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 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.