The Digest Interview: Guido Ghisolfi, CEO, Beta Renewables

Beta Renewables CEO Guido Ghisolfi

The second half of 2014 has been without question the most exciting in the long story of cellulosic ethanol — with first commercial plants now in operation by POET-DSM, and GranBio — and with Abengoa Bioenergy’s project opening next month in Hugoton, Kansas, and DuPont’s project in Nevada, Iowa opening before the end of the year.

The project that got the ball rolling in so many ways was the Beta Renewables plant in Crescentino, Italy — a 20 million gallon first commercial project that officially opened last year, and reached at-capacity production levels earlier this year.

As we wrote in 2012:

The first thing you notice about the Beta Renewables cellulosic ethanol plant in Crescentino is the size and scope. After the long “five years away” era of cellulosic biofuels, where systems fit on benches, or in small shacks that held pilots, this 20 million gallon cellulosic biofuels project, up close and in person, is like seeing the Saturn V rocket for the first time.

The Titan that powered Project Gemini, the Redstones and Atlases that powered Project Mercury, look like midget rockets launched out of backyards by comparison.

Crescentino is a project many thought would never get built. Several years of industry skepticism preceded a decision by Beta’s parent Chemtex (itself a subsidiary of M&G, one of the world’s largest producers of PET for synthetic fibers and plastic bottling) to build the project off its own balance sheet.

The controversy, over the past couple of years, has been whether it was actually possible to deliver cellulosic ethanol for $1.25 per gallon on an operating basis – by delivering 10-12 cent sugars – based on a design that would cost, on a capex basis, around $5 per installed gallon of capacity.

This past week, in our tour of the latest in lignocellulosic technologies in the EU, the Digest caught up with Beta Renewables CEO Guido Ghisolfi in Crescentino for the Digest Interview.

BD. Let’s start with the supply chains — and feedstocks. Many have aimed at low-cost sources like municipal solid waste, while you’ve been focused on agricultural residues and energy crops as well. which come at a higher cost.

GG: All feedstocks are fine, as long as you have a clean output. But that’s the problem. The challenge as we have seen it is that when you take a feedstock for free, the art of handling is passed to a company like ours, and we take on the challenge of purification. So, some feedstocks are “free”, but not really free.

BD: You’ve been outspoken on biomass handling, and not a big fan of being “feedstock agnostic”, citing costs. Can you give an example to illustrate?

GG: One of the first consequential decisions that has to be made in a system is what is accepted in the feedstock. For example, bale size, You have round bales, square bale, even small bales. It costs an additional $15-$20 million to handle “any size of bale”.

And there’s a cost in obtaining “good clean biomass”, too. Nothing that comes off an agricultural field is going to come in without rocks and dirt, so another decision is how much you wash, and how you do it. With cleaner biomass, you spend less energy processing rocks and dirt — so there’s a trade-off between investing more to clean it, or spending more later on to work with a less pure feedstock. We finally concluded that it was better to add a new intensive washing step, which we are implementing right now in Crescentino.

BD: Does putting more moisture back into the feedstock cost you anything later on when you have to move it, and process it?

GG: We add water anyway for the hydrolysis. Straw comes in 88% dry and stover is 75% dry, so we’re not going to process it that dry.

BD: So, having obtained your biomass, you’ve made the decision to extract sugars and go with a liquid fermentation technology. You come from the chemical industry, where thermochemical transformation is very typical. What drew you to fermentation, as opposed to pyrolysis?

GG: I have nothing against gas! To give an example, though, the challenge with pyro oils and pygas is that it gets tough to handle, if you take a different and ever-changing biomass. Can you really handle it? The answer so far in the sector has been no. The process works well, but the problem has been the handling of the biomass, which has proved elusive.

BD: What’s the next consequential design decision, in your view?

GG: The next decision — and it changes the rest of the life of the plant, forever, is the decsion to have pressure or no pressure in the process. Pressure costs. But you have to have something with which yo are attacking the biomass in the pretreatment. So, you generally have pressure, or you are adding chemicals. And that’s a serious decision. Do you use chemicals, or not?

BD: What are the trade-offs?

GG: With chemicals, you can get higher yields. For example, there are competitive technologies available that use 4.3 – 4.4 tons of biomass to get a ton of ethanol. We have 5 tons of biomass to a ton of ethanol. But it is more than a question of yield. The question is do you get enough advantage in not running with chemicals to offset the advantages of the higher yield?

BD: Where do you gain advantages?

GG: In capex, for one. It is a question of metallurgy — the kind of metals you can work with, the kind of steel you can have, the kind of design you need if you are using chemicals. Our conclusion was that it was better not to have chemicals.

BD: How do the operating economics work for you?

GG: In our process, we start with 5 tons of biomass. We make a ton of ethanol, we have a 1.1. tons of CO2 and other gases, and 0.5 tons of stillage (brown organic water at around 10% organic material content), and the rest is mostly lignin cake. So what we really create in a plant is ethanol, lignin cake and stillage, and the business lies in finding the most value in each of those.

BD: In many cases, the lignin is used by the plant to provide power and stream, and the value of the materials is in the ethanol. Your technology places a lot of emphasis on green electricity, as does technology from INEOS Bio. Why?

GG: In our system, we build an anaerobic digester, which converts the stillage to gas which we burn to provide steam to the plant. We obtain more than 4MWh of power from the lignin per ton of biomass, and we have about 3.3MWh left over after we have provided the power for the process. That has real value, depending on the market.

BD: So, you look at this as a plant that makes two products, ethanol and green electricity, when it comes to looking for locations with optimal economics.

GG: It comes down to a simple equation:

B + 350 – E = C, where B is the cost per ton for biomass and you have five tons, 350 per ton is the operating cost for that biomass, E is the value of green electricity you produce, and C is the cost you have in bringing ethanol to the market.

BD: Can you give us an example?

GG: Here we are at Crescentino, in Italy. The value of green electricity is $200 per MWh and the cost of biomass is $100 per metric ton. So you have:

B + 350 – E = C
500 + 350 – 660 = C
500 is 5 tons of biomass at $100 per ton, and $660 is 3.3 MWh of green electricity at $200 per MWh.
190 = C
So, the cost you have for ethanol is $190 per ton, or around $0.55 per gallon. Even with your capex, you are going to make money with this plant.

In Brazil, it works like this, where biomass is $30 per ton, and the green electricity is $150 per MWh.

B + 350 – E = C
150 + 350 – 500 = C
150 is 5 tons of biomass at $30 per ton, and $500 is 3.3 MWh of green electricity at $150 per MWh.
0 = C
So, Brazil is zero cash cost for the ethanol, and what you make s your EBITDA after you have accounted for your capex.

BD: How does this work elsewhere in the EU? What about the US or China, where you have been active?

GG: For France biomass is $60 per ton, and the green electricity is $150 per MWh.

B + 350 – E = C
300 + 350 – 500 = C
So, in France the cost is $150 per ton of ethanol, and the value is around $630 per ton.

In China, the biomass is $40 per ton, and the green electricity is $125 per MWh.

B + 350 – E = C
200 + 350 – 414 = C
So, in China the cost is $236 per ton of ethanol, and in China, cellulosic ethanol is valuable because you can’t make ethanol from corn or other food crops.

In California, the biomass is $100 per ton (Canergy says it will be $80 in their view, and that makes the project better), and the green electricity is $100 per MWh.

B + 350 – E = C
400 + 350 – 330 = C

So, in California the cost is $420 per ton of ethanol, or $1.25 per gallon. With an LCFS in place, you can make the economics work there too. Any where you have a price for green electricity, you can find value.

BD: In your view, what is the biggest design opportunity in a plant — where good engineering can really change the economics — as opposed to economics dictated by, for example, the price of biomass or the price of green electricity.

GG: In reality what you have is a dewatering plant. Think of it this way. You have 60% moisture content, say, in your lignin as it moves through your process. So you have 3.2 tons of water there. Your 0.5 tons of stillage are 10% organic content, so you have 4 tons of water there. Consider your 1 ton of ethanol as “water-free”. In all, you have 3.6 tons of valuable organic product and 7.2 tons of water.

It follows that you have to understand where it builds in your system and where the points are that you can take reductions.