Category: Report

Could new technologies reinvigorate corn-based ethanol? This 12-page  note assesses three options. We are constructive on combining CCS or CO2-EOR with an ethanol plant, which yields a carbon-negative fuel. But costs and CO2 credentials look more challenging for bio-plastics or alcohol-to-jet fuels. 

Challenges for the bio-ethanol industry are re-capped on pages 2-3, building off of our recent research. Hence how could new technologies fix the economics and carbon credentials of corn-based ethanol?

Our constructive outlook on ethanol + CCS is presented on pages 4-6. Ethanol plants have the unique advantage of a nearly pure CO2 stream from fermentation, allowing them to by-pass the costly and energy intensive amine process. The resultant fuel can be considered carbon negative. White Energy and Oxy are pursuing a project.

Our outlook for bio-plastics is presented on pages 7-10. Costs of bio-ethylene will likely be 2x higher than conventional ethylene, mainly due to running ethanol as a feedstock. Although encouragingly, ethanol dehydration could be 70% less energy intensive than ethane cracking.

Our outlook for alcohol-to-jet fuel is presented on pages 11-12. If our numbers are correct, some projects could result in 3-4x higher costs compared to conventional jet, despite minimal CO2 savings. Thus companies in this space are pursuing more novel pathways.

This 11-page note looks back at 175 patents filed by Theranos, which promised a world-changing medical testing technology, but ultimately turned out to be a fraud. The analysis has helped us create a new framework, which we will be using to assess new energy technologies, on a scale of 0-5. This matters for models of energy transition and for SPAC valuations.

300 companies have already raised $100bn via SPACs in 2021. Many are early stage. Hence how can we derive comfort around their technologies? We outline how patents can help with this process on pages 2-3.

Companies with few patents but many bold claims are easy to identify as ‘higher-risk’. We give a recent example from the hydrogen industry on page 4.

But companies with many patents and very bold claims are harder to identify. Specifically, Theranos filed over 175 patents. Some are very detailed. Others contain “experimental results” demonstrating their technology. Examples are given on page 5.

This note reviews Theranos’s patents, finding five signs which may have helped decision-makers to adjust their risking factors. We give examples of each sign on pages 6-10. For each sign, we explore a reassuring example from the patent literature, and a less reassuring example from the Theranos patent library.

Our conclusion is to start applying this new framework consistently, when appraising early-stage technology companies, as explained on page 11.

30M acres of US croplands are used to grow corn for ethanol. Each acre prevents 2-3 tons of CO2 emissions per annum, for a CO2 abatement cost of $200/ton. However, if these same acres were reforested, they could absorb 2x more CO2, creating a 150MTpa CO2 sink; while at $15-50/ton CO2 prices, farmers in the mid-West could have higher earnings. Hence this 15-page note asks if the rise of carbon removals could re-shape US biofuels?

An overview of the US corn-to-ethanol industry is given on pages 2-4, covering the four main rationales for blending 40% of the corn crop into biofuels. But do these rationales stand up to scrutiny?

An overview of the ethanol production process is given on page 5, as this will be the basis for our economic and carbon modelling.

The economics of ethanol production are presented on page 6. We find the marginal cost of US ethanol is currently c40% higher than the cost of wholesale gasoline.

Carbon accounting is the main focus of this research note, and our numbers are laid out on pages 7-11. Looking category by category, we show that the CO2 prevented per acre of farmland is between 2-3 tons per annum.

Reforesting the same land could avoid 2x more CO2, we find. On pages 12-13 we ask ‘is it feasible?’, ‘is it economical?’ and ‘is there a market?’, We argue it is, in each case.

Our conclusions are laid out on pages 14-15. The rise of corporate carbon offsetting could re-shape the US biofuels industry, with implications for farmers, the ethanol industry and the US refining industry.

Reaching ‘net zero’ is impossible without nature based carbon removals. Hence this 17-page note argues corporations will increasingly create internal groups to procure carbon offsets, re-shaping the energy transition. We make three arguments, twenty predictions and draw a historical analogy from labor reforms in 1850-1950. Is this the future of ESG?

We draw a distinction between carbon reduction technologies and carbon removal technologies on page 2-4. It is not possible to get to ‘net zero’ via reduction technologies alone. Allocations are needed to carbon negative removal technologies too. Especially nature-based solutions.

What model will be best for corporations to procure nature-based carbon removals? On pages 4-5, we propose internal groups will be created to ensure these projects are real, reliable, additional, permanent and meet other organizational goals.

Our first line of evidence comes from assessing the increasing trend towards nature based solutions at 35 large organizations, profiled on page 6.

Our second line of evidence is a specific example in a hard to abate sector. Without nature-based solutions, abatement costs 100-200x more and even then, only 40% of CO2 can actually be abated (page 7).

Our third line of evidence is a specific example, a company targeting ‘net zero’ which has created exactly the kind of internal carbon offsetting division that we envisage. It states a goal to “help establish this market by sparking a paradigm shift as soon as possible”.

Other beneficiaries of the theme could be organizations that vet economical carbon removal solutions and sell this service onwards, or Energy Majors that commercialize ‘zero carbon energy’ by combining nature based solutions with their fuels (pages 9-10).

A historical analogy is given on pages 11-14. Correcting the 19th century’s imbalance between labour and capital did not come via dismantling capitalism, but via a series of mundane internal reforms from corporations, from safety measures to defined benefit pension funds.

Implications for the energy transition are given on pages 15-17, including twenty predictions for the future of ESG.

This 15-page report evaluates a pathway for sustainable aviation fuels, feeding biogas into a Fischer-Tropsch reactor. Three projects are in progress. But bio-GTL will likely cost 3x more than conventional jet, for a 75% reduction in CO2, giving an abatement cost of $550/ton. Moreover, the same biomass feedstock could abate 4x more CO2 via other pathways. We still prefer nature-based carbon offsets for aviation.

Three biogas to liquids projects are in progress to help decarbonize aviation fuels. Each project is briefly outlined on page 2.

Our framework for modelling the cost of bio-GTL is explained on page 3, to see whether the technology is attractive.

Biogas production and sweetening are modeled on pages 4-5. We note the importance of policy and the challenge of achieving large-scale production.

The GTL process is modeled on pages 6-10. We focus on the costs, economics, CO2 intensities and liquid yields.

Heavy subsidies are needed to make biogas-to-liquids cost-competitive, most likely in the form of landfill taxes, which must run well over $100/ton, as argued on page 11.

Our main challenge is the carbon accounting, outlined on pages 12-13. We find other biomass pathways could abate 4x more CO2 emissions compared with bio-GTL.

Reactor up-time may also be a further technical risk, based on our review of technical papers, and discussed on page 14.

Our conclusion is that nature-based solutions to climate change are superior to sustainable aviation fuels. They can offset 100% of the CO2 for a cost of $3-50/ton.

Nature based carbon offsets could migrate offshore in the 2020s, sequestering 3GTpa of CO2 for prices of $20-140/ton. In a more extreme case, if CO2 prices reached $400/ton, oceans could decarbonize the world. This 19-page note outlines the opportunity in seaweed and kelp cultivation. It naturally integrates with maritime industries, such as offshore wind, offshore oil and shipping. Over 95% of the 30MTpa seaweed market today is in Asia, but Western companies are emerging.

Nature based solutions to climate change can be improved by limiting their land use and shoring up their longevity. These considerations naturally suggest a role for oceans, which cover 70% of the planet and are a 45x larger carbon sink than the atmosphere (pages 2-5).

Seaweed and kelp’s characteristics, as nature-based solutions, are spelled out on pages 6-8, explaining how they are cultivated, their typical biomass absorption rates, and their typical CO2 sequestration mechanisms.

World-scale potential as a carbon sink is outlined on pages 9-10, including the possibility of decarbonizing the world.

Commercialization is under way, across 30MTpa of seaweed and kelp cultivation in Asia, and a dozen interesting companies in the West. We profile some of the companies that stood out on pages 11-13.

Economics can be attractive, $20-40/ton CO2 prices enhance IRRs and will help the opportunity to scale up. But $400/ton CO2 prices are needed for pure sequestration projects that do not yield any sellable biomass (pages 14-17).

Integration options with pre-existing maritime industries, as well as conclusions for the world’s route to net zero, are spelled out on pages 18-19.

We are raising our medium-term oil demand forecasts by 2.5-3.0 Mbpd to reflect the growing reality of autonomous vehicles. AVs eventually improve fuel economy in cars and trucks by 15-35% and displace 1.2 Mbpd of air travel. But their convenience also increases total travel demand. This 20-page note outlines the opportunity and leading companies.

Patent activity into autonomous vehicles is accelerating at the second-fastest rate of any technology in the future of energy. We review fifty patents into AVs and conclude Level 5 autonomy remains science fiction, but Level 4 applications are credible within 2-5 years (pages 2-5).

Impacts on trucking fuel economy are explored on pages 6-8, including technical papers into platooning and other efficiency gains.

Impacts on passenger vehicles are presented on pages 9-10. Efficiency gains are offset by greater demand for increasingly convenient mobility.

Long distance journeys above 100-miles comprise 40% of all travel miles today. 50% of this market is currently serviced by plane, but we expect switching from aviation to autonomous vehicles (pages 11-14).

Impacts on total oil demand are bridged on pages 15-17, running through our assumptions, category-by-category. Our 2030-40 oil demand forecasts are raised by 2.5 – 3.0 Mbpd.

Five broad implications for different industries and sub-industries are spelled out on page 18. We are increasingly constructive on fuel retail businesses, particularly those selling carbon offsets to decarbonize long-distance car trips.

Leading companies in autonomous vehicles are diligenced in our full screen. Ten of the most exciting companies are profiled on pages 19-20.