Advanced BioFuels USA

by Bill Brandon (Advanced Biofuels USA)  On February 10 & 11, about 120 participants gathered in chilly Chicago for the first Municipal Solid Waste to Biofuels Summit presented by the British firm, Eye for Energy.  The conference drew participants from across the United States, Canada, the Caribbean and internationally from India, the Middle East, Western Europe and Australia.  Participants were primarily technology purveyors, operators or developers.  Others were support technologies and services, waste management firms, or financial/legal services.
Three firms that were technology purveyors/developers utilizing gasification at the front end of their processes gave presentations.  All had demonstration plants and had either broken ground or were fully permitted and funded for starting construction of commercial facilities.    Two used fermentation at the back end to produce their initial end product, ethanol.  One used a chemical catalyst process to produce ethanol as their initial product.  They had different corporate structures and business plans.
Ineos’ CEO, Peter Williams’ presentation, described Ineos Bio as a subsidiary of Ineos International, a worldwide petro chemical firm formed in 1998, with roots going back over 100 years.  Ineos Bio’s proprietary back end fermentation technology was acquired in 2008 through purchase of Bio-Resources, Inc. of Fayetteville, Arkansas, while their front end gasification process is a proprietary modification to an off the shelf gasifier.   In a joint venture with New Planet Energy, they are constructing an 8 MG/Y commercial ethanol facility with 2MW excess power for sale to the grid.  Located outside of Vero Beach, Florida this facility is the recipient of a $50M DoE grant and a $75M USDA loan guarantee for a $130M bio-energy center.   They have also licensed their technology to Powers Energy of America, headquartered in Evansville, Indiana.  Powers is constructing a commercial facility in Lake County, Indiana, an urban/rural county immediately east of Chicago.  Ineos Bio plans to be both an owner/operator/developer and a licensor depending on project opportunities.  Mr. Williams stated that their process is over 50% efficient in converting saleable BTU’s (not including parasitic plant energy needs) and is a modular concept with eventual capital costs projected to be about $7/gallon/yr capacity plus excess power.
Coskata’s presentation stated they are a privately held corporation that has received funding from Khosla Ventures, General Motors, Blackstone, Total and others.  Their demonstration plant is in Madison, Pennsylvania, thirty miles southeast of Pittsburgh and uses a proprietary fermentation back end coupled with an appropriate front end gasification system matched to the primary feedstock.  Coskata has finalized a $250M loan guarantee from DoE, the largest granted a biofuels project, for construction of their Flagship 60MG/Y commercial facility in Boligee, Alabama.  This facility is the largest cellulosic plant being built in the US and will initially use waste wood, not MSW, to allow proof of commercial scale operation prior to confronting issues of feed stock preparation necessary for MSW.  Coskata is projecting a yield of 100 gallons/ton of biomass (about 50 gallons/ton of typically tipped MSW) at a stated production cost of $1.00/gallon.  This figure does not include debt service nor is it clear whether it is supplemented by the value of excess electrical power.  Gasification results in H2, CO & CO2 gases.  Multiple microbes held in a colony suspension convert these gases into ethanol through these two formulas:  6CO + 3H2O yields ethanol – C2H5OH + 4 CO2 and 6H2 + 2 CO2 yields C2H5OH +3H2O.  Coskata’s business plan is primarily to license and provide technical support for project partners with feedstock availability, operational expertise and co-location synergies.
Enerkem, headquartered in Montreal, Canada, presented the third gasification platform technology.  Enerkem has a proprietary modular gasification and gas cleaning technology front end which supplies syn-gas to a back end utilizing well established chemical catalytic conversion technologies.  The initial products will be ethanol and excess electricity. They have a 1.6 MG/Y demonstration facility in Westbury, Quebec and started building a 10 MG/Y commercial facility in Edmonton, Alberta, Canada in August 2010.  Enerkem has established a strong working relation with Waste Management and will soon begin construction on a second 10 MG/Y plant in Pontotoc, Mississippi.  This project is fully permitted, has received a $50M DoE grant and in January 2011 received a USDA $80M loan guarantee allowing construction to begin.  While Enerkem finds it attractive to work with a well capitalized company like WM which has waste processing experience as well as contracted supplies, they are open to other relationships.  Enerkem states that their capital costs and production volumes are competitive with other technologies.
These companies and others at the conference discussed, or even stressed, that “MSW to biofuels” is a too abbreviated concept.  MSW is a very heterogeneous mix of materials that is only 50% cellulosic material and must be sorted and prepared prior to processing.  Beyond recyclable materials, MSW can be ‘sweet’ or ‘sour’ with toxins or pollutants and vary greatly in moisture content.  Physical size of material is also important.  It was often stated that when you are dealing with MSW, you are in the material handling business.  Revenue streams are achieved through recycling ferrous and non-ferrous metals and sometimes plastics and paper goods if not already separated for recycling, but in net this separation adds expense.  There likely will always be a tipping fee for MSW to cover these costs.
Besides the gasification approach, players who employ a hydrolysis and enzymatic conversion model prior to fermentation are also active in the MSW space.  In general, the gasification approach is more tolerant as to feedstock input.  It can handle non-recyclable plastics and other hydrocarbon inputs (old tires), can handle ‘chunkier’ materials and toxins and pollutants can be filtered from the syn-gas and a reasonable amount of silt and silica can pass through to the ash where metals can also be recovered.  Gasification, however, has a low tolerance for moisture content to obtain maximum conversion efficiencies.  The hydrolysis/enzymatic process requires a ‘cleaner’ and finer feedstock, which can add $25 – $30 per ton to the processing costs.  This increase in operating costs may be mitigated by lower capital costs and it can handle increased moisture content.
There were two presentations by firms that I would characterize as ‘MSW converters’.  I believe that one, Friberight of Cantonsville, Maryland, would object to that characterization.  They have a small demonstration facility in Virginia for their front end preparation process including enzymatic hydrolysis and are working on a demonstration/commercial plant in Blairstown, Iowa.  Fiberight’s CEO, Craig Stuart-Paul, described their proprietary preparation operation as a ‘dirty’ MRF (material recovery facility) which could prepare MSW into a cellulosic pulp that could then be converted into polymeric sugars at a total cost of $.05 per pound based on a $30/ton tip fee.  He emphasized that there is no ‘flue’ and all contaminates are driven into a sludge that is then sent to a landfill.  After demonstration of the back end process, the Blairstown facility needs a 6 times scale-up and introduction of MSW feedstock to reach a 6MG/Y commercial capacity.  This scale-up will be done in stages.  The MRF is modular in nature and the fermentation process understood.  No production volumes were stated.
Also speaking was Ed Hennessey, CEO of Cleantech Biofuels, an Australian Company that operates in a similar space as Fiberight. Mr. Hennessey described his proprietary preparation system and in discussing the optimal location for such a preparation system, he alluded to a possible role of supplying processed biomass to a larger aggregator for final fuel conversion.  Since only about 50% of MSW is usable biomass, only that part needs to be shipped to the final processor. The recyclables are pulled out and sent to their ultimate destinations and the remaining portion might be landfilled close to or adjacent to the transfer station.  This could be useful in areas of low population and MSW biomass could be aggregated with biomass from other sources.
Covanta also gave a presentation.  They were an early player in waste management techniques that were direct burn incineration to dispose of MSW while generating saleable heat or electricity.   Covanta operates about half of the direct burn facilities in the US disposing of about 5% of all US MSW.  They know this technology is now obsolete and have invested in a catalytic depolarization process to produce synthetic diesel from MSW.  They have a pilot plant operating for about two years connected to one of their facilities in Massachusetts.  Theirs is an interesting technology, but they are admittedly still having problems with the process and are testing less recalcitrant waste feeds like chicken litter.  While chicken litter or similar wastes need to be appropriately managed, they would appear to be beyond Covanta’s immediate field of expertise in MSW.
Stephen Didcott of Arcadis, UK and Diana Glassmann of Integration Strategy (ISI) are working on jet fuel from MSW, Arcadis in London and ISI in New York City.  The important aspect here, as stressed by Glassmann, is the possibility for the airline industry to become leaders in the use of biofuels.  While standards are strict, prices are high giving an emerging technology a possible step up to become competitive.   Because of rigorous standards, biojet fuel will necessarily be long carbon chain ‘drop in’ fuels.
Three support vendors also gave presentations.  Victaulic Piping Systems presented how they could reduce construction costs and time with their prefabricated piping with compression/sealant joints.  Victaulic stated that since piping is a large part of any of these facilities, these savings could be significant.  GBB Inc., a strategy consultant, discussed establishing partnerships with waste management companies.  Novozymes gave a presentation on enzyme improvements and use of specialized ‘enzyme cocktails’ to enhance productivity and reduce costs to about $.50/gallon.  Novozymes is working with Fiberight on their commercial scale efforts.
BK Rao, CEO of Bharco Ecotechnologies, LLC, gave a conceptual overview of a holistic approach to waste management where each process waste stream is the resource for another process.  Contained in this presentation was a novel approach to waste conversion where a lined deep well bore was used to produce pressure and heat to effect a ‘natural’ conversion.
The last speaker was Karl Drogens of Protec Fuels who presented a vertical distribution model based on local distribution similar to the dairy industry.  This model could apply to any ethanol producer and relies on the fact that ethanol can be produced in any state enabling a system of local supply, local distribution and blending at the pump eliminating the brokers and middlemen.  This could be important for new MSW-to-fuel facilities because it opens up the possibility of long term off take agreements from retailers.
There were also several presentations on financing, tax advantages, government support programs and legal issues.  I present them last here not because they are unimportant, but because, as noted at the convention, they can be very boring subjects until you need them.  While wanting to be brief, the following should be noted:

• As predicted at the convention, the USDA announced on February 14 new rules that allow bond financing to access to loan guarantees.  This is an important move for opening up the capital markets to biofuel facilities.
• The short sunset restrictions on many government programs render them meaningless for a project process that often takes five years or more.
• Reliable long-term supply contracts are a must to obtain financing and long term take off agreements are highly desirable.
• While private equity capital may be available for some projects, multiple engineering consultants will vet each project.  In response to a question from the audience, one of the experts stated that there is a definite trend for positive vetting on gasification technologies.

MY COMENTARY
The last note above is significant.  The money men are placing their bets and the horses are lining up in the gates (or at least trying to line up).  My view from the  paddock of this conference is that the MSW enzymatic horse appears to be ailing at this time.  Just stop and think that MSW contains 1) a diaper with a plastic outside and a God knows what inside. 2) a paper bag containing a coated cardboard cup, a plastic cover and straw, left over KFC chicken and biscuit, 3) a throw away IKEA night stand that is chipboard with a vinyl covering and a non-recyclable plastic drawer, 4) half a can of dried acrylic paint and a paint incrusted roller, 5) styrofoam packing peanuts from your favorite online store, etc, etc.  As long as it is a hydrocarbon, a gasifier can handle it, while an enzymatic process needs cellulose, starch or sugars, $.50/ gal for enzymes and $.30/ gal preparation costs.  Capital cost and operating costs will need to be significantly lower to make up for this difference.  Using the $7.00/gal capital costs projected by Ineos Bio, the 2005 cost for a corn ethanol plant of $1.50/gallon and a 20 year amortization at 8%, would result in additional capital costs for gasification of $.55/gal.  Allowing a $.10/gal preparation cost for gasification this still leaves them ahead by $.15/gal and energy costs or benefits are yet to be accounted. Other races will be held and improvements can be made, but I believe that an enzymatic process will primarily only find its place with a more homogenous feed stock.
While there is time for anyone to fail, I personally think that, unless the gasification horse breaks a leg in the back stretch, this first race is between a microbial fermentation back end and a chemical catalytic back end.  Commercial production rates will need to be verified and kinks will need to be ironed out.  With five commercial plants under construction, I believe we can say that MSW cellulosic ethanol is within predictable commissioning time frames and by 2013 at least 100 million gallons will be available.
The ultimate winners, however, will need to be competitive in the marketplace.  That marketplace is presently heavily rutted and not level.  Blending E85 at the ethanol plant and delivering directly to the retailer for further blending may prove an effective marketing strategy as the ‘volume tilt’ will have changed from gas to ethanol.  By retaining ownership of the RIN, it can then be sold to expand the producers’ margins.  In any event, if the RFSII is retained and met, the distribution system needs to be improved and changed.  The ‘dairy market model’ of produce locally, sell locally has some real advantage in avoided transport costs and potential long term retail off take agreements.  Other strategies may exist.  After clearing all of the technical, financial and permitting hurdles, the MSW cellulosic ethanol industry will still need to clear the last hurdle of distribution.