Apr. 22, 2008 SDF Clean Tech Biofuels

SDForum copy.jpgsdf-aug08-ethanol.jpgalon-ricki-copy.jpgbearsworth-ed-copy.jpgbennett-keith-copy.jpgblake-richard-copy.jpgburrus-don-copy.jpgclark-gregory-copy.jpgcohen-andrea-copy.jpgdarmstaedter-eric-copy.jpgedwards-gwen-copy.jpgeudes-yves-copy.jpgfortney-ray-copy.jpgfox-paul-copy.jpgho-gordon-copy.jpghorn-james-copy.jpgkahn-brian-copy.jpgkan-martin-copy.jpgkatzir-oren-copy.jpgkaufman-david-copy.jpglangley-tristen-copy.jpglynn-kelsey-copy.jpgmatlof-jason-copy.jpgmeerman-hendrik-copy.jpgpedrozo-nelson-copy.jpgpidgeon-jim-copy.jpgporcino-betsy-copy.jpgport-david-copy.jpgrangan-gopi-copy.jpgreichert-bill-copy.jpgrobertson-jan-copy.jpgtaylor-paul-copy.jpgtoriello-nicholas-copy.jpgwilson-steve-copy.jpgwu-marianne-copy.jpg

On April 22, 2008 at AMD’s campus in Santa Clara, SDForum with Astia and Moss Adams presented this month’s Clean Tech Breakfast. The topic was “Cellulosic Ethanol Technologies – What’s Real?”From DJCline.com

Andrea Cohen of Nixon Peabody moderated a panel with Eric Darmstaedter of ClearFuels, Jason Matlof of Battery Ventures, Hendrick Meerman of Cobalt Biofuels, Bill Reichert of Garage Technology Ventures and Marianne Wu of Mohr Davidow.From DJCline.com

They all agreed that the demand for energy of any kind will not go down over the next fifty years. If you think paying four dollars per gallon is a lot, wait until it goes to eight. This morning a barrel of oil costs $117 and there is no reason for it to go down. OPEC says it will not increase production until 2010. I suspect it is because they don’t have the reserves and they intend to get as much as possible for what they have left. In the mean time it might be a very good time to find another source in biofuels.

The first generation of biofuels such as corn ethanol have drawbacks. An increase in the demand for food competes with the need for fuel, driving up the cost for both. If your ethanol refinery expected to pay two dollars per bushel and you wind up paying six, you are not viable but the capital investment is comparatively low.

Second generation biofuels have advantages using waste as feedstock instead of food. It can use municipal waste, wood chips, or other organic material inedible for humans or livestock, but the capital investment is comparatively high.

To get that investment it helps to have researchers create the new technology. It really helps to have people who know how to engineer, build and procure (EPC) the needed materials. Having both will help give traditional investors the confidence they need to go forward.

Cohen talked about the challenge with developing biofuels. It is what the experts call the Valley of Death. Developing a new technology is one thing, scaling it to full production and distribution is another. You need over 50 million dollars invested in something that seems riskier than drilling for oil. You are competing with big oil and they have lots of experience dealing with competition. Can you get 500 gallons per acre or better? What is your fuel yield per ton? How does that compare to petroleum?

Matlof looks for companies that can take sugars in biomasses, pre-treat, hydrolyze, ferment and then dehydrate them into fuel. It is rare for a startup do be able to do all of this in one seamless vertical integration. It is best to become profitable on creating a unique part of the process and then cooperate with other ventures.

Meerman’s Cobalt Biofuels produces bio-butanol and thinks you can build more vertical integration and be successful. He thinks the existing market is so big that we need to get the new carbon technology out there as soon as possible to meet the global demand.

Reichart is technology neutral and simply looks for innovation. Biofuels are a very complex financial and technical chain. Unlike Internet companies, you aren’t just moving bytes around, you have to move actual atoms. It is more than math, it is the physics side that interests him. He does not think the solutions will come from harvesting switchgrass on marginal land. It will come from using existing waste. Unlike software, if you become profitable in biofuels, you will have a market. You won’t have to worry about hiring an army of salesmen in BMWs to persuade people to buy it.

Darmstaedter sees three biofuel groups. There is the enzymatic pretreatment fermentation group, the microbial direct conversion group and the thermo-chemical group. ClearFuels is in that third group with a novel steam reformer that can create different biofuels as end products. The strategy is to work with existing infrastructure to reduce startup costs. Find a lumber mill or sugar cane mill that has lots of waste or feedstock. The feedstock can then be processed on site with no shipping cost. The fuel can help power the plant and the excess can be sold. They have identified commercial sites at sugar mills in various countries with each one costing between $150M and $220M. However, they need to complete their demonstration facilities successfully before moving to finance commercial plant development.

Wu said that despite early venture capital investment and government support, the Valley of Death is still a problem. Working with a third party can take advantage of the new technology reducing the risk in production. Another way is to look at modular processes that can be broken out one step at a time as done in the traditional chemical industry. It is important to remember that you are investing in a commodity market and you must know how different technology can give you any advantage against severe competition. Change can take time. The industrial conversion to new technology could take twenty years.From DJCline.com

If global demand will double in by 2050 and fossil fuels will only meet sixty percent of the demand then biofuels can fill that gap. It might keep fuel prices from getting higher but they are not going down. If you ever want to comparatively pay less than four dollars a gallon it will be in an electric car.

04-22-08-panel-biofuel-copy.jpg04-22-08-panel-biofuel2-copy.jpg

Copyright 2008 DJ Cline All rights reserved.