BERGEN OP ZOOM – Although large companies such as ADM and Cosan are increasing their grip on the ethanol industry, it will probably not be these companies that enable the industry to take the next step in its development. Smaller companies that focus more on R&D such as Iogen, Dyadic, Mascoma and Royal Nedalco are most likely the pioneers in that field. As steady feedstock supply and feedstock costs are becoming more important issues, the need for the flexibility that cellulosic ethanol offers is increasing every day. Pilot plants are announced and build, yet not a single one has achieved industrial scale. Ethanol Statistics sat down with Ger Bemer, Chief Executive Officer at Royal Nedalco, to discuss the process of building a cellulosic ethanol plant. Mr. Bemer explained why Nedalco has chosen to skip the pilot plant phase and is now planning to build a full scale production plant in Sas van Gent (the Netherlands), with an annual production capacity of approximately 200 million litres. A remarkable step, considering the increasing number of announced pilot plants in the E.U. and U.S.
The Feasibility of Yeast Based Cellulose Technology
“We are able to skip the pilot plant phase because our production technology is based on yeast, rather than bacteria” Mr. Bemer explains. “It’s a technology that we as an alcohol producer are very familiar with because it has been the work horse in the industry for years. We know how it reacts on a relatively small scale, and because it is a fairly robust system, we are confident that we can predict how it will react when implemented on a full size industrial scale.”
“This is very different from technology based on bacteria, which is extremely sensitive to infections, making it very difficult to scale up. Although it is not impossible to keep such large systems completely free of infections, it is simply too expensive. For that reason, most companies that aim to develop bacteria based technology gradually increase the size of their pilot plants, to root out any imperfections. In our opinion, the chances for success through that road are relatively slim. We are however betting on a more robust technology.”
Time to Market is Crucial
Nedalco’s choice to develop yeast based technology is maybe best explained by Mr. Bemer’s emphasis on the importance of short time-to-market when discussing the role of patents. “Patents are obviously very important in this industry, as you try to protect your unique position. That’s why we are very active in the R&D field. But owning several strong patents does not mean that much. Patents expire relatively quickly, which means that it is more important to reduce your time-to-market on the product as a whole. That is why we have been and still are actively seeking strategic partnerships with other parties, because most likely you only have one or two pieces in a jigsaw puzzle.”
“Our patents are focussed on the fermentation process. But to produce second generation ethanol, you also need enzymes. That’s why we cooperate with enzyme manufacturers such as Dyadic. You also have to pre-treat your raw materials, with steam or in other ways. That’s why we cooperate with SunOpta, an American/Canadian company that has extensive knowledge on that part. You can never do these sort of things alone. Well chosen strategic partnerships are crucial, as they can help you capitalize your technology more quickly.”
Nedalco recently joined forces on several areas with the American company Mascoma and has been cooperating in the Netherlands with the Technical University in Delft for several years. Nedalco and Delft University have developed the fermentation technology in a joint effort. “It is an important part of our R&D program, which we plan on formalizing in a joint venture”, Mr. Bemer commented.
Government Support and Delays in Construction
In Canada, Iogen Corporation is planning to build a large production plant, while Abengoa announced it plans to build a 30 million gallon per year plant in the United States (Kansas). Nedalco first announced that construction on it’s Sas van Gent plant would begin this year, but recently postponed to wait for the outcome of a long expected subsidy program for innovative biofuels. The slow development in supporting legislation in the Netherlands and sometimes the complete absence of such amazes Mr. Bemer. “Whether or not it is the right decision, the Dutch government has chosen not to support first generation biofuels in order to fully focus second generation. That decision has been made, so be it. But in my opinion, if you make such a clear choice, you should substantiate it with strong actions, incentives and support it with appropriate legislation. In stead, the Dutch government has allocated 60 million euros for the coming 5 years to support the domestic development of second generation biofuels. In an international context, this is of course a joke. I just heard that the Japanese government is planning on supporting a second generation initiative with 60 million dollar. Cananda has allocated 500 million dollar for next-generation biofuels. And in the United States, 6 companies have just received 33 to 80 million dollar each, for pilot plants and semi-industrial scale plants. I hope the Dutch government comes to realize that if they want to help develop this important industry, it will need to take more serious action.”
Market Developments
So what can we expect from the cellulosic ethanol industry in Europe in the years to come? “Three developments are key to that question. First of all, what will oil do? This development is very important for the future of our industry. I can assure you, if oil prices go to or over $100/barrel, every country will start to worry about where to get oil and fuel. On the other hand, if oil would return to $40/barrel, nobody cares anymore. The second development, which is to some extent linked to the first, is when will cellulosic ethanol become economically viable? Technology is developing, as is the cultivation of various feedstock. But the question is more complex as the meaning of economically viable is ambiguous. Viable relative to ethanol, to oil, to your competitors? There are many variables that can change this, but we are convinced this could happen in a relatively short period. Otherwise, we wouldn’t plan to build a 200 million litres per year plant. The third development is ‘who will supply the market?’. Again, this is related to government policy. The European ethanol industry is not capable to fully compete on price with the Brazilian industry for at least the next 5 years or so. So for the industry to mature, we have to strike the right balance between imports and ‘domestic’ production.”
“We are confident that the development of oil prices and production cost levels will be in our favour, otherwise we wouldn’t have started in this business. This market will develop in the next few years, of that I’m sure. I’m just wondering whose going to supply it.”
© Ethanol Statistics 2008