Range Fuels’ Number One Critic
That title appears to be reserved for me, even though I did not set out to earn it. It all started with the first story I wrote on Range Fuels in which I pointed out that their progress does not remotely align with their early promises. Since that initial story was published I have been frequently contacted to provide a skeptical side of the Range story. Below I report on another story on Range that has just come out that reiterates my skepticism – not on the nature of the technology but on the disconnect between the intial claims and actual progress to date.
One person recently e-mailed me and said “I bet (Range backer) Vinod Khosla and (Range CEO) David Aldous don’t like you very much.” Well, that may be (although I have had quite a lot of cordial correspondence with Khosla). I have also said before that I believe Vinod’s heart is in the right place. But this is not personal. I am far more worried about the future and the impact false promises may have on that future than whether I win popularity contests.
What Harm is Done?
Of course some ask “What harm is done? So someone fell short of expectations. Big deal.” In this case I think it is a very big deal. Here’s an analogy to illustrate why. Assume for a second that your house is on fire. Some people show up, dressed as firemen, and start to go through the motions of putting out the fire. To your untrained eye, they appear to be firemen, but you can’t help but notice that the fire continues to burn. After a while, it becomes obvious that these are not really firemen, and don’t know how to put out a fire. Meanwhile, the house burns to the ground. The real firemen never showed up, though, because they had gotten the message that firemen were already on the scene and had the situation under control.
I view our energy crisis as a house on fire, and biofuel hypesters as the faux firemen who lull the public into a false sense of security. They also pose a threat to the real fireman out competing for the same sources of funding. So I want some accountability from biofuel hypesters who go out and make outrageous claims and then fail to deliver on them.
Vinod Khosla on Skepticism
I believe the issues I have raised are fair, especially for Khosla. He made some bold statements about what they would do, and took taxpayer money to do it. The flip-side of that is you have to be prepared to accept responsibility when things don’t go as planned. I have yet to hear anyone from Range or within the government say “Yes, we screwed up a bit.” But all you have to do is read the February EPA report on what Range told them about their progress and contrast that with earlier claims that were made to see that things have not gone according to plan.
And while some have criticized me as the skeptic, note that Vinod has never been shy about expressing his skepticism about certain biofuel technologies. Indeed, Mr. Khosla warned investors to steer clear of clean tech IPO’s that rely too heavily on government funding and lack a clear technological advantage. “There will be Googles in this business, but before there is a dot-com rush, investors should ask questions,” Khosla told Bloomberg in an interview. “My objective is that good companies get funding and that, with the bad ones, people know what questions to ask.”
In response to my criticisms, Range apologists invariably say something like “That guy doesn’t know the big picture.” Actually I know a whole lot more than what I have written. For example, Range laid off a number of employees last year, including employees who were trying to develop a catalyst that could efficiently produce ethanol from synthesis gas. That is pretty key to Range’s claims, and my inference from these lay-offs is that Range couldn’t see any light at the end of that tunnel. That’s not all I know (e.g., a direct quote from a Range insider “There is nothing special about Bud’s (Klepper) gasifier“), and based on what I know, I stand behind my charge that Range has failed to deliver what they promised.
On the other hand, I want to make it clear again that my issue is not with the risk that they may fail. Of course new ventures are risky. Of course there will be unexpected problems. That is exactly why you don’t go out and make a lot of boasts about what you will do and how cheaply you can do it. But if you think I am just trying to belittle someone who took a risk that didn’t pan out, you have it completely wrong. Had they not gone out and made the claims they did – claims that at the time I thought were highly irresponsible and naïve – while chasing tax dollars, this wouldn’t be the same issue.
The Latest Range Story
Back to the new Range story I mentioned in the opening paragraph:
Let me address some specific bits from the article:
OMAHA (DTN) — Between 2006 and 2009, more than 100 news stories and press releases touted a cellulosic-ethanol-technology developer as a leader in a promising industry.
Many of those 100+ stories were hyped up puff pieces that the company encouraged. This hype created a buzz around the company that had them winning accolades long before they delivered. Shouldn’t they now be accountable for wasted tax dollars, and lost opportunities for companies that were denied funding that went to Range? Shouldn’t some of the writers of these puff pieces be taking a second look now? One thing is crystal clear. Range has not lived up to the expectations they created. No amount of dissembling can change that. They have taken in well over $300 million. That’s a lot of money. What do they have to show for that?
Construction on Range Fuels’ Soperton, Ga., cellulosic ethanol plant has stopped while the company continues work to improve its gasification technology. (Caption below a picture of the construction site).
Range Fuels claimed in 2007 it would produce commercial cellulosic ethanol using wood and other biomass at a 20-million-gallon plant in Soperton, Ga. — by 2008. However, the plant remains in development. Now, Range Fuels CEO and former Royal Dutch Shell executive David Aldous said his company has been honing its gasification/catalyst technology and plans to restart construction on the Soperton commercial plant in 2011.
“We have to do an equity raise before we get into the construction phase of that,” he said.
Note that the above implies that construction has stopped, but another story that came out a few days later quotes Range CEO David Aldous as saying the plant will start up producing methanol within the next couple of weeks – and ethanol at some future date (assuming they get more money).
“They were never going to be a cellulosic ethanol producer,” he (Rapier) said. “Can they do this in a cost-effective manner? No, not in my opinion.
Let me provide two additional pieces of information to put that in clear context. First was the fact that historically “cellulosic ethanol” has referred to the process by which cellulose is hydrolyzed to sugars, and then the sugars are fermented to ethanol. With the influx of the venture capitalists into the sector in the past few years, “cellulosic ethanol” suddenly became a catch-all definition for all sorts of processes involving biomass and some type of fuel product. For someone who is familiar with the long history of cellulosic ethanol in this country, this is very annoying. It would be as if we suddenly decided that calling bicycles “cars” is OK, when in fact that would confuse a great number of people.
So the first reason I said they would never be a cellulosic ethanol producer is that their process isn’t cellulosic ethanol except by the colloquial definition. But the second reason is that their process is gasification, and when you produce alcohols in this way you produce methanol or mixed alcohols. So I saw a process that was gasification to mixed alcohols, not a cellulosic ethanol process. Hence, my comment that they were never going to be a cellulosic ethanol producer (not that they could never be successful with their approach) – their process was only going to be gasification to mixed alcohols (including ethanol).
The criticism leveled at Range Fuels is “unfair,” Aden said, and the company likely will be commercially successful at some point. Several things make Range Fuels’ technology “fairly unique,” he said.
The Range gasification technology is a two-step process that includes volatilization. Volatilization is a chemical process that rapidly converts nonvolatile solids and liquids (biomass in Range Fuel’s case) into volatile compounds by thermal decomposition. The company then follows that with steam reforming, Aden said.
I don’t know what Aden means when he says the criticism is unfair. What I have done to this point is contrast what Range is now saying they will deliver with their earlier public statements. If you say you are going to build a plant for $120 million and start it up in 2008 producing ethanol, I think by 2010 you have some explaining to do when you have taken over 3 times that much cash, substantially reduced the capacity, still don’t have a completed plant, and are now saying you need more money to continue. Public statements have been made about deliverables. No amount of spin will make them vanish, and I have a right as a taxpayer to question how my money is being spent. So what is unfair about asking for some accountability for how our tax dollars are being spent?
One of the issues could be that the people within the government who are supposed to be looking after our tax dollars are a little too close to Range to remain objective. After all, Range has a fair share of cheerleaders within the government agencies doing the funding, but those cheerleaders need to take a step back and apply some objectivity with respect to what taxpayers are getting for the money they have been forced to spend.
Second, “fairly unique” is a bit generic, isn’t it? All of these processes are “fairly unique.” They have some subtleties that differentiate them from other processes, but not too many of them are “very unique” – which is how Range sold their process. In fact, Aden describes a two-step process in which the 1st stage process is a pyrolysis step. That part certainly isn’t unique, as I know a company that has been doing that sort of two-stage process for 10 years.
That’s what I mean when I say what Range is doing isn’t unique. (I think they aspired to do something relatively unique, but those aspirations were derailed by technical challenges they underestimated). There are numerous off the shelf technologies that can take a gasifier and couple it to a catalyst for producing methanol or mixed alcohols. People just don’t do it because it isn’t economical to do it. But the technology has existed – for decades – to do it (as I explained to a Range contractor who couldn’t understand why I was criticizing this revolutionary technology).
Why Range’s Initial Plans Derailed
I think two things happened with Range on the way from the lab to a demonstration scale. First, I think they had trouble scaling up their gasifier (in fact I have heard this from numerous sources). These can be notoriously difficult to scale because all kinds of temperature issues can give trouble at larger scale. The inability to scale their gasifier will make it very difficult for them to make their economics work; simply stacking up smaller gasifiers is much more expensive than just building one large one.
Second, I think they thought they could develop a catalyst that could produce ethanol for them in high yields. As Aldous admitted above, they get equal amounts of methanol and ethanol – which is what some of us were suggesting all along would happen. Methanol is cheaply produced from natural gas, so the only way they can compete with that is to get very generous subsidies and then sell to biodiesel producers – who will then presumably collect their own subsidies. So for Range to be successful here is going to take a dual biofuel subsidy and involve methanol which we can already cheaply produce in abundance.
The process itself is not necessarily a bad process: Gasify biomass and produce methanol and ethanol. The problem was that they had a number of bad assumptions to start with, and they have had to spend a lot of money getting to the point they are at. If I started out to design a process for producing mixed alcohols from biomass, I could do it for a fraction of Range’s capital expenditure.
A Skeptic and a Cynic
It’s easy to be skeptical or cynical, Aldous said. The question he would ask of those who are skeptical or cynical is, what are they doing to take on the challenges of achieving energy independence?
OK, I am skeptical and cynical, but I can answer the question. I am doing plenty, but we don’t issue press releases about what we are working on. Don’t confuse making lots of press releases about your plans and goals – very typical of many biofuel companies – with concrete actions. But it is possible – as illustrated in the fireman analogy – to actually do more harm than good even though you are trying to take on the challenge. If in the process you sour the public on the biofuel sector, then I would argue that it would have been better to remain on the sidelines.
I will say again that my criticism has never been directed at Range CEO David Aldous. I think the original management recognized a train wreck in progress (of their own making) and decided to get someone who really knew the energy business. (I think their original view was that they were smarter than all of those dinosaurs in the energy business, but finally concluded that maybe they better get someone who knew the business). Thus, they tapped former Shell executive Aldous. I think he has come in and reeled in most of the irresponsible statements. I can’t think of much he has said that I would have much of a problem with, and I realize as the CEO he has to attempt to defend his company against some of the things I am saying.
To conclude, I am not suggesting that Range can’t succeed technically at what they are attempting. I am only saying that what they are now doing is quite different (and has been far costlier) than what they initially claimed, and it will be very difficult for them to produce economical alcohols via this process. Ultimately, this is a cautionary tale about applying a bit more skepticism and a bit less cheerleading for some of these biofuel companies who promise the solution to all of our energy problems. Sort of like the kind of skepticism Vinod Khosla applies toward prospective algal biofuel producers.