Calysta’s Pivot: Another Green Energy Startup Demotes Fuel Projects

6/26/14Follow @Tansey_Xconomy

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NatureWorks’ co-owner, Cargill, which operates feedlots for cattle and pigs, Davies says. Cargill is investing in methods to trap methane from those lots, he says.

Calysta will continue to pursue deals like the NatureWorks partnership, following a “capital-light” model of inventing technology and licensing it, says Calysta CEO Alan Shaw (pictured above). Calysta has been talking to a number of companies about chemicals other than lactic acid that could be produced from methane using its core technology, he says.

In December, the startup raised $3 million in a Series A financing round led by new investor Pangaea Ventures. The venture firm, based in Vancouver, BC, and Hillsborough, NJ, focuses on advanced materials across a range of industries from energy to agriculture. Its limited partners include German chemical corporations BASF and Evonik. In total, Calysta has raised less than $10 million since its founding, Shaw says.

Calysta has enough money to support its operations through this year, but will need to raise additional funds, Shaw says. And while the startup intends to follow its out-licensing model, it has also embarked on a second enterprise that will involve building its own plants.

In May, Calysta acquired BioProtein of Stavanger, Norway, a former producer of fishmeal for Norway’s fish-farming industry. Terms were not disclosed, but Shaw says the transaction was a “paper merger” that did not immediately lumber Calysta with substantial new costs. Through the deal, Calysta gained rights to the designs for BioProtein’s novel “loop reactor,” in which methane feeds the growth of bacteria that are harvested to make a protein-rich animal food. Silverman says the loop reactor will make Calysta’s own methane fermentation processes more efficient and cost-effective.

Calysta was able to acquire the technology on advantageous terms because BioProtein had fallen on hard times and its plant was dismantled, Shaw says. The BioProtein factory was built with as much as $350 million in financing from Statoil, an international oil and gas company based in Norway, as well as other entities, including chemical giant DuPont, he says. The plant in Tjeldbergodden, Norway, made up to 8,000-10,000 tons of fish food per year between 2000 and 2006, Silverman says. But in the mid-2000s, natural gas prices were high and fishmeal prices were low, leading Statoil to shut down the three-story facility.

But conditions have now flip-flopped, Shaw says. Natural gas prices have dropped, while fish meal prices have risen with increasing international demand among emerging middle classes for high-protein foods, such as salmon from Norway’s aquaculture industry, Shaw says. BioProtein’s manufacturing technology is now an entree to a $370 million market in fish and livestock food for Calysta, which plans to build its own plants by 2017, he says. The deal accelerates Calysta’s timeline to market its first products—a key goal, Shaw says.

“The acquisition is a game-changer for us,” Shaw says. “We’re definitely in growth mode.” The private company, which had 15 employees a year ago, now has a staff of at least 20 and is hiring, he says.

The capital outlays to reconstruct a new commercial-scale plant, based on the blueprints for BioProtein’s dismantled factory, would be substantial, costing “in the low hundreds of millions” of dollars, Silverman said in an e-mail exchange with Xconomy. Calysta will start first with a smaller plant making samples of the fish food to distribute to potential customers.

BioProtein’s now-defunct plant in Norway ran on natural gas from a pipeline—a reliable source, but one that made it vulnerable to price increases. Calysta may use pipeline gas, Silverman says, but it may also try to augment that supply with methane captured at a nearby landfill or other operation where the gas would otherwise become an air pollutant.

Calysta hasn’t entirely given up on biofuels. It’s still working on technology to convert captured methane into liquid fuel, though a partnership formed in January with Lawrence Livermore National Laboratory. The collaborators are testing small portable reactors lined with Calysta’s bioengineered enzymes, which would convert the methane into liquid methanol.

Shaw says Calysta’s fuel technology is promising, but it’s not the company’s best path toward marketable products at this point.

“I still think fuel is a tough nut to crack,” Shaw says.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

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  • Cl1ffClav3n

    Amazingly, the PhDs on these projects are so narrowly specialized they don’t understand the macro view of thermodynamics and realize what they are doing has a negative energy balance. That’s an impossible position from which to create an energy source or economic fuel. Alan Shaw should have known better after wasting $375 million of Shell money at Codexis before bailing out of cellulosic biofuels and into methane biofuels at Calysta. Solazyme still claim to be working on fuel “components” even though the cheapest they ever sold their algae biofuel was $61.33 per gallon. For a thorough but readable walk through all the issues that doom biofuels, take a look at this Canadian paper by a U.S. Navy officer http://wici.ca/new/resources/occasional-papers/#no.4.