The second part of a series on alternative energy sources, the ever popular drop-in fuels gets a second look.
From sewage to seaweed, it’s hard to find an organic material that isn’t being positioned as the next source for the latest and greatest in biofuels. Garnering the most attention recently is the class of biofuels known as “drop-in” fuels – those renewables that can be used without an overhaul to the United States petroleum-based infrastructure, which is expected to see over $7 billion in pipeline expenditures this year alone. But is this class of biofuels really a “next generation” solution to dwindling fossil fuel supplies – or just pie in the sky?
For those on the front lines of drop-in fuel research and development, the answer remains open to speculation, although a sense of growing urgency to reduce oil dependency is driving optimism that a decade or more down the road, the U.S. will be broadening its portfolio of viable alternative energy options. That portfolio is likely to include not only corn-based ethanol but a number of other renewable sources as well, including drop-in fuels.
What is a drop-in fuel?
What exactly qualifies as a drop-in fuel? The biofuels industry itself seems short on a definitive answer. While some define the term broadly, stating that drop-in fuels are any renewable fuel making use of at least some existing portion of the infrastructure, others have narrowed the definition with various qualifiers as to feed stock source and the end use of the biofuel.
Mark Stowers, Senior Vice President of Science and Technology, POET, says drop-in fuels are more appropriately defined as biofuels that can be blended with gasoline and used in the current gasoline infrastructure of pipelines, pumps and other existing equipment.
“A drop-in fuel still requires that gasoline blenders use unique gasoline stocks as the base component to which the drop-in is added,” he explains. “This is the case for butanol, isoprene, and terpenes, among other single molecule compounds. Some groups are looking at making biogasoline, which is a mixture of many chemicals without using a base gasoline stock. Many of the drop-in fuel developers are looking to apply their technology to diesel rather than gasoline.”
While the term “drop-in fuels” may continue to generate confusion and debate, the urgent need for a wide array of renewable fuels, including drop-in biofuels, to meet the world’s future energy demands is much more straightforward, according to Brian Goodall, Chief Technology Officer for OriginOil, Inc., Los Angeles, Calif.
He believes diversifying into a broad energy portfolio – and doing so as expeditiously as possible – is necessary to avoid global conflict of colossal scale with nations clamoring for scant fuel resources.
“We are all working for world peace,” he says, speaking of researchers like himself, who focus their careers on making biofuels price-competitive and infrastructure-ready.
Dominating the Category
Algae-based fuels dominate the drop-in biofuel landscape. Last year, GreenTech Media identified over 50 players in the algae fuels game alone. But despite the surge in activity, Goodall says it will take at least another 10 years of research and development to determine if algae-based drop-in fuel production can be commercially viable.
One of the biggest hurdles in moving forward with algae-based drop-in fuels, and other drop-in fuels as well, has been the difficulty in producing the biofuel on a large enough scale to compete on price with petroleum.
In addition, oil content of algae can vary widely. When algae are ready for harvesting, they are typically 99.9 percent water. Processing to achieve a viable product for refining is a multi-step effort carrying a hefty price tag. Making those steps both technologically efficient and cost effective is the focus of Goodall’s current work.
As reported in the feature, “Tiny Plant, Big Attention,” in the Summer 2010 issue of Vital, the high cost of processing algae for fuel has driven many algae biofuel companies to search for ways to derive additional benefits from multiple products and aggressively pursue energy-saving practices to help defray costs.
Harry Boyle, Bloomberg New Energy Finance, London, England, says that fermentation reaction without light holds the most immediate promise for commercialization of algae-based biofuels since it can be easily scaled up, features relatively high oil yields and fairly low costs in relation to other methods.
Bloomberg New Energy Finance’s recent algae study underscored for would-be investors the need for technological breakthroughs to make algal oil competitive. The study estimates the current cost for photosynthetic pathways to be around $26.53 per gallon. Costs could fall between $17 and $24 per gallon for photobioreactors and between $7.50 and $15 per gallon for open-pond technologies. Algal biofuels, produced via fermentation vessels, can be sold for around $24 per gallon.
Harvesting and extraction are the most costly stages, representing about 60 percent of total costs on average, because both are energy-intensive and have high capital-cost requirements.
Concerns over capital appear highest on the list for companies developing drop-in fuels. Goodall’s former employer, Sapphire Energy, San Diego, Calif., caught the eye of Bill Gates and other investors about a year after its 2007 launch and continues to actively seek new sources of capital. Last month, another leading algae drop-in fuel developer, Solazyme, South San Francisco, Calif., announced it had raised about $60 million in its latest investment round, bringing total equity accumulated to about $150 million.
Both Solazyme and Sapphire have also been recipients of several government grants, guaranteed loans and – in the case of Solazyme – an $8.5 million contract with the U.S. Navy for algae-based marine fuel.
While algae is not the only type of drop-in fuel under development, the challenges it faces are echoed by other biofuel developers – along with similar hopes of reaching a level of competitive price and production.
In August, Gevo, a leading biobutanol company headquartered in Englewood, Colo., announced it had signed an agreement to acquire Agri-Energy’s ethanol production facility in Luverne, Minn. Gevo intends to open its first commercial production site for the drop-in fuel isobutanol, a biobutanol also known as isobutyl alcohol.
Patrick Gruber, CEO for Gevo, characterized the move as another step closer in bringing commercial volumes of renewable isobutanol to the market as soon as possible. The company hopes to begin isobutanol production as early as the first quarter of 2012.
Shortly after the announcement, the company filed its registration statement for proposed initial public offering (IPO), an action seen by industry experts as more a reflection of the need to raise necessary capital than on the growth and strength of the biofuels market.
Gevo’s success is dependent on its ability to cost-effectively make use of existing ethanol plants and to successfully produce isobutanol as a drop-in fuel at a commercial level, both of which will be new frontiers for the company.
While isobutanol is touted as being able to make use of existing infrastructure, it has not been used as a commercial fuel on a widespread basis. Research is not conclusive regarding its impact on engines and the distribution infrastructure. There are also potential safety threats. Its vapors can travel long distances and collect in low-lying areas, making for an explosion hazard. Still, Gruber says isobutanol has a lot of appeal, with broad fuel and chemical applications.
The company has been in a silent period as a result of filing for its IPO, but in its Form S-1 Registration Statement to the U.S. Securities and Exchange Commission, it paints the necessary realistic picture of the challenges and risks it faces, stating, “We are a development stage company and, to date, our revenues have been extremely limited and we have not generated any revenues from the sale of isobutanol…Furthermore, we expect to spend significant amounts on further development of our technology…As a result, even if our revenues increase substantially, we expect that our expenses will exceed revenues for the foreseeable future. We do not expect to achieve profitability during this period, and may never achieve it.”
The company also notes there are no assurances it will be able to retrofit the Luverne plant successfully nor that it will be able to produce necessary commercial volumes of isobutanol.
Partnering for Biobutanol
Among the drop-in biobutanol competitors identified by Gevo in its filing is DuPont, headquartered in Wilmington, Del., with numerous locations worldwide. Already pursuing a cellulosic ethanol venture with Denmark-based enzyme and animal nutrition company Danisco, DuPont has since announced a partnership with British Petroleum to develop and market biobutanol through Butamax Advanced Biofuels LLC, or Butamax.
Like Gevo, DuPont’s venture into drop-in fuels with biobutanol will begin by relying on the use of existing ethanol capacity and making use of conventional feed stocks. The company believes existing ethanol plants can be cost-effectively retrofitted to biobutanol production with only minor changes in fermentation and distillation processes. DuPont describes its biofuel production as a multi-generational process with initial focus on making use of n-butyl alcohol, one of the four butyl alcohol types and closely related to isobutanol.
The company later plans to move to other types of biobutanols, such as isobutanol, as it also moves to other feed stocks. After utilizing feed stocks such as corn, wheat and sugarcane, the DuPont expects subsequent production to be based on cellulosic feed stocks before eventually moving to what the company refers to as “advanced feed stocks,” such as macroalgae. DuPont claims its product will be compatible with current vehicle and engine technologies, and potentially suitable for transport in existing pipelines.
DuPont has not publicized its anticipated production costs, but ButylFuel, LLC, Gahanna, Ohio, claims to have developed a process which makes fermentation-derived biobutanol more economically competitive with current petrochemical processes than what it describes as “earlier production processes.”
ButylFuel says its product can be blended at any percentage with gasoline seamlessly and can also be used in biodiesel applications. Although still in the testing phase, the company claims it will be able to produce biobutanol from corn for about $1.20 per gallon, not including a credit for the hydrogen produced.
More Than a Transportation Fuel
In addition to its cellulosic ethanol venture with DuPont, Danisco’s energy division – Genencor – is also testing the waters of drop-in fuels by partnering with The Goodyear Tire and Rubber Company, Akron, Ohio, to produce bioisoprene. Goodyear’s interest in the renewable product is to replace petrochemically derived isoprene in the synthetic rubber production process. But Genencor heralded the partnership as opening a new age for bioisoprene as a drop-in fuel as well.
“This is one more step toward a new era where biorefineries will take in biomass and turn out a number of valuable materials, from biofuels and other biochemicals to bioplastics,” says Philippe Lavielle, Executive Vice President of Business Development at Genencor. “It signals that we’re not just breaking boundaries in technology, but providing real-world alternatives and solutions to the bio-based economy.”
While bioisoprene may be garnering attention as a replacement for its fossil-fuel counterpart in synthetic rubber production, Genencor clearly has visions stretching beyond tires to the gas pump, referring to bioisoprene as a “business platform chemical.”
In a presentation at the Nordic Green II Conference in Palo Alto, Calif., earlier this year, Genencor’s Gregory Bohlmann characterized its bioisoprene product as having additional uses in jet fuel, gasoline and diesel applications.
“We add to the biofuels sector a new way to produce a hydrocarbon blend stock,” he said. Bohlmann told his audience that Genencor’s bioisoprene product was comprised of pure hydrocarbons and had high energy content compared to other biofuels, something the company believes defines its value in the marketplace. He also said it showed about an 80 percent reduction in greenhouse gas emissions compared to traditional petroleum-based fuels.
Genencor believes it has developed a cost-effective process for generating bioisoprene. Rich LaDuca, the company’s Senior Director of Business Development, told Biofuels Digest in its May 4, 2010, issue that the company expects high purity bioisoprene to be priced at about $1,600-$2,300 per ton, with a global market estimated at up to $2 billion. That figure is in the $5.80 to $8.40 per gallon equivalent range in terms of dollar yield compared to converting biomass to renewable fuels. With 2.5 to 3.5 times the margins expected from fuel markets, Genencor may find uses other than drop-in fuels to be more lucrative for bioisoprene, at least at the onset, despite smaller market sizes and challenges of price stability once supplies grow.
Drop-in Fuels: Real solution or next “shiny ball?”
Of course, there’s a lot of hype over a renewable fuel that doesn’t require a change to infrastructure.
But America needs affordable alternatives at quantities that can make a real dent in fossil fuel dominance. Whether drop-in fuels can compete in today’s market depends on the answers to one important question: “How much?”
How much can we produce?
How much will it cost?
How much time to we have to figure this out?