Cleantech Market Intelligence
As Coskata Zigs, Biofuels Market Zags
Last month Coskata, a well-regarded advanced biofuel company profiled in our 2011 Biofuels Markets and Technologies report, announced that it will shelve plans to build a U.S. Department of Energy-backed commercial biomass-to-ethanol conversion facility in Alabama. Instead, the company will focus on commercializing a natural gas-to-ethanol facility, aiming to ride the shale gas wave sweeping across the United States.
Natural gas has always featured prominently in Coskata’s long-term plans, but will now ride shotgun as the company seeks a financially viable road to commercialization. For a segment of the biofuels industry still navigating the Valley of Death, Coskata’s lane-change shifts the commercialization landscape for advanced biofuels significantly.
The announcement is also a blow for gasification conversion platforms – a process that uses heat and, in some cases, a limited amount of oxygen to convert biomass into a synthesis gas (syngas) – and points to a more challenging road to scale-up for the advanced biofuels industry as a whole.
Race to Cheap Feedstock
Like other companies (e.g., Sundrop Fuels and Primus Green Energy) that sought to rely on abundant forest and agricultural residues for near-term fuels production, Coskata has found relatively inexpensive natural gas too hard to resist.
The pivot to natural gas does not necessarily suggest that biomass gasification is a non-starter from a technological standpoint, but rather that the current economics related to the biomass component appear to be mostly prohibitive. Non-food biomass feedstocks and handling are typically the most expensive piece of advanced biofuel production facilities, and they often come with a great deal of supply risk. Establishing logistically and economically viable supply chains and biomass handling infrastructure has remained a persistent barrier to advanced biofuels scale-up, as I discussed earlier on this blog.
While numerous reports suggest that there is more than enough biomass available globally to meet substantial demand from biopower and biofuels production, the costs associated with harvesting, aggregating, transporting, and processing this material have proven to be high. The biomass sourcing and gasification challenge ultimately forced RangeFuels into bankruptcy last year. For its part, Coskata acknowledges it is faced with challenging economics associated with using biomass as a raw resource.
Already partnered with French oil and gas giant Total, Coskata is among the most well-funded advanced biofuel companies in the field. Meanwhile, producing syngas from natural gas is a well-established, commercially viable pathway. Mitigating feedstock cost also lowers the barrier for advanced biorefineries, which, given the many associated risks – feedstock, technology, and policy – face significant financing challenges from the venture and private equity communities.
Ultimately, Coskata’s gamble is intended to eliminate a key component of risk for advanced biofuel projects and lower the barrier to commercial ethanol production from non-food feedstocks.
Biomass Syngas Woes
Although many advanced biofuel companies share the biomass gasification front-end step with Coskata, they differ in the technology used to convert the syngas to fuel or chemicals. Given the steady drumbeat of biomass syngas defectors, it seems clear that biomass or gasification (or a combination of the two) is untenable in the near-term.
While the abandonment of the biomass gasification front-end component may be a short-term solution for getting steel in the ground, Coskata and other gasification start-ups could very well jump ship on the advanced biofuels bandwagon altogether if natural gas gains momentum as a transportation fuel in the United States and other key markets. Currently, programs to convert natural gas to biofuel are not supported by federal mandates or loans. And for Coskata, there is the additional challenge of accessing a saturated ethanol market in the U.S., unless it can find traction in nascent bio-based chemical and product markets.
Long-term, the natural gas pivot could fast-track a number of once promising advanced biofuels ventures to commercial success. But with at least 1800 additional biorefineries required to meet global biofuels mandates alone by 2022, costing an estimated $580 billion, the apparent shelving of biomass syngas technologies points to a more constrained expansion of advanced biorefinery infrastructure over the next decade.