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The Strategic View
What’s Next in Fuels
The Strategic View
What’s Next in Fuels
Brian Foody
Iogen Corporation
ABLC NextSan Francisco
November 11, 2014
The Strategic View
What’s Next in Fuels
The Strategic View
What’s Next in Fuels
• Brief Introduction to Iogen
• The First Wave of Cellulosics Arrives• What’s behind the curtain?
• Driving better economics• The Quest for Yield
• Breaking Through the Blend Wall• Drop-ins or not?
2
32011
2004 2005
Making Cellulosic Ethanol Since 2004Making Cellulosic Ethanol Since 2004
2010
20092007
• Over 30 years development, with $500 million invested
• Over 300 patents issued or pending
• Strong focus on technology validation and commercial implementation
• History with blue chip partners
Enzyme Business: Historical relationships include:
One of the world’s largest and most experienced teams in cellulosic biofuels
One of the world’s largest and most experienced teams in cellulosic biofuels
• 9 years developing, designing, de-bugging and scaling-up cellulosic ethanol technology in our integrated demo plant
• Achieved steady, reliable production operations - integrating biotech, process tech and engineering
• Projects developed in Canada, US, Germany and Brazil
• Extensive feedstock supply chain experience, with contracts totaling over 2.8 million MT/yr
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The Strategic View
What’s Next in Fuels
The Strategic View
What’s Next in Fuels
• Brief Introduction to Iogen
• The First Wave of Cellulosics Arrives• What’s behind the curtain?
• Driving better economics• The Quest for Yield
• Breaking Through the Blend Wall• Drop-ins or not?
5
The First Wave of Cellulosics ArrivesThe First Wave of Cellulosics Arrives
• Over $2 billion has been invested in commercial cellulosic biofuel production
• Ten technology platforms have been scaled up (including two failures)
• Five platforms, including Iogen’s, are enzyme based cellulosic ethanol
• At least another two pre-commercial platforms have big corporate sponsors
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Our commercial facility is in Brazil - Allied with RaizenOur commercial facility is in Brazil - Allied with Raizen
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Brazilian Sugar Mills Raízen Costa Pinto Mill, Piracicaba, Brazil
Brazil’s largest cane processor, Iogen partner
• 24 sugar/ethanol mills, • ~ 65 m tonnes/yr. crushing • ~ $30 billion sales• ~ 40,000 employees
The Costa Pinto 2G Ethanol Project – Start-up Q4 2014
• US ~$100 million• 40 m litres/yr. 2G ethanol• Bagasse as feedstock • Residue to boiler• Once operational, Raizen
plans for 7 more plants
The Costa Pinto Cellulosic Ethanol FacilityThe Costa Pinto Cellulosic Ethanol Facility
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Brazil’s unique advantage: Co-location synergies Brazil’s unique advantage: Co-location synergies
• Meets the need to wring more out of existing assets• 50% higher yield per acre• Extend the operating season
• Uses feedstock that’s already delivered on-site
• Significant cost savings• Opportunity to share existing
equipment and facilities
• Enables mills to “extend” their operating season 9
The First Wave of Cellulosics ArrivesThe First Wave of Cellulosics Arrives
• With all these facilities now in “start-up”, what’s really happening?
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The First Wave of Cellulosics ArrivesThe First Wave of Cellulosics Arrives
• With all these facilities now in “start-up”, what’s really happening? - RELIABILITY
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Eliminate Line Plugging
What does it mean to work on reliability?What does it mean to work on reliability?
Resolve Erosion Problems
The First Wave of Cellulosics ArrivesThe First Wave of Cellulosics Arrives
• With all these facilities now in “start-up”, what’s really happening? - RELIABILITY
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Target Range
The Strategic View
What’s Next in Fuels
The Strategic View
What’s Next in Fuels
• Brief Introduction to Iogen
• The First Wave of Cellulosics Arrives• What’s behind the curtain?
• Driving better economics• The Quest for Yield
• Breaking Through the Blend Wall• Drop-ins or not?
14
Cellulosic Processes Need to Drive Better EconomicsCellulosic Processes Need to Drive Better Economics
15Cellulose Ethanol
Pretreatment
Enzymatic Hydrolysis
Separation
Ethanol Fermentation
Distillation
Power Generation
Electricity
Enzyme Production
Plant Fibre
Cellulose Ethanol
Pretreatment
Enzymatic Hydrolysis
Separation
Ethanol Fermentation
Distillation
Power Generation
ElectricityElectricity
Enzyme Production
Plant Fibre • Rough landscape:• OPEX: $1.50/gal
• CAPEX: $6 - $10/gal/yr
• Yields: 75 - 95 gal/MT
• Typical strategic choices• Drive improvements in the yield / cost curve
• Simplify to make it cheap• Complicate to add yield / product revenue
• Source low cost feedstock• Tipping fee for MSW vs “pay to collect” ag residues, etc.
• Generate large by-product revenues
• Get financial support on capital
Cellulosic Processes Need to Drive Better EconomicsCellulosic Processes Need to Drive Better Economics
16Cellulose Ethanol
Pretreatment
Enzymatic Hydrolysis
Separation
Ethanol Fermentation
Distillation
Power Generation
Electricity
Enzyme Production
Plant Fibre
Cellulose Ethanol
Pretreatment
Enzymatic Hydrolysis
Separation
Ethanol Fermentation
Distillation
Power Generation
ElectricityElectricity
Enzyme Production
Plant Fibre • Rough landscape:• OPEX: $1.50/gal
• CAPEX: $6 - $10/gal/yr
• Yields: 75 - 95 gal/MT
• How good, really, are our yields?• Biotech processes can drive very high yields, but (at
least conventionally) on only 50% - 55% of feedstock
• 45% - 50% of the feedstock:• Doesn’t make it to market; and• Doesn’t capture renewable fuel premiums
• Can all our feedstock sell as fuel?• Potential for twice our current yields and half our current
unit capital costs
Quest for Yield – Shift more feedstock to fuel Quest for Yield – Shift more feedstock to fuel
• Iogen has been looking for approaches that can• “Bolt-on” to any of the existing cellulosic platforms;
• Produce drop-in fuels that fit existing infrastructure;
• Use existing equipment and infrastructure to save capital
• Introducing Renewable Hydrogen• Made from cellulosic-based biogas using SMR technology
– a staple of petroleum refining
• Incorporated into gasoline with standard refinery equipment
• Allows a shift from making process fuel from the feedstock to making transportation fuel – capturing significant renewable fuel premiums 17
Renewable Hydrogen is a true drop-in fuelRenewable Hydrogen is a true drop-in fuel
• Potential for RH fuels is very large 7 billion gallons (ethanol equiv)/yr
• about 14X the current capacity for CNG/LNG
• Applicable to many of the existing cellulosic process
• Subject to proprietary protection• U.S. Patent No 8,658,026H2 Source H2 Sink 18
Quest for Yield – Shift more feedstock to fuel Quest for Yield – Shift more feedstock to fuel
• It is critical for cellulosic biofuel processes to drive up yield• Need it for basic economics• Competitiveness
• This is not a lost cause … there are options• Lots of different groups will have different strategies
• This quest for yield should drive collaboration among competitors
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The Strategic View
What’s Next in Fuels
The Strategic View
What’s Next in Fuels
• Brief Introduction to Iogen
• The First Wave of Cellulosics Arrives• What’s behind the curtain?
• Driving better economics• The Quest for Yield
• Breaking Through the Blend Wall• Drop-ins or not?
20
The Strategic View on BiofuelsThe Strategic View on Biofuels
Biofuels are steadily becoming more competitive with petroleum
Real costs in agricultural products are generally flat Real oil prices have seen a long term (bumpy) upward trend Ethanol is close to competitive with gasoline on an energy basis
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The Renewable Fuel Standard is also driving biofuel useThe Renewable Fuel Standard is also driving biofuel use
• America has a renewable fuel standard intended to push biofuel market share up
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Renewable Fuel Standard mandate has increased dramatically under the Energy Bill of 2007
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2006 2008 2010 2012 2014 2016 2018 2020 2022
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ConventionalBiofuels(corn ethanol)
CellulosicBiofuels
Other AdvancedBiofuels
Energy Billof 2007
• Put in place for energy security and environmental reasons
• Works through a credit trading system that creates a positive price signal for biofuels
• The design of this credit system has big implications for fuel choice
Debate about the future for biofuelsDebate about the future for biofuels
• The market for ethanol as a 10% blend with gasoline (E10) is fully penetrated
• Pushing ethanol use beyond this level runs up against the so-called blend wall
• Debate about the future for biofuels:
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E85 blends Drop-in fuels
What’s Next in BiofuelsWhat’s Next in Biofuels
Simple Story• Whatever is the cheapest on an energy
basis will win
• More precisely: In order to succeed, drop-ins need to be competitive with ethanol (of the same class) on an energy basis …. And this is not an easy competition
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What’s Next in BiofuelsWhat’s Next in Biofuels
• In order to succeed, drop-ins need to be competitive with ethanol1 on an energy basis
• Why no premium for drop-ins?• The price signal from the RFS will be capped at
what it takes to move E85 into the market
• That price signal looks like it won’t be that far from what it takes to deliver cost parity on an energy basis
251. (of the same class)
Two Lines of Evidence for competition on an energy basisTwo Lines of Evidence for competition on an energy basis
Conceptual
Imagine you had a price signal big enough to make E85 cost effective on an energy basis
Would people buy it if:• It was cost effective;• Their cars could run on it; and• It was available at a nearby station
What does it cost to deliver on these?
• Not that much• E85 station conversions are only 2%
to 5% of the cost of cellulosic facilities
Market Results
Bottom line: The market price for credits matches the price needed to make E85 cost effective!
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What does this mean for cellulosic ethanol?What does this mean for cellulosic ethanol?
• The “Blend Wall” is not a barrier for cellulosic ethanol
• If cellulosics can compete with corn ethanol, given whatever green premiums are available, …
• then they will have a place in America
• Ultimately … cellulosic biofuels will need to compete on an energy basis … but the industry still has a long learning curve
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The Strategic View
What’s Next in Fuels
The Strategic View
What’s Next in Fuels
• Brief Introduction to Iogen
• The First Wave of Cellulosics Arrives• What’s behind the curtain?
• Driving better economics• The Quest for Yield
• Breaking Through the Blend Wall• Drop-ins or not?
28
Thank YouThank You
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