A Solazyme Investor's Guide to 120,000 Tons of Renewable Oil
Last week we looked at the smallest and most important part of the industrial biotech industry: microbial production metrics. It is impossible to be profitable and successful without optimizing the microbes that power your platform. It is also critical to optimize the construction, commissioning, and ramp-up phases of a biorefinery to become profitable as quickly as possible. What is commissioning? How long does ramping up take? Why can't Solazyme investors expect 120,000 metric tons of oils to be produced by the end of 2014? Let's dissect these terms and lose the confusion.
Industry round-up to ramp-up
The list of public industrial biotech companies is growing quickly, although some of the best companies remain in private hands. Here are some companies to keep your eye on that are either currently undergoing ramp-up or looking to do so soon at their first facilities:
50 million liters
50,000 metric tons
Genomatica and Novamont
40 million pounds
18 million gallons
100,000 metric tons
Various oil profiles
Source: Company websites
There will be dozens of announcements this year and next on progress from the commercial operations of these industrial biotechnology pioneers. While it is the responsibility of the companies to provide investors with a complete view of their bio-based chemical platforms, I fear that many investors may be isolated by unfamiliar terms. After all, these are the first companies hitting prime time. Getting lost during this important chapter of development for these disruptive companies could have disastrous results.
Shake, stir, wait 12-18 months (or longer)
Completing the construction of a biorefinery is not the end of the story. Commercial operation of facilities goes through three major phases:
During commissioning all equipment is tested and measured to ensure that it operates as designed. This usually consists of taking a biorefinery's upstream equipment (microbial seed trains, bioreactors, holding tanks, injection units, and the like) and downstream equipment (holding tanks, separation equipment, and the like) through several consecutive production runs. After successfully commissioning a facility, the doors are sprung open, engineers are stuffed into the control room, interns are banned (they just screw things up anyway), and the next phase begins.
Amyris' first commercial scale Biofene facility in Brazil may have come on line six months ago, but it will take nearly three years to reach full nameplate capacity of 50 million liters. Source: Amyris
Production at a biorefinery does not start from the often-quoted numbers, much to the chagrin -- or surprise -- of investors. In fact, it can take 12-36 months to reach the final production capacity, or nameplate capacity, of a facility. The time between start-up and nameplate operation is called ramp-up, which gradually raises the amount of product created. This gives engineers time to work out kinks that were not encountered during commissioning or conceived of previously while optimizing the facility's process scheduling -- the carefully orchestrated schedule of every piece of equipment in the facility.
Not all ramp-up is created equally, however, because companies choose to upgrade equipment on different schedules. For example, the jointly operated facility between Solazyme and Bunge in Brazil will take 12-18 months to reach 100,000 metric tons of capacity, while Amyris' first facility will gradually be ramped to 50 million liters of annual capacity over the course of 36 months. Similarly, Gevo is gradually bringing all of its production trains on line, so ramp-up will occur in multiple phases for the same facility.
That means that operating at less than nameplate capacity is a consequence of ramp-up. Despite having an annual nameplate capacity of 100,000 metric tons of renewable oils and beginning operations in the second half of 2013, Solazyme Bunge will not produce 100,000 metric tons of products between start-up and the second half of 2014.
Nameplate is the end, right?
Eventually, ramp-up reaches full nameplate capacity. Even this phase is not the end of the story, however. Engineers will continually improve the process to improve efficiency, lower manufacturing costs, and even increase annual production capacity. Of course, building biorefineries is only half of the commercialization equation. Products -- you know, the stuff actually generating cash -- must also be commercialized independently of equipment.
Foolish bottom line
There is a difference between bioreactor volumes and realized product volumes, but the interesting thing with synthetic biology is that we still don't know the ceiling. In 20 years from now, Solazyme's heterotrophic algae could be much more efficient at producing tailored oils and Amyris' will be producing more than one end product with the same strain of yeast. Their original facilities in Brazil, in Moema and Brotas, could eventually have their nameplate capacities raised on the heels of scientific advancements alone. No extra bioreactors required!
There are numerous intricacies involved in industrial biotechnology, but with the right information you won't get lost in some inevitably confusing press releases. I am a believer that the industry can really change the world -- and perhaps your retirement -- but it is important to remain patient and take a long-term approach. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich", not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.
The article A Solazyme Investor's Guide to 120,000 Tons of Renewable Oil originally appeared on Fool.com.
Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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