Biorefinery feasibility study

Amsterdam, 20 October 2011

Background of feasibility study

What

• Feasibility study on establishment of integrated, demonstration scale, bio refineries in Europe, focusing high value add products and second generation feedstock • Focus on vision, value chains and required capital investments, funding options, governance and implementation paths

Who

• Europa Bio Team • Dalberg (external consultant) • Bio-based industry: 1

2

nd

generation biorefineries align with EU priorities

Strong alignment with EU core priorities….

• The EU has defined three ambitions for 2020, which are linked to the biobased economy and 2 nd generation biorefineries:

1.

Smart growth:

developing an economy based on knowledge and innovation

2.

Sustainable growth:

promoting a more efficient, greener and more competitive economy

3.

Inclusive growth:

fostering a high employment economy delivering social and territorial cohesion

… but interventions need to be targeted, and aligned with other initiatives

• There is much research on 2 nd generation biorefineries, but the “valley of death” between early stage research and commercialization, especially outside bio-fuels (Chemicals, materials and fibres) remains • Europe is well positioned to spearhead the development of a new bio-economy but risks falling behind the global competition • European decision makers expressed interest in seeing more demonstration scale activity and asked for a fact base on options and funding needs • The industry is willing to invest but lacks public funding support to realize demonstration projects 2

Overcoming the gap from research to funding (called the “valley of death”) requires co-investments from public and private stakeholders

Governments and Industry Markets Financing, technology, ideas Research and Development Demonstration Deployment Diffusion

Graphics: Mercer 3

Brazil, China and the US are making significant public investments in bringing biorefineries to commercial scale

US

• High targets for the replacement of fossil transportation fuels • Wide range of support schemes including grants, tax credits, loan guarantees, etc • Focus: bioethanol • Public support last 5 years: ~ € 1.2 billion

EU

• High targets for the replacement of fossil transportation fuels • Focus: biodiesel/ biochemicals • Public support last 5 years 1 : ~ € 200 million

BRAZIL

• World leading first generation biofuel production • Some commercial 2G bagasse refineries in operation • Aggressive government growth targets for bioethanol by 2025

CHINA

• Large-scale investment in biorefineries • Plan to substitute 20% of crude oil imports by 2020 • Target of 1.7bgy ethanol by 2010 1.

Estimated funds provided by FP6 and FP7 to biorefinery-related projects Source: US Department of Energy, EU, World Economic Forum, Bio-economy.net

4

For example the US has multiple support mechanisms for the biorefinery industry focusing on demonstration and commercial application

US approach to bio-refineries

• Mainly for solving national security issue of foreign oil dependency • Focused on bio fuels and bio ethanol in particular • Started under Bush administration and continued under current

Program (start year)

• Renewable Fuel Standard • Bio-preferred procurement (2002) • Bio-preferred labelling (2002) • Biomass Crop Assistance Program (2008) • Biomass Program • Clean Energy Loan guarantee (2007)

Description

• Goal to produce 36 billion gallons of bio-fuels by 2022 • Act to favour bio-based products over alternatives in public procurement • Cataloguing and labelling products based on biorefinery ingredients • Lucrative support for farmers to transition to energy crops

Government institution

• US gov • Dep. Agriculture • Dep. Agriculture • Dep. Agriculture • Dep. Energy • Dep. Energy Low High

Estimated Impact* Potential

• Support programs boosted with the Economic Recovery Act or 2010 granting USD 564 million to bio-refinery projects • Bio-fuels Loan guarantee • Loan guarantee to finance 2 nd generation bio-refuel plants • Dep. Agriculture • Corn Ethanol tax Credit • Applies to all bio-fuels • 0.45 $/gallon • IRS • Cellulosic Ethanol tax Credit • 1.01 $/gallon production tax credit terminates 2012 • IRS * Impact to date – some programs have only been starting slowly and are therefore not showing too much impact yet Source: interview with BIO; Dalberg analysis 5

Current landscape of biorefinery initiatives in the EU

European Union Member States

Funding mechanisms Fuel Chemicals Mixed outputs BioCore SupraBio EuroBioRef Research projects • Belgium (>20) • Finland (>50) • France (>20) • Germany (>10) • Sweden (>10) EuroBioRef

FP6 - FP7

BioCoup SupraBio

NER300 EIBI

NOT EXHAUSTIVE

BioSynergy Leibniz Inst fur Agrartechnik Icelandic biorefinery Icelandic biomass Biorefinery Ireland BioMCN Nuon

National funding (e.g. FNR - Germany, Nordic Energy Research, BOF - Belgium, BBSRC -UK, etc.)

Europe BioHub Rotterdam

Company

Research Inbicon Procethol 2G DTU/BioGas Sekab Pilot Inbicon NSE Biofuels BioAmber Bio T-Fuel GoBioGas Biogasol Solvay FMS ARD Biodemo BPS Brensbach Abengoa Roquette/DSM Innventia TMO Demonstration • EU is still far from a biobased economy despite the number of initiates and funding mechanisms: • Most facilities focus on

biofuels

and

first generation feedstock

• Most funding is for

research

activities, rather than demonstration facilities 6 Source: Star Colibri, Dalberg research

EU Support should address multiple challenges

Push mechanisms

• Public support to overcome “valley of death”, and to co-invest together with the private sector

Agricultural policy

• Policies to promote production of RRM for all industrial uses (material and bioenergy) to secure sustainable renewable feedstock.

• Support for resource efficiency (land use, climate action) of RRMs, including support for “cascade utilisation” • Need for financial incentives to improve logistical capacity to collect biomass residues in EU Ag and forestry policies

Pull mechanisms

• Need for innovative incentives (e.g. tax or state aid measures) to support the development of new sustainable bio-based product production processes • Binding political framework for supporting biobased economy in the long-term 7

Study findings : Capital requirements, Technical design and Funding model

• There are different technological and commercial options for technologies and feedstock to create the 2 nd based economy generation bio •

Biological enzymatic conversion

of into C5 and C6 sugars and ultimately chemicals, materials and energy. •

Thermochemical conversion

of wood and black liquor into chemicals, materials, fibres and energy. •

Thermic conversion

of agricultural residue, hard wood and energy crops into syngas and subsequent biotechnological transformation to chemicals and energy carriers • There are different objectives for 2 nd generation bio-refineries • Different foci along the

value-chains

(e.g. input, conversion technologies, output) • Different beliefs in optimal

technological pathways

• There are two main models for public-private collaboration, with distinct costs and benefits •

A joint, consensus-focused design

in which a wide range of private and public actors work together to develop 2-3 designs •

Competing coalitions

(sub-consortia) of private sector companies vying for public sector funding (match-fund) 1. For a new biological enzymatic biorefinery the size of 10 tons of dry biomass per day the capital investment required will be in the range of € 25-50 million. For a new thermochemical facility at 100 tons per day the capital investment is likely to be € 150-200 million. If feasible to build on existing facilities investments required will drop substantially 8

Summary of principles for ideal location for a biorefinery

• The locations of the bio-refinery is a complex decision-making process, incorporating feedstock availability, capital costs, clusters, co-location synergies, member state involvement and logistic capabilities • The importance of the location variables depends on the scale of the plant and the time horizon considered. It should optimize the plant’s economics and operations in order to provide the best simulation for larger-scale plants • Early stage facilities are very sensitive to Capex. Commercial scale plants, however, are much more sensitive to operating costs • External financial support and co-location synergies have a high impact on funding needed and are key for demonstration scale facilities • Feedstock costs are especially important for commercial scale facilities • In the medium to long-term, different EU regions might improve their cluster landscape, funding schemes, feedstock availability or transportation network. This would increase the number of potential good hosting regions for the biorefinery • In the short-term, some EU countries (e.g. France, Germany, Belgium, the Netherlands, Denmark, UK, Sweden and Finland) are more attractive locations for a biorefinery (agriculture-based in the heart of Europe and UK, wood-based in Scandinavia) • In the long-term – and as full commercial scale biorefineries emerge - other regions could become attractive locations for a biorefinery provided improvement in key location variables (e.g. Eastern Europe) Source: Interviews, Dalberg analysis 9

Steps to define location of demonstration biorefinery

Decision 1:

• Build on existing facility and/or • Build a new facility

Decision 2 (if decided to build a new facility)

• Funding mechanism • Feedstock, technical route, output • What needs to be tested

Decision 3:

Selection of attractive clusters (co-location synergies)

Decision 4:

Selection final candidates to host the biorefinery

Specific biorefinery location Decision Criteria:

• Availability of time and financial resources • Project match with existing facilities

Decision outcome:

•

Decision to build a new plant and/or to join an existing facility

• Open funding windows • Member states’ support • Consortia’s private interests, state the technology •

Selection of country or high-level region

• Economic synergies • Operability, access to talent pool and expertise • Feasibility to join the cluster (regulation, capacity, etc.) •

Selection of most attractive clusters within the selected regions

• Existence of local feedstock market close to cluster • Degree of industrialization of agriculture/forest processing • Crops/forest residues yields • Access to transportation network •

Selection of key clusters offering the best co-location synergies, feedstock availability and transportation costs

Source: Dalberg analysis

Where does this lead

• Establishing a dedicated platform for biorefineries through a possible ERANET + Scheme • Investigating funding for biorefineries through PPPs and Horizon 2020 (EC Framework programme for research and innovation 2013 2020) • Input into recently published Star-COLIBRI Vision document and Research Roadmap and ambitions for the future • Feasibility study findings integrated into the Commission’s consultation on the Common Strategic Framework for EU Research and Innovation Funding 11

Funding options

Timing of grant Short term (2011-13) Establish demonstration scale ligno cellulosic bio refineries producing chemicals and materials Medium term (2013-15) Long term (2015-)

Primary recommended options Best alternative options

Program/facility

CPI, BE-Basic, BioBase Europe, ARD, etc.

European Industrial Bioenergy Initiative (EIBI) Tailored European Biorefinery Initiative (EBI) Structural funds FP8 call for biorefineries focused on non-fuels

Options to use

Work with/build on existing facility with potential support from FP7 call Establish consortia to answer EIBI call for demo facility

Estimated match

Engage EC to include this initiative under the European Strategy for Bioeconomy Invoke a member state to support a biorefinery project Engage in FP8 dialogue to help define early FP8 call for demo biorefineries High Low PPP for demo bio refineries focused on non-fuels NER300 Article 185 ERA Net Plus Help design new PPP instruments Form coalition to apply in 2014 Establish consortia for next NER300 call Invoke national research support to form partnership Invoke national research institutions to establish joint call 12

Steering group and external experts

Steering Group

• Yvon Le Henaff • Jean-Marie Chauvet ARD • Chris Dowle ARD CPI • Jerry Cooper • Ana-Maria Bravo • Marcel Wubbolts • Ward Mosmuller CPI Danisco/Genencor DSM DSM • Andreas Jung • Manfred Kircher Evonik Evonik • Matthias Moll Evonik • Lars Hansen • Anders Kristoffersen Novozymes • Vincent de Jong Novozymes Purac • Peter Baets • Johan Elvnert • Irina Sterr • Ulrich Kettling • Clas Engstrom Purac Star Colibri SüdChemie SüdChemie Processum SE

Other experts interviewed

• Peter Axegard • Pascal Bailleul • Greg Arrowsmith Innventia Chamtor NER300 • Birger Kerckow • Bruno Schmitz FNR, EIBI member DG RTD • Andreas Pilzecker DG Agriculture • Maria Fernandez • Jean-Emmanuel Faure DG Research and Innovation • Brigitte Weiss DG Research and Innovation Research and Innovation • Giulia del Brenna • Andrew Hagar • Thomas Pscorn • Corry van Driel DG Enterprise and Industry World Economic Forum Andritz BE-Basic

Project Team – EuropaBio

• Dirk Carrez • Jasmiina Laurmaa • Antoine Peeters • Camille Burel 13