13 September 2004 00:01 [Source: ICB Americas]
Chemical and energy companies take on the petroleum habit. Clay Boswell reports.
There is only so much petroleum in the earth, and as time passes, that oil will become increasingly rare, petrochemicals will become specialties, and chemical manufacturing will turn to carbohydrate feedstocks. The transformation is already in pro-gress. The production of glucose from corn has evolved to a highly efficient process, and tremendous advances have been made in the economical production of carbohydrates from non-traditional sources such as wood and agricultural waste. Using recombinant technologies, researchers have adapted microorganisms to produce a range of basic chemicals from carbohydrates, and companies such as Cargill Inc., Dow Chemical Company and DuPont have begun the development of a platform of biobased chemicals that will open the door to a new era of chemical innovation and long-term sustainability.
Massive spending to improve the discovery and recovery of oil only puts off the inevitable, says Dave Sherman of Sustainable Value Partners, a Vienna, Va.-based consultancy. “This delay has a great cost in that we are not putting that same energy and effort into finding innovative, cost-effective alternatives. Biomass feed with innovative processing using biotechnology has the promise of becoming a smarter solution.”
Carbohydrates: The New Oil
Although yeast has been used to convert sugars to ethanol for thousands of years, only in the last few decades have chemical manufacturers been able to draw on the tools of molecular biology to create microorganisms that can efficiently produce a wide range of other useful chemicals. Chemicals manufactured using biotech-nology consequently account for only 5 percent of the industry’s revenues, or $50 billion to $60 billion, according to Jens Riese, associate principal at McKinsey & Company. The greatest contributor to the total is ethanol, at about $15 billion. Other basic organic molecules such as citric acid ($2 billion) and lactic acid are produced by fermentation, and so are all but three amino acids (about $4 billion). The attractive enzyme market has reached $2 billion in sales and is growing by more than 5 percent per year, and specialty chemicals for flavors, fragrances and other application add several more billion dollars.
These major products were already biobased five years ago, and recent growth has occurred mainly in intermediates for pharmaceuticals and fine chemicals, of which about $7.5 billion in sales rely on biotech today. New biobased products have been introduced in polymers and nutritional ingredients, but growth has so far been incremental.
The expansion of biobased chemical manufacturing has in fact only met the lower end of projections made by McKinsey five years ago, and the consultancy has had to temper its outlook for the rest of the decade. Three factors are behind the modest results, Mr. Riese observes. First, governmental support has been weaker than expected. “At the time, there was talk of carbon taxation, CO2 emissions trading; the Kyoto protocol was hot,” he says. “All those things have not happened or did so in a more relaxed way.” Government grants to academia and industry have not satisfied expectations either. Second, for most of the last five years, the low price of oil has reduced the incentive to develop alternative feedstocks. Third, and most importantly, chemical companies have hesitated to make major investments into industrial biotech. “I believe that will change,” says Mr. Riese. “We’ve done projects with companies on industrial biotech projects, and investments are going to be made.” He now puts the realistic potential for chemical products that use biotechnology at 10 percent by 2010. “Even reaching this share will be a challenge, though the technical and economic potential is clearly higher,” he says.
The conditions necessary for the rise of a mature bioprocessing industry rivaling the petroleum industry are already in place, asserts Bruce Dale, Professor of chemical engineering and materials science at Michigan State University in East Lansing, Mich. “We have a large source of glucose, a very pure raw material that is quite inexpensive. We already have a good bit of the processing technology required to convert glucose into a variety of useful products. Much more of the required technology can be envisioned—it is simply a matter of doing the necessary research and development.” The bioprocessing industry will parallel the petroleum industry, he says. It will produce large volumes of both fuel (ethanol) and chemicals; feedstocks will contribute about 60 to 70 percent to the cost of the finished goods as the industry matures; and high-yield, efficient processes will be essential. “We’re not all the way there yet with bioprocessing technology, but there’s no inherent physical or chemical reason why we can’t develop efficient processes for converting plant raw materials to chemicals like those processes used for converting oil to chemicals,” he says. “Look at the early history of oil refining: it was actually very inefficient. They threw away a lot of a barrel of oil. So the biorefining industry is actually very far along in its development.”
A Platform for Innovation
With time, the range of biocommodities available will broaden incrementally, just as petrocommodities appeared over a period of 50 to 100 years. In contrast to the petrochemical platform of olefins and aromatics, however, the platform of basic biocommodities will mainly comprise compounds that include oxygen from the carbohydrate feedstock—organic acids, alcohols, ke-tones and ethers. Instead of methane, there will be C1 compounds such as carbon dioxide or formaldehyde; instead of ethylene, C2 compounds such as ethanol and acetic acid; instead of propylene, C3 compounds such as lactic acid (2-hydroxypropionic acid) and PDO (1,3-propanediol); and so on.
Rising oil and natural gas costs bode well for the biocommodities sector. While long-term sustainability has been touted as a key benefit of biobased processes, immediate economics has become the ultimate consideration in their adoption by chemical companies, says McKinsey’s Mr. Riese. “On different levels, the simplest and most straightforward [issue] is cost savings—producing the same product with a lower-cost process.” One example is riboflavin, which went completely from classical synthesis to fermentative production in the late 1990s. Vitamin C is going the same way.
Biobased chemistry also offers hope to chemical companies desperate for in-novation. “Almost all the chemical companies I’ve been working with over the last two years, one of their top agenda items on the board level is how to deal with the competition from China and the related commoditization of their products,” says Mr. Riese. “They see innovation as a chance to compete with the Chinese on the basis of cost because you have more innovative, effective processes, or on the basis of new products, which is not a strength of the Chinese.” R&D budgets are rising, he adds. “Biotech is identified as one of the areas with the highest headroom for innovation in chemicals…. The technology has become much more potent over the last years.”
Enzymes already play a key role in the emerging biotech revolution, but the availability of new biocommo-dities will create opportunities for innovation just as signi-ficant. For example, in 2002 Cargill Dow LLC, a joint ven-ture between the agrocommodities giant Cargill and Dow Chemical, brought a no-vel polymer with properties similar, and in some cases su-perior, to polyester. Called Na-tureworks in the packaging market and Ingeo in the textile market, it is not truly a new material, but polylactic acid (PLA), a compound invented by a DuPont scientist in 1932. The cost of the monomer, lactic acid, had always been too high for the product to be profitable except in niche applications, but Cargill Dow’s less expensive, fermentative route to lactic acid makes PLA competitive with other polyesters on the market, and Mr. Riese sees long-term potential sales of several billion dollars.
A similar story concerns PDO. When DuPont scientists first synthesized polyesters using PDO (intead of ethylene glycol) over 50 years ago, the fibers they got were uniquely soft, resilient and dyeable—valuable in fabrics. Unfortunately, PDO derived from petrochemicals was too expensive for the fiber to compete. Decades later, however, DuPont teamed with Genencor to create a microorganism that produces PDO, and teamed with corn processor Tate & Lyle to operate a fermentation plant for the organism. Corn-based PDO is cheap enough that DuPont can finally bring its unusual polyester, now called Sorona, to market.
DuPont’s activities in this area extend to a $38 million consortium, the Integrated Corn-Based Bioproducts Re-finery (ICBR) project, which includes the DoE’s National Renewable Energy Laboratory (NREL), Diversa Corp., Michigan State University and Deere & Co. In 2002, the DoE awarded the ICBR project $19 million in matching funds to design and demonstrate the feasibility and practicality of alternative energy and renewable resource technology. In October 2003, DuPont and the NREL signed a $7.7 million cooperative research and development agreement to jointly develop, build, and test a pilot process to make fuels and chemicals from the entire corn plant, husk and all. The result will be a fully integrated “biorefinery” capable of producing a range of products from a variety of plant material feedstocks. DuPont says it will be the world’s first; other biorefineries produce a range of products mainly from either starch-rich or protein-rich biomass, or with vegetable oils.
Other promising platform intermediates now being developed include 3-HP (3-hydroxypropanoic acid), a C3 compound that can be used to obtain PDO, acrylic acid, malonic acid, acrylamide and other useful building blocks. Cargill has developed a metabolic pathway for producing 3-HP that is being optimized with the help of Codexis Inc. Succinic acid and levulinic acid platforms are also under development. “Now we have a number of biobased building blocks that have existed for a while, but for which there has been no low-cost route,” says Mr. Riese. “With biomass conversion [to carbohydrates] and further process innovation in fermentation, we could create a whole new set of biobased building blocks, and out of [them] create a whole new set of products.”
Cheap and Plentiful
For chemical manufacturing, Prof. Dale expects the carbohydrate raw material to come from corn, as it already does for the manufacture of Cargill Dow’s lactic acid and DuPont’s PDO, as well as ethanol. “The supply is more than adequate to produce all organic chemicals that can conceivably be made from dextrose,” he says. Nor would chemical manufacture conflict with the production of food, he asserts, noting, for example, that Cargill Dow’s five PLA plants will consume only 40 percent of a single year’s increase in the dextrose available from the US corn crop. The potential supply of dextrose is growing at about 2.5 million tons per year.
If ethanol supplants fossil fuels, however, it will not be possible to meet demand using corn alone. Manufacturers of fuel ethanol will have to turn to “lignocellulosic biomass”—that is, crop residues, forage crops and woody crops. The primary constituents of these materials is cellulose, a glucose polysaccharide that is tough, fibrous, insoluble and extremely resistant to hydrolysis; hemicellulose, a polysaccharide of glucose and pentoses such as mannose, xylose or arabinose that is more easily hydrolyzed; and lignin, phenolic polymers that add to the strength and rigidity of woody plants. “Biomass is not only cheap, it’s also plentiful,” Prof. Dale points out. He has done calculations showing that biomass has a huge cost advantage over oil with regard to both energy content and, especially, mass—the key consideration in chemical manufacture. “So it’s worth thinking about a long-term, sustained effort learning how to convert cellulosic biomass to fuels and chemicals, like the effort we went through for oil.”
One company, Iogen, has already demonstrated the feasibility of this approach. The company began developing its technology in the mid-1970s. By 1997, Iogen had partnered with the oil company Petro-Canada and the Government of Canada to build a C$40 million ($31 million) demonstration-scale facility in Ottawa, Ontario, and in 2002 the Royal Dutch/Shell Group joined, investing C$46 million in the company with a view toward commercializing its process. In April of this year, Iogen became the first supplier of “cellulose ethanol” to the commercial market, and projected that the global demand for such bio-fuels would grow to over $2 billion by 2012.
Broadly speaking, there are two main approaches to the hydrolysis of lignocellulosic biomass for the production of ethanol: concentrated sulfuric acid and enzymes. Each has champions. Iogen, which supplies enzymes to the pulp and paper industry, naturally uses the enzymatic approach. Iogen’s version begins with pretreatment of the feedstock using steam and dilute sulfuric acid, which breaks the material down to a slurry and hydrolyzes the hemicellulose to xylose and arabinose. The slurry is then treated with cellulase enzymes to free glucose. The unconverted solids are separated from the sugars, which are fermented to ethanol by a yeast from Purdue that can ferment xylose as well as glucose.
Iogen’s Ottawa demonstration plant, designed to produce 4 million liters of ethanol per year from wheat, oat and barley straw, can process about 40 tons of feedstock each day, producing about 300 liters of ethanol from each ton. Switchgrass is a potential feedstock, but hardwoods, while feasible, are too expensive. “The significant costs in the system are the feedstock and the enzyme to do the conversion,” says Jeff Tolan, manager of process R&D at Iogen. “We’re trying to improve on them all the time.” Mr. Tolan expects the efficiency of Iogen’s cellulases to improve significantly, and a full-scale, 220 million liter-per-year plant now in planning will be situated closer to large quantities of feedstock on the Canadian prairies or the US West, further reducing costs. Iogen estimates the investment required at $250 million. Construction may start in fall of 2005. “We’re still securing funding,” says Mr. Tolan. “We’re working with [our partners] and in discussions with other parties as well.” The manufacture of other chemicals is not yet a focus.
Alternative pretreatments include MBI International’s ammonia fiber explosion process, in which lignocellulosic biomass is treated with high-pressure liquid ammonia followed by the explosive release of the pressure. The results is cellulose decrystallization, hemicellulose prehydrolysis and increased accessible surface area, which render the biomass more susceptible to enzymatic hydrolysis. A private non-profit, Lansing, Mich.-based MBI uses the glucose obtained with its process to produce succinic acid by fermentation with Actinobacillus succinogenes. Mark D. Stowers, president and CEO of MBI, says the organism uses both glucose and xylose, an important consideration since biomass typically contains both sugars. “Our goal is a cost-competitive replacement for chemical in-termediates used in the manufacture of pyrrolidinones, butanediol-based pro-ducts and maleic anhydride-based polymers,” he says. “In addition, we are working to develop a new class of polymers, polyamide amines, using succinic acid as a starting material. We believe these polymers will have application in medical devices, metal chelation, antimicrobial surfaces, and conducting coatings.” The company has been in talks with major chemical companies, he adds, but it has not yet partnered with any.
BC International Corp. in Dedham, Mass., has demonstrated its biomass-to-ethanol process in two pilot plants, and the company is now developing three projects—one in Louisiana, which will use sugarcane residue as feedstock, and two in California, which will use rice straw and wood wastes. BCI also has a technology transfer arrangement with Japanese diversified products company Marubeni Corp. for the technology’s application in Asia. BCI has developed a unique approach to reducing costs: proprietary bacteria that co-produce ethanol and cellulytic enzymes. However, BCI’s first commercial project, in Jennings, La., will not use enzymes, but dilute acid and heat. “Later phases will use enzymes co-produced during the ethanol fermentation in combination with purchased commercial enzymes,” says Gregory Luli, vice president, research. “These phases will be implemented as our co-production technology develops and as cost-effective commercial enzymes become available.” According to Mr. Luli, BCI’s ethanol will from the outset be competitive with ethanol from corn, but it has the potential to be significantly less expensive as technology and plant construction improve.
BCI’s Jennings project has been on hold for two years as the company restructured and refinanced at the corporate level, Mr. Luli notes. “New partners have been brought on board for both financing and construction of the project. These new groups have begun their due diligence efforts, which are expected to be completed by the end of the year.” He expects financing for the project to be complete in the first quarter of 2005. Meanwhile, the Japanese engineering firm TSK has constructed a demonstration facility capable of producing four tons of ethanol per day, and BCI’s partner, Marubeni, working with TSK, has begun developing a facility for processing wood waste in Osaka.
BCI is also developing organisms for the production of lactic acid, pyruvic acid, acetic acid and other chemicals. “We expect microbial production of chemicals to continue to increase in importance as the cost of producing these chemicals biologically decreases due to lower raw material costs and increased volumes,” says Mr. Luli. “Moreover, many anticipate the cost of petroleum to increase significantly. This increase, combined with an economic benefit of “white biotechnology” will drive microbial production to a greater market share in the near future.”
Abengoa Bioenergy, a major ethanol producer headquartered in Spain with facilities in the US and Europe, is also developing an enzymatic process.
The US Department of Energy (DoE), through its Biomass Program, has played an active role in the development of the enzymatic process in preference to concentrated sulfuric acid hydrolysis and the related dilute sulfuric acid hydrolysis, older technologies that the program considers “already nearly fully developed with little room for further cost savings.” In 2001, for example, the DoE contracted separately with the leading enzyme pro-ducers Novozymes and Genencor to reduce cellulase costs of $5 per gallon of ethanol ten-fold. Each was provided with $14.8 million in funding over three years. Both companies succeeded, Novozymes announcing a 20-fold decrease to 30 cents in April. The DoE has since extended Novozymes contract by one year and $2.3 million to lower the cost to only 10 cents per gallon.
The task is complicated by the fact that “cellulases” are a complete mixture of enzymes capable of breaking crystalline cellulose down to glucose, says Christian Overgaard, marketing director, grain processing at Novozymes A/S. The hydrolysis typically requires at least three separate enzyme components: exoglucanases that disrupt the fibrous crystalline cellulose and progressively hydrolyze glucose dimers (cellobiase) from the ends of the cellulose chains; endoglucanases that break single glucose-glucose bonds within a cellulose chain; and cellobiases that hydrolyze cellobiase to glucose monomers.
Of course, not all biomass is alike, and its susceptibility to digestion by enzymes will vary. Switchgrass and wood, for example, differ in the content of cellulose, hemicellulose and lignin. The higher the lignin content, the more difficult it is for the cellulases to hydrolyze cellulose to glucose. Digestibility also depends on pretreatment of the biomass, which can improve the accessibility of the cellulose by modifying or removing the lignin and hemicellulose. “The choice of pretreatment likely will have a larger impact on the choice of cellulase than the choice of biomass,” says Mr. Overgaard. He says that Novozymes works with many cellulase mixes that can be tailored to a variety of pretreated biomass substrates, depending on their composition.
Despite these complications, Mr. Over-gaard believes that enzymatic hydrolysis has three primary advantages over concentrated acid hydrolysis technologies: lower-cost reaction vessels that do not have to be resistant to constant exposure to concentrated acid; a higher yield of fermentable sugars with fewer side reaction products such as furfural and acetic acid; and neutral pH reaction conditions consistent with downstream fermentation.
Concentrated Sulfuric Acid
Other companies still favor the con-centrated sulfuric acid route. First practiced early in the last century, it fell out of favor as inexpensive petrochemicals entered the market, although interest was revived after the oil embargo of the mid 1970s. In 1989, Arkenol, a sister company of Ark Energy Inc., determined that it could make the technology economically viable by updating the process with modern technology, control methods and construction materials. The company succeeded through proprietary improvements related to acid recovery and reconcentration; sugar purity and concentration; fermentation of both hex-oses and pentoses; handling of silica in biomass feedstocks; and the use and marketing of all by-products.
One of the advantages of Arkenol’s process is its flexibility. “In our pilot plant, which was sized for 1 ton per day and operated for five years, 1994 to 1999, we tested just about everything—municipal solid waste, rice straw, soft and hard woods, coffee grounds, green waste from around the country, whatever anyone wanted to see,” says Mike Fatigati, vice president. “Concentrated sulfuric acid is very tolerant of feedstock and of upsets in feedstock composition. If you’re thinking of developing an industrial process, those are qualities you want.” He also notes that the feedstock size, typically about an inch, is easily achieved with commercial chippers and grinders, whereas feedstocks for the enzymatic process must be ground almost to a powder.
In 2000, Arkenol partnered with JGC Corporation, a Japanese engineering firm with annual revenues of $3.1 billion. JGC tested Arkenol’s process at the lab scale for six months, then scaled it up in a four ton-per-day facility in Izumi, Japan. Although the plant was originally intended for batch operation, JGC contributed its own innovations by converting the hydrolysis to a continuous process and running a fixed-bed flash fermentation. A flash fermenation requires much less volume than a typical fermenter because a slight vacuum maintained over the broth continuously draws off the ethanol that is produced. It never reaches a concentration greater than 5 percent, and the microbes in question—here a strain of Zymomonas—is never hindered by high concentrations. Sugar is continually fed to the broth. Because Zymomonas, a bacteria, does not form a biomass mat like yeasts, JGC loaded the organism onto pellets, hence the fixed bed. The feedstock at Izumi is industrial wood waste (construction and demolition debris).
JGC, which has been producing ethanol form wood chips since August 2003, has licensed the technology from Arkenol for marketing in Japan and Asia, but the company is still developing an organism suitable for the wood varieties in the region, which yield pri-marily glucose and mannose. The Zymo-monas in use has been optimized for consuming glucose and xylose, the sugars obtained in the US. However, the technology is ready for commercialization in the US, where one of the most promising markets is the treatment of garbage. Landfilled municipal solid waste is about 95 percent glucose polysaccharides, explains Mr. Fatigati. “It’s a tremendous resource. In Orange County [Calif.] alone, we’ve got 17,000 tons a day of material being landfilled. If you could turn all of that into ethanol, it would approach the total demand for ethanol in California.”
Another company, Birmingham, Ala.-based Masada OxyNol LLC, plans to construct a $200 million concentrated sulfuric acid facility for manufacturing ethanol in Middletown, N.Y. The plant, approved by the local city council in December 2003, will reportedly consume 230,000 tons of municipal waste and produce about 10 million gallons of ethanol each year when it goes on line in 2006.
Arkenol has concentrated on the production of ethanol but also demonstrated the production of citric acid, levulinic acid and lactic acid. “The idea of using carbohydrates to replace petrochemicals makes a whole lot of sense, but chemical engineers like to use liquids and gases,” remarks Mr. Fatigati, himself a chemical engineer. “They have a tough time with solids handling. Mechanical engineers can do solids, but don’t mess around with chemistry. So the bridge has to be crossed, somehow. If you focus on the use of carbon as a feedstock, the blinders come off, and you start seeing energy and feedstock supplies everywhere.”
Renewable Environmental Solutions LLC (RES), a joint venture between Changing Worlds Technology Inc. (CWT), an energy and environmental services company, and ConAgra Foods Inc., a North American food company, offers a particularly vivid demonstration of Mr. Fatigati’s point. Like Arkenol, CWT has taken an old technology—thermal depolymerization—and updated it using the latest engineering and materials. According to CWT, the resulting Thermal Conversion Process (TCP) can take virtually any organic material and, in a manner comparable to the heating and crushing that creates petroleum deep in the earth, transform it to a light hydrocarbon similar to diesel fuel that can be used for heating or converted into higher value products.
Beside a turkey-processing slaughter-house in Carthage, Mo., RES has constructed a $20 million TCP facility de-signed to process 200 tons of turkey bones, heads, feet, blood, feathers and grease every day. Construction problems have delayed its start-up, but once it is fully operational, its daily output will be 500 barrels of API 40+ oil, 7 tons of carbon, 8 tons of mineral fertilizer, 12 tons of nitrogen rich fertilizer and fuel-gas. RES reportedly estimates the cost of each barrel of oil at $10 to $15, potentially only $6 to $8. RES already plans to build a second plant near Longmont, Colo., that will process slaughterhouse waste from both turkey and cattle.
If Not Now, When?
Despite the pace of recent developments, no one can say for sure when the chemical industry will commit to the use of carbohydrate feedstocks. “Che-mical companies are working to reduce their dependency on oil, but we strongly believe that oil will remain the lifeblood of the chemical industry for the foreseeable future,” says Stefan Marcinowski, member of the board at BASF and research executive director, responsible for the chemicals segment. Only 10 percent of global crude oil consumption is used as raw material for chemical products, he explains. The majority of crude oil savings must therefore come in the areas of heating and energy generation, where chemical innovations can contribute, for example, by superior insulation materials.
Although BASF has delved into its biotech toolbox to produce vitamins, lysine, chiral intermediates and other products, less than 10 percent of the company’s products are now based on renewable resources, and Mr. Marcinowski does not believe biocommodities based on carbohydrates can yet be cost-competitive. “Current sugar prices, as well as existing technologies, will allow renewable raw materials only to supplement oil and other non-renewable raw materials in the foreseeable future,” he says. “Unfortunately, the price of renewable raw materials, particularly in Europe, often makes them an unattractive alternative—even in the context of today’s high oil price. For example, sugar, which is a typical raw material for biotechnological processes for chemical intermediates, is currently priced at about €300 per [metric] ton in Europe compared with an average global price of €200.” He does see potential in the use of biomass rather than food crops. “[C]ompetition between using land to feed people or as starting point of chemical production is an inherent dilemma we have to face. Therefore the best energy or hydrocarbon molecule is the one you save from being wasted.”
Prof. Dale has higher hopes for biocommodities in the chemical industry. The scale of the transformation would be much larger in the energy sector, he notes. “I think we’ll have a much more significant percentage penetration of the chemical industry before we get a similar percentage penetration in transportation fuel,” he says. “The margins are smaller in the transportation fuel sector, so the emphasis on getting mature processing technology is much greater.”
Whichever transformation occurs first, it will have to contend with the enormous existing investment in the status quo. For example, there already exist efficient biotech routes to several basic chemicals such as acetic acid, propylene glycol and acrylic acid, according to McKinsey’s Mr. Riese. “They could be cost-competitive at large scale today, but the investment doesn’t justify shutting down existing assets for chemical synthesis,” he says. Additionally, many producers of basic chemicals benefit from the economics of integration.
“The economic advantage has to be pretty big for them to change,” Mr. Riese notes. “However, if we have $50 per barrel, and if biomass conversion brings the sugar price down to maybe three cents per pound, I think the economics for a number of products might be such that a shift could happen.”
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