The Chemical Industry Needs Energy Too

Biomanufacturing to save the day?

It’s been a while since I’ve written an original piece and my timing on this seems to be eerily timed with a recent article by

Packy McCormick

in Not Boring. The part that resonated with me from Packy and Sam:

As we speak, everything that moves, heats, lights up, computes, or converts energy is being rebuilt to perform better, faster, cheaper, quieter, and as a freebie, cleaner around electric technology.

Simply put: anything that can go electric will.

Or rather, anything that can go electric economically will.

The chemical industry has forever been intertwined with petroleum and energy derived from petroleum. This is where we get the name petrochemicals as in the majority/all of our chemicals come from petroleum as I’ve already explained a few years ago. There is a fundamental need for both feedstocks to make chemicals such as naphtha and ethane to make things like ethylene, propylene, phenol, and styrene and all of those chemicals getting combined to make the things that enable our modern lives such as computer chips, paint, shoes, battery separators, and composites that go into airplanes, bikes, and cars.

Some chemical reactions get facilitated by electricity, hence the name electrochemistry, but for the most part our industry is dependent on burning things like natural gas to produce heat to produce steam. There might be a situation where someone like DOW figures out a nuclear powered electric steam boiler:

Dow's proposed advanced small modular reactor ("SMR") project is being developed by its wholly-owned subsidiary, Long Mott Energy LLC. The project is focused on providing Dow's UCC¹ Seadrift Operations manufacturing site ("Seadrift" or the "site") with safe, reliable, and clean power and industrial steam replacing existing energy and steam assets that are near end-of-life. The project is supported by the U.S. Department of Energy's (DOE) Advanced Reactor Demonstration Program ("ARDP") which is designed to accelerate the deployment of advanced reactors through cost-shared partnerships with U.S. industry.

Steam is inherent to chemical transformations right now as it provides the much needed heat for starting and maintaining chemical reactions as well as the energy needed for distillations. For the most part, steam is always generated from natural gas and produced on site at a chemical plant. SMRs appear to be poised for deployment in Tennessee with a fresh deal inked just last week between Entra1, NuScale, and the Tennessee Valley Authority (TVA).

Currently, natural gas is one of the most important energy sources we have to power the electrical grid and is a natural complement to things like solar, wind, geothermal, and nuclear. During peak loads or periods where there isn’t enough energy being put into the grid natural gas is there to save the day. Natural gas power plants can be turned on relatively quickly, produce abundant electricity with carbon dioxide as a main byproduct, and be powered down when not needed. Natural gas has been affordable for as long as I can remember and the majority of the cost is in the infrastructure. The issue is we have a big demand for energy on the horizon. There will likely be two key growth areas for energy demand:

1. Data Centers to power compute (e.g., artificial intelligence)

2. Residential and commercial air conditioning.

If you haven’t noticed the world appears to be warming. In some places like Paris, France it has been noted:

France has recently experienced its second heat wave of the summer, with temperatures reaching record highs last week in the southwest and heat alerts covering three-quarters of the country. In Paris, this has become the new normal. Eight of the 10 hottest summers recorded in the city since 1900 occurred since 2015.

In 2019, temperatures in Paris hit a record, nearing 109 degrees. Scientists say it will get worse, particularly since climate change is warming Europe at more than twice the global average.

If you’ve been to Paris then you know that air conditioning isn’t as abundant as it might be in New York City, where it’s a must to survive the summer. Many Europeans don’t appear to love air conditioning like we do here in the United States:

The numbers of this divide are stark: nearly 90% of US households have air conditioning, compared with around 20% in Europe, with some countries falling far below that figure.

In addition to a warming planet and the need for air conditioning (I write this from my air conditioned dining room table) there is also the rapid expansion and build out of data centers to feed the processing power needed for artificial intelligence.

A recent report from the IEA states that electricity demand from data centres worldwide will double by 2030 to 945 terawatt-hours and that AI will be the most significant driver of electricity demand increase globally. Here in the United States the power consumption from data centers will account for half of the growth in electricity demand between now and 2030. The United States will consume more energy for data processing than all energy intensive manufacturing combined including aluminum, steel, cement, and chemicals.

My prediction is that as temperatures continue to rise and demand for energy to power AI increases we will need to figure out a way to become more efficient in chemical manufacturing. BASF, the world’s largest chemical company, has sought permanent volume reductions within the largest chemical manufacturing site in Germany and has made multiple cost reductions with the plan for them to be permanent. ExxonMobil is looking to divest their European chemicals business. Things may continue to turn in a bad way here.

Chemicals and subsequent polymer manufacturing are already commoditized and primed for new ways to reduce costs. I predict this is where biomanufacturing and catalysis still have roles to play in the future. I think the main driver of adopting these technologies in the future is less about sustainability and more about it being the most cost efficient route to produce a target chemical or a new chemical that provides increased value or efficiency to a specific end market.

Biomanufacturing

I’ve written about biomanufacturing already with respect to biosurfactants and downstream processing for poly(hydroxyalkanoates). In essence, it’s never been easier to engineer a microorganism to produce whatever it is that you want from readily available feedstocks such as sugar. If you want to make industrial chemicals at scale and use minimal energy then fermentation might be one of the best routes to get there provided you can produce enough sugar to meet demand and your downstream processing is straight forward. The trick here is keeping sugar prices low and not increasing food production costs because farmland is being used to make chemicals to make yoga pants. This may also get complicated from second order effects such as ammonia prices skyrocketing due to high energy costs and being passed down to farmers.

The advantage of fermentations is that they occur at relatively low temperatures in water. A primary issue with the downstream processing is the potential need to remove water. This is not a trivial step and while these processes might consume energy they are nothing compared to steam cracking olefins or running a vacuum distillation at 200 C for 9 hours.

Biomanufacturing is already happening and becoming more widespread everyday in the areas below in green in the pyramid where the top is the most expensive and the bottom is the least expensive.

You don’t have to take my word for it though. BASF is investing in expansion of biomanufacturing in Ludwigshafen for crop protection (e.g., fungicides and insecticides). Croda is fermenting sophorolipids and Evonik is fermenting rhamnolipids. DSM and Firmenich merged to become a biomanufacturing powerhouse across personal care and agriculture/food focused businesses.

With respect to food based companies, I actually enjoy eating the fermented Quorn mycoprotein nuggets and I hope they can succeed in the space even as they look to start blending with meat. Ongeo is fermenting egg proteins.

I think we are the beginning of the beginning for industrial chemical fermentations. No one has truly succeeded yet, but we just need one winner to open up the entire space.

Enzymes and Catalysis

I’ll file enzymes under biomanufacturing since they are a biological catalyst. I’ve written a lot about enzymes and if you aren’t aware I’m bullish on the technology. Enzymes can facilitate room temperature reactions and there are a plethora of start-ups out there trying to make them more useful, affordable, and ubiquitous. Novozymes, the OG in the space, is in everything from water purification to food production to industrials. While I don’t think enzymatic catalysis can be used for everything they are a useful tool that enables stereospecific reactions to occur and can be selective to specific parts of large molecules. I think enzymatic catalysis tends to be in the pharmaceuticals, food, and personal care chemicals space where molecules are often bio-derived and often benefit from selective, high yielding reactions that can occur in water. I suspect industrials will take some time as water is not often the solvent of choice—if there is a solvent at all.

Looking Forward

As energy prices continue to rise and as demand continues to rise we will start to see more tension across pricing on industrial farming, sugar production, and meat production (ammonia pricing, cooling costs, cleaning). Grass fed beef, maybe the OG in biomanufacturing meat, is having a resurgence and people of means are more interested than ever in the provenance of their meat.

As we move into the future of biomanufacturing and biomass becomes a more centralized piece of our economy I suspect sugar will become a central topic. The majority of the sugar in the world is produced/controlled by a few countries such as Brazil, Thailand, and France where high sugar crops such as sugarcane and sugar beats thrive. We already see it here with corn and ethanol in the United States. Some questions I’m pondering:

• Is growing more biomass to feed a growing fermentation industry the correct way forward?

• Will carbon dioxide based feedstocks take off and be competitive? I won’t hold my breath for sustainable aviation fuel.

• Using sugar and fats to make surfactants requires those sugars and fats to be refined and harvested from things like sugarcane and soybeans. If we were to switch away from oil production completely for our chemicals infrastructure would we have enough landmass to grow enough carbon via sugar?

• Will small modular nuclear reactors be a solution for lowering ammonia costs?

I think crude oil and it’s refined products will still have a very long lifetime for industrial chemicals and the opportunities in biomanufacturing will be when biomanufacturing of the target molecules is competitive on price with equivalent performance.

When we see these conditions met for industrials?

I think biomanufacturing has the opportunity to completely dominate a market and the issue would be being able to meet demand without causing oversupply or influencing sugar prices too much.

When energy prices are high the use of biomanufacturing could be a pressure relief valve that gets turned on to help transition to a lower energy demand. The tricky part is finding the right areas for fermentations and catalysis to succeed and not being overly exposed to a potential resurgence in cheap natural gas once the pressure has been taken off (see Solazyme becoming wildly unprofitable once oil prices came back down).

Let me know if you agree or disagree in the comments.

Tony