One of biofuels' hottest companies transitions from research phase to operating phase with opening of demo plant in Okeechobee – what's next, and where?

In the glades north of Lake Okeechobee, in rural Florida, a 135,000 fermenter column stands out against the landscape like Salisbury Cathedral rising over the plains of Thomas Hardy’s Wessex, and you half expect a tropically-attired Tess of the D’Urbervilles to come around the corner at any moment.

But the VIP-filled sedans, kicking up dust as they head northwest from the lake, are greeted primarily by dumbfounded cows and bulls that are still wondering, to the extent that they wonder, how yellow dragon disease took the citrus trees away, and where all the workers went in Okeechobee County, and why so many Family Dollar thrift shops have popped up, and why so many people are using boards in place of window glass.

After all, the cows see all the Mercedes sweeping from the rich coastal enclaves like Jupiter and Palm Beach, en route to one of the several appealing hunting clubs that dot the region, or the golf courses of the west side.

Do they wonder how the rich got so rich, and the poor so poor, in such a hurry, down in Florida? To the extent that bulls consider macroeconomics, in between meals in the pasture as the cars go by.

The opening of that fermenter column is what the VIPs are coming to celebrate, because LS9′s demonstration facility opened for business in Okeechobee yesterday. A wonder of science it is – a technology that takes in sugars, and through microbial fermentation directly converts the material into a programmable array of products, including biodiesel, jet fuel, diesel, or surfactant alcohols, just for starters.

LS9′s progress

An excellent summary of the project, and the company, was given yesterday by CEO Ed Dineen. You can view a quick video of his remarks, here (via the Digest’s YouTube channel).

The ultimate impact of LS9′s technology — well, it has global and game-changing promise. The company is a couple of years away from being a commercial company, but with the opening of its demonstration facility, it has made the material transformation from research company to operating company. By 2014 or 2015 it can be expected to take that next step with the opening of a commercial-scale facility.

For now, it certainly has been game changing for Okeechobee — a bright spot in a state that’s been through a wrenching real estate bust. For plant operator Jim Studt, it’s his first job in his professional field, since heading down to Florida after earning a chem-e degree at Purdue and finding the pickings slim and only odd jobs on offer in the Sunshine State. For operations manager Dan Corwin, its a return to an operation job at this facility, which is built on the footprint of a yeast production project that went into foreclosure several years ago.

Game-changing later on, we think — also for companies that have invested in or partnered up with LS9 include Chevron, Dow and Procter & Gamble — the companies and their product lines, in themselves, suggestive of the wide array of product that eventually will spill out of the LS9 system.

The Sugar Search

One of these days, it is expected that LS9′s engineered e.coli will be chewing up cellulosic feedstocks, and the Keasling lab at Berkeley has made significant progress towards that end. For now, the magic bug lives on corn or cane syrups — and it is for that reason that the company is expected to build its first commercial facility in the world’s capital of lower cost sugar, Brazil. The Saudi Arabia of syrup.

That’s “lower cost” not “low cost." Followers of world sugar prices know that sugar’s been on a steep price incline since the mid 2000s. What had been a relatively stable price in 10 to 20 cent per pound price range, has become a potential train wreck for sugar-based bioprocessors, as world sugar prices climbed over 30 cents a pound, and reached well into the 50s in the United States last year.

Given that there are seven pounds of oil to a gallon — it doesn’t take a math genius to figure that, even if you could simply convert seven pounds of sugar to seven pounds of oil, with no loss of energy, the cost of US sugar makes fuel production completely out of the question for now, and will push bioprocessors towards but the higher-end chemical and bio-based products for the near term. Or, as an Irishman might say in Texas, top o’ the barrel to you.

That’s the LS9 outlook — same goes for Solazyme, Virent and Amyris, as well — to the extent that they seek to develop large-scale commercial production in the US.

In fact, tough enough right now in Brazil, where sugar/ethanol producers are generally dialing in as much sugar production as they can, without prompting Brazilian President Dilma Rousseff to swing her regulatory Excalibur to ensure adequate fuel supplies. It’s an impact that has been softened to some extent by massive imports of U.S.-made ethanol, from producers in the Midwest and elsewhere who are delighted to have an export market to help them around the challenges imposed by the US’s E10 ethanol blend wall.

The lack of low-cost sugar in the U.S. is likely one of the reasons why a flock of politicians haven’t made the LS9 demonstration plant a regular stop for photo ops in the crucial political swing state of Florida.

You see adjacent to Florida sugar country, the LS9 plant is using corn syrup as its feedstock and would entirely struggle in the present market to acquire affordable feedstocks at commercial scale in Florida. Not even were Ceres to break through here with its super-sorghums that are looking so promising as a for Brazilian cane growers during their cane intercrop periods.

Is sugar policy to blame for high prices?

Somewhere out there amongst the Digesteri, a reader is just now inspired to box an education into my brain, on fouled up US sugar policy that costs taxpayers $3 billion per year through sugar quotas that push up U.S. prices. Don’t bother to send it: I might be able to wallpaper downtown Miami with the material sent by others, over the years, the the topic.

Over here in Digestville, we certainly regret the bill faced by U.S. taxpayers on their sugar purchases: who likes paying $3 for a bag of sugar instead of $2? Though we doubt that making the world safer for cheap Jolt Cola ought to be a focal point of US fiscal policy.