"... is atypical for a bio-based startup in the sense that while we aim to license our technology, the license itself will be free."
Creative destruction is not unknown to the oil business. Whale oil, which dominated the sector from roughly the 17th century, was gradually offset by fossil oil after the discovery of the latter in 19th century United States. The US later lost its dominance in the market to the Middle East in the 20th century. The 21st century, too, has already seen its fair share of disruption innovation, most notably in the US with shale oil and tar sands in Canada. It is fair to say, however, that none of aforementioned crude oil sources can be considered sustainable. Our purpose at Vertoro writes CEO Michael Boot is therefore to hasten the next oil revolution and to help ensure it will be a sustainable one this time around.
We presently pump about five billion tons of fossil oil out of the ground each year. A sustainable resource that could help offset this huge figure is lignin – the constituent of the cell walls of almost all dry land plant cell walls and the second most abundant natural polymer in the world, surpassed only by cellulose.Most terrestrial flora comprises anywhere between 5 and 25% of lignin. In total, Mother Nature produces upwards of 20 billion tons per year of this compound by photosynthesis. Of this amount, only 100 million tons is isolated from bio-mass by the pulp and paper industry, and, more recently, also by the nascent cellulosic-to-X sector. Most, over 99%, of this, is burnt onsite for energy. Accordingly, only one million tons or so of lignin, mostly lignosulphonates, finds its way to the market, to be used as feedstock for chemicals (vanillin) and materials (e.g., binders, resins), or for energy elsewhere (e.g., pellets for co-firing in coal plants).
Designed for speed – ambition and business model.
First, some words on the provocative title of this piece. Commodities, like fuels and chemicals, are most profitably produced when done so in economies of scale and in close proximity of downstream customers. The same is likely to also hold true for their bio-based equivalents. Accordingly, producing commodities directly from biomass at competitive (i.e., level playing field with fossil) prices will be challenging. The rationale being that biomass, absent any fiscal or subsidy incentives, tends not cluster in the required order of magnitude of millions of tons, let alone this being the case near petrochemical clusters.
To resolve all this, Vertoro believes the bio-based economy will require a platform product, being a crude oil, which can be readily transported over long distances, at low cost, and by means of existing assets (e.g., pipe lines, tankers). As is the case for any nascent boom market, the first company to establish sufficient scale with their platform product, say 1 million tons per annum or so in this case, is the most likely also the company that will set the standard for downstream “app” developers. Ensuing network effects will further add to market strength. Speed is critical; it’s a race…
Our unique business model is derived from this ambition and is atypical for a bio-based startup in the sense that while we aim to license our technology, the license itself will be free. Only caveat is that Vertoro is allowed an exclusive offtake agreement of the CLO at a guaranteed annual return of investment for the licensee (typically around 15%). There are two reasons for this approach. First, this way we get fewer potential licensee questions about the market potential / price of CLO; their core business is ethanol or pulp after all. Second, the oil business requires an economy of scale that is not achievable CLO produced by any one licensee. This can only be achieved by aggregating CLO from multiple licensees, which will enhance our bargaining power with our foreseen downstream petrochemical customers.
Inspired by big-oil - technology.
Vertoro’s technology is a derivative of the aforementioned ambition and business model. Our arguably low-tech approach to lignin mirrors that of the one adopted by oil majors for lignin’s closest petrochemical cousin, bitumen; itself a heavy aromatic compound that is solid at room temperature and of low value where it is found. Bitumen valorization involves two main steps. First, it is dissolved in organic solvents (e.g., naphthenes, paraffins) to make it pumpable. The resulting blend, from multiple sites, is then transported via long pipe lines to an oil refinery, where, in the second step, it is co-processed with fossil oil. Needless to say, the latter step takes place at an economy of scale and in the proximity of a chemical cluster, while the former operation takes place near the “mining” site of the raw material.
As lignin is more polar than bitumen, we work with polar solvents instead, but otherwise adhere to the same similar hub (< 1 Mtons) and spoke (50-100 kton) strategy for CLO. A drawback of bitumen recovery is that solvent needs to be constantly recovered and sent back to the field. We avoid this drawback by matching the solvent used to the desired downstream product-market combination. For example, when targeting two known direct applications for lignin, being phenol resins or poly-urethane, we use a diol or phenol, respectively, as the solvent.
The resulting solvent-lignin oil can then be used as a partially bio-based feedstock for aforementioned applications. This way, green-minded producers of these materials do not need to invest in biomass storage facilities, nor in modifying their hardware to allow for solids co-processing. Alternatively, a dedicated downstream refineries, CLO may be processed at a larger scale, thereby allowing for the use of more complex (catalytic) systems. For this, we are developing pathways from CLO to, amongst other commodity chemicals, BTEX, cresol, and phenol.
Part of a larger ecosystem - partners..
Vertoro, Spanish for “Green Gold“, is a young Dutch spin-off from The Chemelot Institute for Science & Technology (InSciTe). InSciTe, in turn, is private public partnership between Royal DSM, the Brightlands Chemelot Campus, Eindhoven University of Technology, and Maastricht University. Vertoro has secured license agreements with InSciTe for two lignin related technologies. One produces Crude Lignin Oil (CLO) from ex-planta lignin (e.g., effluent from paper pulp-, cellulosic ethanol plants). The second does the same from in-planta lignin (e.g., wood). The total R&D and investment budget is approximately 10M€, including aforementioned pilot plant.
Building momentum - recent developments.
On March 7th, 2018, our contender for the “Google Android of the bio-based economy”, crude lignin oil (CLO), was nominated for the Bio-Based Chemical Innovation of the Year 2018 by Bio-Based World News. Now, roughly half a year on, we would like to share with Bio-Based World News and her readers what can best be described as quite the roller-coaster ride. In June 2018, we announced the closing of our first seed round with a 0.5M€ investment made by the Vertoro founders, Chemelot Ventures and Limburg Development and Investment Company (LIOF). A few months later, in August, we shared the first pictures of preparations for a 50 ton CLO per annum pilot plant at the Brightlands Chemelot Campus in the South of Netherlands. Just weeks later, in September, we shared our plans for a multi-purpose demo plant in Cordoba, Spain, spearheaded by UK-based Sainc Energy.
Open innovation = speed
We are firm believers in open innovation as this, as Google has proved with Android, is the best way to garner momentum for any new platform. Partnerships, upstream or downstream, are welcomed wholeheartedly. CLO samples, with your lignin-solvent combination of choice, can be provided free of charge and without cumbersome NDA’s or MTA’s. Joint scientific publications with industry or academia are welcomed as well. Contact me today so we can hasten the next oil revolution together!
Guest posts do not necessarily reflect the views of Bio-Based World News' editorial team and management.
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