Tag Archives: Total

Doing Well by Doing Good: Finding an Opportunity for Renewable Energy Investment as a Financial Vehicle for Sustained Growth

For a number of reports, Lux has relied on electricity grid mix forecasts and future plug-in adoption models. In this analysis, we further investigate these projections in the context of energy infrastructure capital expenditures and carbon emissions. The implications of how energy infrastructure is invested in over the next two decades are tremendous, ranging from flat capital expenditures with grim environmental consequences, to a growing investment market that achieves climate targets. We’ll investigate the conditions that lead to these divergent energy capital expenditure scenarios to understand the key drivers and implications. Continue reading

What Are the Major Alternative Fuels Interests of Oil Majors?

As the alternative fuels industry diversifies and scales up, financing is always the key to technology commercialization. While several sources of financing drive the whole industry forward, we investigate the trends of corporate financing from oil majors, based on a non-exhaustive database of over 1,000 deals and partnership engagements from 2000 through September 2014. With the focus on financial engagement, we only look into the private placement, equity stake, joint venture (JV), mergers and acquisitions (M&A), other than general partnerships. For example, we counted BP’s bioethanol JV plant with British Sugar, but we didn’t include BP’s research work with the Energy Biosciences Institute. We then drew a graph based on the investment counts (rather than invested companies) of the seven most activate oil majors in our database, namely, Shell, BP, Total, Valero, Chevron, Petrobras and Reliance. Particularly, repeated investment activities on the same company would be counted as multiple. We further sorted the investment by six core technology families – algae, biomass to sugar, catalysis, crop development, fermentation (and enzyme development), and pyrolysis/gasification.

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From our analysis of their activities in the alternative fuels industry, we find that:

  • BP leads the investment frequency in a variety of technology families. Particularly, it has a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin (client registration required) and Mendel Biotechnology (client registration required). It also continues investing on biomass to sugar technology including to handle cellulosic biomass, such as REAC Fuel (client registration required).
  • Shell is not a fan of crop development, but has a wide coverage on other technologies. For example, it invested on multiple rounds and formed a JV with Iogen (client registration required), but terminated the JV in 2012. Then the oil giant formed partnerships and JVs with Codexis (client registration required), Cosan, and Novozymes to continue its interests in cellulosic ethanol. Shell shifted its shares in Codexis to Raizen, its ethanol JV with Cosan and “formed the largest sugar and ethanol company in the world”. It also partnered with Virent (client registration required) on the biomass catalytic conversion to produce renewable gasoline, and Cellana (HR BioPetroleum) on algae biofuel. Moreover, Shell Foundation also funded Husk Power System (client registration required) on gasification development.
  • Total and Chevron are the most active corporate investors in the fermentation domain. Total did the private placement on the IPO of Gevo (client registration required) and formed a JV with Amyris (client registration required) with both focusing on corn and sugar cane feedstocks. Gevo is focusing on isobutanol fermentation and Amyris is doing the bioconversion to produce isoprenoids. On the other hand, Chevron invested in Codexis (client registration required) and LS9 (client registration required) with its concentration on the genetic engineering, while LS9 was acquired by Renewable Energy Group in early 2014 (client registration required). All invested companies by these two giants are diversifying their revenue streams with drop-in fuels, specialty chemicals, and/or drugs in downstream markets.
  • Velero has a strong focus on the drop-in fuel production either by bioconversion or catalysis. Valero owns 10 facilities in the U.S. with over 1,000 MGY corn ethanol capacity. However, it is also interested in cellulosic ethanol with its funding of Qteros, Mascoma Corporation (client registration required), and Enerkem (client registration required). Additionally, the focus on waste feedstock can be reflected by its investments in the ill-fated Terrabon (client registration required), which was focused on wet waste-to-gasoline.
  • Investments of oil majors in developing countries are more constrained by local resources and policy drivers. For example, Reliance is investing the algae technology developers such as Algae.Tec (client registration required), Aurora Algae (client registration required), and Algenol Biofuels. Petrobras is concerned with fuel production from sugar cane or bagasse, such as BTG-BTL (client registration required) and BIOecon, which combine the feedstock advantage and local policy driver. Other oil majors not listed in the graph, such as Chinese oil majors, Sinopec and PetroChina (CNPC), are shifting their focuses from food ethanol to cellulosic ethanol and coal-to-ethanol, which is responding to the call of the Chinese government to discourage the food ethanol industry (see the report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.)
  • Less active oil majors in this space include ExxonMobil and ConocoPhillips. They only made sporadic investments – such as Synthetic Genomics (client registration required) by ExxonMobil and ADM by ConocoPhilips. Additionally, ExxonMobil mobile recently teamed up with Iowa State University to research pyrolysis.

Integrated Daylighting Systems Go Mainstream in 2013

2013 proved to be a banner year for integrated daylighting and artificial lighting systems. These systems became widely available across multiple geographies, exhibited low payback periods and attractive financial returns, and the technology developers saw their revenues and profit margins rise. A combination of technology, policy, and financing developments have led to this success.

The basic idea behind an integrated lighting system is simple – to let daylight in, without the glare, so as to reduce artificial lighting consumption. There are benefits – lower electricity consumption, enhanced user comfort, and, in some instances, a measurable uptick in the retail business or employee/student productivity. Our conversations with architects lead us to conclude that to realize the full benefits, relying on users to turn off the lights is not a reliable strategy. Therefore, there is the need for integrated solutions combining daylighting skylights or glazings with backup light-emitting diode (LED) or compact fluorescent light (CFL) lighting systems. The integrated systems necessitate use of daylight and occupancy sensors, so that when a room is occupied and the daylight falls below a set level (e.g. 500 lux for retail or 150 lux for industrial storage), the backup lights turn on.

Lux’s analysis indicates that a state-of-the-art daylighting skylight installed in southern California will have a payback period of three years, translating to a return on investment (ROI) of 31% (client registration required), assuming system lifetime of 10 years and cost of capital at 7%. Using backup LED lights with daylighting and occupancy sensors will increase the upfront cost somewhat (e.g. currently at $1/ft2 for Skyshade in India, translating into $0.04/lumen), but the ROI increases to 50% or higher depending on what kind of lighting system is replaced.

On the technology front, many materials developers, such as Skyshade and Econation, announced an entry into developing proprietary sensors and offer integrated systems. 2012 saw value chain integration (client registration required) from the opposite end with Acuity Brands – a lighting hardware company acquiring SunOptics. Along similar lines, lighting hardware company Cool Lumens and daylighting materials manufacturer Bristolite released a jointly developed product in August (client registration required). The CEO of Sundlier told us that the company is working with Abrisa coatings to apply an inorganic coating to its prismatic daylighting skylights, to reduce the solar heat gain coefficient (SHGC). So far, commercial daylighting systems have not offered any SHGC reduction benefits, so this is the first product of its kind. At the GreenBuild conference in Philadelphia, integrated lighting was predominant, with many firms, such as Autodesk, announcing building integrated modeling (BIM) solutions specifically for daylighting as part of their EnergyPlus platforms.

On the policy front, International Energy Conservation Code (IECC) announced: a requirement that daylighting locations be shown in floor plans; a U-value and solar heat gain control (SHGC) requirement for all fenestration replacements; and a reduction in the minimum size for mandating a daylighting skylight, from 10,000 ft2 to 2,500 ft2. American Society for Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) announced changes in its 90.1 code, requiring double-glazed fenestrations, daylighting sensors in combination with low-lighting power density (LPD) bulbs, and a maximum specification for visual transmission (VT) / SHGC ratio.

On the market development side, daylighting solution providers continued to acquire credible customers, e.g. Skyshade completing a 100,000 m2 installation for Indian Railways, and Econation acquiring Total, Kellogg, Unilever, and Sita.

These favorable policy and market adoption trends have translated into attractive financial results for daylighting companies. On January 9, Acuity brands reported a 20% rise in revenues and a 39% rise in profit margins for Q4 2013 over Q4 2012. Econation CEO Maarten told us that the company has experienced 300% revenue growth in 2013 and an after-tax profit margin of €450,000.

Aspen Aerogels files for IPO

On June 24, Aspen Aerogels filed for an initial public offering (IPO) with the U.S. Securities and Exchange Commission, announcing plans to raise up to $115 million to expand its operations and manufacturing capacity. Aspen makes aerogel insulation, a highly-porous nanostructured material targeted at building insulation, industrial applications, transportation, and even clothing. The announcement has seemingly been in the works for years. In 2005, CEO Don Young projected his firm was on the cusp of profitability and a potential IPO, and we speculated in 2006 about an imminent exit for the company. However, the company has been held back by limited demand for its product, stemming both from its high cost as well as the building construction downturn in 2009.

Aspen originally targeted the building insulation market, but has found better traction in oil and gas applications, namely for undersea pipeline insulation. These “pipe-in-pipe” lines are high-value, space-constrained applications that are well suited to aerogels. Companies will pay a premium for a thermally-robust, highly-insulating material that is packed between the inner and outer pipe. This translates into a reduced diameter of the outer pipe, saving material costs of steel. Aspen’s customers in the subsea pipeline market include ExxonMobil, BP, and Total. Aspen’s shift of focus is analogous to many water desalination companies now targeting fracking applications for gas and enhanced oil recovery. Water and electricity remain subsidized commodities in many regions of the world, and emerging cleantech players may have to look at higher value markets , such as oil and gas, for their technologies.

Aerogels are one of several emerging technologies vying for a piece of the multi-billion dollar general insulation market in buildings. Although aerogels have suffered in the past from handling difficulties on a construction site, by far their main issue is cost. At up to $10/ft2, Aspen Aerogel’s Spaceloft aerogel blanket is simply not competitive with standard insulation like fiberglass, which costs about $0.50/ft2, except for niche, space-constrained applications. Cabot Corporation, one of Aspen’s rivals, is proposing a solution to both problems. Cabot encapsulates its granular Lumira aerogel material into translucent “daylighting” panels that enable natural light to be transmitted while being more insulating than standard double-glazed windows. With this product, Cabot is hoping to find a profitable niche as an eco-friendly daylighting solution in the green building sector. We review the prospects for advanced insulation products – namely aerogels, phase-change materials, and vacuum insulation panels – and size the market forward to 2020 in our latest LRGI state of the market report, Opening the Thermal Envelope: Emerging Innovation in Dynamic Windows and Advanced Insulation, projecting a $230 million market for aerogel building insulation by 2020.