WASHINGTON, D.C. — From California, news has arrived from Byogy Renewables that it has invested in a strategic partnership with AusAgave Australia, aimed at developing multiple feedstocks to develop low cost sugars for the production of renewable fuels and chemicals.
Structured initially as a strategic partnership, Don Chambers, CEO of AusAgave, will join the Byogy team to drive overall global feedstock operations — and, if all goes well, we may find that a merger of the companies may emerge down the line.
Kudos for the partnership arrived from as far away as Brazil, where Byogy established a subsidiary in 2011 and recently partnered with Avianca Brasil Airlines to support global approvals of higher blends of Byogy’s premium fuel. So, not surprising to hear that Avianca Flight Operations Director Norberto Raniero stated: “Our team now includes more elements to produce a competitive, alternative aviation biofuel.”
The Supply Chain Problem
Before we get into the story of agave — and the how and why it may become a strategic feedstock, let’s look at the problem of supply chain that bedevils aviation biofuels.
With feedstock cost representing over 65 percent of fuels final cost, according to Byogy — it makes sense for aviation biofuels companies to take a strategic interest in it. But the capital and management problems are tough. Consider the problem of, say, acquiring and managing some 200,000 acres of farmland to support a 50 million gallon aviation biofuels plant with feedstock (for this example, we’ve used corn sugar yields — obviously, cane, algae and other feedstocks have different agronomics, but you get the idea.).
So, the challenges are thus:
- For the feedstock grower, contract for the long-term, at acceptable margins for the given land that needs to be used.
- For a strategic investor focused on serving the aviation market, ensure that the resulting products are cost-competitive.
- If financial investors are utilized — who other than the potential for ROI have no particular strategic interest in serving the aviation sector, ensure that the product are not only cost-competitive, but represent the highest return amongst the potential product, or are in other ways more sustainable (e.g. long-term contracts,or less commodity price risk in the long-term).
Else the given enterprise might run into the “Natural Law of Alternative Commodity Markets”, as described by ethanol pioneer Eric McAfee, CEO of Aemetis: “The value of any intermediate products produced in any process must be significantly exceeded by the value of the end product, or the end product will not be produced.”
This is where agave might come in. As Westar’s Cindy Thyfault noted in a slide within a presentation at a recent Avalon Air Show, agave has some exotic yields and sugar content to be considered.
What Is Agave, Again?
It’s known around the world primarily as the crop from which tequila is made — but also has been valued for its fibers. Now, like Champagne or Bordeaux, the term “tequila” can only be legally used for spirits made in Mexico’s Jalisco state. Accordingly, there’s not been a huge amount of interest in pushing agave yields in Mexico (more emphasis is on marketing high-margin tequila around the world). Elsewhere, there’s been little interest in developing agave, because marketing under alternative names like “Blue Agave Spirits” has proven to be a bust, and with competition coming from synthetic fiber.
Along comes AusAgave and Don Chambers. They’ve pushed agave yields quite a ways along. According to the firm, they’re getting more substantially biomass per acre than sugarcane, and twice the sugar content.
It’s advantage can be summed up in three letters: CAM. “Crassulacean acid metabolism” is an alternative and important carbon fixation pathways — the stomata in the leaves remain shut during the day to reduce water loss, but iopen at night to suck down huge gulps of CO2. CAM plants have low water requirements and high photosynthetic efficiency. Pineapple is perhaps the best known; and, there’s agave.
AusAgave has spent the last ten years developing intellectual property on the drought resistant agave genus by embracing plant propagation, agronomy, cropping, and harvesting techniques which result in “plantations affording at least a 50 percent yield per acre improvement over historic sugarcane productivity,” according to the firm.
“The results of our recent harvesting program have already proven our efforts to substantially increase sugar yields and decrease delivered sugar costs for select agave species, and we fully expect to continue decreasing sugar costs over the next few years,” states Chambers.
How about ethanol yields of 10,000 liters per hectare (1070 gallons per acre, per year)? That’s a start.
According to Byogy, AusAgave’s recent harvest results already demonstrate the production of low cost sugars allowing Byogy’s technology “to produce cost competitive gasoline, jet fuel, diesel, and a suite of chemicals at or below that of petroleum products without infrastructure modification, blending, or government subsidies.”
More About Byogy
Byogy’s primary goal is to produce 100 percent sustainable and replacement fuels, requiring no blending with fossil fuel and no infrastructure modifications.#rewpage#
Unlike the majority of the biofuel industry, where technology is based on synthetic biology, Byogy’s core technology is a proven catalytic process — sugars from feedstock are first fermented into any form of alcohols. The, the alcohol (e.g. ethanol, butanol, mixed alcohols, etc.) is catalytically dehydrated into its associated alkene/olefin (e.g. ethylene, butane); a process that has existed since the 1930’s. A co-product of this process is the creation of pure water which can be used as boiler feed, irrigation, or even potable uses.
The olefin gas (i.e. bio-ethylene, bio-butene) is then converted into a wide spectrum hydrocarbon liquid in a multi-tube catalytic reactor. This process is known as oligomerization and has been in use since the early 1980’s at refinery scale and is a low intensity reaction with moderate temperature and pressure. The significant difference to other industry processes is that Byogy has mastered this reaction over the past 10 years. This extensive experience has allowed Byogy to perform unique reaction tuning abilities. Byogy CEO Kevin Weiss explains that “Byogy can not only produce the matching aromatic type and distribution of aromatics in its jet fuel distillation, but it can also adjust the percentage of aromatic content from 0 percent to over 40 percent.”
Costs? A 15 Mgy Byogy plant costs just under $5 per installed gallon of fuel capacity, with a break-even at $3.25 per gallon for its mix of gasoline, jet fuel and diesel — and a 15 percent EBITDA return based on an average of $3.80 per gallon fuel price.
The Ethylene, Alcohol or Jet Fuel Question
Let’s look at the technology in light of three three steps to financing that we discussed above — with respect to feedstock, strategic investors and/or financial investors.
For the feedstock grower, the switch to agave essentially means a switch towards a novel feedstock that can produce either higher yields from comparable inputs — or potentially could be quite economically feasible using lower inputs of water. There’s a strong economic argument there for the grower, based on proprietary IP supplied by the venture to growers. That’s a solid, fundamental approach — greatly strengthened from some earlier-generation ventures in biofuels that have run into the problem of being able to afford the feedstock when competing buyers pay more. That’s been a problem, lately in Brazil, when sugar-ethanol ventures have been hard-pressed to make fuels because of high commodity prices for sugar.
For the strategic investor — as Byogy’s Weiss observes: “$3.80 jet fuel of 100% fully replaceable premium product, with qualities better than petroleum derived is cost competitive today. In fact the Navy is targeting $4.00 per gallon.” For the strategic investor targeting $4 jet fuel for the long-term, the Byogy option is projecting the lowest cost in the market that’s been seen to date.
For the financial investor, NLACM concerns — or rather, opportunities — may be present. Which is to say, there are options in this process to make an alcohol fuel, ethylene, or jet fuel. All have ready markets: in this case, the project sponsors are targeting the aviation market where they see stronger demand. We may find that investors ultimately prefer selling $1400 per metric ton ethylene instead of $1000 per ton jet fuel. Or, focusing on opportunities in alcohol fuels. That will come down to strategic choices that ventures make with off takers, and relate back to the saturation of given markets, the cycle of commodity prices, and demand. The good news? Ultimately, these NLACM concerns represents the potential for financial upside for the project, rather than downside.
“Our business plan all along was to vertically integrate technology platforms in an effort to cost effectively develop the complete supply chain. The integration of the AusAgave system may significantly enhance our ability to produce fully renewable, cost competitive fuels and chemicals,” said Byogy CEO Kevin Weiss.
Raniero adds, “We believe in the quality of Byogy’s fuel and are now driving a testing program to possibly achieve greater than 50% use in the future. We recognize the importance of ICAO’s Carbon Neutral Growth goals, and believe that higher blending, or even full use, of full replacement fuels will be required to make a significant carbon emission reduction impact.”
Byogy will now expand its Brazil operations by introducing the AusAgave increased sugar yields of the agave crop, a crop already proven in Brazil for fiber production, to supplement the sugar cane industry to produce drop-in renewable fuels and chemicals from low cost sugars.
The Bottom Line
The project is at pilot-scale right now, neither the processing technology nor the agave is available at commercial-scale, today. So, it will take time to bring this strategy to fruition, and there are scale-up risks that pertain even to technologies based on proven catalytic steps.
This article was originally published on Biofuels Digest and was republished with permission.