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4 BIOMASS MAGAZINE 9|2009
FEATURES ..................... 26 FINANCE In Pursuit of Loot Securing project financing in the current economic environment is tough but there are positive signs that private investors are starting to open up their wallets. In the meantime, the federal government has several billions of dollars available for developers. By Anna Austin and Lisa Gibson
32 INNOVATION Mighty Microbe The Q Microbe is proving its prowess by achieving unprecedented ethanol output, according to Qteros, the company formed to commercialize the microbe. The microbe can produce 70 grams of ethanol per liter of fermentation broth, compared with the commercial threshold of 50 grams. By Lisa Gibson
38 POLICY Turning Tragedy Into Triumph Mountain pine beetles have destroyed millions of forested acres in Western North America. The dead and dying trees are fire hazards and could cause power outages. The biomass industry wants access to these trees in areas where there is none so they can be used for renewable energy By Anna Austin
42 EVENT Biomass’ Role in the Energy Future FINANCE | PAGE 26
The Biomass ’09: Power, Fuels, and Chemicals Workshop stressed the importance of biomass technology as one of a host of renewable energy options being deployed to reduce America’s dependence on fossil fuels. By Anna Austin and Lisa Gibson
06 Editor’s Note On the Biomass Path By Rona Johnson
07 Advertiser Index 08 CITIES Corner Too Many Exemptions Can Spoil the Bill By Tim Portz
09 Legal Perspectives
CONTRIBUTIONS ..................... 46 BUSINESS Securing Outside Financing for Biomass Power Projects Convincing lenders to invest in biomass projects requires a good business plan that addresses permitting, capital costs, power purchase agreements, fuel contracts, site selection, technology and management expertise. By Trotter Hunt
12 Industry Events 14 Business Briefs 16 Industry News 55 BPA Update Biomass is No Longer the ‘Unknown Renewable’ By Bob Cleaves
50 TECHNOLOGY Managing Technology Convergence and Protecting Innovation: IP for Cleantech Ventures—Biomass and Beyond Protecting biomass/cleantech intellectual property can take many forms. Wolf Greenfield suggests some general attributes that should be considered when assessing strategies. By Joseph Teja Jr. and Michael Pomianek
57 EERC Update Biomass ’09 Workshop Highlights the State of Biomass in the US By Chris Zygarlicke
9 |2009 BIOMASS MAGAZINE 5
NOTE On the Biomass Path
f you aren’t convinced that biomass is poised to play a big role in U.S. energy policy, you would have become a believer had you attended the Energy & Environmental Research Center’s Biomass ’09: Power, Fuels, and Chemicals Workshop. The conference was held July 14-15 at the Alerus Center in Grand Forks, N.D. One message that carried through the workshop is that there are many paths to achieving energy independence, and biomass is one of those paths, along with solar, wind, geothermal and hydrogen. The workshop provided attendees with the latest information on trends and opportunities in biomass utilization, biofuels, feedstocks and biomass for the production of heat and electricity. For more information about the event read the “Biomass’ Role in the Energy Future” feature that starts on page 42. Chris Zygarlicke, the EERC’s deputy associate director, also wrote about the workshop in the EERC Update on page 57. Funding, of course, could put biomass over the top in terms of its success. Biomass Magazine associate editors Anna Austin and Lisa Gibson wrote a feature about biomass funding opportunities. As you might imagine, they found because of the uncertainties in today’s economy, not many people were willing to talk about investing in any ventures, biomass or otherwise. Banks, although they’ve received a healthy dose of our tax dollars, don’t seem to be in a hurry to give any of that money back to us. And, while venture capitalists are starting to delve into the biomass-based projects, it’s difficult to see any trends there at the moment. That leaves us with government funding, of which there are several offerings, but anything that comes out of Washington takes time to administer. The funding picture might not be so clear now, but as the economy improves, project developers will get government funding and people will start looking for good, sound investments, and the biomass industry will take off. Some of these investors, as we’ve already seen in the ethanol industry, might be oil companies. I say this because of the recent announcement that General Motors Corp.’s Chevrolet Volt could get up to 230 miles per gallon (mpg). I can’t even imagine what my life would be like if I had a vehicle that got 230 mpg. We probably won’t see many of those vehicles in North Dakota because of our cold temperatures, but I’m sure it will be a hit in other areas of the country. At about $40,000 the price tag on these cars may seem out of reach, but the price will probably decrease in time just as it has for all of the other high-tech gadgets we’ve seen over the years. Now we need to make sure there will be enough biomass-based power to run those vehicles. Be sure to check out the new column that is debuting in this month’s magazine. On page 55 you’ll find the BPA Update, a column by Bob Cleaves, president and CEO of the Biomass Power Association. The BPA lobbies Congress to make sure that biomass is an integral part of America’s energy future. Cleaves will be keeping us apprised of the BPA’s activities on a monthly basis.
Rona Johnson Editor firstname.lastname@example.org
6 BIOMASS MAGAZINE 9|2009
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9 |2009 BIOMASS MAGAZINE 7
CITIES corner Too Many Exemptions Can Spoil the Bill
n the July 27 issue of Agweek magazine, an opinion column written by U.S. Rep. Collin Peterson, D-Minn., outlined the amendments he introduced into the American Clean Energy and Security Act of 2009 before it was passed by the U.S. House of Representatives. Peterson is pro-agriculture and his ability to get the amendments into the bill is an indication of his skills as a statesman. He successfully included an exemption for agriculture and forestry from any cap and trade regulations, while simultaneously allowing farmers to benefit by selling offsets generated on their farms. If these measures survive in the bill and eventually become law, Peterson will have positioned his constituents well as the country moves into a carbon economy. It’s not likely, however, that legislators from states where agriculture is not a priority will allow all of Peterson’s amendments to go forward without comment. Legislators would love to be able to position their own constituents in such a way, sidestepping the costly pieces of new policy, and fully maximizing opportunities for new revenue. How long, however, before the auto industry, the steel industry, the oil industry, and vitally important entities cry foul and site their own importance in the American economy as reasons for exemption or relaxed regulations? Ultimately, every industry or corporation, and finally all of us, are trying to understand how to move forward into a new energy and economic reality with as little disruption as possible.
8 BIOMASS MAGAZINE 9|2009
If we believe that greenhouse gases must be reduced and that placing a value or cost on carbon dioxide and other greenhouse gases is the best way to reduce emissions, then not everyone or every industry can be exempted. Something Tim Portz has to change. Less carbon business BBI must be emitted. New energy developer, International sources must be developed. All sectors must participate. As a Midwesterner and a professional in the ag energy space, I’m thrilled with Peterson’s amendments, but realistic about their chances of long-term survival. If I could choose only one of Peterson’s amendments to survive, it would be the one that excludes the much-debated international land-use change calculation in any life-cycle analysis required for biofuels. Peterson rightly attacks the notion that no industry can be accurately singled out as the contributing factor to global deforestation. No matter how the bill shakes out, it presents real opportunity for the ag and energy sectors. What seems to be up in the air are the nature and amount of heartache that come along with that opportunity. Tim Portz is a business developer with BBI International’s Community Initiative to Improve Energy Sustainability. Reach him at tportz@ bbiinternational.com or (651) 398-9154.
Project Development: Back-to-the-Basics By John Eustermann
ith the anticipated infusion of debt and equity into biomass project development, keeping a few things in mind while developing projects may lead to shovel-ready status. This can remind us of a few things we may have forgotten in the shadow of the stimulus package and its required rulemaking. Thus, here are a few back-to-the-basics points worthy of consideration: Negotiate letters of intent (LOIs) seriously: Project developers would be wise to ensure that LOIs address key deal points and business terms. Whether negotiating an LOI with respect to the lease arrangements for a co-location structure, the terms and conditions of a feedstock/ fuel supply agreement or an operations and maintenance agreement, the developer should ensure the parties’ expectations match and are reflected in the LOI. Further, the parties should set forth in the LOI terms and conditions they consider enforceable (i.e. nondisclosure, transaction cost allocation, governing law) and provisions that they consider nonenforceable and still subject to negotiations and change. Although many argue that LOIs are not enforceable, the courts have held otherwise in many instances. A good policy is to anticipate that the
John Eustermann partner, Stoel Rives LLP
counter party may seek to enforce all the LOI provisions and communicate and negotiate accordingly. Time spent ensuring the parties are of like mind will result in efficiencies in the drafting of definitive documents. Communicate with utilities: One issue cited as a frustration for energy project developers is attaining appropriate power purchase agreements (PPAs). Although biomass projects can be attractive to utilities, the utility needs to address other risks inherent in such facilities. Whether participating in a request for proposals or directly negotiating outside of a procurement process, the parties need to address risks, including feedstock/fuel, electricity pricing and curtailment risks. Although many risks can be addressed in the contractual terms and conditions, the process can take longer than that of other material project documents. As such, a wise project developer will engage the utility early in the process. Planning appropriately and allowing the time needed to finalize the PPA will minimize spillover effects on other project agreements and relationships. Run multiple financial modeling scenarios: To finance projects in today’s environment, developers should create two financial models: one that doesn’t
account for any stimulus money; and another that considers stimulus funds and other capital and revenue streams. With the first model, the developer should fight the urge to include financing from the Recovery Act, save for maybe specific treatment of the grants in lieu of tax credits. This includes revenue calculations that seek to monetize renewable energy credits (RECs) as well (though consideration must be given to the treatment and allocation of the credits when dealing with the project’s off-taker both with regard to the REC and greenhouse gas markets). Such figures will be stripped out by prospective financiers and the numbers re-worked depending on their applicable credit parameters. Preparing for this allows the developer to examine the realities of project metrics accordingly. As for the model that includes incentives and the like, knowing what possible incentives apply and incorporating them into a project’s economics is important for any sensitivity analysis. Further, as such incentives become available they presumably will only improve the project’s viability. John Eustermann is a partner with Stoel Rives LLP. Reach him at jmeustermann@ stoel.com or (208) 387-4218.
9 |2009 BIOMASS MAGAZINE 9
Participants, Sponsors, and Exhibitors for Your Tremendous Support!
July 14–15, 2009, at the Alerus Center
Energy & Environmental Research Center ®
University of North Dakota
OFFICE OF RENEWABLE ENERGY & ENERGY EFFICIENCY
Organized and Sponsored by the EERC
industry events Nordic Wood Biorefinery Conference
September 2-4, 2009
Biopackaging from Feedstock to Waste Stream Conference
Finlandia Hall Helsinki, Finland Industry experts, specialists and leading researchers from multiple disciplines will show how wood biorefineries can shape the next generation of value-added forest products. This year’s conference will offer attendees a unique look at the rewards of wood-based biorefineries from the forest to marketed products and explore how biorefinery processes can transform biomaterials into high-value products that expand and transcend traditional forest products portfolios. +358 (0)20 7477 100 www.kcl.fi/page.php?page_id=499
September 8-10, 2009
Algae Biofuel Summit 2009
Crude Oil to Biofuels-Trends Impacting Global Fuels
September 8-10, 2009
September 9-10, 2009
Symposia Hall New Delhi, India Up-to-date financial and technical information on next-generation feedstocks and technologies in the algae-based biofuel industries will be provided at this summit. Attendees will learn about recent research and development activities such as mass production systems, photobioreactor technologies and other important areas. +91 11 65803335 www.algaebiofuelsummit.com/algaebiofuelsummit2008
Hotel Sofitel Rio de Janeiro This conference will showcase the energy bounty of Brazil and allow attendees to network with people in the industry. Session topics will include a global renewable and biodiesel policy market outlook, the future of biodiesel in Latin America, biofuels sustainability, fuels market outlook and new technology developments. (703) 891-4804 www.hartenergyconferences.com/index.php?area=details&confID=124
Gasification Short Course
Biofuel Supply Chain Summit 2009
September 9-10, 2009
September 15-17, 2009
Energy & Environmental Research Center Grand Forks, N.D. Six experienced instructors will provide technical insight on a broad range of gasification technologies and issues during this short course, which will cover the diverse nature of gasification processes, depending on the feedstocks, products produced and environmental goals. An overview of the gasification process and potential products, including electric power, hydrogen, liquid fuels, gaseous fuels, chemicals and other materials will also be covered. (701) 777-5246 www.undeerc.org/GasificationSC/agenda.aspx
International Convention Center Ghent Ghent, Belgium This summit will unite key people who will debate and address all major issues within the biofuels industry. Leading authorities from Europe and Brazil will showcase their experiences. Discussions will cover the latest EU policies, legislation and economic effects and discover the current developments and future initiatives for the transportation and logistics of biofuels. +44 (0)20 7753 4268 www.vibenergy-events.com/biofuels/programme.htm
2009 International Conference on Thermochemical Biomass Conversion Science
Biomass Boiler Workshop
September 16-18, 2009
Holiday Inn Portland Airport Portland, Oregon New technological developments to improve the operating performance, waste fuel burning capacity, efficiency and fuel economy of biomass-fired boilers will be the focus of this workshop. The program will include troubleshooting and problem solving of challenges the attendees bring to the workshop. Attendees will learn about the current retrofit technology for biomass boilers and associated equipment, see how other mill operations solve their biomass boiler area problems, and receive information and solutions to their mill specific problems. (425) 952-2843 www.jansenboiler.com/workshops.html
Sheraton Chicago Hotel & Towers Chicago Attendees will hear from the world’s leading researchers in gasification, pyrolysis, and pyrolysis oil upgrading. Conference activities include a site visit to Gas Technology Institute’s laboratories and facilities and a tour of GTI’s Henry R. Linden Flex-Fuel Test Facility, which evaluates innovative gasification processes and helps to commercialize advanced gasification and downstream end-use technologies. (847) 768-0940 www.gastechnology.org/tcbiomass2009
12 BIOMASS MAGAZINE 9|2009
Copthorne Tara Hotel London This event will focus on waste management, addressing issues relating to landfill, end-users, legislation and European directives. Experts will discuss adopting waste strategies that satisfy all links in the supply chain and comply with established regulations. The event will cover the latest technology developments and uses for bioplastics in packaging and as a sustainability tool from the perspective of developers and trade organizations. +44 (0) 1372 802164 www.biopackconference.com/
September 17-18, 2009
industry events BTLtec: Biomass to Liquids
World Congress on Oils and Fats
September 24-25, 2009
September 27-30, 2009
Hotel Novapark Graz Graz, Austria The fourth annual BTLtec will feature a world-class panel of experts to share the latest on biomass-to-liquids technology developments, project updates, government policies and feedstock issues, and will explore the latest thermochemical pathways for converting waste streams to liquids. Attendees will be able to network with biofuel project operators and developers, biorefinery executives, gasification technology developers, biodiesel executives and feedstock developers from around the world. +65 63469145 www.cmtevents.com/aboutevent.aspx?ev=090939&
Sydney Convention And Exhibition Centre Sydney, Australia This conference will feature themes related to health and nutrition, processing, lipid chemistry, olive oil, aquaculture, lipid bioscience and genomics, oleochemicals, antioxidants, biodiesel and lipids in animal science. The event will provide a forum for attendees to network and exchange ideas with colleagues and friends from around the world. Session topics include global fats and oils outlook, biotechnology and recent biodiesel developments, trends and conflicts. + 61 2 9518 7722 www.isfsydney2009.com
Next Generation Biofuels Markets
4th Annual Biopolymers Symposium
September 28-30, 2009
September 28-Oct. 1, 2009
NH Grand Hotel Krasnapolsky Amsterdam, The Netherlands This event will address the latest developments in creating cost competitive, industrial-scale production of next-generation biofuels technologies. Topics include commercial strategies and business models, advances in cellulosic ethanol and biobutanol, emerging feedstocks, drop-in fuels, advancements in conversion technologies and algae fuels. +44 (0)207 099 0600 www2.greenpowerconferences.co.uk/v8-12/Prospectus/ Index.php?sEventCode=BF0909NL
Embassy Suites Downtown Chicago This symposium will encapsulate the life cycle of biopolymers in industrial and packaging applications. Attendees will get real-life case studies and presentations from industry leaders. The conference will provide attendees tools to evaluate how to capitalize on the future market in biopolymers and make it work for their business. New technologies, market trends, developments in applications, new guidelines and waste strategies will be presented. (207) 781-9636 www.biopolymersummit.com/
Pellets Industry Forum
Algae Biomass Summit
October 6-7, 2009
October 7-9, 2009
New Trade Fair Center Stuttgart, Germany International manufacturers, wholesalers, suppliers, planners, investors and public decision-makers will have an opportunity to exchange experiences at this event. The forum will address innovative international pellet market developments and sales concepts, industrial research and development, international pellet fuel logistics, natural resources availability, and quality management. +49 (0)7231 / 58 59 8-0 www.pelletsforum.de
Marriott San Diego Hotel & Marina San Diego The third annual event is expected to draw 1,000 global leaders, scientists, innovators and policymakers. Industry leaders and attendees will discuss issues of critical importance to the emerging algae industry, including the commercial viability of algae production, current government and private initiatives, evolving technologies, processing concepts, life-cycle analysis, and venture and project finance. (206) 625-0075 www.algalbiomass.org/events/2009ABS
Bioenergy Engineering â€™09
Biomass & WtE: Waste to Energy
October 11-14, 2009
October 28-29, 2009
Hyatt Regency Bellevue, Washington This event is designed to provide professional education for all aspects of engineering in the biofuels and bioenergy systems from genetics through production, distribution and use. The agenda offers a forum for the exchange of ideas and knowledge. Topics include advances in bioenergy engineering research and technology development, engineering in biorefinery design, the future of biofuel production and engineering a new bioenergy industry. (972) 355-5128 www.bioenergyengineering2009.com
Sofitel Shanghai Jin Jiang Oriental Pudong Shanghai Attendees will have the opportunity to network with biomass, biodiesel, ethanol and cellulosic ethanol producers, local, municipal and provincial government representatives, enzymes and catalyst providers, and other industry experts. The conference will focus on emerging technologies, upcoming projects around the world and feedstock issues. Program highlights will include power generation from agricultural biomass, energy recovery from municipal solid waste and biotechnologies converting biomass to fuels and chemicals. +65 63469145 www.cmtevents.com/aboutevent.aspx?ev=091035&
9|2009 BIOMASS MAGAZINE 13
BRIEFS Virent earns Presidential Green Chemistry Challenge Award Virent Energy Systems Inc. has earned the U.S. EPA’s Presidential Green Chemistry Challenge Award. Virent’s BioForming process, a technology that economically transforms plant sugars into green gasoline, is the first to be honored in the award’s 14year history for the clean manufacturing of liquid transportation fuels from biomass. The Presidential Green Chemistry Challenge Awards, selected by an independent panel of technical experts convened by the American Chemical Society, provide national recognition for outstanding chemical technologies that incorporate the principles of green chemistry across the product life cycle, including the design, manufacture and use of chemical products. Winners demonstrate a commitment to designing, developing and implementing green chemical technologies that are scientifically innovative, economically feasible and less hazardous to human health and the environment. BIO
BioEnergy International forms Myriant Technologies BioEnergy International LLC recently formed Myriant Technologies LLC to further develop the company’s biobased chemicals business. Myriant is headquartered in Quincy, Mass., and has a fully integrated 18,000 square-foot lab in nearby Woburn. The two will operate separately, serving different markets and customers. Myriant will encompass the same team of molecular biologists, engineers and chemists that developed BioEnergy’s D (-) lactic acid, which is used in polylactic acid. The company began producing the acid on a commercial scale in June 2008. BioEnergy will continue its biofuels endeavors, including its 110 MMgy ethanol plant in Clearfield, Pa., slated for operation in January. BIO
Bio-industry veteran Ryan joins Gevo Gevo Inc. has hired Chris Ryan as vice president of business development–downstream. In this role, he will be responsible for business development in converting isobutanol into chemicals, jet fuel, gasoline, diesel and fuel blendstocks. Ryan comes to Gevo with more than 15 years of strategic leadership, business development, research and product development in biobased materials. Most recently, he served as chief operating officer and chief technology officer for NatureWorks LLC. As a founding member of NatureWorks, Ryan was Ryan involved in the development and commercialization of the company’s new biobased polymer from lab-scale production through the introduction and growth of polylactic acid through its $300 million world-scale production facility. BIO 14 BIOMASS MAGAZINE 9|2009
Nexterra CEO named BCTIA Person of the Year Nexterra Energy Corp. President and CEO Jonathan Rhone has been named Person of the Year by the British Columbia Technology Industry Association for his demonstrated vision and executive leadership in British Columbia’s technology sector. The award is presented annually by the BCTIA to an individual who has made an Rhone outstanding contribution to the technology industry during the past year. Criteria for this award include leadership and vision, reputation, and a demonstration of exemplary skills, mentorship and career success. The awards were handed out at the Technology Impact Gala held on June 17, and attended by more than 700 representatives from British Columbia’s technology and business community. Nexterra was also nominated as Emerging Company of the Year. BIO
Terasol Energy appoints Ubrig as CEO Terasol Energy Inc.’s board of directors has appointed Henrique Ubrig to the position of CEO. Ubrig is a Brazilian citizen with extensive experience in industrial chemical production, largescale agribusiness and seed development. He has spent 27 years at DuPont in various roles including as the president of DuPont South America. Sundeep Bhan, who co-founded the company and has served as chairman and CEO since 2007, will continue to serve as chairman. Bhan will continue to support the company’s fundraising efforts, strategic partnership development and corporate governance. BIO
Chemrec named one of top 24 high-growth cleantech firms in Europe Chemrec, a biomass-to-energy company, was named among Europe’s most innovative and promising technology companies at the European Tech Tour Cleantech Summit. The company’s U.S. subsidiary, Chemrec USA, based in Deerfield, Ill., is developing biomass biorefinery opportunities in North America. The European Tech Tour organizes conferences to bring together growth companies such as Chemrec and key European, U.S. and Asian investors and professionals who can assist in their global expansion. Chemrec was one of 24 firms from a pool of 300 applicants invited to present its technology to a delegation of cleantech investors and professionals from across Europe at the June 17-18 event in Geneva, Switzerland. Chemrec was chosen because of the maturity of its technology, attractive niche focus, flexible bioproducts output and seasoned management team. BIO
BRIEFS Frontline BioEnergy announces new investment, management team Frontline BioEnergy announced the completion of a Series A equity transaction with founding partner, Chippewa Valley Ethanol Co. LLLP. The undisclosed equity investment increases CVEC’s ownership and governance position in the biomass technology firm and further validates the ethanol cooperative’s confidence in the potential of Frontline’s technology. In a parallel move, CVEC General Manager William Lee accepted the post of Frontline BioEnergy CEO. As a co-founder and board member of Frontline BioEnergy, he brings to the new role a deep understanding of the company’s technology and its applications. In another management change, Thomas Paskach was promoted to manager of business development. He will provide leadership to the company’s sales and marketing efforts and will work with Lee and founders, John Reardon and Jerod Smeenk, to shape Frontline BioEnergy’s s strategic direction. BIO
Tierney joins Ze-gen’s board of directors Ze-gen Inc., a clean energy company developing advanced gasification technology to convert waste streams into synthesis gas, added Susan Tierney, an expert on energy policy, regulation and economics, to its board of directors. Tierney, a managing principal at Analysis Group in Boston, has consulted for companies, governments, nonprofits, and other organizations on energy markets, economic and environmental regulation and strategy, and energy facility projects. Her areas of expertise include gas and electric markets and regulatory policy, resource planning and analysis (including energy efficiency and renewable energy), regional transmission organizations, the siting of generation, transmission and natural gas pipeline projects, and environmental policy and regulation. The former assistant secretary for policy at the U.S. DOE, Tierney also served as the secretary for environmental affairs in Massachusetts, commissioner at the Massachusetts Department of Public Utilities, and executive director of the Massachusetts Energy Facilities Siting Council. Recently, she co-led the Obama/Biden Transition’s Department of Energy Agency Review Team. BIO
EnerTech commissions renewable energy facility EnerTech Environmental announced the ceremonial commissioning of its first-ever biosolids-to-renewable energy facility. Designed to process more than 270,000 wet tons of biosolids per year, the Rialto SlurryCarb Facility will annually generate more than 60,000 tons of renewable fuel, called E-Fuel, for the Southern California area. E-Fuel produced by the facility is already being used by southern California cement kilns to offset their coal use and will reduce annual local greenhouse gas emissions by more than 80,000 tons. BIO
Xebec, QuestAir merger complete Xebec Adsorption Inc., the company formed by the merger of QuestAir Technologies Inc. and Xebec Adsorption Inc., announced that the previously approved statutory plan of arrangement involving QuestAir and Xebec has been completed. Xebec, the merged company, will immediately leverage the available synergies in gas purification, global distribution and manufacturing to expand its market share in clean energies, such as hydrogen purification, biogas upgrading and natural gas dehydration. BIO
Stoel Rives expands its energy capabilities in California Stoel Rives LLP, a full-service law firm, announced that energy attorneys Morten Lund and David Quinby have joined the firm’s San Diego office as members of the energy and telecommunications group. The San Diego office has relocated to a larger space at 12265 El Camino Real, Suite 303, to accommodate further expansion. Lund, formerly a partner with Foley & Lardner LLP in Milwaukee, has experience in a variety of financing transactions, with particular focus on the development and financing of wind and solar energy projects. Quinby is the office managing partner of the firm’s Minneapolis office, and will now split his practice between San Diego and Minneapolis. He concentrates his practice on corporate, securities, finance, and merger and acquisition matters, with a particular focus on renewable energy clients and their project development efforts. He is admitted to practice law in the state of Minnesota and is pending bar admission to the state of California. BIO
Schmack Biogas honored with EUBIA Industry Award The 7th EUBIA Industry Award was presented to Schmack Biogas AG for its “outstanding contribution to the development of the biomass energy sector.” The prize was awarded June 29 by EUBIA President Tord Fjallstrom to Schmack Biogas spokesman M. Michael Wittmann during the 17th European Biomass Conference and Exhibition. Schmack Biogas was chosen because of its pioneering activity in biogas development in Germany and Europe, and for its commitment to modern and industrial-scale production of biogas. Schmack built its first biomethane plant in Pliening, Germany, and the company went on to build one of the largest plants in Europe at its headquarters in Schwandorf. Currently, three bio-methane plants built by Schmack are in operation and four plants are under construction. BIO 9|2009 BIOMASS MAGAZINE 15
PHOTO: MGT POWER
MGT Power plans to build a 295-megawatt power plant in England, which is shown here in an artist’s rendering. The plant is expected to be on line in late 2012.
World’s largest renewable energy plant to be built in England A 295-megawatt biomass electricity plant—the largest in the world—is expected to be operational and capable of providing energy for 600,000 households near Teesport, England, in late 2012, according to MGT Power, the British company developing it. The Tees Renewable Energy Plant (Tees REP) will run on 2.65 million tons of wood chips per year shipped in from sustainable and certified forestry operations mostly in Europe and America, including the Southeast U.S., according to MGT, which recently received consent from the British government to proceed with development of the facility. No supply contracts are in place yet, but discussions are ongoing. “They’re talking to potential suppliers,” said Paul Taylor, communications representative for MGT. “There’s been a lot of interest.” The company also is developing short-rotation forestry operations, which will be planted on unused 16 BIOMASS MAGAZINE 9|2009
marginal land in the U.K. and globally, to provide Tees REP with its required supply of biomass. Teesport is an ideal location because of its deep-water port and sufficient land available for the enormous facility, among other factors, Taylor said. “There are a lot of good points,” he said. The $819 million plant will create 600 jobs during its three-year construction period, 150 permanent jobs during the station’s lifetime and once operational, will contribute about $49 million to Northeast England’s economy, according to the company. In addition, it will save 1.2 million metric tons of carbon dioxide per year and will account for 5.5 percent of the U.K.’s renewable electricity target. The plant will operate 24 hours a day, year round, producing the same amount of renewable electricity in one year as a 1,000-megawatt wind farm, according to
MGT. Construction should begin late this year or early next year, Taylor said. Financing options are being considered and still have to be put in place, he said. “It’s very much a commercial financial investment,” he said, adding that the company expects financial institutions will want to get involved. Contracts for engineering, construction and other factors also are in the works. MGT was established in 2007 and while this will be its first plant, it has plans to develop more. “They’re certainly looking at other schemes in the U.K.,” Taylor said. “Although it is a relatively new company, the guys have a lot of experience.” MGT announced Aug. 10 that it plans to build another 295-megawatt plant at the Port of Tyne. This plant will also be large enough to power about 600,000 homes and should be operational in 2014, according to MGT. —Lisa Gibson
Finite Carbon helps landowners, forestry consultants enter carbon offset market Finite Carbon could be the solution for landowners and forest consultants who are unsure how to enter the carbon offset market. The company was established in February and offers a single-source, end-to-end solution with in-house expertise that costs the landowners no out-of-pocket expenses and will earn them extra revenue. The company pays the capital for each project, collecting only a percentage of the carbon offsets once completed. That percentage is based on several factors, but it comes down to what makes sense and fits the needs of the landowner, according to President and co-founder Scott Nissenbaum. Finite Carbon performs all the steps in the process including completing a forest carbon inventory; selecting the appropriate registry/protocol; translating inventory into a carbon model and management plan; preparing and submitting a project plan to the chosen carbon registry; hiring a third-party verifier once the plan is accepted and registered; submitting a project verification to register and receiving allocation of carbon offsets; and marketing and selling carbon offsets in the Finite Carbon proprietary network or engaging top brokers to broaden the sales process, according to the company. Buyers can be major corporations and utilities, hedge funds and investment banks, Nissenbaum said. The company was founded and is led by forestry and finance experts with unique forest carbon project experience and knowl-
edge of forest markets. Nissenbaum, a venture capitalist, was chairman of the board of directors for ImageTree Corp., a forestry industry technology solutions company based in West Virginia, for three years and also has finance experience. Carbon Finance Vice President Sean Carney worked with Carbonfund.org developing and managing carbon-neutral programs for well-known companies such as Volkswagen and Dell. Also on the team are Matt Delaney, senior forester with 10 years of forest carbon measuring and monitoring experience; Sterling Griffin, vice president of project development and a registered professional forester in California with 10 years of experience in private and public forest management; and Robert Verratti, CEO and co-founder, also a venture capitalist who has served as the CEO of several other companies. Finite Carbon expects to be working with landowners who have 5,000 acres or more, according to the company. Anything less than 1,000 acres is not a cost-effective project for the company. The process, from inventory to selling of carbon offsets, can take up to six months. That can vary, however, due to several factors including weather, which could keep the team from going into the forests and gathering measurements, Nissenbaum explained. He expects a majority of the projects in which Finite Carbon invests will be approved and registered. “We’re intimately familiar with protocols and what will or will not qualify,” he said. To his knowledge, he
added, Finite Carbon is the only company that offers such a service, with the extent of knowledge and experience the team possesses. The typical contracts with landowners will run from one to 10 years, he said. After that time, landowners and their staff should be educated enough in the process to be able to monitor their own forestland. Finite Carbon will continue to develop contracts with landowners who still want its services, Nissenbaum added. “But for the most part somewhere in the one to 10 years, the landowner takes over and keeps 100 percent of the carbon offsets for themselves.” The projects are in large part a partnership with the landowners and their forestry consultants, he said. “We’re strong believers in aligning incentives.” The capital for each project will vary greatly and depends on factors such as size and location, but typically will be six figures, Nissenbaum said, with some running upward of $1 million. “So far, the landowner response has been great,” he said. “It’s adding revenue with no added cost. We feel like it’s a very compelling value proposition for the landowner.” If climate change isn’t enough of an incentive for them to participate, it comes down to economics, he added. “From Finite’s perspective, our ultimate goal is to create and manage the largest stream of forest carbon offsets in the U.S.,” Nissenbaum said. —Lisa Gibson
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NEWS Cyclone Power Technologies Inc. has completed the first stage of a project with Robotic Technology Inc. to develop a beta biomass engine to power its Energetically Autonomous Tactical Robot (EATR), a vehicle that will be capable of self-obtaining and ingesting biomass to produce energy to power itself. The $850,000 project is a Small Business Innovation Research effort funded by the Defense Advanced Research Projects Agency, a U.S. Department of Defense research organization. The partnership with Cyclone was announced at the end of January 2009, and is to consist of two stages. In the first stage, Cyclone successfully coupled its proprietary steam generator with a compact biomass furnace to be used with the prototype EATR, and produced sufficient steam to power Cyclone’s six-cylinder, 16 horsepower Waste Heat Engine, according to the company. The Cyclone engine is capable of running on any fuel, or combination of fuels, including biodiesel and synthesis gas. It was recognized by Popular Science Magazine as the invention of the year for 2008. During the second stage, Cyclone will work to attach the Waste Heat Engine to the heat source and commence system performance testing with the goal of delivering a complete beta system to Robotic Technology within 90 days. The completed EATR will contain an autonomous intelligent control system with sensors allowing the vehicle to find and rec-
PHOTO: ROBOTIC TECHNOLOGY INC.
Cyclone, Robotic Technology EATR project progresses
RTI’s EATR is designed to generate its own power by obtaining and digesting biomass.
ognize energy sources, manipulate the material with robotic arms, which are equipped with a gripper and a shredder, and divert the biomass into the combustion chamber. To read more about the EATR project, go to www. biomassmagazine.com/article.jsp?article_id=2377&q=robot. —Anna Austin
Mantria opens biochar plant in Tennessee Mantria Industries LLC has officially opened an industrial-scale biochar production facility in Dunlap, Tenn., after weeks of testing and a smooth first burning.” The company has worked the past eight months to develop biorefineries that transform biomass waste into biochar through a pressurized partially pyrolytic gasification system. A standard process system consists of two 3.5-ton autoclave (reactor) units, which are pressurized and sealed once the biomass is loaded into canisters and placed inside. Electric heaters are turned on to ignite the feedstock then turned off, and the autoclave temperature is controlled by a dual-draft process. Under elevated pressure and heat, the feedstock will begin to carbonize at specific temperatures, ranging from 400 to 800 degrees Celsius (750 to 1,470 degrees Fahrenheit). During carbonization, gases from the process are pumped
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through catalysts, broken down into simpler compounds and sent through filters to be scrubbed. When the 25- to-40-minute process is complete, the biochar is set in a cooling pool for 24 hours. The EternaGreen Center will produce approximately 32,000 tons of biochar per year, or 8,000 pounds per hour, mainly from forest waste, slash and residuals. The company believes the new plant is the largest biochar production facility in the world. Mantria also recently opened a Biochar distribution facility in Fulton County, Georgia. A feature article on the benefits of biochar will appear in the October issue of Biomass Magazine, which will include Mantria’s biochar activities. —Anna Austin
NEWS USDA releases report on use of manure for energy Manure can be used to produce energy commercially and on farms without competing with the supply needed for fertilizer, but the economics might not be beneficial to all farmers, according to a report the USDA produced for Congress titled “Manure Use for Fertilizer and for Energy.” Interest in manure-to-energy systems is growing, but implementation is scarce in the U.S. Anaerobic digestion and combustion are the most common processes used to obtain carbon dioxide and methane for electricity generation, the report says. Most digesters are on dairy and hog farms. Combustion can be beneficial to fuel large power plants with poultry litter and fed cattle manure, which have higher energy and lower moisture content. Only one combustion plant operates in the U.S., using turkey litter, and digestion systems cover less than 3 percent of dairy cows and less than 1 percent of hogs, according to the report. Using manure for energy won’t impose substantial constraints on manure for fertilizer supplies, the report says, because the technologies do not consume the nutrients that are beneficial for plant growth. In anaerobic digestion, the nitrogen, phosphorus and potassium remain in the effluent to be spread on fields. Digestion also eliminates odors and nearly eliminates pathogens, according to the report. Combustion plants burn nitrogen nutrients, but leave the phosphorous and potassium in concentrated form in the ash residues. In addition, manure-to-energy projects function in markets for fertilizer and energy and will be most economical in those areas where acquisition costs of manure are lowest, the report says. In turn, manure costs will be lowest where manure is in excess supply, with the least value as fertilizer, the report said. Adopting digestion is costly, however, and while farmers can produce their own electricity, few can realize enough savings to justify the expense, the report said. Costs include capital, operation and maintenance, adapting existing manure handling and storage to biogas systems and the farmer’s time spent learning about and main-
taining the system, according to the report. Benefits are numerous, however, and include avoided costs of electricity if the biogas is used on-site for generation; avoided propane, fuel oil or natural gas purchases if heat is recovered; revenue from the sale of excess electricity to the local utility or from the sale of methane gas; avoided costs of commercial fertilizer and herbicides; avoided costs of bedding made from digested solids; and revenues from the sale of carbon credits. Farm size and location should be taken into consideration, as expenses can vary widely. Social benefits of on-farm anaerobic digestion include methane capture and the replacement of fossil fuels. Those benefits have led to proposals that support the use of manure for energy projects through state utility mandates, subsidies for capital costs and direct subsidies and credits for energy production, the report says. By the summer of 2008, 91 commercial dairy farms were using digesters in the U.S. and another 64 had projects in the construction, design or planning phase, the report said. In addition, the EPA reported that 17 hog farms had operating digesters by that same time period, using the manure supply from 355,000 hogs. Large dairy and hog farms are more likely to adopt digesters, but it’s not widespread, the report said. Commercial combustion plants are still in their infancy in the nation, the report stated, with only one large plant in Benson, Minn., using turkey litter to produce 55 megawatts of electricity, sold to Xcel Energy. Another plant is proposed in Bozrah, Conn., and one is under construction in Hereford, Texas. The potential for generating methane is greatest when manure is collected and stored as a liquid, slurry or semi-solid, the report said, adding that biogas potential is greatest at large dairy and swine operations because they use liquid or slurry manure. Public support will play an important role in the widespread use of manure-to-energy systems, the report concluded. —Lisa Gibson
EU approves BP, DuPont biobutanol venture The European Commission approved a proposal to create a biobutanol production technology joint venture between BP plc. subsidiary BP Biofuels and U.S. chemical manufacturer DuPont, resulting in the takeover of U.S.-based Biobutanol LLC. Under the EU Merger Regulation, mergers or concentrations with a community dimension are subject to exclusive examination by the commission, which found that the BP Biofuels/DuPont transaction would not give rise to horizontal overlaps between the activities of the parent companies, as they are currently not active in the licensing of any production technologies for biobutanol or the supply of biobutanol. The commission also ruled out any competition concerns due to vertical relationships, given BP’s limited position on the downstream
markets of gasoline supply, both at EU and national levels. The joint venture will serve to develop and commercialize technologies for biobutanol production, operations mainly occurring within the U.S. BP and DuPont initially announced plans to develop biobutanol technologies in 2006. BP Biofuels also has a jointly owned, commercial cellulosic ethanol project in Highlands County, Florida, with cellulosic ethanol and enzyme developer Verenium Corp. The 36 MMgy facility will use sorghum and energy cane as feedstock. —Anna Austin
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NEWS Torrefaction technology development company Agri-Tech Producers LLC has selected South Carolina-based Kusters Zima Corp. as its engineering/manufacturing partner to produce its torrefaction equipment. Agri-Tech is utilizing a technology developed at North Carolina State University in Raleigh, which the company obtained an exclusive license for in February. During the process, woody biomass is heated to 300 to 400 degrees Celsius (572 to 752 degrees Fahrenheit), in a low-oxygen environment. The volatile organic compounds and hemicellulose, which are separated from the cellulose and lignin along with water, are combusted to generate 80 percent of the torrefaction process heat. The remaining warm lignin acts as a binder once the torrefied wood is pelletized. The resulting fuel is dense, dry, water resistant and carbon neutral. It also has a low sulfur and mercury content, can be easily crushed and does not rot. Kusters Zima was created in the early 1970s to manufacture textile equipment, and has a production facility in Spartanburg, S.C. The company will manufacture torrefaction machines specific to ATP customer’s needs. Agri-Tech CEO Joseph James said the company is now nine to 12 months away from commercialization. In addition to selling equipment to customers, Agri-Tech plans to deploy the equipment in projects of its own and in certain joint ventures.
Agri-Tech selects torrefaction equipment manufacturer
Pictured, left to right, are Gunter Noll, Kusters Zima executive vice president; James, Agri-Tech president; and U. S. Rep. Bob Inglis , R-S.C.
Agri-Tech is also working on creating mobile torrefaction units with NCSU. A feature on the company’s effort to commercialize its torrefaction process is in the February issue of Biomass Magazine, and can be found at www.biomassmagazine.com/article.jsp?article_ id=2407&q=&page=1. —Anna Austin
Plankton Power unveils algae-based biodiesel plans Algae-based biofuel developer Plankton Power and the Regional Technology Development Corp. of Cape Cod, Mass., announced a collaboration to construct a pilot-scale algae-based biodiesel production facility in Bourne, Mass. Together with the Massachusetts National Guard, Woods Hole Oceanographic Institution, Marine Biological Laboratory and Cape Cod Commission, the groups recently submitted a $20 million project proposal to the U.S. DOE that would leverage $4 million in private funding to construct the facility. Curtis Felix, CEO of Plankton Power, told Biomass Magazine the company will provide its own algae growth technology, which is based on cold saltwater algae species grown in closed ponds, and will have substantial ongoing support from the Woods Hole Oceanographic Institution and the Marine Biological Laboratory in Woods Hole. The Cape Cod Algae Biorefinery will be located on five acres on the Massachusetts Military Reservation in Bourne. Felix said the
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location is ideal for the project, because of its on-site wastewater treatment plant, which will provide an excellent source of nutrients for the algae, and Massachusetts Military Reservation’s close proximity to the Cape Cod Canal, which would provide a convenient source of seawater and a renewable thermal energy source for algal growth and temperature control. Plankton Power hopes to generate approximately 1 MMgy of biodiesel when the pilot facility is up and running, which may be enough fuel to meet Cape Cod’s current biodiesel needs. A project timeline has been tentatively set, according to Felix. “We are targeting construction for the summer of 2010, but that is subject to a National Environmental Policy Review and some other legal and regulatory approvals, which could accelerate or delay our expected timetable,” he said. —Anna Austin
NEWS Fiberight to construct waste-to-energy mini mills Virginia-based waste fiber-to-fuel company Fiberight has worked quietly for the past three years, but may soon make a splash in the biofuel industry. The company has been developing technology that sorts and transforms municipal solid waste (MSW) into cellulosic fibers, which are extracted into biofuel through an energy recovery system. The process chemicals and enzymes used for conversion of cellulosic fibers are recycled, and the transformational system divides organic and inorganic wastes and converts them according to type. “We have a team that comes largely from the waste management recycling industries and biofuel engineering industries, and we’ve really taken the approach that we believe there is an existing infrastructure in waste management,” said Fiberight CEO Craig Stuart-Paul. “In other words, a collection infrastructure we can intercept.” “Fundamentally, there is more energy in the waste stream than there is in lignocellulosic streams that is easier, if you get things right, to extract,” Stuart-Paul said. “We take a series of waste streams of industrial scrap through commercial dry waste—such as office building waste and MSW—and we separate and sequester the organic and inorganic fractions. Then in all of the inorganic fractions, we separate the hydrocarbons and the recyclables and the stuff we send off to landfills. The organic fractions we convert to cellulosic ethanol.” Last year, Fiberight leased a closed corn ethanol plant in Iowa and ran the organic fraction all the way to finished fuel, Stuart-Paul said. “We have filed for permits and a [U.S.] DOE grant, and will be constructing our own commercial-scale plant in the BaltimoreWashington D.C., area, which we should be breaking ground for next year,” he said. The company is also working with Green Star Products on some plastic-to-fuel technologies, he added. Recently, Fiberight announced it had formed a research agreement with MSW-to-energy technology company CleanTech Biofuels Inc. to determine yields and operating costs from using biomass produced by CleanTech to generate ethanol using Fiberight’s biofuel production process. Preliminary tests have showed yields of in excess of 80 gallons of ethanol per ton of biomass, according to Stuart-Paul. “We just completed a run of 2,000 pounds of material through Cleantech, which is the largest sample we’ve been able to get from anyone in this area. It worked pretty well for us,” he said. The yield per ton varies, however. “We are running between 70 and 90 gallons per ton— 90 is super-clean material; 70 if there is more hemicellulose around. That’s the issue with MSW; it does vary somewhat,” he said. Stuart-Paul said Fiberight is also developing its own process to recycle enzymes, and has been working with Novozymes, Genencor and Zymetis Corp.
There isn’t a need for large cities and huge amounts of waste to make the whole thing viable, we’ll look for communities of around 100,000 people, which there are approximately 450 of in the U.S. Craig Stuart-Paul CEO, Fiberight
According to Stuart-Paul, the hardest waste stream to deal with is what he dubbed “black bag MSW” or trash bags from residential collection. “For us to deal with that, we need to have a further pretreatment,” he said. “We’ve been working with several suppliers of autoclave-type technology including several from Europe. Cleantech seemed to have a good knowledge in this.” Fiberight has also completed a 50,000-square-foot testing facility in Virginia. “Our process sequesters the different waste types, and hydrocarbons are turned into electricity and heat for the plant. It requires zero input—we’re not taking any natural gas or electricity off the grid to make fuel. Additionally, we make byproducts, which make it different from other waste-to-energy plants that burn trash. We don’t burn anything, and don’t require expensive scrubbing. Using our processes, there is enough energy from the hydrocarbon fraction, namely plastics, to not only provide enough power for our own plant, but to net export too.” The maximum size of Fiberight’s plants will be 10 MMgy, Stuart-Paul said. “Our plants are designed to produce 7 MMgy to 10 MMgy, which we call mini mills. There isn’t a need for large cities and huge amounts of waste to make the whole thing viable, we’ll look for communities of around 100,000 people, which there are approximately 450 of in the U.S.” Stuart-Paul said plants will be sited within a 25-mile radius of communities, where sufficient volumes of MSW can be accessed. “It is a much better value proposition to some of these communities than to a large city with its own landfill—in a community without a local landfill, generally waste is being transported out of state. That’s true for New Jersey, and a lot of Maryland. What we can do is provide a local solution for waste disposal instead of dumping it into the ground or burning it—the waste stream after the recycling stream has been pulled out.” Fiberight expects the fully-loaded cost, including the appreciation, the power sold back to the community, with a strong-value proposition tip fee, to be approximately $1.25 per gallon of ethanol at full capacity commercial scale. “We should realize that some time in 2011 if all goes well,” Stuart-Paul said. —Anna Austin
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NEWS U.S. Senator Mark Udall, D-Colo., the U.S. Forest Service and the Denver Water Board are behind a proposal to build a biomass plant in Vail, Colo., fueled by lodgepole pine trees killed by mountain pine beetles. Private energy contractor Hayden-Cary & King of Darien, Conn., proposed the combined-heat-and-power (CHP) development project and has applied for a U.S. DOE technology development and demonstration grant, according to Andrew King, president of the company. The estimated cost of the gasification/ pyrolysis project, 28-megawatt thermal, 6-megawatt electrical, is about $20 million, he added. If built, the 18,000-square-foot facility would sit on an industrial site adjacent to the community’s maintenance facility, he said. The demonstration project will displace about 17,000 tons of greenhouseb gases. A feasibility study will be conducted, according to Stan Zemler, Vail town manager, to address elements such as environmental issues, among others. “There is so much discovery that needs to be done here,” he said. “There are always things that surface about emissions.” A sustainable supply is a significant factor in the feasibility study and there’s confidence in the supply over the next 10 years, he said, adding that there are recognizable barriers. Pine beetles have wreaked havoc in forests recently, especially in Colorado, where it’s estimated that 80 percent to 90 percent of the trees will be killed before the epidemic is over, according to Zemler. “The pine beetle infestation is pretty dramatic,” he said. Vail is a good location for the plant, King said, because of the amount of dead trees and its reputation as a world-class resort. “If you can do it in Vail, you can pretty much do it anywhere,” he said.
PHOTO: HAYDEN-CARY & KING
Colorado plant to run on trees killed by pine beetles
This proposed biomass plant in Vail, Colo., would run on trees killed by the mountain pine beetle infestation.
Nearby Holy Cross Energy has expressed interest in purchasing the electricity produced at the plant and supplying it to the grid to power local households, providing the plant meets certain qualifying facility definitions, according to a letter of interest submitted by Holy Cross. The water produced could be used for domestic hot water and heat, King said, or for hotels, snow melting, or chilling for air conditioners in the summer. “The most striking part is what this particular project will accomplish,” King said. The three main objectives are demonstrating total thermal efficiency; surpassing California’s emission standards; and exhibiting sustainable forestry while creating a market for trees killed by pine beetles. —Lisa Gibson
Bacteria simplifies cellulosic ethanol production Bacteria found in sweetgum wood may improve the preprocessing steps for cost-effective production of cellulosic ethanol. JDR-2, a strain of the wood-decaying bacteria Paenibacillus, can break down and digest hemicelluloses, which in traditional cellulosic ethanol production is broken down by acid hydrolysis. A research team from the University of Florida isolated the strain in 2003, according to James Preston, professor at the university’s microbiology and cell science department. The team has mapped out the genome and will work to transfer JDR-2’s abilities to bacteria already used for ethanol production through genetic engineering. Preston expects this to be accomplished within the next year. “By engineering the bacteria already being used to produce ethanol to also process hemicelluloses the way this Paenibacillus does, you should be able to significantly simplify the process,” Preston said. It’s also a possibility that the bacterium can be engineered to make the ethanol itself, he added. The acid, heating and other traditional preprocessing steps are 22 BIOMASS MAGAZINE 9|2009
expensive and require a lot of work. Cellulosic conversion to fermentable sugars is a major roadblock in the cost-effective production of cellulosic ethanol. “Cellulose and hemicelluloses are very difficult to digest to get a complete conversion for maximum yield,” Preston said. Preston came across the bacteria while decaying sweetgum trees to grow shiitake mushrooms on his tree farm in Micanopy, Fla., according to the University of Florida. After studying the unusually uniform composition of the decaying wood, he and his colleagues went on to study the genetics of one of the bacteria digesting it. “It’s not clear if it was indigenous to this tree, although it is a possibility,” Preston said, adding that it could be from the soil and can be found in other hard woods, too. “We find it in sawdust from oak and things like that,” he said. An article about the bacterium and its abilities was published in the July issue of the journal Applied and Environmental Microbiology. —Lisa Gibson
NEWS A systems approach to biofuels sustainability Biofuels sustainability can be addressed by considering the agricultural, energy and environmental sectors as one large system, according to “Biofuels, Land and Water: A Systems Approach to Sustainability,” a study by Argonne National Laboratory researchers. A problem for one sector could be a resource for another. “We could find solutions to pressing problems of each [sector] that are not addressed while we keep the sectors compartmentalized,” said M. Cristina Negri, one of the researchers who conducted the study. For example, nutrients in impaired water from agricultural runoff could be reused on biofuel crops, providing a potential solution to the inefficiency in the use of agricultural fertilizers near the Gulf of Mexico hypoxic zone, she said. This would be a substitute for costly fertilizers. Hypoxia or “dead zones” occur when the concentration of oxygen in water is decreased to the point where it can no longer support living aquatic organisms. The hypoxia in the Gulf of Mexico is said to be caused by fertilizer runoff from the Mississippi River, which flows through the U.S. Corn Belt. The study found that using marginal land and degraded water resources in Nebraska can increase biomass feedstock production to meet 22 percent of the state’s energy requirements, compared with the current 2 percent. Marginal land resources include riparian and roadway buffer strips, brownfield sites and marginal agricultural land. Degraded water resources used in the study include nitrate-contaminated groundwater and wastewater. “We wanted to determine if the potential opportunity for resource recovery was large enough to warrant attention,” Negri said. “Our conclusion is that it is.” Challenges do exist, though, and the team is continuing its work by selecting practical approaches that would create a win-win opportunity for all stakeholders, she said. There could be a sizeable opportunity for this approach in Nebraska, as about 1.5 million acres were determined to be marginal
agricultural land, according to the study, mostly in the western portion of the state. Conservation Reserve Program land accounted for 1.1 million acres in Nebraska in 2007. Possible overlap between land classifications—CRP land classified as cropland or grasslands—is uncertain, though, and merits further investigation, the study says. Spatial overlap between marginal land and degraded water resources is important in maximizing feedstock productivity, while minimizing the cost of transporting the water to the biomass feedstock, according to the study. In Nebraska, about 2 percent of the CRP land, 44 percent of riparian buffers and 50 percent of roadway buffers overlap with areas of nitrate-contaminated groundwater and livestock farms, the study shows. “We are now working on other states and on proposing viable ways to make this concept a solution,” Negri said. Studies have shown that about 28 percent of available groundwater resources in the U.S. are contaminated with nitrate and would need to be treated prior to use for drinking water, according to the Argonne study. The systems approach has the potential to significantly improve the economic, social and environmental sustainability of biofuels, the researchers said. The inclusion of other sources of marginal land could contribute significantly to feedstock production for bioenergy, they added. A further advantage of the approach is the possibility of improving wildlife habitat and biodiversity through the development of buffer strips and biomass feedstock fields as habitat corridors. “Biomass producers would make a profit and could be, at the same time, agents of environmental services,” Negri said. “We could redefine the biomass sustainability issue by positively designing ways of growing it that contribute to clean water, greenhouse gas mitigation, rural development and address land-use change, while sustaining high yields and economic profitability.” —Lisa Gibson
International WoodFuels to build pellet mill in Maine Burnham, Maine, will be the home of an International WoodFuels wood pellet plant capable of producing 100,000 tons of pellets annually from locally sourced wood. The plant is expected to be operational by next summer, according to Laura Sawall, at International WoodFuels. The $20 million plant is a partnership between WoodFuels and Maine & Co., a nonprofit business development team. WoodFuels uses only whole logs for its pellets and is in discussions with local landowners and foresters to develop long-term contracts, Sawall said. The facility will provide 35 new jobs, displace about 12 million gallons of heating oil annually and eliminate 133,000 tons of carbon dioxide emissions, according to the company. The Community Energy Facility will be adjacent to Pride Sports, the world’s largest manufacturer of wooden golf tees, allowing both
to use the same source of wood fibers. The site is in one of the state’s permanently designated Pine Tree Development Zones, created by Gov. John Baldacci in 2004. The location will allow WoodFuels to take advantage of a number of state tax incentives created to promote growth in industries such as manufacturing and environmental technology. WoodFuels produces pellets for its own customers and delivers them locally, resulting in an ultra-low carbon process. The company also has a pellet mill in the works in Virginia that will be operational by next summer with the same capacity as the plant in Maine, Sawall said. The facility used to be a wood chip mill and is being converted into a pellet mill. —Lisa Gibson
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NEWS SGT discovers green algae ‘lipid trigger’ California-based Sustainable Green Technologies has found the elusive “lipid trigger” allowing for increased production of green algae oil for biodiesel production, according to the company. The secret ingredient is the waste stream from the company’s patented biohydrogen-producing bioreactor. SGT’s scientists were looking for ways to use the waste stream when they discovered it sparked algae growth and increased lipid production and storage when combined with green algae in a bioreactor, according to the company. An increase in lipid production means an increase in the amount of oil extracted from the algae. Usually, algae store excess solar energy in the form of starch and in smaller amounts as lipid droplets. This breakthrough allows the plants to “flip a switch” and turn on massive production and storage of oils instead of starch, creating “obese algae,” according to SGT. The start-up company produces biohydrogen for energy using waste products like glycerol from biodiesel production, sugars from sugarcane and sugar beets, office paper once it is turned to glucose by enzymes, and brewery wastes, among others. The waste stream from that process now will be used to increase algae oil production for the company’s biodiesel plant, whose waste stream will go right
back into the biohydrogen bioreactor, according SGT scientists discovered a way to increase lipid to the company. production in green algae using the waste stream from “It closed the the company’s biohydrogen-producing bioreactor. loop for us,” said Jim Siegrist, vice president of marketing and sales for SGT. The biodiesel plant does not run on algae oil yet, but the company is in the process of converting the facility, he said. SGT has an application pending with the U.S. DOE for $15 million, but Siegrist does not expect to hear back with a definitive answer for about three months, he said. Once the plant is converted, it will run on the electricity produced when SGT’s biohydrogen is put into fuel cells. “It’s a nice, completely closed system,” Siegrist said. SGT is in discussions with potential partners, including a 3 MMgy biodiesel plant and a golf course interested in finding green uses for the algae in its ponds, according to Siegrist. The company already has one partnership with Pacific Fuel Cell Corp., he added. —Lisa Gibson
Covanta to acquire seven waste-to-energy facilities Covanta Holding Corp. has signed a $450 million definitive agreement with Veolia Environmental Services to acquire seven municipal solid waste-to-energy facilities in North America, which collectively process approximately 3 million tons of waste each year. Covanta has 38 existing waste-to-energy facilities, which annually process about 17 million tons of MSW. The facilities to be acquired employ about 500 people, and are located in Long Beach, Calif.; Dade, Fla.; Dutchess, N.Y.; Islip, N.Y.; Montgomery, Pa.; York, Pa.; and Vancouver, Canada. The company expects to complete the transaction with Veolia before the year’s end. Covanta Energy also has a $500 million waste-to-energy project with Green Island Energy on Vancouver Island, British Columbia, to serve the province’s waste disposal challenges. On the site of a former pulp and paper mill in the Gold River region of British Columbia, the Gold River Power Project trans-
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forms 500,000 to 750,000 tons of waste to produce refuse derived fuel (RDF) and direct 90 megawatts of power to the BC Hydro grid. Construction of the project may begin at the end of the year. Recently, a subsidiary of Covanta Energy’s Mendota, Calif., biomass facility earned “STAR” status in the California Department of Industrial Relations, Division of Occupational Safety and Health Voluntary Protection Program, the highest honor given to work sites with comprehensive, successful safety and health management systems. Covanta Mendota is the first of the company’s eight biomass facilities to receive the VPP STAR. The Mendota biomass facility, along with Covanta’s Stanislaus Resource Recovery Facility in Crows Landing, Calif., are two of only 70 facilities to earn STAR distinction in California. —Anna Austin
UK’s largest anaerobic digestion facility gets green light A proposal to build the largest anaerobic digestion facility in the U.K. has been granted planning permission by the North Yorkshire County Council. The $32.8 million Selby Renewable Energy Park project will power nearly 11,000 homes and divert 165,000 tons of food waste from landfills each year. In the 2007 budget, the U.K. government implemented tax increases in an attempt to help reduce the amount of waste sent to the landfill each year, and encourage anaerobic digestion activities such as the Selby project. Beginning April 1, taxes increased to about $66 per ton, and will rise by $13 each year until at least 2011. The Selby Renewable Energy Park, which will be owned by White’s Recycling Solutions, will be constructed on eight acres at the 42-acre site of the former Tate & Lyle Citric Acid Plant south of Selby. When completed, the facility will house a pretreatment hall where packaged food waste from supermarkets, food processors, local authorities and caterers will be processed. An anaerobic di-
gester already exists on the site; two additional digesters are included in the proposal. Electricity produced at the park will be directed to the national grid through the site’s existing power connection, and will be sufficient to meet nearly all of Selby’s residential electrical needs. In addition, the facility will provide a low-cost heat source for local businesses, and create about 120 new jobs—including staff at the plant and drivers to transport/administer the fertilizer produced as a result of the anaerobic digestion process. The company is currently signing contracts to begin work in the near future. White’s Recycling Solutions Business Development Manager Shaun Flynn said construction on the first phase of the two-phase project is slated to begin in September, and will be completed in September of next year. Phase two is scheduled for completion in 2012. —Anna Austin
Aquentium studies waste-to-energy plant feasibility in South Korea California-based Aquentium, a public company that acts as a partner to assist its subsidiaries in securing capital, market share and revenues, recently began a feasibility study for implementation of a waste-to-energy plant in South Korea. The company expects the study to yield positive results and open the door for the development of a facility in the country, according to Mark Taggatz, Aquentium president and CEO. “We’re pretty darn close to 100 percent certain,” he said. The study is based on a 1,000 metric-ton-per-day energy processing plant that could supply electricity for a few thousand homes, Taggatz said, adding that it’s too early to determine an exact figure. “The main thing is feedstock and is there a supply,” he said of the study. It will also include the cost, estimated at about $250 million, and byproducts such as potable water, he added. Electricity is first and foremost but byproducts can present another revenue stream, he said. A specific location for the facility has not been determined. The company has ties in South Korea, Taggatz explained, so it
started looking into the idea about a year ago. “We’re making some progress,” he said. South Korea is the 10th largest economy in the world, according to Aquentium, and the government there has a program to spend $45 billion over the next five years on environment projects. Aquentium’s long-term goals involve more projects all over South Korea, including wastewater treatment technologies, Taggatz said. “We want to be able to do more green projects in the future for the country,” he said. “There’s more of a demand in the country than we can provide with just one project.” If the waste-to-energy study proves economically feasible and sustainable, Aquentium will proceed with construction, Taggatz said. “It would become our project.” The next two months will be spent on the study, followed by three or four months on engineering and design. “I would hope by then we can get the exact design and start moving some dirt,” he said. —Lisa Gibson
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In Pursuit of Loot Biomass projects encounter many of the same challenges as other businesses, including obtaining adequate capital. Biomass Magazine talks with industry experts about the current financial situation, and funding opportunities for biomass projects. By Anna Austin and Lisa Gibson
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oney is the determining factor in achieving project success no matter what industry is involved. Although a lack of liquidity in the equity and debt markets is currently keeping a lid on project development activity, there are some encouraging signs on the horizon for biomass projects, according to Rob Kurtz, BBI International Engineering and Consulting Group project manager. “Positive signs include the recent USDA issuance of feasibility study grant guidelines for both combined heat and power at biofuels plants and anaerobic digestion systems, and a slight thawing in venture capital/risk investment as evidenced by the Tendril and Gevo investments recently announced, and several other announcements by companies developing combinedheat-and-power systems,” Kurtz says. The Tendril Networks and Gevo investments totaling $70 million were among the top five reported venture-capital deals nationwide for clean energy and environmental technology companies in the second quarter, according to Ernst & Young LLP. Gevo, an Englewood, Colo.-based alternative fuels producer received $40 million and Tendril, a Boulder, Colo.-based smart grid software company received $30 million. Biomass project developers need to think big when they are putting together
their financial package, says Timothy Baye, bioeconomy and bioenergy business development specialist at the University of Wisconsin-Extension. “Think return on capital, working capital needs, for this type of commodity-related business, you’ll need equal to or up to three times the amount of the capital budget, because you’ve got to secure a feedstock—and that takes money.”
All eyes are on the stimulus and all eyes are on energy and all eyes are on turning this financial debacle around.
Securing Federal Dollars
Repowering Assistance, Bioenergy for Advanced Biofuels and the Rural Energy for America programs. This year, $210 million is available. The money is competitively awarded and the amount depends on the program, according to Jay Fletcher, with the USDA. A staff of professional loan reviewers determines which projects will get funding. This year’s DOE appropriation for the Biomass Program is $217 million, according to Valri Lightner, DOE Biomass Program manager. The entire application process for DOE’s competitive grants and loans takes about eight months, Lightner says. DOE has announced more than $1 billion over five years since the beginning of 2007 to support the development of integrated biorefineries, efforts to advance biomass conversion technologies and research and development of cellulosic feedstock, she says.
Billions of federal dollars are available in the U.S. alone to assist developers in meeting costs. The $787 billion American Recovery and Reinvestment Act of 2009 signed into law in February includes about $94 billion in direct and indirect spending for clean energy projects, including biomass. About $72 billion of that is in direct investments and $22 billion in tax incentives, according to John Eustermann, a partner with Stoel Rives LLP law firm. Additionally, the U.S. DOE provides financing opportunities, as does the USDA, which announced in July that it’s taking applications for the Biomass Crop Assistance Program, part of the 2008 Farm Bill that aims to support crops for bioenergy, by helping with harvest, collection and storage. From 2009-’12, the USDA has a total of $950 million available for renewable energy projects in the Biorefinery Assistance,
John Eustermann partner, Stoel Rives LLP
continued on page 30
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Loan Guarantees Available for Renewable Energy Projects U.S. Energy Secretary Steven Chu announced on July 29 that the U.S. DOE will provide up to $30 billion in loan guarantees, depending on the applications and market conditions, for renewable energy projects. Another $750 million will support several billion dollars more in loan guarantees for projects that increase the reliability, efficiency and security of the nation’s transmission system. The two new loan guarantee solicitations are being funded partly through the Recovery Act and partly through 2009 appropriations. “These investments will be used to create jobs, spur the development of innovative clean energy technologies, and help ensure a smart, strong and secure grid that will deliver renewable power more effectively and reliably,” Chu says. “This administration has set a goal of doubling renewable electricity generation over the next three years. To achieve that goal, we need to accelerate renewable project development by ensuring access to capital for advanced technology projects. We also need a grid that can move clean energy from the places it can be produced to the places where it can be used and that can integrate variable sources of power, like wind and solar.” The lending authority includes: Up to $8.5 billion in lending authority supported by 2009 annual appropriations for renewable energy Up to $2 billion in subsidy costs, provided by the
Recovery Act, to support billions in loans for renewable energy and electric power transmission projects Up to $500 million in subsidy costs to support loans for cutting-edge biofuel projects funded by the Recovery Act Up to $750 million in subsidy costs, provided by the Recovery Act, to support loans for large transmission infrastructure projects in the U.S. that use commercial technologies and begin construction by Sept. 30, 2011 The two solicitations mark the sixth and seventh rounds of solicitations by the department’s Loan Guarantee Program, which encourages the commercial use of new or improved energy technologies to help foster clean energy projects. Applications were accepted for 45 days following the July 29 announcement. The department streamlined its processes to accelerate these new loan solicitations. By investing in both renewable energy technology for generating electricity and technologies to modernize the country’s transmission system, the Recovery Act targets the full integration of renewable energy sources onto the electric grid. For more information on this solicitation and the department’s Loan Guarantee Program, visit the Web site at www.lgprogram.energy.gov/. SOURCE: U.S. DOE
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FINANCE continued from page 28
Each federal agency’s programs have eligibility requirements, along with varying deadlines. Project timelines and percentages of project costs eligible for funding also vary. The U.S. Department of the Interior does not allocate funds specifically to biomass through grants or loans, but some of its projects generate biomass, according to Scott Lieurance, division chief of the Division of Forest and Woodlands with the Bureau of Land Management. Service contracts, where feasible, will have biomass sections. About $10 million worth of current projects have biomass potential, he adds, in projects dealing with habitat restoration, forest health and fuels reduction. “We try to make that material available for utilization,” he says. In 2008, the BLM had 100,000 to 200,000 tons of biomass for sale, Lieurance cites. The department has seen an increase in the past few years in the number of inquiries into how much biomass is available and where, he says. As the economy falters, more people and companies are turning to renewable energy, Eustermann says, and biomass is a huge part of that. “All eyes are on the stimulus and all eyes are on energy and all eyes are on turning this financial debacle around,” he says, referring to the recession. Tammie Ptacek and James Bertrand, shareholders at the Leonard, Street and Deinard law firm, have also seen an increase in interested parties. Many clients are interested in cash grants in lieu of the production tax credit, a program in the Recovery Act. The cash grant is a one-time payment equal to 30 percent of the project’s qualified capital cost, whereas the production tax credit is paid over a 10-year period, Bertrand, the head of the firm’s energy group, points out. “That’s really causing people to get excited,” Ptacek says. The program includes a stipulation that projects have to begin construction in 2009 or 2010. It does not provide initial funding, and applicants must be in the commercial production phase of their projects to qualify. The benefit of the program is that it al-
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lows projects to proceed without tax credit investors, Bertrand explains. “A lot of developers think this makes their projects easier,” he says.
Overcoming Hurdles Although there seems to be plenty of government funding available, getting at that money can be tricky. One of the biggest problems is the process for developing programs: bills come out; they are signed into law and announced; the rules for eligibility and applying are established; and applications are accepted, Eustermann says. Rulemaking takes time, so even though announcements of funding opportunities are made, it doesn’t mean the lump sum is available immediately. “If you’re relying on those to get your project up and running, you’re going to have problems,” he says. “It’s out there, but it’s not solid.” For example, solicitations with crucial details of the DOE’s legacy loan guarantee program for innovative projects, announced in 2005, were just released July 29, 2009, along with solicitations for the newly established loan program for projects using proven technologies. As of that date, no funding had been issued for any projects from the 2005 innovative loan fund, Eustermann says. An issue with the popular cash grant program is that there is no pre-approval process, Bertrand says. “As a developer, you have to move to commercial operation and bank on the fact that you can check all the boxes properly,” he says, adding that the gamble is easier for large developers to make than smaller ones. But the money is starting to flow, Eustermann assures. “They’re rolling out there,” he says. “Each one has its own ins and outs. It’s there; they just need to get the rules around it.” The process could be improved if there was more collaboration between the DOE and USDA on funding opportunities, Eustermann says. “They need to work together,” he insists. “DOE has programs USDA doesn’t have and USDA has programs DOE doesn’t have.”
Projects With an Advantage Presumably, projects with complete applications and the least amount of risk involved will most likely be the biggest competitors for available funds, Eustermann says. “You’ve got to have a complete application; those that have no noise around them; no hair on them.” Projects with the lowest risk are probably going to be financed first and foremost, he adds. The most economically viable and bankable projects probably will walk away with the funding. “It’s going to come down to the projects that have the highest credit rating,” he explains, citing as an example an individual going to a bank for a loan. Ptacek and Bertrand agree that it’s too early to speculate on whether certain types of projects will be more likely to receive money, but Bertrand says there is a preference for shovel-ready projects. The DOE focuses on nonfood cellulosic feedstocks, specifically agricultural residues, energy crops, forest resources and urban wood waste, Lightner says. The department also recently initiated work on algal-based fuels. Fletcher says the USDA does not focus its funds on certain feedstocks.
Applying for Federal Funds Federal funding announcements can be monitored at www.grants.gov. Grant opportunities are listed by agency or category. Information on the DOE’s loan guarantee program is available at www.lgprogram.energy.gov, and USDA funding information can be found at the department’s Web site, www.usda.gov. Specific and in-depth rules and eligibility guidelines for the USDA and DOE programs are searchable on the federal register at www.gpoaccess.gov/fr/. BIO Anna Austin and Lisa Gibson are Biomass Magazine associate editors. Reach them at firstname.lastname@example.org or (701) 7384968 or email@example.com or (701) 738-4952.
MIGHTY Mighty MICROBE Microbe
The Q Microbe, found in the soil near a Massachusetts reservoir, can produce unprecedented amounts of ethanol in a single step. Supported by a company devoted to its process and improvement, it could lead the way to commercial production of cellulosic ethanol and the achievement of renewable fuel standard mandates. By Lisa Gibson
our years ago, Susan Leschine and her research team discovered unique traits and enormous value in a microbe found eight years earlier in the soil near a Massachusetts reservoir. Leschine, a microbiologist at the University of Massachusetts, Amherst called it a “eureka moment.” The Q Microbe, named after its home, Quabbin Reservoir, can produce large amounts of ethanol with almost any cellulosic feedstock. Not only that, but the microbe produces its own enzymes and combines the enzymatic breakdown of sugars and fermentation to ethanol into one step. It requires no additional enzymes to carry out the process. “We realized we had something that could really be useful,” Leschine says. “We were doing an experiment for a completely different reason and we realized that the Q Microbe could produce lots of ethanol.” Researchers working with the microbe announced in July that they’ve
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achieved production of 70 grams of ethanol per liter of fermentation broth in the lab, surpassing the commercial production threshold of 50 grams per liter. That translates to about 9 percent ethanol by volume, according to Leschine, who has studied microbes for more than 40 years, the past 30 at UMASS. “It’s really over the hurdle to be cost-effective,” she says. “As far as we know, no one else in the world has achieved that,” says Bill Frey, president and CEO of Qteros, a company founded to commercialize the microbe and its beneficial traits. “We’ve been able to achieve this through process improvement combined with the microbe’s abilities,” he adds. The Q Microbe was discovered as part of a survey to understand the diversity of microbes that can break down plant material without oxygen. Less than one-tenth of 1 percent of the microbes that exist is known, Leschine says, adding that the microbial world is an amazing resource. “This was a sample that yielded a microbe very different from
Researchers at the Qteros lab in Massachusetts study the Q Microbeâ€™s ability to produce ethanol in one step. PHOTO: JIM GIPE, PIVOT MEDIA, INC.
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PHOTO: JIM GIPE, PIVOT MEDIA, INC.
University of Massachusetts Amherst microbiologists Tom Warnick and Sue Leschine stand beside the Quabbin Reservoir.
any other,” she says. “It was a big surprise after looking all over the world, to find it just next door.” The manmade Quabbin Reservoir is 10 miles from Leschine’s lab and supplies water to Boston. It has served that function since the 1930s and still is one of the largest unfiltered drinking water supplies in the world.
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Economics and Scalability The two most important factors for Qteros to succeed in reaching commercial scale with the microbe’s abilities are economics and scalability, both Frey and Qteros Executive Vice President Jef Sharp agree. “To have an impact on something as large as the planet’s climate, scalability and economics is
important,” Sharp says. He adds that it needs to be capable of scaling up relatively simply. “Simplicity is very good with commodity production of anything,” he says. “One of the most exciting parts of scalability is being able to use different crops,” Frey says, adding that it opens up possibilities for commercialization in different areas. The Qteros research team has experimented with corn stover, sugarcane, woody biomass and energy crops. Sharp adds the team is working with some other feedstocks, but declines to disclose them. The research team currently operates out of a lab in Marlborough, Mass. The lab has the capacity to produce up to 100 liters of ethanol, Sharp says. “There’s a lot going on in the lab,” he says. “It’s very exciting.” Leschine still works as a consultant for the company, but continues to work at the university, where she does some Qteros-sponsored research. The company also has a license agreement with the university. Tentatively, Qteros plans to have an internal pilot facility completed this year and running in 2010, an integrated pilot
PHOTO: JIM GIPE, PIVOT MEDIA, INC.
The Q Microbe can produce ethanol from many different types of cellulosic biomass including corn stover, sugarcane, woody biomass and energy crops.
in 2010 and a facility demonstrating and producing ethanol in 2011, Frey says. They most likely will be at different locations, he adds. The industrial biomass pretreatment phase
will be somewhere in western Massachusetts, according to Sharp. The pretreatment phase is proprietary and not yet perfected, he adds. The business endeavor began after
Leschine and Sharp met through a mutual acquaintance, she recalls. Her team had discovered that the only way to realize the Q Microbe’s commercial potential was to start a company devoted to it, she says. The answer seemed to be SunEthanol Inc., which would change its name to Qteros. “They had just come together to develop green technology,” she says of Sharp and his colleagues at SunEthanol. “It was really serendipitous.” A few different elements attracted Sharp to the venture, he says, including the microbe itself. “Its uniqueness and very early signs that it wanted to produce ethanol when our world needs renewable fuels,” he lists as an attraction. Leschine’s experience and expertise also had a positive influence. “She’s great,” he says. “She’s very knowledgeable. She understood the impact that this could have.” Leschine thinks the collaboration was perfect because she has no experience in the business start-up world. “This business thing is a whole new world to me,” she says. “They have to move fast and they do. It’s a very interdisciplinary approach. I don’t think I could
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PHOTO: JIM GIPE, PIVOT MEDIA, INC.
Qteros’s research is done at its lab in Massachusetts, but the company hopes to scale up to a demonstration facility in 2011.
do that. I’m still interested in the basic science.” Qteros will be a technology provider, Frey explains, not a company that will build, own and operate ethanol plants utilizing the microbe. The target is a four-year or less return on investment, he says. So far, Qteros has obtained $30 million in funding, mostly from investors, and has an application pending with the U.S. DOE. Investors include Venrock, BP, Battery Ventures, Long River Ventures, Camros Capital, Soros Group and Valero. Both Sharp and Frey declined to release a cost estimate of commercialization. “It’s hard to say what the final cost is going to be,” Sharp says. “We like to right-size. We want to continue to be nimble and as soon as you start to get large assets built, it becomes difficult to be flexible.” Enzyme cost is a factor that can stand in the way of commercial production of cellulosic ethanol. “That gives us a pretty significant advantage over other processes,” Sharp says. “It’s hard to compete with a microbe that is this effective.” With the microbe’s characteristics come less capital and equipment costs, as only one tank is needed in the process. Qteros’ ultimate goal is to be a criti36 BIOMASS MAGAZINE 9|2009
cal conversion technology, Sharp says. “We want to continue to improve the most costeffective technology producing the world’s transportation fuel,” he says. Expansion and research into other, similar microbes could be possible in the company’s future. “We’re a company that is focused on that ultimate goal,” he says. “If there are other discoveries that can help achieve that goal, we would consider that.”
A Model Organism for Cellulosic Ethanol Ethanol is a waste product in the microbe’s process, Leschine says, comparing it to the process for making beer. The ethanol the Q Microbe produces would be like a very strong beer or wine, she adds. The microbe can produce large amounts of ethanol, tolerate high concentrations of ethanol and can break down all the important components of plant material, she says. “Because of that, it’s pretty unique,” she says. “It has become a model organism for cellulosic ethanol production.” Complete cellulosic conversion, going directly from the plant material to ethanol, has been dubbed the “Holy Grail” of cellulosic ethanol. Currently, the process for
biological conversion of biomass to ethanol involves several steps. First, the biomass feedstock undergoes a thermochemical pretreatment that opens the lignocellulose, exposing the tough portion of the biomass to saccharification by enzymes, the second step. The five-carbon and six-carbon sugars released in these early steps are then converted to ethanol by a fermenting microbe. The final steps are to separate and purify the fuel. “This is an organism unlike any other using C5 and C6 sugars,” Frey says of the Q Microbe. “It continues to amaze our scientists,” Sharp says. The 70 grams per liter ethanol output was achieved with no genetic engineering. “We’ve had so much progress with classical strain development, we haven’t needed molecular biology,” Frey says. “Knowing what we know now, it really has everything it needs,” Leschine says. “But we can tweak it.” People generally are afraid of genetic engineering, but it’s not the technology itself, it’s how it’s used, she adds. “We fully expect and anticipate we’ll be making considerable progress with genetic engineering,” Sharp says.
What Does it Mean? “It gives us the opportunity to achieve targets set in the [renewable fuels standard], which no one knows how to do,” Frey says. The RFS2 mandates 36 billion gallons of renewable fuel production by 2022 and includes a category for cellulosic biofuels. It will mean more jobs, too, Frey adds. “We think it’ll be the most economic solution because the microbe is really unique and shows an appetite for different kinds of biomass and the ability to turn it into ethanol,” Sharp says, adding that it’s genetically hardwired to make ethanol from biomass. “It just wants to make ethanol,” he says. “It’ll be a win-win for everybody involved. There are challenges and we’re not there yet. But with the recent advancements we’ve made, we feel pretty good about where we are.” “This is the path that will allow us to finally deliver on the promise of cellulosic ethanol,” Frey says. BIO Lisa Gibson is a Biomass Magazine associate editor. Reach her at lgibson@ bbiinternational.com or (701) 738-4952.
Turning Tragedy into
Triumph What can be done with the millions of U.S. forestland acres devastated by the mountain pine beetle? Biomass power applications are an attractive option, but action must be taken before the trees lose their value. By Anna Austin
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n just a few years, the mountain pine beetle has devastated millions of acres of American forestland. Particularly notorious in the Western U.S. and Canada, the bark-devouring insect has destroyed nearly 8 million acres of trees. Insect infestations are nothing new and outbreaks occur regularly in nature. However, the current pine beetle epidemic is worse than any in recorded history. Loss of sustainable forests and wildlife habitats are just a few of the possible consequences of the beetle infestation as they leave dead and dying trees in their wake. Leaving these impacted forests untouched increases the chances of wildfires and downed power lines, endangering the communities in these areas. The pine beetle infestation has prompted many people who are interested or impacted by the issue to recommend swift action be taken. Congress wants to develop a plan and welcomes ideas from those familiar with the pine beetle infestation. On June 16, the House Natural Resources Committee, Subcommittee on National Parks, Forests and Public Lands and Subcommittee on Water and Power, held a joint oversight hearing to strategize how to utilize the affected wood and protect the West. A number of congressional members from western states, representatives of the U.S. departments of agriculture and the interior, state and local officials, and business owners testified, stressing the epidemic’s negative and potentially devastating impacts. Many stressed the importance of allowing the biomass industry access to the pine beetle-damaged wood. Now with several ideas on the table, Congress is tasked with formulating a strategic plan to responsibly and efficiently manage the materials.
Developing a Plan During his testimony, U.S. Rep. John Salazar, DColo., said there are more than 633 miles of electrical transmission lines in Colorado in areas of dead or dying trees, and more than 1,300 miles of electrical distribution lines at risk from falling trees or fire. “A large fire could destroy many of these lines, causing power outages for months,” he said.
Salazar added that he and several other Colorado lawmakers have introduced legislation that includes different approaches to tackling the problem, and are currently working on a bill they had planned to introduce this summer. Several senators are working on similar bills. Recently, U.S. Sen. John Thune, R-S.D., introduced a comprehensive plan to address the pine beetle epidemic, which has infected much of South Dakota’s Black Hills National Forest and the surrounding area. The main thrust of Thune’s plan is to create a market for biomass removed from federal forests, which is prohibited by the current Energy Bill. Thune wants the biomass definition in the Energy Independence & Security Act of 2007 to be expanded to include biomass removed from federal land, a move that many others in Congress support, including U.S. Rep. Jared Polis, D-Colo. During his testimony, Polis said a properly crafted, specific and responsible definition for woody biomass within a renewable energy standard has a significant and positive role to play in helping fund wildfire mitigation projects, and would relieve the backlog of projects that the U.S. Forest Service is waiting to have funded. “This definition can also mean that we see an expansion of cleaner and less carbon-intensive energy sources, like wood pellet heating, that will help combat one of the primary causes of the beetle epidemic— climate change,” he said. “Whether including woody biomass in the definition of renewable energy and thus allowing for incentives under a renewable energy portfolio standard, or through the growing prevalence of blue stain wood products as a decorative building material, creating new market demand for the dead and dying trees provides hope to the communities who want to see fuel reduction effort moving forward.” Polis added that wood products, wood pellets, small-scale energy projects and other local businesses can play a key role in mitigating the damage and lessening the danger from the outbreak. In addition to pine beetle plan, Thune also helped draft the Biomass Crop Assistance Program, as part of the 2008 Farm Bill, which provides payments for the
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A Northern Nuisance The mountain pine beetle infestation isn’t limited to the U.S., Canada predicts that by 2013, 80 percent of the mature pine in British Columbia will be dead. The beetle is also posing a significant threat to Alberta’s lodgepole pine forests and the Jackpine stands in the country’s northern boreal forest. In 2006, the Canadian federal budget provided $400 million for two years to combat the infestation, strengthen the long-term competitiveness of the forestry sector, and support worker adjustment. More recently, the Canadian Forest Service of Natural Resources Canada, the University of Northern British Columbia, the University of British Columbia, the University of Alberta and the Genome Sciences Center in Vancouver announced a $4 million research project to gain a better understanding of how to predict the location of potential supplies of bioenergy. An emphasis will be placed on understanding the biology of the mountain pine beetle and its host in order to form a predictive model to help guide control measures. A proposed 60-megawatt biomass power plant near Hanceville, British Columbia, will utilize trees killed by the mountain pine beetle, if Western Biomass Power Corp. and Tsilhqot’in National Government’s project is selected as a project for Phase II of BC Hydro’s Bioenergy Call for Power.
Pine Beetle Infestation Signs and Symptoms The formation of popcorn-shaped masses of resin, called “pitch tubes,” on the trunk where beetle tunneling begins. Pitch tubes may be brown, pink or white. The appearance of boring dust in bark crevices and on the ground immediately adjacent to the tree base. Evidence of woodpeckers feeding on the trunk. Patches of bark are removed and bark flakes lie on the ground or on the snow below the tree. The foliage turns yellowish to reddish throughout the entire tree crown. This usually occurs eight to 10 months after a successful attack. The presence of live beetles (eggs, larvae, pupae and/ or adults) as well as galleries under the bark. The appearance of blue-stained sapwood. SOURCE: COLORADO STATE UNIVERSITY EXTENSION
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delivery of biomass, including woody biomass removed from federal forests, to biorefineries or biomass power plants. His pine beetle plan calls for full implementation of BCAP from 2009 through 2012, and an extension of the program through 2016. In mid-July, U.S. Sen. Jon Tester, D-Mont., introduced legislation to reform forest management in Montana, which promotes common sense logging to thin beetle-killed trees. In Montana, the pine beetle has increased the mortality rate of mature trees in state national forestlands two-fold in just one year, from 734,500 acres in 2007 to 1.8 million acres in 2008.
Time-Sensitive Issue Even with the many pending plans and bills, time is truly of the essence. “We’ve got to get to these materials in a timely manner,” says Mark Mathis, Pellet Fuels Institute Government Affairs and Commercial Fuel Committee member. “The biggest hurdles are accessing the materials—there’s a lot available, but the tools are not in the tool box, so to speak, at a legislative level,” he tells Biomass Magazine. “At a certain point, the [trees are] prone to blow over, and when they do, they rot dramatically faster and any value from the wood is removed.” Mathis says the utilization of this material from U.S. forests and parks will make the wood, which is currently considered a substantial liability to U.S. taxpayers, more valuable. Mathis is also president of Confluence Energy LLC, which is removing affected timber in Colorado and using it to produce wood pellets. The company operates a manufacturing facility in Kremmling, Colo., 70 miles northwest of Denver. “We’ve been utilizing pine beetle-damaged wood for about the past two years,” he says, which amounts to approximately 150,000 green tons per year. “We do some of the hauling and processing, we have about nine different contracts,” Mathis says. Documents created by U.S. Forest Service personnel suggest that the cost to treat some of the existing area in USFS Region 2 or the Rocky Mountain Region would exceed $220 million over the next three years, according to Mathis. By lowering some of the existing hurdles in accessing the dead and dying trees, private industry can add value to the material—the Btu value of which is not affected by an infestation—and dramatically reduce the cost to the taxpayers, he says. Confluence Energy estimates the potential savings at about $75 million over five years. Mathis presented a plan at the oversight hearing that would require $10 million in grant funding and an additional $20 million in USDA-backed loans. He suggested Confluence Energy build an 8 MMgy to 10 MMgy ethanol plant and said the company has a partnership with a large U.S. fossil fuel company that is interested in a joint venture. The plan also includes the construction of a 5-megawatt power generation system to satisfy the facility and Kremmling’s energy needs; the retrofit and remodel of the company’s existing facility to manufacture high-value wood products; the renovation of an existing rail loading facility to transport finished products to market, and
POLICY the expansion of Confluence Energy’s pellet facility to maximize potential output.
Accessibility Problems A major hang-up involved in retrieving pine beetle-damaged wood is that the government needs to release the land and allow access to those who want to retrieve the trees. “There are some barriers, especially on federal lands out West,” says Seth Voyles, PFI manager of government affairs. “There is always some bureaucratic red tape to go through. There is sensitivity about going into these lands, and sometimes there are no roads to get to them. Some roads have limited access and you can’t get logging trucks in there. Sometimes timber sales are approved by the government and the purchaser, and suddenly someone files a lawsuit against it and it stops. There’s a whole mess of things that could prevent going in and getting the stuff out.” On city-owned land in some areas, agreement can’t be reached on strategies to remove dead trees. Decisions need to be made quickly, however, as the dead and dying trees have a limited shelf life—and the infestation will only spread. “It is estimated that once the trees die and turn red they have eight to 15 years before they blow over,” Mathis says. “Every minute we talk and do not act, not only are we are losing value, but we are reducing the time private industry has to get a return on their money to justify investing in these types of projects.”
Congress will likely utilize testimony from the oversight hearing to determine what can be done on the federal side and in future legislation to help expedite the tree removal process. Voyles says. “There are certain things they don’t want to do though, such as short-shift any environmental protocol or standards out there,” he said. “They held the oversight hearing to get the best possible strategies that they can to help make decisions, so hopefully something will be done sooner rather than later.” Outside of Congress, those interested in using the dead wood must work with relevant groups such as the forest service to determine project feasibility, as competition for the pine beetle-damaged wood could be fairly stiff. “We are making progress—we spend part of our day, every day, working on this,” Mathis says. With a focus on making the most out of the pine beetle epidemic—whether it’s by creating renewable energy and jobs, or facilitating congressional research and forest industry collaborations to prevent other natural disasters, sustainability and responsible procurement practices must also be kept in mind. The longer it takes to deploy a plan of action, the higher the environmental risks and lower the material’s value become. Effectively implemented, however, it may be possible to see a silver lining. BIO Anna Austin is a Biomass Magazine associate editor. Reach her at firstname.lastname@example.org or (701) 738-4968.
9|2009 BIOMASS MAGAZINE 41
Biomass’ Role in the Energy Future The current state and future challenges of the biomass industry were addressed at the Energy & Environmental Research Center’s annual Biomass ’09: Power, Fuels, and Chemicals Workshop.
By Anna Austin and Lisa Gibson Photos by Elizabeth Slavens
42 BIOMASS MAGAZINE 9|2009
lthough the future of the global and U.S. renewable energy industry is hazy, one thing is clear—biomass power will play a significant role. What exactly that role will be, however, is unknown and depends on several factors. Presenters and attendees at the Energy & Environmental Research Center’s Biomass ’09: Power, Fuels, and Chemicals Workshop discussed the current state of the biomass power industry, as well as future challenges and possibilities. More than 300 people from 25 states and three Canadian provinces attended the two-day event, which was held July 14-15 at the Alerus Center in Grand Forks, N.D. During four main sessions, 30 different speakers focused on trends and opportunities in power utilization, biofuels, feedstocks and the use of biomass to generate heat and power. The EERC is a research, development, demonstration and commercialization organization on the University of North Dakota campus. The center has nine primary areas of focus including renewable energy, waste utilization and management, and site remediation and environmental control technologies.
In his opening address, EERC Director Gerald Groenewold said there is much confusion in the world right now regarding energy. “Some people think there are silver bullets that will solve all of the energy issues and that is not true,” he said. “There is a major portfolio of energy technologies that are going to address the needs of this world. Biomass is part of that. I don’t know how big it’s going to be; a lot of that is dependent upon political decisions and regulatory decisions, cap and trade, and carbon management. Frankly there’s a lot of frustration out there right now because we don’t have a good sense of where the road map is.” The EERC is conducting several research projects on renewables, according to Groenewold, including the production of biomass-based jet fuel under a $4.7 million contract with the U.S. Department of Defense’s Defense Advanced Research Projects Agency. “We’ve got a major Gerald Groenewold breakthrough here and are director, moving toward using algae,” EERC continued on page 45
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What’s Ahead for Biomass The pieces are all in place to make cellulosic biomass a viable part of the U.S. energy security puzzle, according to Chris Zygarlicke, deputy associate director for research at the Energy & Environmental Research Center in Grand Forks, N.D. He spoke about the current state of biomass and where it’s headed at Biomass ’09. Cellulosic biomass meets the carbon dioxide emission life-cycle targets, it’s sustainable, has growing incentives and support, has an established window for demonstration of viable technologies for production and conversion and is gathering significant business investment, he said. Success will depend on government policies, incentives, the development of sustainable biomass feedstocks and proving new conversion technologies in nearcommercial-scale biorefineries and bioenergy systems, he added. Cellulosic biomass must become a major, if not the primary, source for biobased fuels, he said. Oil-bearing, non-food crops such as jatropha and oil from new strains of algae appear to be on the verge of becoming important resources for liquid biofuels.
Zygarlicke addressed policy and incentives, feedstocks, biofuels and bioenergy. “Policy and legislation are crucial in moving forward,” he said, citing the Energy Independence & Security Act of 2007, the American Recovery and Reinvestment Act of 2009, which provided $72 billion for clean energy projects and $20 million in clean energy tax incentives, and the 2009 Climate Bill. It could be the first legislation to limit carbon dioxide, he said of the Climate Bill. “This will be a huge factor, one way or the other.” Biomass feedstock availability and sustainability is largely dependent upon commodity crop prices, he said. Biomass is also highly susceptible to climate and climate change. Right now, fewer than 1 billion dry tons of biomass are available, but that number could climb to just over 1 billion with modest changes and higher yields, he showed in a bar graph. Feedstocks can include agricultural and wood residues, municipal solid waste, triacylglycerides and energy crops. “The days of corn ethanol-only are gone,” he said as he began to discuss biofuels. Emerging thermal and fermentation tech-
nologies are moving along in the cellulosic biomass to biofuels sector. In the area of bioenergy, the U.S. has few incentives for large utility cofiring of biomass, Zygarlicke said. “But we are starting to Chris Zygarlicke see a positive slope.” deputy associate Distributed biomass director, EERC gasification is one good solution, he said. It requires low water consumption and simple gas cleanup, among other positive aspects. In conclusion, Zygarlicke took the crowd down the biomass road before us. Sustainable feedstocks must not compete with food, and agricultural processes must minimize water consumption, he said. Opportunities abound for commercialization. “Technology has never been more poised, I don’t think, to determine a future for renewable biomass resources,” he said.
Agricultural Anaerobic Digestion on the Rise National trends in anaerobic digestion of agricultural manure have increased between 2000 and 2007 from fewer than 50 million kilowatt hours (kWh) per year to more than 200 million kWh per year, according to Dan Stepan, senior research manager with the Energy & Environmental Resource Center in Grand Forks, N.D., and a presenter at the organization’s Biomass ’09. A key niche for the process is converting biomass materials to methane gas. In the U.S. this year, 98 anaerobic digesters are using dairy farm manure, 19 use hog manure, three use manure from caged layers, two from ducks and one each from boilers, beef and mixed manure, Stepan told the crowd. “But there’s still potentially a large untapped resource,” he said. The potential biogas-to-energy production from swine farms is more than 3.1 billion kWh per year, he showed in a graph, and the potential from dairy farms is more than 3.3 billion. About half of the country’s wastewater treatment facilities have anaerobic digesters, but only 19 percent use the biogas, Stepan said. Anaerobic digestion is an old technology. “By ‘old,’ I mean really old,” Stepan said. The process was used in Assyria in the 10th century to heat bath water and has been used in the U.S. for the past 100 years to treat municipal and industrial waste and 44 BIOMASS MAGAZINE 9|2009
wastewaters. According to Stepan, it’s an attractive solution for several reasons: the high water content of many biomass materials makes them impractical for combustion; drying costs to achieve a combustible condition exceed the value of energy recovered by combustion; and anaerobic digestion produces a valuable fuel gas. But the process has challenges when it comes to processing different feedstocks, Stepan said. “Siloxanes are a unique attribute of municipally-derived biogas,” he said. The volatile silicon-based compound is used today in personal care products and paints, among other products. It can be found in municipal digester and landfill biogas at high concentrations and forms silica, or glass, when it’s combusted. Accumulated silica damages engine cylinders, turbine blades, exhaust heat exchangers and piping. The typical processes to control Siloxane include refrigeration at less than 40 degrees Fahrenheit followed by activated carbon; advanced refrigeration to minus 25 degrees F; and selexol liquid absorption, Stepan said. Hydrogen sulfide is another gas produced during anaerobic digestion and control techniques include chemical, physical and biological processes. EERC has developed a proprietary sulfide control process with a blend of ingredients that minimizes
the production of hydrogen sulfide, kills the bacteria that produces it, and scavenges any that is produced. It also possesses long-term control effects and comes at a low cost, Stepan said. EERC will demonstrate its sulfide control technology capabilities in anaerobic digestion of dairy manure on the Haubenschild Farm Dairy in Princeton, Minn. The project will take place over the next 2½ years and consists of three phases: lab screening experiments, bench-scale testing and pilot-scale demonstration, Stepan said. Lab screening experiments are taking place now and bench-scale digester design activities have been initiated. Haubenschild Farm has a 500,000-gallon digester that uses the manure from 850 cows, Stepan said. The process produces 72,500 cubic feet per day of biogas with a methane content of 60 percent. The combined-heat-and-power unit, made with a diesel engine and an electrical generator, generates enough electricity for the farm’s operations plus 60 homes and enough heat for the digester and all other buildings on the farm, Stepan said. The digested manure is used as fertilizer, which saves an estimated $40,000 a year, he added.
EVENT continued from page 43
he said. He added, however, “I’m very, very concerned with genetically modifying something that we have thousands and thousands of strains of and don’t know much about many of them; certainly not thousands of them. They produce half of the oxygen on this earth and we want to genetically modify them. I’m very worried about that.”
Change is Necessary U.S. Sen. Byron Dorgan, D-N.D., addressed Biomass ’09 attendees via video. Since 2001, Dorgan has provided nearly $9 million to the EERC for biomass utilization projects, and has included another $7 million in legislation this year, which would be the largest annual federal investment ever made in the program. Dorgan pointed out that some things have to change so the U.S. can have a stable, reliable energy source in the future. “My father spotted an old Model T in a grainery that had been parked there for decades, I bought it for $25 and restored it,” said Dorgan, who grew up in a small town in southwestern North Dakota. Although the car dated back to 1924, he said he filled the tank with gasoline the same way that we still put gasoline in vehicles today. “Nothing has changed at all,” he said. “But it must.” Dorgan said the U.S. faces many energy challenges. “We want to be able to expand our capabilities to produce homegrown energy right here from a range of feedstocks,” he said. “We’ll migrate from corn to other cellulosic feedstocks and we’ll use biomass from landfills. These ideas have been ignored for decades, but not any longer. Congress, and I, believe that it’s long past the time to get busy and create a different energy future.” North Dakota Commissioner of Agriculture Doug Goehring reminded the audience about the influence agriculture has on job creation, statewide and on a national level. Agriculture is responsible for directly and indirectly employing 25 percent of North Dakota’s population, he said, adding that 90 percent of the
state’s total acreage is utilized for agricultural purposes. Nationally, agriculture accounts for 12 percent of the U.S. economy, or about 19 percent of the indirect and direct jobs, according to Goehring. “One of every five people [in the U.S.] is employed by agriculture,” he said. Doug Goehring Goehring, who op- North Dakota erates a 2,000-acre, no- agriculture commissioner till farm near Menoken, N.D., strongly supports increased research into cereal grains and biofuel crops. He said farmers are interested, yet skeptical, when it comes to learning more about the next generation of energy production, primarily biomass. “What will those feedstocks be? Can I grow them on my farm? If it’s a perennial crop, how can I incorporate that?
If it’s annual, how does it fit within my crop rotation? I don’t have those answers,” he said. “Research is being done, and much more has to be done.” One of the biggest hurdles/challenges that remains in advancing the bioenergy crop industry is attitudes, according to Goehring. “Attitudes in general toward renewable energy and biocrops have taken a turn for the worst in the past year or so,” he said. “We need more communication with the public and quite frankly, when we talk about biomass, we need more communication with the farmers. We can educate the public, but we really have to engage farmers, because otherwise all they see are limited benefits and more questions.” BIO Anna Austin and Lisa Gibson are Biomass Magazine associate editors. Reach them at email@example.com or (701) 7384968 and firstname.lastname@example.org or (701) 738-4952.
9|2009 BIOMASS MAGAZINE 45
BUSINESS By Trotter Hunt
Securing Outside Financing for Biomass Power Projects The key to raising money for biomass power projects is developing a good solid business plan that lets investors and lenders know that the projectsâ€™ fundamentals are secure enough to ensure that financial returns are met.
ncentives included in the recently passed stimulus bill combined with pending renewable portfolio standards (RPS) at the federal level, have created a mass of new project developers hoping to bring biomass power projects to market. All of these developers face the same challenge: securing outside
financing. To do this, developers must convince investors and lenders that the projectsâ€™ fundamentals are secure enough to ensure that financial returns are met. Having a good plan and knowing the requirements are key in todayâ€™s challenging economic environment. To secure outside financing developers must create a
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biomass Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).
46 BIOMASS MAGAZINE 9|2009
business plan that addresses areas of concern for lenders. These areas are listed below: Environmental Permitting Capital Cost Power Purchase Agreement Fuel Contracts Site Selection Technology Choice Management Expertise
Any project can be approached in a variety of ways. A project may start with negotiation of a power purchase agreement (PPA). A business plan is then developed to support the PPA. Alternatively, a project concept might be to convert an existing fossil fuel plant to biomass. The business plan created will be to support
BUSINESS By Trotter Hunt
this effort. In any case, a developer typically starts with a concept that he believes will deliver a competitive advantage and the rest of the project is built around that advantage. Whatever the plan, there are some basic steps that most developers follow: Feasibility Study PPA Negotiation Fuel Contract Negotiation Environmental Permitting Preliminary Engineering EPC Bid Package Development EPC Firm Selection Funding Negotiations
Feasibility Study The goal of a feasibility study is to firm up the basic business plan. Hunt, Guillot, & Associates’ feasibility studies have three basic deliverables: a project proforma, a risk analysis report, and a basic site plan. HGA is an engineering and project management firm specializing in biomass-to-power projects. These three documents allow potential investors to quickly review a project concept and confirm or deny interest in the project. HGA’s risk analysis report addresses the key areas that lenders will be interested in (listed earlier). The report documents the plan, the level of risk, the likelihood of the risk occurring and potential mitigation alternatives. Feasibility studies typically cost $40,000 to $70,000 and last a couple of months.
typically are few, if any, bankable fuel suppliers available. Terms of a They are usually power off-take too small to guaragreement are critiantee a certain cal to a project’s viprice or volume for ability and should an extended periTrotter Hunt be addressed early od. The companies in the process. relationship manager, Hunt, would go bust if Lenders prefer Guillot & the company were PPA’s that allow Associates LLC forced to meet exthe plant owner to cessively challenging terms avoid fuel cost inflation risk on an ongoing basis. and push fuel costs through To address this chalto the power purchaser. This lenge, lenders typically prearrangement is similar to the fer a fuel study documenting typical current arrangements at major utilities where elec- a large fuel basket, and fuel tricity costs vary depending contracts to cover the maon natural gas, coal, or other jority of the fuel needs for fossil fuel costs. Fuel cost in- the lending period. A similar creases are passed along to approach to PPAs can also rate payers. Lenders will also be taken for fuel providers prefer PPA agreements with where LOIs can be signed lengths that cover the lend- early in the project life foling period. For example, if lowed by firm contracts once the project is to have a 15- the project is closer to fundyear loan, a 15-year PPA will ing.
be desired or required. One path can be to ask the power purchaser to sign a letter of intent (LOI) to confirm their interest in the project. A formal PPA can be signed at a later date once the project is further developed and any purchaser concerns addressed.
Fuel Contract Negotiation On the fuel side, lenders want confidence that there will be no fuel challenges resulting in power production stoppages (affecting project returns). Unfortunately because of the localized nature of biomass material, there
Environmental Permitting Environmental permitting can be a major challenge these days given requirements in some areas. For this reason, lenders will require permits to be in place prior to funding a project. Permitting timelines can be excessive (up to two years in some regions), so this area needs to be investigated and started early in the process. A variety of firms can assist with this effort. Permitting costs and environmental consulting services will vary depending on the location of the project.
Preliminary Engineering Any business plan must include three primary items: revenues, operating costs and capital costs. Preliminary engineering lays the groundwork for understanding capital cost requirements. The following items are typically included as part of preliminary engineering: development of a project design basis, creation of process flow diagrams, layout drawings, equipment lists and supporting work required for permit applications. Preliminary engineering typically costs about $60,000 and lasts about three months. Additional time and money will be necessary for brownfield projects. Furthermore, additional preliminary engineering will further define the project parameters and ensure that the engineering, procurement and construction (EPC) firm delivers a plant matching the owner’s expectations. However, developers are typically seeking to minimize expenditures on the front end so preliminary engineering dollars are usually kept to a minimum.
EPC Bid Package Development The EPC bid package communicates critical project information necessary for EPC firms in pulling together their project bid. The preliminary engineering serves as the groundwork for the technical portion of the EPC bid package. Additional language
9|2009 BIOMASS MAGAZINE 47
BUSINESS By Trotter Hunt
clarifies responsibilities, performance requirements, bonding requirements, schedule targets and other information required by interested firms. Engineering firms typically assemble very basic EPC bid packages for less than $15,000 and this effort should take no more than a few weeks.
EPC Firm Selection Selection of an EPC firm is a critical step in the development process. The firm should fit with the project goals and lender requirements. These days many lenders are requiring an EPC contract with full wrap including performance guarantees and bond. This arrangement will be a challenge for many smaller EPCs. This arrangement will also result in the highest EPC bid due to increased risk. A consortium of service providers will likely result in lower overall project costs, but might not be able
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to meet other lender requirements. In the end, the EPC firm needs to have experience in biomass power and in managing projects of equivalent size and scope. The firm must be available and able to meet the schedule required. When front end project costs are minimized, as outside financed projects typically are, the resulting EPC bid package is typically rough. This can lead to great diversity in the approaches EPC firms propose and the resulting bid amount. Bids need to be reviewed carefully and approaches discussed extensively to ensure that everyone—developer, lender, EPC firm and engineering counsel—is on the same page. It is common for developers without engineering expertise to hire an owner’s engineer to assist with the feasibility study, preliminary engineering, bid package development and EPC firm selection.
“In this environment, experience and the ability to bond a project are key features we look for in an EPC firm,” says Peyton Bush of FVC, a private equity firm based in New Orleans.
Funding Negotiation Financing typically involves negotiations with two classes of lenders: equity and debt. Equity lenders take on more risk and therefore share more in the upside of a project. Lenders lock in for a set rate of return and incur less project risk. In this environment, equity providers are typically seeking returns of around 20 percent. Given the availability of government-backed loans, debt providers are willing to loan at about 8 percent to 10 percent. Funding negotiations can be lengthy and frustrating in today’s environment, but there are lenders will-
BUSINESS By Trotter Hunt
ing to support worthwhile projects. A common approach is to engage equity providers early (generally after the feasibility study is completed) to understand their interest, key issues, risk appetite, hurdle rates and preferences for doing business. This approach can help to ensure that there are no surprises late in the game. Debt providers are typically brought in once construction is ready to start. Most debt providers prefer a project to have 20 percent equity at minimum before considering funding a project. However, some debt lenders are starting to consider a new approach. The recently passed stimulus bill allows developers to take the 30 percent investment tax credit (ITC) in the form of a cash grant. This grant is paid 60 days after plant commissioning. Some lenders are considering allowing this cash payment to serve as the equity in the project. This means an investor could potentially develop a project for only a few hundred thousand dollars in front-end development costs. “Using the ITC cash grant in lieu of equity investment presents an exciting option for the developer,” says Brent Knight at Cobank, a Denver-based project debt provider. “However, a project will have to have excellent fundamentals for us to approve this approach.” In the end, the lenders have what developers need—money. It makes good sense to engage them early and keep them engaged throughout the process. It also makes final negotiations go more smoothly.
portfolio standards at the federal level, have created a mass of new project developers hoping to bring biomass power projects to market. All of these developers face the same challenge: securing outside financing. To do this, developers must convince investors and lenders that the projects’ fundamentals are secure enough to ensure that financial returns are met. Having a good plan and know-
ing the requirements are key in today’s challenging economic environment. Selecting the right service providers and partners can make all the difference. BIO Trotter Hunt is a relationship manager at Hunt, Guillot & Associates LLC. Reach him at email@example.com or (318) 2515929.
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Conclusion Incentives included in the recently passed stimulus bill combined with pending renewable
The solution behind the solution.
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TECHNOLOGY By Joseph Teja Jr. and Michael J. Pomianek
Managing Technology Convergence and Protecting Innovation: IP for Cleantech Ventures—Biomass and Beyond Although there is no one-size-fits-all approach to protecting biomass/cleantech intellectual property, there are some general attributes of many cleantech efforts that should be considered when assessing possible strategies.
hile intellectual property (IP) is always an important component to the success of any technology-based company, arguably it is especially important for “cleantech” ventures directed to energy and/or environmentally-related technologies. Cleantech is a broad field with several
narrow subsectors—the technologies embraced range from older technologies already in the public domain and now being recycled, to cuttingedge research coming out of academic and industry labs. Some of the innovations involve fundamental technology breakthroughs that may warrant broad protection. In other cases, however, an incre-
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biomass Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).
50 BIOMASS MAGAZINE 9|2009
mental and seemingly narrow improvement in an already crowded area of development may provide an important enabling solution having significant commercial value.
Cleantech Common Themes Keen observers of the biomass/cleantech space note various attributes that ap-
pear to be common themes for many cleantech ventures. First, cleantech typically requires a significant interdisciplinary knowledge of scientific and engineering principles including chemistry, materials science, mechanical and electrical engineering, biology and biotech, environmental sciences, and/or information technology and computer
TECHNOLOGY By Joseph Teja Jr. and Michael J. Pomianek
science. Second, tion, pipelining/ cleantech endeavtransportation, ors often require combustion/ena longer time gine design. Many frame to get to of the solutions market, in some being proposed, instances greater such as celluthan 10 years, losic ethanol, alJoseph Teja Jr. requiring persis- shareholder/ gal biodiesel and tence, patience, co-chair, Wolf ther mochemical and long-range Greenfield conversion of business stratebiomass to hygies. Third, there drogen or liquid may be limited transportation possible routes fuels, have yet to to market, such be proven to be as an existing practical or ecohierarchy which nomical at scale controls some and are likely infrastr ucture, to require large forcing cleantech Michael capital outlays Pomianek companies to shareholder/ over long time sensitively con- co-chair, Wolf frames to reach Greenfi eld sider how their an endpoint of innovations “plug substantial market into” the bigger picture. In penetration and revenue addition, cleantech is often generation. Moreover, each capital intensive, involv- proposed biomass-based ing a bigger financial scope transportation fuel soluand scale than other tech tion ultimately has to deal sectors, and can be signifi- with the formidable hurdle cantly affected by govern- of integrating itself into ment regulations and pub- the existing gasoline/fossil lic perception. diesel distribution/vehicle Considering technolo- requirements infrastructure gies related to the conver- or of inventing—or comsion of biomass into trans- pelling others to invent—a portation fuels as a specific new transportation infraexample is illustrative of structure. how these themes can play out. Innovation required IP Tools to bring such technologies for Cleantech Patents: Many facto commercial fruition can span and integrate a wide tors may affect the proeffectiveness range of technology spe- curement, cialties. Examples include and usefulness of patent horticulture, plant biol- protection in the cleanogy, forestry, genetics, mi- tech space, including the crobiology, fermentation, role of patents in a given gasification/pyrolysis, ca- cleantech business strategy. talysis, chemical purifica- Are patent filings useful to
the business primarily to instill investor confidence or to bar market entry in one or more jurisdictions? Is marketplace exclusivity and a strong defensive position important? Is the IP expected to provide leverage for licensing and partnering opportunities? The answers to these questions and others help structure a successful patent protection strategy. Agreements: For many cleantech endeavors, there is an expanded role for technology partnerships, consultants and advisers in a variety of fields, and thus a greater attentiveness to the protection of proprietary information through carefully crafted agreements often is warranted. Similarly, trade secrets may provide additional or alternative protection for some innovative solutions involving improvements to and/ or combinations of existing technologies or relating to aspects of commercial implementation that provide commercial advantage but for which copying by competitors may be difficult to determine. Trademarks: These also have an important role to play as energy policy tends to be an emotionally charged issue, and the impact of branding on public perception can significantly affect market value.
Developing a Strong IP Strategy For cleantech companies, it is important to note
that investors consider strong IP to be important both for first-to-market companies (to exclude entry of competitors) as well as those that follow (to protect a key value-added proposition for later market entry or licensing/acquisition leverage). Those involved in developing a cleantech IP strategy need to understand all of the technology dimensions involved. For example, appreciable protection may be available not only for the resulting combination of technologies that leads to a particular innovative solution, but additionally for one or more of the respective technology pieces, and/or how the respective technology pieces fit together. As noted above, technology convergence also warrants an increased sensitivity to issues such as ownership and protection of proprietary information in agreements. In academic and corporate research settings, different areas of research that historically may have had no apparent connection to each other, or to energy and the environment, may suddenly find themselves significantly relevant in combination. One example is the synergy between diverse areas such as microbe biology and high-efficiency low-power electronics for certain fuel cell-based biomass to electrical power generation applications. Where/how innova-
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TECHNOLOGY By Joseph Teja Jr. and Michael J. Pomianek
tions will be adopted or plugged into an existing infrastructure is another area for consideration. IP directed to integration with an existing production/delivery/ distribution infrastructure (IP on “the plug”) may in some cases transcend protection of the core technologies associated with a given cleantech innovation and be of key importance. For example in the biomass space, IP directed to improving the logistics and economics of biomass harvest and delivery to conversion facilities, or to facilitating the integration of biomass-derived fuel or energy into existing distribution or end user infrastructure may ultimately be of greater value than IP covering specific biomass conversion technologies. Incremental or narrow innovations can be commercially valuable in the cleantech space, and IP protection should not be ruled out if a broad scope of protection appears to be unavailable. When it comes to energy-related challenges, innovators often need to simultaneously consider supply/demand issues, environmental impact, and national security interests, and provide solutions that positively impact price, reliability and scalability. Even in crowded areas of development, incremental innovations, however seemingly trivial, that achieve any one or more of these things and provide a lynch-pin type of enabling solution are likely to be extremely valuable. Similarly, patent protection should not be discounted or dismissed for cleantech ventures with a long time frame to market and/or a long technology lifespan. Strategic patent application filing approaches may be available in some jurisdictions to potentially increase patent enforcement life, for example, until the effort reaches a certain state
52 BIOMASS MAGAZINE 9|2009
of maturity or potential commercial viability. Another possibility for extending the overall life of a cleantech patent portfolio is to file one or more initial applications relating to core aspects of the technology, and then stagger over time subsequent patent filings to add incremental improvements/changes. Given the global applicability of cleantech innovation, strategic international IP protection may be of significant importance. Protecting innovation globally typically takes into consideration those jurisdictions in which significant market opportunities are present or anticipated, as well as jurisdictions in which potential competitive activity may be likely. For biomass ventures, an additional sensitivity to international regulations, government subsidy and taxation policy, prevailing and projected economics of existing fossil fuel-based alternatives, access to and price of required biomass raw materials, prevailing energy/fuel distribution and end user infrastructure, and jurisdiction-specific enforcement issues relating to energy and the environment is warranted. As noted above, the impact of branding on public perception can significantly affect market value, and cleantech endeavors may face particular challenges given the limited branding vernacular available (“green,” “clean,” “eco,” “earth,” “bio”) In the long run, it may be more beneficial to consider alternatives to the more obvious greenbranding choices while at the same time being mindful of the heightened sensitivity of public perception to energy and environmental issues.
Conclusion While there is no one-sizefits-all approach when it comes
TECHNOLOGY By Joseph Teja Jr. and Michael J. Pomianek
to biomass/cleantech IP, nevertheless there are some general attributes of many cleantech efforts that should be considered when assessing possible IP strategies. We have identified what we believe to be the most salient of these attributes and explored how they should inform an approach to IP protection. To summarize some of the key recommendations: Appreciate the importance of understanding all technology dimensions involved; technology convergence creates potential for enhanced IP protection. In academic and corporate research settings, technology convergence contributing to many cleantech solutions may provide rich possibilities for invention mining and creative bundling for commercial exploitation. IP directed to integration with existing production/delivery/distribution infrastructure (IP on the plug) can in some cases transcend core technologies and be of key importance. Legacy technology does not mean unprotectable technology. Incremental/narrow innovations can be commercially valuable; donâ€™t rule out protection if broad scope appears to be unavailable. For biomass and other cleantech ventures characterized by a long
time to market and long technology lifespan, increase patent enforcement life via strategic filing approaches. International IP protection considerations for cleantech should include sensitivity to the dynamics of local economic conditions and international policies (e.g., regulations, incentives) as well as jurisdiction-specific enforcement issues. Consider the elevated importance of public perception on branding, but beware of â€œgreen gridlockâ€? when considering trademark protection. While some of the identified cleantech attributes may have a greater significance than others for a given venture, being mindful of the variety of issues germane to many energy and/or environmentally-related ventures will invariably be helpful toward building a sensible model for protecting cleantech innovations. BIO Joseph Teja Jr. and Michael J. Pomianek are shareholders and co-chairs of the cleantech group at the intellectual property law firm of Wolf Greenfield in Boston. Reach them at jteja@ wolfgreenfield.com and mpomianek@wolfgreenfield .com respectively.
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Biomass is No Longer the ‘Unknown Renewable’ Formerly considered the unknown renewable, biomass became the central focus of the clean energy debate when policymakers recognized that it was essential to meeting a strong renewable electricity standard. Congress now has the opportunity to take meaningful action on climate change and reduce our dependence on foreign oil. Biomass is the keystone to a national energy policy that can achieve both goals. As the organization dedicated to expanding and advancing the use of clean, renewable biomass power, Biomass Power Association recently launched a full-scale education campaign to promote the economic and environmental benefits of biomass power. The organization is playing an active role in helping to shape energy and climate legislation. This legislation moving through Congress presents a tremendous opportunity to expand and advance the use of clean, renewable biomass power. The first step to reducing greenhouse gases and achieving energy independence is a strong commitment to American sources of renewable energy. To help achieve this, the BPA is working in partnership with the RES-Alliance for Jobs, a coalition of businesses and organizations supporting an aggressive renewable electricity standard. In cooperation with the RES-Alliance, BPA is demonstrating how a renewable electricity standard of 25 percent can spur sustainable economic growth and investment and create thousands of new jobs in the renewable energy industries. The energy legislation currently being debated in Congress calls for a 15 percent renewable energy standard (RES) with loopholes and caveats that water down an already modest proposal. We have the resources to do better. BPA actively engages policymakers and Congressional staff on how biomass power can bridge the gap to a more aggressive RES. Southeastern states that do not have a sustainable supply of wind or solar power can use biomass to meet the demands of a high renewable energy standard. Bio-
mass power also produces electricity 24 hours a day seven days a week, allowing local utility companies to easily add the additional electricity into their base-load power supply. This reliability is the reason that biomass power holds the greatest potential for meeting a national RES. While a meaningful RES remains Bob Cleaves the top priority, Congress must also president and CEO, Biomass take steps to level the playing field in Power Association the renewable sector by providing tax equity, or parity, in the production tax credit. For too long, biomass has been taxed at twice the rate of competing renewables such as wind and geothermal. This leaves biomass at a substantial competitive disadvantage. Congress should not pick winners and losers in the renewable energy industry, but instead give biomass the same tax credits as other renewable sources. In addition to tax parity, it is essential that Congress extend the production tax credit for an additional five years for those plants that were awarded the credit in 2004, but could see it expire in 2009. These plants are the workhorses of America’s existing renewable portfolio and should continue to receive the same support that other renewable technologies receive. The BPA will continue to raise these important issues in Washington, D.C., by working closely with members, lawmakers, and a broad coalition of renewable energy organizations. Expanding the use of biomass power will create additional green energy jobs and greatly reduce greenhouse gases. According to a Washington Post/ABC poll, 84 percent of Americans support a national RES. If Congress is serious about moving America toward a green economy, biomass power will light the path. BIO Bob Cleaves is president and CEO of the Biomass Power Association. To learn more about biomass power, please visit www.USABiomass.org.
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Biomass Magazine is a trade journal serving companies that use and/or produce power, fuels and chemical feedstocks derived from biomass. Collectively, these biomass utilization industries are positioned to replace nearly every product made from fossil fuels with those derived from plant or waste material. The publication covers a wide array of issues on the leading edge of biomass utilization technologies, from biorefining, dedicated energy crops and cellulosic ethanol to decentralized power, anaerobic digestion and gasification. Itâ€™s all here.
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Biomass ’09 Workshop Highlights the State of Biomass in the US The recent Biomass ’09: Power, Fuels, and Chemicals Workshop, held July 14-15 in Grand Forks, N.D., highlighted the state of biomass in the U.S. Although the two-day event wasn’t intended to give concrete answers for every pathway out there for marketable biomass technologies, it put a spotlight on the future of biomass. (see “Biomass’ Role in the Energy Future” on page 42 for more conference coverage) One message that wove its way through the workshop was that U.S. history books will mark this current age as one of opportunity for biofuels and bioenergy. Whether these opportunities turn into profitable commercial ventures or fizzle as poor business decisions is still being written. Success will depend on policy, incentives, the development of sustainable biomass feedstocks and, finally, proving new conversion technologies in near-commercial-scale biorefineries and bioenergy systems. Laws and money are driving factors for biomass. Legislation for carbon cap and trade, renewable fuel mandates, renewable portfolio standards and tax incentives for bioenergy and biofuels have never been closer to becoming a reality. Likewise, research dollars and financial incentives, intensified by an influx of economic stimulus dollars under the American Recovery and Reinvestment Act of 2009, are at an alltime high for developing and implementing new technologies and to grow, harvest, and convert biomass to transportation fuels, heat and electricity. For biomass-based renewable liquid fuels alone, more than 20 multimillion-dollar federally funded projects have been awarded over the past two years. By about 2012, these projects must prove or disprove the technical and economic viability of producing ethanol or green diesel. Updates from Abengoa Bioenergy and Poet LLC on converting wheat straw, milo, switchgrass, corn stover, corn fiber, and other biomass cellulose to ethanol corroborate this 2012 goal. In the next three to four years, there will be answers concerning the reality of producing significant biofuels in the U.S. The bottom line is that biobased fuels will need a production cost that competes with corn ethanol, perhaps requiring other financial incentives or subsidies.
Timothy Baye from the University of Wisconsin made it clear that cellulose biomass is on track to be a commodity that can be brokered. Projects must consider locally available biomass feedstocks and a conversion process that is flexible for feedstock type Chris Zygarlicke and quality. Looking ahead, new oil-bear- associate director, EERC ing nonfood crops such as crambe, camelina, cuphea, jatropha and algae appear to be likely resources for liquid biofuels, as described by Paul Pansegrau from the EERC. J.R. Aspinwall from Midwest Research Institute described a pilot project in Florida whereby open-pond algae is grown and harvested to produce liquid biofuels. David Haberman from IF LLC, agreed that algae is potentially a great untapped fuel resource, but reminded attendees that genetic modifications of algae could create strains that threaten sensitive ecosystems and that only naturally occurring strains should be used. Several utilities presented at the workshop, including Xcel Energy and Great River Energy, and it was clear that a massive resurgence is underway to develop strategies and technologies to cofire biomass residues in coal-fired utility boilers. In summary, cellulose biomass may become a viable piece of the U.S. energy security puzzle. It meets carbon dioxide emission and life-cycle targets, is sustainable, has growing incentives and support, has an established window for demonstration of viable technologies for production and conversion, and is garnering significant business investment. We can finally state with a degree of certainty that the bioenergy business is about three to four years away from demonstrated economic and technical proof. This is truly a historic time for biomass. BIO Chris Zygarlicke is a deputy associate director for research at the EERC Reach him at firstname.lastname@example.org or (701) 777-5123.
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58 BIOMASS MAGAZINE 9|2009
September 2009 Biomass Magazine