Tidbits from the Advanced Biofuels Leadership Conference

by Joanne Ivancic (Advanced Biofuels USA) Four days of total immersion in advanced biofuels’ language and culture at the Advanced Biofuels Leadership Conference in Washington, DC, 107 presentations, leaves one’s mind spinning and stomach churning. So, in the spirit of Twitter and fortune cookies, here are some nuggets of insight gleaned from the speakers and conversations in the hallways and breakrooms.

Chas Eggert of OPX Biotechnologies got in some green chemistry philosophy; that this is not just about replacing existing petroleum chemicals, but creating new “good chemistry.”

The key is to find a solution to a problem according to Jere Kolstad of Rivertop Renewables. His tweetable message: “Make sure you are right because there are a lot of technologies in search of a problem.” And, recognizing the problem of patent applications providing a recipe to a company’s “secret sauce,” he advised innovators to keep and protect trade secrets instead.

Kolstad also praised the innovators who went for “something unique, not drop-ins; something unknown” as a preferred business strategy consistent with the green chemistry philosophy touted by the company.

Solazyme’s Jonathan Wolfson’s advice? Fail fast, learn enough from the failure to be able to move forward further than you would have without the failure.

“Dirty, Dangerous and Demeaning” could be the mantra for some small companies looking for a niche based on a “market pull model” rather than a “technology push model.”

Avello Bioenergy’s Dennis Banasiak referenced the company’s Scientific Advisory Board AND Strategic Advisory Board illustrating the value these days of finance and project development experts to “position the business in a much more favorable light.” He also introduced the idea of leveraging existing resources, an idea which got a lot of air time in many presentations.

John Kasab of Ricardo, Inc., emphasized “more power out of smaller engines” as he explained the value of higher octane for engines that will be built to meet proposed US fuel economy (CAFÉ) standards. His 15 minute presentation could not do justice to the subject and he was surrounded after his presentation. A conference June 18-20, 2012, will explore next generation engines, fuels to feed them and related regulatory issues. Click here for more information.

No tweets from Canadian-born Ensyn Technologies, but Stefan Muller’s story of their growing from a college project in 1984 to a multi-national presence in 2012 illustrates the path that this industry would have taken had the US government’s policy not focused on biofuels, including waving incentives at entrepreneurs to spur development of transportation fuels to replace petroleum-based fuels.

Ensyn began making renewable replacements for petroleum chemicals and is only now moving into the liquid fuels market via RFO, renewable fuel oil. They financed development of technologies to produce lower value fuels with sales of high value biochemicals; the path that most of this industry would have taken had they followed market incentives rather than government incentives which have recently been discontinued, effectively pulling the rug out from under this nascent industry.

Tom Burton of Mintz Levin Cohn Ferris Glovsky and Popeo at the project finance sessions echoed Paul Stuart of EnVertis who spoke at the Forest Biorefinery Workshop in urging companies to “keep the end in mind from the beginning.”

Burton gave scant comfort to the audience with his observation that venture capitalists “travel in herds” with the herd munching on social media these days. That said, those funds that were active in biofuels seven years ago, he noted, are the same ones active now and they can be expected to continue to work in the biofuels space in the future. Their experience with this sector that is seen as high technology risk and high financial risk apparently gives them a greater level of comfort.

Donald Roberts of the CIBC (Canadian Imperial Bank of Commerce) provided meager optimism that some companies “have lots of financial capital to invest” but they are worried, anxious and need to be educated about advanced biofuels.

To deal with the perception of advanced biofuels as a strange high risk sector, ZeaChem did some “out of the box” thinking, explained Joseph Regnery, creating “Delay in Opening” insurance to address the realities of “never been done before” industrial innovations. The plant might not run right on the first day; but that is not unexpected and improvements need to be made. “Failure” then is not declared during the birth pains of the first year of operation. If three years go by without meeting anticipated goals, then the investors may have a problem on their hands.

To bring greater understanding and appreciation for the realities of this developing industry to investors, Gary Luce of Terrabon suggested that we need to adjust our language. Instead of talking about “technology risk” the reality, as illustrated in the ZeaChem experience, is actually engineering and scale-up risk. If investors automatically run the other way from “technology risk” without deeper exploration of the opportunities, perhaps language that better describes the situation enables them to stay for a longer look.

Unfortunately the pithy wisdom from Mike McAdams of the Advanced Biofuels Association appeared in his “Policy Support Chart,” rather than in words. The picture is a bell curve with years from 2004-2012 on the x-axis and level of policy support along the y-axis. Informal discussions starting in the early 2000s build to bipartisan support for the 2005 initial Renewable Fuel Standards to the highs of 2007-2008 with the EISA’s RFS2 expansion. Then the line falls off the cliff during the recession to take us to where we are today, back to the level of square one as far as certain policy support goes.

Thus, the word “Uncertainty” got a lot of play in any discussion of policy. Who knows what this Congress or this Administration will really do? Even stated policies announced with flair at White House events, such as support for new vehicle efficiency standards (CAFÉ), have stalled.

This conference provides a barometer of what is going on in the industry, with more CEOs and high level executives from all aspects of the advanced biofuels industry presenting, attending and discussing deals during networking breaks.

The sense this year was of a very weary and determined boxer picking himself again off the mat, away from the ropes and steadying for a renewed fight, digging into inner strengths, convinced of eventual victory by being able to outlast and endure whatever punches are being thrown. And also a sense of knowing that the advanced biofuels contestant bears scrutiny and must strive to fight with integrity not demanded of the opponent.

Bets are on. Odds are set. In the movies, the underdog with the “good chemistry,” with “something unique” and good intentions to help solve this world’s energy problems should win. The leaders of this industry are convinced that the sleepless nights, the “going where no one has gone before” vision and their persistent efforts to learn from set-backs and to move further forward than they would have without them will make them winners. My money is with them. READ MORE and MORE and MORE (Biofuels Digest) and MORE (ICIS Green Chemicals)