This week we reported that Steeper Energy is partnering with Silva Green Fuel, a Norwegian-Swedish joint venture, to construct a $59M industrial scale demonstration plant at a former pulp mill located in Tofte, Norway leading to a future commercial scale project.
Let’s look at that item in more detail.
Silva is a joint venture between Norway’s Statkraft, a leading company in hydropower internationally and Europe’s largest generator of renewable energy, and Sweden’s Södra, a cooperative of 50,000 forest owners with extensive forestry operations and a leading producer of paper pulp, sawn timber and bioenergy.
Start-up is planned for spring 2019, with a capacity of about 4,000 liters per day. The raw material will consist of residual products from the forest industry. Silva Green Fuel is 49-percent owned by Södra and 51-percent owned by Statkraft — the partnership was formed in 2014 when Statkraft acquired Södra Cell Tofte AS, which owns the industrial site of the former Tofte pulp plant in Hurum, Norway.
The project
Steeper will license its proprietary Hydrofaction technology to Silva, who will build the facility over the next 18 months. The demonstration plant will use woody residues as feedstock that are converted to renewable crude oil and, in turn, will be upgraded to renewable diesel, jet or marine fuel. Steeper’s Hydrofaction technology was selected by Silva after an exhaustive due diligence review of some 40 other technologies. Hydrofaction harnesses water brought to super-critical conditions, to cost effectively convert biomass to high value liquid biofuels. We reported on this effort here and here.
Steeper Energy CEO Perry Toms said “This partnership positions Steeper Energy as a leader in providing advanced renewable fuels that can not only help reduce net carbon emissions, but also produce in-demand renewable diesel for use in heavy and long-haul transport sectors. We are providing a cost-effective solution to address carbon reduction targets for this crucial segment of the economy.”
Next steps
The partnership between Silva Green Fuel and Steeper will confirm engineering data and design protocols to de-risk future commercial scale facilities planned to be built by Silva and will be offered by Steeper globally to other biofuel project developers. It’s the first step towards Silva producing commercial-scale transport biofuels, Steeper advises.
The Steeper technology backstory
We’ve described the Steeper tech as “Biomass Fracking“, because it is all about digging deeper into biomass to release hydrocarbons.
Specifically, it’s called Hydrofaction, and it is supercritical technology. For those new to the the field, that means high temperatures and high pressures, and relies on the strange and useful physical properties of water when it reaches the supercritical temperature range – at 374C and 221 atmospheric pressures.
That’s an exotic region within the Digest Cinematic Universe where everyday physical norms break down – under the anvil of temperature and pressure, the barrier between steam and liquid water begins to get decidedly fuzzy and water begins acting like an acid and a base, at the same time.
Supercritical water is an amazing solvent — Renmatix uses it to separate C6 sugars from lignin in seconds, compared to the hours or days associated with enzymatic systems. And Licella uses a proprietary supercritical water reactor to attack organic polymers, cutting them directly into highly desirable energy products.
Although initially focusing on low-value forestry by-products such as forest residues or mill wastes such as sawdust, Steeper’s technology can also utilize many other biomass feedstocks, including urban organic wastes, agricultural residues, animal manure and algae. Based on a high pressure/temperature process or supercritical water chemistry, the produced oil is suitable as liquid fuel for large compression engines for electricity generation as well as rail or marine propulsion, or can be upgraded using hydrogenation into renewable diesel and jet fuel. The technology is a net water producer (no water consumed) and achieves a feedstock-to-oil energy recovery efficiency of more than 80 percent, making it highly sustainable and economical.
The Economics
Steeper Energy’s CEO Perry Toms recalled, “we wrote a bunch of patents in 2011 around a particular protocol and raised $6M from a Calgary based group – these were predominately investors in traditional oil & gas, but who also invested in unconventional oil. They could see what we were trying to do is liberate shut-in resources in the form of forestry residues. We proved to them that we had a clever and simple hydrothermal application that could keep the capital costs down and drive a better oil out of the door for lower than $80/barrel.
“And we were using commodity pulp prices for the cost of biomass, and we believed then and now that we can beat that and deliver a barrel of biocrude for less then $70, that could be upgraded to renewable fuels, lubricants or biochemicals for well under $90 a barrel.
The Competitive Edge
What is compelling about Steeper’s claim is that their biocrude has 8-10% oxygen content. That’s within the maximum tolerance of hydrotreating technology that is found within conventional oil refineries — we know that because of the KiOR saga – KiOR was delivering a product with around 17% oxygen content, and we reported that this was a major factor in KiOR’s troubles in maintaining offtake arrangements for biocrude and forced it to go down the path of upgrading its own oil.
Now, claims are not proof — but let’s mark this technology down as having special properties of interest for conventional refiners seeking renewables.
$90 per barrel renewable diesel, really?
Can you really make money selling renewable diesel north of $90 a barrel? Well, yes, there’s evidence for that.
$90 oil translates to $2.14 per gallon (we’ve left out refining costs), or roughly $0.08 in carbon credits north of diesel’s current wholesale price of $2.08 per gallon. Not much to make up there. And LCFS credits are trading around $0.62 per gallon (based on a 60 percent reduction in carbon as most RD technologies achieve). We don’t have data for D7 cellulosic diesel RINs but D3 cellulosic RINs are trading at $2.68 each. Accordingly, you could make a scenario of up to $3.30 per gallon in carbon credits in the market right now without being taken to the insane asylum.
And that’s without a renewable diesel tax credit which, if restored, would add another $1.01. In all, the value of renewable diesel could reach something like $6.39 before you’d be strapped in a straight-jacket, and that translates to $268 a barrel.
Now, let’s mark down a caveat. D4 corn biomass-based diesel RIN prices have been crushed of late, and are down to $0.75 per gallon. And the biomass-based diesel tax credit has not yet been extended. So, real-world value could be as low as $3.45 right now, or 145 per barrel. But still.
The Bottom Line
The completion of a demonstration plant — that provides the necessary operating hours to obtain data and get investor confidence for the commercial plant. But then — capex for the first commercial, the construction and deployment. Think years, not months, before anyone raises the “Mission Accomplished” banner on Planet Steeper. But we put this in 2017 in what we called “the small basket of the 10 technologies of most interest for 2017.” And with this news. we’d renew that label for 2018.
Why? As we have noted, renewable diesel has a huge market with no saturation points like E10 or E15. Renewable credits add substantial lift to the economics, and have a long track record now. Third, woody biomass is replete in Canada and Canada’s own low-carbon regime is coming.
Fracking biomass: Steeper Energy and the pursuit of renewable hydrocarbons