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By Robert Rapier on Mar 2, 2011 with 52 responses

Setting the Record Straight on Cello Energy and E3 Biofuels

The Art of Spin

Politicians are known for their ability to spin any situation to make sure it doesn’t present them in an unfavorable light. In that vein, I’m beginning to feel as if Vinod Khosla would make a fine politician. As much as I am tired of writing about him (and I am sure he long-ago grew tired of me writing about him), his recent response to a Wall Street Journal editorial called The Range Fuels Fiasco warrants its own response.

While Khosla does not point a finger directly at me in his response, a number of readers e-mailed or commented on my blog that they believed Khosla was accusing me of misrepresenting his relationship with some of the companies I mentioned (as I explain in more detail below). I will set that record straight and deconstruct his recent response.

My Motivations

Vinod Khosla has long sought to influence the direction of energy policy in the U.S. Business and political leaders listen to him and act upon his recommendations. Therefore his actions — his essays, his speeches, and his investments — are all fair game for judging whether he should be influencing energy policy. I have a fundamental disagreement with him over U.S. energy policy. Khosla’s views are shaped by his experience in the computer industry. He believes that if he spreads his bets, a solution to our energy problem is virtually assured. He believes in the certainty of Black Swans, Moore’s Law, and the power of venture capital to make the impossible happen. If you understand that this is where he is coming from, then his words and actions make sense in that context.

I come from a different place, where the way of life we enjoy has been made possible because of many years of easily accessible and affordable energy. I think those days of cheap energy are coming to an end, and it is far from assured that spreading lots of money around is going to result in a solution to our energy problem. In fact, I can see nothing on the horizon that can easily replace oil, and that poses a serious risk to our economy and our way of life. But if we assure people again and again that solutions are easy and the real problem is oil companies blocking access to renewable energy, or not enough investments in the sector — you lull people into believing in solutions that may never appear. And while they hold out hope for the silver bullet, time is lost and we move closer toward disastrous supply shortages. We should of course still work hard on solutions; that is after all what I do every day. But we should not over-promise. After all, we have no worries if we are about to be swimming in $2/gallon celulosic ethanol, but if this belief prevents us from taking other necessary actions then we may have a problem if the promise doesn’t materialize. If you understand that this is where I am coming from, then my words and actions should make sense in that context.

I want to be clear that I have no personal animosity toward Vinod Khosla. He has never wronged me in any way. In fact, my organization has some ties with him (several people know him or have done business with him) and they probably get uncomfortable over some of my critical articles. I have spoken to Khosla at length on the phone twice and have exchanged numerous e-mails with him. He has always been cordial to me (and I to him). My criticisms are about one thing: The direction of energy policy in this country.

I will defend Khosla on one point. Perhaps I am naive, but I believe his motivation is that he believes he is doing the right thing for the planet. I am currently reading Power Trip by Amanda Little. In the book, she quotes Khosla: “We are seeing in green technology what we once saw on the Internet. But in this case the end result isn’t buying a book or getting a date online, it’s saving the future of civilization.” I think we both want a similar end result, but have sharply different views on the path that needs to be taken, as well as the risks of choosing the wrong path.

With that said, let’s take a look at recent events and Khosla’s response.

The Wall Street Journal Editorial

The Wall Street Journal recently published an editorial called The Range Fuels Fiasco. In the article, they were critical of Khosla on a number of points. I wrote an essay in the wake of that called The Media’s Role in the Range Fuels Fiasco, pointing out that the media also has an obligation to do a better job of investigating claims like those in connection with Range Fuels over the past few years. In my essay I also mentioned Khosla’s connection to E3 Biofuels and Cello Energy, which I will get into below.

Vinod Khosla published a response to the WSJ editorial:

WSJ Bigotry, Lies and Abuse of Power or a “Range Fiasco”?

Khosla begins by stating that the WSJ misrepresented his relationship with Cello Energy:

“I have never publicly uttered the word ‘Cello,’ nor classified it as a ‘great cellulosic hope.’ I have never owned any shares in Cello. I have never evaluated the technology directly or indirectly. A company backed by a fund I invested in paid Cello a relatively small amount for a non-equity relationship to buy blind ‘insurance,’ a tiny amount compared to our biofuels portfolio. This has been widely misreported in the press. An earlier story in the WSJ chose to report ‘that I was an investor in Cello’ despite receiving a statement to the contrary in writing from me prior to publication. It makes me wonder about the ethics of some of WSJ’s reporters.”

The Cello Energy Connection

In 2009, Cello Energy was taken to court and accused of fraud with respect to their operation. While I don’t recall Khosla ever being quoted as calling it a “great cellulosic hope”, relevant court testimony showed more direct involvement than Khosla is admitting. Trial testimony exposed the connection between Khosla’s firm and Cello:

Khosla partner testifies his firm is confident in Baldwin company’s biodiesel process

The leadership of California-based Khosla Ventures was so impressed with Baldwin County inventor Jack Boykin and his claim that he has unlocked the secret to turning wood chips and hay into cheap diesel fuel, they agreed to give him $25 million to build three manufacturing plants and to spend millions more each year to operate them, Khosla partner Samir Kaul testified in Mobile’s federal court on Monday.

Khosla Ventures, a venture capital firm created by the billionaire co-founder of Sun Microsystems, Vinod Khosla, has been sued along with Boykin’s company, Cello Energy, by Parsons & Whittemore Enterprises, one of the world’s leading pulp makers and Boykin’s initial investor.

Kaul told jurors that he first learned of Boykin and his potentially “game-changing technology” in 2007 from David Bransby, an Auburn University agronomy professor. Kaul asked Khosla’s chief scientist to meet with Boykin. His verdict, Kaul said: “Boykin is the real deal and he’ll get funding one way or another.”

It was also revealed that Khosla had Cello’s fuel tested (and determined that it was not derived from biomass), although it was not clear whether this was before or after they had a deal in place. But one thing is clear: The court testimony from Samir Kaul shows that there was a relationship. It is true that Khosla prevailed in the lawsuit, which had accused him of interference between Cello and another investor in Cello called Parsons & Whittemore. But the fact that Khosla prevailed in the lawsuit does not change what Samir Kaul testified to under oath: Khosla Ventures was in fact involved with Cello. A detailed look at the case can be found here, in which Khosla was quoted: “Great job on this one. Herculean effort. But my bet is it will pay off.”

The very same website where Khosla’s recent response to the WSJ was published — GreenTechMedia — wrote this previously on Khosla’s Cello involvement:

Cello Energy: Quiet Khosla-Backed Cellulosic Ethanol Company Emerges

Cello Energy isn’t listed on Khosla Ventures’ list of biofuel companies. But the well-known green VC firm has put $12.5 million into the Alabama-based startup, which the EPA expects to be producing 70 million gallons of ethanol from trash and biomass by next year.

Beyond the initial $12.5 million, Khosla agreed to additional funding for a second and third plant in the contract, Woodburn said.

Those plants, along with a fourth new one, are meant to eventually reach 50 million gallons per year production, but Cello’s shorter-term goal is to be producing 70 million gallons per year by next year, he said.

These accounts and the court testimony contrast with Khosla’s characterization: “A company backed by a fund I invested in”, “a relatively small amount”, “a non-equity relationship”, “blind insurance”, “a tiny amount.” The conclusion on Cello is that Khosla’s organization — and even Khosla himself — viewed Cello as a promising technology and they did provide money to Cello. Cello was convicted of fraud, so someone, somewhere, failed the due diligence test and Khosla is engaging in damage control.

The E3 Biofuels Story

On E3 Biofuels, Khosla wrote this in his WSJ response:

“Others have claimed without attribution that I invested in E3 Biofuels, which I have never done either.”

He doesn’t identify who “others” might be, but I have gotten a number of e-mails who think this is directed at me. Whether it was or not, some people believe it was so I will address it. Typical of some of the responses I got was a person who wrote that Khosla was correcting the factual errors that I reported about his ownership stake in E3 Biofuels, and accused me of “lazy/fact free journalism.”

There is just one problem. I never reported that Khosla had an ownership stake in E3 Biofuels. I wrote that he had promoted them, and you can see that for yourself in My Big Biofuels Bet. In that article, Khosla heaped on the hype. He called the E3 approach “the most promising solution to our nation’s energy crisis”, claimed that they were “the most energy-efficient corn ethanol facility in the country”, and claimed they would make ethanol for 75 cents a gallon — before they even started up. A year later they were bankrupt.

Incidentally, my comments on E3 are not meant to denigrate their approach; I was actually supportive of what they were trying to do. But if you asked me about their potential, I certainly would have cautioned that this approach would be capital-intensive and had a lot of technical risk because of the degree of complexity and integration. Khosla considered the technology so promising that it was a major focus of his article. But no, he never invested in them — and I never reported that he did. He just failed to appreciate the technical risks the company would encounter in commercializing, and thus he grossly overestimated their potential. He has shown a pattern of underestimating technical challenges in the energy business.

Mea Culpa

I strive to get my facts straight, but in reviewing what I had written previously it looks like I did get one wrong:

Khosla: “The goal was never 100 million gallons for $150 million project — those numbers would make it less capital-intensive than corn ethanol projects — not a figure Range ever planned. WSJ or somebody else misinterpreted those facts.”

A year ago I detailed the time line of the Range Fuels story. I wrote “An article in USA Today reported that the initial capacity would be 20 million gallons. The site was permitted for 100 million gallons of eventual capacity, and the cost of building a 100 million gallon per year plant was quoted at $150 million.” All of that is correct except for the last bit. The article actually quoted then-CEO Mitch Mandich as saying “The cost of the plant at a capacity of 100 million gallons per year will be more than $150 million.”

So that one is my mistake. In fact, I can’t find an estimate from Range on how much money they planned to spend in Phase 1 to build 20 million gallons of capacity. But what we do know is that they went through more than $200 million and ended up with a plant capacity that they claimed was “up to 5 million gallons per year” — and what it actually produced was methanol. So their goal may not have been $150 million to build 100 million gallons of capacity, but what they did end up with was more than $200 million for 5 million gallons of capacity.

The Rest of His Response

There are a number of statements in the rest of Khosla’s WSJ response that are worth examining.

“Range’s original formulation may not have been successful, but such risk-taking deserves applause, not derision.”

That depends entirely on the circumstances. Certainly derision shouldn’t be reserved for those who try and fail. But when someone dishes out plenty of their own derision, acts as if they are smarter than the people currently in the industry, says they have better ideas, hypes those ideas like mad, takes taxpayer money – and then fails? That’s a different matter.

“The biggest failure was, I am told by the company, in fact caused by problems in the ‘routine’ wood handling supplied by Metso, not the new technology! Whether that is accurate or not…”

You don’t know whether it is accurate, yet you still threw your wood handling supplier under the bus? Further, it would appear that by characterizing that as the “biggest failure”, it wasn’t the only failure. I have some direct experience with this, though. The reason you might identify the wood handling as a big problem up front, is that it is at the beginning of your process. You won’t know what other problems you have until you get that straightened out and running. Then your problems will move further downstream, and you start to work on those. That is how new processes are commissioned.

“It seems that facts don’t get in the way of any ‘proof’ that supports bigoted opinions of the WSJ editorial staff since they continue to use erroneous ‘facts’ with large doses of innuendo (like ‘superrich,’ political venture capitalist, taxpayer tragedy, etc.). But it gets them sensationalism and readership, so who cares?”

Those are very ironic words coming from someone who casually throws around innuendo and specializes in sensationalism. For instance, when Professor Mark Jacobson of Stanford published a study suggesting that certain emissions would go up for ethanol blends, you attempted to smear him by claiming that the study was funded by Exxon (documented here). Of course that was absolutely false.

From 2005 when gas prices started to rise, the refinery I worked at started to get death threats. And you were there fanning the flames of hatred – telling people that oil companies were ripping them off and suppressing biofuel innovations. You called your opponents derogatory (or maybe bigoted?) names like “oilies.” You hurled numerous accusations and used your own large doses of innuendo when trying to further your agenda. To this day you continue to use derogatory terms like “Luddites” to characterize the opinions of those that differ from your own.

“The project was the only one of the six DOE grants that has been built and mostly met its goals, in my view.”

We should all hope for fewer such successes then. Hundreds of millions of dollars are apparently gone*, and an idle plant is the result. It is hard to imagine what the goals must have been.

“The Range chemical catalysis was superseded by the rapid progress at companies like Coskata and Lanza and other biofuels production technologies.”

This one really leaves me scratching my head. Khosla is strongly implying that the problem with Range wasn’t the gasification, it was the back half of the plant; the part that takes the syngas and turns it into fuel. (Of course given his admission that there was a feed handling problem, it is clear that the plant wasn’t run long enough to accurately make that determination). So based on his experience with Range, Khosla concluded that the way forward had to be fermentation of syngas, and that those who believe otherwise are Luddites.

Yet there are no commercial plants that ferment syngas. Khosla is once more discarding proven technology for unproven technology. Companies like Shell and Sasol have been using catalytic technologies for many years to turn syngas into fuel. They operate in the range of 15,000 barrels per day up to well over 100,000 barrels per day. Yet Khosla argues that such technologies don’t work, and the commercially unproven technology of syngas fermentation is really the way to go. Why should I take that seriously?

“If chemical catalysis was certain to succeed, we would not need the DOE at all.”

Is he simply unaware of approaches like Shell in Bintulu or Sasol in Secunda? Their chemical catalysis processes have commercially produced over a billion barrels of fuel. It seems the “Luddites” have figured out how to make catalysis work — even if Khosla didn’t.

“The purpose of the grant program was to assist high-risk technologies. It is often impossible to tell which is which a priori.”

Especially when you ignore all of the work that has been done before.

“This is how innovation happens, but the WSJ does not really understand innovation. In the end, success is never assured in new technology areas, except, of course, it seems, in the ivory tower of the WSJ, which is full of people who don’t understand technology and prefer to live in their bigoted walled world of pontification without reality checks.”

You created those expectations of success with the constant hype. But yes, reality checks are important. That is why I write essays like this.

“In biofuels we have generated hundreds of millions in profits for our limited partners.”

We probably have different views on what amounts to success. I consider success in the energy business to be the actual act of delivering energy to consumers, not whether investors got rich from an IPO. What if those companies never deliver any energy and burn through all of those investment dollars as Range Fuels did? Is that a success? Range was successful if the metric is raising money.  And yes, before you ask “Well, what have you done?” – I have produced about a billion more gallons of butanol than Gevo has produced. My work in the oil industry has produced a billion more gallons of hydrocarbons than LS9 has produced. But those successes were via Luddite-technology.

“When we first invested in biofuels I expected up a [sic] 70 percent to 90 percent chance of failure (and went on record saying so), and today I’m pretty confident that 50 percent to 60 percent of the technologies will succeed.”

But which technologies have succeeded to date? Which ones are commercially producing energy? I don’t really trust prognostications, but we can look at the track record to date. Neither Altra or Cilion delivered (as Khosla acknowledged here). Range Fuels is not producing. So which companies in the portfolio are producing energy at a competitive price?

Conclusions

There is no shame in attempting something and failing, and there is nothing wrong with having big goals. What I am criticizing is the act of translating those big goals into something more akin to a guarantee of victory, and then soliciting and obtaining public funds as a result. Vinod Khosla has inserted himself as a larger-than-life figure into the debates and discussions on the direction of energy policy in this country. He wants to influence the direction of our energy policy. Hence, he should expect to be graded on performance. He should expect criticism when the hype fails to deliver, because when people believe the hype it can change the trajectory of our energy policy in a negative way.

My concerns have always been — as clearly stated in my 2006 essay on some of Khosla’s claims — that we lose precious time and taxpayer money chasing false solutions, and ultimately the public and politicians lose their appetite for investing in renewable energy because over-hyped claims fail to materialize (and this has certainly happened as I feared). So within our own industry, we have to police over-hyped claims and we have to hold those who make them ultimately accountable if they fail to deliver. If we do so, there will be a disincentive for making overblown claims.

I want Khosla to have projects that succeed, because the world needs solutions to our energy problems. But I want the public and the politicians to understand the risks going in. There were no caveats with Range Fuels, only hype, hype, hype. Had Khosla been more forthcoming about the risks (and more knowledgeable about prior work in this area) then there would be nothing to criticize. Tax dollars will continue to be spent on ventures that are not assured of success, but the risks need to be transparent so we can make informed decisions on whether the risks are acceptable.

Footnote

* The final tally on the Range Fuels project will likely never be known, unless it is revealed in court. But we do know that there was an initial investment that has never been publicly disclosed, there were the reports of an additional $158 million in VC money, $76 million of DOE money (of which Khosla said half was spent), an $80 million loan guarantee from the USDA, and $6 million from the state of Georgia. I think it is a safe assumption that over $200 million was spent and the result was a small amount of methanol. Per this recent article on the project, even though Range announced that they would make one batch of ethanol, that never took place.

  1. By Benny BND Cole on March 2, 2011 at 8:40 pm

    More top-knotch repoting and commentary from RR.

    And BTW, I was a supporter of E3, and learned a lesson the hard way–there is much between cup and lip. And I re-learned an old lesson: In any fever, some outfits form for the purpose of raising money. That is the business plan: raise money. If enough is raised, the founders can get rich on the money raised, not on profits.

    What is disturbing is that sometimes even “responsible” people seem to engage in this shabby financial money raising.

    Read this: 2/22/10 Toronto Sun

    “Researchers in Texas say they have found a way of cutting the cost of producing gasoline by two thirds, taking advantage of the lowest grade of coal available – one that is abundant beneath the Canadian prairies.

    A new refining process being perfected at the University of Texas at Arlington can turn the low-cost lignite coal, also known as brown coal, into oil at a fraction of the cost of importing crude oil from abroad.

    “We’re improving the cost every day,” Rick Billo, the school’s dean of engineering, told a local television station.

    “We started off some time ago at an uneconomical $17,000 a barrel. Today, we’re at a cost of $28.84 a barrel.”

    The University of Texas hopes to license their technology in the next few months and start building the first micro-refineries to produce the cheaper oil in the next year.”

    Even university officials just want to raise money? Time will tell.
    When even universities–places I dearly hope where truth is investigated–stoop to financial bamboozling, you know things are getting bad.

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  2. By Walt on March 3, 2011 at 8:13 am

    Robert Rapier said:

    We probably have different views on what amounts to success. I consider success in the energy business to be the actual act of delivering energy to consumers, not whether investors got rich from an IPO. What if those companies never deliver any energy and burn through all of those investment dollars as Range Fuels did? Is that a success? Range was successful if the metric is raising money.  And yes, before you ask “Well, what have you done?” – I have produced about a billion more gallons of butanol than Gevo has produced. My work in the oil industry has produced a billion more gallons of hydrocarbons than LS9 has produced. But those successes were via Luddite-technology.


     

    Interesting.  From my own experiences, I do think that the metric is how much money have you raised and who are your partners.  Although there is some success in building and operating a plant producing liquid fuels and chemicals, I think few really find that a success.  In our generation, it is how much money did you raise, how fast, with whom and what is the fastest exit strategy possible…  The argument I hear often is if you can engineer government guarantees so our investors will not loose any money, and we can at least get all our money back on the downside, this would be the most important step.  I noticed that a very smart company went public recently with their successful grant funding.  This is the former Conoco-Phillips group as I recall, and they will be unveiling their new technology.

    ———–

    Eltron Research & Development is excited to announce its
    selection for the prestigious Technology Showcase at the ARPA-E
    Energy Innovation Summit, co-hosted by the Department of Energy’s
    Advanced Research Projects Agency – Energy (ARPA-E) and the
    Clean Technology and Sustainable Industries Organization (CTSI).
    Top technologists and cutting-edge clean tech organizations
    competed to participate in the Showcase, a hallway of America’s
    most promising prospects for winning the future in energy.
    As one of ARPA-E’s selected organizations, Eltron will exhibit
    its Cyclic Reforming technology capable of economically superior
    conversion of natural gas to syngas for fuels and chemicals
    production. 2,000 national leaders will gather to drive long-term
    American competitiveness in the energy sector, including top
    researchers, investors, entrepreneurs, corporate executives and
    government officials.

    Eltron is a leading R&D organization with a 30-year history
    of providing technology solutions to industry. In 2011 Eltron
    received an award from DOE of $71 million to scale up its
    pre-combustion carbon capture technology. Eltron’s core capability
    is applied chemistry and the staff of 50 scientists and engineers
    has generated over 75 patents and two spin off companies out of our
    advanced research facility in Boulder, Colorado. For more
    information, visit http://www.eltronresearch.com.

    ———-

    Although Eltron is a very successful group, I do believe they have been able to get a lot of government support to bring their innovations to market, and have worked on a lot of government funded projects where davis-bacon wages/rates are pretty impressive to reinvest into new technology innovations.

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  3. By rate-crimes on March 3, 2011 at 10:17 am

    Great analyses.

    I would like to add that a telling phrase escaped your detailed analyses.  Injecting, “I am told by the company” in the midst of a response speaks volumes.  The language of escape artists is subtle.

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  4. By russ-finley on March 3, 2011 at 1:26 pm

    Great article.

    RR said:

    …you lull people into believing in solutions that may never appear. And while they hold out hope for the silver bullet, time is lost and we move closer toward disastrous supply shortages.

    That and the fact that he actively works to “influence the direction of our energy policy” sums up the problem with Khosla’s game plan. I strongly suspect that the road to hell is paved almost entirely with good intentions. Everyone means well. Khosla is like everyone else in this respect but he has done a lot more paving than your average person. A quarter of a billion dollars is a lot of money to pour down a toilet ; )

     

    When one considers how much land it would take to replace oil with any biofuel, it  boggles the mind. Clearly sugarcane and palm oil are vastly superior to any other scheme afloat and they would quickly clear the planet of its remaining biodiversity if scaled up enough to replace oil.

     

    “We are seeing in green technology what we once saw on the Internet. But in this case the end result isn’t buying a book or getting a date online, it’s saving the future of civilization.”

    He wants to save the future of civilization. Who doesn’t? But if it is going to be saved, it will probably be thanks to the Internet, where ideas (that may be paving the road to hell) are being aired in public and exposed to rational critique. The first great equalizer was the invention of firearms, which took the advantage away from big guys who would thump you in a dispute. In the age of law, the Internet has become the great equalizer.

     

    I just dug up a 2006 interview with Khosla by Amanda Little: http://www.grist.org/article/l…../#comments

     

    “But corn ethanol will have played an invaluable role in getting us started …So, my guess is, if we’re lucky, we’ll have commercial-scale plants in three years. If we’re very unlucky, it will be six”

     

    The Internet may save us.

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  5. By rrapier on March 3, 2011 at 1:51 pm

    Walt said:

    Robert Rapier said:

    We probably have different views on what amounts to success. I consider success in the energy business to be the actual act of delivering energy to consumers, not whether investors got rich from an IPO. What if those companies never deliver any energy and burn through all of those investment dollars as Range Fuels did? Is that a success? Range was successful if the metric is raising money.  And yes, before you ask “Well, what have you done?” – I have produced about a billion more gallons of butanol than Gevo has produced. My work in the oil industry has produced a billion more gallons of hydrocarbons than LS9 has produced. But those successes were via Luddite-technology.


     

    Interesting.  From my own experiences, I do think that the metric is how much money have you raised and who are your partners.  Although there is some success in building and operating a plant producing liquid fuels and chemicals, I think few really find that a success. 


     

    Think of it this way. Let’s say you start an airline company. You take your company public, raising lots of money in the IPO. You spend all that money on publicity, and then you run out of money and declare bankruptcy before you ever make a flight. Was your company a success?

    Of course it takes money to give the opportunity for success, but just raising money doesn’t ensure success. Will we look at Range Fuels as a success story? They certainly raised a lot of money. But they didn’t deliver the energy they promised to deliver, hence they are not a success.

    A scammer can raise money by making grandiose claims. But delivery of safe and affordable energy is what marks success in the energy business.

    RR

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  6. By Wendell Mercantile on March 3, 2011 at 5:46 pm

    When one considers how much land it would take to replace oil with any biofuel, it boggles the mind.

    Russ~

    See A billion tons of biomass a viable goal, but at high price, new research shows

    When miscanthus is added to the mix, the goal of 1 billion tons of biomass can be achieved, but at a cost of more than $140 per ton.

    “Most studies consider costs in the range of $40 to $50 per ton, which is fine when we’re talking about biomass production to meet near-term targets for cellulosic biofuel production,” Khanna said. “But if we really want to get to the 30 percent replacement of gasoline, at least with the current technology, then that’s going to be much more costly.”

    [link]      
  7. By Douglas Hvistendahl on March 3, 2011 at 8:00 pm

    When I was young, cities had electric trolleys and trolley buses powered by wires above. This proven technology can’t work where the population density is too low. But some people are working on personal rapid transit, which with its lower costs just might be able to extend out a bit further from the cities.

    Look ma, no batteries. ;-)

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  8. By Optimist on March 4, 2011 at 6:16 pm

    When one considers how much land it would take to replace oil with any biofuel, it boggles the mind.

    Of course, a good start would be to use no land at all: start with the 94 million tons of renewables that Americans send to the landfill every year. If one assumes the organic waste is ~18.5 GJ/t and can be converted to a liquid fuel at 50% efficiency, we are talking about replacing oil (~41 GJ/t) at a rate of 21 million tons a year or 140 million barrels a year.

    That’s only ~2% of our oil consumption, but its a good start. It can be doubled if you also convert waste pastics and other organics into fuel.

    Let’s leave the farmers (and the farmland) to produce food. Or to convert fossil Joules into edible Joules.

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  9. By rbm on March 4, 2011 at 6:47 pm

    Optimist:

    Let’s leave the farmers (and the farmland) to produce food. Or to convert fossil Joules into edible Joules

    Hmmm, I like it put that way.

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  10. By Kit P on March 4, 2011 at 7:44 pm

    “Let’s leave the farmers (and the farmland) to produce food.”

     

    Are farmers having trouble producing enough food? No of course not, they do have a problem with with saturated markets. Producing biofuels provides a new market. Corn ethanol has saturated the E10 market in just a few short years. That is what I call good start.

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  11. By rate-crimes on March 5, 2011 at 7:18 am

    “Are farmers having trouble producing enough food? No of course not,” – Kit P

    “UN special rapporteur on the right to food, Olivier de Schutter, says a combination of environmental degradation, urbanisation and large-scale land acquisitions by foreign investors for biofuels is squeezing land suitable for agriculture.”

    “According to the World Bank, more than one-third of large-scale land acquisitions are intended to produce agrofuels.”

    http://www.guardian.co.uk/envi…..ood-crisis

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  12. By Walt on March 5, 2011 at 11:21 am

    I just watched a very interesting video that defined a “root-striker”.  It gets at the heart of corruption.

    http://www.youtube.com/watch?v…..T6CXwqzucY

    “Harvard’s Thinks Big forum gave me 10 minutes to explain corruption.”

    If one is going to be able to save the biofuels movement from the corruption involved, we need to strike at the root.  If not, then let the valley boys and the wall street boys have their fun with your money and their policy.  The “smart money” is leaving America as we watch the dollar struggle like the Russian Ruble did in 1992-1994 when we could only use barter or USD to buy anything.  The fleesing of the taxpayer (through inflation and corruption) is in high gear now.  It is becoming very sad the more I read who is getting all this funding and closed door deals.

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  13. By Kit P on March 5, 2011 at 1:05 pm

    Thanks Rate Crimes for the link supporting what I said.

    “Although food stocks are generally good despite much of this year’s harvests being wiped out in Pakistan and Russia, sugar and rice remain at a record price.”

    Since I was talking about American farmers producing fuel for Americans, naturally Rate Crimes would wonder about Mozambique and Uganda a go looking in GB rag to be well informed. Lucky for them and the NYT the planet keeps producing floods and heatwaves so journalists can fear monger about fictional crisis. Contrary to the headline, there is no food crisis.

     

    Furthermore, Rate Crimes just trusted journalist rather than actually reading the UN report linked in the article.

    “For all these reasons, the Special Rapporteur has insisted that investments implying a shift in land rights should be treated with great caution.”

     

    It should surprise anyone that journalists at the Guardian and the UN Special Rapporteur got it wrong. Investment in food production by the world bank is be squeezed out and land rights might shift. Interesting stuff but the fact remains American farmers have saturated the market for food so producing energy is a new market.

    [link]      
  14. By Kit P on March 5, 2011 at 2:11 pm

    “It gets at the heart of corruption.”

     

    What corruption? I think maybe you should have some evidence before you accuse people of crimes.

     

    “If one is going to be able to save the biofuels movement from the corruption involved, we need to strike at the root.”

     

    Again what corruption are we talking about? The people who deliver corn ethanol to the market have have done a gone job while Walt has failed to deliver.

     

    I contribute to my company’s PAC. I want my voice to be heard too. I was watching a Senate hearing a while back. I heard an odd state choice of words by one of the Senators that reflected words that I heard in a marketing presentation by my company. I also know that some Senators and Congressmen were taken on a trip to tour some of the facilities my company owns. I also heard one of the Senators state what I call the Sierra Club positions. The point is that both sides got heard.

     

    I work for a big multinational company with high ethical standards. We create wealth and pay taxes because we produce things that are needed. We create jobs and we pay taxes. Sometimes government pools the taxes money we pay into the systems to pay for research that benefits my industry. Call it corruption, call it subsidy but first note the balance of payments.

     

    [link]      
  15. By rate-crimes on March 5, 2011 at 2:27 pm

    “Are farmers having trouble producing *enough food*?  No of course not, they do have a problem with with saturated markets. [emphasis mine]” – Kit P

    “Since I was talking about American farmers *producing fuel* for Americans, [emphasis mine]” – Kit P

    Perhaps, you should be a little more clear and a little less contradictory with your pronouncements.

    [link]      
  16. By rate-crimes on March 5, 2011 at 2:39 pm

    “a big multinational company with high ethical standards.” – Kit P

    Setting standards is easy.  What are they?  How are they communicated?  Are they being met or exceeded?  How are they reinforced?

    [link]      
  17. By rate-crimes on March 5, 2011 at 2:44 pm

    “go looking in GB rag to be well informed” – Kit P

     Kit P, it’s simply a game for us to see how many ‘Google moments’ it takes to find a hundred pages of articles that defeat your arguments.

    [link]      
  18. By Kit P on March 5, 2011 at 3:49 pm

    Modern farm methods and food distributions systems are indeed a marvel. We have never had a famine in the US.

    http://en.wikipedia.org/wiki/L…..of_famines

     

    [link]      
  19. By OxyMaven on March 6, 2011 at 8:29 am

    Thanks for putting Mr. Khosla’s comments into context with reality. He’s a lot like a politician and fact-checking is always in order. One thing I think DoE and USDA owe us all is some kind of transparency regarding this ‘Green Energy’ “investment” for biofuels. The Obama administration constantly stresses that much of energy spending is for “investments” to reduce our dependence on fossil fuels. I’m OK with that, and I especially think there is value in working to diversify our options in transportation fuels. But it’s reasonable to make sure the government’s investments are effective, especially in this budget climate. Given the horrible performance of the first round of DoE “Integrated Biorefineries” that were awarded in February 2007. As Khosla notes, of the 6 commercial scale grants only Range has built something (although it’s really not clear exactly what). None of the others has even broken ground for their projects. Industry cheerleaders blame all of that on the Wall Street meltdown. Of course that contributed – but it’s not the whole story, and that story should be fully told to see if there are lessons learned for the next round of goverment “investments”. I’m OK with thoughtful gov’t spending / investments, but like so many things, I’m not sure that gov’t performs this function better than private markets, and as taxpayers we need transparency / accountability to help everyone understand where we are at in the evolution of biofuels, and how far we have to go to begin to fulfill their promise. Maybe it’s just another 3-6 years like Khosla thought back in 2006, maybe it’s further away than that. . . .

    [link]      
  20. By Walt on March 8, 2011 at 8:40 am

    What if the technologies don’t work, can the business model still make money?  Through connecting money to others who don’t invent something, but only take money and spend it on research and development.

    The article below seems to suggest it is not the technology stupid…

    In my experience, I think they are right.  It really is not about developing the best technologies that work and are profitable…that is old school thinking that has no place now in cleantech in some circles.  I don’t know how many I’ve come across that don’t want anything to do with some technology that is working in the field, but only money for things that can get funded or financed as new research.  The government mentality is effecting even the best entrepreneurs and innovators now.  Sad.

    ———————————–

    http://www.cleantechblog.com/2…..ch+Blog%29

    Cleantech junkies like myself get seduced by all sorts of neat-o new
    technological ideas.  But, we need to bear in mind that technology
    invention is only a part of commercial success — and in fact, arguably
    not even the most important part.
    This perspective is brilliantly put forth in a brief essay called “A History Lesson for the Cleantech Revolution” by Andrew Hargadon, Senior Fellow of the Ewing Marion Kauffman Foundation and Professor of Entrepreneurship and Technology Management at the Graduate School of Management at the University of California Davis.

    It’s a short but great read, with three major points:

    1. Business models are more important than inventions.
    2. Innovation is about connecting, not inventing.
    3. Innovation is action:  learning-by-doing, learning by using. 

    Important for those of us in the cleantech community to keep reminding ourselves:  it’s not just the technologies, stupid!

    [link]      
  21. By Kit P on March 8, 2011 at 7:24 pm

    What a load of BS! Electric lights are better than gas lights. Cars are better than horse drawn carts. X-ray machines are better than guessing at what you can not see. Radios are better than signal lights. Semi-conductors are better than vacuum tubes (unless you are trying to make X-rays).

    No one needs to put ‘clean’ in front of better. Here ends the history lesson. The problem with ‘clean’ is that it is not better. No one would be making electricity with coal if ‘clean’ tech was better. I do not have a problem with government trying to pick winners. However there is not ‘clean’ tech revolution just some praddle at university lecture hauls.

    If they make electricity with dairy farm manure at UC Davis no doubt it will be done with a fuel cell. Over at the Vanderhoofenhoofen dairy farm an ICE will making the electricity.

    [link]      
  22. By rrapier on March 9, 2011 at 2:34 am

    Walt said:

    What if the technologies don’t work, can the business model still make money? 


     

    Well, no. Only by selling the ide to some other poor suckers can a business model whose technology doesn’t work make money. Even in the case you cite, you say at the end that it isn’t just the technology — not that the technology didn’t work.

    RR

    [link]      
  23. By Walt on March 9, 2011 at 9:29 am

    Robert Rapier said:

    Walt said:

    What if the technologies don’t work, can the business model still make money? 


     

    Well, no. Only by selling the ide to some other poor suckers can a business model whose technology doesn’t work make money. Even in the case you cite, you say at the end that it isn’t just the technology — not that the technology didn’t work.

    RR


     

    The part, “you say at the end that it isn’t just the technology” was part of the other gentlemen’s quote.  I’m not sure why two spaces were there sounding like it was my quote.

    The issue arises where some companies are making millions and millions of dollars getting government grants.  In some cases the technologies work, but in many cases they never get out of the research phase yet these companies are making millions.  I once met a company in Detroit that claimed to be a professional grant winner.  I was at an STTR/SBIR conference the government was sponsoring, and I met the person when I was getting a cup of coffee.  He was very pleasant, but after a short dialogue I found it interesting that there is no money from some to try to move the technology into development or commercialization.  It is just too costly, time consuming and requires too much uncertainity.  For his company, like many, they make millions off of knowing how to fund grants for technologies they will never commercialize.

    Certainly I’m not saying this is common, but the methodology to develop a profitable business on never taking a technology into the marketplace, or even spending millions knowing it may never work as claimed, seems to be an issue.  I know first hand how difficult it is to convince skeptics that a technology is worth investing money besides my own, and that it has global commercial potential, but this would be really very hard for me to do if I did not have the evidence and proof along the way.

    The above story at the coffee table, along with someone who was quoted on RR site that something like “How could Range Fuels spend hundreds of millions of dollars, and later come back saying ‘it did not work’?”  I think he asked where were all the stages of proof that the technology worked through multiple field demonstrations before spending $400 million (or whatever they spent).  I just am wondering about all the hundreds and hundreds of millions going from Washington and Silicon Valley into these companies…with such a low success ratio.  Maybe I am niave (please don’t everyone agree at once), but I am wondering if there (like Wall Street who is weekly being exposed) something to all this financial modeling and financial engineering that makes money without anything really going into the commercial marketplace.

    It is not something I’m dwelling on, but certainly, it has got my curiousity and my taxdollars…so I wanted to ask.

    [link]      
  24. By sameer-kulkarni on March 9, 2011 at 1:19 pm

    Robert Rapier said:

    I want Khosla to have projects that succeed, because the world needs solutions to our energy problems. But I want the public and the politicians to understand the risks going in. There were no caveats with Range Fuels, only hype, hype, hype. Had Khosla been more forthcoming about the risks (and more knowledgeable about prior work in this area) then there would be nothing to criticize. Tax dollars will continue to be spent on ventures that are not assured of success, but the risks need to be transparent so we can make informed decisions on whether the risks are acceptable.

    Footnote

    * The final tally on the Range Fuels project will likely never be known, unless it is revealed in court. But we do know that there was an initial investment that has never been publicly disclosed, there were the reports of an additional $158 million in VC money, $76 million of DOE money (of which Khosla said half was spent), an $80 million loan guarantee from the USDA, and $6 million from the state of Georgia. I think it is a safe assumption that over $200 million was spent and the result was a small amount of methanol. Per this recent article on the project, even though Range announced that they would make one batch of ethanol, that never took place.


     

    Creating hype shall sustain only in short term ‘make hay while the sun shines’. In long term the person loses his dignity. However there are three aspects concerning Range fuel’s process which leave me puzzled

    1. Chemical engineering, unlike nano-tech or stem cell science etc, is not an upcoming science but has matured over a 100 years. Such a failure could’ve been justified back then. Modern process tools like Computational Fluid Dynamics CFD could have determined whether the process is viable for a few thousand dollars before pumping in millions to construct a commercial facility. The promoters themselves being from a software background could have implemented this risk assessing step. Even the most systematically engineered process at a pilot scale could be scaled up successfully to a commercial scale.

    2. US has some of the leading schools of chemical engg MIT, Univ Wisconsin, Purdue to name a few. The investors could have hired the leading scientists to evaluate the merits of the process prior to endowing precious $$ for construction of the plant. 

    3. A situation where a software co goes bust the computers, servers, building could be devoted for developing different software/s with some minor retrofit. However it is extremely difficult for the chemical processing facility to be turned- around for synthesizing a dissimilar product unless the plant has been designed specifically for a multiproduct batch process (Range’s process being a continuous one for Methnol & Ethanol).

    If investors want to make quick buck they can easily trade in stocks/gambling with careful analysis & make a killing. What’s the point of investing in a new & a critical project which has a very few chances of success. 

    [link]      
  25. By sameer-kulkarni on March 9, 2011 at 1:45 pm

    And what about backup or contingency plan if the process doesn’t get going through. Take for eg. Solazyme http://biofuelsdigest.com/bdig…..care-line/. if algae don’t produce diesel fuel economically

    [link]      
  26. By moiety on March 9, 2011 at 5:21 pm

    SAM said:

     

    Creating hype shall sustain only in short term ‘make hay while the sun shines’. In long term the person loses his dignity. However there are three aspects concerning Range fuel’s process which leave me puzzled

    1. Chemical engineering, unlike nano-tech or stem cell science etc, is not an upcoming science but has matured over a 100 years. Such a failure could’ve been justified back then. Modern process tools like Computational Fluid Dynamics CFD could have determined whether the process is viable for a few thousand dollars before pumping in millions to construct a commercial facility. The promoters themselves being from a software background could have implemented this risk assessing step. Even the most systematically engineered process at a pilot scale could be scaled up successfully to a commercial scale.

    2. US has some of the leading schools of chemical engg MIT, Univ Wisconsin, Purdue to name a few. The investors could have hired the leading scientists to evaluate the merits of the process prior to endowing precious $$ for construction of the plant. 

    3. A situation where a software co goes bust the computers, servers, building could be devoted for developing different software/s with some minor retrofit. However it is extremely difficult for the chemical processing facility to be turned- around for synthesizing a dissimilar product unless the plant has been designed specifically for a multiproduct batch process (Range’s process being a continuous one for Methnol & Ethanol).


     

    That is all fine except that it is not reality. You can never guarantee success with process simulations. Indeed process simulations most likely played an important part in range’s strategy.

    Even with extensive modelling, a full picture of the process is never reached. A good overview is possible but you have to build and pilot to gain real experience and details. Indeed in many if not all process simulations, control strategies are rarely considered. Further they are usually not based on direct data from a real process so are unable to deal with unexpected results. In fact I will go so far to say that computer simulation as you describes are only useful during the early stages of research when the process has not proceeded further than the lab. Lab results and pilot results are not trivial to scale up so they only give a limited amount of confidence.

    Further if collaboration had occurred with universities, it is likely that much sensitiveve information may have come free. Universities want to publish in open journals which can release information that a company may not want.

    What has seemed to have happen here (in the best case) is that there were some scientists or engineers over estimated the potential for whatever their process could do. Funnily enough these assertions would have been based on process simulation based on their ”pilot” results. The funding agency bought into this probably as they did not have the expertise to assess the process properly. IMO it is clear that neither the Range bouys or the agency who granted this had enough experience in the pitfalls of the process and hype was left to run wild.

     

    Even the most systematically engineered process at a pilot scale could be scaled up successfully to a commercial scale.

    On that point is is always the unforeseen things that will cause issues. A ppm level of a catalyst poison may appear when you go to larger scale or hot spots can develop in your process or your condensers are suddenly less efficient etc. It is never so easy despite what many people seem to think.

     

    [link]      
  27. By sameer-kulkarni on March 10, 2011 at 1:18 pm

    Moiety said:

     

    That is all fine except that it is not reality. You can never guarantee success with process simulations. Indeed process simulations most likely played an important part in range’s strategy.

    Hi Moiety,

    Scale-Up, as I understand, involves formulating process models which depict the performance of the chemical process at a large mfg scale. These models are conceived on the basis of a collection of variables like Pressure, temp, flow etc., However many variables are assumed to make the model simple. Undertaking Lab-scale trials results in a very preliminary structure of model which has to be evaluated at a pilot scale. But before investing money for constructing a pilot plant it is much cheaper to test the model in a process simulator. So it depends more upon the technocrat (with his experience) who has developed the model & the way he performs the simulations in order to guarantee the success. By performing numerous iterations an explicit model can be developed with the aid of process simulators.

     

    Even with extensive modelling, a full picture of the process is never reached. A good overview is possible but you have to build and pilot to gain real experience and details. Indeed in many if not all process simulations, control strategies are rarely considered. Further they are usually not based on direct data from a real process so are unable to deal with unexpected results. In fact I will go so far to say that computer simulation as you describes are only useful during the early stages of research when the process has not proceeded further than the lab. Lab results and pilot results are not trivial to scale up so they only give a limited amount of confidence.

    But of course even range fuels have operated a pilot plant http://www.rangefuels.com/our-…..plant.html. I don’t always agree that models or simulations are often successful but the essential question is to what extent do they work or to put it down simply at what efficiency? – 30%, 50% 80% or 90%. Evaluating lab models at pilot plant answers this question & brings out further amendments in the model. So if it yields satisfactory results we are ready to scale. Having said that, even so at a fully scaled-up commercial process there are going to be bottlenecks & further optimization would result in desired process yields. However in Range’s case the plant designed for producing 100 MGY ethanol could produce only 4 MGY methanol (0% Eff). It seems that something has gone terribly wrong somewhere. Everybody sincerely hopes that they resolve this issue asap.

    Further if collaboration had occurred with universities, it is likely that much sensitiveve information may have come free. Universities want to publish in open journals which can release information that a company may not want.

    Simply Sign an NDA then.

    What has seemed to have happen here (in the best case) is that there were some scientists or engineers over estimated the potential for whatever their process could do. Funnily enough these assertions would have been based on process simulation based on their ”pilot” results. The funding agency bought into this probably as they did not have the expertise to assess the process properly. IMO it is clear that neither the Range bouys or the agency who granted this had enough experience in the pitfalls of the process and hype was left to run wild.

    Even the most systematically engineered process at a pilot scale could be scaled up successfully to a commercial scale.
     

    On that point is is always the unforeseen things that will cause issues. A ppm level of a catalyst poison may appear when you go to larger scale or hot spots can develop in your process or your condensers are suddenly less efficient etc. It is never so easy despite what many people seem to think.

    Indeed these are not easy that is why the processes are designed for higher outputs operating at lesser efficiencies for e.g. construct 125 MGY commercial plant that produces 100 MGY products at 80% Eff.

     

    [link]      
  28. By Walt on March 11, 2011 at 9:14 am

    SAM said:

    But of course even range fuels have operated a pilot plant http://www.rangefuels.com/our-…..plant.html. I don’t always agree that models or simulations are often successful but the essential question is to what extent do they work or to put it down simply at what efficiency? – 30%, 50% 80% or 90%. Evaluating lab models at pilot plant answers this question & brings out further amendments in the model. So if it yields satisfactory results we are ready to scale.


     

    This is my experience too.  Unless there is some real uncertainities, I find it almost unbelievable that Range Fuels spent that sort of money to end up with 0% efficiency and loss of millions of dollars.  Something makes no sense to me…as the process models could not be that far off unless someone used assumptions to raise money only, and spend it in ways that might have profited only a small group of people involved.  I just don’t understand.

    [link]      
  29. By carbonbridge on March 12, 2011 at 2:27 am

    Robert Rapier said:

    The Art of Spin

    • RR:  Per this recent article on the project, even though Range announced that they would make one batch of ethanol, that never took place.  There were no caveats with Range Fuels, only hype, hype, hype.  Had Khosla been more forthcoming about the risks (and more knowledgeable about prior work in this area) then there would be nothing to criticize.  Footnote: * The final tally on the Range Fuels project will likely never be known, unless it is revealed in court.

    • And from Russ:  I strongly suspect that the road to hell is paved almost entirely with good intentions.

    • And from Optimist:  Of course, a good start would be to use no land at all: start with the 94 million tons of renewables that Americans send to the landfill every year.  Let’s leave the farmers (and the farmland) to produce food.  Or to convert fossil Joules into edible Joules.

    • And from OxyMaven:  Thanks for putting Mr. Khosla’s comments into context with reality.  He’s a lot like a politician and fact-checking is always in order.

    • And from Walt:  Something makes no sense to me…as the process models could not be that far off unless someone used assumptions to raise money only, and spend it in ways that might have profited only a small group of people involved.  I just don’t understand.

    • And from Sam (India):  Simply Sign an NDA then.


     

    RR:  Again, good reporting and most of us who read your blog essays realize that you earlier thought that you were done with your own comments regarding this crashing issue regarding Range Fuels.  Yet things continued to heat up over at the Wall Street Journal and other notable publications. 

    Both V. Khosla’s and Range employee’s mistakes here are hurting more than just Vinod and his closest investors who choose to let him spend their investment dollars his own way.  The fallout from this Range Fiasco is widespread across the biofuels landscape and my guess is that it is far from being over.  And the interesting part is that despite the thoroughness of your essay reporting herein, not half of the real underlying story has even been revealed.  Previously in your blogs I’ve suggested to those keenly interested — to locate and read at least 21 patents filed by Range to get a much better drift of what they were attempting here.  It wasn’t and isn’t ‘ligno-cellulosic ethanol’ — the buzzwords used by Range to collect DOE grant money and USDA loan guarantee funds.

    And from Sam (India):  Simply Sign an NDA then.

    Five years ago last month I began educating Vinod about the gasification of solids (a clean thermal process vs: inefficient batch fermentation of corn kernels) where a carbon is a carbon is a carbon atom as a basic building block.  Then add a magic Oxygen atom derived from water and float-on-water bio-OILS become biodegradable, water soluble, oil soluble, coal soluble fuel ALCOHOLS.

    Specifically, I educated him about producing a stronger, lower cost, 24×7 continuous (not batch), formula-patented version of C1-C10 higher mixed alcohols tradenamed as ENVIROLENE® which averages 3.9 carbons per mole and features all sorts of interesting new combustion and blending synergies in addition to featuring 20% more BTU’s and 30 more octane points than corn ethanol.  This new, lower cost, biodegradable and scaleable GTL oxycarbon biofuel had been through rigorous combustion tests and had also achieved EPA registration and approvals for commercialization to all 50 states.  What it needed was a strategic financial partner to scale it, demonstrate it and begin further producing and globally licensing it.

    Mr. Khosla was interested.  “Send me a business plan by PowerPoint format” was his initial reply.  I responded by first sending him a mutual NDA.  Again, he replied by text email, requesting that I “send him a business plan in PowerPoint format.”  Again I re-sent him an NDA and told him that several “different sized” financial business plans existed, — yet none of these documents would be sent out as a PowerPoint slide presentation by email to start circulating globally at the push of a button.  Such business plan documents would be overnighted to him in bound, paper format with the word “Confidential” printed in red ink on the bottom of each page.

    Apparently Vinod doesn’t involve himself in signing NDA’s – perhaps he’s been burned before?  Thus, he did not receive my firm’s detailed business plan(s) without first completing a standard and mutual NDA confidentiality agreement.

    Instead, Vinod and his group went elsewhere in pursuing this particular stronger BTU, continuous thermal GTL production, new biofuel. 

    Quite amazingly, just 30 days later, he had located and purchased controlling equity interest in Mr. Bud Klepper from Denver who had obtained a patent to a tweak on a particular gasifier which apparently years later has problems scaling in Sooperton, Georgia.  This same gentleman had struggled to catalytically produce higher mixed alcohols as a GTL back-end yet was not there commercially as defined by reaction kinetics and critical fuel formula outputs.  Didn’t matter.  One of the very next hype stories publicly released was how Khosla and his associates had crowded around the desk of this precision pipefitter in an industrial area of north Denver, then purchased him lock stock and barrel for $3M. 

    Just recently, RR has re-described the misappropriate language used to illustrate what this Klepper gasifier device actually looked like.  To me, this language indicated that Vinod himself really didn’t have a technical clue here yet he was obviously very excited.  And it didn’t take very much of his money to obtain controlling interest in Mr. Klepper, his gasifier patent and the presumed new biofuels product offtake.  Next, let’s hire a former Apple Computer salesman and begin the public PR campaign…and let’s coin the new biofuel product output as “ligno-cellulosic ethanol.”

    I note here that there was never any background EVER publicly released on how Mr. Klepper had come to acquire some limited knowledge of this particular GTL catalytic process to produce higher mixed alcohols in a basic methanol GTL plant format.  Nor was there any public release on what lawsuit(s) Mr. Klepper was previously involved in with other sources [not me] who had provided him with this limited GTL back-end catalytic knowledge.  And there has been only scant public evidence of newer, fresher lawsuits filed against this K/K pair for apparent broken license deals made to another man in Utah long before Khosla ever met Klepper and formed Kergy, Inc., which soon became Range Fuels.

    A month later, new fresh management hires at Range were attempting to pull my firm’s Chief Catalytic Chemist (source of the original catalyst for this higher mixed alcohol GTL process) away from our firm.  So much for those non-accepted NDA’s which would have provided Vinod with the specific knowledge base which he and Range needed and desired — let alone [potential] partnership access to formula-usage patents covering this particular higher mixed alcohol GTL fuel output.  I had to intervene and direct Range’s new Biz Development man to back off and leave one of our firm’s scientists alone.  Same scientist also co-signed formula-usage patents with me and others at SACA.  He wasn’t interested in changing horses in mid-stream…

    Since then, I’ve quietly watched Range and assembled detailed files of all data references which were made public over the next handful of years regarding something dubbed “ligno-cellulosic ethanol.”  During this same time frame, I often wondered what might have progressed had Vinod accepted these initial confidentiality agreements and therein become properly educated?  Perhaps his newest biofuels venture wouldn’t have been named Range Fuels and with ‘correct knowledge and secret catalytic sauce and patent protection,’ such a ‘public new biofuel turn on’ in Georgia or some other location might have gone much differently.

    However, this little smidgeon of personal background now publicly released by me here is just a spec of biofuels development history.  What remains of Range Fuels, — will it resurface and somehow re-direct and solve internal technical problems with new money?  I have no idea…   Did Range produce one batch of ‘ligno-cellulosic ethanol?’  Again, I have no idea…  Only time will tell.  I have never interviewed any of the 150 staff people originally hired by Range in order to learn any private details.  What I know about the Fiasco meltdown has come from public information released by Range itself or from reporters doing their own investigations.  Matters of prior or existing lawsuits are available via public records searches more easily accessible by attorneys.

    And perhaps the ‘other half of this story’ regarding this high profile investor’s recent public failure using public taxpayer monies via grants and loan guarantees will ALSO work its way out and into the public domain…

    Personally, I find it interesting to note that Vinod seems to have chosen to go into other biofuel directions involving genetically-modified biobugs and batch fermentation processes, even those which turn certain bugs loose on intermediate streams of CO & H2 syngas to create C2 ethanol.  Best of luck – while 69¢ of every fuel dollar Americans currently spend continues going overseas on a one-way ride for imported crude OIL.

    Mark C. Radosevich 

    Co-Founder, Chief Scientist & Inventor

    Standard Alcohol Company of America, Inc.

    Durango and Denver, Colorado

    (mark  at  carbonbridge  dot  net)

    p.s.  This article in THE ECONOMIST just broke 3-11-11.  Reading through it made me decide to post my personal thoughts above.  Mr. Khosla is indeed a different breed of investment cat – he takes different risks and now shares those risks with others who risk his judgement with their private money via two Khosla Hedge Funds.  Yet I agree with still others that perhaps Vinod has a better feeling for computer chips or software than he does at interpreting the basic earth chemistry of isolating and recombining Hydrogen and Carbon atoms from wastes with Oxygen derived from H2O to form biodegradable Oxycarbon fuel-grade alcohols.  Vinod:  Ya gotta be able to discern the difference here between (i) butanol and (n) butanol – both fermented with different biobugs from corn kernel substrates.  Apparently DuPont doesn’t understand this.  So I guess that many others can’t accurately discern this either.   :-(   –M.R.

    http://www.economist.com/node/…..p;fsrc=rss

    [link]      
  30. By Walt on March 12, 2011 at 10:45 am

    CarbonBridge said:

    p.s.  This article in THE ECONOMIST just broke 3-11-11.  Reading through it made me decide to post my personal thoughts above.  Mr. Khosla is indeed a different breed of investment cat – he takes different risks and now shares those risks with others who risk his judgement with their private money via two Khosla Hedge Funds.  Yet I agree with still others that perhaps Vinod has a better feeling for computer chips or software than he does at interpreting the basic earth chemistry of isolating and recombining Hydrogen and Carbon atoms from wastes with Oxygen derived from H2O to form biodegradable Oxycarbon fuel-grade alcohols.  Vinod:  Ya gotta be able to discern the difference here between (i) butanol and (n) butanol – both fermented with different biobugs from corn kernel substrates.  Apparently DuPont doesn’t understand this.  So I guess that many others can’t accurately discern this either.   :-(   –M.R.

    http://www.economist.com/node/…..p;fsrc=rss


     

    Amazing story Mark…it had me gripped to the computer screen!  And I thought I could relax on Saturday and let me mind wind down.  Not!

    The final two paragraphs of the economist article make me wonder the same thing as the author…plus more after your commentary:

     

    Facing both industry scepticism and the ire of environmentalists, Mr
    Khosla decided to engage Tony Blair, a former British prime minister,
    who joined Khosla Ventures last year as a senior adviser. The idea is
    that Mr Blair can provide a more diplomatic public face for the company,
    and he also brings global clout.

    Mr Khosla, who clearly likes to see himself as a green iconoclast and
    financial maverick, is either very foolish or very clever. But at this
    point it is difficult to say which. “I try a lot of new things,” he
    says. “It’s fun to play the game and fun to play the odds—and long odds
    win a lot of fun.” Mr Khosla’s cold-blooded view of the economics of
    environmentalism has certainly ruffled some feathers. But if he turns
    out to be right, his quest for clean-tech black swans could be exactly
    what the planet needs.

     

    Sometimes I wonder the same thing about how much fun it would be to play with all that money…and they are spending a LOT of money…so I guess it must be a lot of fun indeed.

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  31. By rrapier on March 12, 2011 at 11:46 am

    CarbonBridge said:

    p.s.  This article in THE ECONOMIST just broke 3-11-11.  Reading through it made me decide to post my personal thoughts above.  Mr. Khosla is indeed a different breed of investment cat – he takes different risks and now shares those risks with others who risk his judgement with their private money via two Khosla Hedge Funds.  Yet I agree with still others that perhaps Vinod has a better feeling for computer chips or software than he does at interpreting the basic earth chemistry of isolating and recombining Hydrogen and Carbon atoms from wastes with Oxygen derived from H2O to form biodegradable Oxycarbon fuel-grade alcohols.  Vinod:  Ya gotta be able to discern the difference here between (i) butanol and (n) butanol – both fermented with different biobugs from corn kernel substrates.  Apparently DuPont doesn’t understand this.  So I guess that many others can’t accurately discern this either.   :-(   –M.R.

    http://www.economist.com/node/…..p;fsrc=rss


     

    Good find Mark; lots of good nuggets in there. Here is one:

    Another start-up, KiOR, is hoping to go one step further, converting cellulosic biomass (such as waste wood and leaves) into a crude oil replacement called Re-Crude. Fans of cellulosic biofuels hope that they can produce ethanol without competing with food crops for agricultural land. According to Mr Khosla, KiOR can produce Re-Crude in America today for less than $90 a barrel.

    This is the first time I have seen costs of KiOR’s oil discussed. So let’s review what we have here. Khosla says “less than $90.” In Khosla-speak, based on past experiences that means anywhere from $120 to $180 a barrel. But even if it was $90, it is pyrolysis oil. When pyrolysis oil is converted to hydrocarbons about 50% is lost to carbon dioxide and water. Another large fraction is lost to very light hydrocarbons, about 30% ends up as gasoline fractions, and under 10% ends up as diesel fractions. So the economics on KiOR based on Khosla’s comment probably don’t look too hot.

    RR

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  32. By sameer-kulkarni on March 13, 2011 at 11:09 am

    Walt said:

    …..Something makes no sense to me…as the process models could not be that far off unless someone used assumptions to raise money only, and spend it in ways that might have profited only a small group of people involved….


     

    I don’t think anybody would want to fashion such a scam at a mammoth scale out in the open. The issue is of overconfidence as Moitey rightly said

    What has seemed to have happen here (in the best case) is that there were some scientists or engineers over estimated the potential for whatever their process could do’.

    Add to that they have hurried off to construct a commercial scale plant without evaluating their process at a semi-commercial scale.

     

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  33. By rrapier on March 13, 2011 at 2:31 pm

    SAM said:

    Walt said:

    …..Something makes no sense to me…as the process models could not be that far off unless someone used assumptions to raise money only, and spend it in ways that might have profited only a small group of people involved….


     

    I don’t think anybody would want to fashion such a scam at a mammoth scale out in the open. The issue is of overconfidence as Moitey rightly said


     

    I think a lot of it — and I am seeing this is a case I am looking at right now — is overconfidence about models. People build a model and some other people believe that this represents reality, not that it ATTEMPTS to simulate reality. A perfect example is building a model that simulates syngas production. It probably does not simulate tar production, so the model says smooth sailing while reality says tar in the system. That is why it is important to use models as guidelines, but then to prove those models out by constructing and operating actual systems at various scales.

    RR

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  34. By moiety on March 13, 2011 at 6:04 pm

    Firstly Range will almost definitely have performed process simulations before they started moving up to pilot scale. In fact I believe if these simulations were not presented, they would not have been given funding. These simulations are an easy and clear way to show what the potentials your project has while giving it an aura of legitimacy. That is not the problem nor is the use models or simulations (indeed every time you design a reactor you are essentially modeling or simulating). The problem is that too much confidence is given to the results these simulators bring. Many times too much confidence is placed on simulations.

    Process modeling and simulation tools do not provide the ability to generate, deploy and run executable processes. They therefore only target business analysts and enforces them not to consider any technical details. They model processes to meet certain business objectives and requirements, abstractfrom any technical consideration. Most process modeling tool vendors would argue that this is a better methodology to focus on the business independently

    from the technical constraints first, and later have other people in the IT to figure out what to do with it.

    http://onbpms.com/2007/07/18/b…..emulation/

    Simulations remove the technical competence element far too easily. Consider if I run a model from behind my computer. I then direct an operator to do some work and then report back to me. If I am not adding the technical requirements in my requests, I can very easily not specify what to look out for or notice ominous data. The big advantage of a simulation or model is it allows me to cut out work in future projects and enables me to take legitimate and correct short cut decisions. However they need experience fromm an actual plant or process. Sometimes that experience can be replaced by literature but in the business of scale up, this is far too risky and requires engineers and operators familiar with the process.

    If I speculate on what I read from Range I feel that their tests were not rigorous enough. They say from their website that they have logged 000′s of hours on their pilot using 30 different feedstock’s. Let’s consider say 10000 hours. That is 333 hours per feedstock all things being equal. Using good scientific practice would have dictated changing the active materials (e.g. catalysts) and cleaning the system between each feedstock. Thus a long term lifespan of the key components appears may not have been fully assessed. As pointed out in the corrosion article, it takes times for failures to develop and I certainly have firsthand experience of that.

    In a project after proving that our invention as shown by simulations based on laboratory data could be interesting, it was decided to progress to pilot scale. The testing on the laboratory scale was not stopped while the transition started. After nearly a year of continuous lab testing, problems started appearing which ultimately stopped the scale-up. Now we consider Range and see that a continuous test was probably in the region of 000’s hours. The data that was put into simulations mean that those said simulations are only valid for that time period until testing breaks this boundary. However often from my experience this period is overextended. If nothing bad is seen often nothing bad is expected. Another point that has already been mentioned is the difference from the lab to larger scale. Detained control and limitations of larger scale equipment are not considered if the process simulators are plugged in blindly.

    A risk is always contained in the scale up process. The primary goal of build different scales is to reduce that risk from unacceptable to acceptable. Simulations can and do help this process but they should not take away from firstly the risk that still exists and secondly the need for understanding the limitations inherent in simulation. The right people are needed to scale up the lab and simulation results.

     

    [link]      
  35. By Walt on March 14, 2011 at 9:57 am

    Robert Rapier said:

     

    I think a lot of it — and I am seeing this is a case I am looking at right now — is overconfidence about models. People build a model and some other people believe that this represents reality, not that it ATTEMPTS to simulate reality. A perfect example is building a model that simulates syngas production. It probably does not simulate tar production, so the model says smooth sailing while reality says tar in the system. That is why it is important to use models as guidelines, but then to prove those models out by constructing and operating actual systems at various scales.

    RR


     

    I’m still concerned.  I get push back from engineers all the time about technology scaling and also the use of model to simulate validated production processing.  The Range Fuels situation just makes no sense to me.  How could the engineers defy their training and ignore proving at different scales beyond the pilot plant and spend $200-400 million at the corporate level?  Did they all believe the models worked perfectly…even their engineers?

    My experience in my own development from the ground up is that investors and VC’s (especially) like massive deals.  Where I might say I can prove the next scale for $1 million they will argue it will never get funding.  We need a minimum $10 million dollar deal, and from what I see in some circles like when Great Point Energy got their third round, they needed $100 million.  Velocys has over $150 million in just R&D in their microchannel reactors, and likely another $50-100 million for their small demo unit in Brazil.  I really think deals need to be large, exciting and involve multiple rounds, high valuations promoted by the VC evangelist leader.  You cannot talk to a VC without them saying that their greatest value will be to make this technology known in the market, and attract attention from investors, top talent, other portfolio companies they support, etc.  Of course, the technology is crucial…nobody does not want to really understand the technology…they want to fund the story, the global picture, the top down financial models and if you have good research funded by government or other industry sources…all the better.

    If you don’t want $10 to $100 million (and loose control), forget it.  Scaling the technology at $1 million or $2 million under all sorts of conditions makes no sense.  It is a $50-500 million dollar story that brings in real excitement.  Models definitely help, but I think there is more to the game.

     

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  36. By carbonbridge on March 14, 2011 at 11:39 am

    Walt said:

    If you don’t want $10 to $100 million (and loose control), forget it. 

    Scaling the technology at $1 million or $2 million under all sorts of

    conditions makes no sense.  It is a $50-500 million dollar story that

    brings in real excitement.

    Walt:  You are beginning to hit that nail squarely upon its head while true understanding of technologies whether simple or compex oftentimes still goes lacking.  Like I’ve said here before, the basic defination of “biofuels” should be a fuel which “biodegrades” and doesn’t float on this planet’s water bodies when accidently spilled – just as happens with Crude OIL. 

    I’ve read some very interesting commentaries this past weekend with certain pundits calling for a global replacement for oil.  What they are looking for won’t be another form of oil – derived from either plant or animal substrates.  Yet same people writing these editorials really have no clue as to what they wish to see.

    Back to adding that missing (and magic) Oxygen atom derived from H2O which changes the polarity of a complex hydrocarbon molecule and converts it into a water soluble [biodegradable] oxycarbon alcohol molecule.  Same missing oxygen component doesn’t add one BTU however, – it only serves to ‘fan the flames’ and get all or nearly all of the liquid fuel’s carbon components to fully combust.  That is what isn’t happening with refined petroleum fuels and their emissions then becomes another oil spill in the sky which we see and breathe as brown urban smog which now billows between continents.

    One interview I heard via internet radio last night went into some detail regarding new oil leases recently made in Iraq.  Same commentator was talking about this news NOT being shared over in the western world (more media censorship) yet that this ‘oil dominion control’ from bombed-out Iraq was public news in that same Middle Eastern world now revolting against its dictators.  Anybody know more about these new Iraqi oil leases?  Last week I heard it was China moving in.  The radio program last night identified the biggest player as Exxon.

    –Mark

    [link]      
  37. By Walt on March 14, 2011 at 12:51 pm

    CarbonBridge said:

    I’ve read some very interesting commentaries this past weekend with certain pundits calling for a global replacement for oil.  What they are looking for won’t be another form of oil – derived from either plant or animal substrates.  Yet same people writing these editorials really have no clue as to what they wish to see.

    Back to adding that missing (and magic) Oxygen atom derived from H2O which changes the polarity of a complex hydrocarbon molecule and converts it into a water soluble [biodegradable] oxycarbon alcohol molecule.  Same missing oxygen component doesn’t add one BTU however, – it only serves to ‘fan the flames’ and get all or nearly all of the liquid fuel’s carbon components to fully combust.  That is what isn’t happening with refined petroleum fuels and their emissions then becomes another oil spill in the sky which we see and breathe as brown urban smog which now billows between continents.

    –Mark


     

    Mark,

    We have started to put together an MSDS sheet on our production of methanol.  The lab reports give us the information we need now to produce and send samples to customers.  We have finally found a massive demand for oil & gas hydrate inhibition for the shale gas play.  They use methanol for these gas processing plants (where they need to control pressure drops), and pipelines due to the water saturated in the gas.  We will not be able to compete with the Chinese methanol prices which are coming into America currently (we tried to get interest from a fuel cell company who is importing Chinese methanol to avoid the price spikes by Methanex and others who control the market).  The Chinese are able to sell into America at a loss cheap alcohols now to grab market share, but I hope over the next years we will be on their tail domestically.

    Methanol and mixed alcohols will face all the negativity of MTBE here in America over polluting ground water.  We are working on trying to separate methanol from MTBE but it will not be an easy argument.  I recently just got an email about how methanol is a killer and I’m not entirely sure where it came from, but one of my Advisors responded who has spent a lifetime working on methanol based fertilizers and other uses:

    I agree with Kavanaugh and it may be possible to obtain background literature from him on all points.
    MeOH is less toxic to humans because it may turn you blind from drinking it, but it won’t kill you like
    drinking the same amount of gasoline. It all comes down to a measure of degree. Oxygen will kill you if
    you breath the pure gas, but you don’t see people running down the hallways screaming of oxygen
    toxicity. Methanol is made by plants–it is wood alcohol for Evan’s sake–and volatilized from plants all
    day long everywhere in the world, so it is environmentally ubiquitous. There is nothing dangerous to you
    and me from environmental spills. Methanol is digested so quickly by bacteria that most remains of
    accidental spills cannot even be detected by the time the EPA detectors get there.
    Try to relax, because GasTechno is positioned perfectly in time and space.

    In the future, I think if we can break the MTBE connection, methanol and mixed alcohols will be “one solution” for a possible fuel…not just a base chemical or hydrate inhibitor.  That will not happen for many years I’m afraid…there are too many engineers linking MTBE and methanol.  The argument was made with the lawsuit by Methanex vs. the ADM/California claims, but it did not make any headlines.

     

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  38. By rrapier on March 14, 2011 at 2:24 pm

    Walt said:

    The Range Fuels situation just makes no sense to me.  How could the engineers defy their training and ignore proving at different scales beyond the pilot plant and spend $200-400 million at the corporate level?  Did they all believe the models worked perfectly…even their engineers?
     


     

    In talking to many people close to the situation, they were being driven
    by people whose experiences in the computer industry shaped their
    beliefs. There, you throw money at a problem and you get fantastic new
    breakthroughs. Problems today are solved (because they haven’t been
    problems for decades, which is what has been ignored in the case of
    Range Fuels). So it is simply the attitude that Silicon Valley know-how
    can solve these small technical problems as they have done with so many
    in the computer industry, so there really isn’t much risk in pushing
    full steam ahead.

    By the way, this was just published in the Wall Street Journal. As I said, Khosla is engaging in spin over the Cello situation, and this would seem to confirm that:

    As one of the attorneys representing Parsons & Whittemore
    Enterprises Corp. in its federal court lawsuits against Cello Energy and
    others, I want to correct the record in the opening paragraph of Vinod
    Khosla’s letter of Feb. 22 in response to your editorial “The Range Fuels Fiasco
    (Feb. 10). Mr. Khosla’s statement that “a paper company called P&W
    was the principal backer of Cello” has no factual basis. P&W at the
    time owned the Alabama River Pulp Mill in Claiborne, Ala., which was the
    largest pulp manufacturer in North America. P&W’s payment of $2.5
    million to Cello for an option to purchase a larger interest upon proof
    of the success of the technology, when compared to a Khosla
    Ventures-related entity’s initial investment of $12.5 million with a
    substantial further commitment, hardly made P&W Cello’s “principal
    backer.”

    John N. Leach

    Mobile, Ala.

    [link]      
  39. By Walt on March 14, 2011 at 3:01 pm

    Robert Rapier said:

    Walt said:

    The Range Fuels situation just makes no sense to me.  How could the engineers defy their training and ignore proving at different scales beyond the pilot plant and spend $200-400 million at the corporate level?  Did they all believe the models worked perfectly…even their engineers?


     

    In talking to many people close to the situation, they were being driven

    by people whose experiences in the computer industry shaped their

    beliefs. There, you throw money at a problem and you get fantastic new

    breakthroughs. Problems today are solved (because they haven’t been

    problems for decades, which is what has been ignored in the case of

    Range Fuels). So it is simply the attitude that Silicon Valley know-how

    can solve these small technical problems as they have done with so many

    in the computer industry, so there really isn’t much risk in pushing

    full steam ahead.

    By the way, this was just published in the Wall Street Journal. As I said, Khosla is engaging in spin over the Cello situation, and this would seem to confirm that:

    As one of the attorneys representing Parsons & Whittemore

    Enterprises Corp. in its federal court lawsuits against Cello Energy and

    others, I want to correct the record in the opening paragraph of Vinod

    Khosla’s letter of Feb. 22 in response to your editorial “The Range Fuels Fiasco

    (Feb. 10). Mr. Khosla’s statement that “a paper company called P&W

    was the principal backer of Cello” has no factual basis. P&W at the

    time owned the Alabama River Pulp Mill in Claiborne, Ala., which was the

    largest pulp manufacturer in North America. P&W’s payment of $2.5

    million to Cello for an option to purchase a larger interest upon proof

    of the success of the technology, when compared to a Khosla

    Ventures-related entity’s initial investment of $12.5 million with a

    substantial further commitment, hardly made P&W Cello’s “principal

    backer.”

    John N. Leach

    Mobile, Ala.


     

    Wow, this is a serious statement by John Leach.  It makes me wonder what is really going on with Khosla’s representations.

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  40. By paul-n on March 14, 2011 at 11:30 pm

    I find Walt comments quite interesting – the possibility that the Vc’s desires for “big” deals lead to leapfrogging of an intermediate stage pilot plant.  If your goal is to make a big spalsh, attract lots of capital, and then cash out, this seems like a real possibility.  Of course, VC’s from Silicon Valley, who virtually created the pump and dump in the dot com bubble, would never do that, now would they?

    As an alternative, if this was being developed in house by an oil company, I’ll bet they would have done a smaller scale pilot first.  I’m sure Shell did lots of small scale prep to prove out their technology before building Bintulu, because they were seeking real results, not publicity and capital – a completely different approach.

    Perhaps that is part of the reason why oil companies are among the world;s biggest, and VC’s are searching for the next “deal”, and still haven;t produced any commercial quantity biofuels 

    [link]      
  41. By Walt on March 15, 2011 at 5:35 am

    Paul N said:

    Perhaps that is part of the reason why oil companies are among the world;s biggest, and VC’s are searching for the next “deal”, and still haven;t produced any commercial quantity biofuels 


     

    One of the things we are made aware of when VC’s explain their model is that they need to get the best “deal” since historically only 2-3 out of 10 investments produce a successful exit for their money.  With this track record, they argue they would like to have control to insure they are protected from possible mismanagement or a deal going sour.  It would make sense to me if they actual reversed this trend and were successful in 9 out of 10 investments, rather than 2-3 out of 10.  The worse part in my experience is how self confident is the typical VC investor in their skills to manage other people’s money, and knock it out of the park every 2 out of 10 times.  On average, I think the last I saw was that they made about 10-11% return for their institutional investors on 10 year money commitments.  I’m sure current statistics are out there somewhere, but I suspect the average return must be lower for their investments in clean tech and biofuels companies.

     

    This is why it makes me wonder where on earth all this money goes once invested…  Look at Bloom Energy…like $500 million to build the bloom box and its manufacturing plant.  Range Fuels…I just cannot comprehend investing $200-400 million and then folding the company arguing the models were wrong.  I know there are success stories out there, and clearly these guys have the gifts to make some amazing looking financial engineered models, but where are the good old fashion boot strappers and companies that just innovate without government funding and millions upon millions of money nobody will ever trace once spent.  It is like…”Listen, we put 2-3 out of 10 into the stars man…back off, so we loose 7-8 of our investments…big deal.  Without us the world of innovation would be nowhere, and clean tech industry would be only a dream for thousands of companies.  As far as where the money went, that is our business and our model.  Keep quiet, or be black listed from our industry.  This works for people who work the plan.”  I understand Washington politics is no different in many ways…so let’s just hope those averages increase with our taxpayer money.

     

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  42. By paul-n on March 15, 2011 at 2:31 pm

    On average, I think the last I saw was that they made about 10-11% return for their institutional investors on 10 year money commitments.

    I’m sure the government, the ultimate “institutional investor” has ha d a return of much less than this from the biofuel/clean tech VC’s.

    Perhaps what government should do is not invest in the projects, but invest in, and demand a seat on the board of, the VC;’s themselves – then they would know where the money is going.  I wonder how Khosla et al would react to that?

     

    We have to keep in mid the ultimate goal for the VC’s is simply to make a return on their investment  - whether or not any biofuels (or anything else) is actually produced.  In that regard their track record is abysmal.  How can we even call it a “clean tech” industry, when, mostly, it is not producing anything?  It is a clean tech investment industry, which is like investing in junior gold explorers operating in third world countries, and about as risky.

     

    Look at Bloom Energy…like $500 million to build the bloom box and its manufacturing plant.

    You have to wonder how much creative supply goes on – where they buy the hammer from a friend for $300 instead of $30 at Home Depot.  Bloombox  is terrible – $500m to build these devices that convert natural gas to electricity with an efficiency no better than CCGT, and at a capital cost 10x greater – just what has been achieved?

     

    The problem with VC’s s leveraging government (or other) money is that they are then playing with other peoples money – they are not very concerned about losing it.  

    Keep quiet, or be black listed from our industry.

    if  a clean tech company, like GasTechno, had been black listed by the VC’s, that might just be a signal to invest in it!  I’m sure the oil companies don’t give a hoot what the VC’s say.  BP has just spent $600m buying into Brazilian cane ethanol – something I’m sure the VC’s wouldn;t touch.

    It’s up to them if they want to make bets with a 2 out of 10 success rate – our governments should not be so hasty to fund these bets.  

    [link]      
  43. By carbonbridge on March 15, 2011 at 4:32 pm

    Walt said:

    Methanol and mixed alcohols will face all the negativity of MTBE here in America over polluting ground water.  We are working on trying to separate methanol from MTBE but it will not be an easy argument.  I recently just got an email about how methanol is a killer and I’m not entirely sure where it came from, but one of my Advisors responded who has spent a lifetime working on methanol based fertilizers and other uses:  Methanol and mixed alcohols will face all the negativity of MTBE here in America over polluting ground water…There is nothing dangerous to you and me from environmental spills. Methanol is digested so quickly by bacteria that most remains of accidental spills cannot even be detected by the time the EPA detectors get there…In the future, I think if we can break the MTBE connection, methanol and mixed alcohols will be “one solution” for a possible fuel…not just a base chemical or hydrate inhibitor.  That will not happen for many years I’m afraid…there are too many engineers linking MTBE and methanol.

    ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

    Walt:  In past blog discussions on this same RR column, we have gone through the elements of easy biodegradability of fuel alcohols including C1 methanol, the world’s largest chemical by volume. We’ve also talked about methanol being the neat, substitute fuel of choice by the Indy 500 Racing Circuit for 37 years until C1 methanol was politically replaced by C2 fermented corn ethanol about four years ago.

    The simple arithmetic here goes back to normal, simple, linear molecular chains vs: much more complex and branched molecules.  When (normal-n) alcohols are accidently spilled and then diluted into water, bacteria, phytoplankton, single-celled organisms, living green plants and trees all will consume these dilute (n) variety alcohols as a free lunch.  The OH group on an alcohol molecule combines with the one, stray, extra 3rd Hydrogen ion on the first carbon atom consumed in these chains to become H2O or water.  Presto!!!  Then the bug or tree moves on to the next dilute (n) alcohol molecule to eat for lunch.  Pretty simple and this is the very basis for what I and others describe as basic BIODEGRABILITY. 

    This is not so when hydrocarbon oils or ground coals phase-separate from water.  Liquid hydrocarbons persist in the environment and do not easily biodegrade.  Just like last summer’s Gulf Gusher!  This has been the chief problem with fossil fuels and their uncombusted emissions streams since the beginning of using fossils for cheap and available combustion energy…

    MTBE is gone now in the USA although it continues to be used in some foreign markets.  Methyl Tertiary Butyl Ether is a branched, stacked molecule.  It is more complex than is (n) ethanol.  While all ethers, like alcohols, contain an Oxygen atom (formerly allowing MTBE to substitute for agri-derived C2 corn ethanol under Clean Air mandates) ethers are the branched “iso” types of more complex molecules which is the primary mechanical difference here.  This planet’s micro-organisms, simple bacteria and even tree roots cannot break this stacked (triple strength) carbon bond in the more complex ether molecule. Thus MTBE and other branched molecules like (iso) Butanol won’t easily biodegrade.  These compounds will dilute into water – but microscopic bugs and green plants can’t eat them and pop off that H2O water molecule at the end of their more complex molecular chain…

    Please interpret what RR has previously talked about on some of his threads concerning the difference between normal (n) butanol and iso (i) butanol now being commercially scaled up by DuPont. Combustion of these two different C4 butanol alcohols (one normal or linear – the other iso-branched or stacked) is different – just as is their abililty to break down and become bug and plant food when accidently spilled into the environment.

    The fear mongers and disinformation specialists will be back talking about methanol poisoning.  I’ve commented before about ethanol poisoning as well.  And you yourself have provided key posts on this blog citing 30% volume use of MeOH today in China which appears to be working very well for motorists who seem to like it…  Yet most alley drunks realize that IF they consume too much C2 ethyl alcohol in one session – it can permanently turn out their lights.  This typically happens to a few college freshman every year as they’ve escaped their parents homes for their first stint away in college dormatories.

    I close by restating that all of the synthetic alcohols contained within E4™ ENVIROLENE® higher mixed alcohols are of the normal (n) linear configuration.  Bugs and trees seem to like em’ just fine when properly diluted.  Yet these synthetic fuel alcohols, just like gasoline, are not for human consumption.  We’ll leave em’ to the bugs and plant kingdom to enjoy as easily digestible food sources when accidently spilled.

    Good luck in moving your Gas Techno “direct oxidation” demos further into the daylight.

    –Mark

    [link]      
  44. By Walt on March 15, 2011 at 4:52 pm

    CarbonBridge said:

    Please interpret what RR has previously talked about on some of his threads concerning the difference between normal (n) butanol and iso (i) butanol now being commercially scaled up by DuPont.  Combustion of these two different C4 butanol alcohols (one normal or linear – the other iso-branched or stacked) is different – just as is their abililty to break down and become bug and plant food when accidently spilled into the environment.

    The fear mongers and disinformation specialists will be back talking about methanol poisoning.  I’ve commented before about ethanol poisoning as well.  Most alley drunks realize that IF they consume too much ethyl alcohol in one session – it can permanently turn out their lights.  This typically happens to a few college freshman every year as they’ve escaped their parents homes for their first stint away in college dormatories.

    I close by restating that all of the synthetic alcohols contained within E4™ ENVIROLENE® higher mixed alcohols are of the normal (n) linear configuration.  Bugs and trees seem to like em’ just fine when properly diluted.  Yet these synthetic fuel alcohols, just like gasoline, are not for human consumption.  We’ll leave em’ to the bugs and plant kingdom to enjoy as easily digestible food sources.

    Good luck in moving your Gas Techno “direct oxidation” demos further into the daylight.

    –Mark


     

    Yes, it has been difficult to weed through all the misinformation.  I hope to be sending samples this week to begin testing on various plants, flowers and vegtables in Arizona to see how much growth we get from the raw liquids, as well as that mixed into proprietary methyl glycosides and alkyl glycosides.  We will then spray the plants with gasoline, diesel and other “fuels” that never make the press as destroying the environment.  The studies have been done, but I want to get the pictures so at least I will be able to show that the alcohols in certain proprietary volumes make these plants grow as sources of sugars, and are not as evil as people claim in some circles.  We will post the studies as well proving the research over many, many years including the most current.  Again, we will warn people not to drink methanol like they should be warned not to drink gasoline and diesel fuel as well…unless of course gasoline and diesel fuel can get FDA approval…which would make it fine to take with certain side effects! :)

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  45. By carbonbridge on March 15, 2011 at 5:43 pm

    Walt said:

    Yes, it has been difficult to weed through all the misinformation.  I hope to be sending samples this week to begin testing on various plants, flowers and vegtables in Arizona to see how much growth we get from the raw liquids, as well as that mixed into proprietary methyl glycosides and alkyl glycosides.I hope to be sending samples this week to begin testing on various plants, flowers and vegtables in Arizona to see how much growth we get from the raw liquids, as well as that mixed into proprietary methyl glycosides and alkyl glycosides.

    Walt:  These next experiments of yours are very likely to succeed quite well.  Once, back about 1987-8, I visited an agricultural experimental station operating on the Navajo Nation’s giant industrialized NAPI farm just south of Farmington, New Mexico.  There, scientists grew two batchs of corn which were both irrigated by sprinklers.  One plot of corn had just water, the other had a quantity of pure C1 methanol added to the same irrigation water.  I don’t remember the MeOH volumes used, but the quantity of dilute MeOH actually rained down upon the corn plants in this trial was almost trace volume.  What was interesting was to view these two corn plots.  The dilute methanol acted as an efficient fertilizer (free lunch for the plants) and this small stand of corn was about 30% larger than the comparison plot watered without the dilute simple alcohol as extra food.  I have NO idea what ever became of this specific research, I’ve NEVER come across anything like this in the greater worlds of agri-science since.  So I suspect that your demos will ‘re-prove’ the ability of simple, normal alcohols to fertilize and strengthen plants.  Again, good luck!!!

    –Mark

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  46. By paul-n on March 15, 2011 at 6:59 pm

    Mark/Walt,

    The real benefit of adding methanol to the plants is that it provides food for all the bigs in the soil, not the plant itself.  This particularly applies to nitrogen fixers, that need a carbon source as food.  With legumes, they pay the N fixers with sugary secretions and acetylene (!)from their roots, for normal plants, including corn, they don’t provide this, so if the Nfixers can’t get food from them they shut up shop.  

     

    Methanol is used as an additive in some sewage treatment systems to aid bacteria that convert ammonium to nitrate, allowing removal of the nitrate under anaerobic conditions – there is never any methanol left in the final effluent.  It is called “biological nutrient removal, or BNR – it is certainly not called methanol nutrient removal, but the methanol (or another volatile fatty acid) is the key additive to make it happen.  In soil, the methanol aids the bugs to make the same conversion, allowing for removal by the corn plant

    In addition to methanol, good plant responses are also achieved by spraying out dilute solutions of blackstrap molassess – provides food for the soil bugs and also chelating agents, which helps nutrient availability.

    Anything that helps build up the soil humus, fungi and bacteria, helps plant growth.   Modern farming methods, particularly tillage, over-aerates and heats the soils, resulting in the bacteria eating the humus and then you just have near sterile “dirt” – hence the need for large amounts of artificial fertilisers.  No-till farming has improved this situation somewhat.

    If you spray the methanol just onto the foliage, and not the soil, I would not expect much of a response, but I’ll be interested to see your results.

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  47. By Walt on March 15, 2011 at 10:40 pm

    Paul N said:

    Mark/Walt,

    The real benefit of adding methanol to the plants is that it provides food for all the bigs in the soil, not the plant itself.  This particularly applies to nitrogen fixers, that need a carbon source as food.  With legumes, they pay the N fixers with sugary secretions and acetylene (!)from their roots, for normal plants, including corn, they don’t provide this, so if the Nfixers can’t get food from them they shut up shop.  

     


     

    Paul, actually in my discussions with Dr. Nonomura he said that it can be applied both on the plant/surface or in the soil.  It depends on sunlight and the proper mixture.  They have shown this in spraying golf courses where the grass grows substantially and to the point where they don’t want to spend the money to pay someone to cut the lawn so often.  It is great to make it grow, but not so good on costs of maintenance.  It is best to focus on flowers, vegtables and other foodstuffs which can be grown as a controlled hydroponic supply. Although there is a growing list of articles, here was something that gives methanol a good name.

    http://www.indonesianfarmers.c…..n-air.html

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  48. By paul-n on March 16, 2011 at 1:33 pm

    Walt – good find.  I stand corrected -seems that both bugs and plants can beneficially use methanol.  Given that (normal) methanol is made from NG, it would be interesting to then compare the growth increase from NG-methanol with NG-Nitrogen.

    I had read somewhere (can;t find it now) an account of someone who applied pyrolysis condensate (from charcoal making) to soil, and saw a dramatic response.  They put it down to all the pyroligneous acids (which would include a small amount of methanol) feeding soil bugs.

    In any case, methanol in the environment is not really a contaminant – it is beneficial.

    It is also naturally occurring, in small concentrations…

     

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  49. By Walt on March 16, 2011 at 10:49 pm

    Paul N said:

    Walt – good find.  I stand corrected -seems that both bugs and plants can beneficially use methanol.  Given that (normal) methanol is made from NG, it would be interesting to then compare the growth increase from NG-methanol with NG-Nitrogen.

    I had read somewhere (can;t find it now) an account of someone who applied pyrolysis condensate (from charcoal making) to soil, and saw a dramatic response.  They put it down to all the pyroligneous acids (which would include a small amount of methanol) feeding soil bugs.

    In any case, methanol in the environment is not really a contaminant – it is beneficial.

    It is also naturally occurring, in small concentrations…

     


     

    It is occuring, in nature, in small concentrations…yes, this is important.  There are some really important developments made in this area, and some really new publications that were released last year and some more coming this year.  What is evil politically speaking among certain groups could be a rallying cry for those looking for real solutions to food, fuels and an improved quality of life.  We are not going to get any support from the Methanol Institute.  They are controlled by a few companies, like the ethanol lobby, and you will never see our technology ever again mentioned on their site.  They are given just enough support to allow Methanex to move them where they want to fit their desire for market share…of course, this is my opinion and my experience.  I know it sounds like crying and whining that they would not stand in support of new methanol technologies, but lobbies operate with an agenda that often times we just don’t really understand as the public.

    We are making very good progress with a mere fraction of the money pouring into the ethanol and butanol competition, and obviously get zero publicity beyond a local detroit editor who pushes the limit on all sorts of new innovations.  I know the chance to break into the fuels market is not ever going to happen as EPA will block it due to emissions arguments, and I’m still uncertain (which is why I like following this block) on the problems with alcohols in the infrustructure and the engines.  Those are two hurdles which RR has rightly addressed that need attention if these alcohols are ever going to get into the fuel sector.  I hope his raising these issues get people to address it now…not after all the problems later are announced as a means to shut down any progress.

    The fertilizer market and hydrate inhibitors are markets that could add to the “control chemical” sector by a few importers.  I’ll be here to fight to open these markets.  I’ve been arguing for a new Methanol lobby for over a year…at some point I think that will happen…but not yet.  I’ve sent emails to multiple blogs and clean fuels critics that have raised their voices here on this blog, but they have not yet given us any space.  It seems ethanol and butanol will still be the preferred fuels no matter the cost of production or limitation.  Thank you for bringing to attention the possible benefits of methanol as a fertilizer.  Methanol as a fuel additive is growing worldwide…as I see the emails in my box…but here I think our only real chance is waste water treatment and fertilizers to break into the market…beyond gas pipeline inhibition.

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  50. By Walt on March 18, 2011 at 9:52 am

    This was an interesting brief statement…especially after Mark’s comments about the business plan that all VC’s want to have without signing an NDA.

    ——————————————–
    How to know when a venture capitalist may really be your friend
    On March 15, 2011, in Blog, by Neal Dikeman

    Live from the Cleantech Forum, the largest investor conference for energy and environmental technologies, our take on how to tell if the venture capital investor you are talking to really may be your friend. Only partly tongue in cheek.

    1) when you ask how things are going, he moans about all of his portfolio companies who are suffering; and doesn’t tell how all of them are getting traction.

    2) when you ask whether they’re actually investing this year, he tells you no, their fund is full but he refers you to an investor who has just raised a fund (and doesn’t tell you, “oh yes; we’ve still got one or two deals left to do and we’re exploring raising our next fund” – VC code for I’m out of money.

    3) when you ask for advice, he actually tells you the terms of the last couple of deals they’ve done.

    4) in your due diligence, he shows you the business plan of one of his portfolio companies who competes with you – instead of handing yours to them.

    5) he starts offering to meet at YOUR office and then picks up the tab for lunch.

    6) he gets your kid an internship at one of his companies.

    And, the final way you know the VC you are talking to may really be your friend:

    7) he hands you his resume.
    http://www.cleantechblog.com/2…..ch+Blog%29

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  51. By rrapier on March 18, 2011 at 2:18 pm

    Paul N said:

    In any case, methanol in the environment is not really a contaminant – it is beneficial.


     

    I had to correct Rufus on that point once. I was pointing out that methanol has a lot of advantages if we went to that as a fuel, and his response was “Do you know what methanol will do when it leaches into the environment like MTBE?” I said sure, I know what will happen. Bugs will break it down it very quickly.

    Speaking of Rufus, I wonder what’s happened to him. Not commenting on the corrosion posts means he has either been reassigned, is incapacitated, or on a very long vacation with no Internet.

    RR

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  52. By paul-n on March 18, 2011 at 4:29 pm

    I had to admit I was surprised when I saw methanol being used in sewage treatment – but very efficient for biological conversion of ammonium to nitrate.  In aerobic soil/groundwater its half life is about 7 days , and it is often used as an aid to remediation in soil/groundwater of much more intractable organic contaminants.

     

    Rufus did say before Xmas he was going to take a “holiday”, but that could mean anything.  Still, his commenting on ethanol threads was almost as reliable as the sun rising – I actually miss the bugger.

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