Branson’s Butanol Heading to U.S. as Ethanol Substitute

Source: By Eduard Gismatullin and Kari Lundgren, Bloomberg • Posted: Friday, January 31, 2014

Butanol, the gasoline substitute promoted by billionaire Richard Branson, is headed for its debut at U.S. pumps as soon as next year in a challenge to ethanol’s domination of the $26 billion renewable fuels market.

Like ethanol, the colorless alcohol can be brewed from corn, though it packs more energy when mixed into gasoline. Butamax Advanced Biofuel LLC, funded by DuPont Co. and BP Plc (BP/), is retrofitting an ethanol plant in Minnesota to begin making butanol in commercial volumes in 2015. Gevo Inc., backed by French oil producer Total SA (FP) and Branson through his Virgin Green Fund, already runs a distillery 60 miles away. Both say they’ve lined up clients for large-scale deliveries.

“This is the future of renewable fuels,” Branson said. “It’s also hugely versatile so can be created to produce gasoline fuel blends, rubbers, solvents, plastics and jet fuels, which give us scope to enter into a range of markets.”

The nascent industry is trying to take share from ethanol – – both may be blended as a clean fuel with traditional gasoline. Companies like Butamax and Gevo are urging more producers to retrofit their plants on the technological promise that little else is needed — the distribution networks and vehicle engines work just as well with butanol as they do with ethanol.

The optimism contrasts with a series of disappointments by oil company sponsors. Several have cut or killed various types of biofuels research because they couldn’t get costs down.

Oil Companies

BP, based in London, and Royal Dutch Shell Plc (RDSA) from The Hague have scaled back work on various types of biofuels made with alternatives to corn and sugar cane because of difficulty in making a laboratory success work at a commercial scale.

“There is certainly potential, but there have been quite considerable technical problems in the technology” to ferment butanol, said Clare Wenner, a transport analyst at London-based Renewable Energy Association. “It’s taking a lot longer than anybody thought years ago.”

While butanol has existed for decades as a chemical byproduct of oil refining, making it from crops is a success for the renewables energy industry. The process that now depends on corn as a raw material can be adapted to work with other substances such as sugar cane and cellulosic biomass, resulting in a fuel called biobutanol, according to Butamax.

Biobutanol makers can point to a few successes: BP fueled BMW cars during the London 2012 Olympic Games with the brew. Several gasoline retailers had indicated interest in Butamax’s product, said Chief Executive Officer Paul Beckwith. He didn’t disclose names.

Jet Fuel

“We’ve advanced steadily, and we now are at the phase where we are commercializing the technology,” Beckwith said by phone. “We are spending significant sums of money. The technology is being implemented as we speak.”

Branson is the second-largest investor in Gevo, with an indirect stake of almost 5 percent, according to data compiled by Bloomberg. The company tested biobutanol with the U.S. Department of Defense and Coast Guard and in racing car fuels. Virgin Atlantic Airways Ltd., founded by Branson, is interested in the renewable fuel.

Biobutanol’s promoters say it packs more energy than ethanol and is easier for refiners to blend with gasoline. That would give oil companies more options to comply with rules in the U.S. and European Union mandating more use of biofuels that reduce carbon emissions from petroleum.

‘Significant Change’

“Biobutanol is a drop-in fuel molecule that represents the next significant change required to meet the growth in demand for lower carbon, renewable fuels for transportation,” said Sheila Williams, a spokeswoman at BP. “Commercializing an all-new energy technology properly takes time, despite being one of the most advanced biofuels.”

Butamax has pulled together several ethanol producers, such as Big River Resources LLC and Siouxland Ethanol LLC, willing to switch when the technology is ready. They have about 900 million gallons of combined capacity. The U.S. can make about 14 billion gallons of ethanol a year.

Gevo’s plant in Luverne, Minnesota, is running at about two-thirds of 18 million gallon-a-year capacity after a yeast fermenting facility contamination in September 2012, said Brett Lund, the company’s general counsel. Billionaire Vinod Khosla, the co-founder of a venture capital firm bearing his surname, also is an investor in Gevo.

The Gevo fermentation is cost competitive with the standard ethanol production, according to a spokesman at Total who asked not to be named.

Flexibility Granted

The new fuel would allow policy makers and governments to increase use of renewable energy in gasoline to meet carbon dioxide emission reduction targets

The U.S. currently limits ethanol to 15 percent of the content of gasoline for cars made after 2001. Many older cars can only cope with weaker concentrations of the renewable fuel.

The same engines could take a blend that’s 16 percent butanol, which is less corrosive than ethanol, said Claire Curry, an industry analyst at Bloomberg New Energy Finance in London.

President Barack Obama’s administration in November proposed oil companies for the first time reduce use of ethanol in gasoline. The U.S.’s Environmental Protection Agency plans to approve a new requirement later this year because the industry has almost approached the maximum level of using the renewable diluter for safe use in all nation’s cars.

“With ethanol dominant as a gasoline additive, the U.S. fuel industry simply hasn’t had much reason for adoption of butanol,” said Pavel Molchanov, an analyst with Raymond James Financial Inc. “However, that may be starting to change now that ethanol is hitting a blend wall.”

$6 Billion Investment

Investment in butanol plants may reach $6 billion by 2020 as ethanol makers switch their plants to the new process, according to Bloomberg New Energy Finance.

The brewing process involves fermentation of corn or other biomass sugars by yeast microorganisms transforming glucose into biobutanol. The biological yeast is different from the one used for ethanol production. There are some other distillation alterations that can make refining more efficient.

Gevo’s products “are beginning to enter multiple markets, Branson wrote in an e-mailed response to questions thorough his office in London. ‘‘Jet fuel is initially the most significant for Virgin but today it is more a question of which opportunities make the most commercial sense.’’

Travel Further

Butanol has a few advantages. It holds 84 percent of the energy content of gasoline, more than ethanol’s 66 percent. That means drivers can travel further on a tank with butanol blended in than they would with ethanol.

The fuel is also cheaper to blend into gasoline supplies because it has a similar vapor pressure — the pressure at which a liquid turns into a gas. That means refiners don’t have to strip out butane and other products out of gasoline to stabilize their mixture as they do when they blend with ethanol.