Biofuels are the sirens of renewable energy, luring startups with enchanting promises of enormous markets, from aviation to trucking and shipping. Companies just can’t help throwing themselves at the problem, and more than a few have been dashed to pieces in the process.
One new startup, though, hopes it’s Ulysses in this tale, able to sail past the rocky shores that have sunk more than a few of its predecessors.
XFuel is pinning its hopes on a modular refinery design that it says can produce replacement fuels for marine shipping and diesel vehicles with a carbon footprint that’s up to 85% lower now and possibly carbon-neutral in the future.
Today, the Dublin-based startup announced an €8.2 million investment round led by AENU, a new German VC firm, and joined by Union Square Ventures and HAX/SOSV.
XFuel is currently making marine- and diesel-grade fuels and developing aviation fuels.
“It is a direct replacement for the fossil counterparts,” co-founder and CEO Nicholas Ball said. “The focus here was to develop a technology to be able to produce fuel at a comparable or lower price point than fossil fuels. We went down this R&D path for a number of years, a lot of trial- and-error-type work.”
The result, he said, is a demonstration plant in Spain that “proves out the technology that we have and the modularity that we’re trying to encompass here.”
The heart of XFuel’s work revolves around what the company calls mechanical catalytic conversion, which takes plant material and uses heat, chemical reactants and friction to help break it down. (Ball, when pressed, wouldn’t be more specific than that.)
The reactors in which this process takes place are relatively small and modular, just a few feet tall, allowing them to use some economies of scale in production to bring the price down, Ball said. The prototype, which has four reactors, fits inside a small warehouse (seen above). Reactors can be added or removed to match the size of a proposed project.
Ideally, those projects are sited close to the source of the feedstock, the raw materials that go into the reactor. In XFuel’s case, they’re targeting feedstocks with high percentages of cellulose. Most of today’s biofuels are made using plant material with high sugar content, like sugarcane and corn. Sugar ferments easily, but its use as a biofuel feedstock can drive up food prices.
Cellulose, on the other hand, is found in a wider variety of plant material, most of which people can’t eat. Ball said XFuel is currently targeting waste from construction sites and logging operations. Construction sites end up with scrap piles from cutting boards to size or from pallets used to deliver other materials. Logging operations have their own form of scrap, known as slash. These thin branches can be sent to biomass power plants, burned in piles on site or left strewn across the landscape. Some governments require slash to be collected to minimize fire risk.
Because the reactors can be placed close to the feedstock source, Ball said that minimizes transportation costs, something that’s driven up both costs and carbon emissions for other biofuel projects. The reactors essentially distill the valuable portion of the waste, reducing the volume and weight that needs to be moved while also increasing its value.
Because XFuel’s end product is a liquid fuel, it’s generally more valuable than energy produced by biomass power plants, meaning that XFuel and others can pay more for the feedstocks. “They have very tight margins,” Ball said of biomass plants. “We don’t really.”
Another possible source of cellulose, Ball said, is deadwood. Nearly 11 billion metric tons of carbon are released by decaying wood every year, which makes it a seemingly attractive target. “There is a huge amount, an abundant amount of biomass available for us to be able to make use of as long as it’s sustainably sourced, and that is really key.”
But finding large amounts of sustainably sourced deadwood will be difficult, if not impossible. It’s broadly dispersed and plays an important ecological role, providing habitats for animals, insects and fungi. When it eventually decomposes, it then provides nutrients for the next generation of plants that grow on the site. That recycling happens in every forest, and quite rapidly in tropical forests. Removing decomposing wood en masse could leave soils significantly depleted, hindering forests’ ability to regenerate.
Ball acknowledged that he wasn’t an expert in the area. “We do need to delve into it a little bit more,” he said.
While deadwood may not be the feedstock of the future, demand for biofuels will likely remain in industries like aviation that will be challenging to fully electrify. XFuel still faces many of the uphill battles that all biofuels have faced, including challenges around sourcing feedstocks and concerns about whether the carbon accounting will pencil out. Since biofuels all demand feedstocks that are grown, often the cheapest route is to use those that grew naturally (e.g., a forest).
That’s not something XFuel can necessarily control, but the carbon footprint of the fuels its reactors produce will be directly influenced by where its feedstocks come from. It’s a challenge that faces the entire biofuels industry.
Investment in the biofuels industry has surged this year, mostly on the back of one deal, according to a TechCrunch analysis of PitchBook data. Nine companies have raised $223 million, compared with 21 companies raising $55.6 million last year. The largest was Enerkem, a Canada-based company that raised $202 million this year to produce methanol and ethanol from compostable municipal waste. Others to watch include Lyxia, which raised almost $16 million in May 2021 to further its algae-based biofuel process, and Sea6 Energy, which raised nearly $9 million to continue work on its seaweed-based approach.
The size of these deals pales in comparison with those that have closed recently in the battery sector, though that’s not surprising given the low demand for biofuels today. That may change if aviation and marine shipping can’t find suitable, carbon-neutral replacements for fossil fuels, but those industries have been slow-walking the transition, meaning that investments today tend to be early and any success is farther in the future.