Scaling up success
Intensive climate and energy policies, and a stronger focus on energy security in addition to the ambitious decarbonisation targets are encouraging investments into advanced biorefineries of 2G ethanol and biochemicals in Europe.
The Renewable Energy Directive (RED) II defines binding sub targets for advanced biofuels based on sustainable feedstocks like lignocellulosics. The sub targets are increasing to 3.5% in 2030.
RED III is on the way and European member states are following advanced biofuel targets in their national regulations, for example, Slovakia with 0.5%, France with 1.6% and the Netherlands with 1.8% for this year.
Available long-term off-take contracts on the market, and premium pricing due to a demand-and-supply gap of existing and planned advanced biofuel production seem to present a powerful economic perspective. What about the technology side. Here Melich Seefeldt provides some of the answers.
How do you see the past developments of 2G biorefinery investment projects?
During the first wave of construction of first-of-its-kind (FOIK) 2G bioethanol plants, multiple investors had already planned special purpose vehicles (SPV) for advanced biorefinery projects in great detail. Project developers were on the lookout for the perfect site, ideally being co-located with an existing utility infrastructure or a 1G ethanol plant. Feedstock supply chains were planned in an economic radius, discussing with farmers in between the piles of wheat straw bales or visiting pulp and paper factories caressing the sawdust.
Due diligence of technology providers was carried out, and discussions were held about license agreements. Were technology performance guarantees or EPC contracts possible? What should I do with the lignin? First conversations with ethanol off-takers were held with confidence. I personally remember looking into the crystal ball about what the 2G price premium will be. However, besides the lack of incentivising regulation at that time, what was missing was a green light to invest. Hence, investment concepts were put in the drawer.
How would you describe the current developments of advanced bioethanol commercial plants?
In the meantime, the second wave of realisation of improved first-of-its-kind plants is being rolled out. Considering the increasingly stimulating regulations in the pipeline, investors are watching carefully through their binoculars the construction and start-up of the upcoming commercial plants. They are spearheaded by three large-scale biorefineries based on the Praj Enfinity process in India. We are proud to say that those plants are the first commercial cellulosic plants going online, which have not been funded by the technology provider himself. Instead, three different Fortune 500 energy enterprises invested in the plant realisation having licensed the Praj technology. Beyond the technology licensing Praj delivered proprietary critical process equipment and executed the EPCM. The plants are flexibly based on different feedstocks like rice straw, maize stalk and bagasse. At the Indian Oil Corporation site, for example, 115,000 tons per year of rice straw going to be converted into 26,400 tons per year of advanced bioethanol. Impressively 4,500 tons of structural steel, 6.5 km of piping, and 550 km of electrical cabling are installed. The start-up is expected at the end of 2022. The Investor’s drawers are opening again.
What, in your opinion, investors should keep a close eye on observing the current commercial plants going online?
It is one of the fundamental targets of investors to achieve continuous, secure, and long-term revenues. Therefore, the FOIK plant’s performance on the selected feedstock needs to be monitored and documented after start-up. Performance parameters on the selected feedstock are, among others, continuity and reliability of operations, the operating capacity during and after a ramp-up phase as well as the process efficiencies and yields. The plant’s performance shall also be tested under stressed conditions during the operations. The performance parameters and penalty structure usually are agreed upon with technology providers in their license agreements. Foremost, it is a mandatory condition to reach the specified end products’ quality for example in fuel grade ethanol as per EN 15376. Currently, a dilemma is present that project owners shall rapidly act with the development of their 2G biorefineries to exploit the benefits of the supply-demand gap as first movers. It is important to consider the development timeline, which case-by-case might take three to four years regarding project planning and financing, design, permitting and construction as well as commissioning. On the other hand, it will cost some more time to receive the new FOIK’s performance data at the current phase.
What can be done in the meantime to estimate the scale-up success of a process technology?
Before the new commercial plants will have proven their techno-economic performance, we advise assessing the preferred process technology and its provider. Three key characteristics can give a good prediction of the successful large-scale realisation.First, evaluate the technology’s scale-up factor from pilot to demonstration and then to the commercial plant. It is a balancing act to find the right ratio, of having the minimum size to reach scale effects. On the other hand, the scale-up ratio must not be too large. An aggressive scale-up represents a significant risk of not meeting the targeted process parameters and therefore endangers the SPV’s revenue generation capabilities. As a rough rule of thumb different senior lenders might look for a scale-up factor up to 30 times and equity providers up to 100 times. The Enfinity technology platform of Praj Industries owns a scale-up factor of 12 times from pilot to demonstration and a factor of 35 times from demonstration to the commercial plant. Since 2016 Praj’s demonstration plant in India is co-located to and fully combined with a third party 1G ethanol and sugar production facility.
The demonstration plant has a production capacity of 900 tons per year of fuel grade ethanol based on rice straw, which it is selling to the adjacent ethanol company. It also operates its own integrated biomass boiler and wastewater treatment. During the last years, it has tested all feedstocks of relevance from different continents.
Secondly, scale-up success can be evaluated more down-to-earth, if the technologies’ demonstration plant can offer documented performance tests already, ideally being carried out with a potential external customer looking over the operator’s shoulders.
The Praj demonstration plant has successfully undergone a 60-day commercial deployment evaluation based on wheat straw. It reached an up-time factor of 96%, an average operating capacity of 87%, and a yield of 258 litres AA/BDMT biomass. Another crucial aspect is that the demonstration plant, as a basis for the commercial plant, should be fully integrated on the inside as well- as in the outside battery limits. An integration into own utility facilities is a must to avoid high risk.
Thirdly, operating a successful 2G bioethanol facility is not only a matter of the performance today but also of the likelihood of significantly improving the performance of tomorrow. During the last almost four decades Praj has boosted its customers’ economics by scaling-up biorefineries by 40 times, increasing the overall efficiency from 82% to 91%, decreasing water and steam consumption by 4 times, and bringing the wastewater generation with their proprietary Zero Liquid Discharge technology from 12 L/L of EtOH to zero. We will deliver high-performing commercial plants to our licensees this year and repeat the success story of continuously improving our technologies in the same way we have done for the conventional biorefineries
How are Praj’s business plans for Europe?
For the last 16 years Praj Industries has served many biorefinery customers in Europe. Around 18% (ca. 1BN liters per year) 1G EtOH production in the EU is based on Praj technology. We are a member of ePure and the LSB, the Advanced Biofuels Coalition. Now we are in the process of founding our Praj EU subsidiary from Frankfurt in Germany. We are expanding our manpower in our main European business 1G and 2G biorefinery technologies and are establishing more of our business lines, which have strong synergies with bioenergy.
Our portfolio incorporates HighPurity in sterile biotech plants and additionally Critical process Equipment & Skids. Praj’s 300 cross-functional engineers modularize entire process plants through high-quality pre-fabricated packages, which are assembled on the customer’s site to reduce capex and construction time. This is our unique strength. The equipment is produced at Praj’s four manufacturing facilities in India. In the near future we also tend to bring our business line wastewater and effluent recycling to Europe.
For more information: Visit: praj.net
The Renewable Energy Directive (RED) II defines binding sub targets for advanced biofuels based on sustainable feedstocks like lignocellulosics. The sub targets are increasing to 3.5% in 2030.
RED III is on the way and European member states are following advanced biofuel targets in their national regulations, for example, Slovakia with 0.5%, France with 1.6% and the Netherlands with 1.8% for this year.
Available long-term off-take contracts on the market, and premium pricing due to a demand-and-supply gap of existing and planned advanced biofuel production seem to present a powerful economic perspective. What about the technology side. Here Melich Seefeldt provides some of the answers.
How do you see the past developments of 2G biorefinery investment projects?
During the first wave of construction of first-of-its-kind (FOIK) 2G bioethanol plants, multiple investors had already planned special purpose vehicles (SPV) for advanced biorefinery projects in great detail. Project developers were on the lookout for the perfect site, ideally being co-located with an existing utility infrastructure or a 1G ethanol plant. Feedstock supply chains were planned in an economic radius, discussing with farmers in between the piles of wheat straw bales or visiting pulp and paper factories caressing the sawdust.
Due diligence of technology providers was carried out, and discussions were held about license agreements. Were technology performance guarantees or EPC contracts possible? What should I do with the lignin? First conversations with ethanol off-takers were held with confidence. I personally remember looking into the crystal ball about what the 2G price premium will be. However, besides the lack of incentivising regulation at that time, what was missing was a green light to invest. Hence, investment concepts were put in the drawer.
How would you describe the current developments of advanced bioethanol commercial plants?
In the meantime, the second wave of realisation of improved first-of-its-kind plants is being rolled out. Considering the increasingly stimulating regulations in the pipeline, investors are watching carefully through their binoculars the construction and start-up of the upcoming commercial plants. They are spearheaded by three large-scale biorefineries based on the Praj Enfinity process in India. We are proud to say that those plants are the first commercial cellulosic plants going online, which have not been funded by the technology provider himself. Instead, three different Fortune 500 energy enterprises invested in the plant realisation having licensed the Praj technology. Beyond the technology licensing Praj delivered proprietary critical process equipment and executed the EPCM. The plants are flexibly based on different feedstocks like rice straw, maize stalk and bagasse. At the Indian Oil Corporation site, for example, 115,000 tons per year of rice straw going to be converted into 26,400 tons per year of advanced bioethanol. Impressively 4,500 tons of structural steel, 6.5 km of piping, and 550 km of electrical cabling are installed. The start-up is expected at the end of 2022. The Investor’s drawers are opening again.
What, in your opinion, investors should keep a close eye on observing the current commercial plants going online?
It is one of the fundamental targets of investors to achieve continuous, secure, and long-term revenues. Therefore, the FOIK plant’s performance on the selected feedstock needs to be monitored and documented after start-up. Performance parameters on the selected feedstock are, among others, continuity and reliability of operations, the operating capacity during and after a ramp-up phase as well as the process efficiencies and yields. The plant’s performance shall also be tested under stressed conditions during the operations. The performance parameters and penalty structure usually are agreed upon with technology providers in their license agreements. Foremost, it is a mandatory condition to reach the specified end products’ quality for example in fuel grade ethanol as per EN 15376. Currently, a dilemma is present that project owners shall rapidly act with the development of their 2G biorefineries to exploit the benefits of the supply-demand gap as first movers. It is important to consider the development timeline, which case-by-case might take three to four years regarding project planning and financing, design, permitting and construction as well as commissioning. On the other hand, it will cost some more time to receive the new FOIK’s performance data at the current phase.
What can be done in the meantime to estimate the scale-up success of a process technology?
Before the new commercial plants will have proven their techno-economic performance, we advise assessing the preferred process technology and its provider. Three key characteristics can give a good prediction of the successful large-scale realisation.First, evaluate the technology’s scale-up factor from pilot to demonstration and then to the commercial plant. It is a balancing act to find the right ratio, of having the minimum size to reach scale effects. On the other hand, the scale-up ratio must not be too large. An aggressive scale-up represents a significant risk of not meeting the targeted process parameters and therefore endangers the SPV’s revenue generation capabilities. As a rough rule of thumb different senior lenders might look for a scale-up factor up to 30 times and equity providers up to 100 times. The Enfinity technology platform of Praj Industries owns a scale-up factor of 12 times from pilot to demonstration and a factor of 35 times from demonstration to the commercial plant. Since 2016 Praj’s demonstration plant in India is co-located to and fully combined with a third party 1G ethanol and sugar production facility.
The demonstration plant has a production capacity of 900 tons per year of fuel grade ethanol based on rice straw, which it is selling to the adjacent ethanol company. It also operates its own integrated biomass boiler and wastewater treatment. During the last years, it has tested all feedstocks of relevance from different continents.
Secondly, scale-up success can be evaluated more down-to-earth, if the technologies’ demonstration plant can offer documented performance tests already, ideally being carried out with a potential external customer looking over the operator’s shoulders.
The Praj demonstration plant has successfully undergone a 60-day commercial deployment evaluation based on wheat straw. It reached an up-time factor of 96%, an average operating capacity of 87%, and a yield of 258 litres AA/BDMT biomass. Another crucial aspect is that the demonstration plant, as a basis for the commercial plant, should be fully integrated on the inside as well- as in the outside battery limits. An integration into own utility facilities is a must to avoid high risk.
Thirdly, operating a successful 2G bioethanol facility is not only a matter of the performance today but also of the likelihood of significantly improving the performance of tomorrow. During the last almost four decades Praj has boosted its customers’ economics by scaling-up biorefineries by 40 times, increasing the overall efficiency from 82% to 91%, decreasing water and steam consumption by 4 times, and bringing the wastewater generation with their proprietary Zero Liquid Discharge technology from 12 L/L of EtOH to zero. We will deliver high-performing commercial plants to our licensees this year and repeat the success story of continuously improving our technologies in the same way we have done for the conventional biorefineries
How are Praj’s business plans for Europe?
For the last 16 years Praj Industries has served many biorefinery customers in Europe. Around 18% (ca. 1BN liters per year) 1G EtOH production in the EU is based on Praj technology. We are a member of ePure and the LSB, the Advanced Biofuels Coalition. Now we are in the process of founding our Praj EU subsidiary from Frankfurt in Germany. We are expanding our manpower in our main European business 1G and 2G biorefinery technologies and are establishing more of our business lines, which have strong synergies with bioenergy.
Our portfolio incorporates HighPurity in sterile biotech plants and additionally Critical process Equipment & Skids. Praj’s 300 cross-functional engineers modularize entire process plants through high-quality pre-fabricated packages, which are assembled on the customer’s site to reduce capex and construction time. This is our unique strength. The equipment is produced at Praj’s four manufacturing facilities in India. In the near future we also tend to bring our business line wastewater and effluent recycling to Europe.
For more information: Visit: praj.net
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