The Future Of Fuels And Alternative Feedstocks .

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Dr. William F. BanholzerExecutive VP and CTOThe Dow Chemical CompanyThe Future of Fuels andAlternative Feedstocks –Recognizing Hype vs.Practical Limitations

Call to Engineers and ScientistsToo much hype for thepossible and not enough focuson the practical.We are letting society down!

Business vs. Academic SuccessChallengesto SocietyInventionWhat people want Whatthey will pay for Whatthey can affordImpactto SocietyAcademicSuccessWhat they will pay forimpacts societyBusinessSuccessEconomicViabilityRisk vs.Reward

HighMan Made DiamondsTransistors AntibioticsLEDsH2 fuel cellsEthylene StyreneInterpolymerswireLowImpact to Society Business SuccessBusiness Success vs. SCIENCELowQuality of ScienceHigh

Biology Can Do Great Things

Biofuels Are Like a Jetpack

Biofuels Growth

Energy Sources Always Changeall other100%Fracion of Total 0%Natural GasMigration to higher energydensity, more available,lower cost sources40%30%20%Petroleum10%What’s Changed? Oil Price Rise CO2 awarenessSource: IEA. EIA; US Primary EnergyWill this reversethe 1900189018801870186018500%

Migration to Higher Energy Density SourcesBtu/lbCrude oil is three times asenergy dense as biomassEnergyEquivalency Capital /Usable MM Btu1 OilRefinery 1026 MethanolPlants 15100 EthanolRefineries 30-120*Crude OilMethanolBiomass*land & water penalty not includedEnergy from fossil infrastructure built over 80-100 years defines our current standard of livingSources: Heating values from GREET, Argonne National Lab, May 2008; Refinery size and economics by Oil & Gas Journal construction update, Apr 2011 for RasTanura; Methanol for Atlas, BP annual report and Lurgi literture; Ethanol plant of 100 MM gal/yr from DOE targets assuming 100 MM gal and 10/annual gallon

Recognizing FadsThe art of being wise is the art of knowing what to overlook - William JamesHydrogen Car"We asked ourselves, 'Is itlikely in the next 10 or15, 20 years that we willconvert to a hydrogen careconomy?' The answer,we felt, was 'no,‘”Steve Chu, EnergySecretary, May 2009Bio PlasticsCorn EthanolBiodieselCellulosic EthanolAlgae“ Usingland togrow fuelleads tothedestruction offorests,wetlands and grasslandsthat store enormousamounts of carbon.”“Biofuels are contributingto higher prices andtighter markets.”“ the need for trucks,machinery and manpowerwould come duringharvest, already thebusiest time of the yearon the farm. And that’swhere a massive federalinitiative into cellulosicethanol may find itsbiggest bottleneck – onthe farm.”Robert Rapier“ microalgae can beraised on cheap, sunsplashed land that isunsuitable for crops ormuch of anything else.”Timothy Searchinger,Princeton UniversityApril 2011Michael Grunwald, TIMEApril 2007Glycerin to Epi“Sun Chips Bag to Lose Its Crunch”Bio basedpackaginglaunched in 2009but discontinuedby late 2010, dueto performanceperception issuesDow launched the JV withCargill in 1997 to developand market PLA from corn,exited the JV in 2004.Photo: Associated PressDow postponed in 2009 due touncertain supply Natural Oil PolyolsDow Launched in 2007, exitedin 2010.Paul Voosen, New YorkTimes, 29 March 2011.ADM-MetabolixADM has given noticeof termination of theTelles, LLC jointventure for PHAbioplastics

Hype Building for Algae?Using sunlight, CO2 and little else, manyvarieties of fast-growing pond scum, whenstarved of nutrients, quickly build up oil intheir cells. They need no external sugar fromcorn or cane to grow, so they don't competewith food crops. Farmed in ponds ortranslucent reactors, microalgae can be raisedon cheap, sun-splashed land that isunsuitable for crops or much of anything else.Voosen, Paul; "As Algae Bloom Fades, Photosynthesis Hopes Still Shine", New York Times, 29 March 2011.

Practical?LumiGrow LED technology isinstrumental to the operation ofAlgae Farm’s algae biomassproduction system, which willproduce algae for the nutraceutical,cosmetic and renewable energymarket sectors. By growing in aclimate-controlled indoorenvironment, Algae Farm canachieve predictable and scalableyields while it maintains the highestpurity standards.LumiGrow press release “Algae Farm Selects LumiGrow LED Horticultural LightingNovember 29, 2011

Funding Follows the Hypebiodiesel cellulosic ethanol bioengineeringreactor design trans. phenomena fluid dynamicsPercentage of Faculty with “Bio”Related Research Interests:Top Strategic UniversitiesPublished Articles Reflect the Focuson “Bio” Related Research:Dynamic range of the discipline is threatened bydecreasing support of the traditional core research areas.

Synthetic Biology lead story in Science 20January 2012 issue Bio Architecture Lab,Berkeley, CA seaweed has no lignin alginate not fermented byyeasts E. coli geneticallyengineered to fermentalginate and other majorsugars present to ethanol

Hype? alginate only about athird of sugars present U.S. owns more oceanarea than any othercountry “no land, (no) freshwater or (no)fertilizer”Erik Stokstad, Science, 20 January 2012, page 273

Problem not solved harvested for over 400years cost for wet biomass are 400/ton at water levels 70% more expensive thancorn! Redfield ratio still required arable ocean (analogy toarable land) needed

Biofuels Key Issues How much biomass is available?not enough to replace fossil fuels How much will the biomass cost?it is not cheap! How much will biofuels cost? more than fossil How much more are we willing to pay? nopremium How realistic is chemical production frombiomass?we already do, but chemical use doesn’taddress the big issuesNRC, "Renewable Fuel Standard: Potential Economic and Environmental Effects of U.S. Biofuel Policy", 4 October 2011.

Largest Plantsfeedstock limits scale

Original Inv.Scale of Fuels Makes it HarderLargest SocialCommunity onInternet0.05% of GlobalElectricity GenerationCapital for Single PlantRevenue 1051MM/y Β0.02% of GlobalElectricity GenerationRevenue 441MM/y t 10s yt2% of Global MEGConsumption0.3% of GlobalEthylene consumptionActivation CapitalSources: facebook original investment showing combined amounts from Peter Thiel (PayPal cofounder), Accel Partners and Greylock Partners as described in the Historyof facebook on wikipedia; Power Plants: RL34746 report - Stan Kaplan - Congressional Research Service; MTO: PEP Report 261 – SRI and EG: PEP Repor 2I – SRI; Revenuesfor Power Plants calculated using 2010 electricity average retail prices (all sectors) 9.88 cents/kWh (data from DOE)

Impact / Market PenetrationTimeline for ImpactSingle SiteCatalysisSuper CriticalCoal PowerInventionDemonstration 10s MM t 1957, 80 tDevelopment1920 50 MMDeployment 150 MM*Σ 12 yrs1980-901989 100s MM 500 MM 2 B**19571970s1930 -50sSources: SRI PEP LLDPE 36E 2008, SRI PEP 153B 2001 Single site catalysts for PEProduction, AEP Power Co, World Bank, EIA 2011 Energy Outlook, Electricity Market Module1991*400 mT LLDPE plant, 2008 Σ 50 yrs**600 MW plant, 2009

Energy ContentEIA is DOE Energy Information Agency, CMAI is an HIS affiliate, CARD is Iowa State Center for Agricultural and Rural Development, CEPEA is Centro deEstudos Avancado em Economia Aplicada – data for 3-5 years depending on source.8 Feb 2012

Energy Industry DynamicsTotal Production cost (2008 /bbl)As oil price rises, new capital will flow to EOR, Arctic, Oil sands, GTL, CTL before biofuels.180130110Recent price of oil907050OPEC Middle East10020ARCTEORICVenezuelanHeavy Oilmargin30CellulosicEthanol*Predicteddemand till 2015OtherConventionalOther OPECOil4060FSUDeep Water80Million Barrels of Oil Equivalent per DayConventional OilBiofuels(Corn Based)CTLGTLOil ShaleOil Sands (in situ)Oil Sands (Mining)Biofuels (Sugar Cane Based)100120Non Conventional liquid sourcesSource: IEA, EIA, Booz Allen Hamilton, DOE Biomass Multiyear Program Plan April 2011, Dow Analysis*Based on DOE volume projections for US in2022. DOE price target is 113/bbl

Global Ethylene Cash Cost

Alternative Feedstock - Cane to LLDPEEthanolEthyleneFully-integrated facility in BrazilUtilizes state-of-the-art Dowpolymerization catalysis

Ethanol to PE in 2008naphtha was looming as the only feedstock choiceMarket prices and selected costs on energy equivalent basis Existing logistics forethanol in Brazil High polyethylene price inBrazil Ethanol price fluctuationrequires integration65%Area required to produceBrazilian cane ethanolsufficient to meet 2011global PE demandMarket PricesUSA Brazil WorldSources: Ethane, ethylene, polyethylene (US): CMAI; Ethanol US: CARD, Ethanol Br: CEPEA; PE Brazil calculated based on market price differential Br to US. Price histograms shown for 2005to Feb 2012; Prices shown from Feb 2012. *Costs: Br EtOH: Data Agro 2009 and Estado de S. Paulo 2007 ratioed to 2012 exchange rate

Ethanol to PE – A Niche OpportunityMarket prices and selected costs on energy equivalent basis Existing logistics forethanol in Brazil High polyethylene price inBrazil Ethanol price fluctuationrequires integration65%Area required to produceBrazilian cane ethanolsufficient to meet 2011global PE demandMarket PricesUSA Brazil WorldSources: Ethane, ethylene, polyethylene (US): CMAI; Ethanol US: CARD, Ethanol Br: CEPEA; PE Brazil calculated based on market price differential Br to US. Price histograms shown for 2005to Feb 2012; Prices shown from Feb 2012. *Costs: Br EtOH: Data Agro 2009 and Estado de S. Paulo 2007 ratioed to 2012 exchange rate

Shale Gas Revitalizes the Industry

Shale Gas Growth

Demand for Bioproducts?Midland Daily News1 January 2012

Changing EmphasisBiomass 2011: Replace the Whole Barrel,Supply the Whole MarketThe New Horizons of BioenergyJuly 26–27, 2011“sugar is the new crude”

U.S. Petroleum FlowEIA, "Annual Energy Review 2009", August 2010, DOE/EIA-0384(2009) and Sean Davis, "SRI Petroleum Liquid Feedstocks", June 2010

Bio Commodities Too ExpensiveCash cost indifference analysis for ethylene from crude oil and bio feedstocksworld sugarUS corn*Excludes Capital

Use of Renewable Feedstocks:A raw material or feedstockshould be renewable ratherthan depleting whenevertechnically and economicallyfeasible.

Two Carbon Flavors

Berkeley Study on PHA

LCA of PolymersBiopolymers rank in the middle of LCA rankingsMaterialGreen DesignRankLCA RankPolylactic Acid – StoverCornstalks24Polyhydroxyalkanoate-GeneralCorn kernels28Sugar/cornstarch49HD PolyethylenePetroleum52PETPetroleum610LD PolyethylenePetroleum73Petroleum /plants812PolypropyleneFossil fuels91General Purpose eum1211POLYMERPolylactic Acid-GeneralBio-PETPVCPolycarbonateTabone, MD; Cregg, JJ; Beckman, EJ; Landis, AE. Environ. Sci. Technol. 2010, 44, 8264-9.

LCA of PolymersBiopolymers rank in the middle of LCA rankingsMaterialGreen DesignRankLCA RankPolypropyleneFossil fuels91HD PolyethylenePetroleum52LD Cornstalks24General Purpose PolystyrenePetroleum105Polylactic Acid – Corn onatePetroleum1211Petroleum lylactic Acid-GeneralBio-PETTabone, MD; Cregg, JJ; Beckman, EJ; Landis, AE. Environ. Sci. Technol. 2010, 44, 8264-9.

What works in bioproducts? nature prepares the molecule:– nature puts it in the right oxidation state (kind ofcarbon)– nature makes the right molecular structure for theend application(shape of carbon)– nature makes enough that recovery is economical technical risk to serve market is low:– identical biomaterial for established markets– fossil and bio parity in market

What are we doing?R&D goal is to extract more earnings per dollar of investmentDow chooses to operate wherematerials science expertise drives successEnergyStorageSuperior fficiencySuperior Materials:Energy efficiencyimprovements forcommercial andindustrial productsEnergyGenerationSuperior Materials:EfficiencyYieldPerformanceDurability

Electrification Beats BiofuelsGREET October 2011 update

Electrification Beats BiofuelsGREET October 2011 update

Conclusions Too much hype for the possible and not enough focus on thepractical Incumbent fossil sources set the standard for competition It takes decades to deploy a new technology Scale wins and biomass availability limits biofuels scale Small companies access to patient capital makes successchallenging Fundamental engineering judgment is crucial to long terminnovation Can society afford to pay for a different solution?Facts are the air of scientists. Without them you can never fly.- Linus Pauling

Thank You

Dow Supports Chemical Engineering 250 million total programfoster better balance10 year program11 major universitiesareas– catalysis– process development– new materials electronicsenergytransportationconsumer applications

Final ThoughtAverage US Household Abatement CurveChristopher M. Jones and Daniel M. Kammen; “Quantifying Carbon Footprint Reduction Opportunities for U.S. Households and Communities”,Environ. Sci. Technol., 2011, 45 (9), pp 4088-4095; DOI: 10.1021/es102221h

Left for DeadMcKinseyHydrocarbon Processing

Global Commodity Production

Source: IEA, EIA, Booz Allen Hamilton, DOE Biomass Multiyear Program Plan April 2011, Dow Analysis . Energy Industry Dynamics . As oil price rises, new capital will flow to EOR, Arctic, Oil sands, GTL, CTL before biofuels. 110 130 . Million Barrels of Oil Equivalent per Day . 0 . 20 40 60

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