Amyris and the Great Rate Debate

by Jim Lane (Biofuels Digest) ... Either there’s a tremendous amount of down-time at the plant. Or, the plant is struggling with rate.

We highlighted production rate in this article on hard times and bright prospects at POET-DSM, and we’ll highlight it here as well. Since we don’t have complete transparency on the business — we have to make substantial room for the possibility that there is simply so much switching time between campaigns that the problem is one that can be solved by building more specialized capacity.

Which is Amyris’ current plan, as a matter of fact. The company has broken ground on Brotas 2, which will focus in on flavors & fragrances, while the current plant focuses in on.

Why is rate so important? Surely if you can produce a $5 product for $1 in sugar and associated labor and maintenance, you’re on to a good thing, and possibly a great thing.

For companies like Amyris, a plant that was built for 40 million liters but is sold out at two-thirds of that — well, you’ve just brought up the capex per liter by 50%, and that’s a problem, because in the business of building out the bioeconomy, all the money comes in the end from equity and debt sources who would like to see returns in the mid-teens or higher. Not the 4% rate that we see in the home mortgage market or the 1% returns offered by the US government for its 10-year Treasuries.

There’s a plug-and-play idea going around Silicon Valley and elsewhere, that in the future there will be shared production refineries serving multiple smaller companies that go to market without having to build production capacity — saving gobs of time, money and aggravation in the process.

It’s not exactly the tolling model — it’s more collaborative, and based in services and not just time-sharing the shiny fermenters. The idea is that specialized scale-up teams, shared between many organism development companies, will be the most efficient path to market.

The observation we’ll make is that the gap we see here in capacity utilization with Brotas — which possibly stems back to switching back-and-forth between production organisms — could spell T-R-O-U-B-L-E for the plug-and-play idea. It may well be that we’ll see a more sophisticated model emerging — shared resource for pilot through to the first commercial runs — then the construction of dedicated capacity by licensees who want the increase the margins. That’s essentially been the Genomatica approach and it could well be the winner.

... we’ve seen investments in the $10B+ range in the oil & gas business that always run the forward risk that prices will collapse, or supply will flood the market.

Seen through that lens, Amyris’s future has a lot less volatility than crude, and given the option of building a world-scale ethylene cracker and praying that natgas prices stay low enough relative to to beat the pants off naphtha while not dropping so low that the market beats the pants off of the whole project — well, you put Amyris into that context and you begin to see the point of it all.