The New Economics of Next-Gen Gasification

Those who take an interest in the history of engineering probably know about the problems of high cost and fuel yield that plagued the development of the early steam engine, just as they have plagued the development of affordable Fischer-Tropsch and other thermal and catalytic conversion technologies for biofuels.

As Santayana’s dictum goes: “Those who cannot remember the past are condemned to repeat it.”

When we here at the Biofuels Digest report on the opportunities in developing aviation or ground-fleet biofuels using the Fischer-Tropsch (F-T) process, the parade of naysayers inevitably march in.

When looking at the development of these technologies, it’s helpful to remember the struggles of Thomas Newcomen and James Watt – among many others – who toiled for so long to develop a workable steam engine and unleash the industrial revolution.

It is suitably ironic and pleasing that steam should be associated with one of the technologies now powering a change in energy: In this case, steam reformation, a process by which gasified biomass is converted into a useful balance of hydrogen and carbon monoxide.

Steam reformation itself has struggled with high costs associated with the high temperatures at which the system operates. But it has been a technology worth chasing, for in the development of F-T plants it eliminates both the need for expensive oxygen plants and larger footprints needed to deal with nitrogen dilution from air, lowering capex and space requirements.

$3.00 Per Gallon F-T Fuels

The potential thereby is to develop F-T plants on a much smaller scale and with target costs of $3.00 per gallon at full commercial scale, changing its prospects from “technology of interest” to a near-term technology for scaled drop-in aviation fuel and renewable diesel.

The company that has been attracting the most attention in this area is ClearFuels Technology, which was voted last year as one of the 30 Transformative Technologies by the Digest’s readers and made a solid run into the 100 Hottest Companies in Bioenergy last month.

ClearFuels’ Technology

Unlike other gasifiers or pyrolysis processes, ClearFuels HEHTR is a one-step rapid steam reforming process that converts all the biomass to syngas with no char, no liquid intermediates, no ash slagging/fouling and low tar content. The technology has operational controls for a tunable hydrogen to syngas ratio of 1:1 up to 3.5 to 1, while also interchangeably running on syngas, tailgas, biogas or natural gas.

The project that has attracted the most attention is Rentech’s Product Demonstration Unit (PDU) in Colorado. ClearFuels received a DOE Integrated BioRefinery grant for $23 million, plus guaranteed funding of up to $25 million from Rentech (which acquired 25 percent of the company) to complete a demonstration of its front-end gasification system. The PDU project is expected to produce renewable jet fuel and diesel from mixed bagasse and woodwaste by October 2011. (Note: Rentech’s first commercial plant – its Rialto project is scheduled to come on line in 2012, using the Rentech-SilvaGas biomass gasifier).

Working with Amyris, Inbicon, Coskata and United Power

But the technology is also being tested by other companies. ClearFuels’ initial technology evaluation with Amyris for hydrogen, steam and power is completed. ClearFuels’ technology can also integrate with the Coskata process for conversion of clean biomass to cellulosic ethanol. United Power and Inbicon are are investigating with ClearFuels the use of biogas from the digestion of C5 sugars to drive ClearFuels HEHTR for more efficient conversion of lignin to syngas and the reformation of biogas to syngas for drop-in fuels.

We caught up with ClearFuels’s CEO, Eric Darmstaeder, to understand more about the technology’s promise and opportunities.

BD: What are the near term projects we should be looking for from ClearFuels?

ED: We are 10-11 months away from project completion in Colorado.The equipment is ordered, and we are under construction. Next up are projects in Hawaii and Tennessee – Tennessee is the one we’ve announced.

(More on Tennessee: Last February, ClearFuels announced its 20 million gallon project at the Hughes Hardwood International site in Collinwood. Utilizing 1,000 bone dry tons/day (BDT/d) of local timber resources, the plant will produce approximately 20 million gallons per year of very high quality renewable liquid fuels, plus 6-8 MW of electric power that will be exported to the grid.

The project will use ClearFuels’ High Efficiency Hydrothermal Reformation process to produce syngas that will then be converted to renewable diesel and naphtha fuels through Rentech, Inc.’s proprietary Fischer-Tropsch process. Feedstock for the plant will come from timber slash, underutilized wood products, and local mill residues.

ClearFuels plans to break ground on the bio-refinery in late 2011 or early 2012, with the plant reaching commercial operation in late 2013 to early 2014. Initial design and permitting work will be under way in the 3rd quarter of 2010.

The Collinwood facility will represent an investment of roughly $200 million by ClearFuels. The construction phase will ramp up to employ up to 250 people. Once in operation the plant will create approximately 50 direct jobs. In addition approximately 100 indirect jobs will be created in harvesting, processing and transportation of feedstock).

BD: Why is this technology promising such different economics – $2.00 on an opex basis, $3.00 per gallon with capex?

ED: The obvious reason is that we are a steam reformer. We don’t have needs, like Sasol for example, to have to have a 30,000 barrel project size. We don’t have an oxygen plant, an air plant. We are indirect fire. We don’t need gas shift equipment, we do that with the reformer itself. Plus, we can use the tail gas off the FT process to drive the reformer. If you are using, for example, a plasma gasifier, you have to buy power and you can’t substitute the tail gas off the F-T process. In other systems, you have to use the char for power, so you are producing a lot of char. All these things together help drive our yields up 20 to 30 percent.

If you are using waste and a plasma gasifier and you are running off an oxygen plant – you have to deal with all the waste streams. A lot of any tipping fees for handling waste get eaten up in dealing with waste stream. Our technology has advantages in dealing with clean biomass.

When we look at this, compared to projects that are producing renewable diesel from sugar – well, consider what’s happening with sugar. Whether you are actually paying 35 cents per pound or not, your supplier has that opportunity cost – that’s a $700 per ton feedstock cost, right out of the box.

BD: Other advantages?

ED: There are quite a few. For one, we don’t have slagging or fouling concerns. Another – we are not buying natural gas or power off the grid, in fact we will produce plus producing 6-8MW of exportable power.

BD: Costs for the system?

ED: For our first plant in Tennessee, the cost is $200 million, but we have a number of R&D projects with Rentech to reduce the capital costs and we are looking at $140 million for a 1,000 ton per day intake, producing 18-20 million gallons of fuel per year, over the long term.

BD: Tell us about your partnership strategy with the feedstock providers.

ED: Most of us came from IPP (independent power production), and we have done a lot of energy conversion contracts. In those, traditionally you teamed up with a partner, they give you oil, you give them power. In this execution, we are working with a biomass supplier, preferably on an equity basis. They give us their sawdust and bark, we provide them steam and power to run their system. For them, its a much tighter integration and a hedge against rising energy prices. So we construct a contract in which we take care of the biomass supply with an energy conversion contract, and we use the rest of the syngas to make diesel or jet fuel, and they participate in that depending on how the deal in constructed.

BD: Other opportunities for synergy?

ED: Well, the ultimate goal is to de-link a partner as much as possible from petroleum prices. Maybe you can’t do entirely – for example, your source of fertilizer may tie you back to petroleum. But, co-located with a sugar milll, a large cost is the diesel for their machines – if we are making diesel from the process, then our partners are able to hedge internally, through the project. Plus, because you are tying feedstock back to petroleum prices through the production of jet fuel and renewable diesel, even if costs are going up, revenues are too, and you can hedge risk that way too.

For a simpler explanation of the business of synthetic fuels, check out this 2008 interview with Rentech CEO Hunt Ramsbottom:

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