Ethanol Makers Switch to Bio-Chemicals
Ethanol producers, who focused on transforming corn into transportation fuel, got whipsawed by skyrocketing corn prices and collapsing demand as consumers cut back on driving.
Now a group of biotechnology and chemical companies is proposing a different model: using the existing ethanol infrastructure to make higher-margin chemicals.
Worries about global warming and government efforts to make chemicals more environmentally friendly are pushing the industry to find alternatives to the building-block materials they make mostly out of oil and natural gas. Ethanol itself, and other chemicals that can be brewed at ethanol plants, are emerging as viable options.
The trend could give the nascent green-chemicals industry a big boost, and revive business for ailing ethanol producers, some of which are bankrupt and idle.
“The economics of current ethanol production are almost begging for improved processes,” says David Gaskin, director of planning for Glycos Biotechnologies Inc., a Houston-based start-up company.
His firm is one among a handful that sees opportunities in retooling ethanol plants to produce chemicals. Others include San Diego-based Genomatica Inc., Englewood, Colo.-based Gevo Inc. and Myriant Technologies LLC, in Quincy, Mass.
World-scale players are getting involved, too. Dow Chemical Co. has formed a partnership with Algenol Biofuels Inc., based in Bonita Springs, Fla., to develop algae-based ethanol.
To be sure, most of these projects are still in development. Many are still in the research stage and won’t reach commercial production for years. Others have not yet secured funding.
Gradual Process
Still, analysts say, the ethanol industry will gradually move into bio-chemicals because they represent an intermediate step between corn-based ethanol and more-advanced, next-generation bio-fuels.
“We’re not going to go from 1.0 to 2.0,” says Matt Hartwig, a spokesman for the Renewable Fuels Association in Washington, D.C., likening ethanol’s evolution to software versions. “There’s going to be 1.2, 1.5, 1.7 in between.”
By tying chemicals into the transportation-fuels business, biotech and ethanol companies are recreating oil refiners’ strategy, says Doug Cameron, chief science adviser for the investment firm Piper Jaffray Cos. While refiners mainly produce diesel and gasoline, they are also the beginning of a long manufacturing chain that churns out myriad other products, from auto lubricants to plastics.
The main difference is that bio-chemical producers will rely on living bugs that have been biologically engineered to transform plant materials into other specific substances.
At GlycosBio the focus is on glycerin, a by-product of ethanol fermentation. The company is developing an add-on process for ethanol plants to transform glycerin into more fuels and chemicals used to make fabric, insulation and food, says Mr. Gaskin.
He says several companies have expressed interest in the process, but he doesn’t have their authorization to provide their names.
Special Prices
Although the market for any particular chemical is dwarfed by the size of the fuel market, chemicals generally fetch higher prices