SOLAR TODAY - June 2012

Keep Your Eyes on Green Chemicals

Bio-based fuels and chemicals are ready to replace petroleum products.

By RONA FRIED, PH.D.

Rona Fried, Ph.D., is president of Sustainable Business.com, the online community for green business: daily green business and investor news, green jobs and the green investing newsletter, The Green Investor. Contact Fried at rona@ sustainablebusiness.com.

Anew era in aviation began last fall, when the first commercial flights ran partially on algae- and cook- ing oil-based jet fuels.

Bio-fueled test flights using Boeing commercial aircraft and General Electric engines began as early as February 2008. But the first scheduled flight with paying passengers came in September 2011, when KLM mixed its kerosene jet fuel with a compatible fluid derived from used cooking oil, to power Airbus service on the Amsterdam-Paris route.

Airbus estimates airlines may derive 30 percent of their fuel from plant-derived sources by 2030.

In November, Continental began mixing in an algae-derived jet fuel, between Houston and Chicago. The same month, Alaska Airlines flew 75 commercial passenger flights on U.S. routes, powered partly by used cooking oil. By February, airlines from Chile to Spain to Australia had blended biofuels into their jet juice.

airline executives see huge potential for using these fuels. all they need is a reliable supply at a reasonable price. To help matters along, in August, President Obama announced a $510 million public-private partnership to produce advanced drop-in aviation and marine biofuels (“drop-in” means the fuel can go straight into a conventional turbine engine, or blend with petroleum fuel).

“Commercial airplanes are equipped and ready for biofuels,” said Alaska Air Group CEO Bill Ayer. “What we need is an adequate, affordable and sustainable supply. To the biofuels industry, we say: If you build it, we will buy it.”

and that’s what the nascent green chemicals industry is gearing up for.

Consult your financial advisor before making any investment.

The Players

San Francisco-based Solazyme (SZYM) fueled Continental’s Houston-to-Chicago route with a combination of 40 percent algae oil and 60 percent petroleum jet fuel. United, which owns Continental and is the world’s largest airline, signed a letter of intent with Solazyme to purchase 20 million gallons of algae-based jet fuel a year, starting in 2014.

Beyond fuels, algae oil can substitute for petroleum in chemicals, nutrition and personal care, but separating the oil from algae has proven to be difficult and expensive. Solazyme’s solution is to grow algae in closed indoor tanks where it ferments by feeding on sugar, rather than by using lots of land required for photosynthesis. This makes algae competitively priced with petroleum products, while also yielding byproducts derived from algae’s protein and fiber.

Importantly, Solazyme can generate commercial volumes in just several days. Initially, Solazyme is targeting the nutrition market, offering alternatives to eggs, butter and oils and the cosmetics market, with anti-aging products, a

key growth area. Since the launch of its algenist skin care line in 2011, Solazyme has generated about $3.5 million in sales, estimates Canaccord Genuity.

Solazyme went public in May 2011, following the success of initial public offerings (IPOs) from Codexis (CDXS), Kior (KIOR) and Amyris (AMRS), all of which are working on drop-in biofuels. amyris has inked a jet-fuel partnership with French oil giant Total, the owner of SunPower.

Gevo (GEVO), another recent IPO, begins shipments this year after winning the first biofuel contract with the U.S. Air Force. USAF has a target for aircraft based within the United States to fly on 50 percent alternative fuels by 2016.

Gevo saves money by converting existing ethanol plants into biorefineries and is ramping up commercial production of fuel and chemicals from isobutanol this year. Gevo makes isobutanol from a variety of plant-based fermentable sugars like corn, wheat and barley. Total has invested in Gevo, too, and plans to buy isobutanol for use as a biofuel.

In the longer term, isobutanol will come from agricultural waste and other biomass. Traditionally made from petroleum-based sources, isobutanol and its derivatives can also be used as chemical solvents to make paints, coatings, plastics, lubricants and synthetic rubbers, and those are Gevo’s initial markets. It’s also working with Coca-Cola to develop plant-based soda bottles.

Ceres (CERE), which markets seeds for energy crops, went public in March. Several similar companies plan IPOs this year, including Myriant, Mascoma, Elevance renewable Sciences and Fulcrum BioEnergy. For information on other companies, see renewablejetfuels.org.

eyes on Fuels, Chemicals First

While aviation fuels are tremendously exciting, they won’t drive short-term revenues for these companies. The same processes to make fuel can make substitutes for a wide range of petroleum-based chemicals, used in products from cosmetics to foods.

The chemical markets are enormous at $3 trillion a year, according to the American Chemistry Council, and are ripe for petroleum substitutes that can reduce greenhouse gas emissions, toxic byproducts and lack of biodegradabil-ity. Chemicals enable production of about 95 percent of manufactured products in the United States. right now, the majority of manufacturing chemicals are made from oil, natural gas and coal.

The global market for bio-based chemicals currently stands at about $170 billion (chemicals, plastics, fuels) and will grow to more than $500 billion by 2020, according to McKinsey. ST