opening up woody biomass, ag residue and industrial gases as a source for low-cost sugars that can expand the potential geography for new advanced biofuels projects. We’re all waiting for the first commercial operating plant employing those technologies, and we’d be surprised if 2015 passed without significant news along those lines.

Q. What other feedstock sources are aviation companies considering, given that many of them have embraced biofuels as a path but we are not yet seeing a lot of gallons, and most cite high feedstock costs as a barrier?

A. At least two companies (Fulcrum and Solena) are pursuing aviation fuels from negative-cost MSW, so in some cases this is just the technology-and-financing timeline at work more than feedstock costs.  But companies such as AltAir are pioneering new feedstocks such as camelina, Byogy is working on agave, and Licella is working on woody biomass. Boeing is working with COMAG on aggregative gutter oil in the China market. For sure, the next-gen feedstock companies such as NexSteppe, Chromatin, Genera Energy, SGB, Yulex and others have aviation very much in their sights.

Production technologies

Q. Fossil-based refiners get crude from many sources and make many products. What are the roadblocks to refiners of “green crude” using the same model?

A. We expect that the refiners, indeed, will make many products. Indeed they already do (for example, ethanol, corn oil, DDGs and CO2 at a first-gen ethanol plant). Projects like Anellotech focus on a suite of BTX molecules, Gevo is doing side-by-side production of ethanol and isobutanol, and Amyris and Solazyme are making entire product suites.

Taking in different feedstocks is more of a long-term challenge, because they are less uniform than petroleum feedstocks, and even in the petroleum work there are plants that, for example, specialize in heavy crudes as are obtained from Alberta or Venezuela. To the extent that we see an “industrial sugars” industry emerge, we’ll see more of the “get it from anywhere” approach to sourcing. But, today, REG has developed tremendous technology to handle a wide range of oil-based feedstocks and it is a major competitive edge for them, and we expect also to see CO2 sourcing go this route pretty quickly, too.

Q. Are there are symbiotic relationships between DME and ethanol production, e.g. syngas from stover and extra CO2 from ethanol, and process heat from ethanol refiners?

A. Yes, primarily in the areas of using stover as a source for syngas. For now, DME projects have focused on other waste sources, but stover is out there for sure.

Q. When will DuPont’s Nevada cellulosic ethanol plant start?

A. Before the end of 2015 is the latest word. But expect no major crowing from DuPont when mechanical completion is achieved (and that is right about now, April 2015), or when the first drops of ethanol come through the system. Expect DuPont to “declare victory” only when they feel they have the plant running in a manner where they are highly confident that they have the operational experience gained and technology tweaks completed to run at or near nameplate capacity.

Downstream: products and markets

Q. Are consumers or other buyers aware of the BioPreferred label? Is there any empirical evidence that consumers really would like to pay more for biobased products?

A. Not really, and no. Having said that, it all comes down to marketing? People aren’t aware of anything unless you promote, promote, promote. And, marketers have to learn to sell on performance benefits, rather than sustainability, which is thought of as a “reason not to buy” rather than “a reason to pay more”, so “green” affects market share more than price.

Q. What are the best suggestions fort easing the blend wall. Or, is the expectation that drop-in fuels will eliminate concern about blending limits?

A. What we have is an E10 saturation point./ Whether that represents a blend wall depend on your view about the use of E15 and E85. The most important “blend wall” strategies, aside from getting more E15 acceptance and E85 pumps are: more flex-fuel vehicles (whether they use E15, E30 or E85), more isobutanol plant conversions (that shift the blend wall way out), more drop-in fuels, more aviation fuels that can be used for RFS compliance and blend at 50% or higher ratios, and more biodiesel (biodiesel is well short of a saturation point and more vehicles are being manufactured to support B20-B99 every day).

Q. Most automotive OEMs recognize there is a much more optimized way to use ethanol in a mix with petroleum or other advanced biofuel components — studies have show an optimal blend around 25-30% enables the development of higher-performance and more efficient internal combustion engines?

A. CAFE standards are a two-edged sword. The bad news, they are expected to reduce the US market for gasoline and therefore the blending pool for renewable fuels. The good news, reaching the targets will require innovation in engine efficiency that may well include more use of ethanol. Simply stated, higher octane levels allow for higher engine compression ratios, and that leads to more engine efficiency. E30 ethanol levels have been mentioned as a point where you get the best trade-off of engine efficiency vs the cost and range associated with ethanol as a fuel molecule.