Wednesday, March 27, 2013

Ten Green Googles

Vinod Khosla, the billionaire Silicon Valley venture capitalist, told Bloomberg TV in October of 2010 that "there'll be ten Googles in the next ten years in energy." 

When I was a young child my father would sing a lullaby to me that was “ten green bottles hanging on the wall and if one green bottle should accidently fall there’ll be nine green bottles hanging on the wall”.  It then continued that if there were nine green bottles and one should fall there would be eight green bottles.  This continued till there were no bottles hanging on the wall.  Here is a youtube link that sings the lullaby to you.

Vinod is the VC who brought us the green companies of Kior (Condi is on the board), Range Fuels, Cello, Calera, and several other green bottles that could not hang on the wall of the laws of thermodynamics.

I suggest that readers watch the two videos.  The lullaby first and then Vinod’s fairytale interview with Bloomberg back in 2010.  Here is the link to that interview

Talking of utter thermodynamic failures our old friends at A123 asked the SEC to accept a name change for the company.  It will now be called B 456.  Here is the SEC link to this effect.

 B456 used to supply batteries to Al Gore's wonder car company Fisker.  Fisker is on its last legs.  It furloughed all of its workers and has engaged a bankruptcy lawyer just in case Al Jazeera cannot save the struggling company that took almost $200 million in loans from Chu Chu in the name of we the American people.  Here is a link on the latest from Fisker that is hanging onto the wall by a whisker.

I don't think fiction could be as crazy as this.  Khosla claims the oil companies think "linearly".  At least the oil companies know that thermodynamics rules.  Khosla should have stuck to something simple like knitting.  Thermo was way over his head.  Al Gore should have stuck to counting hanging chads rather than hanging green bottles.

Sunday, March 24, 2013

More on Acetic Acid and Ethanol

Several readers emailed me to ask if I was sure the yield of ethanol from acetic acid on a mass basis was only 75%.  I am actually sure it is less than 75%.  One mole of acetic acid will yield one mole of ethanol.  The molecular weight of acetic acid is 60 the molecular weight of ethanol is 46.  If the reactions are fully efficient and no reagent is lost the maximum mass yield of ethanol from acetic acid is 46 divide 60 or 76.6%.  With two reactions to get from acetic acid to ethanol each step will have a yield loss.  In the best of cases a 90% yield is pretty much the highest one can expect in an industrial reactor.  With two reactions one multiplies 76.6% by 90% twice and the optimistic industrial yield of ethanol from acetic acid is 62%.

Secretary Vilsack and his team at the USDA should perform a thorough and detailed analysis on the claims Zeachem has made.  If indeed the process should stop at the first step of making acetic acid then the USDA should significantly reduce the loan guarantee and simply tell Zeachem to demonstrate the biological production of acetic acid from cellulose and hemicellulose.  I am pretty sure the termite bugs will make a dilute solution of acetic acid and then Zeachem can sell vinegar to Whole Foods for $25 a bottle and the USDA may see five cents back on the dollar for the loan guarantees even if these loan guarantees are reduced to $50 million from almost a quarter billion.

I suggest we all write to our representatives in the US House as well as our Senators to apply $200 million of these savings to the fiscal cliff.  Spending money to make wine out of vinegar makes no sense when there is no money to keep the Whitehouse open to the public.  Even Marie Antoinette would not say if they have no wine let them drink vinegar.   Let’s see what Obama, Vilsack, Boxer, Feinstein, and Huffman do when I contact them.

USDA – Turns Vinegar Into Wine and Dollars Into Manure

I was asked to comment on Zeachem a company that turns wood into ethanol.  I have often blogged that the idea of cellulosic ethanol is a waste but I was particularly interested in Zeachem’s approach.  They convert the cellulose and hemicellulose in wood into vinegar (Acetic Acid) using a naturally occurring bug that is present in termites.  They also convert the lignin in the wood into hydrogen.  In a traditional chemical plant they react the acetic acid to form ethyl ester and then use the hydrogen from the lignin to produce ethanol from the ethyl ester.  Lots of chemistry steps to yield the biofuel

The US DOE is done with wasting billions so now it is the USDA’s (Dept of Agriculture) turn to blow our money.  Ag Secretary Vilsack was happy to provide almost a quarter of a billion dollars of loan guarantees to Zeachem for a facility in the port of Morrow in Boardman Oregon that will use locally grown poplar trees for the source of wood

OK so the USDA wants to turn vinegar into wine in a place called tomorrow.   For argument sake let’s dream that the bugs derived from termites can effectively turn cellulose into acetic acid (no bloody way they will).  Why not just stop at selling biovinegar.  Acetic Acid has a value of approximately $500 a ton.  Acetic acid is heavier and denser than ethanol and there are yield losses through the multiple processing steps to get the ethanol.  Also the gasification of the lignin to hydrogen is expensive and wasteful of energy. 

Let’s assume 0.75 pounds of ethanol result from one pound of acetic acid, therefore the cost of only the acetic acid is $666 per ton of ethanol.  Adding labor, maintenance, capital recovery, catalysts, and other costs will probably double this cost to around $1,400 a ton of ethanol.   Also the lignin could simply be burned as a fuel and this should be charged as a cost to the production of the ethanol rounding out the ethanol cost at approximately $1,500 a ton.  At $2.50 a gallon a ton of ethanol sells for approximately $750 a ton.  Wow make it for $1,500 sell it for $750!!  This is called Obamanomics.

So why in heavens name would a sane person convert the acetic acid they claim they make into ethanol they claim they make when the bio acetic acid is a more “profitable” and less risky business.   Of course the answer is that President Obama and Secretary Vilsack cannot dole out a quarter of a billion dollars for biovinegar when it is much more “palatable” to dole out the money for biofuel.    You see Oregon is known for its award winning wines not for its balsamic.

The folly of making vinegar into wine only can play out with free money from the government.  In rainy dreary Oregon the foresters are happy as the sun will come out in Morrow to grow the poplar trees.  Who said government money does not grow on trees. 

Saturday, March 23, 2013

Condi Talks - Some Lemmings Listen

Last week I blogged that Condi Rice gave the thumbs up to the “reality” of cellulosic transportation fuels and to the wonderful outlook of KIOR a company where she sits on the board of directors.  Actually Condi also has a close business relation with Vinod Khosla who is a large shareholder in KIOR.   The statement in KIOR’s press release attributed to Condi must have been vetted by a team of lawyers.

The statement was as follows:

"KiOR is changing the American energy equation by innovating and commercializing an entirely new generation of hydrocarbon-based diesel and gasoline fuel. By making the promise of cellulosic fuels a reality, KiOR demonstrates that these fuels are an attractive option for lessening America's dependence on foreign sources of energy."

KIOR announced this just as the market opened on Monday morning.  Partly due to Condi’s statement the stock moved up $6.10 early in the trading day from $5.88 where it opened.  The market then digested the earning and the real statements by the CFO in the earnings call where he stated that shipments of the cellulosic fuel were essentially zero.  By Friday (yesterday) KIOR stock has dropped to $5.13. 

I am no legal expert but I do believe that folks who bought the stock early on Monday morning relying on the statement of the former secretary of state may have a case against her and the company.   Note the CFO’s statement were made later in the day and then the stock headed down. 

I found an interesting video links that relates to this blog.

This is an old ad for a stock brokerage house E F Hutton that had the ad tag line “when E F Hutton talks people listen”.    E F Hutton is now long gone and is party of Citi Group’s and Morgan Stanley’s too big to fail empires. 

The lemmings in the video were the investors who bought KIOR first thing on Monday.  Condi you may be a genius, you may be Khosla’s strategic adviser, but you are going to look a long time for KIOR’s missing weapons of mass combustion.  I still have a target price of $3 on KIOR.

Wednesday, March 20, 2013

KIOR – Ships Essentially Zero Biofuels But Condi Thinks This Is Big

On Monday KIOR announced their results for 2012.  They also announced they shipped the first commercial quantity of biodiesel made from wood chips in Mississippi.

The link to their full press release is below.

Of particular interest to me is the statement in their press release by Condi Rice ex secretary of state and now a board member of KIOR.
Condoleezza Rice, former U.S. Secretary of State and a current member of KiOR's Board of Directors, added, "KiOR is changing the American energy equation by innovating and commercializing an entirely new generation of hydrocarbon-based diesel and gasoline fuel. By making the promise of cellulosic fuels a reality, KiOR demonstrates that these fuels are an attractive option for lessening America's dependence on foreign sources of energy." 

Ms. Rice I think you went a little too far in stating that KIOR made the promise of cellulosic fuels a reality.  They shipped  a small amount of cellulosic fuel blended together with normal fossil based diesel.

In their earnings call their CFO stated : 
“As Fred mentioned, while we’ve commenced shipments but have not cut over yet to reaching or extended operations and we don’t expect to be cut over for some time. As a result shipments can be expected to be a bit sporadic as units operations are optimized over the months again, gradually smoothing later in the year as the plants focus turns from lining out to maximizing utilization and efficiency. Until then though, for planning purposes we are assuming that our 2013 total production target of 3 to 5 million gallons will simply occur linearly starting from essentially zero in Q1.”
Here is the link to earnings call

The CFO admitted commercial shipments were essentially zero!!

The US DOE is counting on KIOR to ship 57% of all cellulosic fuel the DOE hope will ship in 2013.  This is 8 million gallons of ethanol equivalent out of a total of 14 million gallons of ethanol equivalent cellulosic fuel.

I think it is too early call KIOR a reality.  I think KIOR is making soot, smoke, and very little liquid fuels out of wood.  Ms. Rice this may just be another case of the mistaken “weapons of mass combustion” that probably will never be found.  The DOE also has exuberant and irrational expectations for KIOR.  The Green Machine is going on record that KIOR will ship less than three million gallons of ethanol equivalent cellulosic fuel in 2013.  Credit Swiss lowered their target price of KIOR from $25 to $20 today, I have a target price of $3.