Repost of TDP: The Next Big Thing

Because of the upcoming IPO for Changing World Technologies (See this story at Seeking Alpha) the articles that I wrote on the company are getting quite a bit of traffic. I thought I would bump them to the top for a review of who they are, what they do, and where things went wrong for them. The following essay was originally published on April 9, 2007. If you want to immediately read the sequel to this post, it was TDP: What Went Wrong. That post was written by a reader, and is full of slides and some very keen insight. I will bump it up to the top in a couple of days.


If you are a layperson, it may not be clear to you just how much of the current infatuation with cellulosic ethanol is hype, and how much is based on realistic assessments. So, I thought I would take you down memory lane and revisit another technology that was going to reduce our dependence on foreign oil.

The Hype: TDP Will Save the World

In May of 2003, Discover Magazine published Anything Into Oil. It was a look at a technology called thermal depolymerization (TDP), which could take any organic material and turn it into oil. This was a high profile write-up with a lot of hype, and the technology of Brian Appel and his company Changing World Technologies (CWT) was really going to change the world.

I remember the first time I read the article, and I thought to myself “Wow, this is really something special.” However, the hype of the technology didn’t quite match up with reality. Let’s take a look back at that original article, and see if we can draw some parallels with some of our current biofuels delusions.

The article starts off:

“This is a solution to three of the biggest problems facing mankind,” says Brian Appel, chairman and CEO of Changing World Technologies, the company that built this pilot plant and has just completed its first industrial-size installation in Missouri. “This process can deal with the world’s waste. It can supplement our dwindling supplies of oil. And it can slow down global warming.”

Pardon me, says a reporter, shivering in the frigid dawn, but that sounds too good to be true. “Everybody says that,” says Appel. He is a tall, affable entrepreneur who has assembled a team of scientists, former government leaders, and deep-pocketed investors to develop and sell what he calls the thermal depolymerization process, or TDP.

So far, so good. An entrepeneur (like Vinod Khosla), former government leaders (like Tom Daschle), and lots of deep-pocketed investors. The article opens with a little bit of hype, and follows with another liberal dose:

“The potential is unbelievable,” says Michael Roberts, a senior chemical engineer for the Gas Technology Institute, an energy research group. “You’re not only cleaning up waste; you’re talking about distributed generation of oil all over the world.”

“This is not an incremental change. This is a big, new step,” agrees Alf Andreassen, a venture capitalist with the Paladin Capital Group and a former Bell Laboratories director.

Yeah, but it’s got to be expensive, right? Not so:

Private investors, who have chipped in $40 million to develop the process, aren’t the only ones who are impressed. The federal government has granted more than $12 million to push the work along.

“We will be able to make oil for $8 to $12 a barrel,” says Paul Baskis, the inventor of the process. “We are going to be able to switch to a carbohydrate economy.”

The article goes on to explain that the technology originated back in the 1980’s:

Usually, the Btu content in the resulting oil or gas barely exceeds the amount needed to make the stuff. That’s the challenge that Baskis, a microbiologist and inventor who lives in Rantoul, Illinois, confronted in the late 1980s. He says he “had a flash” of insight about how to improve the basic ideas behind another inventor’s waste-reforming process.

“The prototype I saw produced a heavy, burned oil,” recalls Baskis. “I drew up an improvement and filed the first patents.” He spent the early 1990s wooing investors and, in 1996, met Appel, a former commodities trader. “I saw what this could be and took over the patents,” says Appel, who formed a partnership with the Gas Technology Institute and had a demonstration plant up and running by 1999.

And they were on the verge of printing money, planning to make oil for $15 a barrel (I thought it was $8-$12?):

And it will be profitable, promises Appel. “We’ve done so much testing in Philadelphia, we already know the costs,” he says. “This is our first-out plant, and we estimate we’ll make oil at $15 a barrel. In three to five years, we’ll drop that to $10, the same as a medium-size oil exploration and production company. And it will get cheaper from there.”

The Hype Begins to Unravel

Well, it’s been 3 to 5 years, and things have not worked out as planned. Costs were much, much higher than forecast. Unforeseen complications appeared. Small technical problems turned out to be big technical problems after the process was scaled up.

Let’s look at some of the issues. A Newsday article in 2004, while also full of hype, foretold of some potential problems:

Turning Garbage into Oil—and Cash

Appel and his financial backers have bet more than $66 million that the modern-day alchemy practiced by Changing World Technologies Inc. will revolutionize the way the world deals with its waste, reduce dependence on foreign oil, fight the spread of mad cow disease and even ease global warming.

Not bad for a 25-person company that Appel, who has no scientific training, runs from the top floor of a Hempstead Avenue china shop owned by his wife, Doreen.

No scientific training? Hmm. Where else have I seen amateurs jumping into an alternative fuel technology with both feet? Oh, yeah. Here and here. (I don’t mean to sound elitist, because amateurs have made valuable contributions in many fields. However, they are more likely to make mistakes/miscalculations than a professional).

The article continues with one more bit of hype that eventually turned out to be unfounded. More on this later:

Incredibly, the only “waste” that’s left behind is distilled water. There are no smokestacks bellowing chemical-laden smoke, and no pipes discharging fetid wastewater.

The article continues by indicating that despite the hype, there really isn’t that much that is known about the process:

Although Discover, Money and Scientific American magazines have all written wildly enthusiastic stories about the company recently — Money called it “The Next Big Thing” — competitors and independent researchers point out that Changing World Technologies has released very little information about the details of its patented process.

So the skeptics (AKA, naysayers) weigh in:

“You have to remember that people have been pressure-cooking different types of biomass for a long time now, and we really haven’t seen these kinds of breakthroughs,” said Ralph Overend, a leading authority in the bio-energy field and a research fellow at the National Renewable Energy Laboratory in Golden, Colo.

“People always stay skeptical until they can see the real data,” added Overend, editor of the academic journal Biomass & Bioenergy.

Appel said the company’s focus has been on building the Missouri plant, not on publishing scientific papers that he worries could tip off potential competitors.

And then there were those nagging cost issues:

Skeptics also wonder about the project’s profitability, and whether it can truly compete with traditional oil drillers and refiners.

Appel acknowledges that producing a barrel of oil through thermal conversion costs about 50 percent more than doing it by conventional refining.

Only 50% more?

And then he makes the mistake that so many others repeatedly make:

If the price of oil keeps rising, he said, so will profits.

This is the same mistake that proponents of tar sands, GTL, oil shale, cellulosic ethanol, and many others have run into. They believe that oil prices will rise, and yet their costs will magically remain where they were. In fact, what happens is that as oil prices rise, all the costs associated with these various projects rise. That’s why oil shale has been imminent for 100 years. That’s why ExxonMobil is scrapping GTL plans. And that’s why tar sands costs have skyrocketed. A poster at The Oil Drum has referred to this trend as The Law of Receding Horizons.

The Bloom Comes off the Rose

So, where does the technology stand today? How far off were those $8 or $15/bbl costs estimates? After all they had run the pilot plants. They had “done so much testing in Philadelphia“, they “already know the costs.” Turns out they didn’t:

Reports from 2005 summarized some economic setbacks which the Carthage plant encountered since its planning stages. It was thought that concern over mad cow disease would prevent the use of turkey waste and other animal products as cattle feed, and thus this waste would be free. As it turns out, turkey waste may still be used as feed in the United States, so that the facility must purchase that feed stock at a cost of $30 to $40 per ton, adding $15 to $20 per barrel to the cost of the oil. Final cost, as of January 2005, was $80/barrel ($1.90/gal).

$80 a barrel! That was an an order of magnitude higher than their earlier estimates. (Incidentally, if their process really worked as they claimed, they could just feed it corn and turn it into oil at a very high EROEI). Not only that, they obviously made more errors in their estimates than just presuming the feedstock would be free. Subtract that $20/bbl and you are still at $60 a barrel – 300% over their highest prior estimate of $15/bbl. Cellulosic ethanol hypesters, take note.

And there was more bad news:

Turkey-oil plant closed due to foul odors

SPRINGFIELD, Mo. – A foul-smelling plant that turns turkey byproducts into fuel oil was ordered closed by the governor Wednesday until the company finds a way to clear the air.

Renewable Environmental Solutions Inc. in the southwest Missouri community of Carthage had agreed in May to improve its odor-control systems after state and city officials sued, alleging the smell posed a public nuisance.

The company also was cited six times by state environmental officials this year, Gov. Matt Blunt said, but the smell continued.

Well, at least there were “no smokestacks bellowing chemical-laden smoke.”

The Lesson Here

CWT still exists as a company today. Like cellulosic ethanol, TDP is a technology that actually works. But the technology was hyped beyond reason. People did not apply enough skepticism before embracing the promise of the technology. It was really going to be “the next big thing.”

But costs and complications were grossly underestimated. They fell victim to The Law of Receding Horizons. They learned that the public doesn’t like smelly plants in their community. Discover ran an updated article in 2006 in which Appel admitted “We have made mistakes. We were too aggressive in our earlier projections.” The hype just ultimately did not match the reality. And while TDP may make some small contribution to our energy needs, it isn’t going to make any measurable dent in our fossil fuel usage.

But at least we have cellulosic ethanol, which I have heard really is “the next big thing.”

9 thoughts on “Repost of TDP: The Next Big Thing”

  1. There are simple rules for energy projects.

    #1 – Do not count your chickens before they hatch. Either it works or it does not. Who cares what EROI is for things that do not work. I do not care how green it is if it does not work. If there is a large potential like wind and solar, R&D efforts should be made to make them work well enough to compete with coal and natural gas.

    #2 – Big does not matter. Geothermal works and is big in California and Iceland but for the US as a whole it will be a small source of energy. There is nothing wrong with being the next small thing.

    #3 – You can not kill and hurt your employees. OSHA gets mad and want to put people in jail.

    #4 – You can not make your neighbors mad by screwing up their environment. A turkey oil plant may be good for the environment in general but if you stink up the neighborhood.

    The trouble many 'do gooders' have is that they do not think the rules apply to them. All 317 volumes of regulations.

  2. “But at least we have cellulosic ethanol, which I have heard really is “the next big thing.”

    Hey Robert, I’ve got a really good idea. Let’s grow corn and turn it into ethanol. After all, Henry Ford built his first car to run on alcohol and we’ve got lots of corn.

    As oil climbs in price, we’re bound to make billions.

  3. As a former financial reporter, I have an even more cyncial eye than RR.
    It goes like this: You want to make money. You don’t have any. So, you “develop” a process or product in a “hot” section of the investor universe. It’s dot.coms one year, alternative fuels the next, sometimes real estate.
    Separating money from investors is a favorite pastime on Wall Steet and elsewhere. Kind of a lucrative hooby.
    Technical fields are always good, as it is difficult for financial types to determine what is good and what is problematic.
    As a result, venture capital waste makes government spending look almost smart. And real estate investors? Please, every real estate investment in the last three years is looking like a money-loser.
    Still, after the dust settles, the overall results are remarkable. We have the Internet, even if most investors lost money investing in parts of it. We have lots of nice buildings.
    We will have PHEVs someday, I am pretty sure. GM may tank, and many lithium battery outfits may crumble. But the PHEV will emerge from the morass.
    Biofuels? Palm oil is a go, for sure. The rest will be subsidized, and unwisely, IMO. Still, we may get 5-15 mbd from palm oil someday. Not a global solution, but a huge patch.
    One word to RR: Please don’t quote those lu-lu’s at TOD. We know that new technologies are difficult to develop without the doomer-porn addicts of TOD telling us.

  4. Nice job, RR!
    The part that I find troubling is the obvious lies that CWT keep spreading:
    1. The ludicrous 85% efficiency claim.
    2. The equally outrageous anything into oil claim.

    The 85% efficiency claim is based on a faulty mass balance. The faulty mass balance is the basis for an equally faulty energy balance. You can verify by comparing production data (bbl oil/ton of waste) to the mass balance (still) presented by CWT.

    Contrary to what the breathless writers at Discover magazine believe, this technology is good only for recycling lipids (fats and oils) and the fat-soluble amino acids in protein. To understand why you need to follow the process flow diagram, which consists of three key steps:
    1. Thermal Depolymerization (aka Dilute Acid Hydrolysis – yes, the process uses sulfuric acid).
    2. Separation of water and fat/oil.
    3. Decarboxylation of fatty acids to yield hycrocarbon (diesel) product.

    Anything soluble in water goes into the effluent in step 2. That includes (but is not limited to) all carbohydrate and the bulk of the protein hydrolysis product (amino acids).

    CWT cleverly states that this makes the effluent a high quality fertilizer. Probably true. But that high quality fertilizer contains BTUs not available as fuel (the main product).

  5. To their credit, Discover magazine did raise another issue: product quality: Fuel quality was another challenge. Changing World Technologies‘ thick, tarry fuel resembles boiler-grade fuel oil. One prospective buyer insisted on what the company called “unacceptable pricing terms” for its relatively unproven product. In the end, CWT sold only 93,000 of the 391,000 gallons of fuel it produced and earned just 99 cents for each one. At the time, wholesale fuel oil distributors were raking in $2.50 to $3.30 per gallon. Even with the $1-per-gallon U.S. biofuels tax credit for every gallon sold, Changing World Technologies paid more for Butterball’s turkey offal than it earned back in revenue. (Accounting for all its operating costs, the company lost $5,003,000 in the first quarter of 2008, though operating at a loss is not uncommon or necessarily a very bad sign for a technology startup.) Emphasis added.

    Don’t worry – I’m sure next year they’ll be printing money…

  6. Before we beat up too much on the ethanol crowd…COP just reported a quarterly loss of $32 billion. That’s with a “b”.
    Lots of pain to go around.

  7. perhaps a much more plausable approach== renewable methane[RNG] via anaerobic digestion of AG waste.

    EPG focuses on LARGE HERD animal farms to industrialize organic waste,
    sell gas, create tradeable carbon offsets, create secondary AG useable products, while cleaning up land/food/water facilities. it may be great help in achieving RPS req’ts for states.

    big action now in TX,CA, midwest dairy and feed lots.


  8. Fran, you are correct when you suggest that AD of CAFO manure is a good source of renewable energy. Micrology has a good AD system and business model. However, it looks like they are bleeding red from their 2007 annual report. Maybe Benny can look at the financials to see if the red is due to new project development.

  9. this story appears in today’s Newsday…

    West Hempstead diesel fuel company files for bankruptcy

    March 13, 2009

    A West Hempstead company that promised a revolution in “renewable diesel fuel” by subjecting turkey parts and other waste to high pressure and heat has filed for bankruptcy protection.

    Changing World Technologies, whose chairman and chief executive, Brian Appel, 50, made his fortune through involvement in Ticketmaster, had tried and failed to take the company public last month as debts loomed.

    It and three subsidiaries, Renewable Environmental Solutions, Resource Recovery Corp. and Thermo Depolymerization Process, filed separately for Chapter 11 protection March 4.

    In a statement released last week, Changing World said it had “significantly downsized” and laid off most of a workforce that once numbered 72. News reports in Missouri said 50 workers at the company’s sole processing plant, in Carthage, were let go. The company, which also operated a lab in Philadelphia, said it will continue to seek funding while it reorganizes.

    Appel did not return calls to his West Hempstead office yesterday.

    Changing World’s patented process promised cheap, pollution-free fuel that would address global warming, reduce foreign-oil dependency, even take on mad cow disease.

    But problems outlined in the company’s public offering statement suggest the turkey-to-fuel factory, located near a Butterball turkey plant, had frequent hiccups.

    Renewable diesel fuel from the Carthage plant cost more than $11.18 a gallon to make, yet Changing World was only able to sell it for an average $1.19 last year, the filings reported. Since it began operations in 1999, the company posted accumulated losses of $117.9 million, including $60 million in the last three years.

    The company relied in part on a $1-a-gallon federal subsidy for biodiesel producers to help mitigate losses. And though it boasted of several new customers, Changing World reported that of the 1,095,000 gallons of renewable diesel it produced in the first nine months of last year, it sold only about 684,000 gallons to industrial companies to power their plants.

    The Carthage plant also was the subject of odor complaints from residents and state officials, who hit it with a cease-and-desist order and fines and required odor-reducing retrofits. The plant suffered from regular shutdowns – it was 80 percent operational at best, the company said. When it wasn’t operating, Changing World had to pay to “divert or dispose of [turkey parts] that we received but were unable to store or process.”

    The claim that the plant would also be able to self-produce all the fuel needed to heat the diesel-making animal parts turned out to be optimistic. Last year alone, the company spent $900,000 to buy natural gas, nearly 7 percent of its total cost of goods sold.

    In a 2004 Newsday interview, Appel predicted the company would have 10 big plants across the United States by 2009.

    Copyright © 2009, Newsday Inc.

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