Detroit’s NextCAT Hopes to Light a Fire Under Idled Biodiesel Producers with New Catalysts

5/17/10

A funny thing happened on the way to the green economy. Real-life market forces have a way of foiling the best-laid plans of mice, men, and government incentives. When petroleum diesel was 4 bucks a gallon a couple of years ago, biodiesel seemed like such a deal. But then, says Derrin Leppek, of Detroit-based biodiesel catalyst developer NextCAT, “the price of petroleum diesel dropped, biodiesel was no longer competitive, and soybean prices went through the roof.”

So, says Leppek, 80 percent of the biodiesel producers in the United States sit idle. Government regulations and environmental concerns may be increasing demand for biodiesel, but market realities are holding them back. That’s where NextCAT comes in with what it says is a solution to the problem. Its technology can take biomass that’s less expensive than food feedstocks—like soybeans, corn, or sunflower—and convert nonfood feedstocks like algae and recycled cooking oil into fuel.

NextCAT, which is located at the TechTown business incubator in Detroit, signed an option agreement to produce technology developed at the National Biofuels Energy Laboratory at Wayne State University in Detroit. The company also recently received $50,000 from the Michigan Microloan Fund and another $50,000 from the First Step Fund, newly created by the New Economy Initiative, a Detroit-based philanthropic partnership.

That $100,000 will take the company a long way—far enough to conduct its first pilot plant test sometime in the next 90 days. Leppek is a technology commercialization fellow at Wayne State on loan full-time to NextCAT. The university pays his salary. Founder Charles Salley and other executives are working without compensation.

Leppek says the company has “also received indications” that it will receive a Small Business Innovation Rearch Grant from the National Science Foundation as early as July.

“But what we’re looking for in the next nine to 10 months is a half-million in funding,” Leppek says. “And that will get us through pilot and scale testing and enable us to enter the market.”

Without getting too technical about types of feedstocks, their prices, levels of free fatty acids, the process of transesterification, and other fun stuff of interest to specialists in the field—you can read about the technology here and see a technical paper here—NextCAT, in a nutshell, believes it has a better, cheaper, more-efficient way of sparking the entire process. Simon Ng, NextCAT’S CTO and interim associate dean of research at Wayne State’s College of Engineering, has helped to uncover a new class of catalysts that have the ability to convert a wide range of oil feedstocks to biodiesel while, at the same time, simplifying the biodiesel production process. 

Turning inexpensive waste grease oil and animal fats into suitable feedstocks for biodiesel production. should enable a restart of the 140 (out of a total of 173) biodiesel producers currently idled by high feedstock costs, according to NextCAT. The company says that by opening the door to these less expensive feedstocks, NextCAT’s catalysts will save biodiesel producers at least $1 per gallon. The global biodiesel market was 4 billion gallons in 2009 and, largely due to government mandates, is projected to grow at 10 percent anually over the next five years, according to figures supplied by NextCAT.

NextCAT plans to enter the U.S. market first to retrofit existing idle plants as demand increases because of government mandates. Federal regulations require 1 billion gallons of biodiesel in fuel blends by 2012. The company projects revenue of $18 million in 2014, assuming a usage fee of $0.125 per gallon of biodiesel produced. For a plant that produces 10 million gallons per year, the company says, that equals $1.25 million a year. Catalysts last about a year, so revenues are recurring.

It’s a good time to go to market, then, says Leppek. The next 90 days will see pilot testing at a European catalyst manufacturer and, he is quick to add, “we’ll also perform one in Michigan as well.”

And that, NextCAT believes, is how innovation can solve problems associated with the conflict between government plans and market realities.

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