Blend Wall Busters, RD Bang for the Buck and Policy Stability rate slightly behind. Better Technical Readiness Assessment rates much lower.

Readers come up with 63 alternative “calls to action”. A new Digest poll puts those into the mix for a more comprehensive view of industry priorities.

Over the past 10 days, Digest readers have been evaluating areas of focus for 2015 in order to move the industry forward faster.

Take the follow-up survey here. Your input is important to setting the industry agenda for 2015.

We asked you to look at six specific areas:

1. Policy stability.
2. Blend wall busters.
3. The overpromise, underdeliver problem: Better tools for assessing technical readiness.
4. Valley of Death: New financing structures for affordable capital
5. Bang for the Buck: Closer cooperation on RD spending
6. Supply chain: Accelerating the development of sustainable, affordable, reliable, available feedstock supply chains.

The Tale of the Tape

Critical

50% Valley of Death (finance)
44% Supply chain (feedstock)
39% Bang for the Buck (RD)
33% Blend wall busters (infrastructure)
22% Policy stability
11% The overpromise, underdeliver problem (hype)

Critical or “highly important”

88% Supply chain (feedstock)
72% Policy stability
72% Blend wall busters (infrastructure)
72% Valley of Death (finance)
72% Bang for the Buck (RD)
61% The overpromise, underdeliver problem (hype)

Somewhat, highly important or critical

99% Valley of Death (finance)
99% Supply chain (feedstock)
94% Bang for the Buck (RD)
94% Policy stability
89% Blend wall busters (infrastructure)
78% The overpromise, underdeliver problem (hype)

Looking at the results

For all the comments we receive around “hype” here in Digestville, we’re relatively shocked that developing better tools for assessment of technical readiness rates so low, After all, it’s a key to avoiding problems of the sort that technologies such as Range Fuels and KiOR ran into — would have benefitted them, and the industry as a whole. But readers weren’t too crazy about that.

Financing and Supply chain were very much on your wind — financing a clear winner in terms of being rated “critical” and Supply chain a clear winner in terms of being rated “critical” or “highly important”. Bank for the Puck and Policy Stability were slightly behind, with Blend Wall Busting rating just a shade lower (perhaps because of the hopes around drop-in fuels), while the afore-mentioned Technical Readiness brought up the rear.

Your action comments and calls to alternative actions

At the same time, we opened the floor for additional ideas, and in all we received 63 individual ideas for moving the industry faster towards commercialization.

Now, we’ve sharply critiqued “laundry lists” of ideas in the past for not having some study put into feasibility or impact — in other words, there are lots of good ideas out there, but which are those when taken together that will do the most effectively job of moving industry forward?

Step one is to find out which of these 63 reader “action comments”, in your view, would have the highest degree of impact and feasibility. We’ll also put six general notions we tested in the original survey into the mix.

We’ll combine your views on feasibility and impact (for instance a rating of 2 on scale of 4 for each factor would be an overall rating of 0.25 (0.5 * 0.5) – while a rating of 4 out of four for impact and zero out of four for feasibility would result in an overall rating of zero (1.0 * 0.0).

We hope that we will emerge with a set of clear winners — tasks you believe are critical for accelerating the industry towards stronger results.

If you see a suggestion that you feel is too vague, we suggest that you reduce your rating for “feasibility”.

Then, we’ll be workshopping those top results at ABLC to develop a set of detailed tasks that the industry believes it must pursue — and begin to accumulate a set of stakeholders ready to drive those goals to realization.

 

How to rate

In rating “potential for impact” and “feasibility”, consider the following fictional examples:

1. Reducing the cost of biofuels to zero.

Likely, this would have a) big impact and b) is highly unfeasible. So you might rate it 4 for impact but 0 for feasibility, which would have a net rating of 4.0*0.0=0.0.

2. Reducing the cost of corn as an ethanol feedstock by one penny .

Likely, this is a) highly feasible but b) not very impactful in terms of moving the industry forward. So you might rate it 4 for feasibility but 0 for impact, which would have a net rating of 0.0*4.0=0.0.

3. Improving the yield of an algae-based technology from 20 grams per square meter per day to 30 grams.

Likely, this is a) challenging but possible and b) highly but not transformatively impactful in terms of moving the industry forward. So you might rate it 2 for feasibility but 3 for impact, which would have a net rating of 3.0*2.0=6.0.

We’ve organized the suggestions into 10 functional areas.

Take the follow-up survey here. Your input is important to setting the industry agenda for 2015.

Focus on winning technologies

Many readers cited “focus” as a problem, in many cases, highly critical of spending on technologies that “will never work”, are “too small for impact”, on technologies with excessive capex. In several cases they suggested alternatives, sometimes, loconically as in the case of readers who responded with “biochemicals” or “biodiesel”

In all, there were 11 differentiated solutions offered..

1. Biochemicals.

2. Biodiesel

3. I have felt all along that the problem with biofuels is that competition with oil is not the way to go. Instead it should be more along the model of an integrated model that is applied by folks where the biofeed stock is utilized to manufacture specialty chemicals. This bio-refinery is special as the JVs on the industrial site are chemicals and fine chemicals that are not manufactured through the Hydrocarbons model (i.e. cracker to ethylene and propylene).

The chemicals whether food related, fine chemicals, solvents, agricultural chemicals, etc. need to be economical against current method of manufacture or perhaps dont exist as the standard chemistry will not allow it.

US (mainly government) needs significant regulatory financial difference between established production technologies =and= emerging, nascent biofuel production technologies.

4. Money is being spent on technologies that will NEVER work – e.g. all the other MSW to liquid fuels (except maybe Methanol). The industry needs to establish some technical credibility by outing these ‘pretend’ technologies and focus on what can actually work. 2nd generation ethanol can work but needs lots of help to get through the ‘valley of death’ for commercialisation.

5. leave the “small market” concept. Think bigger and cheaper

6. A successful future is one where the out-of-pocket costs for drop-in biofuels is consistently lower than traditional fuels. Pay attention to the Main Street economy, not the Wall Street or K Street economies – people don’t eat externalities.

7. Different approaches than the big integrated cellulosic ethanol plants should be of interest. Big is beautiful seems to be the only way currently, but it could very well just result in big losses. Sometimes smaller is the clever choice – if the economics work out. Would be interesting to investigate other approaches.

8. Finance. All current cellulosic plants, for example, are greater than $10 CAPEX/nameplate gallon ethanol. Finance. To meet RFS would require $100 billion. That is 500 plants producing 32 million gal biofuel each for 16 billion gal cellulosic biofuels, and 500 plants x $200 million CAPEX is $100 billion.
Getting past ethanol as THE fuel/chemical. Ethanol may really not have a future past E10.

9. Stop thinking that coming to a likely conclusion with the RFS will fix anything, or that the US is likely to budge it’s E10 limit any time soon. Don’t count on a premium for biofuels…it just needs to get to parity price, and fit within the existing infrastructure. Everything else, for the foreseeable future, is distraction.

10. The capital is too high for the return. The capital for the plants must drop to levels similar to corn ethanol since the product price is nearly the same.

11. I can’t emphasize enough the importance of moving to algae based systems and away from corn ethanol. Wasting arable land and potable water on corn for ethanol is terribly short sighted. The commercially capable systems that are able to be married to CO2 producing power plants and industrial sites are significant and its past time for their acceptance and integration into the mainstream. Algal systems can be placed on non arable lands, saving those arable lands for future food production needs. It should be a no brainer, but the money always seems to take the easy path no matter the ultimate costs.

It’s the feedstocks, stupid

A number of readers pointed directly at feedstocks, anything from “supply chain” to “yield” or New technology” and even over to “underutilized feedstock opportunities.” In some cases, the conflict between economies of scale for processing plants and the cost of transporting biomass was raised.

In all, 4 suggestions were made in the feedstocks arena.

1. Proving the maturity of a long term concept of supply of Cellulosic feedstocks. 2. Building an infrastructure to receive and pay for Raw Biomass “in the field” paying the Harvesters of that biomass for cost of labor, investment in equipment and daily operations. 3.To create a marketplace for these American Harvesters and in turn a respect for what they do!

2. Low feed stock prices and production costs with products competing with low oil price.

3. Start developing technologies such as onsite sugar production near the biomass feedstocks, and biomass sugar concentration and rail transport by tank car. Make nonfood sugars a new commodity, shipped by rail. Creating a fungible, tradable intermediate like concentrated nonfood sugar syrup opens the field to normal commerce as seen in the food industry. Dunkin Donuts does not have wheat fields in their parking lots. They buy a standardized commodity: flour.

Begin to deal realistically with the conflict between large plants with economies of scale and the inherent distributed low density nature of biomass. Two good solutions are the production of nonfood sugar syrup at biomass sites, and the development of smaller, low capex hurdle ethanol plants, and lots of them. These technologies will be particularly useful in Asia, where the big plant U.S. model is even less likely to succeed.

4. AzkooNobel of the Netherlands has joined forces with SuikerUnie, Robobank, Deloitte, Investment Agency for the Northern Netherlands (NOM)Groningen Seaports, and the Province of Groningen of producing chemicals from beet-derived sugar feedstock. THAT SMALL LAND BASED COUNTRY HAS RECOGNIZED THE VALUE OF SUGAR BEETS FOR FEEDSTOCK,
PRODUCING ENVIRONMENTALLY FRIENDLY PRODUCTS WHILE HERE IN THE US EPA DRAGS ITS FEET IN APROVING ENERGY BEETS, THAT CAN’T BE USED AS FOOD GRADE SUGAR, AS AN ADVANCED BIOFUEL !

Policy reform

There was a lot of focus on policy. In some cases, revisiting climate change policy itself, and carbon taxes, subsidies and the like. In other cases, the timing of support or just “policy certainty” as a virtue in itself. In other cases, there were comments focused on more specific topics such as “IP protection” or superior “definitions”.

In all, there were 12 suggestions.

1. Federal and State climate change policies

2. Unstable US government policy has been the biggest visible detractor to the industry over the last year, but feedstock is the elephant in the room. When technologies are developed to take lower cost feed stocks and produce higher value products, there is absolutely no reason for government intervention or fancy project finance capital strategies.

3. Tax oil for the costs of global warming and the rising ocean levels. Places like Miami will suffer enormous costs as the ocean washes ashore.

4. Demand that priorities be set that we use biofuels first, then use oil to make up any shortfall. A Biofuels Priority Act would do the trick!

5. To explain why I think accelerating development of sustainable etc. feedstocks is only “somewhat important” – obviously this is a critical piece of the puzzle. But it is a necessary, not sufficient, condition for advanced biofuels to succeed. In my mind, getting the policy right on this issue would be a sufficient condition for success, and all these other pieces would fall in line. The feedstock piece would be readily tackled and resolved if the market place actually worked.

6. Long-term regulatory stability!!!!

7. Government subsidies are important. Such would attract more PPA to assist the industry

8. Government subsidization over the medium terms will be needed to nurture development of commercial scale biorefineries. Comprehensive energy policies will need to be adopted by countries that are major energy consumers. that focus on encouraging use of cleaner fuels. There should be a price paid for producing CO2 either through cap-n-trade or taxing carbon. Incentives, such as excise tax credits should be offered resellers of biofuels of all types and these “subsidies” should be high enough to keep renewable fuels competitive with conventional fossil fuels. And an increase in the use of government backed grants, loan guarantees and public/private joint ventures should be aggressively pursued to accelerate the growth of renewable fuels industry.

9. Increase Federal Highway Tax by $.20 gallon immediately and add $.10 gallon for three years. 100% of money to be used exclusively for Federal and State highways. b. Fuels that are cleaner than gasoline to be exempt from a portion of the new tax on a scale that slides with lower carbon numbers (yes, a carbon tax).
c. Discontinue all Federal tax incentives for fossil fuel exploration, production, refining and distribution.
d. Require “blender” pumps at an increasing percentage of all gas stations until 25% offer consumer choice.
e. Require automakers to produce 100% FFVs. My true preference would be to simply have a free market where fuel performance and environmental quality dictate consumer demand and therefore fuel price.

10. a. IP protection — licensing efforts; b) GMM Regulatory — Biosafety freedom to operate; c) Capital eqv USA versus other countries, set technology package strategies.

11. Moving policies and practices that use broader definitions of biofuels and eliminate the bias in favor existing vested interests. e.g. “biodiesel – fatty acid methyl ester”.

12. The US must introduce some form of carbon tax, a floor on oil price or other mechanism to decrease the appetite for petroleum and improve the attractiveness of bio-based alternatives.

Messaging

Messaging — to the public and to other stakeholders, was the subject of 9 different action comments.

In some cases, the comments were general in nature, urging “more support” for emerging technologies, all the way to detailed “Citizen’s awareness” campaigns. In some cases, the focus was on changing the messaging, for example from energy security or environmental benefits to health benefits, or to performance characteristics such as “high octane”.

1. Play the low-carbon high octane card. Biofuels are high-performance fuels.

2. Greater support and promotion of new technologies

3. A more informed public – campaigns for greater awareness of how renewables actually work. Government support for these initiatives.

4. Getting Big Oil out of the way at the government lobbying level. Similarly, and as we have seen this past week with 2015 budget: Big Banking has won part of their battle to tear down Frank/Dodd.

5. Selling the message that help is needed to survive the “valley of death” of early commercial plants but that with operating experience the costs for subsequent plants will (must) come down and the subsidies can be reduced. Cost reduction with commercial deployment is understood perfectly in industry, but not nearly as well by policy makers or financiers.

6. Citizen’s awareness of the Climate Change issue and of ways to mitigate it; multinationals will not do it !
— Community-driven efforts such as requesting from political candidates ( at municipal, state/province and federal levels) their position on bio-fuels and whether they will vote favorably for RFS, etc.
— Stimulate entrepreneurial activity on biofuels given than oil and gas multinational corporations have to many conflicts of interest to be serious about renewables.
— Reduce environmental barriers: they are so costly that only large multinationals have the cash flow to go through them.
— Focus on intermediates that can be produced in one site and transported upgrading/finishing plants where economies of scale can be achieved.
— Lower cost biomass by increasing productivity and selectivity in the biosynthesis leading to valuable co-intermediates

7. Focusing on fuel standards that are based on engine and environmental performance rather than petroleum standards and ‘drop-in’ fuels. Focus on health issues – no aromatics and very low ultra-fine particulate mater as less politically divisive than GHG’s

8. We’ve got to remind people that price plays a role, but should not be the sole barrier to new technologies. In the past we’ve prioritized technological advantage over price and we are still reaping the rewards. Ray Mabus said it best: œIf concerns over cost and fear of change had carried the day, we would still be using sails… We never would have pioneered nuclear power, nor would we build nuclear carriers and submarines today, because they remain far more expensive than conventional models. We do these things because they give us a technological advantage[…]Today, we have the opportunity to be present at the creation of a new energy future, which will strengthen our national security even as it creates an engine for a new economy and provides for more stability around the globe. This opportunity cannot be undermined by present-day naysayers who refuse to envision the future, even when the path is illuminated by past successes.”  More here.

9. Addressing the general public’s lack of differentiation between corn-based ethanol and advanced cellulosic biofuels.

Shift to bolt ons, incremental add-on

Several commentators focused on shifting from greenfield project development to Bolt-on” technologies that had fewer capital challenges and took advantage of existing ethanol and biodiesel infrastructure. In all, there were 3 action comments.

1. If the next few years are going to be dominated by abundant supply of relatively cheap oil and natural gas the biofuels industry needs to focus itself in two areas:

2. a) Upgrading existing biofuels facilities to improve revenues using new technologies that can be bolted on and new feedstocks that are lower cost. b. Continue to focus on product diversification at existing facilities. Develop bioproducts markets with technologies that can be added to these operating entities. Advance new technology and improve revenue streams with the added benefit of product diversification.

3. Building upon proven technologies.

RD reform

A number of commentators addressed the balance of spending between pure research, development of new applied technologies and commercialization of existing technologies. Some felt “picking winners and losers” was not the right public RD goal, while others felt this was inevitable. Coordination was cited by many to drive efficiency.

1. Solidifying and improving Congressional support for energy RD with the goal of independence is critical. Memories of 9/11 are growing short and now that oil is cheap again and with a Republican dominated Congress, support for renewable energy RD is sure to come under fire.

2. Here’s a thought. Why not establish regionally deployed biorefining research facilities that can be used by emerging technology groups to conduct RD on next gen technologies. Give access to the facility for 6 to 9 months and then make it available to the next user. Lets’ see 4 such facilites to start with. Let’s fund them with public / private partnerships including academia, defense and other related industry partners. Let’s make them available at really affordable costs, like free and lets’ do it now not 5 years from now! NREL, Nevada IA and the others out there aren’t enough.

3. Looking closer at new technologies by providing funding for quick demonstration facilities that can prove greater efficiency and competency than achievable with slow enzyme technologies. Let’s go back to simple chemical biotechnologies and their derivatives.

4. Price to end-user seems to me to be THE driver of biofuel acceptance for all but the most prescient and forward-thinking energy consumers (e.g., the military) or those with the financial comfort to support acceptance of global warming science. Biofuel adoption appears to me to depend primarily on (reliable) lower-than-fossil-fuel pricing to refiners. Driving cost out appears to be fundamental in selling any commodity. Maybe that’s why I checked “critical” above for reviewing technological (and cost-effectiveness) readiness tools.

5. You have identified the major buckets of regulation, government support, finance, commercial readiness and feedstock. All important, but with varying priorities. I would like to see a blend of all of those that focuses research, finance and commercialization priorities on a set of alternatives that have a higher likelihood of success rather than the scatter gun research funding coming from government, universities and industry. It would be good if this could be driven by a national energy policy–LOL. This unfortunately picks winners and losers, but will result in better progress, in my opinion, than throwing billions on the wall to see what sticks.

6. Stop focusing on RD and start focusing on Commercialization.

7. Engaging stakeholders – other industries, government,etc. – cooperatives to solve problems (ie. new tech) simply can’t be done alone

8. First, we need to come to some standardized procedure to approve new projects. To construct a biogas operation, I could produce an ethanol plant quicker. Second, tax relief for RD. Third, better coordination between universities, business, and government to advance research. It seems that if you have five universities, they are all researching the same item, seeking a different output. Let us come up with a product that is fairly efficient and than begin research to improve, rather that attempt to develop the initial product. Fourth, provide additional information on new products.We currently have four or more organizations that promote ethanol, one or two for diesel, one or more for advance biofuels, etc. Do I really need to go to four different seminars on Ethanol to discover new procedures or better equipment?

Financial reform

A number of commentators cited “finance”, 7 in all. In some cases, general calls for increasing sophistication in industry or the boarder community, in other cases specific remedies such as expanding access to “master limited partnerships”.

1. Access to finance.

2. THE #1 PRIORITY – of which I am currently aware that is in need of changing – is the “lock” on capital financing sources that FOSSIL FUELS entities enjoy by their monopoly over “Master Limited Partnerships” which eliminate the “double taxation” so that innovators can be general partners in entities need large amounts of capital to build infrastructure for production and transport of competing [and even superior alternative] fuels.

3. The average person has no idea how capital intensive energy source creation and production and distribution for retail market uses can be.

4. improving industry wide financial sophistication

5. Enabling capital deployment on a global basis into technologies that have the ability substantially reduce emissions from the energy sector, namely fuels and chemicals.

6. If we are not able to scale 2nd and 3rd generation technologies in the next 5-10 years, we have no hope of stabilizing our atmosphere from runaway climate change related weather patterns.

7. Society needs solutions and we need a global initiative that accelerates funding into systems that can actually make a meaningful difference. There is a ton of money sitting on the sidelines waiting for a global investment opportunities in the clean teach sector, but with the volatility in governmental policies and crude oil prices, we are going to be paralyzed for years unless we can change the way this industry is funded.

Finding the customer

Two readers made comments that we joined under the heading “finding the customer,” which is to say focusing on building markets with the right stakeholders, whether it is finding customers affected by “externalities” not reflected in the fuel price (e.g. carbon regulation), or selling fuels to a coalition of the willing, including farmers.

1. the fuel must be competitive with incumbents on a per gallon basis. Fuel is a commodity. Need to find and sell to customers that face externalities in buying decisions.

2. Farmers should be producing their own fuel to ensure a supply of food for the country. Fuel for the military needs to be available in country. Biochar to improve agricultural lands is becoming increasingly important.

Delivering on promises

A number of readers referred to hype — the oversell, underdeliver problem that plagues new technologies. In some cases, specific ideas such as focusing attention on getting existing plants to run at full capacity — in other cases, dampening down hype of unproven tech.

1. People with plants need to get them running. Crescentino, POET, Abengoa, DuPont, etc…what can help them get their plants running consistently? What can be done to help everyone win?

2. The industry needs to demonstrate that their technologies are ready for prime time. Too much empty promises have led to immense disappointment both within the industry itself and the public.

3. The industry needs to establish its credibility that it is not simply hyping its technologies and that is the biggest challenge, hence the highest priority.

4. The industry needs to stop over-promising and under-whelming. I know, this has been said for the last 5-10 years, but it continues to be true. This seems to be heavily related to funding grabs…no one probably wants to fund where things are at, so we over-promise on technical metrics as well as time lines in order to attract interest. But this ends up looking badly for everyone in the biobased space…when even companies that are producing (maybe like Solazyme) are still overpromising, the falling valuations reverb throughout the industry.

Infrastructure

Three action comments came in focused on infrastructure, especially blend-wall busters, whether it is getting more gallonage out of E85 channels, or developing”ethanol optimized engines”.

1. I think a key technology approach that is missing is working with OEM engine manufacturing to develop new machinery for biofuels rather than trying to force biofuels into the existing energy infrastructure. Over-processing of renewable feedstocks could be a significant hindrance to their competitiveness vs. fossil sources. It may be a longer term approach that ultimately leads us back in time to wood burning stoves, etc

2. The most vital priority is education consumers of the safety (to vehicle engines/fuel systems), sustainability and energy security that biofuels provide in their country (wherever that may be). A key stumbling block in moving ethanol at higher blends has been educating consumers that 1). they have a flex-fuel vehicle and 2). E85 or other higher blends are cost effective to use and are better for the environment. Opponents have a much harder time arguing against the evidence of demand-side economics. Along with this, the ethanol industry must push delivery of higher blends to more fully permeate non-Midwest areas (read: East and West coasts) with these fuels and make them attractive on cost.

3. What needs to be done is for automakers to build ethanol optimized engines. They know how. They do it for Indy, Nascar. Look, its thermodynamics. The higher the compression ratio the greater the thermodynamic efficiency. QED. If 16-20 to 1 or higher ethanol optimized engines were offered, which could actually get as good mileage or better mileage than current gasoline engines (because of the higher octane, and the even higher effective octane in DI engines (because of evaporation effects), all of the other issues would MELT AWAY. Properly turbocharged engines could get close and have fuel flexibility. When you could get E85 for under $2 a gal and get better performance AND BETTER MILEAGE, the public would NOT shy away from the fuel – auto companies would of course be warranting these flex fueled cars. Look at Cummins and Ricardo efforts for starters, look at Scania for heavy vehicles, and look at the EPA National Engine lab results of the early 2000′s.

Take the follow-up survey here. Your input is important to setting the industry agenda for 2015.