By Kapil Shyam Lokare, PhD
The importance of renewable energy sources in the global energy mix is growing, with its share now approaching 14%, according to the latest figures from the International Energy Agency. As many new startups enter the field, the question is which renewable energy companies should we keep our eyes on?
There are some challenges to the growth of renewable energy companies, such as inflated and unrealistic valuations, a shaky stock market and a weaker China which has been fueling global growth until recently. As crude oil prices remain depressed, they will take many smaller and less stable biofuel-based startups down. Why? Because you cannot have a successful biofuel-based company without subsidies or government incentives with crude priced at USD44 per barrel.
The global population has more than doubled in the past 50 years. As of March 2016, the world population was estimated at 7.4 billion, an all-time record high. The United Nations estimates that it will further increase to 11.2 billion in the year 2100. As the population has increased, so has energy consumption. This will continue, especially as incomes and lifestyle requirements continue to rise globally.
Over this period of rapid growth, the proportion of the market that consumed energy powered by fossil fuels has remained fairly steady, falling marginally by about 10-12%. A portion of that slight drop is due to lower coal consumption. The first oil price shocks in the 1970s triggered the start of intensive research and development in renewable energy sources: solar, wind and hydroelectric power, together with a range of cultivated biofuels from grasses to algae to municipal waste.
In the conceptual design for the future heading towards a sustainable society, often times there is a high degree of disengagement with what matters most within the industry and, more importantly, a lack of understanding of societal needs. Finding an alternative for a 100+-year old petroleum industry is a herculean undertaking. The three obvious pathways to create a sustainable future are via an integrated approach:
A. Carbon capture and storage – to mitigate emissions from existing infrastructure, such as the ubiquitous iron and steel factories and the cement and chemical industries, along with the aviation, automotive and marine industries etc. to minimise the impact of global warming;
B.Utilise solar, wind and hydro towards CO2 mitigation and electricity generation to address local transportation requirements, and
C. Focus on a biofuel-based industry for novel approaches to transportation fuels (heavy trucks, marine and aviation fuels etc.) but also supplement the chemical requirements (fundamental chemical building blocks, chemical precursors, solvents, lubricants etc.). See Chart 1.
Terrestrial biomass growth occurring on the earth’s surface is approximately 118 billion tonnes per year, dried. About 14 billion tonnes of biomass are produced yearly in agricultural cycles, and of this, nearly 12 billion tonnes are essentially discharged as waste. Obviously, there is enough biomass available at a potentially low cost to be used in many different ways (such as upgrading the available biomass itself, extracting valuable components, etc.). Many companies have capitalised on various aspects that are described in Charts 2 and 3.
The need to invest in renewable energy sources is now recognised by the oil industry. For example, the Recent Outlook to 2035 by BP1 and The Outlook for Energy: A View to 2040 by Exxon Mobil2 discuss their predictions for forthcoming changes in distribution within the industry.
For those in the renewable energy sector, there is no time for complacency. Which goals and projects should be considered as top priorities in the coming years besides solar, wind and hydro-based companies in regards to upgrading biomass? The two graphics below show my picks for the top 50 companies in the renewable fuel and chemical space. These companies are chosen based on a few primary industries i.e., fuels (ethanol, butanol, diesel, renewable jet, marine fuels, CO2 remediation) and chemical-based companies. The list is based on feedback from some of the top minds in the industry.
Finally, I’ll share my list of the top five companies to keep your eyes on, companies that have the potential for capturing the right markets while disrupting existing value chains, namely, Green Biologics, Novvi LLC, Licella, Genomatica and Avantium.
- Green Biologics
Founded by Edward Green in Oxford, England, Green Biologics Ltd. is a renewable fuels/chemicals company focussed on developing and delivering bio-butanol with its technology platform built on Clostridium microbial fermentation. Following its merger in 2012 with Butylfuel™ Inc., and acquiring the assets of Central MN Ethanol Co-op LLC in Little Falls, Minn., U.S.A., in 2014, Green Biologics is repurposing a 21 million gallon per year (gpy) ethanol plant to produce normal butanol and acetone. Now that it has set up distribution agreements with Texas-based Nexeo Solutions and Acme-Hardesty, a division of Jacob Stern & Sons Inc. and a leading supplier of bio-based chemicals, Green Biologics is one company that has managed to keep a level head as opposed to other isobutanol companies. This gives Green Biologics a well-deserved number one spot.
- Novvi LLC
Novvi LLC is a joint venture between the very successful global leader Amyris, Inc. and Cosan S.A. Industria e Comercio created to develop, produce, market and distribute high-performance base oils and lubricants from renewable sources. Novvi draws from the strength of both companies; Amyris with its synthetic biology platform to produce targeted hydrocarbon molecules from plant sugar, and Cosan’s feedstock capabilities, plus its supply and distribution infrastructure. With its recent partnership with American Refining Group (ARG), with ARG taking a one-third stake in Novvi, Novvi has created an alliance with a conventional petroleum-based company to divests its non-core marketing activities.
Licella uses the Cat-HTR platform to convert a variety of low-cost, non-edible biomasses into stable bio-crude oil that can be refined, in a conventional refinery, into next-generation biofuels and biochemicals. Operating over the past eight years, Licella has invested AUD60 million (USD45.6 million) in technology development, conservatively yet progressively scaling up its Cat-HTR platform to its current Gen-3 version. Licella is a subsidiary of Licella Pty. Limited, which in turn is a subsidiary of Ignite Energy Resources Ltd. (IER), an Australian public unlisted natural resource and energy technology development company. IER has developed a proprietary lignite and biomass-upgrading platform, the Catalytic Hydrothermal Reactor (Cat-HTR). IER operates via three subsidiaries: Ignite Resources Pty. Ltd. (applying Cat-HTR to lignite), Licella Pty. Ltd. (applying Cat-HTR to biomass), and Gippsland Gas Pty. Ltd. (biogenic natural gas resource). With a past collaborative effort with Norske Skog, and the latest with Canadian Canfor in 2016, Licella has one technology that has a huge hidden potential and needs the right investments to flourish.
A widely recognised bioengineering technology leader within the bio-chemical industry, Genomatica with its GENO BDOTM process has produced 2,000 metric tonnes of 1,4-butanediol (BDO) and is gaining recognition. BASF and Novamont have licensed the GENO BDOTM process for their commercial plants. Cargill is supporting Genomatica with a full range of feedstock and production support services. The BDO produced continues to extend further into product value chains, with validation from firms including Invista (Lycra® spandex), BASF (PolyTHF®), DSM, Lanxess, Toray and Far Eastern New Century. With partners including Versalis and Braskem, Genomatica has managed to raise more than USD125 million in financing from Alloy Ventures, Bright Capital, Cargill, Draper Fisher Jurvetson, Mohr Davidow Ventures, TPG Biotech, VantagePoint Capital Partners, Versalis and Waste Management. Genomatica is one company that keeps delivering and claims the top spot within the chemicals sector.
A spinout from Royal Dutch Shell in 2000, Avantium was founded with the singular purpose of using advanced catalysis to transform the world of R&D. One of Avantium’s many success stories is the YXY technology to produce PEF, a completely new, high-quality plastic made from plant-based industrial sugars. PEF is 100% recyclable. Early this year, Avantium and BASF signed a letter of intent to establish a joint venture for the production and marketing of the renewable chemical building block FDCA, as well as the marketing of PEF. The joint venture intends to use the YXY process technology developed by Avantium to solidify its world-leading positions in FDCA and PEF, and subsequently license the YXY technology for industrial-scale applications. A solid catalysis foundation definitely makes Avantium one of the top future technology providers for the bio-based industry.
On a closing note, one aspect is clear—the giants within the industry have taken note of the changes, and have slowly expanded their business portfolios to include renewable energy sources; some of them include Coca-Cola, BASF, DuPont, UOP, DONG Energy, Total, Shell and Sasol.