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Bio-based Feedstock Supply Chains: Subject Matter Experts Speak in Washington

I attended a conference today in Washington DC hosted by Duke University and Yale University on Biobased Feedstocks. The discussion led to some interesting observations about the tradeoffs and opportunities between biobased and fossil based feedstocks.

The bioeconomy is a large and rapidly growing segment that allows everyone to live longer, healthier lives, reduce dependence on oil, address key environmental challenges of the world, transform manufacturing processes, and increase the productivity and scope of the global agricultural sector while growing new jobs and industries world-wide.

This involves multiple parties collaborating across disciplines, including supply chain management, biochemical/fermentation engineering, chemical engineering, and others.

Bio-based feedstocks can be converted into food, fuel, or other materials. Chemicals and plastics are converted into consumer products. Conversions steps take it into intermediate chemicals and put into a final product that goes into chemical. It is important to note that fossil fuels may feed a bit into same chain as bio-based chemicals. As we think about chemical markets, there is already a downstream investment to pull the material through – but you will have to compete with that investment. At some point bio-based supply chains merge with existing fossil-based chains as you get closer to the consumer.

Established supply chains developed according to societal needs – and emerging ones will need time and capital to develop. This is certainly the case with bio-based supply chains. Getting rid of the risk and attracting capital is an issue in development of this industry. We are in the fossil based economy using crude oil, natural gas, applying distillation, cracking, treating and blending to make fuel, power, and plastics. Basic chemicals like propylene and ethylene go into polyethylene and others go into downstream products. Bio-refinery chemical plants on the other hand utilize biomass feedstocks such as starch crops, agricultural waste, vegetable oils, carbon dioxide and algae, municipal solid waste – which are converted into enzymatic fermentation, acid hydrolysis, and gasification.

Bill Provine from Dupont discussed the diverse investments being made in bio-based products. First, the organization is investing heavily into bio-based food such as Probiotics. They have also invested in a pilot feedstock plant in Vonore TN, which has been operating since Dec 2009. It has demonstrated lower capital integrated unit operations, and is generating operating data for commercial scale up. They have also invested in a Nevada IA facility which will be breaking ground in November 2012. This is a commercial cellulosic ethanol plant. Both of these facilities rely on collaboration with local farmers and growers, to ensure that bio-based materials are all in a 30 mile radius. This is an important component in thinking about logistics costs as an input into bio-based feedstock production.

Ken Spall from Deloitte discussed many of the challenges ahead for the supply chain. Conversion capacity is limiting the supply of fuels and chemicals. Organism productivity life and product tolerance is a big issue, similar to catalyst productivity. Pricing is important, and access to low cost sugar or other carbon sources is always a concern. Co-product or residual energy credits associated with a given feedstock are absolutely required to sustain the industry. The amount of energy needed to isolate the product from relatively dilute aqueous solutions is a major cost factor. Logistics costs associated with raw materials is also an issue. Finally, one of the biggest issues is attracting the capital for technology development and commercialization. Ken emphasized that finding the right partners to develop these supply chains will be critical, which includes new energy crops, funding product marketers who are making the packaging, and providing government understanding.

Keith Belton from Dow discussed their early experiments in bio-based fuels, beginning with sugarcane polyethylene. Dow has a joint venture in Brazil is moving forward, DOWLEX. This has been successful, due to ready access to sugarcane, but also because fossil fuels are expensive and are subject to tariffs, making the economic case sustainable. They have been less successful with an effort to convert soybeans to polyols. The bio-based polyols did not meet all of the characteristics required, and also had a smell that was not suitable to their products.

Robert Kozack from Advanced Biofuels argued that climate change is not an externality it is a reality. If we don’t care about this and eliminate carbon taxes, biofuels will not work economically. And many believe why should we support biofuels if it is not sustainable? We have to stop thinking about countries as consumers, and think of them as citizens. Sometimes we need to rise above what consumers want, and think about the greater good. He noted that a common feedstock for a biofuel production system is needed to pull together multiples types of bio-based materials (switchgrass, corn, etc.) and a common conversion process that can be biorefined at different locations. But a central location is needed to create a bio-based supply chain that makes sense, which produces soluble liquids based on C-5/C-6 sugars.

All of these discussions led to some very interesting discussions around the opportunities and risks ahead for bio-based feedstock supply chains.