By JIM LANE, Editor & Publisher, Biofuels Digest
As the sunset of 2012 gives way to the dawn of 2013, here at Biofuels Digest, we resist the holiday temptation to look back over the challenges and highlights of the year gone by, and instead, once again, roll the dice as we list the top 10 bio-based predictions for 2013.
1.) Fiscal Cliff
Worried that the U.S. will go into financial Armageddon come January 1, including a ferocious set of cuts that will derail support from the U.S. Department of Agriculture?
Well, expect no deal in 2012, and no grand bargain in early 2013, say the Digest soothsayers. But, there will be a patch that is passed by Congress and signed into law in early January. The key? By letting all of the Bush-era tax breaks expire, and only restoring the majority of them, anti-tax lawmakers can say that they stayed true to their “read my lips, no new taxes” pledges.
Offtakers for years have been learning to work with the known and unchangeable properties of fossil oil and gas molecules. We see a big change coming — offtakers specifying ideal molecules that have enhanced properties they can take advantage of — and bio-based producers working magic with their engineered yeasts, algae or bacteria to delivered tailored oils, alcohols and organic acids.
3.) Why Make $3 Fuel When You Can Make a $5 Chemical?
For years, biofuels have been hogging the venture fund coffers because of the huge markets they represent. But margin is making a comeback as a must-have metric, and bio-based materials are well-positioned to take full advantage. Look for chemicals to go from a by-product to the main stage in 2013 as a revenue factor. The markets may be small, but they add up and the margins add up, and strategic investors — especially in Asia — are more widely available than in fuels.
4.) Just One Word — Plastics
To date, most of the activity has been in organic acids — biosuccinic, adipic, acetic and levulinic, to name a few. We see the big trend towards plastics in 2013 — whether it is renewable PET as Avantium, Virect and Gevo are working on — or bio-based PVC compounds. Plastic is ready to go big, for sure.
BioPreferred picks up continuing support in the U.S. Farm Bill, picking up another five years of life with more focus on its consumer mission, in addition to the marketing to government.
6.) Hot Markets
They are, in order — Brazil, the U.S., Malaysia, Indonesia and France. Project flow will increase dramatically in all five during 2013, but it’ll be slow going elsewhere.
Our crystal ball tells us that master limited partnerships will be approved for renewable energy and bio-based materials in 2013 — opening up a new financing channel that has long proven successful in oil and gas. Elsewhere in finance, the difficulties will be less in midstream (processing technology) risk and downstream (offtakers), and more in the upstream (feedstock cost control). Where projects are well-hedged for the long term on input costs, there will be action.
It’s gas, gas and more gas in 2013. Not just natural gas (natgas) — we see a continuing surge in synthetic gas (syngas). Fast pyrolysis, gas fermentation — the hottest companies for the year will increasingly be those like INEOS Bio, LanzaTech, KiOR, Velocys and others that are working with industrial gases and gasified biomass.
It’ll be another tough year for financing. Essential to the picture is the wave of strategics waiting to dive in on renewable chemicals once the demonstrations are successfully concluded.
The strategics are going to have financing available to them and control access to key downstream markets — once the processing technology is proven, they will be looking for safety and hedging on feedstock prices. No one wants to be making $5 chemicals out of $10 of raw material. Staying away from hot commodities and locking down long-term prices at scale has never been more important.
We see at least one major company failure in the synthetic biology space when it is unable to hit milestones fast enough to raise affordable capital. The problem? Too many predators and competitors are enjoying the hot sugary waters in the fermenters, and several companies have seen side-reactions knocking down their yields. The good news — we see several advancing, though almost exclusively in bio-products than fuels until late in the 2010s.
10.) Natural Gas & Catalysis
In the fuel markets, we’ll hear a lot about natural gas — and in some base chemical markets like ethylene, we’ll hear a ton — though capacity building is just underway and impact will not be directly felt until later in the decade. However, with specialty chemicals, where long-chain molecules rule — the presence of natural gas will not hugely affect supply and demand. In fact, by diverting investment away from fossil oil upgrading, it may retard innovation. That plays strongly into the hands of synthetic biology companies that can make long-chain molecules directly from renewable sugars.
And, there are plays like Calysta, where the technology exists to make fuels and chemicals directly from enzyme-based catalysis using natural gas molecules. We think catalysis could go big — felt more on the bio-based side than just in the fuels.
What’s your take? Please feel free to comment below! Copyright 2013; Biofuels Digest