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Frontier and JP Morgan are charmed by bio-oil

In the last two weeks Charm Industrial has inked two huge commitments for its process of capturing and storing carbon by converting waste bio-mass into oil through a process called 'fast pyrolysis'. This oil is injected into the ground, reversing the process of extracting oil and burning it, and delivering significant carbon credits to the purchasers. Frontier committed at an average price of $473/ton for efforts spanning through 2030.


The commitment price is lower than Charm's current pricing of $600/ton, but a far cry of the company's promise to hit $100/ton by 2040. Is it reasonable for Charm to hit such pricing?


The economics of bio-oil production via fast pyrolysis has been analyzed many times before, though previously with an eye towards up-conversion of the bio-oil into useful fuel. NREL published an excellent techno-economic analysis in 2006 which reviewed literature estimates of bio-oil costs, finding a low value of about $100/ton in 2005 dollars, equivalent to $180/ton now. The composition of the bio-oil is about 55-58% carbon, and using this value we can convert the carbon-equivalent costs to $90/ton as CO2 in today's dollars.


NREL estimates this could be cut by 1/3 to $60/ton on a CO2 basis with reasonable improvements in yield and a scale of 700,000 tons/yr of bio-oil, which would require a little over 1M tons/yr corn stover or other biomass. (This is equivalent to a CDR plant at a scale of 2.5M tons/yr). As the plant runs on biomass, it cannot scale too large lest it run out of low-cost local inputs. But the US alone produces over 75 million tons of corn stover per year, so this scale is at least plausible in rich agricultural regions.


The oil then needs to be injected into the ground. Bio-oil tends to be corrosive, containing a decent fraction of organic acids such as acetic or formic acid, and there are therefore trade-offs between oil composition (and yield) and pipeline costs that are yet to be determined. The good news for Charm Industrial is that injection need only be in a Class I or V well, which are less regulated (and therefore less costly) than a Class VI well. The bio-oil will be denser than water, and will tend to sink, reducing the chances of leaks, and thereby reducing monitoring and insurance costs. The bio-oil does not require the high pressures of CO2 injection, though it will be done on a scale less than CO2 injection. To be conservative, we could place a cap in costs at $30/ton, recognizing it could reasonably be much less.


There are more complexities than this, of course. The cost of feedstock in the NREL assessment was in the range of $40-50/ton in todays dollars, while current prices are over $60/ton. Feedstock costs represented about 40% of total costs in NREL's models, so this is significant, pushing bio-oil closer to $100/ton. However, Charm's report on MMRV points out that they should get credit for avoiding CO2 and methane emissions from the usual decomposition of corn stover. The process of fast pyrolysis also produces a mixture of CO2 and CO, which undoes some of these gains unless they are abated (where the cost of abatement will be based on whether the plant is sited near a CO2 pipeline). The plant will also produce some biochar, which will tend to push their balance sheet slightly better as this can be counted for carbon capture as well.


The bottom line is that a quick and dirty analysis shows that long term claims of CO2 capture at $100/ton or less are absolutely viable. The technology has far less risk than other methods of CDR, and is being deployed now. It's easy to understand why Frontier and JP Morgan are excited.

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