The Year of Deploying Dangerously: Bioeconomy Opportunities for 2025

The holiday baubles are now put away, January is upon us.

The cold flowing out of Washington DC in the form of chilly 45Z tax credit guidance is matched only by the heavy Eastern snows.  Fires rage in Los Angeles fueled by two wet winters, the US is trolling Denmark over Greenland because, presumably, new sea-lanes will emerge as the ice caps retreat. You could see climate change in all of this. Yet, voters at the polls are rejecting the Puritan script of mandates, lectures on correctness, and more government intervention in energy markets; plus, the mercantilist script of tax credits for the Elect brethren. 

The New Pharaoh

In the end, why? The public is in no mood for paying a little more, enduring disruption. After four years of watching our weight and taking our vitamins, the voters have ordered pizza. 

Now, it is a time for the Cavalier spirit in America instead of the Calvinist. You remember the Cavaliers, the settlers of Virginia and the Carolinas who came in search of a Shining Pot of Gold, instead of a Shining City on a Hill. Bioeconomy developers see 2025 as a Year of Deploying Dangerously, and some are sitting on their order books, pocketbooks, or keisters.

Now, nativism, isolationism, protectionism, low taxes and laissez-faire are in the driver’s seat. Like it or not, change is upon us. Change brings opportunity for the opportune of mind. 

What will come? First, you will see many companies abandoning their commitments to DEI, ESG, CSR, and so forth. Not all. Not for all time. Not in full. But it is a time of glacial retreat and climate retreat.

Allies for the Wilderness Years

It is an hour of opportunity for the bioeconomy, because there is a powerful story to tell, but it will take magic to tell it. Why magic? Simply put, the bioeconomy is never big enough as an industry or a movement or a lobby to command the attention of Washington DC nabobs, all by its onesey. The story of the bioeconomy is a story of allies, and the magic is not in the storytelling but in the friend-finding.

For the bioeconomy, forget the environmental movement, they dislike cars, fumes, and industrial use of farmland.  The natural allies of the bioeconomy are found in Houston, in the oil and gas industry. Not because they have acquired an appetite for energy transition. They want to sell more molecules, believe in private transportation and the internal combustion engine, they like freedom to operate, that’s all. That’s enough. Yes, most of them would rather find and sell more conventional oil and gas, but not every soul controls the necessary expanses of Texas, Wyoming, Saudi Arabia, Siberia, or Western Canada. 

Found on a tablet near Sinai: The 7 Opportunities

If oil & gas are the friends, what can friends do together?

1. Re-establish links to the auto industry. Not every automotive company remains in love with their prospects in the EV market. Just ask GM, Ford or Volkswagen. Companies who were preparing for the end of the IC engine by 2035 may be re-considering their options.

2. Make the case for a robust Renewable Fuel Standard volumes. The disconnect between drop-in renewable fuels capacity and the RFS volumes is a joke. There might be almost two gallons of drop-in capacity for every gallon in the RFS. The RFS was supposed to expand and encourage renewable fuel capacity, not constrain it.

3, Expand the feedstock set. We need feedstocks that can compete with reasonably priced oil. Yes, oil prices can drop to $30, but they average out at around $60, or around $348 per ton. Bio-feedstocks have to go that low, and take out 50 percent for the water and 50 percent for the oxygen, so think $87 or less per green ton, or 4.3 cents per pound, for feedstock. In the long term, cheap will out. That’s why residues and woods are so precious and important.

4. Export. Perhaps the US will buy fuels on price, but Europe will buy on carbon attributes. Ultimately, the leaders of the EU, having set unattainable technological standards, will face a choice between altering the standards (e.g. less e-fuels in the near-term) and missing the targets. The US can bring cheap volumes of low-carbon fuels.

5. Re-double state-level efforts. Defeat at the federal level of climate-focused policies does not equate to defeat in California, Oregon, Washington state, New Mexico or elsewhere among the states. New York might enact an LCFS, perhaps a Midwestern state, Hawaii too — efforts worth supporting to expand the pool for renewables fuels.

6. There are three Es, message effectively. The three Es of renewable fuels are energy security, employment and environment. When environment is out of favor, talk about energy security, exports, and good-paying jobs.

7. Find new paths to finance. Ahem, the 45Z tax credit rules have disappointed. So, project developers will need another pathway. That will come through reducing cost or reducing risk.  For reducing cost, it’s all about the feedstock. For reducing risk, it’s all about focusing on risk and mitigating it. Technology is the Book of Genesis, cost is the Book of Numbers; under-managed risk is the book of investor Exodus.

The Lesson

The bioeconomy’s future is in the price of its feedstocks. Nothing about the rest of biorefining is much specific to the bioeconomy anyway. Processing comes from chemical engineering, downstream is based on traditional vehicles. Feedstocks, they are the difference, and it will not be a case of “vive la difference!” until we can afford la difference. 

It might ultimately be possible to persuade a public to finance the building of a bioeconomy infrastructure — the way we build highways to carry cars, canals for ships, backbones for internet, satellites for communications, all in the name of the blessings of trade. It would not be easy to persuade the public to pay, but it is possible, and there is precedent. But not so, if there is a lack of sustainable, affordable, reliable, abundant feedstock. 

The Benediction

Let us raise ourselves up and undertake the work we have been set, without rancor, or looking back, or feeling sorry for our plight. Opportunity abounds. The path to victory is through the portal of effort, effort we can make, we must make, we shall make.