INSIGHT: US cellulosic biofuel players determined to commercialise

24 September 2013 15:51 Source:ICIS News

By Tracy Dang

HOUSTON (ICIS)--The US cellulosic biofuel industry has made visible progress toward commercialisation as ongoing research has led to the development of new supply chains that increase product yield and lower enzyme and catalyst costs.

After years of significant investment and challenges that have stymied advancements, several companies are transitioning from technology development and small-scale demonstration to deployment of commercial-scale production.

In March, KiOR announced the first shipments of cellulosic transportation fuel from its plant in Columbus, Mississippi. The facility uses a process called biomass fluid catalytic cracking (BFCC) and can produce over 13m gal/year (49m litres/year) of gasoline, diesel and fuel oil blendstocks.

The INEOS Bio joint venture in May began commercial production at its Indian River BioEnergy Center in Florida. The facility has the capacity of 8m gal/year of cellulosic ethanol and 7MW of renewable power, using gasification and fermentation technology.

Last week, American Process announced that its Alpena Biorefinery in Michigan was fully operational, capable of producing up to 900,000 gal/year of cellulosic ethanol. The company’s GreenPower technology extracts the hemicellulose of woody biomass and hydrolyses it into sugars.

Additionally, commercial-scale production of ethanol is targeted for 2014 at several other facilities.

Abengoa is expecting its plant in Kansas, which uses enzymatic hydrolysis of corn stover and other agricultural wastes, to be in operation by January. The plant will have a capacity of 25m gal/year of ethanol and up to 20MW of electricity.

The Poet-DSM Advanced Biofuels joint venture will start up its 20m gal/year cellulosic ethanol plant in early 2014. The plant will use enzymes and yeasts to extract and ferment sugars from corn cobs, leaves, husks and stalks.

Also, DuPont’s 30m gal/year cellulosic ethanol plant in Iowa and CoolPlanet’s three 10m gal/year biomass-to-gasoline plants in Louisiana are all expected to begin commercial production next year.

ZeaChem is building a 25m gal/year cellulosic chemicals and ethanol biorefinery in Boardman, Oregon, but has not provided a schedule for start-up.

Despite the progress in the cellulosic biofuel industry and potential for further advancements, however, the path to commercialisation has been slow.

KiOR is falling short of its initial biofuel production target of 3m-5m gal for 2013. Through August, the company has produced slightly over 357,500 gal at its Columbus facility.

The US Department of Energy (DOE) reported earlier this month that it had spent $603m (€446m) of its obligated $929m in financial assistance for 29 integrated biorefinery projects.

However, the DOE has yet to demonstrate the commercial applications of the integrated biorefineries, as required under the Energy Policy Act of 2005 (EPAct 2005) and Energy Independence and Security Act of 2007 (EISA 2007), and the agency is not on target to meet its biofuel production capacity goal of 100m gal/year by 2014.

In evaluating the 15 demonstration-scale and commercial-scale integrated biorefinery projects, the DOE found that only three have demonstrated successful operation, although none of them have reached commercial scale.

According to the report, nine projects have experienced delays because of various challenges, including difficulties with ethanol meeting technical specification requirements, problems with acquiring private industry partners, as well as extended environmental reviews.

One of those projects is Mascoma’s proposed 20m gal/year denatured ethanol plant in Kinross Charter, Michigan, which received a DOE grant in February 2009. However, Valero confirmed in August that it was withdrawing its $50m investment in the project, potentially setting it back even more.

The DOE report also noted that six of the 15 projects have been mutually terminated by the agency and the grant recipient.

In February 2007, Verenium broke ground on its 1.4m gal/year demonstration cellulosic ethanol biorefinery in Jennings, Louisiana. With the help of major investor and later joint venture partner BP Biofuels, the facility was commissioned in May 2009.

That year, the joint venture announced it was building a 36m gal/year cellulosic ethanol facility in Highlands County, Florida. However, BP acquired Verenium in 2010 and cancelled plans for the plant in 2012.

Critics, such as the American Fuel & Petrochemical Manufacturers (AFPM), said the DOE report is “yet more evidence of how government policies that pick winners and losers in the marketplace end up in colossal failure”.

“It is just the latest in a slew of examples highlighting how flawed energy policies based on subsidies and mandates, rather than markets and entrepreneurship, are detrimental to American consumers and the economy,” said Charles Drevna, AFPM president.

Additionally, the Environmental Protection Agency (EPA) recognised that there was a need to adjust the 2013 requirement for the Renewable Fuel Standard (RFS), a federal fuel volume mandate created by the EPAct 2005 to boost ethanol, biodiesel and other renewable resources.

After an evaluation of cellulosic biofuel volumes expected to be available this year, the EPA in August lowered the 2013 requirement for that category to 6m gal.

This is less than half the level it proposed in February and far below the 1bn gal target specified in the EISA 2007, according to the US Energy Information Administration (EIA).

The EPA added that it may waive or reduce volumes for the 2014 requirement.

The American Petroleum Institute (API) and American Energy Alliance (AEA) have criticised the RFS and deemed cellulosic biofuel a “phantom fuel”, asking how the government can mandate something that does not exist.

While the cellulosic biofuel industry remains optimistic about commercial deployment, companies will continue to face hurdles that could delay or hinder growth.

According to the EIA, technology scale-up has been difficult at start-up companies, and strategic corporate shifts have occurred because of the increased availability of low-cost natural gas from the advent of shale in North America.

Meanwhile, many have had difficulty obtaining financing in the aftermath of the debt crisis, and securing capital is still one of the biggest challenges facing the industry today.

“They’re still hesitant to put money into the first-of-its-kind,” said Matt Carr, policy director at the Biotechnology Industry Organization (BIO). “Once the first-of-its-kind demonstrates success, then they’ll jump in on the second one – and that remains to be seen.”

However, he pointed out that those who are investing are “major players” that take large sums of money to build large-scale projects.

“They wouldn’t be making those types of investments if the technology isn’t right,” Carr said. “You also have oil majors that are making assessments because they understand that they can’t afford to be left behind.”

Still, production costs – on both a volumetric and energy-content basis – remain higher for many of these first-of-its-kind projects than for those processing petroleum-based fuels.

And like corn and other types of ethanol, cellulosic ethanol faces the same market and regulatory challenges to increasing its share of the fuel market.

Regardless, BIO believes the US has a great opportunity, and as long as the industry has the support from Congress and willing investors, cellulosic biofuel will continue to see tremendous growth.

“It took a quarter of a century for petroleum refineries to evolve from a very simple model to today’s complex integrated refinery,” Carr said. “Biofuels are going through a similar evolution but condensed down that time to a decade. There’s so much more we can do, and they’re good reasons to continue to invest in the industry.”

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By Tracy Dang