Could sugar be the new oil?
Upstate company Sweetwater Energy has made their second $100 million deal in as many months, and they’re setting their sights on comparable deals every month over the next two years.
This latest deal involves a 15 year contract with Colorado-based ethanol producer Front Range Energy, and will see Sweetwater build and operate a plant to produce sugar from biomass like softwood waste and corn stover, and convert it to ethanol.
Sugar is a lower cost alternative to the corn mash that is currently used by Front Range Energy.
The cellulosic ethanol produced by Sweetwater will initially account for six to seven percent of Front Range’s overall production, which means about 3.6 gallons of ethanol per year in the primary stages.
However, Sweetwater CEO Arunas Chesonis says they have the capacity to produce up to 40 percent of the company’s ethanol in the future and that could become a reality within five years.
“What we end up doing is taking away the very expensive, volatile corn that they end up buying on the spot market that isn’t being supplied by their local farmers.”
Chesonis says the deal is exciting because he believes sugar could emerge as a viable replacement for petroleum in the future.
“You can sort of envision not just ethanol, but higher value fuels, aviation fuels, bio-diesels. As well as different types of specialty chemicals, bio-plastics, that could be replacing petroleum.”
“Everything you can make out of petroleum, you can make out of sugar. So you can make tires out of sugar, you can make not just bottles and other types of plastics out of sugar, but you can make carpet out of sugar. I mean there is just everything possible.”
Chesonis says the product left over after biomass is converted into sugar is also valuable, and could potentially generate and entirely different revenue stream as a cleaner alternative to coal.
He says when it comes down to it, sugar is a solution everyone can be happy with.
“At the end of the day it’s something that we can make here on a renewable basis and whether you’re a tree hugger, or whether you’re a dirty capitalist, or whether you care about national security, or you care about climate change – it doesn’t really matter what you care about, ok. Using cellulosic biomass to replace oil is good. There’s not a single person who would not like that.”
A growing company
Chesonis is not one to think small. On the whiteboard in his office he has a five year plan laid out; one he hopes will see 25 new plants built.
He says the company has its eyes set on expanding into markets like Brazil and Europe, as well as into other US states.
“We would like at least a third of those locations to be outside of the United States, and we would like about half of those locations both in the US and overseas to be in the bio-plastics and bio-chemicals arena. We’re not looking just to focus on the ethanol industry.”
Chesonis says there is no reason that Sweetwater couldn’t also build up several operations upstate to take advantage of the many avenues for their product.
“There’s nothing that says we couldn’t build in New York state, 30 little mini refineries that are building all kinds of plants associated with placing plastics and chemicals and becoming a net exporter of those products as opposed to a net importer in New York state.”
He also says the company is looking at taking up a spot in the Eastman Business Park in Rochester, and possibly bringing in other partners to that area.
Chesonis says Rochester has a lot to offer a company like Sweetwater, and he wants to take advantage of that.
“Rochester has had a long history of entrepreneurial ventures that have had impacts way beyond just the Rochester area, and we think our company will have that kind of impact.”
He says the company hopes to create about 75 jobs in Rochester over the next 4-5 years, bringing their staff numbers here to about 100.
Sweetwater’s research and development headquarters will remain in Rochester, NY, but Chesonis says that most people hired to run any new operations will be sourced locally at operation sites.
Although there is a lot of R&D going on at Sweetwater, Chesonis says the company is not really utilizing any of the research tax credits that were renewed in the deal to avoid the fiscal cliff.
He says the company does not currently take advantage of the bio-fuel tax credits either, and that comes down to the uncertainty that stems from the credits being extended and not made permanent.
“It’s sort of an ongoing short term conversation with the legislative branch, so it’s difficult to count on.”
Chesonis says there’s huge potential for their technology and he is optimistic that they can reach their goal of securing 25 deals by the end of 2014.
The company has its eyes set on a path that could dramatically change the ethanol industry, and Chesonis says company revenues could be in the region of $1billion annually within 6-7 years.
“We just want 25 locations, 600 people, one billion in sales. Makes me happy,” he says.
Chesonis says he believes sugar has the potential to be the new oil, and that could mean a lot to the state, and the nation.
“When you’re talking about just your own security and not being dependent on someone else for your energy needs, that’s a big deal.”