Not All Bioenergies are Created Equal

At last week's Renewable Energy World Conference and Expo in Las Vegas, Nevada, Podcast Host and Staff Writer Stephen Lacey sat down with some of the exhibiting bioenergy companies to talk about the issues facing this wide-reaching industry.

Participating in the roundtable discussion were: Karen Bertram, President of International Environmental Solutions, a developer of advanced pyrolysis waste-to-electricity projects; Steve Walker, President of Biofuel Energy Systems LLC, a developer of wood pellet manufacturing facilities; Dale McDonald, a Consultant for Price Biostock Services, a feedstock procurer for bioenergy companies; and Arnold Klann, CEO of BlueFire Ethanol, a cellulosic ethanol producer.

On Getting Financing for Projects

Karen Bertram: Financing for my company is hard because the company has the [proprietary] technology. If somebody says, 'I'll give you a waste contract and I will give you a power purchase agreement,' I have money coming out my ears for a project, but my company can't find the money because it's the risk in the technology that they're worried about. It's still a hard road because these are emerging technologies and there is some risk, but as these progress over the next two years you're going to find that the capital is there.

Arnold Klann: It's very difficult when you have a first-of-a-kind technology. The biggest problem has been that everyone wants to be first in the financial community to finance the second project. They don't want to finance the first one. So we went public specifically to tap a different capital market that was not available to us as a private entity. Part and parcel to that is the $40 million grant we received from the Department of Energy for our 17 million-gallon-per-year ethanol plant. But that $40 million really only represents the equity component. We still have to raise $80 million in the debt market for that particular project. The biggest problem has been financing. It's not a technical issue, it's not a processing issue, it's not a regulatory issue.

Steve Walker: Most of the customers that we talk to are much larger companies. The plants we're talking about are about $7 to 20 million a piece, and it's really not something [customers] will internally finance. Up until recently, most of the projects have been financed out of pocket. But in the last few years it's been a lot easier in debt finance – not mentioning the last six months. And also the equity money and venture money has gone from zero to one hundred in the last few years.

Dale McDonald: Our financing is through a variety of sources. Primarily, we own and operate these plants, and the availability of financing is based on our strength and our track record as well as the company that we are contracted to. So financing generally is not a problem.

On Technological Challenges

KB: We have public perception to get over. People akin my type of technology to incinerators. We are not in incineration, we are pyrolysis. We have no oxygen and we have no combustion on the waste itself, so we use decomposition and distillation.

AK: Our technology has been around for a long period of time. The very first acid hydrolysis plants were built in the early 1900's, so you have century-old technology. The biggest issue now is perception of utilizing chemistry within an urban area. We've gotten through all the issues of siting, permitting and locating these plants; but again, the biggest problem has been financing.

SW: It's all the normal challenges that you'd get in any kind of heavy equipment construction. There isn't a lot of real challenge in that for us – we've done this over and over. These are still being developed and with each plant we try to push the technology envelope a little bit. Probably more importantly is the perception that it's fairly simple, so we've never run into finance groups being worried about the technology side. However, probably 50% of the pellet plants built have failed. I think because people think it's so easy and they go ahead like bulls and just start bolting equipment together and assume it's going to work.

DM: There's a lot more to it than meets the eye. It's a very simple thing to bolt equipment together, but it's very difficult to make a functional system and to integrate that with a staff that will operate the system economically. From the manufacturing standpoint, that's the trick to the trade. From the procurement standpoint, what we need to do is train [our customers] to grow a crop which lends itself better to Btu production. Through genetic engineering and breeding techniques, we should be able to build super trees which will be grown specifically for their Btu content rather than for their mechanical strength or fiber strength.

On Bioenergy in the Political Arena

AK: I think from a regulatory standpoint, everything that needs to be done has been completed. Having said that, now the politicians are trying to get into fine tuning what they had passed, and that's where the real problems come in because you have a lot of special interests. And oddly enough, the environmentalists are for the most part shooting themselves in the foot because all these groups that want to look at how this gets implemented according to their particular prejudice. I think the framework is there, I think the programs are there, we just need to be diligent to make sure they don't get mucked up in some way.

KB: When I talk to people about taking care of their waste, many say, 'I like your technology, but can we make this into biofuels?' President Bush did us a disservice in his State of the Union address when he used the word “ethanol” because that set the tone for ethanol and biofuels. We don't get subsidies, we don't get grants – they're few and far between. You find one and it's usually in the couple million dollar range. It's nothing like they're giving cellulosic ethanol. We need more money flowing into this sector because transportation fuels really answer only a small part of our problem.

SW: Ethanol has received an enormous amount of money relatively speaking to a lot of renewable energy. I think the ethanol industry has done a great job of getting out there. For the most part, the government has picked up on the transportation side of things, and that is mostly in ethanol and biodiesel. We make a thermal energy, so we're kind of out there in the wind right now, although we're working on the problem. [Thermal] is one third of the energy that this country is consuming, and I think it should get the same attention. I think the government needs to be much more technology neutral and focus on the end goal. If the end goal is clean, say how clean. If the end goal is to be CO2 neutral, say exactly how you want that measured. If you want renewable, define that and let's get on with it and create markets that can free flow between not only different technologies, but between electric, thermal and transportation.

On the Future Role of Bioenergy

KB: I see that waste-to-energy is going to be an important component in managing our waste problems in landfills and providing different electrical needs. The good thing about our system is that it's modular. Instead of having these gigantic incinerators, we can set these in individual communities. So where the waste is produced, the energy will be used.

SSW: I see the pellet side having a great ability to store. We can store up an enormous amount of energy and use that energy when it's needed. There's enough biomass out there to offset all the oil we import, if not significantly more than that, and so this problem can be attacked. I think biomass is going to play a massive, if not the majority of the role going into the forseeable future.

DM: In the short term, we have a transition problem. Ultimately, we're going to go to our ultimate solar source, which is photosynthesis and we're going to have to manage some type of crop – whether it be trees, sawgrass, switchgrass – that is specifically bred for energy production.

AK: Bioenergy is going to play an important role in the energy mix both here in the U.S. and internationally. Even if you capture all the available energy from solar, you still can't meet the growth 50 or 100 years out. So it's going to be a blend of all the resources and technologies that are available out there.

Note: These responses are edited for print. For the full answers, listen to the February 21 edition of the “Inside Renewable Energy” podcast.