Best stock to invest in – Renewable Energy Group Teams Up With ExxonMobil For Cellulosic Biodiesel



Best stock to invest in

Jim Lane

Two giants hook up to bring cellulosic biodiesel to scale. A new
source of biodiesel feedstock, and a new source of renewable
fuels.

In Iowa, ExxonMobil (XOM) and Renewable Energy Group (REGI)
have agreed to jointly study the production of biodiesel by
fermenting renewable cellulosic sugars from sources such as
agricultural waste.

REG has developed a patented technology that uses microbes to
convert sugars to biodiesel in a one-step fermentation process
similar to ethanol manufacturing. The ExxonMobil and REG Life
Sciences research will focus on using sugars from non-food
sources. Terms were not disclosed.

Readers will remember the technology unit, branded as LS9 before
the REG acquisition in 2014. LS9 focused on biodiesel from its
earliest days in 2006 — in fact, that was the sole product in
development until a detergent alcohol was put into development in
2008.

“The core technology is advanced”

Through the research, the two companies said they will address
the challenge of how to ferment real-world renewable cellulosic
sugars, which contain multiple types of sugars, including glucose
and xylose, but also impurities that can inhibit fermentation.

“The core biodiesel technology is advanced,” REG Vice Presdient
Eric Bowen told The Digest. “That’s one of the reasons ExxonMobil
reached out, they know there’s a quicker timelines than other
projects they’ve looked at, because there’s 7 years of work
already done to ferment sugars into FAME biodiesel. The work now
is to port that technology to cellulosic sugars, something which
there has been DOE-sponsored work on in the past, some of which
was announced publicly.”


“The bulk of cellulosic sugars development has been for
cellulosic ethanol, which is primarily though not exclusively a
yeast-based fermentation. It’s much more dilute, too. In our work,
we do very concentrated fermentations and we like a very
concentrated sugar source. So, optimizing those sugar streams, and
understanding the impurities is an important part f the work going
on now. The impurities depend on the source. They could include
acids from the hydrolysis, or ash content. We’ll be looking at how
concentrated those impurities are.”

“If there were large volumes of sugars available today, I have no
doubt we could manufacture almost right away.”

ExxonMobil’s interest?

Exxon has been quiet of late in renewables, though they ran some
algae TV ads around the time of COP 21. Maybe, in the context of
showing that they are “doing something”. Lately, they’ve been more
active in partnering and talking up their algae research. Consider
this $1 million partnership with Michigan State University, here
, or this recent ExxonMobil perspectives posting, here.

Back in the days before REG acquired LS9 and before the
cellulosic sugar path was discovered, Chevron became an investor
in 2009. Back then, the aim was to show that it could produce
renewable diesel at $45-50 per barrel, by 2011, with a goal of
commercial-scale production as soon as 2013. The basic science,
said LS9 at the time, was completed — it was a matter of yield and
scale.

Timing?

“The timing is really about the availability of cellulosic
sugars,” Bowen added. “If there were large volumes of sugars
available today, I have no doubt we could manufacture almost right
away. The technology has been significantly de-risked.

“Clearly, our interest and ExxonMobil’s is on commercial-scale
production,” Bowen said. “There’s a stage-gate process in place.

The pivot to cellulosic feedstocks

On LS9’s fuel aspirations we wrote some time back:

Given that there are seven pounds
of oil to a gallon, the cost of US sugar makes fuel production
completely out of the question for now, and will push
bioprocessors towards the higher-end chemical and bio-based
products for the near term. In the company’s early days, the
magic bug lived on corn or cane syrups – and for that reason the
company was initially expected to build its first commercial
facility in Brazil, the Saudi Arabia of cane syrup.

But, no longer.

That’s where Jay Keasling’s lab at UC Berkeley/JBEI comes into
the picture. In early 2010, working with REG Life Sciences, they
came up with a way to utilize cellulosic sugars. At the time, they
said that the team of researchers engineered a microbe that
“consolidates advanced biofuels production and cellulosic
bioprocessing for the first time. This breakthrough enables the
production of advanced hydrocarbon fuels and chemicals in a single
fermentation process that does not require additional chemical
transformations.” The research results appeared in the January 28,
2010 edition of Nature.

The cellulosic option broadened the geography considerably —
conceptually, into REG’s base of operations in the Midwestern US.
Or, possibly in its new operating sphere of Eastern Europe.

Advanced fuels, good, advantaged fuels, better

Biodiesel is America’s favorite advanced biofuel, but it also is
one of the most advantaged by policy considerations. Specifically,
biodiesel qualifies under the Renewable Fuel Standard as a
biomass-based diesel fuel; it qualifies for the biodiesel tax
credit, if that is extended beyond 2016; it conceivably qualifies
under RFS relating to the sale of cellulosic waiver credits, as a
cellulosic fuel. If produced in California, it would qualify under
the California Low Carbon Fuel Standard.

Bowen agrees. “Cellulosic RINs? There’s that nested category,
cellulosic diesel, that was established for some players that
aren’t around any more, but it’s there, and although we have not
completed the lifecycle analysis and not yet formally approached
EPA, we’re expecting that the fuels would not only qualify as an
advanced biofuels but as a cellulosic diesel. California would
welcome this fuel, I would expect, and we expect it to fit the Low
Carbon Fuel Standard very well, though again, the lifecycle
analysis has yet to be completed.

What about cellulosic drop-in fuels?

Well, REG Life Sciences has IP in that area too. In the article “Microbial
Biosynthesis of Alkanes”
published in Science magazine in
July 2010, a team of REG LS scientists announced the discovery of
novel genes that, when expressed in E.coli, produce alkanes, the
primary hydrocarbon components of gasoline, diesel and jet fuel.
This discovery is the first description of the genes responsible
for alkane biosynthesis and the first example of a single step
conversion of sugar to fuel‐grade alkanes by an engineered
microorganism.

Yield, and scale-up

Scale? That’s something for later in the partnership, as the
partners have indicated. So, we are left with the chase for yield.
It’s the task that consumes Amyris (AMRS)
every day, Yield, yield, yield.

No more so than with cellulosics, where the sugars are only a
fraction of the biomass and the transportation and logistics
penalties for low yields add up quickly.

“Right now, as with all our process development, we’re focused on
the 5 liter stage now,” REG’s Bowen told The Digest, “and then it
moves to the 650-liter stage, and then as with all our work it
would move to Okeechobee for testing in large scale fermenters.”

ExxonMobil’s reaction

“This research is just one way ExxonMobil is working to identify
potential breakthrough technologies to reduce greenhouse gas
emissions, increase energy supplies and realize other
environmental benefits,” said Vijay Swarup, vice president of
research and development at ExxonMobil Research and Engineering
Company. “The science is extremely complex, but we hope to
identify new affordable and reliable supplies of energy for the
world that do not have a major impact on food supplies.”

“As we research renewable energy supplies, we are exploring
future energy options with a reduced environmental impact,” Swarup
said. “Our first challenge is to determine technical feasibility
and potential environmental benefits during the initial research.
If the results are positive, we can then take the next step and
explore the potential to expand our efforts and explore
scalability.”

The REG Life Sciences demonstration plant

REG Life Sciences’s demonstration plant is in Okeechobee,
Florida, and was initially designed, and has been used, to
scale-up LS9’s fermentation technology and generate large
commercial samples for testing and product qualification by key
partners and prospective customers. Since the company’s initial
run at 135,000 liter scale in Q3 2012, LS9 has made numerous
additional fatty alcohol runs, production runs of fatty acid
methyl esters (biodiesel), and some co-operative work with Cobalt
Technologies.

In 2012, we wrote of LS9’s demonstration plant opening day.

In the glades north of Lake
Okeechobee, in rural Florida, a 135,000 liter fermenter column
stands out against the landscape like Salisbury Cathedral rising
over the plains of Thomas Hardy’s Wessex, and you half expect a
tropically-attired Tess of the D’Urbervilles to come around the
corner at any moment.

But the VIP-filled sedans,
kicking up dust as they head northwest from the lake, are
greeted primarily by dumbfounded cows and bulls that are still
wondering, to the extent that they wonder, how yellow dragon
disease took the citrus trees away, and where all the workers
went in Okeechobee County, why so many Family Dollar thrift
shops have popped up, and why so many people are using boards in
place of window glass.

After all, the cows see all the
Mercedes sweeping from the rich coastal enclaves like Jupiter
and Palm Beach, en route to one of the several appealing hunting
clubs that dot the region, or the golf courses of the west side.

Do they wonder how the rich got
so rich, and the poor so poor, in such a hurry, down in Florida?
To the extent that bulls consider macroeconomics, in between
meals in the pasture as the cars go by.

The opening of that fermenter
column is what the VIPs are coming to celebrate, because LS9’s
demonstration facility opened for business in Okeechobee
yesterday. A wonder of science it is – a technology that takes
in sugars, and through microbial fermentation directly converts
the material into a programmable array of products, including
biodiesel, jet fuel, diesel, or surfactant alcohols, just for
starters.

The Bottom Line

Well, ExxonMobil. REG. Biodiesel and its established market, and
legion of fans. The “we could manufacture almost right away”
perspective from REG. What’s not to like about this one? It’s a
pick-me up of the first magnitude, and coming on the heels of the
US Navy, Tesoro, and Suntory in recent days — it’s a tidal wave of
dive-ins by major partners, for sure.

Jim Lane is
editor and publisher  of Biofuels Digest where this
article
was originally published
.
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