July 20, 2009

Agri-Tech Reaches Significant Milestone

Agri-Tech, a SC start-up that has licensed technology from NC State, today announced that it had reached an agreement with Kusters Zima Corporation to manufacturer torrifaction equipment under license.

The first units are scheduled to be in the market in around a year, and pre-production orders are now being taken.

The technology is believed to be highly scalable -- with initial units targeted in a mid range of around 10 tons per hour. People interested in pricing should contact the company directly.

This is no small milestone. Without significant outside investment, Agri-Tech has been able to fund the placement of the initial units into the market by leveraging the Intellectual Property they have under contract.

This is one to watch.

June 21, 2009

Biomass to Electricity is 80% more efficient than Biofuels

Biomass to Electricity (and torrefaction as a densification and logistics strategy) continues to make more and more sense.

A recent study published in Science concludes that using biomass to produce electricity is 80 percent more efficient than transforming the biomass to biofuels and 200% more effective at reducing greenhouse gas emissions.

While I understand our infatuation with creating liquid fuels, if biomass is more effective in generating electricity in the near term (and it is) we should apply more funds and political support for biomass combustion (the "burn baby burn" strategy).

Every year we put off addressing global warming in a meaningful way just increases the hole we have to eventually dig out of, and the cost of doing so.

Biomass to electricity is today's solution -- it costs less to implement than the alternatives and it reduces the amount of carbon we pull out of the ground.

I think Ethanol did the industry a huge dis-favor. The numbers on it were just horrible yet it got over-promoted. Now, I'm afraid that we threw the 'baby out with the bathwater' and for a period of time "Ethanol" became synonymous with "BioMass" .

The good news is that time and data are changing that perception. This study is just one more example on how the United States is coming around to what much of Europe has already figured out -- Biomass is the lowest cost, most practical way to make meaningful progress on global warming. It is the most Intelligent Carbon Strategy.

June 7, 2009

Duke University Grad Students Complete Torrefaction Business Plan

I recently mentored a Duke Graduate Engineering group in an Entrepreneurship Studies Class.  The topic was Torrefaction (this surprises you!). 

These students developed a full blown business plan for a torrefaction mini-mill (regional plant) in North Carolina.

When the cost of the plant was $ 600/Ton hour of production, and there was a mix between initial equity and convertible debt ($ 3 Million), and $4 Million downstream debt their business plan calls for a 25 Million dollar revenue company generating 31% EBITDA by year 5 .  I actually think that they grow the business too fast in the early years. It may be more capital efficient to take on less capital up front, grow a little more slowly until the intial units are generating cash, then use debt if you can get it, or higher priced equity later to ramp up the buisness quickly.

They assumed Green Credits starting at zero in year one, and ramping to $20 per ton over time, which is anyone's guess.  They also did not do a sensitivity analysis to the carbon spread (the difference between the price of raw biomass and the displaced coal on a BTU basis), which is key to the analysis which I held out as an 'advanced assignment' if they had time.   I will either do this analysis or have it commissioned and will post next on this issue).

But overall, it provided two really valuable things:

1)  Another set of eyes and spreadsheets working independently on the analysis of the underlying business model.

2)  Another business plan which independently tries to concisely communicate the value proposition, market and risks associated with torrefaction.  (I ghost wrote a plan for another company to try and help them move forward -- so now that's two plans from which to draw from the future).

Torrefaction plants are one block in the value chain and a necessary part of the development of the industry. 

The recent downdraft in coal prices in the US, coupled with a lack of green credits right now, has hampered the development of the industry in the US.  Yet these business plans show that there is promise in the US, and explain why this industry is developing more quickly in Europe.

Next, I'm going to apply option pricing models (talk about geeky!) to determine the volatility weighted coal price at which torrefaction makes sense.  The model is still most sensitive to carbon spreads.  The notion would be that if an investor wanted to, they could build a plant and hedge against downdrafts in coal prices.  Then the question is would it make economic sense when you put the cost of the hedge on top?  Stay Tuned.

May 17, 2009

Another set of Bio Char Test Results

We can probably call the "biochar debate" with the number of precints that have already reported.

Yet each study is helpful as it adds to the overwhelming preponderance of evidence.

Now Blue Leaf in Canada has reported the results of a recent study.

Results include:
  • Crop Yeild Range: +6% to +17%
  • 68% greater root length
  • 24% increase in plant density

In addition, some of the best work has been done at Cornell.

Biochar for carbon sequestration has the potential to instantaneously ignite (maybe not a good word when talking about torrefaction) the torrefaction industry, as well as being a viable solution to cost effective global warming. So we'll continue to track it.

May 12, 2009

More on the BEPEX Project

I've been contacted by several people for more information on the Bepex project, asking for more information.

I think the most interesting thing about the Bepex project is its use of corn stover. While removing corn stover requires that you add nitrogen back into the soil, that cost can be covered if coal prices rise or carbon credits kick in the right way.

The pilot plant is very small in volume compared to the expected production plant.

Interestingly, Bepex calculates that the larger production plant (100 KT per year) can support a 11.3 MW plant or 10% co-firing for a 113 MW plant.

The corn stover would be sourced from a 30 mile radius using only 3% of the available stover. That gives you an idea of just how much stover exists in the corn belt! That's a pretty reasonable plan.

Bepex plans a co-firing trial in August. That should be pretty interesting, and they will capture emissions. If the co-firing trial goes well it could be an accellerant for the industry. I will, of course, follow up and post what I learn.

The price of coal (which is very low in the corn belt) and the uncertainty of Carbon Credits are the main hurdles. Bepex has the technical expertise and corporate size to pull this off. At $ 1,000 per installed ton/hour of production, Bepex is getting close.

I've been asked to update and compare Bepex to Agri-Tech. The Agri-Tech solution continues to make progress, and I think that it will more likely be targeted at what I refer to as a Mini-Mill. Not field deployable in the first iteration, but a small community plant that farmers could own in a co-op arrangement. The visionary founder has a clear idea of how torrefaction could help rural communities. Bringing both these solutions to market would be great for the industry.

May 3, 2009

Alterna --Another Report from International BioMass Conference

Torrefaction vs. Carbonization:

Alterna Energy of Canada presented on their carbonization program.  (Charcoal)

An inspiring presentation.  The business is up and running and generating revenue, with two plants in operation.  The plant in South America is co-located with a nut processing facility so they have access to shells as a low cost waste steam.  In South America, they sell charcoal as a retail cooking fuel. (higher price).  Unfortunately, high priced cooking fuel or sales of industrial charcoal do not a large scale renewable energy business make.

However, Alterna Energy may be able to get there first because part of their plant cost is covered by sales of industrial charcoal.  This is one to watch.

April 30, 2009

100 Torrefaction Geeks in the Same Room!

The International BioMass Conference is this week in Portland Oregon.

At a breakout session over 200 Torrefaction Geeks sat glued to the presentations by Integrow, Bepex and Pellet/Briquette manufacturers.

Kevin Grotheim from Bepex gave an excellent update on thier research and provided much needed specific numbers to help our understanding of torrefaction. (of course I kept wondering if he should change his name to GroTherm).

Contact me if you want all the data, but the most interesting to me was the capital cost they are projecting:

15 Million to 25 Million for a plant with a capacity of 100Ktons to 150 Ktons per year. Thats $ 1,000 per ton of capacity. That's not too bad, especially for the first version of the project.

Walt Dickenson of Integro Earthfuels gave a clear, realistic overview of why torrefaction is ideal for co-firing. Integro is now targeting year end for their plant.

Everyone at the conference commented on the need for Cap&Trade to add at least $ 20 per ton of value for the models to work. Coal price volatility is the killer. Hard to shoot at a moving target.

Yet I think the industry is not focusing hard enough on getting the capital cost down through really creative engineering. Bepex's work is quite encouraging. Topell was often mentioned as the lead horse in the global race.

Great conference by the way. Ya'll come!

April 12, 2009

Close.... But we need $ 500K per ton hour of Capacity

The drop in the price of coal has gotten the attention of everyone following Torrefaction .

From an investment viewpoint, part of  the challenge with Torrefaction is the sheer number of variables involved; price of feedstock, price-to-compare for delivered coal, impact of Carbon Credits, and what the cost of processing equipment will be.

When you stack probabilities on top of probabilities, the percentages are not your friend.  

When coal prices were above $ 120 a short ton, Torrefacton made economic sense without Carbon Credits with plenty of headroom for increases in feedstock prices, and a wide range of prices for equipment and operating costs.

Now that coal is way down we've rerun a lot of numbers (I'll share you the geeky probability trees) but the result is pretty clear.  

We Need the Price of Torrefaction Equipment to be $ 500,000 per ton hour of capacity for Torrefactoin to develop pre Carbon Credits. This is the price at which an investor can reasonably take the gamble on the ups and downs of coal prices and the other variables.

Unfortunately, this is about twice the low end of the range of prices we're getting.  When we have greater clarity on Carbon Credits, the industry may be able to afford higher equipment prices. Carbon Credit clarity is the case in Europe right now and Torrefaction makes great economic sense for biomass serving that market. So maybe Torrefaction will develop for the export market first (just as Green Circle is exporting the pelletized woody biomass from Florida.

However reaching the magic number of $ 500K per ton hour of capacity is quite achievable and a much closer putt than .50 cents (installed) per watt of solar energy, or $ 500 per kw (installed) for Wind.  Not that these are bad technologies -- they're not and we support all renewables in a multi-technology strategy to get us to 20% renewable;  but here's the point:

Biomass, and Torrefaction in particular are a shorter putt.  Reaching $ 500 per Ton Hour of Capacity is just not that far off, and the industry develops at that price because that price can support all the variabilities in other inputs.

Lets go sink that putt.  

March 22, 2009

Georgia Power's Intelligent Carbon Strategy

Georgia Power (part of Southern Company) announced that the PUC has approved the conversion of the Mitchell Plant to a 100MW biomass plant.

That's not surprising.  What is surprising is that through the analysis, no one has seriously questioned the size of the plant!  100 MW is just too large for a cost effective biomass plant without torrefaction -- and Southern Company has no known plans for torrefaction.

According to one estimate, the plant will require 160 Chip Trucks a day.  Given an economic distance of 25 miles, consuming 3,520 tons of chips a day will create a regional biomass black hole pretty quickly.

Now lets look at the other side:  Three things are true.

A)  The amount of woody biomass available is generally underestimated and Georgia is rich in aging woody biomass due to the downturn in paper and housing
B)  Depending on how Cap-&-Trade comes down, the value of biomass could make bringing chips in by rail from further distances economic.
C)  Georgia does not need to run the plant at capacity nor do they really have to commission it

What you say?  Since they are retrofitting an existing mothballable plant, they can move the process forward and see how Cap-&-Trade comes down.  If biomass gets calculated right (carbon neutral) and it looks like the price of credits are going to soar, they can press forward quickly and get this plant into production quickly.  If they create a black hole for local biomass, at least they have bought time and avoided buying into a short term carbon credit bubble.

Hmmm... Some smart thinking going on at Southern Company.....

Of course the "Right" answer long term is:

1)  Build plants in the 30MW to 40MW -- this is the optimal size for green chips
2) Invest in Torrefaction!  Stretch the economic range of delivery to 100 miles by rail or more! 

We'll continue to work on #2.

March 12, 2009

Its Time for a Conversation about BioChar -

BioChar is basically taking torrefied wood and tilling it into farmland. Why would you do that?

1) Because it would sequester the carbon -- it doesn't break down quickly
2) It is reported to be quite helpful to the soil (and this is where the debate seems to be)

But here's the important thing.  If BioChar gets legislated as an acceptable form of carbon sequestration.......... Watch out!

 Torrefaction will soar. The existing nasiant industry will explode and existing players will either take off or get blown away by savvy investors that bet big bucks on a 'better machine'.

A lot of smart, knowledgable people point to science that says it really helps soil quality. I recently learned that a Duke Professor has a trial patch in NC (the southeast has a lot of marginal farmland). I'll track that particular experiment.

Althought the science seems compelling, the press and industry are not all over it.  I'm not sure why. If short rotation crops were turned into biochar and tilled under the soil of nearby food production acreage we might get a win win. Cornell and Duke are deep into the subject.

If you want to do your own reading click on any of the following:

If you know why biochar is not getting more attention in the discussions on carbon sequestration please update our growing audiance by commenting below.