Cellulosic biofuels have multiple advantages over conventional biofuels like ethanol and biodiesel. Primary among the advantages is that the fuel’s feedstock is agriculture waste, which means it avoids controversial topics like the food versus fuel debate and direct or indirect land use change concerns. Despite these advantages, hope for cellulosic biofuels has eroded because multiple companies have failed to produce the fuel at scale and a competitive price point.
The many failures forced the U.S. Environmental Protection Agency (EPA) to cut the annual volumetric blending requirement for cellulosic biofuels mandated by the Renewable Fuel Standard (RFS) to levels ranging from 6 million gallons to 9 million gallons between 2010 and 2013. For 2014, the EPA has proposed cutting the original volume requirement for cellulosic from 1.75 billion gallons to 17 million gallons. Additionally, KiOR, the company closest to producing cellulosic biofuels at scale, has run into financial stumbling blocks. This situation is leading some to question whether cellulosic biofuels will ever take off. But while the industry has certainly appeared to be on the brink, investors do still have hope, as demonstrated by Cool Planet’s successful closing of $100 million Series D financing at the end of last month.
Saving Cellulosic Biofuels One Plant at a Time
Cool Planet has often been described as similar to KiOR, as the two companies take cellulosic biomass and convert it to hydrocarbons chemically identical to petroleum-based fuels. The two companies are, however, also “dramatically different,” as described in interview with Cool Planet’s CFO Barry Rowan. The most significant differences are related to Cool Planet’s novel approach to production plant development, the production process, and the development of the company’s propriety biochar, CoolTerra.
Rather than focusing on one or more major production facilities, Cool Planet will develop numerous small-scale (10 million gallons per year) plants. This approach has multiple advantages. First, it reduces risk to investors, as each small capacity plant is significantly less costly than one giant facility. Second, the development costs of each new plant are reduced and production margins improved since Cool Planet is able to innovate on lessons learned from past plant developments. Third, it allows Cool Planet to bring the plant to the biomass rather than the biomass to the plant. This reduces the transport costs for the cellulosic biomass and insulates Cool Planet against feedstock shortages. Rowan notes that the capacity of each plant is limited to a fraction of a region’s cellulosic resources.
Cool Planet can use a variety of cellulosic feedstocks, which the company exposes to high temperature and pressure to create a biovapor. The biovapor is then converted to a high octane gasoline blend stock. In contrast, KiOR’s process produces a biocrude oil, which is then refined into gasoline and diesel products. When put through a proprietary catalytic column, the biovapor created by Cool Planet’s process produces the biofuels and a residual biochar – both of which have markets.
The biochar produced from the biofuels development is then treated by Cool Planet to create the company’s proprietary product, CoolTerra. According to the company, which has five PhDs working on this product, trial results show improved crop yields and growth rates, as well as reduced water and fertilizer input requirements. The resulting impact is a fuel that is carbon-negative; any carbon produced is sequestered in the CoolTerra, which will be used to produce carbon-absorbing plants and thus reduce atmospheric carbon concentrations.
Development of Cool Planet’s first 10 million gallon facility located in the Port of Alexandria, Louisiana is underway; the plant should be operating by 2015. The development of two other plants in Louisiana is scheduled to follow in 2015 and 2016. Rowan estimates Cool Planet can be profitable at oil prices of $50 per barrel, well below today’s rate. Real world tests of Cool Planet’s business model will demonstrate its viability. If anything can be gleaned from the recent struggles and successes of KiOR and Cool Planet, it’s that the industry is not dead; rather, it is simply taking longer to adapt to technological and logistical problems than expected. And it’s clear investors believe Cool Planet may have a winning approach.
Tags: Biofuels, Clean Transportation, Finance & Investing, Policy & Regulation, Smart Energy Program
| No Comments »