07/09/2012 The Six-Year Odyssey: Or, why it takes so long to develop biofuels projects
A two-part series in which Digest contributor Tim Sklar looks back on the development of a biocoal technology.
All the promise in the world, and every adversity, too.
By Tim Sklar
Getting Back In The Game
Sklar & Associates, a Washington, DC corporation was incorporated in 1986. For over a 30 years period S&A had been providing financial due diligence and financial packaging services to developers of large-scale projects around the world. In mid-2006, as founder, I decided to retire and move to South Carolina. It was time to slow down and beaches, biking, boating and fishing beckoned.
Unfortunately, my retirement aspirations were not yet that strong. I was lured back to finding biofuels projects to develop.
It was a time when Federal energy policy was specifically directed at increasing the availability and use of renewable fuels.
Off on the wrong track
The strategy that I first pursued involved decided to get involved contacting a number of South Carolina based companies that were believed to be positioned to undertake second-generation renewable fuels projects and had access to local sources of woody biomass.
Second generation ethanol production was in its infancy and there were many firms trying to perfect technologies to convert cellulosic woody biomass , cellulosic crops and cellulosic wastes into ethanol. There were a number of pilot operations underway, and the commissioning of a commercial scale cellulosic ethanol plant appeared to be just over the horizon.
Also under development was the integrated forest biorefinery concept that combined pulp mill technology with the 2 staged acid hydrolysis/fermentation process to produce bio-ethanol.
With little effort, I was able to identify the five large pulp and paper mills in South Carolina that are the dominant users of locally harvested pulpwood and the two pulp mills that had deep-water port access, the one in Georgetown, SC, close to home, and the other 60 miles south in North Charleston, SC.
It appeared to me as a layperson, that the IFB concept could be viable, especially in South Carolina, even if converting pulp mills into IFB’s was complex. Yet, mill managers had much at risk if a conversion of their mill into a IFB proved un-satisfactory as well as costly. And such integrations could offer pulp mills a new high value product, ethanol, which would add to overall revenue and help hedge against erratic profitability.
To get started down this path, a short presentation on the IBF concept was prepared and a meeting request was sent to the mill manager of the Georgetown mill. This mill manager not only agreed to meet, he arranged for several of his key people to attend the briefing. And better yet, after the meeting, he agreed to have us undertake a preliminary fact finding and pre-feasibility assessment. assigning his chief engineer to help. He suggested that if the IFB concept appeared as a worthwhile option, that he would authorize the go ahead for a full feasibility study in which S&A would participate.
After a six-month fact finding and pre-feasibility assessment, we made a presentation of the pre-feasibility findings and recommendations. In attendance was the VP of Technology from Corporate headquarters. We had never been asked to communicate with him about our work and this presentation was his first exposure to what we had been asked to do. He was clearly angered that the mill manager had authorized such a fact finding without his say-so and he promptly made it known that the mill would never be converted to an integrated forest biorefineryeven if it appeared to be feasible. As a consequence, the mill’s IFB efforts were abandoned.
Among lessons, learned, we should have realized that a pre-feasibility study for converting this mill into a IFB was pre-mature, as at that time, there was no mill that had actually done such integration and the preliminary findings had too many known-unknowns.
Also, in discussions with the mill manager he opined that the technical risks were likely to be too high for them to assume, even if it was indicated that the IFB appeared feasible and profit improvements were expected to be substantial. Over the course of our investigation, we failed to change his perceptions, thus sealing the fate of our initial effort.
Finally, we had not paid sufficient attention to the corporate hierarchy that was involved and who would be the one to ultimately approve continuance of our work.
The pivot to bio-coal
Immediately after this set back, a presentation was given to the General Manager of the second mill that had been targeted for an IFB study. Unfortunately at the time, too little progress had been made on the IFB projects that had been announced. Likewise, the technology providers had yet to be able to scale up to commercial levels.
Further, the chief engineer of this mill pointed to the fact that they did not have excess steam capacity at this mill, and the General Manager had made the point that the market for kraft paper had recently improved and the market for ethanol had softened. As a consequence, we all agreed that it made no sense to do any more work on this project.
These two cases point to the importance of biofuels project developers having acceess to a commercially viable technology and process before undertaking other tasks.
During this period, a strong relationship was established a woody biomass procurement consortium that had an initial interest in supplying wood chips to bio-refineries that could produce alternative liquid fuels.
Yet, as they watched failures like Range Fuels, it had become apparent that making liquid transportation fuels from woody biomass had proven much more costly and difficult than using woody biomass to produce bio-coal.
So they decided to concentrate on bio-coal, and a South Carolina project was investigated. By 2010, S&A was presented with a new bio-coal user opportunity – a coal fired power station in New York State, owned by EBP.
The wood consortium indicated that it was in a position to organize a consortium among in southwest New York and northwest Pennsylvania, and eventually we joined forces with a technology provider based in Pennsylvania.
Disaster struck when EBP’s parent filed for bankruptcy and the prospects of the EBP project fell into the hands of a bankruptcy Trustee.
In Wednesday’s Digest, part II of the series – looking at the South Caroline project – the financing and proof of technology, and the Known Unknowns of bifocal. For more information about the project itself, contact Tim Sklar here.