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Summary:

For anyone searching for a smart critical analysis of the biofuel industry, Robert Rapier’s blog R-Squared has been like a breath of fresh air. The engineer, who has led teams creating biofuel technology at Accsys Technologies, Conoco Phillips and Celanese, has spent years crunching the numbers […]

hawaiibiofuelsFor anyone searching for a smart critical analysis of the biofuel industry, Robert Rapier’s blog R-Squared has been like a breath of fresh air. The engineer, who has led teams creating biofuel technology at Accsys Technologies, Conoco Phillips and Celanese, has spent years crunching the numbers on the economics of various biofuels on his blog and used the medium to take startups and investors to task for some audacious claims. Well, now the avid blogger has a lead role in a new biofuel entrepreneurial venture that has its own bold vision of how biofuels will fit into the world.

Rapier told us in an exclusive interview last week that he has taken a position as the chief technology officer of Merica International, a company that is building out a vertically integrated approach to sustainable and localized biofuels. Merica, headquartered on the Big Island of Hawaii, will act as a holding company for a variety of companies, Rapier told us, including Forest Solutions, a forest management group, SunFuels Hawaii, a synthetic biodiesel provider, a yet-to-be-named company that will develop a biomass trading platform, and a company that will concentrate on acquiring and developing biomass conversion technologies. In addition, Merica owns parts of several other clean energy companies that will contribute to the company’s vision, like Choren Industries, a German company that makes waste to fuel gasification technology.

Merica’s ultimate goal is to use its large portfolio of companies to provide sustainable bioenergy solutions for communities, using local energy solutions and completely removing petroleum inputs from the equation, explained Rapier. For example, the solutions can’t be dependent on petroleum-based fertilizer, or have to be shipped long distances using petroleum, both characteristics of U.S. corn ethanol, which Rapier has been bearish on. Rapier thinks industries like Brazil’s ethanol biz, which relies on sugarcane, and biomass to liquid technology (BTL) are much more viable biofuel solutions, in comparison to corn ethanol, because they don’t need to be reliant on fossil fuels.

The vision sounds ideal, but it’s also going take a whole lot of money to implement. The entire portfolio under Merica already consists of “hundreds of millions of investment” and will eventually require “multibillions” to execute the company’s vision, says Rapier. And don’t expect Merica to make its investors a massive return, he says. “I expect the company to bleed money for the first five years. Energy is a difficult low-margin business. That’s the reality.”

So what kind of investors want to spend a lot of money and not make a ton of money back? On that Rapier was more reticent. Much of the funds are coming from a private investor, who enjoys his privacy (doesn’t want his name in the press) and is interested in seeing truly sustainable biofuels developed. The investor has already found some success with German green energy company Lichtblick. While Merica isn’t seeking additional investors, it’s still adding on some strategic investors who “share the company vision,” Rapier said. For example, Rapier said he’s heading down to Panama next week to meet with a potential backer.

Rapier will be spending the bulk of his time working on Merica’s conversion platform, which will use different technologies (enzymes, gasification, chemical technologies) to convert biomass, like plant waste and energy crops, into fuels. He will help determine which technologies will be the best fit for different processes (biofuel needed for a stationary power plant is different than for vehicles) and ideally Merica will own the technologies, he said.

Like many of the companies and technologies that Rapier writes about on his blog, a lot of questions about Merica remain unanswered, like how the big-picture vision will fit together, or how the company will make enough money to be economically sustainable in the long run. But Rapier thinks that a vertically integrated approach is necessary for the world of biofuels:

If you control your feedstock, you insulate yourself from those problems. If biomass prices rise, it doesn’t kill your business because you own the biomass. The supply of sustainable biomass is also limited, and if you don’t control it, then you have a serious business risk hanging over your head. Further — and very importantly — you can assure that the biomass is being produced in a sustainable manner, because you are producing it.

Something clearly has to change for biofuels. The needs of local communities are varied, and the world’s natural ecosystems are sensitive and interconnected. Large companies and government mandates supporting first-generation biofuels often haven’t paid attention to these details. Rapier on his blog once called U.S. biofuel mandates “one of the greatest mistakes ever in American energy policy.” Increasingly the tide has started to turn for the idea of using biofuels for transportation in general, with Energy Secretary Steven Chu recently siding strongly with electric vehicles, not biofuels, as the U.S. choice to solve the carbon-connected transportation problem. Perhaps a forward-thinking umbrella company, backed by sympathetic investors, can have enough international insight to help get biofuels finally on the right path.

Image courtesy of Flickr Creative Commons.

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By Katie Fehrenbacher
  1. Nice scoop Katie:

    You may be beginning something absolutely new here, kinda. RR’s analysis of various aspects of the energy industry is to be highly commended and his column is read by many from around the world. Like you have indicated, kind of a breath of fresh air among many columnists who don’t understand much what they are publishing and their readers (as well as large and smaller investors alike) don’t really understand much about intrinsic basics which are so key.

    Your introduction is well done in some aspects, totally missing a few key elements in a couple of others. If you’d read RR’s own comments on his own blog during the past couple of weeks you would have maybe noticed something else here. And I’m attempting to focus you a bit more about specific end products within the alternative fuels arena. Not everything within this emerging alternative fuels industry appropriately fits under a “bio” label. Maybe like something that which RR said to his readers concerning “if I could wave a magic wand here,” —.

    Personally, I believe that interested parties will be dissecting and learning more about what “bio” actually ‘is’ and what ‘bio’ may not be. I personally think that a broad term as ‘bio’ should refer to the natural science of biodegradability. How about you? And therein certain new fuels and certain new companies and new trade associations may become better understood. I’m sure that you’ll be writing about some of this downstream.

    Thanks again for your info and initial insights thus far. Congrats to you and to RR who is developing another specific career choice. He’ll uncover much in his forward journey for Merica.

    –Gary

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  2. Thanks Gary. The strategy he layed out for me was pretty vague and focused on a holistic and vertically-integrated approach, not specific end-products. Save a couple pieces of info, I put everything out there that he told me. But, you can hear more from him on it soon — he’ll be writing on his blog shortly about his plans and he plans to speak at some events in the coming weeks.

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  3. Good article Katie – I am a regular follower of Robert’s blog and totally enjoy his ‘down to earth’ approach.

    Glad to see the introduction to his new task. If anyone is to be successful in this field it takes a long term approach where all the bases (that you can think of anyway) are covered – not to mention a whole lot of luck.

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  4. Ah, now we know why he (lifelong oilman) spreads misinformation about corn ethanol. Gotta make his future multibillion-dollar proprietary super-sexy super-secret super-greener corporation look even gr$$ner.

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    1. LOL! I see, it only took one oilman to take down the entire corn ethanol industry? If corn ethanol was such a great idea, it should be flurishing under the Federal Protection program (subsidies AND mandates)!

      Super-secret? Read the man’s blog. He promises to tell much. But like any business his primary function is to make money (long term or otherwise) not to win arguments with wise-guys.

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      1. Optimist, please uninstall your browser.

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    2. Disclaimer: I am a fellow contributor to The Oil Drum with Robert and nudged him into blogging.

      It’s very amusing that this troll considers Robert anti-ethanol, when Robert was very much behind the integrated feedlot/ethanol operation which:
      a) did not waste energy drying the distillers grains before using them as feed, and
      b) converted manure to bio-gas to run the distillery.

      I can’t recall the company name (I think they foundered because a supplier delivered faulty product and they had no capital to recover). Regardless, Robert is definitely for alternate fuels, not fraudulent fuels (“alternatives” which are just “laundered” oil, coal and natural gas).

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      1. Hi troll. Neither you, Rapier or any of your Oil Dumb hacks know anything about ethanol. You’re all just fakes who play scientists on teh internets. Player haters and fanbois the lot of you.

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  5. [...] Our Holistic Approach [...]

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  6. [...] to discuss the details of his new company.  Probably worth watching.  A quick first look is here: Rapier told us in an exclusive interview last week that he has taken a position as the chief [...]

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  7. Hawaiian knowledge Wednesday, October 28, 2009

    Katie,
    Much respect to you and for your article. However, your photo shows Hanalei valley and loi kalo(growing terraces for taro) which have been there for many centuries. Great photo for showing sustainablity (reseach taro/kalo/loi), but not so great for a discussion on the biofuel industry. Many people would “freak out” if they misinterpreted and thought kalo, or this area, was being considered for energy use.

    Please continue to follow RR and his prospect in Hawaii while keeping your content correct.

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  8. [...] My previous job was as the Engineering Director for Accsys Technologies, but I am presently the Chief Technology Officer for Merica International, a bioenergy holding company (more details on that can be found at this interview with earth2tech). [...]

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  9. [...] indicated in my recent interview with Katie Fehrenbacher, sustainable forestry is a critical component of our platform. We have a forestry company called [...]

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