ZeaChem launches its 250,000 gallon per year core process. How could this possibly matter in the context of a 500 million gallon cellulosic biofuels target for 2012 that was waived down to 10 million? As it turns out, a lot. The RFS is in much better shape than its critics advertise. Here’s why.
In Colorado, ZeaChem reported they have begun core facility operations at their Boardman, Oregon biorefinery.
The core will initially produce 250,000 gallons of the intermediate chemicals acetic acid and ethyl acetate, which are high-value products for applications including paints, lacquers and solvents. ZeaChem will sell bio-based chemicals to commercial and industrial customers seeking renewable and cost-competitive alternatives to petroleum-sourced chemicals.
“We came in on schedule and significantly under budget,” reflected ZeaChem CEO Jim Imbler, speaking with the Digest. “We had a guaranteed maximum price, but in this case we received a rebate check. One of our long-term VCs said to me ‘I’ve seen a lot of things, but I have never seen a check come back.’ It came down, we think, to the choice we made to use known processes, known vendors.”
Next step? The company will be constructed by the DOE-backed process “bookends” that will add the conversion of ethyl acetate into ethanol, which is backed in part by a $25 million DOE-integrated biorefinery grant. The company also is expected to undertake thereafter the addition of its alcohol-to-jet process, which will produce renewable jet fuel from alcohol, as well as adding a C3 platform that will produce higher-value 3-carbon chemicals such as propylene.
The project, which uses high-density hybrid poplar trees from Greenwood Reources, is based on a long-term binding term sheet signed with GreenWood Tree Farm Fund last June. ZeaChem will integrate feedstock from a portion of GTFF’s residual fiber with local agricultural residue suppliers to achieve feedstock costs 50% less compared to Brazilian sugar cane and 80% less, compared to corn based processes.
The Greenwood project, in part supported by the USDA, will provide 7,000 acres of coppice trees for the project.
ZeaChem will construct its first commercial plant, with a 25 million gallon capacity, at the same location, adjacent to the Columbia River in Boardman, which is a logistics and transportation hub for the Columbia River system through the Port of Morrow.
The news of ZeaChem’s start-up comes at a time of significant blow-back for the cellulosic biofuels movement and sector, after the EPA waived down the scheduled 500 million gallon mandate for cellulosic ethanol, first proposed back in 2007 when the current Renewable Fuel Standard was developed, down to 10.45 million gallons for 2012.
The protest over cellulosic biofuels mandates: National Petrochemicals & Refiners Association
Even the minimal mandate attracted howls of protest from the National Petrochemicals & Refiners Association president Charles Drevna, who said, “Once again, EPA has acted unwisely to make a bad law worse with regulations not based on reality and science. Once again, refiners are being ordered to use a substance that no one is producing in commercial quantities — cellulosic ethanol — and are being required to pay millions of dollars for failing to use this non-existent substance. This makes no sense.”
“This new rule is another reminder that the Renewable Fuel Standard needs to be modified to prevent harm to American consumers and the American economy. Government mandates like EPA’s new regulations calling for enormous increases in the annual production of advanced biofuels in the United States are unrealistic and impractical, and not in the best interest of American consumers.”
“Instead of imposing an unreasonable biofuels mandate, which would raise energy costs and impact fuel supplies, government should allow consumer choice and the free market to determine the mix of energy sources to best meet our nation’s needs.”
“The standard is not achievable or sustainable economically or environmentally. The American people shouldn’t be required to spend billions of their hard-earned tax dollars to prop up renewable fuels that are plagued with problems, unpopular with consumers, and unable to survive on their own in the free market.”
The Renewable Fuel Standard, revisited
The Renewable Fuel Standard has two main components — the corn starch ethanol pool and the advanced biofuels pool.
A qualifying advanced biofuel meets a 50 percent reduction in greenhouse gas emissions, is produced at an EPA-approved facility, and is made from a qualifying biomass.
A number of fuels qualify here. Biobutanol, for example. Brazilian sugarcane ethanol, or biodiesel — in addition to cellulosic biofuels. In this way, Congress created a number of ways to meet a mandate, should one pathway prove more technologically or economically difficult than originally expected.
Within the advanced pool there are two sub-categories, they can be waived at any time by the EPA. Those are biomass-based diesel and cellulosic biofuels. Those are highly targeted pools designed to help foster a market for highly-desirable molecules.
If cellulosic biofuels come up short, however, that sub-pool is simply waived down and obligated parties can buy and blend other qualifying fuels.
In this way, Congress signaled what it wanted while creating a mechanism for flexibility should the future not pan out as planned.
The ethanol-equivalent adjustment
As most know, biodiesel, renewable diesel, renewable gasoline, biobutanol and other fuels contain more energy than ethanol, and generally the yields when produced from biomass are, accordingly, lower. So, these are rated in “ethanol equivalent gallons.” For the purposes of counting volumes towards the mandate, one gallon of biobutanol is rated as 1.3 gallons of ethanol, a gallon of biodiesel is rated at 1.5, and a gallon so renewable diesel at 1.7.
That’s important to keep in mind. For example, the 36 billion gallon mandate for 2022, which includes 15 million gallons of corn ethanol and 21 billion gallons of advanced biofuels, could be met with as little as 12 billion gallons of renewable diesel (in addition to the corn ethanol pool).
The RFS mandate for 2012
The overall mandates for 2012, under the Renewable Fuel Standard, are as follows, expressed in ethanol-equivalent gallons.
- Biomass-based diesel: 1.5 billion gallons of production
- Advanced biofuels: 2.0 billion gallons
- Cellulosic biofuels: 10.45 million gallons
- Total renewable fuels: 15.2 billion gallons
The expectations back in 2007, and dialing forward to 2012
For example, there was an expectation that there would be 500 million gallons of cellulosic biofuels and zero gallons of drop-in renewable diesel. That’s the 2007 schedule.
As it turns out, there was about 10 million gallons of cellulosic biofuels, and about 750 million gallons of renewable diesel capacity (on a global basis). In the U.S. alone, roughly 210 million gallons of renewable diesel will be online during 2012, and the 500 million additional gallons of capacity, primarily representing Neste Oil capacity, are without question aimed at the U.S. market is the pricing works out.
Why and how can 250,000 gallons matter?
As engineers know, scale up proceeds in a series of steps, and the scale-up between steps can range from from a factor or, say, 10X in the case of a conservative play, to as much as 150X in a single step.
Why is that important?
In the case of renewable fuels, work starts (and for a long time stays) at the bench-level, where “production volumes” might be as little as 100 cc, over a couple of days of fermentation. That’s about the equivalent volume to a double shot of whiskey.
It takes two years, and then you make it to pilot, or around 10,000 gallons. Two years later, you hope to be at demonstration scale, around 1 million gallons. Two years later, you can scale to commercial-scale, in the range of 10-70 million gallons.
So, progress can look slow in industrial biotech, then suddenly explode. 20 companies moving from bench to pilot may move sector capacity from 2,000 gallons to 200,000 gallons. Hardly noticeable. But a few years later, the demonstration-to-commercial step can add 800 million gallons from the same 20 enterprises.
From there, most companies can support the construction of 2-3 additional facilities per year, according to the rate of build-up in the corn ethanol sector between 2006 and 2008. So, in your mythical fleet of 20 companies, you have the capacity to add as much as 2.4 billion gallons of capacity per year.
From commercial scale to RFS scale
Now, keep in mind that you don’t actually have to build out 36 billion new gallons to meet the RFS mandate. The corn ethanol capacity is, essentially, built out and as of 2012 operates on an unsubsidized basis. There is at least 2 billion gallons in existing US capacity for biodiesel, and more than 10 billion gallons of qualifying advanced biofuels capacity elsewhere around the world. Around the world, by the end of this year, there will be 1 billion gallons of next-gen biofuels capacity – primarily, renewable diesel at this stage.
Altogether, there is around 28 billion gallons in capacity, that rates out to just shy of 32 billions gallons in capacity on an ethanol-equivalent basis.
That’s the good news. Now, the not-so-good. Those are global figures, not US, and the US can’t soak up the entire pool for its own mandate. Plus, there’s more ethanol in that global capacity than there is a US distribution path in this time, due to the US ethanol “blend wall” and a shortage in flex-fuel blender pumps.
There are other items. Project finance remains a significant headache. Plus, no actual developer of next-gen fuels has anywhere near a schedule of “2-3 plants per year” set up at this time.
Moreover, there’s the $64 question. The U.S. is short on talent in the manufacturing sector. That means process engineers, welders. “For a long time,” ZeaChem’s Imbler notes, “this sector has not been ‘coll’ to work in. It’s nice to see a manufacturing resurgence, with US refiners exporting again, but its challenging finding all the talent in the near-term, especially in that 10-15 year experience range. You end up hiring more younger people than otherwise would happen.”
So, significant challenges remain. It’s one of the reasons that “work” remains a four-letter word.
But there’s a difference between saying that advanced biofuels has challenges, and saying that those challenges cannot be overcome.
It’s also worth pointing out that the capacity to produce every gallon in the 2012 RFS, and the expected 2013 RFS, already exists in the U.S. And that the U.S. biofuels industry has proven, through past performance, that it has the ability to scale-up by more than 2 billion gallons of capacity per year. And that the industry has never missed either its advanced biofuels or corn ethanol capacity building targets, to meet the RFS.
The obligated parties and the Renewable Fuel Standard
Which raises another point. There has been some remarkable work, by strategic investors such as BP, Valero, Total and Shell, to name a few, to build next-generation biofuels capacity that meets the U.S. mandates, as well as demand in other places around the world, especially Brazil.
The dispute between the refiners and US government is about timing and volume, more than it is about the potential future and importance of next-gen biofuels. Even the Koch Brothers, no friend of climate change studies, are investing in next-gen biofuels through their Flint Hills Resources unit.
The integrated biorefineries and the RFS: why make a $3 fuel when you can make a $6 chemical?
One concern, especially in the near-term, is that numerous companies that have the capacity to produce biofuels will instead produce largely renewable chemicals, because those molecules command higher values in the marketplace.
ZeaChem CEO Jim Imbler disagrees.
“I’ve never bought into that $6-$3 idea,” he says. “It comes down to producing low-cost molecules, where you have a cost advantage over the incumbent process. Propylene sells for the same price no matter what you use it for. If you have a pathway that produces an advantage, then you can sell into the market for that molecule. If you don’t have an advantage, chemicals are not going to provide you a panacea. A lot of the talk around chemicals is disingenuous hype.”
The Bottom Line
Consider the agenda of the opponents of the Renewable Fuel Standard, and consider the facts on scale-up, capacity, pace of construction, and the nature of the mandate itself.
It’s a relatively elegant mechanism. It’s final rule making was completed and in force as of January 2011. It’s just one year in complete force. Millions of gallons of capacity have come on line, primarily from biodiesel and renewable diesel. Millions more are coming from projects by POET, Mascoma, Abengoa, Chemtex, BP Biofuels, Fiberight, Solazyme, Amyris and more, over the next 12-24 months.
It’s an exciting time in building new fuel-production capacity in the United States, and elsewhere around the world. Slowly, alternatives to fossil transportation fuels are getting scale. 10 percent conversion might not sound like much to you.
Er, how long did the oil industry take to scale?
It is worth noting that the U.S. oil industry did not reach the 17 billion gallon per year production mark until 1919, 50 years after production got underway in earnest in Pennsylvania.
Building out a comparable capacity in renewables, in less than one decade? Well, it deserves more credit within the historical context than its critics, who could and should know better, give it.