It has been an exciting week in industrial biotech. Elevance filed for its IPO as it chases down scale-up for its technologies, unlocking value in renewable chemicals and possibly fuels. Then there was the news that Mascoma and Fulcrum Bioenergy were also filing IPOs for their cellulosic ethanol technologies, as they assemble capital for their leap to commercial scale, too.
And there was news that POET closed the first DOE loan guarantee for biofuels, which virtually seals off its capital raise for its own Project LIBERTY cellulosic ethanol plant in Emmetsburg, Iowa. And the news that Kansas has OK’d Abengoa Bioenergy’s air permit, and cleared the way for that project to go forward in Hugoton after that capital assemblage is completed.
Industrial adrenaline — the rush of fear, or excitement?
But underneath all the excitement, one feels just a little bit of desperation – oh, perhaps not just from these companies but their competitors. Everyone knows at some macro level that, while there are hundreds of industrial biotech projects and ventures going on at least at lab scale somewhere in the world, there are far fewer that will reach pilot and then demonstration scale. Only a handful may ultimately get through the technical and financial hurdles to reach commercial scale.
So, there is the challenge and excitement of the leap to commercial scale. But there is also the dread of being left behind — and the dread may push a few companies to go forward when the IPO window, or the VC window, is wide open — not always driven by the cool logic of the technical fundamentals but by the waves and windows in the financing cycle.
It is certainly the case that a lot of companies will not reach scale — there simply isn’t the available capital or mental bandwidth for the market to finance them all.
But it may be that entire classes of technology do not reach scale, or at least the kind of scale that we are talking about when we are talking about fuels — thousands of tons of biomass per day, per biorefinery. Some technologies may serve the sub-1000 ton per day world of renewable chemicals. Or the smaller scales for exotic nutraceuticals.
Which are the technologies that — so far — are showing signs of going all the way to fuel-scale? We are seeing three.
Two are pretty obvious. Then there’s a Third Way, which we will need to go into in a bit more detail.
The First Way
The first class of technologies are the those that are, broadly speaking, using heat to begin the process of unlocking value in biomass.
Some of the most popular and well-known in this class are those that are going all the way to a gas state, and performing conversion from there. That’s, for example the class that Fulcrum Bioenergy fits into. The ClearFuels gasifier and the Rentech modified F-T process is another well-known and widely followed example. ZeaChem is doing some gasification. Coskata, LanzaTech and INEOS Bio are a trio that ferment gas into target fuels and chemicals (though LanzaTech has been initially focused on using existing waste gases, rather than gasifying waste biomass such as wood chips or MSW).
Then there are companies like Enerkem that gasify MSW and then chemically – rather than biologically – convert to higher-value products.
Then there are the sub-class of technologies that heat biomass into a liquid state – typically, a pyrolysis oil – and do upgrading or stabilizing from there. That’s the essential technology behind hot companies like KiOR, or Envergent, Dynamotive, or Ignite Energy.
Overall, this class has been doing an outstanding job of moving towards scale. There are numerous demonstration-scale projects either running or being completed. Companies like KiOR, Enerkem, Coskata, and INEOS Bio are heading for commercial scale right now.
The Second Way
The second class of technologies? These are the ones who are using biological and chemical processes, instead of heat, to unlock the hidden value in biomass.
In this class, the model technology uses a chemical pretreatment to crush biomass down to a size that is optimized for bioprocessing, then an acid or enzymatic hydrolysis to liberate the sugars, and a fermentation process to convert the sugars into target fuels or chemicals.
In a nutshell, that’s POET and Abengoa, for example, and companies like Dupont Danisco Cellulosic Ethanol and BlueFire Renewables.
There are some who, in the pursuit of higher value or lower costs, have pioneered consolidated bioprocessing to cut that three-step model technology down to two steps, pretreatment and processing. That’s where, for example, Mascoma fits in. Also, that’s where Qteros’ magic bug does its magic.
In fact, Gevo, Butamax, and Cobalt technology fits right in here – though their magic bugs create higher value biobutanol molecules in the process.
The use of biology or chemistry to treat biomass for advanced biofuels is not entirely different from the process used to make traditional ethanol – or traditional beer or wine, for that matter. What is different in the case of cellulosic ethanol is the tricky biomass – corn straw and wheat draw instead of, say, corn starch.
You can easily figure out how difficult cellulosic ethanol is with a simple test. First, eat a wheat cracker some time. Right away, you’ll taste some sugar as the enzymes in your own mouth do some quick and easy bioprocessing after your teeth have done some pre-treatment work.
Now, munch on a blade of grass. There’s a little sugar in there that is easy for you to capture, but not much. Your own personal biorefinery can’t do the work, either. Your body can tolerate grass, but you’ll never get enough energy out of it to run your body systems. Cows can, with a specialized system for processing grass – and termites can ingest wood. That’s why we study them.
And that’s what makes enzyme cocktails from the likes of Novozymes, Genencor, and Codexis pretty special. They can liberate all those sugars from biomass, though not as cost-effectively as we want and need, at the moment — though costs are coming down fast.
The Third Way
Which brings us to the Third Way. This is the tricky one.
Already you might have guessed that popular companies like LS9, Solazyme and Amyris fit in here somehow, since they haven’t been mentioned elsewhere. So, you might have an idea that this class includes engineered organisms that produce specialty fuels and chemicals. Based on the fact that a lot of these companies are starting business units in Brazil, you might have an idea that they are all using cane sugars as a base.
But how is that different from, say, Gevo or Cobalt? Except that they are using cane sugar instead of corn starch or cellulose — and except that they produce a different range of fuels and chemicals — for example diesel fuels or surfactants used to make, for example, washing powders.
The difference is that the Third Way represents not a class of technologies, but a class of systems.
The best way to understand this is to think about how we raise cattle for beef production. There the first phase, where cattle are raised on pastureland. Then there’s the feedlot. In the first phase, the cattle are raised simply to make cattle, cattle. There is a lot of focus on breeding and selectivity, but not nearly as much on fattening them up. That’s what the second step is all about, at the feedlot — where it is all about growth, growth, growth.
Now, let’s just introduce one element that we have forgotten about in the age of the tractor, that pertains to the feedlot and the pasture. If you happen to have any family letters from say, before 1920 or so, chances are the family was living on the farm. Chances are that they were growing one heck of a lot of food just to feed the animals that worked the farm. One whole portion of the farm was for the food to feed to pigs or cattle, one portion for the work animals, and then there were the cash crops. Keep that in mind, you’ll need to remember this.
In the case of, say, Solazyme, the Third Way System is a little hard to see, because the first phase is so short and relatively obscure. The algae are grown and designed in the lab, then very small quantities are inoculated into fermenters, and fed a whole lot of sugar to fatten them up. But you see the system — the lab is the pastureland, and the fermenter is the feedlot. The sugars are the feed crops that grandpa grew beck in the old days on a portion of the farm.
It’s easier to see with companies like Phycal, that overtly follow this path. In their 58-acre demonstration under construction in Hawaii, roughly half of the farm will be used to grow cassava, and half to grow skinny algae. Once the algae have reached a certain size, they are transferred over to the fermenters and fed a whole lot of cassava sugars.
What happens to the algae is the same thing that would happen to you, were you in residence at some crazy, upside-down health resort where you were fed sugar doughnuts sixteen meals a day. You get fat, fat, fat. So do algae. That’s the lipid for fuels and chemicals.
Or, they can be engineered, ultimately, to grow fat with something else besides a traditional lipid — after all, a traditional lipid is simply a traditional organism’s attempt to store up energy. That energy can be released in the form of, say, alcohols or other fuels or chemicals. Or stored up in some other energy carrier.
Advanced biofuels as a system of systems
But think of it as a system. In the example of Phycal, the ponds are the pastureland, and the cassava section is the land to grow the feed crops. And the fermenters are the feedlot.
That’s the Third Way — a system for industrial biotech at scale, where each one of the steps is optimized for industrial biotech, and uses the latest in synthetic biology.
That’s the difference between, say, the other two biomass classes where they use existing crops that may have been developed for other purposes (such as using corn starch or cane grown on farms that, fungibly, might be aiming to grow corn or cane, for feed, power, sweetener or fuels and not care a whit what the industrial bioprocessor makes).
That system of fungibility is the dinosaur in the system. It is what links all the markets together and causes them all so much economic pain when rising demand for one leads to rising price for the other. Also, it is sub-optimal, from a processing point of view.
Taking fungible, already aggregated crops and using them for industrial biotech may be an efficient way for a company to get into business, but it is fatally flawed for standing up an entire, at-scale industry. Just ask any US ethanol or biodiesel producer how much they loved 2008-09. Or ask: “Why there is an ethanol shortage in Brazil, and India?”
It is the problem of borrowing dad’s carwax or mom’s kitchen to start a kid-owned business in car-washing or selling lemonade by the roadside, and trying to take it to scale. Scale ruins relationships, when a feedstock is shared. It’s a variation on the Tragedy of the Commons.
Now, you may rightly also ask, what have you separated out companies like Amyris and LS9 for, when everyone knows they are making products using pure sugarcane — the dread shared, fungible feedstock?
Well, the Third Way is about providing alternatives through a systematic approach. Right now, Amyris, Solazyme and LS9 fit into The Second Way — but they are moving towards the third as they work with companies that are developing dedicated sugar sources.
Companies like Proterro, Comet Biorefining, and Renmatix. Or, companies like Edeniq, BlueFire or KL Energy that can go all the way to cellulosic ethanol, but also have a particularly strong technology in pre-treatment and saccharification — that it, producing a cellulosic sugar. Codexis too. These are the companies that are providing what we generally call “cheap cellulosic sugars” — but in the example of the cattle system we described earlier, they are providing the cattle feed for the feedlot.
Pastureland, feed land and the feedlot
Pastureland, feed land and the feedlot. It’s a combined and engineered system. Sometimes, the feedlot is most of what you see. That’s the case with Solazyme, which is all about the big bioreacting fermenters and little tiny beakers at the labs that represent the pastureland where the organisms are grown,.
But it go can go completely in the opposite direction. Take the example of Joule Unlimited. There, a technology that has an enormous solar-based pastureland. It’s organisms grow photosynthetically, almost all the way to finished products, right on the main farm.
Not much of a feedlot at Joule, they pretty much grow the entire organism right out there in the field — running CO2 and water out to the field just like farmers run nitrogen and water out to the farm land. They may well find that it is more efficient for them, in the long run, to fatten up or otherwise optimize their organisms in the feedlot, having made them in the field.
In their case, they need CO2 out there in the pasture — that’s the other component they need in huge quantities besides water and sunlight. For now, they are seeking industrial partners that have concentrated sources of CO2 already available. And, why not? The CO2 is available, and hopefully affordable, as an unwanted by product.
Sustainable production vs. using aggregated residues
But they may well find that their economics, ultimately dictate the production of CO2 in a different way than simply capturing existing residues. Using residues is good for economics — and good for the planet — but it limits scale and geography.
Ironic in an age where we have so much atmospheric CO2 that we are in danger of global warming, that we are as yet limited to using concentrated industrial CO2 in our industrial biotech projects. But that may change. The feed land – that part of the farm we have described in out Third Way — may ultimately and most happily become the sky itself.
Now, that is a worthy goal for some biotechnology development — the organism that can process atmospheric CO2 at an industrially feasible scale.
It’s talked about a lot, in the discussions around algae — in the chase to create a bioreactor or pond system that will produce a low-cost, high-value algae. But it fits better within the Third Way, where we see scientists working on three fronts: giving us more options for the feedlot, more options for the feed land, and more options for the pastureland.
Now, let’s be clear. The Third Way is a means of understanding a trend in synthetic biology and industrial biotech. Although the expression itself may be novel, it’s a pattern that can be seen all over the sector. It may well be that it helps us to measure what is a valuable company in this space — because, minimally, a company will have to have optimized either its own walled garden, its self-contained system of systems — or will have to have optimized at least one aspect (e.g. the feedlot, or the pastureland), and have world-class partnership management skills in its corporate DNA.
It is not required, for example, that Solazyme make low-cost sugars or Proterro optimize bugs for making designer renewable oils. Any more than cattle growers have to grow their own feed, or feedgrowers have to raise their own cattle, or feed lot operators have to own ranches.
But the new industrial biotech survivors will have to be world-class at one of the three key tasks, and will have to know how to optimally combine their efforts with others.
One more thing
Just one more thing. It really humbles one to try and figure out a puzzle, and then realize that our most ancient human agricultural systems of systems — like cattle raising or wine-making — are continuing to have on bleeding-edge industrial biotech. It tells you something about the cleverness of our forgotten ancestors of so long, long ago. It tells us, also, that while we may well think ourselves as being enlightened industrial creatures who have advanced long beyond the wisdom of the ancients, it may not really be so in some very important ways.
We may be simply people still wandering around in the Dark Ages, having forgotten so much of what was developed in time out of mind, and how, and why.
It may be that we aren’t much advanced from peasants scratching at medieval plots of land in profound ignorance of how to do almost anything that its worthwhile in a sustainable manner.
That we are still a walking Tragedy of the Commons species with far to go, albeit one that has learned a lot (lately) about very small things like molecules and atoms, and learned all too much about how to dig holes in the ground and extract minerals and oils that we don’t know enough about how to responsibly use, or responsibly replace when they are all used up.