The political classes chattered about cellulosic ethanol after President Bush’s 2006 State of the Union address. Bush used that speech to raise the profile of fuels made from ordinary biomass like wood chips, cornstalks, or sugarcane, making it sound like a potential key to the U.S. strategy to break the addiction to foreign oil.
Four years later, no one has yet come close to fulfilling this vision of making cellulosic ethanol in a large-scale way that makes the planet greener, and generates major cash. But one of the interesting early attempts is advancing inside a small lab operated by ZeaChem in Menlo Park, CA. The company, headquartered in Lakewood, CO, will undergo a critical test over the coming year at a $50 million facility along the banks of the Columbia River in Boardman, OR.
ZeaChem (pronounced ZEE-uh-kem) is one of the many small companies around the country seeking to make at least some kind of progress toward Bush’s ambitious goal of reducing oil imports from the Middle East by 75 percent by 2025. The ZeaChem effort has attracted more than $40 million in venture capital from well-known backers (Mohr Davidow Ventures, Firelake Capital, etc.), interest from a big oil refiner (Valero Energy), some sizable tax breaks from the state of Oregon, and a $25 million grant from the U.S. Department of Energy. If ZeaChem’s chemistry and math is being extrapolated correctly, the company says it should be able to make ethanol fuel for about $50 a barrel in operating costs within two to three years.
It all hinges on how well it can put together a couple of lab processes at a new plant under construction in Oregon, which will seek to show the lab work in Menlo Park can be reproduced at industrial scales. The Oregon plant is scheduled to be up and running in 2011.
“We believe we’ve developed a process that has better yield than any other ethanol process,” says Dan Verser, ZeaChem’s co-founder and executive vice president of R&D. “It’s a huge opportunity.”
The ZeaChem story goes back to 2002, years before Bush put cellulosic ethanol into the nation’s vocabulary. The company was started by Verser and Tim Eggeman, who had worked together at Coors Brewing on a biopolymer project until that was sold to agricultural giant Cargill. They both have doctoral degrees in chemical engineering, and experience working together, so they set out looking for some new venture they could start or expand.
One of the ideas they scoped out in the late ’90s was a corn-derived ethanol project that never really got off the ground. Part of the problem is that corn kernels aren’t nearly as abundant as the corn cobs and stalks, and any effort to use corn as a raw material for fuel is going to run into a PR buzzsaw called the “food versus fuel” debate. Plus, the existing process for producing ethanol also consumed lots of energy, so it didn’t appear to be a viable business, especially when oil was much cheaper.
“Tim and I looked at it and said ‘what’s wrong with this project? Is there a technical solution?'” Verser says. “We actually came up with a better way to make ethanol.”
A fair bit of chemistry goes into this process, but here’s the gist from what I gathered from Verser. ZeaChem’s patented process starts with wood chips from poplar trees, which are mainly used today for paper and pulp. The biomass goes through a separation process called fractionation. Sugars from the wood are filtered out and sent through a fermentation process. A natural microorganism from soil, called an acetogen, then converts the sugars into acetic acid without creating carbon dioxide as a byproduct—which other ethanol-making processes do. The acetic acid is converted into a chemical intermediate called an ester, which then goes through an industrial hydrogenation process in order to become ethanol.
That could be the end of the process, but it isn’t. One of the byproducts of the fermentation process is lignin, the tough glue-like material in wood and other biomasses that can’t be broken down efficiently. Part of the key to ZeaChem’s plan is to capture this lignin residue and run it through a high-heat industrial gasification process that creates a rich stream of hydrogen that’s needed for hydrogenation, and which produces power for the factory.
At the end, about two-thirds of the energy stored up in the ethanol comes from the sugar fermentation process, while the rest comes from lignin residue.
“The neat thing about is that you get all the fractions of the wood into the product,” Verser says.
So far, ZeaChem has only performed this process in 5,000 liter fermenters—too small for commercial scale. It has run various parts of the process at different facilities, and has never really done it in a true closed-loop system like it intends to at commercial scale. That’s what it plans to do at the plant in Boardman, OR.
Oregon was chosen to be the proving ground for this cellulosic ethanol process for a number of reasons, Verser says. For one, ZeaChem found a steady, reliable supply of raw material in the form of poplar trees from Greenwood Resources, which runs a 28,000-acre tree farm nearby. The trees grow fast—reaching maturity in about three years—and they can re-sprout when they are cut off at the ground, meaning there’s no need to re-plant them, Verser says. The farm is located near a deepwater port on the Columbia River, providing easy access to the Pacific Ocean and major West Coast shipping ports. And the state of Oregon has a tax credit program, mainly used for wind farms, that is expected to pay for about $6 million to $7 million of the construction costs of the $50 million ethanol demonstration plant in Boardman, Verser says. (About half of the construction costs will be paid for by the U.S. Department of Energy, with the rest coming from ZeaChem, he says.)
Once up and running, the Boardman plant should have capacity to generate 250,000 gallons of cellulosic ethanol per year, Verser says.
But that’s still just a drop in the bucket. If ZeaChem can show in Boardman that it can really put all the pieces of this puzzle together, and run an efficient demonstration plant, then it will be in position to talk about big time production. A full-scale commercial plant, which could produce 100 million gallons of cellulosic ethanol per year, is estimated to cost about $400 million. ZeaChem expects to talk with big chemical or oil companies with pockets deep enough to take on a project that big, Verser says. It will be 2013 or 2014 at the earliest before the company could be in a position to make ethanol at commercial scale, he says.
But ZeaChem is seeking to hedge its bets ever so slightly, to make its business about more than just ethanol. Its process can also be used to make chemical intermediates that go into latex paints and adhesives. The company also isn’t wedded completely to poplar trees, saying its process is “feedstock agnostic” and that it should work on other cheap sources of biomass like sugarcane, switchgrass, or corn stalks and leaves.
There are plenty of competitors in the ethanol race, like Lebanon, NH-based Mascoma, Marlborough, MA-based Qteros, Cambridge, MA-based Verenium (NASDAQ: VRNM), Broomfield, CO-based Range Fuels and others. Some, if not all, of them are sure to flame out. But if anyone proves that cellulosic ethanol can be mass produced, the market is potentially a big one. The Renewable Fuel Standard calls for 36 billion gallons of renewable fuel to be produced in the U.S. by 2022. Even a small slice of that market share could yield sizable returns for a startup like ZeaChem, with a little more than 30 employees, and $40 million of venture capital investment.
“The number of plants is huge, there could be hundreds of facilities,” Verser says. “There’s a lot of space there if all this happens on a time frame and a pace people expect.”
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