Solugen to get government-backed loan for biochemical plant

The biomanufacturing firm Solugen will get a $214 million loan backed by the US Department of Energy to finance a biobased chemical plant the company is building in Minnesota. The loan is part of a government-wide strategy to reduce the risk of investing into new biomanufacturing technologies.

Solugen’s plant, announced in 2023, will use enzymatic and chemical steps to convert dextrose into glucaric acid, gluconic acid, and hydrogen peroxide for use in industries including concrete, cleaning, agriculture, and oil. Solugen broke ground on the plant in April and says it will be able to produce up to 75,000 metric tons of the chemicals per year once it is fully operational. The company already operates a similar plant in Houston that is about one-sixth that size.

Biomanufacturing companies like Solugen say their facilities emit far fewer greenhouse gases than traditional plants making the same products. But many such companies get stuck at the pilot-project stage because traditional infrastructure investors are wary of financing larger plants that employ a new process.

Solugen’s chief technology officer, Sean Hunt, says the firm’s Houston plant likely wasn’t big enough to assuage the concerns of a conventional lender, but it was advanced enough to give the DOE’s Loan Programs Office confidence that the scale-up would succeed. “A bank wants to see that you’ve built two or three facilities,” he says. “But we have customers. . . . We ship tanker trucks at 4 a.m. on Saturdays. It’s a real operating entity.”

Jason White, CEO of the bioeconomy advisory firm Lee Enterprises Consulting, says that when government agencies offer loans for emerging technologies, they help companies prove to private investors that large plants are viable. “They can step in and give a spark to something that shows promise when the private market is not willing to,” White says.

The US government has started to provide more of this support. In 2022, President Joe Biden issued an executive order directing several agencies to support the biomanufacturing industry. Since then, the DOE has issued modest grants to start-ups in early stages of R&D. And last fall, the US Department of Agriculture guaranteed a $25 million loan for Liberation Labs, a contract fermentation firm building a plant in Indiana.

But Solugen’s loan is the government’s largest investment in biobased chemicals since the 2022 executive order. “It’s kind of a big deal for the whole industry,” White says.

In the past, this type of support has had mixed results. Between 2009 and 2017, a US Department of Agriculture program guaranteed several loans for biofuel facilities. Some of those companies ultimately failed, including Range Fuels, Ryze Renewables, and most recently Fulcrum BioEnergy in Nevada.

The DOE’s Loan Programs Office, which is backing Solugen’s loan, has funded successes like the electric-car maker Tesla, but it also famously lent to the failed solar company Solyndra. Chris Creed, the organization’s chief investment officer, defends the overall track record of his program, arguing that it offers a good way of supporting emerging technologies until private investors are willing to bet on them.

During Barack Obama’s presidency, the DOE program funded utility-scale solar projects, which now routinely secure conventional loans. Creed says many biobased chemical processes are now in the same place those solar projects were a decade ago.

Solugen CEO Gaurab Chakrabarti says he’s excited to observe that the government is elevating biotechnology to the same level as more established clean technologies like lithium-ion batteries. He says his company’s loan provides a road map for other biomanufacturers. “We’re not going to be the first and last company that does this,” he says.