29 Sep Alternative energy visions: Virent's Apfelbach talks up green gasoline
Editor’s note: On the heels of encouraging news about the green gas it is developing for commercial energy markets, Virent Energy Systems’ Eric Apfelbach gave his take on where the company stands in the alternative energy industry. The green gas, which was found to be cost competitive with gasoline, will be Virent’s first commercial product, followed by renewable jet fuel and diesel fuel.
Part II of our Visions interview will focus on the future business plans of Virent, which has established partnerships with the likes of Shell Oil.
WTN: About the news that your green gas can be produced at a price that is competitive with conventional gasoline, how much work is left to do before you prove to investors that the technology will work in the market?
Apfelbach: As you know, the price of regular gasoline is a moving target, so we kind of look at that and say we don’t really know where that is going to end up. Really, most of what we’re doing now is scale-up work. Our technology, from a chemical processing perspective, is a very conventional technology – much like what’s used in a refinery. There are some new steps in our process and we have to prove all of the operability of the process at scale. We’re building a new building right now in Madison, and the shell is just up. We’ll be putting a larger scale, integrated pilot plant in that building next year to prove that scale up.
Then, really, you go to commercial size from there. We haven’t determined what the size would be, but the intent is to have a commercial-sized process and then it’s probably going to be a $100 million price tag to build something like that. Realistically, we have to see how fast we can move through the pilot plant in our new building next year, but as soon as we’re happy with that data and the operability, we’ll start the design process for the commercial plant.
WTN: Do you necessarily need investors to eventually build the big, commercial-scale plant, or is it possible that a corporate partner like Shell would step up if the engine testing of the fuel goes well?
Apfelbach: Our plan is there would be a combination for the first plant. The first plant will probably include some of the DOE funding. You’ve probably seen the $50 million to $70 million funding package DOE [U.S. Department of Energy] has put out for first plants, and also some of our own private equity capital as well as partners like Shell, Honda, Cargill would also, I’m sure, be involved in that.
WTN: Tell us a little bit about the pilot production plant that you intend to build with the help of clean energy money from the state?
Apfelbach: We’re not so much worried about size as we are demonstrating integrated operability. Our scale-up work is fairly well known. It’s a fairly well-known process. Our partner Shell has done this many times, where they take our catalytic process and scale it up. The size of that plant would probably be 25 to 50 gallons a day, making gasoline. It will be producing gasoline from sugar, so it will be the first time anything like that has been done. Right now, we have 20 pilot plants in Madison that produce on the half gallon to one gallon per day, but we’re already shipping pretty large samples to our partners for engine testing. We’re not just producing little test tubes of this gasoline.
WTN: How confident are you that given global demand, crude oil will remain above the $60 per barrel mark, which seems to be a demarcation point for you in terms of cost competitiveness?
Apfelbach: I don’t really worry about that at all. One thing you can count on is that all these forecasts have been wrong and they are going to continue to be wrong. Nobody really knows. Even the international energy agency has been perpetually wrong since I’ve been in this business in terms of forecasting oil price. When you step away from the macro issues of limited supply and increasing demand, we’re pretty confident that we’re going to have a pretty decent economic model relative to the price of oil.
WTN: Why are you confident of that?
Apfelbach: There is a very real supply shortfall developing on what I would call cheap oil. There are a lot of ways to squeeze oil out of shale in Colorado and take it out of sand in Canada, and to drill in ultra deep water, etcetera. Most of these things, by the time we’re doing a commercial plant, are going to be at break-even prices up to at least $90 a barrel. If you look at the macro environment, we’re not concerned that somebody is all of the sudden going to find a huge pool of cheap oil. Shell, one of our partners, is one of the best modelers of future oil supply in the world. We look at their models and they don’t think there is going to be cheap oil, either.
What we have to worry about is the other thing because we use a raw material, biomass. We spend most of our time looking at what is a long-term, sustainable way to get biomass feedstock into our process. A lot of what we do in Madison is actually is looking at non-food, sustainable feedstock supplies that can be scalable over the long term. There are a lot of things going on to expand bioenergy feedstock supplies, and we think that will pay off. We’re not going to be using corn as a primary biofuel feedstock in the future. There will be other things.
WTN: Is your green gas product likely to be commercialized before cellulosic ethanol-based products?
Apfelbach: They’ve been working on cellulosic ethanol for 20 years in some of these companies. The struggle with cellulosic ethanol is they want to use a bug to eat the sugar. So you’re basically trying to blast apart the cellulose and then create one sugar that this bug will eat, and unfortunately that’s a tough equation because when you blast apart cellulose, you get all sorts of different molecules coming out of there – most of which the bug will not eat or will eat very slowly.
The benefit we have is a catalyst that is really operating out of chemical functionality on these molecules. It doesn’t care if it’s a five-carbon sugar or a six-carbon sugar. It’s going to go ahead and send that down a chemical pathway independent of how many carbons it’s got. We think that’s one of our biggest advantages, that we are already processing mixed sugar streams like that.
It’s a race. There are tremendous amounts of money going into cellulosic ethanol, and my experience in technology is that you take all these brains and all this money and apply it to a problem, and you usually come up with some solutions.