Move over Super, here comes SuperDuper. All the high octane and performance, and the renewability too, at a price you can afford.
Biofuels are adding options for drop-in, low-carbon, super-perfornance gasoline via isooctane and isooctene, as Gevo (GEVO) announces sales of isooctene to BCD Chemie, a subsidiary of Brenntag.
In Colorado, Gevo said that it has begun selling renewable isooctene to BCD Chemie, a subsidiary of Brenntag. Initial orders in 2015 are expected to result in revenues to Gevo of over $1 million.
And you might wonder why that matters.
The performance appeal?
One, high octane, unlike gasoline but like ethanol. Two, unlimited blending via a pure hydrocarbon and no tolerance hassle, unlike ethanol but like gasoline.
The economic appeal?
Three, the value is isooctene in Europe can range up to $7.00-$10.00 per gallon for petroleum-based isooctene and isooctane, according to Gevo.
In the US, it could be worth something like $4.35 per gallon, today.
Here’s our math on that. Adding 13% renewable isooctene or isooctane to 85-octane refinery blendstock, you get an 87-octane E0 fuel which commands a 20-cent per gallon premium over 87-octane unleaded E10, and there’s roughly 13 cents in RIN value in there also, plus you start from nickel-cheaper 85-octane blendstock in making an E0 product, instead of making 87-octane. Adding $0.38 in margin with a 13% blend gives you a $4.35 per gallon value in the additive.
Plus, use of these renewable hydrocarbons enables companies to meet regulatory requirements for renewable content in fuels while satisfying the performance requirements of their customers.
The background on renewable isooctane and isooctene
We’ve been tracking the birth of this market for some time. Earlier this year, Ronan Rocle and David Gogerty of Global Bioenergies observed in June:
Isooctane is currently derived from the dimerization of isobutene followed by hydrogenation. Another method to produce isooctane would be alkylation of isobutene by isobutane. But additional [production] steps results in isooctane and alkylate products that are, on average, 25% and 15% more costly than gasoline, respectively, with the big driver in isooctane price being the requirement for isobutene as part of the production process.
This is where bio can have a large added valuebio-engineered microbes are great at producing specific products such as isobutene.
Gevo and Global Bioenergies in the lead
The isooctene in the BCD deal will be produced at Gevo’s biorefinery in Silsbee, Texas, derived from isobutanol produced at Gevo’s plant in Luverne, Minn. Gevo’s biorefinery is operated in conjunction with South Hampton Resources.
Meanwhile, direct production of isobutene by fermentation has been reported by Global Bioenergies at its pilot plant in France. Isobutene evaporates from the fermentation broth, leading to no toxicity for the microbe, and is then directly recovered as a pure product. Due to the relative simplicity of this process, renewable isobutene can be produced cost competitively compared to fossil-based pure isobutene, based on five year averages.
One could then envision the production of isobutene and the dimerization of isobutene into isooctane (via isooctene) for a 100% bio-based, renewable molecule. This could come to fruition scientifically, but the renewable industry has heard one key message loud and clearcustomers only want renewable/sustainable products that are at or below fossil prices. Thus, a renewable company would find it difficult in today’s market dynamic to compete on price with gasoline when it would have to make two very pure bio-isobutene molecules and saturate the isooctene product with hydrogen to produce the isooctane.
Two routes to value
Gevo is highlighting the high price route – targeting a $7-$10 fuel molecule in the EU. But, there’s premium value in the US, too.
Conversely, Global Bioenergies has highlighted a low-cost approach. Specifically, combining a high-purity bio-isobutene monomer with the very cheap refinery product, butane, to produce an isooctane molecule that competes on cost with conventional isooctane, and 50% renewable content and RIN-qualified. thus qualifying for a pro-rated RIN price that will add additional benefits to its economic feasibility.
One more thing: The vapor pressure performance add-on
As Rocle and Gogerty noted in the Digest, customers get a second benefit beyond the high-octane molecule, they get a vapor pressure much lower than ethanol, gasoline, and even alkylate. This vapor pressure value is critical, because by adding isooctane with a vapor pressure of 1.8 psi, one can blend gasoline with cheaper butanes that have a decent octane value (92) but a difficult vapor pressure (54 psi).
For consumers at the pump
Rocle and Gogerty predict:
“We can already see some indication of what this means for consumers at the pump. They will have the opportunity to purchase a sustainable, domestically produced fuel with identical hydrocarbon qualities as gasoline and higher performance. Higher technical properties also mean that lower quantities of premium components are needed to match the same quality.”
The deal background and prospects moving forward
BCD Chemie is targeting applications in Europe with Gevo’s isooctene. This commences a relationship with BCD Chemie that may include the marketing of other hydrocarbon products, including isooctane and jet fuel, and builds on Gevo’s existing partnership with Brenntag in Canada, which is currently selling Gevo’s isobutanol as a solvent in Canada.
Reaction at BCD and Gevo
“BCD Chemie has begun purchasing continuously increasing quantities of renewable hydrocarbons from Gevo for distribution to selected customers. These customers are very excited to utilize renewable components in their products as they are green replacements for fossil hydrocarbons, which benefit the environment without any performance loss. We are looking forward to developing this market together with Gevo in Europe, as this fits our business plan of expanding sales of high performance chemicals and substances throughout Europe,” said Denis Hamann, Project Manager for BCD Chemie.
“Gevo appears to be one of the only sources of renewable isooctene and isooctane globally. As a result, the market has been very excited by these product offerings, with demand outpacing our ability to produce at our biorefinery in Silsbee. Renewable hydrocarbons are exact replacements to petroleum-derived hydrocarbons, so there is no compromise on performance. We are very pleased to be working with BCD Chemie. The European market is an ideal place to be marketing many of our specialty fuels and chemicals products,” said Gevo CEO Pat Gruber.
The Bottom Line
Here’s the renewable riddle?
Q: Why make a $2 fuel when you can make a $5 chemical?
A: When you can make a $7 fuel additive.
Which is to say, Gevo is one of those companies targeting niche fuel additive markets. Recognizing that the fuel supply is so vast that even commanding a 30% market share of a 3% fuel additive would be, globally, something like 5 billion gallons. A volume of business that would keep companies like Gevo and Global Bioenergies building capacity as fast as they could for years to come.