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Do you think there is a case for developing 'proof of concept' pilot plants with subsidy even if the price of oil is so low that there would be no commercial bu

Do you think there is a case for developing 'proof of concept' pilot plants with subsidy even if the price of oil is so low that there would be no commercial business that could be carried on? Just so that if/when things change in the future the technology is well known? (I'm in UK, politics around subsidies a bit different)

mikeyouse 11y ago
Honestly, that's just about what's happened.. All of the companies in the biofuel world (KiOR, Solazyme, Amyris, Aurora, Algenol, Joule, Sapphire) spent a ton of money -- I think everyone on that list blew through >$100M -- to develop the technology and get to the pilot level. They all failed trying to commercialize. The technology still exists in the form of IP held by the investors, so if the economics ever make sense again, it would be a much shorter route to commercialization than the first time around. We absolutely have the ability to make large amounts of energy from algae, cyanobacteria, cellulose, etc. Given a few hundred million in CapEx to get a plant off the ground and a few tens of million in working capital, most of those companies break even with usable fuel at ~$150/bbl. If you relocated the facilities to a low-cost-of-living area and started with, say $1B, you could likely produce for ~$100/bbl. Unfortunately, the return will be very low and unstable based on global energy prices. The pitfalls of producing a volatile commodity. Another random thought is that we were seeing immense progress in the quality of work out of Asia for engineering and construction for the facilities. It's expensive to put steel and concrete in the ground, shockingly so for many SV investors, but the quality was quickly improving out of China / Thailand for custom-engineered oil/gas processing equipment. Assuming this continues to improve, the future costs will be much lower.
- keithpeter 11y ago
  OA did mention many companies failing but not in the detail you have in your first paragraph. Your last paragraph suggests that amortization of the capital used to build the plant is a major factor in the cost per barrel of oil-equivalent. Historically in UK, we have had subsidy (and insolvency!) to offset capital costs for canals, railways, some roads, and some of the early electricity generation (pre-Nationalisation). There have been 'public-private' partnerships since (i.e. taxpayer takes a chunk of risk) some of which have worked and some of which have been more questionable. Good luck!
- peter_bacjmann 11y ago
  Solazynme is not a biofuel company. They produce tailored oils, cosmetics and food. Guess who manufactures the oil in Soylent that makes it possible to have 12 months of unrefridgerated shelf life? Yes, they do provide fuel to UPS but it's just a sidenote.

mikeyouse 11y ago

Honestly, that's just about what's happened.. All of the companies in the biofuel world (KiOR, Solazyme, Amyris, Aurora, Algenol, Joule, Sapphire) spent a ton of money -- I think everyone on that list blew through >$100M -- to develop the technology and get to the pilot level. They all failed trying to commercialize. The technology still exists in the form of IP held by the investors, so if the economics ever make sense again, it would be a much shorter route to commercialization than the first time around. We absolutely have the ability to make large amounts of energy from algae, cyanobacteria, cellulose, etc. Given a few hundred million in CapEx to get a plant off the ground and a few tens of million in working capital, most of those companies break even with usable fuel at ~$150/bbl. If you relocated the facilities to a low-cost-of-living area and started with, say $1B, you could likely produce for ~$100/bbl. Unfortunately, the return will be very low and unstable based on global energy prices. The pitfalls of producing a volatile commodity. Another random thought is that we were seeing immense progress in the quality of work out of Asia for engineering and construction for the facilities. It's expensive to put steel and concrete in the ground, shockingly so for many SV investors, but the quality was quickly improving out of China / Thailand for custom-engineered oil/gas processing equipment. Assuming this continues to improve, the future costs will be much lower.

keithpeter 11y ago
OA did mention many companies failing but not in the detail you have in your first paragraph. Your last paragraph suggests that amortization of the capital used to build the plant is a major factor in the cost per barrel of oil-equivalent. Historically in UK, we have had subsidy (and insolvency!) to offset capital costs for canals, railways, some roads, and some of the early electricity generation (pre-Nationalisation). There have been 'public-private' partnerships since (i.e. taxpayer takes a chunk of risk) some of which have worked and some of which have been more questionable. Good luck!
peter_bacjmann 11y ago
Solazynme is not a biofuel company. They produce tailored oils, cosmetics and food. Guess who manufactures the oil in Soylent that makes it possible to have 12 months of unrefridgerated shelf life? Yes, they do provide fuel to UPS but it's just a sidenote.