Build-Out Bust or Boom?
When the U.S. DOE, USDA and the U.S. Navy jointly launched a bold effort together with the private sector in August to invest up to $510 million over the next three years to build or retrofit existing industrial facilities for drop-in biofuel production, the news was generally well-received by the biorefining community. Questions remain as to whether the investment is enough to support this commitment over the long-term and, even if it is, the one-to-one matching fund ratio from the private sector may prove challenging, especially during a recovering economy.
“It may not be a lot [of money] in terms of changing the energy environment of the country, but it’s a good start,” says Ken Eickmann, a retired lieutenant general who worked at the Aeronautical Systems Center at Wright-Patterson Air Force Base. Eikmann is currently deputy director of the Center for Energy Security at the University of Texas, state vice chairman for the Texas Engineers Taskforce on Homeland Security and serves on CNA’s military advisory board.
“We’ve got to step forward and start producing some of these different types of alternative fuels to solve some of the technical issues that are associated with them and to incentivize industry to get involved,” Eickmann explains.
According to Gary Luce, CEO of Houston-based Terrabon Inc., the federal program should prompt private equity and debt financing entities to more stringently evaluate where funds are to be directed to support project and technology developments for drop-in biofuels. Terrabon optimizes a proprietary biorefining technology called MixAlco to convert biomass into biochemicals such as acetic acid, ketones and alcohol-based jet fuel and gasoline.
“One of the challenges with this [federal investment] is just as private companies try to interface in with federal programs, it’s a different operating mentality,” Luce tells Biorefining Magazine. “If the government is putting up $500 million and the capital markets have to match that, then it’s not really about the advanced biofuel developers, it’s about whether the capital markets see the structure in such a way that’s worth their risk to deal with the government risk in the implementation of the program.”
In July, Terrabon was awarded a $9.6 million grant by Logos Technologies Inc. and the Defense Advanced Research Projects Agency to create 6,000 liters of jet fuel using its MixAlco process. Luce says that his company’s alcohol-based jet fuel is undergoing certification process and anticipates breaking ground on a commercial production facility sometime next year.
“What this [federal program] will do is separate the men from the boys,” Luce says, “because I think the capital markets will allocate their equity a little bit differently than the federal government will.”