STATE OF THE INDUSTRY - PART II

Our first state of the industry report focused on the various alternative fuels themselves and their standings in the marketplace. Here we look at the stakeholders, the types of companies involved in alternate fuels ventures and in manufacturing equipment to produce the fuels.

The Fossil Fuel Incumbents

The biggest players in the alternative fuels space are in fact those companies primarily engaged in selling fossil fuel products. Shell and British Petroleum are both heavily involved in alternative fuels though Shell’s activities are considerably more diversified, and Peabody, the world’s largest coal company, is strongly committed to the production of coal based synfuels as well as to the use of coal power in ethanol production.

Indeed, among major petroleum companies almost all have some involvement in alternative energy though not necessarily alternative fuels.

The Chemical Companies

A number of leading producers of industrial chemicals either produce alternative fuels currently or have ongoing projects for developing such fuels or improving the production processes for manufacturing them. Archer Daniels Midland, Cargill, and Dow are among the most significant.

Oil and Chemical Plant Engineering Firms

Plant engineering firms are a somewhat amorphous group of companies who either design or construct major facilities for processing fossil fuels or industrial chemicals. These firms include Aker Kvaerner, Haldor Topsoe, Uhde, Mitsubishi Heavy Industries, Halliburton, Lurgi, and about fifteen others, mostly located in either Northern Europe or in the U.S. Many of these companies also manufacturer modular, skid mounted production equipment for smaller plants. The majority of these firms are now designing facilities for producing biofuels, hydrogen gas, and other alternative fuels, though, for most, oil and petrochemicals remain their major business.

The Auto Manufacturers

Most major auto manufacturers are now promoting flex fuel vehicles capable of running on either gasoline or ethanol, and most also make some cars that can utilize biodiesel. Most also have hydrogen fuel cell development programs underway, although we see little likelihood of commercial introduction within the foreseeable future. In the past, auto manufacturers have shown varying degrees of support for other alternative fuels including natural gas, methanol, and liquid petroleum gas, and doubtless in the future they will support yet other types of liquid and gaseous fuels.

Ethanol Plant Engineering Firms

The burgeoning ethanol industry has its own unique set of plant engineering and construction firms which specialize in this area. These include, Katzen, Broin, Praj, and a number of others.

Industrial Gases Companies

The largest industrial gases companies, including Air Products, Air Liquide, BOC, Linde, and Norsk Hydro, are all giant corporations with tens of thousands of employees and billions in revenues. Their primary involvement in alternative fuels is the production of hydrogen, either for hydrogenation and hydro-cracking of unconventional oils and biofuels, or for use in pure form as a fuel in hydrogen fuel cells and internal combustion engines.

Manufacturers of Discrete Processing Units

There is considerable overlap between the members of this group and the plant engineering companies, but in general the processing unit manufacturers concern themselves with producing single production units rather than entire plants. Usually that production unit will be a piece of equipment performing a key production process, and examples would include gasifiers, pyrolysis reactors, plasma reactors, anaerobic digesters, and pressure swing absorbers. G.E. and Lurgi play in the space, as do countless smaller firms such as Ensyn, Dynamotive, Fortum, and Pearson Technologies.

Component Manufacturers

A vast number of companies provide the components used in alternative fuels facilities, including pumps, compressors, storage tanks, combustors, sensors, and various waste removal devices.

Process Innovation Companies

These are generally, though by no means always, smaller firms who do not themselves manufacture industrial scale equipment but have developed new processes for producing alternative fuels. These include startups such as Atlantic Biomass, PureVision, Standard Alcohol, PlentyEnergy, Changing World Technologies, and many others; medium sized firms such as Iogen and Arkenol; and giants such as Shell, Lurgi, and Exxon Mobil who maintain active research arms.

Specialized Synfuel Companies

These firms specialize in the production of analogs of refined petroleum products from natural gas and/or coal. In most cases they are types of process innovation companies with a focus in very specific area, although one, SASOL of South Africa also operates plants. The others in this small group are Syntroleum, Rentech, and Headwater. Several of the larger oil companies also have involvement in synfuel.

Specialized Oil Shale Companies

At least a half dozen startups are touting new technologies for extracting kerogen from oil shale or for processing it subsequently. Among the major oil companies, Shell has also developed new technology aimed at exploiting America’s vast oil shale resources.

Farmers and Agricultural Cooperatives

Unquestionably, much alternative fuel will come from biomass including both food crops and specialized energy crops, and thus the role of agriculture in the industry will be even greater than it is today. Currently, agricultural cooperatives produce a large proportion of ethanol in the U.S.

Biotechnology Firms

These include seed development companies, genetic engineering firms, and vendors of enzymes and micro-organisms. Among the leaders are Genecor and Novozymes.

Biodiesel Manufacturers

Unlike, ethanol which is to a major degree the province of chemical companies, large agricultural ventures, and petroleum companies, biodiesel tends to be a separate and distinct industry, the real upstart among the alternative fuels. All biodiesel companies are essentially startups, and none are really large yet, but the industry has exhibited phenomenal growth. Some few firms such as Pure Energy are involved in both ethanol and biodiesel.

Distribution

Distribution is obviously the key to alternative fuels succeeding on any large scale, and it is an area where the industry is relatively underdeveloped. Very few tanker ships exist for the long distance transport of any form of alternative fuel nor have pipeline networks been constructed.

Wholesale distributors exist for both ethanol and biodiesel in the United States while a small but growing number of independent filling stations sell various alternative fuels, primarily natural gas, liquid petroleum gas, E85, and biodiesel. Some distribution is also handled by companies with an emphasis in refined petroleum products.

Engine Manufacturers

Many major engine manufactures such as Cummins and Caterpillar have turned their attention to alternative fuels, while a considerable number of startups, including Pivotal Engineering, Axial Vector, OX2, and Freedom Motors, have designed equipment capable of running on hydrogen, ethanol, biodiesel, and other unconventional fuels.

Manufacturers of Advanced Electrical Motors and Batteries

This group of companies arguably falls outside the scope of alternative fuels, but because hybrid and electric vehicles represents to some extent a complementary approach to addressing the world’s transportation energy problems, they need to be considered in any journal devoted to alternative fuels.

The Financial Community

Almost every major venture capital firm and investment bank has an energy division today and alternative fuel ventures have received a disproportionate amount of investment of late. Further growth of alternative fuels is of course heavily dependent upon continued support from private investors.

Support Services

A considerable number of consultants, analyst firms, law firms, and lobbying groups sell their services to the alternative fuels industries. A handful of publications like ourselves are also active.

The 50,000 Foot View

Alternative fuels is a relatively young and evolving industry which yet has many stakeholders. There are almost no large entrenched incumbents with a specialization in alternative fuels, rather, the biggest players are companies with diversified ventures in energy and/or chemical manufacturing. An extensive amount of startup activity is present in all aspects of alternative energy, but especially in process engineering.