IHS Chemical Week


A View from the Inside: The Status of Renewable Chemicals

1:40 AM MDT | August 26, 2010 | By JIM STOPPERT

Answers by Jim Stoppert, CEO Rivertop Renewables (Missoula, MT)

How fast is the renewable chemical/biomaterials sector developing? How is the overall health of the sector?
o        This sector got off zero with the launch of new products from Cargill Dow (NatureWorks) and DuPont in the late 90’s, but little else for some time. However, it has begun to pick up dramatically as the need for new sources of abundant environmentally friendly feedstocks has grown. There are several key reasons for this slow emergence. The first is cost. I have been in this industry for more than 35 years and one theme has been consistent is that consumers purchase functionality at a price. Until recently bio-based chemicals have been cost disadvantaged. However, with cost reductions coming from new technology and with higher petroleum prices, this is changing. Second, the newer products being developed are easier to substitute for incumbents than ever before. Third, and maybe most important is consumer awareness. I believe one of the key tipping points of awareness was 9-11. After 9-11 I saw firsthand how audiences including producers, manufacturers, and all the way down to consumers, became more aware of the products they buy.  People started to see the connections with a reliance on foreign oil, and wanted choices. I saw a dramatic increase in the level of activity in renewables and biomaterials at that point. We are already seeing signs of a similar impact from the current Gulf Oil Crisis.

·         Where is the money going? Is venture capital (VC) money coming into renewable chemicals?
o        Over the past decade, VC money has been very scarce due to the lack of quality investment opportunities, lack of understanding of the sector by VCs, and more recently because of the lack of capital due to the recession. Thankfully, we are starting to see a shift in that trend, with VCs being more open and interested in investing in renewable chemical companies. The key difference I’ve seen is that investors now more clearly understand the sector and its potential to complement investments in renewable fuels. Companies are understanding that they must show a quick track to market, and where the direct market potential is. In the case of Rivertop, there is a $9 billion market for phosphate replacements in detergents, which our technology and products can begin addressing in a matter of a few years.

o        In addition to changes in venture funding, recently we’ve seen several companies in our industry file for their IPOs. This will be an interesting time to watch and see how the financial markets react to these offerings. I think many of us in the industry are in a “wait and see” position, but we are hopeful these will be a success. I believe that in order for the industry as a whole to succeed, we really need a series of positive outcomes for the leading companies of our industry.

·         Where is the new technology appearing?
o        Until recently the large chemical companies have been noticeably absent from the development of new renewable chemical technologies. As a result many of the new companies have come from agricultural companies such as Cargill and ADM or from universities. Examples of university spinouts are companies such as Gevo, OPX, Rivertop Renewables, Genomatica, Metabolix. The emergence of these companies will have a dramatic impact on the chemical industry in the future, and we may begin to see large chemical companies partner with or invest in these ventures.

·         What are other strategies companies are using in this space to commercialize?
o        One trend we are seeing is companies moving from pure biofuels plays to finding high value co-product in renewable chemicals. Companies which began with a technology solely dedicated to biofuels, now see that renewable chemicals offer a vast, and often higher priced market place. While the fuel market is undoubtedly a huge one, the capital costs of getting there are forcing companies to look to renewable chemicals to maintain their bottom line through diversification.

o        Another strategy which is becoming common is for a renewable chemicals start-up to find a large, stable, strategic partner which it can partner with to ensure feedstock supply, product demand, and/or technology sharing. Moving forward in our space, I expect many will go this route since companies can do together what few of them can do alone.

·         What impact, if any, is the United States federal stimulus funding having on this space?
o        To date, little of the stimulus money has trickled down to the companies developing renewable chemicals. At this point, applying for stimulus money is an expensive, time consuming process with low odds of success (particularly for early stage companies in which resources are stretched in many directions already). Even those companies that have received awards are having to wait over a year for funds to be distributed. This means the impact has been almost non existent. However, there is an increased collaboration between the U.S. Department of Energy and the Department of Agriculture which should help expand and speed up the rate to public investment in commercialization efforts. Furthermore, the trend among biofuels start-ups to expand into renewable chemicals may enable many to leverage biofuels-focused stimulus funding to support renewable chemical platform development.

·         What are the hurdles the industry/sector faces currently? And what does the industry need to do to overcome those?
o        As with many nascent industries, research and development is the key to our industry continuing its path towards mainstream adoption. We need to see continued private sector and public sector investment in renewable chemical technologies in order to truly make a difference, and see the environmental, economic, and even geopolitical benefits we all talk about. This investment will allow for dedicated research needed for key breakthroughs. The petrochemical industry has had a 100-plus year head start on our industry, and to their credit produce amazingly helpful products we all benefit from daily. The renewable chemical industry is building on that base of knowledge and taking it a step further.

Jim Stoppert, CEO of Rivertop Renewables, is an industry veteran and bioproduct pioneer. After a 30-year career at Dow, he co-founded and served as CEO of the industry pioneering bioplastics joint venture between Cargill and Dow Chemical that is now known as NatureWorks. Jim has since incubated and led several companies in this space which continue to thrive including Elevance, BiOH, and Segetis.

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