Sixteen Going on Seventeen: It’s Springtime in the Bioeconomy, Where’s Summer?

by Jim Lane (Biofuels Digest) ... We are trying so hard to do so much so fast, the tuneful “better beware, be canny and careful” is good advice for an industry where many feel that too little is happening, too slow.

It’s not for the lack of prodding and funds from the federal government, desperate to deliver on its Bold Goals for the Bioeconomy. On March 8, the Department of Energy Office of Clean Energy Demonstrations (OCED), released its Funding Opportunity Announcement (FOA) for the Industrial Demonstrations Program, with more than $6bn in hand. And, there’s the Bipartisan Infrastructure Law, the Inflation Reduction Act, the CHIPS and Science Act, there is intense effort to revive high-technology manufacturing in the US and defossilize at the same time.

The Meeting of the Minds

The influential UMass professor Joel Tickner, executive director of the Green Chemistry & Commerce Council, known widely as the GC3, convened a brainstorming session in recent days to “outline some of the most promising technologies and companies in the sustainable chemistry space that are ready to move beyond demonstration to deployment and scale.”

The GC3 is intensely focused on engaging “the finance sector on the importance of investments in sustainable chemistry to achieve climate and circularity goals as well as de-risk costs,” and a list of companies and technologies might prove helpful in that effort as well. Andy Shafer amongst others was whipping the industry to drum up just the right brainstorming group, and so they gathered on a Thursday afternoon this past week, or early evening for the Europeans, to identify the candidates. It was the Meeting of the Minds.

An impressive list. It comes at a frothy moment in the bioeconomy. The rise of renewable diesel, the surge in RNG, the excitement over SAF, the surge in federal funding — the excitement is palpable. People speak of a tipping point, and they believe it is near.

The Electric Fence

Yet, an electric fence has descended across the defossilization movement and divided it. On the one side are the heavy molecules, the ponderous carbohydrates, the sugars and the hydrocarbons, the Poverty Row of Decarbonization, where talk is of manufacturing squeezes, capital shortages, and vision quests for affordable feedstock.

On the other side are oceans of capital, and project developers in stately pleasure-domes, for a consensus has emerged in the US and Europe of a new paradigm for decarbonization, based in three principles which no one quite yet has the bad manners to articulate, preferring to speak of “all of the above” rather than “three of the above”, but these three are:

1. Electrification of the fleet.
2. Defossilization of the molecule via hydrogen first, carbon later.
3. Carbon capture and storage.

They have drunk the milk of paradise and found it was electrons. Hydrogen, EVs and carbon capture give major incumbents such as utilities, oil refiners and auto manufacturers something to do, some way of escape from the noose of their Net Zero commitments, and they are going for it, full tilt.

The Risk Problem

By contrast, there is little money for commercializing sustainable chemistry. The problem of the bioeconomy are inside the bioeconomy. There is too much risk in the system outside of technology risk.

There are too many ways for chemical projects to die. Just ask Terrabon, BioAmber, Green Biologics, Elevance, Sweetwater Energy — none of them doomed by technology failure, none of them here in their original form today.

What’s the fix? The fix lies partly in understanding what I call the Capex and Opex problem, the way people respond to price signals in their recurring expenses (opex), compared to their response to occasional capital purchases (capex).

Low carbon fuels and sustainable chemicals have won the Negative Trifecta. Rising carbon prices that incentivize sustainable alternatives trigger gas price panic, could be associated (remember “food vs fuel”) with food price panic, and cause us to change fuels, an operating expense, instead of cars, a capital expense.

The changes are far more unsettling than, say, EV adoption, especially so long as the government offers extravagant tax credits for EV sales that far exceed the value of the carbon saved.

We analyzed the cost of the carbon savings not too long ago in The Digest, and found that EVs cost Californians some $500 per ton of CO2 avoided for the benefits we bring. $500? Outrageous! Why is there not a revolution against EVs? Why is US government and state governments are doubling down on electrics? Are they insane?

First of all, as mentioned above, incumbents like utilities, car makers and even oil refiners are happy with the new paradigm. Well, oil refiners are not overjoyed, but they do recognize that a climate change consensus is dooming the gasoline model; the new paradigm may be as good as it gets, for them.

Second, for consumers the costs are buried inside stealthy payments like US national debt payments and rising car prices.

Open your mind, examine your choices

Probably, nothing. Ideally, focus must shift from using carbon prices to incentivize fuel switching and instead focus on capex. For example, a $200 per ton carbon price ignited fuel-switching in California, but is controversial and would cost $980 billion per year nationwide until the solutions arrive and restore equilibrium. Disaster.

Let’s think another way, just for illustration. If we simply built the capacity to use the Billion Tons of Biomass that the Billion Ton Study says we have, and did so at, say, $8 per installed gallon of capacity, we’d have 70 billion gallons of fuels and chemicals, enough for aviation, marine and a whole bunch of materials, for about $560 billion. Yes, ruinously high, but something like 40 percent less than the cost of carbon credits in their first year.

It’s more complex than this simple example which is not intended as a roadmap to a national energy solution — rather it is I hope a roadmap to a better National Energy Solution Conversation by the time we are seventeen going on eighteen. READ MORE