China Steel green-lights commercial-scale LanzaTech advanced biofuels project

Phase 1 will produce 17M gallons/year of gasoline blendstock and ethanol; in Phase 2, a 34M gallon facility.

In Taiwan, China Steel Corporation announced formal Board approval of a $46M capital investment in a LanzaTech commercial ethanol facility. This follows the successful demonstration of the revolutionary carbon recycling platform at the White Biotech Demonstration Plant in Kaohsiung using steel mill off gases for ethanol production.

As CEO Jennifer Holmgren tells the Digest, “the problem one always has in scaling is getting someone to agree to be the first.  We now have another partner that is interested in scaling our technology.  When you license technology – you need to scale more than at one facility to get the revenues you need to become self sufficient and therefore having multiple units on track to scale up is important.”

In November 2012, CSC and LCY Chemical Corporation formed a joint venture, White Biotech, as part of a Green Energy Alliance with LanzaTech. The resulting demonstration plant met or exceeded all ethanol production milestones and the CSC Board have formally approved the capital to move to commercial scale.

A 50,000 MT (17M gallons) per annum facility is planned for construction in Q4 2015, with the intention to scale up to a 100,000 MT (34M gallons) per annum commercial unit thereafter. The initial project is expected to be operating, by China Steel’s estimate within 2-3 years, or as soon as spring 2017.

Capital costs for LanzaTech’s first commercial are estimated to be around $4.80 per gallon, or roughly $81.6M; the $46M investment would include the equity required for the project, plus additional plant modifications not a part of the LanzaTech unit. Although debt/equity ratios have not been disclosed, a typical project ratio would be in the 60/40 to 50/50 range.

Initial product focus will be industrial ethanol and gasoline additives, with plans for increased product diversity utilizing LanzaTech’s unique microbial capability.

Reaction from the stakeholders

“LanzaTech will help create a more sustainable future by recycling carbon from the steel mill and enabling green growth through production of useful everyday products. We will have to work even closer to complete this important project,” said Dr. Jo-Chi Tsou, Chairman of CSC.

“CSC has long been a champion of utilizing new technologies to create a better future and we are proud to help make this a reality,” said LanzaTech CEO Jennifer Holmgren. “We need to keep fossil resources in the ground and carbon recycling is one way we can achieve this. If we are to keep within our global carbon budget we need all technologies to contribute and, more importantly, we need forward looking industries and organizations, such as CSC, to bring these technologies to market.”

More about LanzaTech

LanzaTech has developed a fully sustainable integrative gas to fuels and chemicals platform that has no impact on food, water security or high biodiversity land use.

LanzaTech’s gas fermentation platform disrupts the current highly centralized global energy system by enabling the regional production of low-cost energy from local wastes and residues, including gases as varied as industrial flue gas, gasified biomass wastes and residues, biogas, and high-CO2 stranded natural gas. The company was originally founded in 2005 in New Zealand, and Digest readers worldwide voted LanzaTech the #1 Hottest Company in Bioenergy for 2014/15.

The proprietary gas-to-liquid platform produces fuels and high value chemicals such as 2,3-butanediol (2,3 BDO) and acetic acid from a variety of waste gas resources.

LanzaTech’s biological microbes can utilize the lowest cost, most readily available gas resources including waste industrial flue gases from steel mills, processing plants and refineries; syngas generated from any biomass resource (such as municipal biowaste, organic industrial waste, and agricultural waste); coal derived syngas; and reformed natural gas are all resources for the LanzaTech gas fermentation process.

For complete background on LanzaTech, see our 2015 5-Minute Guide, here.

The investment story in more detail is available via here.

Answers to your most exacting technology questions are here.

The Digest’s Take: Lessons Learned on the Road to Awesome

LanzaTech CEO Jennifer Holmgren gives a number of industry and company presentations with the general theme of “The Road to Awesome”, and there are some lessons out of the LanzaTech playbook that are applicable to all.

1. Never fall in love with single feedstock. Whether it is carbon monoxide, CO2, natural gas, MSW, petroleum, or corn stover — one never knows what the future will bring, and the answer to uncertainty is diversity.

2. First Cut is the Deepest. As she points out above, “the problem one always has in scaling is getting someone to agree to be the first.  We now have another partner that is interested in scaling our technology.  When you license technology – you need to scale more than at one facility to get the revenues you need to become self sufficient and therefore having multiple units on track to scale up is important.” One never knowns that the future will bring — did we just observe that? — and putting all one’s faith in a single commercial partner or execution is an increase in risk, at a time when companies must focus on scrubbing out the risk.

3. Zero out the mandates. No mater how much you may count on mandates or other forms of policy support, they may not in fact be reliable. Projects that pencil out on the economics and then have a green premium rather than a green dependency are more likely to be built.

4. Multiple products matter. Though one or two “first molecules” are important, to attract multiple partners you not only have to support multiple feedstocks, but have multiple potential downstream products that a) fit partner strengths and b) offer risk-mitigation within the commodity price rollercoaster.

5. Be candid, but not garrulous. Half of the companies in this space spend too much time on their visibility and not enough on their credibility, and the other half spend too much time on their credibility and not enough on their visibility.

It is not enough to talk about accomplishments but not aspirations, not enough to talk about moonshots without demonstrating a track record. Being an effective communicator of real data and talking about real things that really happen, that’s what guidance is all about.

That’s what gives a “management premium” to any company that practices same, and every company in new technologies needs any premium it can lay its hands on in order to reduce risk.

6. Do effective demonstrations with name partners. They inspire confidence.

7. Here, There and Everywhere. Think in terms of multiple geographies. One never knowns that the future will bring — did we just observe that? — and putting all one’s faith in a single ideal location is an increase in risk, at a time when companies must focus on scrubbing out the risk.

8. Change happens. Better to have a wonderful technology in a poor market than a poor technology in wonderful market.  Markets change, but wherever you take your technology, there it is.

9. Build your house on rock, not sand. To succeed, acceptable financial returns are a must, that’s a company’s motivating interest in accepting the monetary risks. But to motivate partners to persevere through all the aggravations and uncertainties of new technologies, it is essential to appeal not only to interests, but to fundamental Concerns. In the case of bioenergy, these are the concern over energy security, or the concern over carbon emissions, take your pick.

In the case of LanzaTech, the fundamental Concern is carbon, as CEO Jennifer Holmgren illustrated:

“Carbon is a precious resource and we need to treat it that way.  We need to recycle carbon.  A 2-degree carbon budget will require countries to leave 80 % of coal, 50 % of gas and 33 % of global oil untouched. This is only possible with technologies which can utilize carbon emissions and emphasize carbon efficiency.

“Today, carbon is pervasive and is seen as a liability- the cause of our planet’s problems. We need to think of carbon as an opportunity to create change and to ‘reset’ and consider where our energy is sourced and how we can avoid adding to our already heavy carbon related climate burdens. Carbon recycling is a huge opportunity.   And, we are not the only ones focused on this…  consider all the work on algal fuels and chemicals as a perfect example.  Even growing a tree is carbon recycling!  How do we harness all this power?”

The enduring partnerships that drive this technology to scale are, in LanzaTech’s case, built on a shared concern fora transforming a carbon problem into a carbon opportunity — that is the rock-solid platform that supports the effort, far more reliably than the shifting sands offered by swinging commodity prices and fickle policies.