In the previous story — Butanol 101 — I provided readers some background on the production of butanol, including my own background on working with butanol. This story is about one company’s efforts to commercialize bio-butanol.
The interview originated from a press release I was sent a couple of months ago detailing an agreement between Cobalt Technologies (formerly Cobalt Biofuels; and I will get into this name change below) and the U.S. Navy on developing next generation biofuels:
Mountain View, CA – November 03, 2010 – Today, Cobalt Technologies, the leader in commercializing biobutanol as a renewable chemical and fuel, announced the signature of a Cooperative Research and Development Agreement (CRADA) with the U.S. Navy to develop technology for the conversion of biobutanol into full performance jet and diesel fuels.
Under the CRADA, n-biobutanol produced by Cobalt will be converted to bio-jet and biodiesel fuels using technology developed at the U.S. Naval Air Warfare Center Weapons Division (NAWCWD) in China Lake, CA. The result will be a complete substitute for military and civilian jet fuel, meeting all applicable specifications. In addition, Cobalt will have an option to obtain an exclusive license to commercialize process improvements, made under the CRADA, for the production of all military and civilian transportation fuels.
I may get half a dozen press releases like this a day — most of which I don’t act upon — but given my background I have a particular interest in butanol. As is the case with many press releases, Cobalt personnel were made available for interviews. I indicated that I would be interested in speaking to someone at Cobalt, but my questions would not be the standard questions they tend to get. I would focus on areas that I know to be challenging for biobutanol, and they would be technical in nature. The agreed to handle my questions, but it took a bit of time and some back and forth before I got the answers.
So below are my questions (denoted “RR”) and the unedited answers I received via e-mail from Rick Wilson (denote “RW”), CEO of Cobalt Technologies. If I have additional commentary on Dr. Wilson’s answer, I will indicate it as “RR: Comment:…”
Butanol Q&A With Cobalt Technologies CEO Rick Wilson
RR: Can you take me through your process? How does it differ from the ABE process that became uncompetitive once the petrochemical route was discovered?
RW: We start by using waste biomass, such as tree bark, forest waste, bagasse from sugar cane production, palm waste, and extract the sugars “a proprietary cook”. The fact that we can use inexpensive waste feedstocks, which reduces the cost of production by $2/gallon, is the first key difference with the ABE process which uses expensive food-based feedstocks like corn and sugar. We ferment the cellulosic sugars to n-butanol. Standard ABE fermentations require 72 hours to complete, but we get the same job done in 4 hours, which shrinks all the equipment thereby reducing investment costs. Then we separate to n-butanol. Because we can make n-butanol at such a low cost, we can convert it to butyraldehyde which is used to make 2EH, and we can dehydrate it to 1-butene used in a variety of materials.
RR: 2-EH is 2-ethyl hexanol, which is also produced by many butanol manufacturers.
RR: Is it true that you are making i-butanol only?
RW: We make n-butanol, and a very small amount of acetone. N-butanol is a chemical used to make paints and plastics which is our focus market. We are looking for a partner to work with us to develop a microrganism that makes mostly acetone, which we can convert to propylene for polypropylene, acrylonitrile and other plastic products.
RR: Gevo is a company that plans to produce i-butanol.
RR: Now that I know we are talking about n-butanol, I have a couple of followups. Butanol can be distilled from water, and the lower the titer the more energy intensive the separation. If you can get beyond the concentration at which it phases out of water (7.7% butanol) then you get two phases, one water rich and one butanol rich. So my question is whether you are able to reach phasing concentrations. If not, how high can you go?
RW: No, we do not reach phasing concentrations directly, currently we have to boil off till we get to 7%. However now know to phase out below that concentration (a bit of solvent chemistry learned through our work with the Navy on jet fuel), but have not tested that in our pilot yet.
RR: While there are solvents that can preferentially extract butanol from water, the butanol ultimately has to be distilled from the solvent. So there is no free lunch here. There may be certain solvents that can reduce the energy requirements somewhat, but distillation is still going to be required.
RR: The route from butanol back to butyraldehyde doesn’t make a lot of sense to me. In the chemical industry, we make butyraldehyde and then hydrogenate it to butanol, because butanol is a higher-value product. If it weren’t, we would just stop and sell the butyraldehyde (and we do a little bit, but most of it is turned into butanol). So why wouldn’t you just sell the butanol?
RW: Correct. First we sell to the butanol market. It is 1.2 BGPY. However the butyraldehyde market is equally as large, so with a little chemistry we double our market potential across oxo alcohols, economically only because we can make butanol at such a low cost that the butyraldehyde route makes sense (you would never do this via petroleum butanol).
RR: Even so, butanol commands a higher price in the marketplace because the conventional way of making it requires extra steps beyond butyraldehyde. So if someone could really make cheap butanol, they should sell it as butanol even if they took market share from other butanol producers, which could then leave those producers to pursue the less lucrative butyraldehyde market. Cobalt will have to make a lot of butanol before they need to worry about turning any into butyraldehyde.
RR: What is known about using i-butanol (or n-butanol) as fuel? Who has tested it?
RW: BP Butamax and Gevo make i-butanol for fuels from sugar and corn, and BP has done extensive engine testing and its a great story. However we do not see the economics of using sugar or corn ever supporting using any kind of butanol as a gasoline or diesel fuel additive without subsidies, although it is a great molecule for that purpose. We have an arrangement with the Navy to develop jet fuel from n-butanol derived from waste cellulosics, but the economics only work if you can locate the plants close to the demand, which we can.
RR: I think that’s a very important point, and the distinction is often lost on people. Butanol is a great molecule for a gasoline engine, but it may not ultimately be an economical one.
RR: Are there any hurdles that need to be jumped before butanol is used as transportation fuel?
RW: For jet fuel we need to get certification for use through ASTM “American Society of Test Methods” and the jet engine manufactures. Cobalt is working to get our jet fuel approved currently participating on the ASTM task force to do exactly that.
RR:What percentage mixes do you envision would work in an engine? I presume it would be a gasoline/butanol mixture and not pure butanol?
RW: We are not focused on gasoline. We believe our jet fuel will be 100% replacement, i.e. meeting jet spec D 1655, perhaps the only route to achieving the existing petroleum spec.
RR: Recently the EPA came out and said that there was presently no route for Range Fuels to get cellulosic credits for their methanol process. That is expected to be rectified, but are there still regulatory issues to be worked out before butanol can qualify for tax credits?
RW: We are not focused on gasoline or diesel. We are developing our jet fuel so that it does not need to have subsidies to be economic.
RR: If you look at their news archives, sometime near the end of 2009 news releases stopped referring to Cobalt Biofuels and began to identify the company as Cobalt Technologies. My guess is that the reason for this is that butanol sells for too much to be considered as a motor fuel. According to my former manager at Celanese — and I checked with him just before I wrote this story — butanol is currently selling for about $7 per gallon. Add the fact that the energy content is less than gasoline, and it is simply too far beyond a price that could be competitive with gasoline. After all, the conventional method of producing butanol starts with raw materials not far removed from gasoline (propylene and natural gas) and then goes through a number of processing steps to turn those into butanol. So, butanol tends to sell for a lot more than gasoline does. Thus, I believe that Cobalt decided that there were more lucrative markets than the motor fuel market, hence the de-emphasis on “biofuels.”
RR: What is the tolerance of your microbes to the alcohols (i.e., what sort of titers do you achieve?)
RW: We have overcome the butanol tolerance issue over the range of sugar concentrations used in our process. Our rate of production with hemicellulose C5 sugars is 3.7 g/liter/hour.
RR: What is your cost of production today?
RW: $1.90/gallon, and we expect to get costs down to $1.50/gallon by next year. N-butanol from petroleum costs $4.00/gallon to produce.
RR: I think butanol from petroleum currently costs more than $4/gallon to produce at today’s oil prices. And if Cobalt could really produce butanol for under $2/gallon, they could dominate the entire butanol market, which as Dr. Wilson says is over a billion gallons per year. But count me among those skeptical that they have the technology today to produce butanol for under $2 per gallon. If they can, they can sign up customers right now for $6 per gallon — $1 less than market price — and sell hundreds of millions of gallons per year. My guess is that they have models that they are using to project that once they build a full scale plant (and maybe resolve some technical issues) that will be their production price. But these models are often based on assumptions for cheap or even negative cost feedstocks — and that may not be a good assumption in the long run.
RR: What sort of piloting have you done? At what scale and for how long?
RW: We have been piloting our technology 24X7 since June 2009 on a wide range of cellulosic feedstocks, one ton per day feedstock equivalent. We are building a demo unit with 500,000 GPY representing a 100X scaleup.
RR: 500,000 gal/yr is 33 barrels per day, so that would put current production at a third of a barrel a day. At that level of production, I don’t believe that one can estimate a cost of production for a commercial facility (maybe 10,000 times the size of their lab unit) with a high level of certainty.
RR: What are some major challenges you still need to overcome?
RW: The technology already performs at commercial targets. The only challenge is to raise enough money needed to run the company until we can build a plant that pays the bills.
RR: Can you point me to some granted patents or any peer-reviewed literature that covers the process?
RW: Please see attached, one of our key patent filings.
RR: The attached patent was an international patent application, WO 2009/126795 A2: Immobilized Product Tolerant Microorganisms.
With that, I would like to thank Dr. Wilson for taking the time to answer my questions. Without really delving into their models, it is hard for me to estimate the likelihood of producing butanol for under $2/gallon — but they have a lot of scaling up before they can challenge competitors in the butanol market. If they can produce for $2/gallon, they could be a billion dollar company.
I use my former employer Celanese as a sort of sanity check here; butanol was only one of many chemicals they made, and their market cap has been a few billion dollars for several years (currently $6.8 billion). Butanol probably only made up 10-20% of Celanese’s overall business, so that helps give me some order of magnitude idea of the value of a company that could potentially compete in the butanol market. (Celanese spun off the oxo chemicals business line in 2007 into a new company, OXEA, but a market cap for the company isn’t available as it is part of a larger private equity company).
My comments aren’t meant to convey doubt as to Cobalt’s chance of success, but I do think it is important to keep in perspective exactly where they are in the process of commercialization.