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Two Up: Amyris, Queensland gamble on farnesene for SE Asia

Biofuels Digest - Thu, 06/22/2017 - 4:23pm
 

The Digest discovered this hand-written lyric, we think written with a thumbnail dipped in biocrude, near Amyris headquarters in Emeryville, California.

Somewhere north of Byron Bay where Cooktown orchids grow,
and cane is ever-present and the Pioneer River flows,
there’ll be a group of smarties along the coastal towns
hawking tonnes of bio farnesene for a zillion yuan a pound.

Yes, we’re the ridgy-didges who split our Aussie week
into eighty hours biotech’ing, eighty hours sleep.
and eight hours more we’re beach-bound for bonza Queensland rays.
and we’ll go the endless scale-up for all our endless days.

And Johnny M says Amyris is in historic climb,
and 100 million revenues will be coming any time,
another plant is all that’s needed, cane’s the way to go,
and we’re off Down Under building now that Anna runs the show.

In Brizzie we’ve been busy cooking up a deal or two,
and China will be getting it when all the yeast is through,
We’ll ship it north and price it high as biofene can sell,
Me mateys, we’re as greedy as an Araby cartel.

Yes, we’re the ridgy-didges who split the Aussie week
into eighty hours biotech’ing, eighty hours sleep.
and eight hours more we’re beach-bound for bonza Queensland rays,
and we’ll go the endless scale-up for all our endless days.

But change the world we will and do it green and right and true
and proudly we will wave the flag that once Eureka flew,
‘under the Southern Cross we’ll stand a sprig of wattle in our hands’
singing Amyris, you bloody beauty

Amyris heads Down Under

Yes, Amyris and the Government of the Australian state of Queensland revealed plans this week to accelerate development of a new 23,000 tonne Amyris production plant with support from local partners to produce farnesene for cosmetic emollients, fragrances, nutraceuticals, polymers, and lubricant applications. Sugar cane is the feedstock.

Acceleration of this project, which was first announced on December 6, 2016, came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland. Amyris was chosen based on its legacy expertise in operating such production facilities.

First industrial production of product at the new production facility is expected to occur in 2020. It is anticipated that $60-$80 million in annual revenue would be generated, the partners said. This would potentially give a 2-3 year payback for investors in the production plant.

“Amyris is seeking to replicate its successful biorefinery in Brazil and sees Queensland as an ideal location due to the abundance of sugarcane and close proximity to Asia,” said Queensland Premier Annastacia Palaszczuk. “The Queensland Government’s funding and support for biorefinery projects will create high-value jobs and investment in regional Queensland by using renewable feedstocks to create biofuel and other bioproducts.”

“Our growing demand in China for Vitamins and the Asian demand for cosmetics and fragrances supports a new specialty farnesene fermentation factory in Queensland,” said Amyris CEO John Melo. “The funding from the Queensland government along with the operating expertise and sugar cane base of our local partner make this factory possible and enable savings from our current production in Brazil and the associated shipping costs. Like all our new projects, this factory is expected to be sold out when it starts operating.”

The Queenaland backstory

Last December, Amyris and the Government of Queensland, Australia inked a partnership to create a southeast hub of sustainable ingredients production for the rapidly-growing personal care sector in Asia, while supporting Queensland’s local economy and sugarcane industry. The partnership aims to develop a new production plant with support from local partners. The plant will produce Amyris’s high-value personal care and nutraceutical actives, as well as farnesene-derivative products.

Amyris and the Government of Queensland have successfully partnered on a number of initiatives since 2010 designed to foster adoption of renewable product solutions targeting large global markets while also supporting the development of a Queensland-based biotechnology industry using feedstock from local sugarcane.

Ms Palaszczuk said the proposed Amyris biorefinery was another step towards achieving Queensland’s vision for a $1 billion sustainable, export-oriented biotechnology and bioproducts sector. “Acceleration of the Amyris project came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland to process materials such as agricultural and industrial waste,” she said.

The key to all this

In a word, China. Amyris’ China sales have been doubling, and the company expects to generate $50 million or more in revenue over the next 12-18 months from its sales into China. The biggest news there is farnesene-based Vitamin E oil, and there are opportunities to supply intermediates and ingredients for the large and fast growing Chinese food ingredients market.

The rate constraint

As we reported earlier this year the Brotas plant’s farnesene-producing capacity is sold out through 2020. But as we asked then, how can a plant with a nameplate capacity of 40 million liters be sold out on a revenue of $77M, especially when that revenue consists mostly of “collaboration payments” that usually extend beyond product production to include product development costs.

Let’s start with a $2.50 per liter farnesene price, and let’s simply focus in on reported production revenue, which reached $15M in  Q4 2016. That translates to 6 million liters of production and a 60% plant utilization. If the actual farnesene price is higher, the utilization rate could be lower.

We highlighted production rate in this article on hard times and bright prospects at POET-DSM, and we’ll highlight it here as well. Since we don’t have complete transparency on the business — we have to make substantial room for the possibility that there is simply so much switching time between campaigns that the problem is one that can be solved by building more specialized capacity.

Which is Amyris’ current plan, as a matter of fact. The company has broken ground on Brotas 2, which will focus in on flavors & fragrances. And now we have this farnese plant announcement for Queensland.

The wow technology story

Last month, we reported that Amyris had completed strain engineering and optimization to 26 key metabolic precursors across multiple organisms – including many different pathways beyond terpenoids allows Amyris to develop an industrial-scale fermentation process for virtually any biological molecule. That work is funded in part through a multi-year agreement with the US Defense Advance Research Projects Agency, the famed DARPA that gave us everything from kevlar to the Global Positioning System and the Internet — the goal in this $35M agreement with the Biological Technologies Office was to create new research and development tools and technologies — compressing the time to market for any new molecule by at least 10-fold in both time and cost.

The Amyris financial backstory

Last month, Amyris reported Q1 revenues and Jeff Osborne at Cowen & Co noted, “Amyris reported revenue of $13.0mn, well below our estimate of $37.1mn due to much lower collaboration payments than we had anticipated.

At the time, we liked one item more than anything. In Q1 2016, product sales were $5.2M and the cost of product sales were $11.2M, and a number of informed observers became alarmed that the company was losing money on every product produced, and that growth would be unsustainable. But the company has staged a turnaround in that critical metric. In Q1 2017, product sales were $13.2M and the cost of product sales were $12.8M.

For Amyris, the big hit was Biossance and the big miss was Ginkgo. In the case of the former, sales are expected to reach $10M in 2017, but in the case of the latter a mysterious milestone payment was missed.

We noted that:

“Amyris has been pushing back it’s time to $100M in revenue for some time. It missed in 2016 a plan to reach that threshold and 2017 will need to quickly get on track. Wall Street may well be able to put the past in the past with all forgive if Amyris can break out and hit that $100M revenue threshold, and even with a strong second half, the company will need to reach something like $30M in Q2 revenue to maintain belief, given the 2016 miss.”

The best news on Planet Amyris? Amyris says “double the revenue” is in sight with Nenter Vitamin E Partnership as a DSM Vitamin A partnership was unveiled last month, and DSM led a $47M investment round into the company in recent weeks.

Queensland’s progress

We have seen quite a lot of expressions of interest.  “A total of 120 parties recently indicated interest in biorefining in Queensland through the program<‘ said Ms Palaszczuk, “ and 26 submitted detailed expressions of interest. The Queensland Government is leading Australia’s bio-economic revolution through the Advance Queensland Biofutures 10-Year Roadmap and Action Plan.”

The Bottom Line

Good news for fans of Amyris eager to see growth. Equally good for fans of Queensland’s bio-future. Now, comes the time to translate talk into steel in the ground.  Steel made from good ol Aussie iron, of course.

Categories: Today's News

Two Up: Amyris, Queensland gamble on farnesene for SE Asia

Biofuels Digest - Thu, 06/22/2017 - 4:00pm
 

The Digest discovered this hand-written lyric, we think written with a thumbnail dipped in biocrude, near Amyris headquarters in Emeryville, California.

Somewhere north of Byron Bay where Cooktown orchids grow,
and cane is ever-present and the Condamine sweetly flows
there’ll be a group of smarties along the coastal towns
hawking tonnes of bio farnesene for a zillion yuan a pound

Yes, we’re the ridgy-didges who split our Aussie week
into eighty hours biotech’ing, eighty hours sleep
and eight hours more we’re beach-bound for bonza Queensland rays
and we’ll go the endless scale-up for all our endless days

And Johnny M says Amyris is in historic climb
and 100 million revenues will be coming any time
another plant is all that’s needed, cane’s the way to go
and we’re off Down Under building now that Anna runs the show

In Brizzie we’ve been busy cooking up a deal or two
and China will be getting it when all the yeast is through
We’ll ship it north and price it high as biofene can sell
Me mateys, we’re as greedy as an Araby cartel

Yes, we’re the ridgy-didges who split the Aussie week
into eighty hours biotech’ing, eighty hours sleep
and eight hours more we’re beach-bound for bonza Queensland rays
and we’ll go the endless scale-up for all our endless days

But change the world we will and do it green and right and true
and proudly we will wave the flag that once Eureka flew
‘under the Southern Cross we’ll stand a sprig of wattle in our hands’
singing Amyris, you bloody beauty

Amyris heads Down Under

Yes, California, Amyris and the Government of the Australian state of Queensland revealed plans this week to accelerate development of a new 23,000 tonne Amyris production plant with support from local partners to produce farnesene for cosmetic emollients, fragrances, nutraceuticals, polymers, and lubricant applications. Sugar cane is the feedstock.

Acceleration of this project, which was first announced on December 6, 2016, came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland. Amyris was chosen based on its legacy expertise in operating such production facilities.

First industrial production of product at the new production facility is expected to occur in 2020. It is anticipated that $60-$80 million in annual revenue would be generated, the partners said. This would potentially give a 2-3 year payback for investors in the production plant.

“Amyris is seeking to replicate its successful biorefinery in Brazil and sees Queensland as an ideal location due to the abundance of sugarcane and close proximity to Asia,” said Queensland Premier Annastacia Palaszczuk. “The Queensland Government’s funding and support for biorefinery projects will create high-value jobs and investment in regional Queensland by using renewable feedstocks to create biofuel and other bioproducts.”

“Our growing demand in China for Vitamins and the Asian demand for cosmetics and fragrances supports a new specialty farnesene fermentation factory in Queensland,” said Amyris CEO John Melo. “The funding from the Queensland government along with the operating expertise and sugar cane base of our local partner make this factory possible and enable savings from our current production in Brazil and the associated shipping costs. Like all our new projects, this factory is expected to be sold out when it starts operating.”

The Queenaland backstory

Last December, Amyris and the Government of Queensland, Australia inked a partnership to create a southeast hub of sustainable ingredients production for the rapidly-growing personal care sector in Asia, while supporting Queensland’s local economy and sugarcane industry. The partnership aims to develop a new production plant with support from local partners. The plant will produce Amyris’s high-value personal care and nutraceutical actives, as well as farnesene-derivative products.

Amyris and the Government of Queensland have successfully partnered on a number of initiatives since 2010 designed to foster adoption of renewable product solutions targeting large global markets while also supporting the development of a Queensland-based biotechnology industry using feedstock from local sugarcane.

Ms Palaszczuk said the proposed Amyris biorefinery was another step towards achieving Queensland’s vision for a $1 billion sustainable, export-oriented biotechnology and bioproducts sector. “Acceleration of the Amyris project came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland to process materials such as agricultural and industrial waste,” she said.

The key to all this

In a word, China. Amyris’ China sales have been doubling, and the company expects to generate $50 million or more in revenue over the next 12-18 months from its sales into China. The biggest news there is farnesene-based Vitamin E oil, and there are opportunities to supply intermediates and ingredients for the large and fast growing Chinese food ingredients market.

The rate constraint

As we reported earlier this year the Brotas plant’s farnesene-producing capacity is sold out through 2020. But as we asked then, how can a plant with a nameplate capacity of 40 million liters be sold out on a revenue of $77M, especially when that revenue consists mostly of “collaboration payments” that usually extend beyond product production to include product development costs.

Let’s start with a $2.50 per liter farnesene price, and let’s simply focus in on reported production revenue, which reached $15M in  Q4 2016. That translates to 6 million liters of production and a 60% plant utilization. If the actual farnesene price is higher, the utilization rate could be lower.

We highlighted production rate in this article on hard times and bright prospects at POET-DSM, and we’ll highlight it here as well. Since we don’t have complete transparency on the business — we have to make substantial room for the possibility that there is simply so much switching time between campaigns that the problem is one that can be solved by building more specialized capacity.

Which is Amyris’ current plan, as a matter of fact. The company has broken ground on Brotas 2, which will focus in on flavors & fragrances. And now we have this farnese plant announcement for Queensland.

The wow technology story

Last month, we reported that Amyris had completed strain engineering and optimization to 26 key metabolic precursors across multiple organisms – including many different pathways beyond terpenoids allows Amyris to develop an industrial-scale fermentation process for virtually any biological molecule. That work is funded in part through a multi-year agreement with the US Defense Advance Research Projects Agency, the famed DARPA that gave us everything from kevlar to the Global Positioning System and the Internet — the goal in this $35M agreement with the Biological Technologies Office was to create new research and development tools and technologies — compressing the time to market for any new molecule by at least 10-fold in both time and cost.

The Amyris financial backstory

Last month, Amyris reported Q1 revenues and Jeff Osborne at Cowen & Co noted, “Amyris reported revenue of $13.0mn, well below our estimate of $37.1mn due to much lower collaboration payments than we had anticipated.

At the time, we liked one item more than anything. In Q1 2016, product sales were $5.2M and the cost of product sales were $11.2M, and a number of informed observers became alarmed that the company was losing money on every product produced, and that growth would be unsustainable. But the company has staged a turnaround in that critical metric. In Q1 2017, product sales were $13.2M and the cost of product sales were $12.8M.

For Amyris, the big hit was Biossance and the big miss was Ginkgo. In the case of the former, sales are expected to reach $10M in 2017, but in the case of the latter a mysterious milestone payment was missed.

We noted that:

“Amyris has been pushing back it’s time to $100M in revenue for some time. It missed in 2016 a plan to reach that threshold and 2017 will need to quickly get on track. Wall Street may well be able to put the past in the past with all forgive if Amyris can break out and hit that $100M revenue threshold, and even with a strong second half, the company will need to reach something like $30M in Q2 revenue to maintain belief, given the 2016 miss.”

The best news on Planet Amyris? Amyris says “double the revenue” is in sight with Nenter Vitamin E Partnership as a DSM Vitamin A partnership was unveiled last month, and DSM led a $47M investment round into the company in recent weeks.

Queensland’s progress

We have seen quite a lot of expressions of interest.  “A total of 120 parties recently indicated interest in biorefining in Queensland through the program<‘ said Ms Palaszczuk, “ and 26 submitted detailed expressions of interest. The Queensland Government is leading Australia’s bio-economic revolution through the Advance Queensland Biofutures 10-Year Roadmap and Action Plan.”

The Bottom Line

Good news for fans of Amyris eager to see growth. Equally good for fans of Queensland’s bio-future. Now, comes the time to translate talk into steel in the ground.  Steel made from good ol Aussie iron, of course.

Categories: Today's News

The Yottabyte, Hyperspeed Economy, and you

Biofuels Digest - Thu, 06/22/2017 - 11:11am

If you saw this story on the Internet this week:

You may be wondering about the roles that industrial biotechnology, big data, genetics, robotics and advanced computing are playing and will play in the “entire industries are about to become toast” game.

This video about innovation and convergence, and the implications — may be of use to you in your thinking. It’s called The Yottabyte, Hyperspeed Economy, and it’s here in a slighly more full-screen version — or you can watch it embedded into this web page, below.

It’s about how technologies and forces are arraying and deploying. How they relate to each other and to jobs, work, and value-creation. How they may have catastrophic or sublime outcomes for you, depending on your own market position.

Over the past two months, this has only been seen in Silicon Valley, but upon reflection I thought I might share this (entirely non-commercial) vid with all my readers. Hope it gives you food for thought, and that you find it entertaining.

Categories: Today's News

RFA chief calls Brazilian policy ridiculous and Chinese policy schizophrenic

Biofuels Digest - Wed, 06/21/2017 - 7:17pm

In Minnesota, the CEO of the Renewable Fuels Association told the Fuel Ethanol Workshop during a keynote speech that the proposed import tariff on ethanol into Brazil is ridiculous and destructive while China’s imposition of a tariff in January was schizophrenic. The two countries have been major import markets for US ethanol that must now find a new home as the global ethanol policy landscape shifts. US ethanol producers continue to produce on average a million barrels per day.

Categories: Today's News

Biodiesel fly in sees nearly 100 descend on Washington to push for biodiesel tax credit

Biofuels Digest - Wed, 06/21/2017 - 7:16pm

In Washington, nearly 100 biodiesel advocates from across the country are visiting Capitol Hill Tuesday urging Congress to bring back the biodiesel tax incentive as proposed in both chambers of Congress. Participants include biodiesel producers, distributors and feedstock suppliers representing more than two dozen states.

One theme is clear among members from each of these geographic regions—the biodiesel tax incentive works, having helped grow the biodiesel industry from a 100-million-gallon market in 2005 to more than 2.9 billion gallons in 2016. The current legislative proposals in the U.S. Congress reform the structure of the incentive such that U.S. producers—those who make biodiesel here in the United States—would qualify for the credit, and not those who blend biodiesel from anywhere into the world. Doing would cut off subsidies for foreign manufacturing, create jobs here at home (instead of in other countries), reduce the potential for tax fraud, continue to lower the cost of diesel fuel for consumers and save taxpayer dollars.

Categories: Today's News

REG completes $20 million land purchase to expand Geismar facility

Biofuels Digest - Wed, 06/21/2017 - 7:15pm

In Louisiana, Renewable Energy Group Inc. announced it has completed the $20 million acquisition of approximately 82 acres of land at and in close proximity to its Geismar, Louisiana, biorefinery from Lion Copolymer.

The purchase includes land REG previously leased for its Geismar operations and approximately 62 additional acres in parcels adjacent to and near the facility. The company plans to improve and utilize the new acreage to support existing production capacity and future expansion opportunities. The purchase of the previously leased property will save REG approximately $35 million in future lease payments through 2033.

Categories: Today's News

Federal judge rules California’s LFCS may discriminate against Midwestern fuels

Biofuels Digest - Wed, 06/21/2017 - 7:13pm

In California, a federal judge has ruled that the state’s low carbon fuel standard can’t discriminate against Midwest fuels in favor of California ones, but pretty much the rest of the policy can continue. He ruled that the LFCS does not in fact go against the constitution nor was the law in conflict with federal rules, and that Midwest-produced biofuels could potentially be pushed out of the market—even if unintentionally—by the state’s carbon intensity assignments to out-of-state fuels.

Categories: Today's News

Copersucar’s US ethanol arm sees market share grow with sales of 9.2 billion liters

Biofuels Digest - Wed, 06/21/2017 - 7:12pm

In Brazil, larger ethanol trading volumes from Copersucar’s US-based trading arm Eco-Energy Biofuels helped the parent company achieve higher earnings despite less sugar crushed by more than 20 mills associated with the cooperative during 2016/17. Eco-Energy Biofuels’ ethanol sales rose 4.5% during the period to trade 9.2 billion liters, with an estimated 16% market share in the US. The company is currently discussing with US companies in order to secure more trade flows as it market share grows.

Categories: Today's News

Jamaica moves to vehicles trials of castor-based B5 blends

Biofuels Digest - Wed, 06/21/2017 - 7:11pm

In Jamaica, the Petroleum Corp of Jamaica is moving forward its vehicular trials of B5 blends using castor oil-based biodiesel in an effort to see if the fuel could be a viable alternative for the island. The trials run jointly between the PCJ, the Ministry of Agriculture, Bodles Agricultural Research Station and the Caribbean Agricultural Research and Development Institute have been ongoing since December. No details about results from the trials so far have been released other than results are feeding back into the blending trials to find the right mix.

Categories: Today's News

German researchers develop biodiesel production method using lower temperatures

Biofuels Digest - Wed, 06/21/2017 - 7:10pm

In Germany, researchers from Kaiserslautern, Bochum, and Rostock have developed a method for producing a petroleum diesel-like fuel from conventional biodiesel at low temperatures. The new biofuel fulfills the current EU and US requirements. It can be used undiluted in modern diesel engines or mixed in any ratio with petroleum diesel. The researchers present their work in the prestigious journal Science Advances.

The particular advantage of this new technique is that the researchers are able to precisely adjust the chemical properties of the mixture. This process changes the ignition and combustion properties of the biodiesel. Combustion starts at lower temperatures.

Categories: Today's News

Thailand orders 40% increase in biodiesel stocks to support palm fruit prices

Biofuels Digest - Wed, 06/21/2017 - 6:57pm

In Thailand, the government is calling for a 40% increase in biodiesel stocks held by oil companies to 90 million liters to help absorb excess palm oil supplies and support prices. Palm fruit prices were expected to respond within a week as a result of the policy shift. The country currently blends 7% biodiesel. About half of the country’s palm oil production goes towards biodiesel while the remainder is used for food. The government is also moving to establish a floor price for palm fruit.

Categories: Today's News

Explosive new ICCT report says “offsets” will dominate “alternative fuels” in aviation

Biofuels Digest - Wed, 06/21/2017 - 3:22pm
“Bulk of aviation emissions reductions will be achieved through carbon offsets,” not fuels, writes ICCT
  • Slow scale-up foreseen for biofuels
  • Challenges in feedstock costs
  • Carbon pricing too little, too late
  • The fatal distortion lies in petroleum markets

In Washington, the International Council on Clean Transport reports that “it is likely that the bulk of aviation emissions reductions will be achieved through carbon offsets and efficiency improvements,” and not through the development and deployment of aviation biofuels.

In the report, Alternative Jet Fuel Development and Deployment in North America (which you can download here) lead author Nikita Pavlenko writes that “the fuel pathways that can supply the steepest GHG reductions are constrained by feedstock availability, cost, and time it would take to commercialize an advanced AJF industry. In addition, using these feedstocks in AJF may reduce opportunities to abate emissions in other economic sectors, such as the heavy-duty road sector.”

The CORSIA problem

The problem in part is one of design. Cheap offsets, that is. “The high expense of AJFs relative to the low projected cost of offsets in the near future make it unlikely that CORSIA alone will drive high levels of fuel switching,” says the ICCT report.

It adds, “the plan’s delayed transition from collective, industry average to individual offset responsibility greatly reduces the incentive for any individual airline to rely on AJFs to mitigate emissions, particularly in the early years. Estimates of the value signal of CORSIA suggest that direct offsetting costs are unlikely to exceed 5% of fuel costs by 2035 without substantially higher offset prices. Robust policy support would be necessary to spur AJF deployment at the scale needed to make a substantial contribution to CORSIA commitments.”

What is CORSIA, anyway?

This is the Carbon Offsetting and Reduction Scheme for International Aviation, which is the International Civil Aviation Organizations’s ICAO’s primary policy tool for reducing the international aviation sector’s emissions.

CORSIA offers a phased implementation; the first two phases (the pilot phase, 2021–2023, and Phase 1, 2024–2026) are voluntary, and Phase 3 (2027–2035) is mandatory to most aviation traffic. Both Canada and the United States have committed to the voluntary phases of CORSIA.

The size of the opportunity

ICCT concludes that by Canadian and U.S. international carriers would need to offset 250 Mt of CO2 by 2035, based on expected growth and fuel efficiency gains.

In practical terms, the industry would need to use 50 billion gallons of fuel, by 2035 (that’s a cumulative figure, not an annual production) to reach those numbers with a fuel that cut emissions by 50%.

So, think 3.3 billion gallons per year, in the US and Canada, starting in 2020. Alternatively, 5 billion gallons starting in 2025 will do the trick.

The math outlines the challenge. Right now, advanced biofuels refineries that can make jet fuel are planned in the 10-75 million gallon per year range, and Wall Street isn’t exactly falling over itself to invest in them, and airlines have taken a very proactive position on signaling intent to purchase, so long as it doesn’t cost any more in dollar terms. Minimally, we’re looking ta 35 refineries, maybe more. Needed soon.

The problem of course continues to be the old one.

1. The improved performance of these fuels is in carbon, not mileage (there’s a very modest 1% or so fuel efficiency gain from switching to biofuels — not enough to justify the expense of fuel-switching).

2. The value of every bio-based feedstock grown at scale far exceeds its energy value. For growers, switching from existing customers to fuel customers requires a higher price they are not seeing.

3. The lone exceptions are bio-based waste residues and wood — there’s not enough of the former, and energy prices are too low for the latter.

4. Petroleum-rich land and sea areas are generally sovereign-owned, while bioenergy land is generally in private hands, and the value of sovereign-owned land is not subject to market forces, which would substantially raise the cost of petroleum.

Liquid fuel itself is traded in the most dynamic, competitive and fungible market of all — the oil market — and it gives the illusion that free-market forces are at work. Which makes libertarians wary of intervention to secure free markets. Ironically, government actions are labeled as market-distorting, rather than liberation.

The hard data on petroleum leasing price distortion

In December 2016, CNBC reported that the “average price for the three most expensive deals in the Midland Basin this year was nearly $49,000 per acre, compared with an average of $38,300 per acre for the top three purchases in 2014.”

So, that’s the free market. Now, let’s look at the sovereign market. The Washington Post reports:

“For decades, the minimum bid to lease public land for fossil fuel production has been just $2 an acre. Annual rental fees, which companies pay to hold and explore federal lands before production, are just as low. And the royalty rate for oil and gas produced onshore has remained at just 12.5 percent since 1920.” (Note to readers: these are per-year lease costs, not one-time).

It’s not an inconsiderable amount of fuel coming on to the market with completely distorted costs. Again, the Post report that “oil, gas and coal from public lands – including offshore leases – still account for 25 percent of total U.S. fossil fuel production.” And American Progress reports that 34.5 million acres are leased this way.

An example from everyday life

Imagine buying a condo down the street, to generate a little rental income, for $200,000.  And renting it for 64 cents per month. That’s the same economic structure as petroleum leasing.

First of all, you’ll never get a mortgage on that deal. Second, you’d be crazy to do it, you can earn 250 times as much holding the money in a CD at a federally-insured institution, with absolutely no risk, no hassle at all.  Only the federal government would take such a deal, since they didn’t pay for the land and want to keep gasoline prices cheap.

By contrast, a farmer has to pays $325 per acre to lease land. That was in in 2016, according to our friends at the University of Illinois at Champaign-Urbana.

So, that’s why you pay more for biofuels than petroleum, in a nutshell. And why the ICCT sees problems for airlines ahead in buying alternative jet fuels.

Next steps for aviation

Leaving aside the problem of land-value distortion, for which the solution is a better market-making mechanism that raises revenues for royalty owners rather than setting a goal of giving away land to keep gasoline prices artificially low, what’s ahead for the aviation industry?

Option one is setting a carbon price that levels the playing field. ICCT likes that it is seeing in Canada.

Canada’s proposed Clean Fuels Program provides a solid foundation for incentivizing the most effective AJFs because it uses an LCFS structure that rewards fuels in proportion to their carbon intensity. However…a blending mandate or other aviation sector– specific target would help to create a market for AJFs in the absence of a strong value signal from CORSIA.

The Bottom Line

Given the lack of a free market in petroleum based land, an offsetting mechanism in carbon is a must. The ICCT sees promise in the LCFS model.

We do need change. Right now, we’re leasing public land at absurdly low rates so that consumers don’t pay high fuel prices. Now we want airlines to switch from subsidized fossil fuels. So we set up carbon offsets to be cheaper than alternative fuels. So airlines buy offsets instead of fuel-switching, pass along the cost of carbon in the form of higher ticket prices,. Net result, we’ve increased fossil fuel prices, and we don’t reduce carbon.

Exactly the opposite of our policy goals.

Categories: Today's News

Growing Global Bioenergy Markets

Biofuels Digest - Wed, 06/21/2017 - 3:13pm

By Gerard J. Ostheimer & Douglas L. Faulkner

Special to The Digest

The world really, really wants to have a thriving Global Bioeconomy. It just doesn’t know it, yet.

Two years ago, essentially all the governments of the world agreed that they wanted a sustainable, low carbon future. These ideas were encapsulated in two landmark agreements: The United Nations Sustainable Development Goals and the more widely known Paris Agreement on combatting climate change. The 17 Sustainable Development Goals (SDGs) (link), make explicit a combination of Economic, Environmental and Social aspirations that are shared by the Digest readership such as increased use of renewable energy and chemicals; decent jobs; technological innovation; and, natural resource conservation.

Big emitters like China, India and the EU have all expressed their commitment to the Paris Agreement. In addition, several U.S. governors, mayors and CEOs have since stepped forward to claim the mantle of U.S. climate leadership. Jerry Brown was particularly loquacious on this point with his Chinese hosts during the recent Clean Energy Ministerial in Beijing. Despite this professed enthusiasm, there is a general lack of understanding of how to de-carbonize the chemicals and transportation sectors, and specifically, how the bio-economy can contribute.

Growing Acceptance of Biofuels

Support for the global bio-economy comes from an unexpected place – international technical agencies. Recently, the International Energy Agency International Renewable Energy Agency (IRENA), IEA Bioenergy and the UN Food and Agriculture Organization (FAO) drafted a joint paper that supports bioenergy’s role in Sustainable Development (link), and especially food and feed production. In stark contrast to the perceived wisdom of bioenergy’s critics, the global bodies responsible for Energy Security and Food Security see numerous advantages to the use of sustainable bioenergy for heat, electricity, chemicals and fuels, including

  • Improving the agriculture sector for sustainable food and feed production in developing countries;
  • Revitalizing the forestry sector in developed countries; and
  • Helping countries meet their SDG and climate change mitigation targets.

These agencies specifically encourage re-framing old debates about food vs fuel into food plus fuel: “The attitude towards biomass production for food, bioenergy and other purposes should evolve from single end-use orientation to integrated production systems that ensure high resource use efficiency and reward sustainable production and use.” Unfortunately, policymakers in the U.S. and EU are either unaware or choosing to ignore this emerging international technical consensus as well as the historic roots for promoting a global bioenergy partnership in the George W. Bush Administration. Today’s proponents of the global bio-economy would do well to educate policymakers and bioenergy’s critics on this historical perspective and the emerging agreement among international organizations.

Market Dynamics

Where are the growth opportunities for the promised global bio-economy? On the fuel side, first-generation fuel use has limited potential for growth in the U.S. and Europe and uptake of advanced biofuels and renewable chemicals is slower to take off than expected with lower oil prices and surging natural gas production. In BRICS countries, there is appetite and some progress, but again the low price of oil undermines the growth rate of the sector. We see developing countries in Africa and Asia as the geographies with the greatest potential for rapid uptake of bio-based fuels and chemicals.

First, countries like Kenya and the Philippines have land, water and an under-performing agricultural sector. Consequently, opportunities exist to sustainably intensify biomass supply chains. Second, these countries spend enormous amounts of their national treasure proportionally to import fossil fuels, which prevents investments in things that they need like schools and infrastructure. As such, it has been argued for at least a decade that these countries would benefit from substituting domestically produced biofuels for imported fossil fuels. Third, a robust domestic biofuel sector can be a source of demand for agricultural products that can lead to investment and modernization of the agricultural and forestry sectors in developing countries – – a virtuous circle of growth.

These new national bio-economies aren’t going to grow on their own. Technology, investment, and – most of all – knowledge will be needed to grow the global agro-energy sector. At the moment, Indian companies like Praj and ISGEC have a booming business in bringing bioenergy to developing countries. With increasing biofuel and renewable chemical demand opportunities will emerge for American, Brazilian and European firms to license their technology, build new plants and provide their services.

Realizing the Potential

As we will explore in future columns, the issue in our minds is not whether a vibrant global bioeconomy will benefit developed and developing countries, but how to speed up the change and spread the benefits. We want to explore what lessons from earlier bio-economies to reject and which to adapt. We will dig into the barriers to growth and examine the efficacy of government policies in these new settings. We believe there are no “one-size fits all” solutions, but there are some common elements, like building partnerships between rural communities/interests and the industrial users and focusing on economic, environmental and social sustainability. Biofuels ventures are sprouting around the world, with new approaches, new coalitions, new politics and new technologies – – they should be encouraged and supported.

Categories: Today's News

And no extra hydrogen: The Digest’s 2017 Multi-Slide Guide to one-step, high-yield, drop-in biofuels

Biofuels Digest - Wed, 06/21/2017 - 2:57pm

Vertimass’ John Hannon gave this illuminating overview of Done-step, high-yield production of drop-in fuels without added hydrogen, at the 2017 DOE Project Peer Review sessions.

Categories: Today's News

Amyris and Queensland team on commercial-scale biorefineries

Biofuels Digest - Tue, 06/20/2017 - 8:23pm

In Australia, Amyris, Inc. and the Government of Queensland announced the next step in their plans to develop a leading industrial biotechnology hub in Southeast Asia. Plans call for developing a new production plant with support from local partners to produce Amyris’s sugar cane-based ingredient called farnesene, which is used in products including cosmetic emollients, fragrances, nutraceuticals, polymers, and lubricants.

Acceleration of this project, which was first announced on December 6, 2016, came out of the Queensland Government’s Biofutures Acceleration Program that offers support to companies to build commercial-scale biorefineries in regional Queensland. Amyris was chosen based on its legacy expertise in operating such production facilities. Queensland Premier Annastacia Palaszczuk said the interest by Amyris was welcome.

“Amyris is seeking to replicate its successful biorefinery in Brazil and sees Queensland as an ideal location due to the abundance of sugarcane and close proximity to Asia,” Ms Palaszczuk said.

“The company’s proposed biorefinery would aim to produce 23,000 tonnes a year of a sugar cane-based ingredient called farnesene which is used in a range products including cosmetics, fragrances, nutraceuticals, polymers, and lubricants.”

“The Queensland Government’s funding and support for biorefinery projects will create high-value jobs and investment in regional Queensland by using renewable feedstocks to create biofuel and other bioproducts.”

“We are very pleased with the commitment of the Queensland Government to be leaders of the Bioeconomy,” said John Melo, Amyris President & CEO. “Our growing demand in China for Vitamins and the Asian demand for cosmetics and fragrances supports a new specialty farnesene fermentation factory in Queensland. The funding from the Queensland government along with the operating expertise and sugar cane base of our local partner make this factory possible and enable savings from our current production in Brazil and the associated shipping costs. Like all our new projects, this factory is expected to be sold out when it starts operating with agreements to supply our current partners in China and other Asian markets. Queensland offers an excellent location option for Amyris with its favorable business climate, extensive sugar industry and geographic proximity to these markets.”

Amyris and the Government of Queensland have successfully partnered on a number of initiatives since 2010 designed to foster adoption of renewable product solutions targeting large global markets while also supporting the development of a Queensland-based biotechnology industry using feedstock from local sugarcane.

Amyris: The Digest’s 2015 5 Minute Guide

Categories: Today's News

RSPO denies FairPrice’s claims of certified oils

Biofuels Digest - Tue, 06/20/2017 - 8:21pm

In Malaysia, in a Straits Times article published on October 16, 2016 FairPrice Premium Cooking Oil and FairPrice Vegetable Oil claimed having been certified by NTUC to be from RSPO certified sources. Roundtable on Sustainable Palm Oil (RSPO) says that the claim made by NTUC Fairprice is not verified in accordance with the RSPO systems and regulations.

Since the claim was made in October 2016, RSPO has taken steps to engage with NTUC Fairprice to rectify the claims or to bring their processes in compliance with RSPO standards. NTUC Fairprice has been informed multiple times that as a non certified, non-member of RSPO, claims such as those published in the Straits Times cannot be endorsed by the RSPO.

As a multi stakeholder, membership based, non-for-profit organization, RSPO is committed to the standards outlined in their Principles and Criteria and to maintaining and improving transparency in standards related claims and communications.

RSPO is always happy to support and engage with any company wishing to become certified under RSPO Certification and we remain open to assist NTUC Fairprice to take the necessary measurements to verify these claims, and in transforming the market to make sustainable palm oil the norm.

Categories: Today's News

Statkraft teams with Sondra on hydro thermal liquefaction facility

Biofuels Digest - Tue, 06/20/2017 - 8:20pm

In Norway, Statkraft has created a JV with Sweden’s Sondra called Silva Green Fuel that will invest up to $78 million in a hydro thermal liquefaction facility, a process the state-owned energy company developed to replicate underground oil production in minutes from wood waste. The demonstration facility will be built south of Oslo with the fuel destined for aviation, trucking and other non-car transport markets that need liquid fuel replacements. A commercial scale facility could cost hundreds of millions of euros and is at least five years away.

Categories: Today's News

University of Illinois researchers says economics favor corn for food over ethanol

Biofuels Digest - Tue, 06/20/2017 - 8:19pm

In Illinois, researchers at the University of Illinois have quantified and compared these issues in terms of economics of the entire production system to determine if the benefits of biofuel corn outweigh the costs.

Civil and environmental engineering professor Praveen Kumar and graduate student Meredith Richardson published their findings in the journal Earth’s Future.

As part of a National Science Foundation project that is studying the environmental impact of agriculture in the U.S., the Illinois group introduced a comprehensive view of the agricultural system, called critical zone services, to analyze crops’ impacts on the environment in monetary terms.

“The critical zone is the permeable layer of the landscape near the surface that stretches from the top of the vegetation down to the groundwater,” Kumar said. “The human energy and resource input involved in agriculture production alters the composition of the critical zone, which we are able to convert into a social cost.”

To compare the energy efficiency and environmental impacts of corn production and processing for food and for biofuel, the researchers inventoried the resources required for corn production and processing, then determined the economic and environmental impact of using these resources – all defined in terms of energy available and expended, and normalized to cost in U.S. dollars.

Categories: Today's News

UPM Biofuels’ Ecofys study shows surplus crude tall oil availability

Biofuels Digest - Tue, 06/20/2017 - 8:18pm

In Finland, UPM Biofuels commissioned a study from leading international energy and climate consultancy Ecofys – A Navigant Company, entitled “Crude tall oil low ILUC risk assessment: comparing global supply and demand”. The study looked into crude tall oil (CTO) availability, current usage, whether the feedstock creates an additional demand for land, and whether the use of CTO in advanced biofuels can cause distortive effects in the markets.

The recently conducted Ecofys study concludes that “the CTO market is not overly tight and potential surplus of about 850,000 tonnes of CTO is still available that could be tapped into”. The total potential CTO supply is around 2.6 million tonnes. Current actual CTO demand is approximately 1.75 million tonnes, of which about 1.4 million tonnes is used by distillers and roughly 230,000 tonnes for biofuels. Ecofys also concludes that “CTO use for biofuels did not cause displacement effects elsewhere, and hence CTO, a non-land using process residue, is a low ILUC (Indirect Land Use Change) risk material.”

Categories: Today's News

Turkish researcher awarded grant to study electrodeionization for biofuels

Biofuels Digest - Tue, 06/20/2017 - 8:16pm

In Arkansas, a Turkish researcher has been awarded an AAUW International Doctoral Fellowship from the American Association of University Women in part to research use of electrodeionization, or EDI, which uses electricity to remove ions from water. In addition to other areas, she is studying the use of EDI in the process of growing algae for biofuels. In this project, researchers use EDI to convert carbon dioxide into bicarbonate. The bicarbonate will help create an ideal environment for growing algae, which can be used to create biofuels.

Categories: Today's News

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