Renewable chemicals: The clean tech underdog

In this column, Kelly Ogilvie, CEO of Blue Marble Biomaterials, discusses how renewable chemicals have not seen the federal support that biofuels and renewable energies have received, and how this may be stunting the clean tech industry from developing its most valuable assets.

A specter is haunting the renewables industry: The specter of cheap petroleum. All the powers of the political and financial old guard are propping up this illusion with tax relief and subsidies worth $740 billion worldwide.

It is clear that renewables are competing on an uneven playing field. But even within the renewable industry, misplaced subsidies are stunting the growth of the industry’s most valuable and competitive assets.

As we try to wean ourselves from petroleum and fossil resources in general, legislators are focusing on obvious drains: fuel and energy. The Renewable Fuels Standards passed in 2007 has vowed to include 36 billion gallons of biofuel per year in the United States by 2022.

Meanwhile Renewable portfolio standards are setting goals for renewable energy use in each state. These goals are being aggressively pursued through tax incentives, tax credits, feed-in-tariffs and loan/grant programs. Support from the Department of Energy and the Agriculture Department have not only helped individual projects, they have also bolstered public interest and investment in biofuels and clean energy. While fuel runs our vehicles and energy powers our lights, there is something even more ubiquitous that has been left out of this agenda: Petrochemicals.

Ninety-six percent of consumer goods contain chemicals made from petroleum -- electronics, paint, cosmetics, food and nearly everything we touch contain petrochemicals. More than three million barrels of oil per day are used in their production. While this is a relatively low volume compared to fuels, it represents a significant portion of profits for the industry.

A quick price comparison between petroleum-derived fuels and chemicals reveals just how lucrative these products are. Conventional diesel is currently selling at an average $3.09 a gallon and acetic acid (a chemical derived from petroleum feedstock) is selling for $167.01 a gallon.

Petroleum and other fossil resource producers use high-value chemicals to internally subsidize the cost of low-value products like fuel.

Renewable chemicals are profitable at price parity with petrochemicals, even at a small scale. For examples, starting next year Blue Marble Biomaterials plans to sell renewable chemicals alongside petrochemicals through Sigma-Aldrich. Renewable chemical biorefineries can immediately stand alone to be profitable or integrate with biofuel and bioenergy facilities to subsidize their low-margin products. Despite this promising business model, renewable chemicals have not received the attention, funding or support that biofuel and bioenergy have.

In fact, federal subsidies for the bio-derived sector has almost exclusively bolstered low-value, low-margin products. Renewable chemicals did used to be on the federal funding agenda, though never the focus of targeted development. The USDA’s 2002 farm bill allowed biorefineries that focused on chemicals to receive assistance in grant/loan programs. Now, under the 2008 farm bill, biorefineries that produce chemicals must primarily be fuel focused.

The Energy Department's Office of Energy Efficiency and Renewable Energy’s Biomass Program provides a little more support for renewable chemicals. Starting in 2009 the DOE made an encouraging shift to support integrated biorefineries that produce both fuels and chemicals. In the same year, the DOE funded 19 integrated biorefineries; of these, one was purely a renewable chemical refinery, four others produced chemicals and fuel and the rest were 100 percent focused on fuel or ethanol.

Federal support for biofuel and bioenergy is essential for the renewables industry as a whole, but it can be done more effectively by supporting the most immediately profitable sector of the industry.

Where policy goes, money follows -- markets, investors and innovators look to where government support is as an indicator of future success. With no explicit, direct federal support for renewable chemicals, the renewables industry’s most valuable products remain in the shadows. Biobased chemicals and products need tax credits, tax incentives and loan/grant programs to provide now-elusive capital to the industry. If not, we could be missing a great opportunity for U.S. manufacturing. The U.S. exports more chemicals than any other country -- about 20 percent of global exports. If the U.S. can apply this leadership to biobased chemicals and integrate biofuels and bioenergy, we can lead in the post-oil economy.

Wisely spent subsidies within the renewable industry is the first step. The second step is uniting to overthrow the existing subsidies for polluting and non-renewable resources so renewables can compete on an even playing field.

Let the old guard tremble at a renewable revolution. We have nothing to lose but our constraints. We have a world to win.

More resources on Renewable Chemicals:

The USDA Biobased Products Market Potential and Projections through 2025

Biotechnology Industry Organization: Biobased Chemicals and Products

Kelly Ogilvie is the co-founder, president and CEO of Blue Marble Energy and Blue Marble Biomaterials. He has extensive planning, strategy and outreach experience from over a decade of work in politics and finance. Before founding Blue Marble, he held positions in the Seattle Chamber of Commerce, Vulcan Inc., the Washington Governor’s Office and the Seattle Mayor’s Office.

The Pivotal Leaders business network aims to grow the Northwest cleantech industry by cultivating leadership in Oregon, Washington, Idaho and British Columbia. Through this twice-monthly column, members of the Pivotal Leaders network take turns discussing some of the most pressing issues and trends facing cleantech entrepreneurs in the Northwest and beyond.