Australia’s ARENA makes its largest bet on advanced biofuels, as Ethtec taps Aussie waste for fuels

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In Australia, the Australian Renewable Energy Agency has made its single largest direct investment in second-generation biofuels via $11.9M in funding support for Ethtec to complete the development and demonstration of its advanced biofuel production technology.

The total project cost is $30M, and the ARENA funding of $11.9 million is being matched by Jiangsu Jintongling Fluid Machinery Technology Company Limited. In addition, Ethtec has partnered with Apace Research Limited, the University of Newcastle’s Institute for Energy and Resources and School of Environmental and Life Sciences as well as with Muswellbrook Shire Council to complete the project. Additional funds and in-kind support from the project partners make up the funding for the new $30 million Hunter Pilot Biorefinery.

Above: The Ethtec Phase 2 pilot in Maclean, New South Wales

The Ethtec pilot plant will be the centrepiece of the Hunter Pilot Biorefinery located at Muswellbrook in the Upper Hunter Valley of New South Wales.

The Ethtec project

We’ve been following the Queensland-based Ethtec – or Ethanol Technologies Limited – for more than a decade.  It’s an international technology story that dates back at least to 2007. the hydrolysis and fermentation technology was developed in collaboration with the University of Southern Mississippi and the University of New South Wales, and Apace Research Limited also contributed IP. Willmott Forests made an early0stage investment into the company to catalyze the phase 1 pilot, before Willmott itself collapsed in 2010 as Australia’s timber industry tanked.

Above: Detail at the Ethtec Phase 2 pilot in Maclean, New South Wales

The Ethtec competitive edge

The most intriguing aspect of the technology has been the use of what is called ‘induced phase separation’ for ethanol recovery from the broth that fermentation produces. Why special? The technology aims to eliminate the use of conventional distillation — and that knocks down the capex but also significantly reduces the operating costs and improves the sustainability and energy intensity of a project.

The Aussie horizons

Ethtec’s Andrew Reeves believes the potential in Australia alone for facilities is compelling. “There is the potential for at least 30–50 ethanol plants to be established on the east coast of Australia as the raw material is there. There are approximately 30 sugar refineries and plants using wood in the region,” he noted in 2015, here.

The pilot begins

The team eventually selected the NSW Sugar Milling Co-operative Harwood Mill and Refinery near Maclean in the far north of New South Wales, less than 200 kilometers south of Brisbane.

Above: Detailed view of the Ethtec Phase 2 pilot in Maclean, New South Wales

Phase one was complete in 2009. “To conserve costs, the initial work concentrated on breaking down woodchip and sugar cane bagasse and converting the cellulose and hemi-cellulose into sugars in a batch process,” said company CEO Robert Carey at the time. “Once we were confident that the process would work in a batch mode, the plant was upgraded so that Phase 1 could run in a continuous mode. Phase 1 has achieved the remarkable milestone of being able to convert woodchip to sugars in less than two minutes and was signed off by the Ethtec Board in October 2009.”

Phase two of its pilot development involved separation of the acid, sugar and lignin streams and recycling of the acid and water streams — and the company picked up a Federal Government Grant under the AusIndustry’s Climate Ready Program to help along.

The beginning of licensing interest

Two companies stepped forward in the early 2010s as potential licensees of Ethtec’s technology — the company mentioned in 2009 that “Those include NQBE who are proposing a new sugar orientated factory in the Herbert River district.”

Above: Back at a time when original strategic investor Willmott Forests was on-board, the company projected that it would complete by 2009 the multi-stage pilot project that now ARENA and JTL have stepped forward to fund.

Another was Dorset Renewable Industries, which aimed to revive industry and jobs in the depressed timber industry areas of southern Tasmania. In 2013, DRI applied for a $1.6M grant under Tasmanian Forest Agreement economic diversification funding — the aim was to investigate feasibility for a 30 million liter ethanol plant that would utilize 150,000 tonnes of wood feedstock — but the grant app was unsuccessful. In  October 2014, DRI confirmed to its stakeholders that Ethtec had “successfully completed phases 1 and two” of its pilot project and that “preliminary work for phase 3” was “well underway”.

The NQBE project is based in a group of cane farmers in north Queensland with aims of utilizing sugarcane for green power and ethanol production. At some stage the Ethtec and NQBE melted into a tangle of cross-identity, for they shared a management team, but the NQBE project began to focus on use of bagasse to produce renewable power rather than cellulosic ethanol.

By 2017 the NQBE project is still not built and has ballooned from $520 million into a $640 million project (in Ingham, Queensland) that would crush up to 3.1 million tonnes of sugar cane annually and export in excess of 550,000 megawatts of renewable power into the National electricity grid, enough to power approximately 28,000 homes.

Out of the projects, a strategic investor emerges

But there’s been good news for the cellulosic technology out of the NQBE project, after all. As NQBE chairman Robert Carey noted to shareholders:

“After a number of false starts and disappointments with other EPC contractors,” he added, “[Jiangsu Jintongling Fluid Machinery Technology Co., Ltd ] were chosen because of their manufacturing capability and their vast experience as EPC contractors in the power generation industry in China. JTL is a publicly listed (not State owned) company on the Chinese Stock Exchange and the company’s chairman, Mr Ji, has been personally involved in the negotiations.”

So, arriveth JTL, which we noted was the strategic investor matching ARENA’s grant for the Ethtec pilot plant.

JTL is Jiangsu Jintongling Fluid Machinery Technology Company Limited. The Wall Street Journal’s profile is here. Reuters says that “[JTL] is principally engaged in the research and development of air systems, as well as manufacture of fans and fluid machineries…and small-scale steam turbines for industrial use. “

Not a slam-dunk prospect for investing in pilot-stage cellulosic biofuels R&D — kudos to the Ethtec team for developing a strong partner in the form of an EPC that primarily had experiences with the power generation industry.

A question of yield

International observers such as The Digest have long gazed at DRI’s project descriptor and wondered about Ethtec’s yields. 30 million liters of fuel from 150,000 tonnes of feedstock. For those more comfortable with US measures, that’s 7.9 million gallons from 165,000 tons of feedstock, or 48 gallons per ton of biomass. The’s low by global standards.

And there’s the question of rate and the scale of the scale-up. The pilot project utilizes two tons of biomass feedstock per day. The completed project would utilize something like 480 tons per day (assuming 85% uptime) — that’s a scale-up factor of 240X from the proposed operation at scale. Who knows what harsh lessons that biomass could mete out to a project moving at such a daunting scale-up factor?

By contrast, Iogen (which also worked with multiple feedstocks and commercialized with sugarcane bagasse, in Brazil) ran for 5 years at demonstration scale and reached 85% project uptime, commercialized the 7th iteration of its technology — and still had considerable operational lessons to learn and took more than a year to reach operational stability after completion of construction. Cellulosic biomass has its mysteries.

The company has emphasized strong economics as a drawcard.  Back in 2007, Dr. Reeves told Transport & Logistics News that “feasibility studies have concluded that fuel ethanol produced by the Ethtec process will have a crude oil equivalent cost in the range of US$36-50 per barrel (at exchange rate A$=US$0.88) when the ethanol is used in blends with petroleum fuels*.

But we wonder. A 30 million liter project is going to generate something like $0.37 per liter in today’s global market  — or around $11 million for the fuel value. Leaving aside the break-even point for now — how much capex is going to be invested in support of $11M in revenues?

The project stalls, and a Strategic appears to revive it

Since 2015, there hasn’t been progress reported towards the third phase of the pilot — it’s been the old story of finance, complicated by the global collapse of oil prices beginning in late 2014. And so the arrival of ARENA and JTL in support — well, it couldn’t have been more opportune.

Finance, it’s been a bear for projects not only in Australia but around the world. In this case, teh solution came in the form of an unusual collection of investors — an JTL, Muswellbrook Shire, ARENA, an original investment from Willmott Forests into the phase 1 pilot, not to mention the interest and investment of Queensland-based cane growers into NQBE.

One other face in the crowd of note and interest, Dr. John Hewson, former head of Australia’s Liberal Party and odds-on at one time to become Australian Prime Minister, until a shock election loss in the 1990s. He’s been in investment banking since leaving the leadership in 1994. He has been a noted (and relatively rare) case of a supported of a carbon emissions trading scheme. Hewson has joined the project as an advisor and NQBE director — adding some national visibility to the project.

The appearance of strong support from Muswellbrook also prompted a shift in the project geography. And shifting a pilot midway between phase two and three is no small business — doubtless contributing to the elevated pilot project cost.

ARENA also injects $4 million into Microbiogen to improve biocatalysts

In an unrelated development — yet one that could also lift prospects for Australian biofuels based on Australian technology, we reported this week that ARENA announced $4.03 million in funding for Australian yeast developer Microbiogen to make production of bioethanol from plant waste cheaper and more efficient. will aim to optimize biocatalysts targeted to more efficiently convert sugars to bioethanol for commercial production.

ARENA’s grant will support Sydney-based Microbiogen in a $8.06 million project to adapt and selectively breed a yeast strain capable of optimizing second generation bioethanol production where waste biomass is utilized instead of food. Microbiogen’s project is expected to to speed up the process, reduce by-products and allow higher solid loadings.

ARENA CEO Ivor Frischknecht said “this project could improve the commercial viability of advanced biofuels and hopefully open up export opportunities in North America and Asia.” Microbiogen CEO Geoff Bell added: “We believe that this technology is critical to the sustainability of biofuels since it will address both the economic and sustainability issues surrounding biofuels today.”

Reaction from the Ethtec stakeholders

Dr Russell Reeves, Ethtec’s chief scientist and managing director: “Internationally it is recognised that an ethanol fuel industry based on production from lignocellulosic materials results in substantial reductions in greenhouse gas emissions from the transport and industrial sectors while simultaneously assisting provide solutions to rural unemployment and land degradation through enhancing the economics of crop and forest production.”

Dr Tony Banks, Ethtec’s senior research chemist, also explained: “One of the unique aspects of our technology is that it can be implemented across multiple sectors because it can process any lignocellulosic feedstock, including mixed feedstocks. For this industry to be commercially viable, the technology must be able to deal with real world feedstocks.”

Dr Geoff Doherty, Ethtec’s senior research biotechnologist, added: “To provide an economic buffer during periods of low oil prices, Ethtec is engineering flexibility into the process by enabling plant operators to choose to produce valuable co-products with ethanol”.

The Bottom Line

Ethtec has been on the radar for quite some time — suffering from a lack of investor interest that has plagued Australian advanced biotechnology development, and forced most companies to seek project partners and strategic investors far from Aussie shores. Licella has aimed at Canada and the UK for its first commercial projects; Leaf Resources has aimed at Malaysia. Now, Chinese investment has been critical to move Ethtec along.

But it’s a significant step forward for ARENA as well. It’s been so focused on green power at the expense of green transport fuels that one wag dubbed the agency AGRIPPA (Australian Green Power is Pulling Politicians Astray).

But, here is a grown-up investment tackling a pressing Aussie problem: Australia’s long-term emissions problems are rooted in transport — air and road — it’s a big country and its vast regional geography produces the foundation of Australia’s economy in the form of mining, energy and agriculture. 40 percent of Australian emissions relate back to road and air transport using liquid fuels.

As Dr. Hewson noted, “There has been a lot of publicity around electricity security lately but what many people don’t realize is that oil is responsible for around 40% of Australia’s energy use, and this announcement makes it clear that ARENA is committed to funding the development of renewable transportation fuels as a means to mitigate greenhouse gas emissions.”

We’ll look for progress or transparency on yields and hope that the high-cost of the pilot means low costs for the project and company going forward. Meanwhile, it’s ARENA’s biggest public biofuels investment to date, and that is a good sign.