Renewable Energy Journal » Biomass

Switchgrass Gas

mike — Wed, 16 Apr 2008 13:52:42 +0000

Photo Credit: Ben Barnhart

The holy grail of biofuels has been to find a feedstock that doesn’t compete with food (i.e., corn), produce a product that is compatible with existing infrastructure and has great performance, and to discover a low-impact/energy process to produce the product.

University of Massachusetts (Amherst) BioChemist, Dr. George Huber and his graduate students, Torren Carlson and Tushar Vispute, may have grasped the grail with their switchgrass gas. A process that makes not ethanol, but actual gasoline compounds by combining the cellulose with certain catalysts in the presence of heat to produce the precursors to gasoline and then to run a series of steps that further refines these compounds into gasoline, effectively indistinguishable from the petroleum based fuel used today.

While many years from appearing at the pump, this breakthrough has the possibility of transforming the inefficient and increasingly controversial biofuels segment into something completely different.

Ormat 3rd Quarter Results

mike — Tue, 13 Nov 2007 16:22:43 +0000

Last week Ormat announced a solid quarter with revenues $79.5M, up 2% Y/Y and earnings of $15.8M up 13% Y/Y. Details of the earnings announcement are available in this press release. Dita Bronicki reaffirmed guidance for the year and the quarter and the stock has responded well in the market place. For the year, Ormat is on track to deliver $280M in revenue and around $55M in earnings for 2007.

The equipment business continued to be “lumpy” showing a decrease of 15.8% Y/Y – while the recovered heat product wins seem to be coming in, increased competition in the geothermal heat conversion business could be starting to have an impact. Also, a number of developers we have contact with are not inclined to select Ormat equipment for their projects due to the competitive relationship (some have used the word “predatory”) Ormat has fostered with developers. This bears watching closely, though the electricity segment continues its growth generally as predicted.

A secondary offering of 3.3M shares raised $155M in this quarter, though it is not reflected in the results. This money will be used to further advance the development of new power plants. Also, it is rumored, though not reported that the company may have realized positive results from one of its drilling and exploration programs in Nevada.

At current market cap, $1.89B, Ormat is trading just north of 34 times 2007 earnings.

Corn Hog

mike — Thu, 06 Sep 2007 13:45:18 +0000

Buy a $10 Ticket to buy this E85 Chopper

The Iowa Farm Bureau and Orange County Choppers have teamed up to build this great looking bike to increase ethanol awareness. It’s a great message, you don’t have to be a tech-weenie to be able to have a cool vehicle that also has a little lighter footprint on the planet. This plus what Tesla is doing on the electric vehicle front should help to start change the perceptions that your only choice is to drive a dorky looking, efficient car.

The drawing is tomorrow, September 7, so there’s still time to buy that ticket (if you can get to Iowa.) An aside: MeV owns an E85 vehicle, we can attest that the fuel works great. As a California company, it is disappointing as there are only 4 gas stations with E85 in the whole state.

Glitnir to invest $1B in geothermal

mike — Wed, 05 Sep 2007 22:12:22 +0000

Via Inside Greentech:

Iceland’s Glitnir Bank released a report today on the booming geothermal market in the U.S., and it intends to be a part of it.

The bank, which opened its first U.S. office in New York today, said it plans to invest $1 billion in U.S. geothermal energy projects over the next five years.

“The challenges are numerous, but the potential is huge,” Arni Magnusson, managing director of sustainable energy for Glitnir, told a press conference today.

[...]

In its report, Glitnir predicts a more than six-fold increase in the annual sales of electricity from geothermal sources in the United States to $11 billion in 2025, up from $1.8 billion now.

The report said geothermal energy could fill up to 20 percent of California’s electricity needs, 60 percent of Nevada’s and 30 percent of Hawaii’s.

Glitnir is no stranger to geothermal, with 90 percent of all houses in Iceland being heated geothermally.

But it says the U.S. is a global leader in geothermal, with a current installed capacity of 2,800 megawatts and annual electricity generation of 16,000 gigawatt hours. Current projects, when completed, could bring that installed capacity up by another 2,800 megawatts, according to Glitnir.

Read more…

McDonald’s slick oil recycling

mike — Fri, 20 Jul 2007 07:05:47 +0000

With over 150 delivery trucks (lorries if you prefer,) McDonalds consumes over 6 million litres of diesel fuel each year. That many people have been asking the restaurant (and others) for their used cooking oil has not gone unnoticed and as a result, McDonalds UK plans to use a mix of 85% recycled cooking oil and 15% rafeseed oil to power their fleet.

At the beginning of this month, a subset of 50 trucks was converted to run on the bio fuel and the full fleet should be converted shortly. From a financial perspective, this is great news for the company as they could realize savings of up to $12M per year in fuel costs and potentially have excess fuel to resell providing even more bottom line boost. Reuters published an interesting writeup on this earlier in the month.

Another case where recycling and smart ecological thought translates to positive cashflow.

What are the costs to produce ethanol?

mike — Fri, 29 Jun 2007 14:54:53 +0000

Another interesting tidbit picked up at REFF was what the requisite input costs are in the production of ethanol in the US. The pie chart above shows that the largest cost of input by far is the feedstock, corn at 66%. The cellulosic approach definitely makes sense as it attacks this major cost of production – one has to wonder if nations like Brazil, where 40% of their transport fuels are ethanol, experience a similar input cost percentage using sugar cane as the feedstock?

The next large cost is natural gas used in the distilling process. The natural gas and feedstock costs account for 84% of the production cost for ethanol! Unbelievable. Changing the equation of production costs will definitely have an impact on the future of the fuel. Corn prices have doubled as the demand for ethanol has increased. Natural gas prices have doubled in the past 6 years. Unless these trends moderate or the production methodology changes to break from the dependance on natural gas and corn, ethanol will become ever more expensive to produce.

Biomass to go

mike — Thu, 28 Jun 2007 16:44:26 +0000

AgriPower, a biomass equipment provider, has created and tested a new transportable biomass power unit that outputs net 225kw. This is an interesting technology as it can be taken to where the fuel is located for distributed generation rather than causing the fuel to be transported to a large, central generation site.

The View from REFF

mike — Wed, 20 Jun 2007 19:48:36 +0000

Today we’re attending the Renewable Energy Financing Forum sponsored by ACORE in NY. Thus far, there have been two very interesting sessions on Biomass/biofuels and Solar (PV). The panels have been informative, a mix of executives from established companies in the segments and investors (mostly public market.)

In his opening remarks this morning, Michael Eckhart, the President of ACORE, walked through the various renewable resources and he singled out geothermal as being the ONLY renewable capable of displacing coal baseload generation. Curiously, there is not a geothermal session in this conference and we here from the Geothermal Energy Association, Geothermal Resources Council, or even a single geothermal industry attendee from the Geothermal Financing Workshops over the past year. This is a missed opportunity.

A few key points from this morning’s session were:

10% of venture capital investments in 2006 were in renewable energy
1.6B people do not have access to electricity (perhaps we ought to solve the power divide too…)
20% of US corn output is used to make ethanol, that is predicted to rise to 30% by 2010
2/3 of the cost of ethanol in the US is due to fuel stock (corn) prices
Aggregate market capitalization for US solar companies has increased from $1B in 2004 to $67.3B now
It takes between 2-4 years of electricity production of a solar cell to offset it’s electrical and environmental impact of manufacture
Refined silicon costs on the spot market have increased from $50/kg two years ago to over $250/kg now. Long term contracts can be had for $70/kg. The cost of Si is forecast to decrease to $40/kg over the next 2 years.

Those are facts we found interesting, we’ll share more on the afternoon’s sessions in future entries.

90.5 million acres of corn planted

mike — Fri, 30 Mar 2007 15:00:26 +0000

This constitutes a 15% increase from 2006 and the largest corn planting in over 60 years. The demand for corn is being driven largely by the use of corn to produce ethanol (though other types of plants have greater ethanol yields in other places, like sugar cane in Brazil.)

Since farming is something of a zero sum game, other species of crops will decrease as a natural consequence of the bull run on corn, notably soy beans which have decreased to 67.1M acres in 2007. The US Department of Agriculture released a report this morning detailing these shifts and more.

Enel acquires AMP Resources

mike — Thu, 22 Mar 2007 14:43:16 +0000

Fifteen months after agreeing to be acquired by Raser Technologies, and six months after backing out of that deal, AMP Resources has agreed to be acquired by Italian power company Enel. The jewel in Enel’s portfolio is the Larderello geothermal plant which has been in operation since 1906.

The headline on this deal is “Enel buys into US Market with 150MW acquisition of AMP Resources” but this is misleading as headlines can often be. That’s not to say that AMP’s assets are without value, it’s simply overstating what AMP has to justify a wild premium paid for those assets. AMP, according to its website, has the following assets:

21MW nameplate Stillwater, Nevada geothermal plant and a second undeveloped anomaly on the lease
12MW Cove Fort, Utah lease on 4,000 acres (the plant was closed for upgrade)
Salt Wells, Nevada lease of 3,000 acres (no plant)
Surprise Valley, California lease of 5,000 acres (no plant)
Undisclosed intellectual property related to Kalina cycle binary heat systems

Obviously, there may be other assets AMP has that are not enumerated on their web site, but that is what’s visible. The only functional and productive plant in the portfolio is Stillwater with a nameplate output of 21MW. However, our research indicates the average net output from the plant is on the order of 10MW at any given time due to high parasitic load consisting of cooling and pumping both geothermal resource and working fluid around the plant. A generous valuation for this asset is $30M.

The “brownfield site” of Cove Fort, Utah has much less risk than other undeveloped properties and as such should be assigned more value. It was producing gross 12MW before it was shut down for upgrade. It’s unclear where that project is at present, but until the upgrade is complete, it’s difficult to assign more value than when the plant was operational, call a generous valuation $20M.

That leaves the undeveloped properties including the area in the Stillwater lease that is still untapped. According to a PIER report for the San Francisco Public Utilities Commission from 2004, the Stillwater site has a most likely rating of 32MW gross and if we use the existing plant as the benchmark, we would expect no more than 15MW net to be harvested. This is undeveloped but known resource, a generous valuation is $1.5M.

The other two properties at Salt Wells and Surprise Valley are early development stages, but have their charms like location close to transmission lines and some early exploration and sizing work complete. However, at this stage, generous valuation of these properties taken together is no more than $2M.

Finally, there is the IP and associated products. With the entry of companies like UTC into the binary harvest market, these assets are far less valuable than a few years ago. Between Ormat and UTC, it’s hard to see AMP and now Enel competing effectively in the binary system space. I don’t know how to value this asset, but the total is likely much less than the differential between the purchase price and the sum of the tangible assets enumerated above.

My conclusion is that with a $90M acquisition price tag, Enel has paid a $36.5M, or 40% premium over the intrinsic value of the corporation and assets. Admittedly, that values the IP at $0, but the tangible assets are all priced above at the high end of the pricing spectrum which means that the IP is likely priced appropriately relative to the actual value of the tangible assets. We’ll see if this deal ultimately goes through, after the prior deal fell apart with Raser, there is a precedent and some reason for skepticism.

Disclosure statement: The principals of Montara Energy Ventures hold no shares in and have no other financial relationship with Raser Technologies, AMP Resources, or Enel.