Renewable Chemicals and Materials – The Competitive Landscape

Algae

Algae are fast-growing, simple, hardy organisms that have been touted as a source of biomass for fuels since the US government's Aquatic Species Program (ASP) in the 1970s. Despite billions of dollars spent on research, numerous technical and economic challenges have kept large-scale cultivation for fuel a niche process. Algae can be used for other applications besides fuel, however, and determined developers continue to search for profitable markets for higher-value co-products in the biobased chemical and materials sector, ranging from baby food to polyethylene.

Whereas a few individual players in this space may make strides and distance themselves from the pack, broad-based improvement is not expected in the algae field as a whole. The same problems that tabled the ASP have plagued Greenfuels (Cambridge, MA) and other algae developers. Once considered an early leader in the space, the sun set on Greenfuels three years ago. So, while algae developers and organizations like the Algal Biomass Organization profess that a breakthrough in algae is imminent, and some firms might become successful, Lux Research has very low expectations for the group as a whole. If investors nevertheless decide to get involved in the space, they are advised to be extremely cautious and choosy in picking partners.

Biocomposites

Biocomposites, including polylactic acid, starch-based polymers, and biofiber-reinforced materials, are the original bioplastics. They are generally used to make resins, coatings, and adhesives that are partially renewable or biodegradable. Unfortunately, they are often expensive or have performance shortcomings such as brittleness or low melting temperature that make them imperfect substitutes for petroleum-based polymers. While the barriers to entry for biocomposites are not as low as in the field of algae, biocomposites are relatively easy to manufacture.

Both mature players and recent entrants populate the biocomposites landscape and are actively developing products. A large number of developers produce commodity compounds that appeal to application developers serving an environmentally friendly niche market. Some of these developers are small university spinouts, while others such as NatureWorks (Blair, NE) are part of large incumbent chemical companies. Cargill (Minneapolis, MN), Teijin (Oskaka, Japan), Dow Chemical (Midland, MI), and PTT Chemical (Bangkok, Thailand), for example, have all held a stake in NatureWorks at some point. A number of innovators are developing new technologies to lower cost and improve performance of such materials.

Until recently, biocomposites were synonymous with bioplastics, but drop-in replacements for materials already widely used, such as biobased polyethylene, are no longer novelties limited to lab-scale quantities. Such developments are the biggest threat to biocomposites; even when a biocomposite offers superior performance, biobased drop-in materials have an advantage because downstream manufacturers do not have to retool their production lines. As producers of drop-in biobased materials like Braskem (São Paulo, Brazil) and Amyris (Emeryville, CA) benefit from increases in both production scale and cost-competitiveness, biocomposites developers will need to focus on markets in which being biodegradability, renewability, and improved handling gives them an edge.

Biocatalysis

In the biocatalysis sector, mature, integrated firms manage well-established commercial streams, even as new entrants join the fray. Bioprocessing firms develop whole cell biocatalysts that make useful products with engineered microbial metabolism. At one time, the cost of enzyme purification was the main hurdle to using biology to do industrial-scale chemistry. Now, the engineered enzymes are often expressed in whole cells, where they remain, and metabolic and cellular systems are fine-tuned to optimize yields, titers, productivity, and product specificity.

Several years ago, bioprocessing companies largely focused on biofuels and struggled to attract sufficient funds to develop and bring commercial-scale capacity online. Those that changed course and began to pursue opportunities overlapping chemicals and other marketable products were more successful at scaling up production and generating revenue. As these incumbent companies mature, recent entrants face some new challenges.

Cellulosic Processing Technology and Crop Modification

The microbes that produce biobased materials and chemicals require sugar, and considerable investment is being made to recover sugars from non-food sources efficiently and inexpensively. Unlike the sugars readily available from food crops like corn and cane, however, sugars from cellulosic material—the main component of plants—are tightly bound to each other and are more difficult to release Approaches used by companies actively pursuing this area include acid treatment, enzymes, and even genetic modification of the feedstock.

Several companies are tinkering with biomass genetics to create shortcuts in the path from field to product. These crop modifications include introducing genes that protect the plant from drought or salt stress or increase its production of a desired compound While some of the technologies and methods in development are specific for producing biobased materials and chemicals, others apply equally well to food crops.

Collaboration is crucial for the eventual success of companies developing crop modification technology. Developers do not directly compete against each other, since most are a few years from market entry. Even after products are launched, the technologies can, at least in theory, be stacked or integrated with each other in one organism. However, when developing their corporate strategies, both current and future, companies need to consider the industry dynamics, vis-à-vis other players downstream and even outside the space. Crop modification companies will greatly advance biobased materials and chemicals if they can overcome key challenges such as acceptance of genetic modification techniques and the resulting products, achieving technically and economically measurable benefits, and connecting with addressable markets.

Waste Gas and Thermochemical Processes

With a global imperative to reduce carbon dioxide emissions, technologies that consume what would otherwise be released into the environment as pollutants in the form of waste gases have gained considerable interest. Such technologies not only sequester carbon, they also convert it into useful products such as polymers, platform chemicals, specialty chemicals, and other basic materials.

The waste gas-to-chemicals space is, however, cluttered with idealistic but ineffective approaches. Arguably, all biomass extracts carbon dioxide from the atmosphere and converts it to materials like wood, food, and flowers and, in the absence of a carbon tax or other polluter-punitive mechanism, companies will have to compete with nature's carbon capture mechanism as well as with each other for feedstock. The most significant challenges remain developing attractive process economics and finding ways to implement capture at production sources, milestones that few companies have accomplished successfully at scale.

Thermochemical technologies, on the other hand, promise the high yields of bioprocessing without the finicky nature of microorganisms. Instead of fermenting sugar to produce biobased materials, thermochemical routes use catalytic and conventional methods. Given the field's already strong advancements, companies are likely to focus more on scale-up and commercialization than on novel science. Affordability and flexibility will be important for success.

Other Biobased Materials and Chemicals

Outside of the major categories described above, there are dozens of companies developing innovative solutions to pressing problems in the biobased materials and chemicals space. Several players have demonstrated strong technologies and business execution. Some of these firms provide services for industrial biotechnology, such as gene synthesis companies making complex biochemistry accessible. Others offer new ways to modify incumbent biobased materials like wood, paper, and textiles for higher-value end uses. Some innovators are developing methods to replace petroleum-based materials with conventional and readily-available biobased materials. These companies do not directly compete with each other, making it more difficult to make comparisons, but clearly defined factors can be used to evaluate them.