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Biochar Investing

Tom Konrad, Ph.D., CFA

BioChar, or using black carbon directly as a soil amendment holds the promise of both increasing agricultural yields and locking up carbon in the soil for centuries or millennia.  Are there ways for stock market investors to benefit?

The technology is simple, but the results are potentially quite profound.  By pyrolyizing (heating in the absence of oxygen) biomass, and mixing the resulting char into the soil, it is possible to produce 

  1. Energy, in the form of heat, electricity, and or liquid fuel
  2. Carbon sequestration
  3. More productive agricultural land.

Key to producing both energy and sequestering carbon is what would otherwise have happened to the biomass if it had decayed under normal conditions: The carbon content would have been returned to the atmosphere as CO2 or methane.  Pyrolysis produces two products: pyrolysis gasses or BioOil, which can be burned for energy or upgraded into transportation fuels, such as jet fuel, gasoline, and diesel, and char, which  can either be used as a fuel (charcoal- the same stuff we grill hamburgers on), or as a soil amendment (biochar.)  

Biochar resists ordinary decomposition in the soil, and hence stays there for centuries or millennia.  In addition, it enhances soil fertility.  Although biochar alone has not been shown to enhance soil fertility.  Biochar's complex surface area and intricate pore structure is hospitable to soil bacteria and fungi which help plants absorb nutrients from the soil.  Christoph Steiner, a researcher at the University of Georgia's Biorefining and Carbon Cycling Program says, "We believe that the structure of charcoal provides a secure habitat for microbiota, which is very important for crop production."

For all these reasons, biochar has broad support in the environmental community as one more tool to devote to combating climate change.

An Investing Perspective

Such win-wins are essential for us to tackle climate change without crippling our economy, but can stock market investors benefit?  The low-tech nature of creating biochar is a challenge.  No high technology is needed to create charcoal.  In fact, the benefits of biochar as a soil amendment were discovered thousands of years ago by Amazonian aborigines who used the process to enhance crop production in the poor soils of the Amazonian basin.  Portuguese colonialists called it terra preta, or "Black Earth."

Modern pyrolysis enhances traditional methods of creating charcoal by capturing the volatile organic compounds as Bio-oil, reducing pollution and creating a second potential value stream.  One company attempting to commercialize this process is Dynamotive Energy Systems (DYMTF.OB), which recently obtained an independent analysis of their upgraded BioOil, confirming that 80% by weight could be distilled into gasoline, jet, and diesel fuel.  Dynamotive expects that it can "deliver advanced (second generation) fuels from biomass at a cost of less than $ 2 per gallon of ethanol-equivalent fuel in facilities processing about 70,000 tonnes of biomass per annum."

Although I have not taken an in-depth look at Dynamotive's business model, I'm cautious.  The price of the biomass input is highly variable, and will have considerable impact on the eventual fuel cost. The company's technology seems to center around upgrading the BioOil, but I am uncertain if this is the best use of the volatile organics; it may end up being much simpler to simply burn them to generate electricity or heat to use on site.  

There is also private competition.  There are at least two private companies: Carbon Diversion, Inc., and Alterna developing competing reactors for producing energy and biochar.  Just as I discussed regarding Algae biofuel companies, public equity investors should be cautious when the majority of an industry is still private; because the private companies do not disclose, it becomes much more difficult to tell which company is in the strongest competitive position.

In the same article, I concluded that price and supply of feedstock will be essential to the profitability of advanced biofuel companies, and I see the likeliest beneficiaries to be the growers of the biomass feedstock advanced biofuels companies such as Dyamotive use in their processes.  The potential for additional revenue streams from biochar and carbon offsets could accrue to the technology firm, but it could just as easily accrue to the owner of the biomass, depending on the local competitive uses for the biomass.  Meanwhile those same biomass growers may benefit from increased productivity with biochar.

Probing Deeper

At the moment, I don't see any practical way to invest in the potential of biochar.  However, next month I plan to attend the North American Biochar Conference 2009 in Boulder.  I hope to discover ways investors can help sequester carbon through Biochar, and see a good return on their investments at the same time.cees ibi biochar logo 2009.png

DISCLOSURE: None

DISCLAIMER: The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.



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Comments

Tom:

Did you come across information on feedstock availability?

When I did research into wood pellets and woody biomass, one the issues that came up was that there was only so far this industry could be scaled up before running into forest sustainability issues.

I suspect the same would hold here.

I agree that feedstock is the key biomass/biofuel/Biochar issue. The only reason biochar may be different from other biofuels is that the intent is to return the char to the soil, which should increase the uptake of nutrients in the soil/fertilizer and reduce nutrient runoff. The positive effects of the biochar may allow slightly more of the biomass to be removed, but there will still be the same issue of an upper limit. At the conference I'm going to try to get a better idea of what that limit is.

Tom,

Great article. Clad to see some folks on the investment side taking notice of biochar and pyrolysis. We find that the variable feedstock costs associated with biomass can be largely overcome through the use of small, distributed generation assets co-located with available biomass. Pyrolysis is an ideal technology for a distributed scheme. You can learn more at our website, www.re-char.com

Jason Aramburu
Founder
re:char

On the comment about wood pellets, most work in biochar is done with wood however you can find people using anaimal manure and grassy biomass as well which have less competition as an input for other process.

As far as the article, highlighting that "[biochar] technology firm[s]" and ,"owner[s] of the biomass" is very insightful and very accurate. There are many types of soil, biochar, and process to make it. Most of what is produced will be used locally in most cases. So focusing on sucessful tests that can be replicated thoughtout a region are the key things to look for.

Huh, interesting. I like the connection between the production of biochar and bio-diesels. The use of algae for the production of bio-diesel, and I suspect also for the production of biochar, is very exciting stuff. There is an interview with Richard Armstrong, a CEO of an alternative energies company, all about the use of algae as biomass to produce bio-diesel at http://www.ourblook.com/component/option,com_sectionex/Itemid,200076/id,8/view,category/#catid92 which is very useful on these subjects.

Regarding the emerging feedstock thread, I think algae for biochar has excellent potential: there's little issue of soil depletion, and after the oil has been extracted from the algae, the rest could be pyrolyzed for biochar and biooil.

Making good use of the non-oil parts of the algae might enable the use of faster growing and more robust algae strains. Even this is still a long way off; algae production is still too expensive for low value commodity appplications such as fuel and biochar.

Our group has done significant testing with algal pyrolysis. The main issue is moisture content of the algae. Most algal slurries contain 1-1.5% biomass by weight. That means a large amount of energy must be expended to dry the algal feedstock before it is converted to biochar. To that end, we are working on a variety of techniques to couple solar drying with waste heat drying to make algal biochar efficient.

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