Recognizing Hype versus Practical Limitations in Fuels and ...
36
Recognizing Hype versus Practical Limitations in Fuels and Alternative Feedstocks William F. Banholzer Executive Vice President and Chief Technology Officer March 24, 2011
Transcript of Recognizing Hype versus Practical Limitations in Fuels and ...
Recognizing Hype versus Practical Limitations in Fuels and Alternative Feedstocks
William F. Banholzer Executive Vice President and Chief Technology Officer
March 24, 2011
Inven%on to Innova%on
W Banholzer
W Banholzer
Business Success LO
W
PE
RFOR
MANC
E
HIG
H
LOW COST HIGH
NICHE
NICHE
BANKRUPT
W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers Cellulosic Fuels
Bio Based PET PE from Ethanol
W Banholzer
W Banholzer
Novel Route to Key Aroma%cs
“The transforma%on of simple alkanes into valuable aroma0c compounds is remarkable, and demonstrates exquisite control of selec%vity.”
Prof A Haynes, University of Sheffield
Sources: Ritu Ahuja, Benudhar Punji, Michael Findlater, Carolyn Supplee, William Schinski, Maurice Brookhart and Alan S. Goldman, Cataly%c dehydroaroma%za%on of n-‐alkanes by pincer-‐ligated iridium complexes, Nature Chemistry, Volume 3 ,No 2 (2011)
W Banholzer
W Banholzer
But Before You Begin, You Should Ask….
Where do n-‐alkanes come from? With BTX global produc%on at 100 million ton/year, what do you do with > 400 million ton/year of 2,2-‐dimethylbutane?
Authors propose the use of high value propylene as sacrificial hydrogen acceptor to
produce low value propane.
Sources: Ritu Ahuja, Benudhar Punji, Michael Findlater, Carolyn Supplee, William Schinski, Maurice Brookhart and Alan S. Goldman, Cataly%c dehydroaroma%za%on of n-‐alkanes by pincer-‐ligated iridium complexes, Nature Chemistry, Volume 3 ,No 2 (2011)
W Banholzer
W Banholzer
How CAPITALISM Works….
Companies have to make money
Money flows towards higher returns
Investors are risk adverse Wrong investments drive companies to collapse
W Banholzer
W Banholzer
The Energy Outlook En
ergy (Q
uad)
Sources: DOE – Annual Energy Outlook Early Release 2011, Table: Total Energy Supply, Disposi%on, and Price Summary
Energy = Prosperity & Real Challenge
W Banholzer
W Banholzer
Managing Energy and Feedstocks
ENERGY SOURCES CHEMICAL
NUCLEAR
ENERGY TRANSPORT & STORAGE
ELECTRONS
CHEMICAL BONDS
POTENTIAL
W Banholzer
W Banholzer
The Scale of Industry
2% of Global MEG Consumption
0.3% of Global Ethylene Consumption
0.02% of Global Electricity Generation
Revenue $441MM/y
0.05% of Global Electricity Generation
Revenue $1051MM/y
Original Investment
Capital for Single Plant
Largest Social Community on Internet
Sources: facebook original investment showing combined amounts from Peter Thiel (PayPal cofounder), Accel Partners and Greylock Partners as described in the History of facebook on wikipedia; Power Plants: RL34746 report -‐ Stan Kaplan -‐ Congressional Research Service; MTO: PEP Report 261 – SRI and EG: PEP Repor 2I – SRI; Revenues for Power Plants calculated using 2010 electricity average retail prices (all sectors) 9.88 cents/kWh (data from DOE)
W Banholzer
W Banholzer
The Challenge of a New Company
Frac7on of companies that survived a=er launch
Energy & chemical industries require very high reliability Energy & chemical industries are extremely capital intensive Failure has massive financial and social consequences
Source: Knaup, Amy E., May 2005,, “Survival and longevity in the Business Employment Dynamics data,” Monthly Labor Review, pp. 50–56; Knaup, Amy E. and MC. Piazza, September 2007, Business Employment Dynamics Data: Survival and Longevity, Monthly Labor Review, pp 3-‐10. W Banholzer
W Banholzer
Feedstock Oxida%on States
W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers
Bio Based PET • Economic Feasibility • Technical Challenges • Consumer Sen0ment & Demand
• Product Complexity and Uses
W Banholzer
W Banholzer
Managing “Green” Fads – Green PET
Natural Gas
$/MMBTU
Ethane
$/gal
Ethylene
cents/lb
Gasoline
$/gal
Polyethylene
cents/lb
Coal
$/ton
Electricity (Industrial)
cent/kwh
MEG
cents/lb
PET
cents/lb
Ethanol
$/gal
USA Brazil Middle East Sources: Natural Gas, ethane, ethylene, polyethylene, gasoline, MEG, PET: CMAI Coal: EIA, Electricity: DOE, Ethanol US: ICIS, Ethanol Br: ESALQ Price Densi%es shown for Dec 2008 to Dec 2010 Prices shown from Dec 2010
As of Dec 2010
W Banholzer
W Banholzer
Managing “Green” Fads – Green PET
USA Brazil Middle East Global Prices shown as of Dec 2010 2 years price variaAon
Natural Gas
$/MMBTU
Ethane
$/gal
Ethylene
cents/lb
MEG
cents/lb
PET
cents/lb
Ethanol
$/gal
p-‐xylene
cents/lb
PET
cents/lb
Naphtha
cents/gal
isobutanol
$/gal
“Hypothetical” Bio-route cost
Natural Gas, Naphtha, xylene ethane, ethylene, MEG, PET: CMAI Ethanol US: ICIS, Ethanol Br: ESALQ; isobutanol: report SRI PEP 274
Oxo-process Mkt price
Bio-route Real Cost - unknown
W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers Cellulosic Fuels
PE from Ethanol Bio Based PET
W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers
• Economic Feasibility • Technical Challenges • Supply Chain
W Banholzer
W Banholzer
Glycerin to Epichlorohydrin
New Route
Industry Standard Route
Hypothesis Glycerin from biodiesel Economically aprac%ve • Low Capital (2x lower) • Simple & compe%%ve process • Addi%onal market value for renewable feedstock
W Banholzer
Glycerin to Epichlorohydrin
Sources: Glycerin price from December 2010 Oleoline market report with prices corrected to Tallow glycerin. Propylene prices from CMAI, spot simple average Biodiesel: EIA Biodiesel Overview 2001-‐2009, Table 10.4 + AEO 2011 for 2010 data GDP (%): The World Bank database
Significant Issues: Supply chain uncertain%es for crude glycerin Dependence on biodiesel = uncertain future Dow’s investment decision coincided with global economic downturn Propylene price varia%on challenges profitability
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers Cellulosic Fuels
PE from Ethanol
Bio Based PET
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers
Cellulosic Fuels
• Capital Costs • Feedstock Availability • Technical Challenges
W Banholzer
W Banholzer
Fads and Hype Do Not Survive….
W Banholzer
W Banholzer
The Cellulosic Ethanol Fad
70
50
90
110
130 150 170 190 210
230
250
Sources: Crude Oil price, CMAI, Spot Average FOB price; monthly average prices from Jan 2005 to Jan 2011 Targets from DOE for Biochemical and Thermochemical routes; Capital from Biomass Multi Year Program 201 report from DOE (revisited by DOE on Nov 2010) Corn Ethanol from the Center of Agricultural and Rural Development from Jan 2005 to Jan 2011 Reality today: based on announced Verenium Capital Intensity and assuming: yield of 70 gal EtOH/ton of biomass, enzyme cost at $0.50/gal EtOH and biomass at $75/ton
270
290
310
W Banholzer
W Banholzer
Ethylene Cost Curve
To replace a $1.5B plant producing 1 MM tons per year with a cash cost of $492/ton (NA average) with a new $1.5B plant requires a cash cost of $216/ton or less*
*13% discount factor
MEA
NA EU
NEA SEA
Zero NPV @ 13% disc.
Source: CMAI - 2010 World Ethylene Cost Study
Variable Cost from Cellulose EtOH route 1100
W Banholzer
W Banholzer
The Promise versus The Reality
Corn 50 years to 3x yield
Soybean 50 years to 2x yield
Cumula%ve Total R&D Investment Dow Agrosciences Syngenta Monsanto
Switchgrass today = 4.6 ton/acre Miscanthus – trials only
“Promised” to 10-‐15 ton/acre in a decade and 15-‐20 ton/acre over following few decades
PROMISE
REALITY Area Produc0vity
Source: USDA – quickstats.nass.usda.gov – reports: AFBDFE1E-‐1AFC-‐35DE-‐8A93-‐7FB72F0DA089 0DB967AF-‐4F8E-‐32ED-‐9D5D-‐D150ADE7D838 Source: Bloomberg for 2007 to 2009 and Annual financial reports from 2010
W Banholzer
W Banholzer
The Promise versus The Reality
Soybean 50 years to 2x yield
Switchgrass today = 4.6 ton/acre Miscanthus – trials only
“Promised” to 10-‐15 ton/acre in a decade and 15-‐20 ton/acre over following few decades
PROMISE
Source: USDA – quickstats.nass.usda.gov – reports: AFBDFE1E-‐1AFC-‐35DE-‐8A93-‐7FB72F0DA089 0DB967AF-‐4F8E-‐32ED-‐9D5D-‐D150ADE7D838 Source: Bloomberg for 2007 to 2009 and Annual financial reports from 2010
Cumula%ve Total R&D Investment Dow Agrosciences Syngenta Monsanto
REALITY
W Banholzer
W Banholzer
Cost and Time to Implement
Actual Growth from Corn Ethanol
1 New Plant every 8 days ∼$200B in capital
Na0onal Academy of
Sciences Projected Biomass (550MM ton) with
Thermochemical Process
9% of US Liquid Fuel Consumption in 2020 3% of US total Energy Consumption in 2020
Data shown in 2020 includes only the energy generated by the 550 MM ton of biomass (Nat. Academy of Sciences) with performance of 2012 DOE target W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers Cellulosic Fuels
PE from Ethanol
Bio Based PET
W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers
PE from Ethanol
• Economic Feasibility • Technical Challenges • Geographic Constraints &
Advantages
W Banholzer
W Banholzer
An Alterna%ve Feedstock -‐ Cane to LLDPE
Ethanol Ethylene
Fully-‐integrated facility in Brazil U%lizes state-‐of-‐the-‐art Dow polymeriza%on catalysis
W Banholzer
W Banholzer
Ethanol to Polyethylene – A Niche Opportunity
Ethane
$/gal
Ethylene
cents/lb
Polyethylene
cents/lb
Ethanol
$/gal
Sources: Ethane, ethylene, polyethylene (US): CMAI; Ethanol US: ICIS, Ethanol Br: ESALQ; PE Brazil calculated based on market price differen%al Br to US (reference ) Price Densi%es shown for Dec 2008 to Dec 2010; Prices shown from Dec 2010
• Exis%ng logis%cs for ethanol in Brazil • High polyethylene price in Brazil • Ethanol price fluctua%on requires integra%on
cents/lb
Polyethylene Ethanol
$/gal
UNITED STATES BRAZIL
W Banholzer
W Banholzer
Business Success vs. SCIENCE LO
W
B
USIN
ESS
SUCC
ESS
HIG
H
LOW QUALITY OF SCIENCE HIGH
STATIN Drugs
Man Made Diamond
LEDs
Ethylene Styrene Interpolymers
Cellulosic Fuels
PE from Ethanol
Bio Based PET
W Banholzer
W Banholzer
Compounding Miracles
Photosynthetic Yield
Collection & Transportation
Conversion/Cost
Production of Hydrogen
Hydrogen Storage
Fuel Cells
Distribution & Infrastructure
Hydrogen Fuel Cell Technology requires 4 miracles
Cellulosic Ethanol Technology requires 3 miracles
W Banholzer
W Banholzer
Thank You
W Banholzer
Feedstock Oxida%on States
W Banholzer
W Banholzer
Understanding the Key Issues
• The requirements of CAPITALISM must be addressed. • ENERGY R&D is a mul0 level challenge • NEW FEEDSTOCKS have uncertainty in supply chain complexity, long term availability and market pull
• TIME & SCALE TO IMPLEMENT cannot be ignored • The rela0onship between SCIENCE and BUSINESS is hard to predict • INCUMBENT TECHNOLOGY sets the standard for compe00on
• COMPANIES FAIL! For a successful technology, reality must take precedence
over public relations, for Nature cannot be fooled.
- Richard Feynman W Banholzer
W Banholzer
