With competition in the alternative fuels sector intensifying, how can companies prove the viability of their technologies? During today's OnPoint, Robert Johnsen, CEO of Primus Green Energy, discusses the challenges posed by the growing number of companies and technologies competing for market share. He discusses the state of private investments for the industry and explains the impact of U.S. EPA's Tier 3 gasoline standards on alternative fuel technologies.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Robert Johnsen, CEO of Primus Green Energy. Bob, thanks for coming on the show.
Robert Johnsen: Pleasure to be here.
Monica Trauzzi: Bob, there are many different technologies and companies that are trying to make the case for their viability in the alternative fuel sector. What's your technology and how are you separating yourselves from the vast and intense competition?
Robert Johnsen: Our technology is an evolutionary rather than revolutionary refinement of existing thermochemical processes used for decades in the petrochemical industry. In that way, we are able to rely upon the proven processes, known metrics of production, and the risk mitigation that comes with using established processes. Basically, we've reduced the footprint of capital components from about 23 to 10 in the whole processes. That reduces capital cost, and it also reduces OpEx, as well.
Monica Trauzzi: Give us some examples of what the real world application is.
Robert Johnsen: The real world application is our first plant and presumably our earliest plants will be called gas to liquids. We'll be using natural gas and not biomass and producing a drop in gasoline. Both components, the downstream and the upstream aspects of this, are to some extent revolutionary where what we're doing is building a 25,000,000 gallon plant, the first of its kind plant, and doing it on a very cost effective, not a loss leader basis.
Monica Trauzzi: How far are you beyond the startup phase, and how close are you to commercialization?
Robert Johnsen: Well, we've received $54,000,000 of funding to date and, with that, we have built a demonstration scale plant that is being fine tuned with component testing and run-throughs. It demonstrates the viability of the process at scale sufficient to enable us to obtain construction financing to build the first commercial plant.
Monica Trauzzi: This financing is all coming from the private sector?
Robert Johnsen: It's all coming from the private sector.
Monica Trauzzi: How difficult has it been to sort of sell people on this technology, this idea?
Robert Johnsen: It's less difficult than [Laughter] a pure biomass, first of its kind plant. When it's biomass, you're complicating the process. You're making it more difficult because you have the process technology risk of being the first of its kind at a large scale combined with feed stock delivery, feed stock handling, feed stock costs that are inherent in handling daily with biomass on a long term basis. Besides which, we're dealing with commodities that are either hedgeable or they're not hedgeable, and most biomass commodities are not when you're dealing with things like the gas and wood chips and other kinds of biomass. Whereas natural gas has a liquid, large, very fluid-pardon the expression-market.
Monica Trauzzi: How intently are you watching the big natural gas discussion that we're having here in Washington in terms of rules on fracking and then also the exporting of liquefied natural gas-how do these two elements factor into your business and how could it be affected by those two things?
Robert Johnsen: All scenarios that we have seen call for low cost, extensive supplies of natural gas going out 30, 40 years. The fracking argument and rules relating to fracking all relate to the supply side of natural gas. We're on the demand side of natural gas. That, I think, is the next frontier of exploration where liquefied natural gas, compressed natural gas, gas to liquids are all competing-but not directly-for using the lower cost natural gas that's now widely available.
Monica Trauzzi: It is thought that the price of natural gas will go up, so what is kind of that ceiling price that you look at?
Robert Johnsen: You know, there are a lot of scenarios in which the EIA, the Energy Information Agency, has a low case, a high case, a medium case. Most cases show natural gas pricing for decades being less than $10.
Monica Trauzzi: Well, let's talk about EPA's Tier 3 standards for gasoline, which would cut the sulfur content of gasoline by two-thirds. There's competing evidence about the overall air quality impacts and also how much it would actually cost consumers per gallon of gasoline. What's your take on the proposal and the future of the rule?
Robert Johnsen: Well, I think that, ultimately, the country tends to follow California. California has implemented or is implementing this kind of rule. It just so happens that our product is a no sulfur product, low benzene, it's a very high quality, high octane value product with no bad actors.
Monica Trauzzi: Does that mean, then, the rule would not have an impact on your business?
Robert Johnsen: The rule would have no adverse impact on our business, and in fact, it makes it more attractive to use and buy our product.
Monica Trauzzi: All right. We're gonna end it right there. Very interesting stuff; thanks for coming on the show.
Robert Johnsen: Pleasure to be here.
Monica Trauzzi: And thanks for watching; we'll see you back here tomorrow.
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