To make money in biofuels boom, think plastics

BioEnergy International is turning to biochemicals to survive in the low-margin world of biofuels.

The biofuels market has grown so rapidly the past two years that many people are already calling it the bursting of the proverbial investment bubble.

The tough economic situation is brought on in part by the rising price of corn--the source for nearly all ethanol. And a fuel's input, now in high demand, makes up about 60 percent to 70 percent of a fuel's production costs, said Stephen Gatto, CEO of BioEnergy International, who spoke at the Clean Energy Conference in Boston earlier this week.

To get more from that feedstock, the company is developing an "integrated biorefinery" that will be equipped to make several products from a single feedstock, much the way oil refineries operate, he explained.

His company's strategy reflects how biofuels companies are seeking to carve out areas of differentiated technology in the commodity fuels business.

"The focus here is today and how do you become profitable," he said, calling his company's biorefinery technology a "cheap sugar platform."

Bioplastics, lactic acid, polyesters, and replacements for polyurethane are all products that the company's processes, now being tested at refineries, can produce from plants, he said.

The reason for this diversified strategy boils down to economics, Gatto explained. Corn-based ethanol offers 4 cents a pound profit while the same feedstock can make lactic acid, which is used in plastic bags and soaps, and other products at 42 cents to 60 cents a pound profit, he said.

The company's microbial fermentation process can work with a range of plants, including corn, orange peels, straw, and wood waste, he said.