Debra Fiakas'  Instablog

The series continues on the companies and organizations that were awarded grants from the Department of Energy to pursue renewable energy sources.  Private investors are left out in the cold on the award given to Renewable Energy Institute International (REII), a non-profit organization.  Eventually some of the institute’s technology will find their way into commercial projects  -  at least that is the idea  -  and within reach of investors.

REII is receiving just under $20 million to produce green diesel from agriculture and forest residues using advanced pyrolysis and steam reforming technologies.  They are to establish a pilot plant that can process up to 25 tons of feedstock per day. 

I have been somewhat critical of the DOE for awarding large grants for development of technologies that appear to be well established and already in commercial stage.  We have already seen several green diesel concepts and plenty who are targeting ag and wood waste.  However, this project does not involve the usual cellulosic ethanol processes and proprietary enzymes.

Pyrolysis  -  combustion in the absence of oxygen  -  is worth exploring further.  There are yet unanswered questions about pyrolysis.  What is the energy requirement to kick-start the process?  What is the real output in terms of finished product and waste or pollution streams?  What scale is needed to make a pyrolysis operation breakeven?  Then where can a pyrolysis plant be located to ensure both access to adequate raw material supply and distribution?

Investors may not be able to invest in REII, but it is worthwhile to watch the outcome of this project as it will provide valuable insight into the economic viability of pyrolysis technology as a viable energy resource.

Notably Waste Management, Inc. (WM:  NYSE) and InEnTec have a joint venture, called S4 Energy Solutions, that aims to produce renewable fuel and power using plasma gasification.  InEnTec calls it their PEM or Plasma Enhanced Melter.  In this process biomass is superheated in a closed chamber to temperatures of up to 20,000 degrees Fahrenheit, yielding a synthetic gas.  The “syngas” is then reformulated using into ethanol, green diesel, hydrogen and methane.  Since WMI brings feedstock material to the equation, we are inclined to expect more at an earlier date from the S4 Energy venture.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

Elevance Renewable Sciences (private) is launching a pilot project to turn it and plant oils into jet fuel.  Elevance is getting $2.5 million from the Department of Energy’s stimulus funds to complete a preliminary engineering design for a renewable fuel facility in Newton, Iowa.  The company is putting up $625,000 of its own money for the design.

Elevance claims to be the first company to “successfully bridge the renewables and chemicals industries.”  The company says it is trying to turn natural renewable plant-based oils like soybean, canola, corn and sunflower into specialty chemical products.  Elevance claims to have Nobel Prize-winning catalysts and other proprietary technology at its disposal to synthesize natural oils with greater efficiency.

Alright, for $2.5 million I guess we can see if Elevance really has built a better mouse trap.  However, I am skeptical that the company can come up with anything significantly different than the processes used by any number of other players which have already been using chicken fat for jet fuel. 

For example, Tyson Foods, Inc. (TSN:  NYSE) teamed up with Syntroleum Corp. (SYNM:  Nasdaq) to build a facility that is expected to produce 75 million gallons of renewable diesel and jet fuel from Tyson’s chicken fats and other oils in Syntroleum’s patented Biofining process.  Syntroleum uses a version of the well-known Fischer Tropsch process.  Syntroleum already tested 100,000 galls of synthetic jet fuel with the U.S. Air Force in 2006.  The joint venture is already started construction on a refining facility in Geismar, Louisiana.  It is expected to begin production in 2010 and turn out about 75 million gallons of fuel a year.

Darling International, Inc. (DAR:  NYSE) has also formed an alliance with Valero Energy Corp. (VLO:  NSYE) to produce renewable diesel from used cooking grease and other animal by-products collected by Darling.  Darling and Valero have applied for a DOE loan guarantee but no new science and no seed money for engineering designs are needed to bring this project to commercial stage.

Furthermore, chicken fat is not the only contender in the feedstock race.  Sapphire Energy in California successfully tested algae-produced renewable jet fuel on a Continental flight.  Bill Gates put $100 million into Sapphire, probably because he and his advisors can see that algae-based renewable diesel shows great promise.  Given that algae can produce a finished product in two weeks means that one acre of algae can deliver more fuel than one acre of just about any plant and could far surpass chicken and other animal by-products in terms of volume.  The National Algae Association estimates current algae technology could produce up to 3,000 gallons of biocrude per acre per year and that the cost of algae-crude could drop to $10.00.

My hat is off to the Corn Belt congressional delegation.  They seem to get what they want when it comes to their “pork” and chicken projects.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  Crystal Equity Research has a Buy rating on DAR shares.

The Department of Energy (DOE) awarded American Process, Inc. (private) a fairly most award compared to some of the other grants announced in December 2009.  American is getting $17.9 million to produce biofuel and potassium acetate using wood waste.  American will need to come up with $10.2 million of its own funds to complete the project.

American’s pilot plant is located in Alpena, Michigan near a manufacturer that uses hardboards to make wood panels among other products.  The facility is expected to produce up to 890,000 gallons of potassium acetate per year beginning in 2011.  American, which is a self-described consulting firm, plans to use ist proprietary “American Value Added Pulping” technology. 

Why potassium acetate?  It is a salt that can be used as a de-icer instead of chlorides.  It is less corrosive, making it particularly attractive in places like airports that must have de-icers to keep planes going in and out, but need to minimize environmental impact.  Fire extinguishers, food additives and certain pharmaceuticals (penicillin) also require potassium acetate. 

The use of this specialty chemical across so many diverse industries may be a factor in the limited amount of information available on total production and market size.  China is a major producer and exporter to the U.S. and the rest of the world.  American Elements (private) is a major producer in the U.S.

During the winter of 2008-2009 the U.S. FAA reported shortages of potassium acetate-based runway de-icer.  This was primarily due to a shortage in raw materials typically used to make potassium-acetate de-icers.  Major potash mines can be found in Saskatchewan, Canada; California, New Mexico and Utah in the U.S.; China and Germany.

The de-icer situation suggests a door might be open for American Process if they can make the stretch from “consultant” to “producer.”  However, the pilot project may require an additional player to commercialize this bochemistry project.

Once production is at full scale investors might see a profit margin in a range of 15% to 20%.  While this might seem slim to some, efficiency in sales and distribution allows specialty chemical companies such NewMarket (NEU:  NYSE) and Chemspec International (CPC:  NYSE) to report net margins of 11.1% and 21.0%, respectively. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.