VC Taskforce: Next Generation Biofuels

This past Wednesday, the VC Taskforce held a panel discussion: "Next Generation Biofuels: The Prospects and the Challenges of Non Food Crop Energy". This link may work for the summary.

Moderator: Michael Ward, Partner, Morrison & Foerster
Panelists:
Jim Mullen, Partner, Morrison & Foerster
Michael Burnside, President & CEO, Catchlight Energy
Jim Imbler, President & CEO, Zeachem Inc
Neal Gutterson, President & CEO, Mendel Biotechnology

Without much editorializing, here are the highlights of the panel discussion.

First generation fuels were "small kernel" (corn, soy) -- contrast this with using the entire plant's biomass. In addition, this first gen fuels created tension between crops as food and crops as fuel. The positives for these first generation fuels is that humanity knows how to create ethanol from them, we've been doing it for a long time. Second generation biofuels require more science, but are better long term. On an interesting historical note, Diesel (inventor of the eponymous engine) powered his original engine using peanut oil.

A key component of biofuel production must be sustainability: minimize food conflict, minimize biodiversity issues (no monoculture crops), minimize acreage used (especially, land for food production).

Another consideration is feedstocks: engineered vs. existing. Engineering creates concerns over GMOs (Genetically Modified Organizisms), whereas existing plant material may be less efficient during conversion process.

There was some discussion regarding residuals (e.g. McDonald's fryer oil). The fryer oil is considered a hazardous pollutant and restaurants used to pay to have it removed and processed. At first, they were giving it away to anyone who wanted it. After a while, they began to sell it. Finally, organized crime has gotten involved and steals it. However, the ultimate challenge for residuals is one of distribution and scale. If fryer oil is to be used as a fuel in vehicles, can it really be an infrastructure play?

For the biofuel industry, it's important to take into account public reaction to the entire process. The facts/myths behind the food reducing first generation products should be a warning to those wading in, now. Fuel generation facilities should be built with aesthetic qualities and low/no emissions to reduce NIMBY reactions. Crop diversity (mosaic of feedstocks) is vital, both from a sustainability and economic perspective.

Switchgrass and miscanthus are excellent, fast-growing, non-food plants. The estimate is that 200-400 million acres could produce enough biomass to meet the world's needs. However, the dangers of monoculture must be avoided. Pestiticide use must be low/no. Plants should grow on their own with minimal water, minimal chemicals and minimal work. Another important point was that perenials (vs. annuals) must be used. Generally, we don't eat perenials and they are better for the soil. They renew it, retain water, fix nitrogen, add to the top-soil and grow well on lands that currently make poor food production lands and are not used for grazing. 40-50 Million acres of unused annual production land could well serve the US biofuel needs.

That brings us to the key to making biofuels profitable: efficiency. The beautiful thing about efficiency is that when achieved it is both environmentally sound and makes money. The objective is to plant as little as possible while reaping the rewards.

Three elements of efficiency are: biomass (great CO2 footprint, no chem/H2O), conversion (high biomass to fuel conversion ratio), mileage (fuel allows higher mileage, transportation is more efficient).

Another critical part of making biofuels work is energy density. I didn't quite follow the numbers, but the comparison was made between petroleum and biofuel production (150-200K barrels/day petro vs. 7.5K barrels/day biofuel). There's a 20x difference between the two, right now. In addition, petro refineries are very efficient at extracting, while bio refineries are around 5-10x for their production costs.

Investment opportunities are in the movement of feedstocks from farm to production plant as well as various fuel conversion pathways (biochemical, thermochemical, biological).

However, the key for the big dogs to jump in the game is in the Execution phase kicks in. During R&D phase, most energy companies just cannot think in high risk terms, and R&D looks like high-risk. Once R&D is completed and execution phase starts, then the large energy conglomerates would be willing to venture.

Some economic figures were tossed around. $50/ton of biomass is roughly equivalent to $0.50/gallon. That becomes a baseline, on top of which everything else must be added, profit margin is slim. The figure of $70/barrel for petro was felt to be the critical point where biofuel begins to make sense. This is quite similar to the coal liquidation number (unfortunately).

Sometime in the next few posts, I'll write an analysis of all of this.

Boo: Carbon Offsets and Cap-N-Trade

Sure, carbon offsets and cap-and-trade schemes sound like a really, really great idea. Lots of smart people think so. The idea is we could solve the world's environmental problem if we could only create the right kind of carbon sinks on a grand scale and allow market forces (via the selling and buying of carbon credits) match money to carbon. So, a company in Europe exceeds their carbon cap and they offset the remainder by getting another project in Asia to sink their carbon somewhere.

As always, the devil is in the details, and there is plenty of devil to go around for this one. Summary of the linked article: China builds dam it was going to build anyway (not building coal plants it wasn't going to build anyway) while German company pays for offsets by funding dam project. Net effect? More carbon released, unlikely progress made.

The thing is, this isn't a one time occurance. Indonesian peat bogs are being drained to plant forests to offset European carbon excesses. However, draining the peat bogs releases much more stored carbon than planting trees will ever hope to hold. In effect, the very situation that Europe was hoping improve (carbon reduction) through their funding is being made worse.

Then, we have crackpots running around trying to dump tons of finely ground iron into international waters to promote algal blooms with the optimistic hope of burying carbon and intending to sell carbon credits for it. There "research" is flimsy, at best.

Now, you may ask why turn such a jaundiced eye on these projects? Each of these ignores the Law of Unintended Consequences. The people involved may be well meaning, or perhaps they just want to find a way to fund their project or make a buck or relieve their guilt.

The problem is that the Earth's air and water can't absorb our guilt anymore than it can absorb our carbon emissions. Let's make progress via thoughtful and realistic changes backed by detailed study and science. I'm not arguing for analysis-paralysis, and, Yes, I recognized that perfection is the enemy of the good.

This, however, is not a call for perfection. It is, instead, a call for testable progress. Quite frankly, there may be a fundamental problem with cap-and-trade -- it may never work.

That said, any project purporting to be a true carbon sink project (worthy of offset) must be requried to build a realistic, published carbon offset model. That model must be independently confirmed by a couple of third-parties and those third-parties must disclose their financial funding. The model must be tested over time, and if it fails to perform as expected, the money invested must be returned to those buying offsets. Let the carbon companies buy offset insurance, if they like and leave the insurance companies to investigate offset claims (not a fan of this, but the more watchdogs, the better).

If you're a believer in buying carbon credits to assuage your carbon guilt, do your homework. Don't just take as gospel the offset literature published on your favorite offset website. Dig into their information. Go find counter opinions. Become a skeptic.

I think there's a better way than "Captain Trade" and will blog about this tomorrow.

PS: Some other links on this topic

1. Can technology clear the air?
2. Burying biomass to fight climate change
3. Artist releases CO2 as performance

#1 and perhaps #2 may be methods for real offsetting of carbon. #3 hopes to expose the problems of Captain Trade.

Treasure Island Development Factors In Sea Levels

This SF Examiner article explains how planners have decided to raise the land area around new development work planned for Treasure Island (San Francisco Bay). I read this article with mixed emotions.

On the positive side, planners are factoring in sea level rise, so that's a good thing, right? Climate Change and its impact are being taken seriously.

On the negative side, sea level rise is almost inevitable. In addition, I'm a bit more of a Cassandra on the issue of sea level rise, I think we would be lucky if they only go up one meter. New development should be restricted to higher ground, insurance rates for coastal buildings (those that can be washed out to sea due to rising sea levels) should be incredibly high or unavailable. Cities built in hurricane zones that are destroyed should not be rebuilt with government money. I know this is harsh, but it makes no sense. Rescue people living in an area about to be decimated? Absolutely. But, pay to rebuild their city so they can continue to live in the path of danger? I don't think so.

Tens of millions of people in Bangladesh are going to be displaced over the next century due to sea level increases. Those people will need our help. Where will they go? How will they live? What will they eat? Dumping a few extra feet of dirt on the edge of one little island is not going to be enough.

It really all feels overwhelming, doesn't it?

Solar Industry Hurt By Economy

The linked article refers to a slowdown in PV installs and announced layoffs due to the faltering economy. This fact and the reasons behind it are not surprising. This issue really isn't demand for solar installations. The problem is that solar companies are having trouble financing the materials and installations costs. No company can escape the credit crunch including the brightest light in the most promising industry.

Government and financial institutions must come together quickly to figure out how to restart the credit markets for this area. Demand continues to grow. Where are the funds to grease the operations?

Dawn of a New Era

Can the importance of today's events be overstated? Probably, but not from this author's perspective. For far too long we Americans have been living beyond our means. The past eight years have been devastating for the environment, not only due to the lack of progress on changing to a sustainable energy economy, but also due to the impact of Greenhouse Gas on Global Climate Change. Two wars and now a broken world economy have served to distract us from regressions on all fronts. The Bush government's War on Science quelled alternative viewpoints and repressed data. Ideology replaced Reality.

Ahhh, what a difference a day makes.

Can we spend or grow our way out of economic hardships? Unlikely. Can we turn technology on our climate and scrub the atmosphere? Again, unlikely -- we ignore the rules of unintended consequences at our peril. However, the population craves a better, safer, healthier, cleaner world and businesses that in the end must be profitable to survive wish to save money. In other words, it takes a willing population and dedicated leadership to effect change. Perhaps, the former begs for the latter.

With sound investments in clean technologies, we can make these things happen. Over time, supply-side Clean Tech (solar, wind and geothermal) will inevitably become more efficient and cheaper. Meanwhile, non-sustainable fossil fuels will continue to get more and more expensive. Likewise, demand-side Clean Tech will continue to improve (lowering per capita demand) through mandated and cost effective energy improvements and again these technology improvements will get cheaper and simply become part of all new and renovation projects.

All of this with the change in government at Noon Eastern Time to a President who is willing to see the world as it is.

Enviu - Innovators in Sustainability

This Netherlands based organization (charity) incubates ideas and companies. Two of its current projects:

• Open Source House - Seven rules for how to build a sustainable house.
• Sustainable Dance Floor - Dancing generates power to run the club.

Check it out.

SFPUC seeking to dig into $1Million fund

Here's a Letter I just sent to the Editor of the SF Examiner. Check back to see if it's published. Link above points to original article.

Regarding the article this past Sunday on the SFPUC seeking to dig into $1MM funds set aside for low-income residents. I doubt anyone ran the numbers for an installation. A small sized PV unit costs around $12K. For an upper income tax payer, city rebates plus tax breaks drop that to $3,500. Because tax breaks are smaller for a low-income family (lower tax bracket), a system would cost more. I cannot imagine a low-income family spending 10%+ of their yearly income for solar panels. PV installations often require roof modifications or a new roof. Although well intentioned, this was not thought through.

You could give away PV to low-income families, but that's not what they need. Improve home efficiency and reduce energy usage through insulation, better heating, energy efficient appliances. Make a difference were it can help the most.

New Year's Resolutions

The most common New Year's Resolution is to lose weight and the most common weight loss goal is 10 pounds. So, will losing weight reduce your carbon footprint? The factors affecting the answer are huge. Here are the pros and cons of losing weight on carbon footprint:

Cons (increases to carbon footprint)

1. More activity in the gym means more use of heating/cooling of gym, more electronic workout machines, more towels, more laundry.
2. Driving to/from gym.
3. Healthier lifestyle means living longer which increases lifetime carbon footprint.
4. Increased food consumption due to increased activity.

Pros (decreases to carbon footprint)

1. Healthier lifestyle means less time in hospital (lower medical/carbon impact).
2. More likely to walk than drive and take stairs over elevators.
3. More time working out means less time watching TV, better sleep patterns (less electronics usage at night), unless you're working out in front of one of these.

Sure, some of this is tongue in cheek. Yes, it's very important to live an active, healthy lifestyle. Note, however, that just being healthier is not in and of itself "Green". It's important to focus on the kinds of methods and means of arriving at a healthier lifestyle if one of the motivations is carbon footprint reduction.

What can you do?

1. Workout outside more often, take walks during lunch.
2. Hike in the mountains; you'll gain an appreciation for some natural beauty and may be inspired to help protect wilderness regions.
3. Bike or walk to the gym instead of driving. Better yet, ride or run for your workout - why stay inside?
4. Eat foods from your region (foodshed), eat organic, eat low impact foods (lower on the food chain).
5. Need a caffeine boost before your workout? Bring your mug to your favorite coffee shop, don't use their plastic or paper cups. If you do use them, make sure you recycle or compost!

Russian Natural Gas: Energy Independence Means Comfort and Safety

You don't need to believe in Global Warming to see the value of energy independence. Due to a price dispute between Russia's Gazprom and the Ukraine, Europe's supply of natural gas has been cut. Russia claims that the Ukraine is stealing gas destined for Europe, and they are in the midst of a price dispute. Citizens of countries all over central and eastern Europe spent Winter nights without heat. Some businesses shutdown their production facilities to reduce non-essential gas usage.

Does Peak Oil (or Peak Natural Gas or Peak Coal) really matter? Shouldn't every country have a safe and reliable energy grid? The more local the energy generation, the more resiliant a regional population can be to national and international distruptions.

Russia may simply be flexing its considerable political weight in the European/Asia theater; this problem will be resolved. However, there will always be disruptions. Natural and man-made disasters could have the same effect on energy supply. Some argue this requires the US to drill and dig in its own backyard. The US is a large country, energy supply routes criss-cross thousands of miles. Katrina wiped out fossil fuel production for a few weeks and energy prices spiked, and unfortunately, a terrorist attack could do the same.

Consider one alternative. Generate electricity locally using solar and wind.

How many acres of rooftops exist in any city? Flat roofs can be covered in PVs. Sloped roofs have PVs on the south face and, where it makes sense, quiet micro wind turbines on the North face. Reduce energy consumption in homes, offices and transit. Buy food locally from your foodshed. Look for work near your home and walk there, bike to work, telecommute, carpool, take the train.

The Green Revolution is not about burning corn-based ethanol or fear of global catastrophe. It's about physical safety (clean water/air, comfortable homes), economic security (stable energy and material prices), reducing demand (efficient buildings and transportation) and changing supply (sustainable energy generation, increasing local production/usage) .

Update: One Block Off the Grid (1BOG)

If you've been thinking about installing solar and have not yet pulled the trigger, there are still some fantastic rebates to be had. Despite incentives being lowered by California and San Francisco, One Block Off the Grid has negotiated a deal with an installer (Solar City) for a price reduction *and* some free monitoring benefits.

Coincidentally, this is the same installer (Marin Solar) I chose for my house. 1BOG (what an unfortunate acronym) scheduled two webinars:

• Wednesday, January 14th at 12:00 PM
• Saturday, January 17th at 10:00 AM

Check out the webinars or just go ahead and sign up for an evaluation. You can also call Solar City directly and tell them you are intersted in the One Block Off the Grid program.

If you live in the Bay Area, but not San Francisco, you can still take advantage of this deal from 1BOG.

Why wait?