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Five Things to Know about Biorefinery Investments

October 15, 2014 - 1:46pm

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Five Things to Know about Biorefinery Investments

This week, Abengoa’s cellulosic ethanol plant in Hugoton, Kansas, will have its grand opening—right on the heels of POET-DSM’s Project LIBERTY in September. Both biorefineries produce cellulosic ethanol, which has only been produced commercially in the United States since last year when INEOS Bio-New Planet Energy’s Vero Beach facility opened. These steps are helping the United States “transition to a clean energy reality,” which is the theme for Energy Action Month.

These cellulosic ethanol plants managed by Abengoa, POET-DSM, and INEOS are three of the fifteen active integrated biorefinery projects under the Energy Department’s Bioenergy Technologies Office. Also, three new companies were awarded contracts to construct biorefineries to produce “drop-in” biofuels for the military and private sector last month. Energy Department-funded biorefineries come in all shapes and sizes, but here are five things to know about them:

1.The industry partner and the Energy Department share construction costs. Federal funding provides a huge boost to the biorefinery’s construction and development, but the companies pay a portion of their construction costs with non-federal sources. The required amount varies according to the funding award. Projects must present how they will meet their cost-shared contribution requirement before they are selected for funding.

2.The industry partner receives funding incrementally. Once selected, projects must adhere to the Energy Department’s project management requirements and pass appropriate stage gates to continue to receive funding. The companies submit invoices, which are reviewed and approved prior to payments, rather than lump sums (see the Project LIBERTY infographic). Commercial-scale biorefineries are often required to show that they can operate for profit without direct federal intervention after the initial construction costs are paid.

3. Most biorefineries are the stepping stones to commercial-scale production. While INEOS, POET-DSM, and Abengoa biorefineries are designed to produce fuel that can be sold commercially, not all biorefineries are designed to produce at commercial scale. Eleven of the biorefineries in the Energy Department’s portfolio are smaller, pilot- and demonstration-scale biorefineries that are designed to test new biofuel conversion technologies and fuel production processes. These facilities are platforms where process steps can be tweaked, adjusted, and optimized prior to scale-up.

4.Not all biorefinery projects are expected to reach completion. Similar to building a financial portfolio, the Energy Department invests in a broad portfolio of biorefinery technologies and projects, knowing that some projects will be completed and show great technical achievements and some will not. As with all new, cutting-edge technologies, biorefinery projects are considered high risk. The Energy Department funds projects that are technically sound and have a high possibility of success. It also provides technical project officers and independent engineers to ensure that projects are managed in accordance with policy. While some projects end before completion, the Energy Department is still making progress towards its overall goals for national security, the economy, and the environment.

5. Biorefineries are meant to decrease marketplace risk for many technologies. The Energy Department does not pick favorites. The biorefineries it helps to fund feature a broad range of technologies (biochemical conversion, thermochemical conversion), project scales (pilot, demonstration, commercial), feedstock inputs (woody biomass, agricultural residue, algae), and fuel products (cellulosic ethanol, renewable hydrocarbon). The purpose of this variety is to decrease marketplace risk for “first-of-a-kind” technologies across the bioenergy spectrum. This speeds up the overall development of the industry—reducing costs to consumers and improving energy security.

While biorefineries like Abengoa’s Hugoton plant and POET-DSM’s Project LIBERTY demonstrate cellulosic ethanol coming to the marketplace, the Energy Department’s range of biorefineries  are moving many biofuel technologies to commercialization every step of the way. Visit the integrated biorefineries map to see the entire portfolio. 

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