ZiTech seeks funding to make plastics-to-fuel technology commercially viable

Stas Zinchik has proved that his company could turn nonrecyclable plastic into small pellets that can be burned to generate a surprisingly clean source of electricity. Now, the founder of Calumet, Mich.-based ZiTechnologies Inc. is meeting with potential investors to raise the money he needs to ramp up production and make the process profitable.

In May, ZiTech was one of 51 early-stage companies that exhibited before a national audience of venture capitalists at the annual Michigan Growth Capital Symposium, which was held remotely this year. And about a year ago, he began consulting with Arcadio Ramirez, a longtime technology-business consultant with the Michigan Small Business Development Center, a statewide network funded in part by the U.S. Small Business Administration and the Michigan Economic Development Corp.

ZiTech's pellets are produced through a process called torrefaction, which removes chlorine from plastic. When plastic containing chlorine is burned, it produces hydrochloric acid and dioxins, extremely toxic byproducts that, until now, has prevented power companies from exploring the use of plastics to reduce their reliance on coal. ZiTech's process produces small solid cylindrical black chunks about half an inch by two inches that are far cleaner than coal, on par with natural gas.

ZiTech is a tenant in the Advanced Power System Research Center in the industrial park at the Houghton County airport, a Michigan Technological University facility.

Ramirez, who is based in Ann Arbor, Mich., said one selling point for ZiTech is that about $8 million has been spent over the last seven years on torrefaction research at Michigan Tech. The money has come from utility companies, private investors, the state of Michigan and the National Science Foundation, including a $256,000 Phase I grant for ZiTech last year from the NSF's Small Business Innovation Program, which was matched by $25,000 from the state.

"Waste incineration has been practiced for some time and brings operational difficulties and high emissions ... Torrefied waste is significantly low in hazardous components and can be pulverized, enabling application as a solid renewable fuel," read the NSF grant announcement.

ZiTech hopes to get a much larger Phase II grant later this year or next, in the $1.5 million range, based on hitting goals in the first grant.

With help from Michigan Tech Enterprise Corp.'s Tech SmartZone, Zinchik began the process of commercializing the technology he licensed from the school in March 2020 — hardly a good time. Suddenly unable to go knock on doors with possible strategic partners or drive to meetings with potential investors because of COVID restrictions, Zinchik said he and his small team of three could concentrate on improving their processes in the Power System Research Center.

Ramirez said another selling point for ZiTech is the rising cost of putting plastic in landfills.

"Plastics in garbage is a huge issue. Now, most plastics aren't recyclable, and tipping fees at landfills are increasing dramatically," he said. "Stas knows his technology really well. He's a scientist, not a business person, but he's willing to listen and talk to people about what he doesn't know."

Ramirez consults with companies statewide and is close to Ann Arbor's venture-capital community. He can help bring to the attention of VC firms investing in clean energy that they might want to meet Zinchik.

Zinchik says his company can produce 200 pounds an hour of material that can be burned to produce electricity, but the cost involved at that scale makes it unprofitable. He said he needs to get to the range of three tons an hour to be profitable, which will require an influx of funding.

The torrefaction process mixes fiber waste such as paper and cardboard with plastic waste. When and if ZiTech ramps up to the point commercialization is feasible, it will get paid on the front end from companies generating lots of paper and plastic waste who want someone to take it off their hands, packaging companies and automakers being two prime examples. It will generate revenue again on the back end when it sells those tons of black pellets to institutions with electric power plants.

"Solar and wind can't supply all that's needed to get away from fossil fuels," said Zinchik.

ZiTech has established a strategic partnership with Green Bay, Wis.-based Convergen Energy, a company that converts industrial waste and biomass waste into a variety of clean fuel sources. Its customers are Midwest organizations with on-site energy generation systems, including utilities, universities, hospitals and manufacturers who use solid fuel to heat, cool and power their facilities.

Its manufacturing facility in Green Bay can produce up to 150,000 tons a year of clean burning fuel, according to Chief Financial Officer Steven Brooks.

Brooks said Convergen has a long history of working with researchers at Michigan Tech. He said he has been impressed with ZiTech's progress and is optimistic it will become a supplier to his company.

"We really think highly of Stas. What they are working on is the future of what we want to do. It is much more sophisticated than what we are currently doing. It can increase the waste we take," he said. "What impressed me this far with Stas is his team continues to improve. It's a really good partnership, his team, the National Science Foundation and us working together to achieve something we couldn't achieve alone. We can offer Stas access to all our sales channel, and the NSF provides commercial funding and really important commercial advice."

Stevens said he is confident ZiTech will get to his goal of two tons an hour. "In 12 to 18 months or so, if not sooner, we want to have them become full commercial partners."

"The fact that he can remove chlorine during his proprietary process is intriguing, to be able to come out on the back end with clean energy pellets. It'll never be a huge market, but it's a nice niche," said Patrick Visser, the chief commercial officer at Tech's SmartZone technology accelerator. "We're putting his technology in front of investors."

Visser said contacts at Michigan Tech helped ZiTech bring on a veteran of commercializing renewable fuels, materials and processes as an adviser. He is Vesa Pylkkanen, a native of Finland who is vice president of business development at Atlanta-based IntelliGenetics LLC, a DNA testing company.

From 2007-2012, he was technical director of American Process International LLC's $30 million plant in Alpena, which created ethanol from cellulose and was heavily funded by the U.S. Department of Energy.

John Diebel is the Houghton representative of the SBDC and introduced Zinchik to Ramirez.

"I've been working with Stas for years. He's done an excellent job. He's very coachable," he said. "I've seen him grow as an entrepreneur. He needed to learn the ins and outs of business. He's able to take himself out of the lab and away from the technology and talk with business people."

Diebel said that while there is a lot of talk about decommissioning coal-fired power plants, the reality is that the cost of doing so can be prohibitive. There is a big demand for swapping out some of the coal they now use with burnable plastics.

"I've talked to some venture capitalists downstate and as soon as you talk about creating energy from plastic, they tune you out. But they immediately tune in, again, when you tell them chlorine is separated from the plastic before it is burned."