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By Robert Rapier on Mar 21, 2014 with 27 responses

KiOR: The Fat Lady Warms Up Her Voice

Predictions

In January of this year, as I do each year, I made several predictions for 2014. One was that natural gas prices would be higher. That prediction is looking pretty solid, with natural gas inventories this week dropping below 1 trillion cubic feet for the first time since 2003 — 49% below the level of one year ago.  As I have argued in recent articles, this is likely to mean a year of higher natural gas prices than what we have become accustomed to over the past couple of years.

Among the other predictions I made for 2014 was “KiOR will declare bankruptcy in 2014.” While it is still a bit early to write KiOR’s (NASDAQ: KIOR) obituary, the patient is looking pretty unhealthy. I have been getting a lot of emails asking for comment on their recently released annual report, and I would have had something posted already, but I was traveling during the first half of the week. So let’s dissect what has happened.

KiOR Overview

First, a quick review.

KIOR is one of three advanced biofuel companies that venture capitalist Vinod Khosla took public in 2011. The other two were Amyris (Nasdaq: AMRS) and Gevo (Nasdaq: GEVO).

In a nutshell, KiOR’s process is to rapidly heat wood chips and break them down to form a bio-oil which is essentially pyrolysis oil (not “just like crude oil” which has been a frequent misrepresentation) that is then upgraded into finished products like diesel and gasoline. The process itself has been around for a while, and similar processes have been carried out in many labs and at smaller scale by a number of companies. So it is a real, working process.

The problem has always been the cost. As I explained in Why Biofuels Tend to be Costly, when you have to use human labor and energy inputs to replicate something nature did for free, costs are going to be an issue. Further, yields from this process tend to be low because a lot of the pyrolysis oil is converted to water, carbon dioxide, and light gases during the upgrading process. Add in the fact that the process requires a lot of natural gas — and as I have been saying the outlook for natural gas prices is high for the next year — and KiOR faces some tremendous challenges.

No Downside?

Here is what KiOR’s stock chart looks like since Khosla took the company public in 2011:

KiOR Chart

The share price is down 96 percent since its IPO, and 96 percent since I wrote Why I Didn’t Short KiOR — an article that argued that the company was overvalued by the market (but also explaining my philosophy not to short stocks).

Many of KiOR’s backers oversold the technology, and continued to do so even as it became clear that they were facing serious challenges. KiOR was the company that Vinod Khosla highlighted in the recent 60 Minutes piece on cleantech; the one that featured this exchange:

Vinod Khosla: Nature takes a million years to produce our crude oil. KiOR can produce it in seconds. And we take that, add this magic catalyst-

Lesley Stahl: This is the secret sauce?

Vinod Khosla: Yeah.

Lesley Stahl: You throw that on top of the chips?

Vinod Khosla: And then, out comes something that looks that looks just like crude oil. It smells like crude, it works like crude except it’s 100 percent renewable. Then it’s distilled onsite into…

Lesley Stahl: Clean gasoline?

Vinod Khosla: Clean green gasoline.

Lesley Stahl: This goes right into the tank, right? You don’t have to build a new infrastructure?

Vinod Khosla: Absolutely.

Lesley Stahl: You make it sound almost – sorry – too good to be true. There must be a downside.

Vinod Khosla: There is no downside.

If you have read or heard Vinod Khosla’s claims before, you probably know he exaggerates and misrepresents things. There are three examples in the above exchange. By calling the catalyst “magic”, he is really trying to stress that they can achieve the impossible. But KiOR’s catalyst is now known to have had some big problems. Many catalysts have a problem with deactivation or poisoning, and KiOR’s process produces lots of odds and ends that would be challenging for any catalyst.

Also, as noted above, what they produce isn’t like crude oil. To turn it into something more like crude oil requires more expensive downstream processing. But the biggest misrepresentation is Khosla’s last statement: “There is no downside.” Of course there is a downside. The high cost of the process is a huge downside. Khosla is projecting a future in which they scale up the process, gain efficiencies, and produce something that is cost competitive. He is once more making the mistake of believing that Moore’s Law works on biofuels, and this mindset continues to be the biggest reason that he consistently over-promises and under-delivers.

The Dreaded Annual Report

That brings us to KiOR’s annual earnings release this week. There were signs that something was amiss with KiOR when they postponed the earnings announcement that was scheduled for March 13th. I guessed that they had really bad news to share, but there was also the possibility that they had found more money, or maybe were going to take the company private.

Most of the recent news over the company has been bad. They under-delivered their own projected volumes all last year. Board member Condoleezza Rice resigned in December 2013. Also in December, KiOR’s CFO left abruptly with no advance notice, and has not been replaced. Major KiOR shareholder Stuart Peterson has been dumping shares for months, at a huge loss. KiOR CEO Fred Cannon sold nearly 71,000 shares on the day before earnings were announced. He unloaded his shares at $1.10 on March 17th. But the delayed announcement saved him some money, because on March 18th when earnings were actually announced the share price fell by 40%. And in fact, several KiOR executives were dumping shares just ahead of the earnings announcement.

KiOR’s annual report was full of bad news, but I wasn’t too surprised at what they reported. For KiOR investors and employees, it’s close to a worst case scenario. Among other things the company said that the SEC served them a subpoena seeking documents about the progress at their Columbus, Miss., facility and the timing of projected biofuel production levels. An SEC investigation is certainly unwelcome news for the company.

Other important items from their 10-K filing:

  • They need more money to keep operating.
  • They reported an impairment of $185.0 million for their Columbus facility because it was not generating positive cash flows and they were unable to get the facility to “steady state” operations.
  • They have a commitment from Vinod Khosla for up to $25 million, but can borrow no more than $5 million a month, and it is subject to achievement of performance milestones.
  • A 2nd tranche of financing from Khosla and Bill Gates is unlikely to be received, because it requires KiOR to raise $400 million, and that seems highly unlikely.

The bottom line is that they are out of money, which translated into the annual report as “We have substantial doubts about our ability to continue.” They made this comment in the report 9 times, as if to emphasize that they really, really mean it. They indicated that they will need to secure additional funding by April 1st or they will be forced to default on their debt.

Lifeline

But KiOR isn’t dead, because I don’t think Khosla is yet ready to throw in the towel. There were many worrisome statements in the annual report, but the following commentary leads me to believe they are going to be funded for at least a few more months:

“Other than the Commitment from Mr. Khosla to invest in us a cash amount of up to an aggregate of $25,000,000 in available funds in a number of monthly borrowings of no more than $5,000,000 per month, we have no other near-term sources of financing. Because the Commitment is subject to the negotiation and execution of definitive financing documents and the achievement of performance milestones, we cannot be certain as to the ultimate timing or terms of this investment. There is no assurance that we will be able to successfully secure such additional financing and if we are unable to do so, we do not expect to find other sources of near term financing.”

So once more Khosla may step forward with a lifeline. Of course his credibility and a lot of his cash are also on the line, so I believe his strategy is to keep them afloat for a few more months as he tries to reel in another investor. Ultimately I think the company will end up in bankruptcy regardless, but as I said when I made the prediction, Khosla can keep writing checks to keep them afloat.

I think they will get the additional $25 million commitment from him finalized, but then by about August if Khosla hasn’t convinced someone to step up with a more substantial investment they will be out of options. I can’t see him funding this perpetually without a clear indication that they are on a path to profitability, and it’s going to take a much larger investment before they can move in that direction. My guess would be that by the fourth quarter he will swallow his pride and let them go under.

Who is Accountable?

While we won’t be doing an autopsy on what went wrong until/unless they actually do fold, at this point it is clear that once more Vinod Khosla has overpromised and under-delivered. I know that he thinks he needs to do a lot of cheerleading, but when people assign credibility to you and you make claims that fail to materialize, you have some accountability to those people. In this case, KiOR didn’t accept federal funding (beyond a per gallon credit for biofuel actually produced), but they did accept a $75 million loan from the state of Mississippi that will likely not be recovered, and investors have lost billions. Those investors include Khosla himself, as well as Alberta Investment Management, which invests on behalf of the Alberta government.

Vinod Khosla likes to say that failure is a part of venture capital investing, and that is true, but at some point you have to have some success. This isn’t like making a number of small bets on two guys working on an Internet startup in a garage. Each Range Fuels or KiOR-sized bet comes at a cost of hundreds of millions of dollars. And Khosla continues to bat zero on his “big biofuel bet.”

Conclusions

To be clear, I am not celebrating KiOR’s troubles. Predicting something and then reporting on it doesn’t mean I am celebrating it. It would have been nice to see them succeed. As I have indicated before, I have friends who work at KiOR, and I don’t want to see them lose their jobs. I also strongly support renewable energy, and when a company like KiOR fails it damages the credibility of the sector.

KiOR is in serious financial trouble, but I think Khosla will keep them solvent for a few months while he works the phone to get other investors involved. I would like to see them work through their problems, but I think the chasm is too deep. They require a very large investment just to demonstrate claims that were supposed to have already been demonstrated, and there are no assurances even then that they will achieve their targets. Bill Gates had invested some money with them by buying shares at $2.32 each (now worth $0.65 — a loss of 72%), and had committed to a second round of funding contingent upon enough other people climbing on board that the company raised $400 million. They admit that this is highly unlikely, and therefore the 2nd tranche from Bill Gates isn’t expected to be received.

So my prediction remains that I believe they will go bankrupt, but I don’t think it’s going to happen until later in the year.

Link to Original Article: KiOR: The Fat Lady Warms Up Her Voice

By Robert Rapier. You can find me on TwitterLinkedIn, or Facebook.

  1. By Tom G. on March 21, 2014 at 6:28 pm

    I’m with you Robert. I also support renewable energy and certainly the biofuel sector could someday be the way forward. But for now; I hope KiOR can stay afloat and we can somehow save these good paying jobs.

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  2. By CarbonBridge on March 21, 2014 at 7:26 pm

    KiOR seems to be missing the boat technologically. Using pine chips as carbon feedstock is a great and wonderful idea! Yet what is the best technological method in order to profitably process pine chips?

    True “ligno-cellulosic” [buzzword here] processes would be to cook the pine chips with very expensive, extra acid enzymes/water and then toss in bread baker’s yeast and ferment the sugars which were produced into low volumes of extra expensive ethanol. This is a 7-day batch process in comparison to a 4-day batch process when producing ethanol from corn kernels instead of pine chips. And Mother Nature’s own biobugs invade this longer, 7-day cooking cycle and typically spoil every third batch.

    And the pine chip leftovers? They still are full of carbon building blocks and are most often landfilled. Now startup another batch.

    So instead, KiOR decides to “PYROLIZE” the wood chips. Pyrolysis is only the beginnings of an incomplete, true gasification cycle. It produces pyrolysis oils as RR has mentioned, plus lots of other cats and dogs including biochar instead of inert obsidian glassy slags [from non-carbon elements remaining] which have resale value and don’t leach poisons into groundwater if landfilled.

    Instead, COMPLETE GASIFICATION should be employed to cleanly disintegrate the total volume of these pine chips into mid-stream CO & H2 synthesis gas. The least value-add to continue with would be to spark this syngas and co-generate a little bit of steam electricity which doesn’t pencil in the USA and only slightly does in Europe where rates paid for co-gen electric are far higher.

    The only way to make a good profit from this intermediate syngas (whether it is gasified from pine chips, garbage, sludge, ground tires or even coal) is to convert it into one form or another of liquid fuels. And I’ll stop here as this would open up Pandora’s Box regarding a whole new host of possibilities and methods…

    In the present scenario, KiOR’s pyrolysis oil offtake needs to be further refined at a Crude Oil Refinery [another industry, partner & processing step here] where its volumes decline as some of this oil is converted into water, carbon dioxide, and light gases during the upgrading, refining process as RR has noted.

    The end liquid products produced in low volume only by KiOR really shouldn’t be classified as “biofuels” because they don’t biodegrade, they float on water instead — as all hydrocarbon oils do… Now, these expensive, finished new fuels are simply a new class of hydrocarbon oils because they did NOT originate from crude oil stocks but from pine chips. And this pine chip feedstock is classified as RENEWABLE and qualifies for generous RFS Fed Gov’t tax subsidies of $1.01 per gallon. Sometimes, additional 10¢ or 20¢ state tax credits are added in as well. Thus the entire target of KiOR’s technology and conversion process becomes the RFS subsidy to possibly make something pencil.

    The problem which I view from arm’s length perspective is that Mr. Khosla needs a better spotter. His last one left his firm years ago to take a certain alt fuel process over to China and attempt its commercialization there initially… Thus Vinod continues to toss his [and other investor's] money at nearly anything which might someday become a substitute for traditional, fossilized, crude petroleum oil distillation. And he personally doesn’t understand the intrinsic chemistry processes dovetailing to the needed bottom line profitability index in order to duplicate, enlarge and decentralize such new alternative fuel systems abroad. I view this particular investor trying almost EVERYTHING in the hopes that just one of these biofuel systems will someday take off.

    If he understood more about the intrinsics of basic chemistry processes in the beginning, he would likely not invest his money in most of what he’s attempted thus far in this sector. His publicized losses continue to hurt the BioFuels sector.

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    • By Optimist on March 26, 2014 at 3:46 pm

      COMPLETE GASIFICATION, eh? RR, do you have an opinion?
      Where should the syngas go? Methanol? Syncrude?
      CB, you aware of hydrothermal “wet” gasification?
      Biofuel, IMHO, refers to the origin, in this case biomass means biofuel. KiOR should qualify. In an ideal world I think we’d want to convert waste organics, from/at the landfill into hydrocarbons (for high energy density, familiarity, and many other benefits) that can be blended into the existing fuel supply at any conbenient ratio. No blend wall!

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  3. By Curtis on March 22, 2014 at 1:27 am

    Oh rats. So if KiOR goes by the boards, I guess it will be tough for Khosla to get Richard Branson to throw even a few sheckles towards the LanzaTech, Freedom Pines adventure?

    Come to think of it, somebody better produce something and in quanity somewhere. Branson doesn’t have a history of being a romantic all that much in love with the Black Swann theory. This could be a real rodeo before it’s over.

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  4. By ben on March 22, 2014 at 10:26 am

    CarbonBridge’s long-winded explanation seems on point. The constraints of biomass appear to offer rather modest grist for the mill. Chasing government subsidies and supply quota mandates ultimately makes for malinvestment (one need not embrace von Mises or Hayek of the Austrian School to arrive at such understanding) and necessarily leads to commercial failures.

    Transportation fuels is on the cusp of some sea-changes in the way supply and demand converge at a new intersection in the modern marketplace. The nexus of this evolution will not be centered in biofuels regardless of political machinations in Washington between USDA, DOE and others who aim to feather very old nests.
    The laws of physics long ago conspired against the efficacy of displacing fossil fuels with bio-based feedstocks. That’s all RR has been honestly sharing (in writing)
    for the past decade. So news that an otherwise smart fellow like Khosla might
    miss the cue isn’t probably so much about not understanding physics as it is a willingness to resist the Siren Song drifting out across the Potomac to those jazzy conference rooms of Silicon Valley and the board rooms along SF Bay.

    Yeah, “pump and dump” was/is pretty irresistible, so long as the clownish salesmen in our nation’s capital keep up their performances of the soft-shoe and hat routine. At some point folks may actually dare say: “Hmm, this routine seems to have grown pretty stale.” When they do, Rapier is still going to be offering a healthy
    dose of common sense.

    At the risk of sounding a bit cavalier:

    “Never argue with stupid people, they will drag you down to their level and then beat you with experience.” – Mark Twain

    Ben

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  5. By Forrest on March 22, 2014 at 3:50 pm

    I think were a tad pessimistic in dismissing the entire bio fuel sector. Corn, beet, sugar cane, and sorghum already successful and produce a much needed economy boost. Sure RFS will probably be maintained to ensure market, but the fuel supply chain is gradually improving. Cellulosic ethanol process and cost accounting appear to make economic sense. Ethanol in general has several advantages over gasoline. Crude oil is always within the exploration and development cycle with unknown success. This is costly and becoming more costly and riskier adventure. The public is becoming less sympathetic per the high risk effort to environment and safety mostly occurring within far off inhospitable regions of earth. On geopolitical hostile territory or environmental sensitive lands. Governments are demanding evermore revenue from their countries natural resources per the ancient earth processes of oil generation. These countries know the dwindling oil supply and what maximum return for their countries geological production. Crude oil must be transported from distant and changing production sites to far away refineries. Refineries are prohibitively expensive and as a result few in number. Most countries can’t afford them and must ship their crude for processing from far away ports then ship finished product back. Refineries are so expensive and limited it presents a critical vulnerability to countries liability. Terrorist can do much harm to country by attacking these. The refineries and crude oil exploration maximize giant international corporations control of energy markets. That’s not a good thing per modern crony capitalism politics. In general crude oil supplies will become more expensive.

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    • By Optimist on March 26, 2014 at 3:31 pm

      Food-to-fuel is a crime against humanity. Period.
      America is becoming energy independent, no thanks to ethanol, thanks to fracking.

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  6. By ben on March 22, 2014 at 4:39 pm

    Forrest continues to beat his drum. EPA’s mandates for RFS-compliant cellulosic production would be laughable, if they weren’t so darn embrarrassing. Anyone watching this fiasco very long might go so far as to consider the management in Havana a model of efficiency!

    Just a modest acknowledgment that if it takes an awful lot of energy to produce
    not a whole lot more energy, well, the arrangement isn’t very promising. I’m too intimate with the genesis of ethanol producer development via the Clean Air Amendments (1990) to view things apart from the fact that without the oxygenate content requirement and the RFS blender mandate, the US biofuels industry wouldn’t be much more than Cargill and ADM peddling their off-season, surplus feedstocks.

    I very much warm to the idea of domestic energy supplies and the security that might accompany such progress. I just don’t believe that it’s either wise or sustainable to achieve this with Washington’s pixie dust. One thing has become clear, Corn Belt agribusiness interests remain intent on preserving a generous
    slice of the national treasury with the Midwestern farmer as their symbolic champion–or whipping boy.

    Requirements for the transportation industry are undergoing major change and domestic demand will continue to shift out of oil and into alternatives. Among the alternatives, ethanol will not feature prominently. In fact, we can assume the production volume goal of the current RFS will never be met notwithstanding blend wall constraints. This is a byproduct of economics and that is something that the Congress doesn’t control despite occasional representations to the contrary.

    Perhaps it’s time to find another drum for the beating. The current drumbeat sounds increasingly hollow and no incremental increases in materials handling logistics or production economies of scale will change the underlying limitations of those pesky hydrogen and oxygen molecules. I reminded of the young kid interacting with Shoeless Joe Jackson on the eve of the infamous Black Sox scandal: “Say it isn’t so, Joe!” I’m afraid it is, kid.

    Ben

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    • By Forrest on March 22, 2014 at 6:25 pm

      Ethanol does have excellent oxygenate abilities, one of the good attributes of the fuel. Gone are the days of MTBE poison derived from methanol and tetra-ethyl lead. Ethanol is a marvelous octane booster in addition to being an oxygenate, a very sought after commodity. Hard to image a better development to fuel supply than adhering to Henry Ford’s desire and push to E30 fuel way back. Standard Oil stood firm and maximized political clout in efforts to avoid using a hard to control and monopolize competitor. Some claim the politics of Prohibition had more to do with monopolizing fuel supply? What to think, another conspiracy? The RFS cellulosic ethanol mandate is important element to success to a fragile budding and important fuel supply. We shouldn’t act in haste to condemn. Ask yourself how long crude oil has enjoyed no compete status and maximum taxpayer support? Also, the years of engineering to maximize the fuel cost effectiveness per drilling, refining, transportation, pipelines, and ICE technology. Present day combustion engineers claim we need higher octane fuel for high efficient engines. No alternative to low cost ethanol.

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      • By Forrest on March 22, 2014 at 6:40 pm

        We shouldn’t conflate farm ethanol with the farm bill just renewed. Our useless Senator Stabenow acting as Chairmen, is proud of the bill. This omnibus legislation chuck full of political give me more social agenda crapola…a disgrace. For years the media was reporting on the high price of milk if the Republicans got they way.

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      • By Optimist on March 26, 2014 at 3:28 pm

        Forrest,
        Please STOP the flow of horse manure!
        1. Ethanol may be the greatest oxygenate known to the tin foil hat crowd, but oxygenates are no longer required.
        2. Ethanol’s great octane doesn’t mean much if you have to design the engines to run on gasoline most of the time, as you’d have to do for the foreseeable future.
        3. Henry Ford? Really? I guess all geniueses have some useless ideas.
        4. Stop confusing Standard Oil of the 1910s with Big oil of the 2010s. Goes well with the tin foil hat, but not reality.
        5. Prohibition was a scam by Big Oil? Man, that takes the cake, even in a room full of tin foil hats! You shouldn’t start on the ethanol so early in the day, man.
        6. Regardless of every government’s best and worst efforts, crude oil remains the fuel of choice, pretty much the world over. Now, you can don that tin foil hat, and see a BIG conspiracy. Or you can look at the properties of the fuel, its widespread availability, ease of transport, ease of use, cheap price (most of the time), etc.

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  7. By TimC on March 24, 2014 at 12:13 pm

    Just a few years ago, many smart people thought KiOR had the best chance of any advanced biofuel pure play to reach commercial success. KiOR’s management team includes experienced oil industry executives who know the fuels business. And KiOR’s pyrolysis technology is based on the Fluidized Catalytic Cracking Units (FCCUs) that have been used for decades to crack crude oil to gasoline in commercial scale refineries. If KiOR goes belly-up, it should throw the whole value proposition around advanced biofuels into serious doubt. For example, I would imagine the folks at Cool Planet are watching the demise of KiOR with keen interest. Cool Planet is on a very KiOR-like trajectory: they are building a small-scale plant in the southeast (Alexandria, Louisiana) that will pyrolyze wood residues to make fuel products. If that approach doesn’t work out for KiOR, why will it work for Cool Planet?

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    • By Forrest on March 25, 2014 at 8:05 am

      After reading Cool Planet web site info and info on the Clean Tech terminology, I understand more of what Robert posts of Clean Techs arrogant aura attitude of self importance and superior thinking skills. They write like pious merchants of healthy clean planet earth whom are sharing their intelligence to us less enabled. Much philosophy, little economic or scientific facts. Cool Planet post more of their wonderful bio-char (plain common charcoal) than they do of producing competitive drop in fuels. Also, they appear smug that their process would never utilize a food stock nor a land mass that could be put to use for food production. I’ve experienced this arrogant Green attitude before reading Michael Pollan’s “Omnivore’s Dilemma” teaching the farmer’s their foolish ways.

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      • By TimC on March 25, 2014 at 10:35 am

        In addition to the pious tone, Cool Planet’s website actually brags that their production facilities will be “approximately one hundred times smaller than a typical oil refinery.” Rather than boasting about this as though it’s an ingenious deployment strategy, I would prefer they offer some explanation about how they intend to make fuels economically at this tiny scale. Many others, including KiOR, have tried to make fuels in dinky biorefineries, only to discover that their capital and labor costs are just not competitive. Cool Planet certainly has impressive backers: GE, BP, Conoco, Exelon, Google. Maybe they will be the ones who figure out how to make money by making fuels at tiny scale. But right now, I don’t see anything to distinguish their technology or business model from all the failed attempts that went before. A few months ago, Peter Kelly-Detwiler of Forbes magazine did a gushing review of Cool Planet, in which he reported that their goal is to produce fuel at $1.50 a gallon. Where have we heard that before?

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        • By Forrest on March 26, 2014 at 8:27 am

          I’ve been reading CEO Mike Cheiky comments on process. Not very convincing. They have an extensive lab facility and not wed to particular process. This gives them flexibility in that if one process fails they go on to another. They’re on a mission not a process. -end this was 2012 interview.

          Pyrolysis fractionating of carbonaceous plant matter is fraught with problem of unpredictable reactions once moving to large commercial scale. So, this process is sketchy when attempting to project lab results to commercial scale. Cool Planets current process appears to be low temperature gasification under pressure. Biogas then converted per catalyst at temperature pressure constraints, wherein a certain percentage of acceptable gasoline stripped off upon condensing. Then the waste liquid is vaporized and treated per new set of catalyst pressure and temperature constraints whereupon the percentage of gasoline stripped off. This process repeated per additional reactor stations to convert all liquids to gasoline. They can dial up process to convert all biochar or dial down to produce more. The magic of their patented process- their biomass fractioner is an orderly chemical process that preserve chemical bonds. They have a cat. process that can dig deep into chemical fragments and piece together anyway desired.
          They have a lot of pie in sky examples of 25Ton/acre/year Giant Miscanthus grass yields (at best 1/2). About 160 gallons gasoline per ton biomass (I’ll wait to see actual production for that one). They can convert the bio-mass per $1 to $1.15 per gallon. Maybe additional 13 cents capital cost and 60 cents raw material costs. So, they can produce finished gasoline product 50 cents cheaper than a gallon of unrefined oil. They will use the Google Village system to set up small low cost and mass produced skid mounted bio refineries all across country to convert local bio-mass, distribute gasoline and biochar back to farmers. Maybe, don’t sell your Exxon stock just yet? Oh, they are on 4th generation of processor. I’m sure just tweaking the last 1/2 of one percentile of improvement.

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          • By Robert Rapier on March 26, 2014 at 10:31 am

            “About 160 gallons gasoline per ton biomass (I’ll wait to see actual production for that one). ”

            For reference, I think KiOR was getting 20 or 30 gallons a ton but had forecast 90 I believe. I find Cheiky to be the same sort of serial exaggerator as Khosla.

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            • By TimC on March 26, 2014 at 5:25 pm

              Just to run this through the BS checker: 160 gallons of conventional gasoline has LHV of > 18 MMBTU, while a ton of typical biomass has LHV < 17 MMBTU. So, Cool Planet's process either requires some other form of (fossil) energy inputs, or defies the 1st law of thermodynamics. But the animated "Carbon Negative Fuel Cycle" diagram on the Green Fuels page of their website doesn't show any fossil inputs. Hmm. I bet within about five years the Fat Lady will be warming up for Cool Planet.

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            • By Forrest on March 27, 2014 at 7:44 am

              I was reading patent info- Subjecting biomass to ramps of temperature under pressure which increase thermal conductivity to transform to syngas. Note a big heat arrow input to this process. This reaction chamber is subjected to increases in temperature and pressure to convert first lipid rich biomass, then hemicellulose, then finally lignin to syngas. Each processing step requires a new set of catalytic upgrading. Optional to feed CH4 to syngas. The process sketch looks complicated. My thoughts per an article on technology breakthrough whereupon a research chemist sent the last 25 years on catalytic process to convert natural gas to ethanol. I think it was ethanol? Anyway he achieved lab success with catalytic metals that for the first time not cost prohibitive, utilizing some nickel alloy. He claimed his job was about half done since the real work of recouping or reactivating catalytic required to make useful upon production. So, Cool Planet could get obtain flood of capital, if first starting out with easy task of converting natural gas supply to fuel. Pallet machines plumbed to N.G. placed within gas station fuel hubs. Let NG pipeline transport fuel. Goggle “It takes a village” investments would buy into that!

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    • By Eric on March 27, 2014 at 5:41 pm

      Quite simply, it won’t work. Cool Planet is basically building a charcoal kiln and capturing “producer gas” which was traditionally let escape during the production of charcoal. Producer gas is notoriously difficult to work with. It is a combination of synthesis gas *plus* a host of things such as tar and char – which are not conducive downstream upgrading. The worst of it is the tar, which plates out once the gas cools below 700F – thus forcing cleaning steps before catalyzing the gas stream into gasoline-like products. The cleaning techniques are expensive and, to my knowledge, not proven at scale. The heating value of the tar is essentially lost in the process, making an expensive proposition even more so. Lastly, the “biochar” left over is not the universal agricultural miracle that its made out to be. It is of limited value in limited circumstances – and the cost per acre of treating farmland with it is exorbitant.

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  8. By Oojin T Mudgett on March 25, 2014 at 4:40 am

    RR, do you think it a possibility for Russia to cut diesel/crude exports to Europe, and would this affect the ban on crude exports from the US?

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  9. By Russ Finley on March 25, 2014 at 10:59 pm

    Should electrification of transport grow much faster than anticipated due to battery/cost improvements, the price of oil may drop …not good for biofuel start ups which need high priced oil to compete.

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    • By Tom G. on March 26, 2014 at 8:07 pm

      Well maybe Russ but I don’t see that happening at the pump where I live – well at least not yet, But one never knows. If the Tesla battery factory actually gets built in the 2015-2017 timeframe you could be right. But for the moment from what I read, the industry seems to need about $100/barrel oil just to make the numbers work.

      There are however far more qualified individuals posting here who can address your post.

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  10. By Tom G. on March 26, 2014 at 7:56 pm

    I have followed Cool Planet since they first announced their process during a Google Solve For X presentation a few years ago. Maybe Robert knows some of the individuals on Cool Planet’s Technical Advisory Board and can enlighten us further.

    http://www.coolplanet.com/about/team/technical-advisory-board

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  11. By LogiRush on March 27, 2014 at 10:38 pm

    So what happens when KiOR’s money runs out?
    Does the Columbus plant get shut down and abandoned?
    Or does some other investor (or possibly government-backed entity) buy the plant for pennies on the dollar and give it another try?
    Or can the plant be converted to some kind of economically viable activity? (I don’t know enough about the facility to even speculate.)
    Or does it become some kind of Department of Energy research facility, perhaps with University partners?

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  12. By Robert Wilson on March 28, 2014 at 5:12 pm
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  13. By Sean on July 10, 2014 at 10:21 am

    Great article and great predictions so far. Wish I would have read this 4 months ago.

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  14. By james rust on January 12, 2015 at 9:07 pm

    Georgia has already gone this route with Range Fuels

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