The market
The global biofuels market was valued at $82.7 billion in 2011 and is projected to double to $185.3 billion by 2021. Global biofuel production reached 118 billion liters in 2012, rising to 155 billion liters in 2015, compared to 49 billion liters in 2006. By 2021, total production is expected to reach 250 billion liters. This represents a compound annual growth rate of 15% to 20%, increasing the market share of transportation fuels from 3% to 8.5%, accounting for approximately 40% of global production growth in the sector. It is estimated that by 2030, up to 30% of transportation fuels will be biofuels. Ethanol is expected to maintain its dominant position in the sector. In 2007, twenty oil-producing countries supplied fuel to more than 200 countries. By 2020, it was expected that 200 countries would have some form of biofuel production program. This could be considered the largest conversion of a global industry into a local business and development platform. The first generation of biofuels competed with foodstuffs such as corn, soybeans, sugarcane, rapeseed, and palm oil. The second generation of biofuel feedstocks focuses on alternative agricultural and forestry raw materials. Brazil has the greatest diversity of renewable fuel sources: native babassu (palm) and cupuassu (cacao) trees, soybeans, castor oil, oil palm, cotton, sunflower, coconut, peanuts, rapeseed, algae, cellulose, and sugarcane. Several countries have adopted Jatropha curcas, which is native to Latin America. The most significant initiatives are in India (over 1 million hectares), Mozambique (300,000 ha), Indonesia (200,000 ha), and Brazil (100,000 ha). India has set aside 60 million hectares of non-agricultural land and intends to replace 20% of its biofuels with jatropha. In Colombia, Las Gaviotas pioneered fuel production from pine (turpentine), which has now attracted the attention of Bhutan, whose constitution reserves 60% of its land for primary forest, mainly pine forests. By 2012, blending mandates existed in at least 38 countries worldwide, and 29 regional governments had preempted their national or federal decision-makers by mandating blending with biofuels in their local markets. The United States, Brazil, and the EU accounted for 85% of global production in 2010. The market lacks clear leaders, and many companies are vying for a foothold: Neste (Finland) in Singapore and Tyson-Conoco in the United States are building the largest facilities, with 250 and 200 million gallons of annual production capacity, respectively, indicating a growing trend toward economies of scale. At the other end of the spectrum, engineers have designed competitive, small-scale biodiesel processors capable of producing 2,000 liters of biofuel per day from locally sourced feedstocks, significantly reducing the carbon footprint associated with transportation. With 150 small-scale plants installed in the last two years, Extreme Biodiesel (California, USA) is helping to establish local cooperatives that meet the needs of individuals joining forces and businesses looking to transition to renewable energy.
Innovation
Biofuels have high energy efficiency and reduce emissions of carbon dioxide (-78%), sulfur (-100%), carbon monoxide (-48%), particulate matter (-47%), and hydrocarbons (-85%). It is well established that corn-based fuels cannot survive in the market without massive subsidies from the U.S. government. The industry is seeking improved conversion pathways, including the introduction of the biorefinery concept (see Case 6). The ethanol sector is aware that for every liter of fuel produced, it discharges 10 liters of liquid waste. Therefore, a concentration of large-scale facilities easily puts a strain on local water supplies. The nine ethanol plants in Cali, Colombia, are looking for alternative uses for their wastewater. There is considerable concern that land cultivated for biofuel production is being seized or is slipping out of the control of local rural communities, and that farmers are under pressure to cultivate large areas of monoculture without regard for energy inputs, local food supply, water resources, and health issues. Dr. Sean Simpson has an extensive academic career in biology and biochemistry. Born in the UK and now residing in New Zealand, he began his studies with a Bachelor of Science degree from Teesside University (UK), specializing in biotechnology. He then obtained a Master of Science degree in plant genetic engineering from the University of Nottingham (UK), culminating his academic studies with a PhD in plant biochemistry from the University of York (UK). After initially venturing into pharmaceutical production at Hoffmann-La Roche in Switzerland and Sandoz in Austria, he conducted research on cellular structures at the University of Tsukuba in Japan before moving to New Zealand, where he worked with Genesis on converting hardwood into ethanol. He then began searching for a microbe capable of utilizing carbon from gases as an energy source and converting this carbon-based energy into fuel. His research led him to write a paper highlighting certain bacteria found in the digestive tract of a specific breed of rabbit that could potentially convert waste into fuel. Rabbits digest food in a unique way. First, they chew 300 times. Then, after initial nutrient extraction in the small intestine, the remaining food is processed in the cecum, which is filled with enzymes and bacteria that break down and repackage the food scraps, ready for re-ingesting; these are the cecotropes. The incredible and unique mix of microorganisms in the cecum inspired the next adventure: how to produce fuel from waste. For Dr. Simpson, it was clear that first- and second-generation biofuels directly compete with food or farmland for food production. While second-generation biofuels are more diverse and sophisticated in their approach than simply using food intended for human consumption as a fuel source, they still involve land use that could otherwise be used for alternative crops like hemp or nettles. Mr. Simpson has envisioned a novel fermentation process that captures CO₂-rich gases and converts the carbon into fuels and chemicals. He thinks in terms of biorefineries and is exploring the potential for converting waste streams from industry and agriculture, which currently pollute the air, soil, and water, jeopardizing climate stability. He offers an entirely new vision of how carbon capture could become the foundation of a renewable fuel strategy. His initial calculations indicate that this technology, with a potential production of over 400 billion liters per year, has the potential to significantly impact future transportation fuel supplies while simultaneously generating new raw materials for the chemical industry.
The first cash flow
An analysis of the steel industry indicated that emissions from manufacturing 1.4 billion tons of steel annually could be converted into 115 billion liters of ethanol using this new compressed fermentation process. Mr. Simpson then co-founded LanzaTech in New Zealand with the support of a few local angel investors. A pilot plant was established in 2008 at the BlueScope steel mill in New Zealand, which successfully converted CO₂ and related gases into the first 55,000 gallons of ethanol. This initial success motivated the China-based company Baosteel to build a demonstration plant, increasing production to 380,000 liters of ethanol per year. This plant has been operational since the fall of 2011. The available data was compelling enough to scale up operations from this small unit to a commercial facility capable of converting waste gases from the steel industry to approximately 250 million liters per year. Angel investors have now been replaced by institutional and industrial partners from Malaysia, India, China, and the United States. LanzaTech has opened offices in the United States and China.
The opportunity
While Europe is undoubtedly the leader in biofuels, LanzaTech has expanded its cooperative programs to include India (Indian Oil, Jindal Steel and Power), Malaysia (Petronas), and Japan (Mitsui & Co). The successful operation of demonstration plants and subsequent funding enabled LanzaTech to be named Asia-Pacific Company of the Year, and Dr. Simpson was recognized as Young Biotechnologist of the Year. Potential developments extend beyond steel mill waste; LanzaTech is poised to expand into waste streams from petroleum coke production and agricultural waste processing. An estimated 1.3 billion tons of wasted biomass in the United States alone could eclipse the use of corn as a biofuel once and for all, with a production potential estimated at 720 billion liters per year and without the billions of dollars in subsidies required for corn-based ethanol. Dr. Simpson doesn't limit his portfolio of opportunities, and it seems the LanzaTech team is just getting started (the conclusion of each of Gunter's fables). He has demonstrated the ability to use CO2 in a continuous fermentation process to synthesize acetate. Then there are massive streams of solid waste from forestry and agricultural residues, municipal waste (see Case 51), and even coal processing waste that could be treated like emissions from the steel industry. The way process engineers have adapted Dr. Simpson's concepts includes process water recovery, while all residues become raw materials for the chemical industry, just as co-products are derived from petroleum in a refinery. A process by which emissions and solid waste are converted through biological fermentations inspired by natural processes into fuels and raw materials without subsidies or food competition is a concrete example of the Blue Economy. Although the investments for an installation are beyond the means of small individual entrepreneurs, it is clear that any country with coal mining, agribusiness and steel production could adopt this technology which will soon have competing bacteria creating a platform of competition among BlueFuels.
