Next Generation Bio-Based Chemicals Summit Review
by Pete Davey (Advanced Biofuels USA) Currently many of the world’s chemicals originate from petroleum based sources, causing a major dependence on petroleum that encompasses more than transportation fuels. Some of the chemicals currently derived from non-sustainable sources are the building blocks for, but are not limited to, plastics, detergents and super-absorbents. These commodities form a multi-billion dollar industry, making this market highly sought after. The social passion to diverge from dependence on foreign oil has prompted an opportunity for scientists and businessmen/women to capitalize on an emerging sustainable market. Many members of the chemicals industry assembled in San Diego, CA from February 8th to Wednesday February 10th for a three day Next Generation Bio-based chemicals summit sponsored by Infocast. The three day summit consisted of a pre-summit technical symposium on Monday and the main session on Tuesday and Wednesday.
The Pre-Summit technical symposium was comprised of a wide variety of start-up biorefinery representatives updating the chemicals community on their latest innovations. As the chemical engineering and molecular biological breakthroughs were being presented it was interesting to note that the focus wasn’t to produce transportation fuels. Instead, the goal of the biorefineries was to synthesize high value chemicals that are currently derived from petroleum. The value is extremely high because in a barrel of petroleum only 8% is used to produce these chemicals, but the return accounts for 40% of the profit of that barrel.
The notion of high profitability naturally attracts the attention of businessmen/women from a wide variety of sources. The final two days of the Summit focused on professionals describing the financial potential of the current market by weighing the opportunities and risks in bio-based chemicals. These risks and opportunities were assessed by biorefinery owners, feedstock suppliers and venture investors providing different perspectives on the same issues. By describing various angles in a short timeline a three dimensional view of the bio-based chemicals industry was presented.
The biorefinery representatives fell into two major groups, the first were representatives who wanted to replace an existing petroleum-based chemical with a bio-based one, while the others were trying to create a new bio-based chemical. There was a large focus on one molecule currently produced from petroleum called 1-4 butanediol or BDO. BDO is a molecule that has many industrial uses that include being a strong solvent and a precursor to plastics and elastic fibers. It is currently being produced in small scale amounts by many start-up biorefineries trying to intrude on the petroleum based BDO market.
An example from the second group was presented by a representative from SyntheZyme who is producing new chemicals called omega hydroxy fatty acids. The incentive to synthesize these new omega hydroxy fatty acids is to make bio-plastics that have unique qualities in an attempt to replace a lucrative petroleum based polyesters (plastics) market. An advantage to these fatty acids lies within its ability to be stretched considerably before it reaches a breaking point that far exceeds current polyesters. Tensile strength is a key feature in plastics and is sought after by manufacturers, causing a high demand for these types of polymers.
The issue from a biorefinery’s standpoint for either category of chemical is how to raise enough initial capital to avoid bankruptcy within the first five years, otherwise known as “the valley of death.”
When trying to produce bio-based chemicals of either of these categories there are many problems that have to be addressed before a venture investor will fund the operation. Assuming the technology is cutting edge, producing a consistent product, there are still issues of market availability, cost effectiveness and scaling.
There is an increasing demand for bio-based chemicals due to environmental concerns, which means that there is a market for replacing existing chemicals with a bio-based alternative. However, the biorefineries have to make sure that their product has the same properties as the existing petroleum based chemical for it to be competitive. It also has to be comparable in price with the currently used chemical because it is well documented that consumers as a majority won’t pay more for a bio-based alternative.
In the other category of producing a new chemical there isn’t initially a clear market for the new chemical that will replace an existing one. This is due to the fact that a new chemical will inherently have different properties that could change its demand. In the example of omega hydroxy fatty acids, it had better tensile strength, creating a higher demand for it in the plastics industry than polyesters. If there is higher demand, then the cost of the product could be a little higher than the petroleum-based chemical because of its unique performance. If it is possible for a biorefinery to produce a premium chemical at the same or lower cost as the current petro-chemical, then venture investors will be inclined to fund the project.
As a biorefinery accomplishes the previous goals at a small scale and gains some capital from investors they have to start engineering a commercial scale facility. Many problems arise in increasing the scale of an industrial operation including feedstock supply and microbial death.
Microbial death is a constant issue for many biorefineries because an engineered organism producing one chemical in large quantities creates a toxic environment for itself. A biorefinery needs to then think of possible ways to avoid microbial death like extraction of a chemical while it is being produced or engineering the microbe to be more resistant to harsh environments.
Another problem is obtaining a constant amount of feedstock year round to fuel the commercial size process. Feedstock suppliers need contractual agreements with a biorefinery in order to supply them with enough biomass to fuel the operation. That also means that if a biorefinery needs a certain feedstock, the supplier has to have a contractual agreement with farmers to grow what is necessary. Feedstock suppliers, like venture investors, have to be assured that the process is cost effective and has the potential as a large scale operation to fulfill a profitable market before working with a biorefinery.
Experts projected that it will be necessary for numerous biorefineries to fail or merge with another company within the first five years because the amount of start-up companies far exceeds the possible market. On the other hand, there will be survivors and those who can understand and prosper within this dynamic environment will reap the benefits of a multi-billion dollar industry.
To engender a thriving bio-based chemicals industry there is a necessity for government policy initiative and subsidy. The current administration has recently updated the Renewable Fuel Standard to encompass biodiesel among other renewable products, which will help the industry grow.
It has become apparent to Advanced Biofuels USA and numerous other experts that for further policy changes to occur there must be a national movement toward renewable sources that starts with education at the high school level and common society. Advanced Biofuels USA is currently exploring options of incorporating renewable energy learning materials into high school science curriculums. By broadening the knowledge base of young minds and teachers about renewable energy our country can begin to make intelligent decisions concerning policy issues. Knowledge and innovation will help lead this country to becoming a global leader in a renewable energy revolution.
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