The Strategic View What’s Next in Fuels Brian Foody Iogen Corporation ABLC Next San Francisco...

The Strategic View

What’s Next in Fuels

The Strategic View


Brian Foody

Iogen Corporation

ABLC NextSan Francisco

November 11, 2014

The Strategic View


The Strategic View


• 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?

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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


The Strategic View






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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


• With all these facilities now in “start-up”, what’s really happening?

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• 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


• With all these facilities now in “start-up”, what’s really happening? - RELIABILITY

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The Strategic View


The Strategic View






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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


Separation


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


Separation


Distillation

Power Generation

Electricity

Enzyme Production

Plant Fibre

Cellulose Ethanol

Pretreatment


Separation


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


The Strategic View






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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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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


The Strategic View






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Thank YouThank You

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The Strategic View What’s Next in Fuels Brian Foody Iogen Corporation ABLC Next San Francisco...

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