News arrives from Sao Paulo and Rome that GranBio and NextChem have inked a strategic alliance and will co-license GranBio’s patented technology for the production of second-generation ethanol. NextChem is a subsidiary of Italian engineering giant Maire Tecnimont dedicated to the energy transition.
The news follows the announcement last week that GranBio has retained Citigroup and UBS for a planned IPO that aims to raise $290 million. The stock is aimed for a listing on the B3 (Brasil Bolsa Balcao), the country’s second-oldest exchange, by the end of 2020.
Dateline Brazil: The technology deployment to date
The technology developed by GranBio to produce 2G ethanol has already been implemented in its factory located in São Miguel dos Campos, in Alagoas. USD220 million was invested in the construction of this plant, the first in the Southern Hemisphere dedicated to cellulosic ethanol. Currently, the company has the current capacity to produce around 30 million liters of 2G ethanol per year and the potential to export 100% of this biofuel to the American and European markets.
The partnership will enable the commercialization of this technology globally, combining GranBio’s knowledge in biomass and second generation biofuels with NextChem’s engineering intelligence and Group global presence, to offer integrated services – feedstock and project feasibility studies, development of integrated projects, engineering, and construction of factories worldwide. Together, the companies will have the opportunity to lead decarbonization of liquid fuels in an efficient and profitable way on a large scale.
To Past the Limit: Why is cellulosic ethanol so hot, of late?
Policy, policy, policy. Governments are starting to tackle their ambitious transportation goals. In particular, the California market, driven by the stable LCFS program that sits atop the US Renewable Fuel Standard; India, where the oil marketing companies have undertaken a significant 2G ethanol effort. Also, Eastern Europe, where feedstock is in abundant supply and the recent RED II regulations have tipped Europe decisively towards advanced low-carbon fuels and beyond the first-generation of grain-based fuels.
The advances are helped by the adoption rate of ethanol in the EU and India, which is nowhere near the E10 bland wall, so there’s no question of first-gen and second-gen fuels having to compete, and policy has clearly aimed in both markets at low-carbon cellulosic fuels. In the US, where conventional and second-gen fuel do have to compete for the limited market imposed by E10 or E15 blend limits, the premium between cellulosic and conventional fuels has widened in recent years.
Why did cellulosic cool in the mid-2010s?
In some cases, the technology was immature. More importantly, the commitment of technology pioneers such as DuPont, Abengoa and Ineos dimmed as gasoline prices plummeted in 2014-15 and commitment to the US Renewable Fuel Standard weakened substantively under the Obama and Trump Administration’s. California’s LCFS was not yet proven to be the driver of demand that it has become.
Also, a second factor in California. Renewable diesel and cellulosic biogas have been hugely popular, but are starting to run into the feedstock availability and cost problems, on the horizon more than the here and now, that have posed difficulties for biodiesel from time to time. Long term, cellulosic ethanol’s potential to drive down carbon and tap a wider set of waste feedstocks at low prices has proven to be a driver. Clariant has been taking advantage of the same tailwinds in recent months, announcing four licenses for its technology. Praj has also been active in deploying its new 2G technology.
The GranBio-NextChem alliance sets up perhaps a triad of global competitors in cellulosic ethanol: GranBio/NextChem, Praj, and Clariant. Meanwhile, Axens with Futurol is on the move and POET-DSM,m while back in R&D mode, has the potential to surge as a global player. Meanwhile, DuPont’s technology has been acquired by Sustainable Technology. And Aemetis has a cellulosic project in the works based on LanzaTech’s gas fermentation process and orchard waste.
Who will do what in the new partnership?
“We will work on marketing the technology for licenses and we will be jointly working on all the engineering packages, said GranBio Chief Commercial Officer Ken Hill The Digest, adding that he and NextChem’s Valerio Coppini will personally spearhead the alliance’s activities. Hill paid tribute to NextChem’s engineering expertise and global reach as key factors that drove the discussions leading to the alliance.
“Yes, we want to blow out GranBio’s cellulosic ethanol technology on a global basis,” Hill said, noting that the company had now consolidated its technology acquired from API last year. “GranBio’s small compared to the size of the opportunity, and we can augment and blow out our organization in working together.” Hill also noted the commitment of Maire Technimont to the NextChem subsidiary and its role in energy transition. “They are walking the talk, looking at all kinds of ways to have a leading role in the renewable transition.”
The feedstock story
GranBio was able to develop a flexible model for the use of raw materials, which allows the use of almost all types of agricultural waste and energy crops, such as sugarcane straw, miscanthus, and corn straw as well as wood waste, such as pine and eucalyptus, to produce cellulosic ethanol. “In other words, in addition to having a fully sustainable final product, we were able to make the most of biomass inputs, including recovering degraded lands. Together, we will certainly transform millions of tons of agricultural and forestry waste into second generation ethanol, contributing strongly to decarbonization worldwide. The expected gains go beyond the creation of a new market, but they give meaning to our mission to act to reverse the human impact on the climate. We want to act, effectively, in defense of the planet and of future generations”, concludes Nigro.
Reaction from the stakeholders
“We are proud of the partnership with GranBio, that improves our technological portfolio in the biofuels area and gives NextChem a chance to enter some key markets with a flexible and profitable solution to produce ethanol, a globally used chemical for motor fuel, with many other well established industrial applications and an enormous potential” said Pierroberto Folgiero, CEO of NextChem and of Maire Tecnimont. “GranBio’s reference plant is the only one of this kind, on an industrial scale, that is in operation at a worldwide level. The technology can be deployed globally, as it uses widely available raw materials, which do not interfere in the food sector. With our experience in the chemical and petrochemical sector we are confident in offering a winning solution that we shall be able to industrialize everywhere, thanks to our worldwide presence and engineering capabilities”.
“We want to be pioneers in this business model, leading the development of the cellulosic ethanol industry in the world, offering complete solutions, from the feasibility study to the engineering project. Some countries like the United States, China and Brazil already recognize the renewable carbon premium. The European Union, for example, recently determined policies that will promote the construction of dozens of second-generation fuel plants by 2030”, explains Paulo Nigro, CEO of GranBio. In this scenario, GranBio and NextChem intend to lead this new market. “We are confident that our technology is very promising, being the key to a major transformation in the way we produce fuels,” he says.
The GranBio backstory
Founded in 2011, GranBio is a 100% Brazilian industrial biotechnology company, controlled by GranInvestimentos S.A., which creates solutions to transform biomass into renewable products. A pioneer in the production of cellulosic ethanol, or second generation (2G), in the Southern Hemisphere, the company is the only one in the sector that operates from the beginning to the end of the production chain – from raw material to the distribution of the final product – integrating its own technologies and of partners. With investments focused on the renewables industry, it keeps its efforts focused on the supply of biochemicals, nanocellulose, and biofuels that combine economic competitiveness and low carbon emissions, in order to combat climate change in the world. More information here.
The NextChem backstory
Valerio Coppini presented on NextChem at ABLC 2020, and you can see the presentation, here.
Maire Tecnimont S.p.A., listed on the Milan Stock Exchange, is the head company of an industrial group, a leader in the natural resources processing industry (plant engineering in oil & gas downstream, with advanced technological and executive skills). Through its subsidiary, NextChem operates in the field of green chemistry; NextChem develops, designs and markets technologies for the energy transition, to produce chemical products sourced from non-fossils. NextChem roadmap goes in three directions: lower climate impact of traditional plants through industrial technologies that use renewable energy sources and CO2 capture and recovery; the production of intermediate products and chemicals from bio-sourced raw materials; advanced recycling (Upcycling) of plastic waste and chemical recycling.