future industrial bio refineries report 2010

8/6/2019 Future Industrial Bio Refineries Report 2010

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THE FUTURE

OF INDUSTRIAL

BIOREFINERIES


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A white paper edited and authored bySir David King, Director, Smith School of Enterprise and the Environment, University of Oxford, United Kingdom,with co-authors and contributions from O. R. Inderwildi and Alex Williams

World Economic Forum contributor and editing by

Andrew Hagan, Associate Director, Head of Chemicals Industries, World Economic Forum ([email protected])

World Economic Forum contributors:Karin Lfer and Nina Gillman, Project Managers, Chemicals Industries, World Economic Forum/McKinsey & CompanyUlrich Weihe, Project Supervisor, Chemicals Industries, World Economic Forum/Associate Principal, McKinsey & CompanyStephane Oertel, Associate Director, Global Risk Network, World Economic Forum

The World Economic Forum would also like to acknowledge and thank McKinsey & Company for their contribution to thisproject and the report.

The World Economic Forum would like to thank the members of the Steering Board of the project for their contribution:Feike Sijbesma, Chief Executive Ofcer, Royal DSM, Netherlands

Steen Riisgaard, President and Chief Executive Ofcer, Novozymes, DenmarkBernardo Gradin, Chief Executive Ofcer, Braskem, BrazilThomas M. Connelly, Executive Vice-President, Agriculture, Nutrition and DuPont Applied BioSciences, DuPont, USACouncil Members o the World Economic Forums Global Agenda Council on Emerging Technologies

The World Economic Forum would also like to thank for extra contributions:Rob W. Van Leen, Chief Innovation Ofcer, Royal DSM, NetherlandsThomas Scher, Senior Director, Novozymes, DenmarkSteve Hamburg, Chief Scientist, Environmental Defense Fund, USA

The World Economic Forum would also like to acknowledge and thank

World Economic Forum Partner Contributors

Royal DSM, DuPont, Novozymes, Braskem, BASF, Bayer, Evonik, Lanxess, Jubilant Bhartia Group, Reliance Industries,Tata Chemical, Mitsubishi Chemical Holdings Corporation, Sibur, Lufthansa, Swiss, Etihad, Airbus, TNT, Renault/NissanShell, BP, FMG, SCM, Anglo American

Nongovernmental Organizations

EDF (Environmental Defense Fund), IUCN, Greenpeace

Experts, Academics and Policy-makers

Kiyoshi Kurokawa, Professor, National Graduate Institute for Policy Studies (GRIPS), JapanLee Sang-Yup, Distinguished Professor, Director and Dean, Korea Advanced Institute of Science and Technology-KAIST,Republic of KoreaAndre Faaij, Professor, Coordinator Research Energy Supply and System Studies, Utrecht University, Netherlands

Luis Guillermo Plata, Minister of Trade, Industry and Tourism of ColombiaWaldemar Kutt, Deputy Head of Cabinet, European Commission, Brussels

REF: 210610The views expressed in this publication do not necessarily reect those of the World Economic Forum.

World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744E-mail: [email protected]

2010 World Economic ForumAll rights reservedNo part of this publication may be reproduced or transmitted in any form or by any means, including photocopying or recording, or by any informationstorage and retrieval system.


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The Future o Industrial Bioreneries

Contents

Foreword 5

Executive Summary 6

1. Basic Concepts o Bioreneries 71.1 Biomass Feedstock 71.1.i. Sugar/Starch Crops1.1.ii. Vegetable Oil1.1.iii. Lignocellulosic Biomass1.1.iv. Jatropha Oil1.1.v. Micro-algae

1.2 Conversion Techniques 91.2.i. Fermentation of Sugar/Starch Crops1.2.ii. Fermentation of Lignocellulosic Biomass1.2.iii. Transesterication of Triglycerides1.2.iv. Gasication: Formation of Syngas1.2.v. Fast Pyrolysis1.2.vi. Fischer-Tropsch Synthesis1.2.vii. Hydrogenation1.2.viii. Conversion of Syngas to Methane1.2.ix. Anaerobic Digestion

1.3 Bioreneries 121.3.i. Optimization and Efciency1.3.ii. The Biorenery Concept

2. Current Status o Industrialization 152.1 History o Bio-based Products 15

2.2 Industrialization 152.2.i. United States2.2.ii. Brazil2.2.iii. European Union

2.2.iv. Asia2.2.v. Africa

2.3 Revenue Potential 182.3.i. Agricultural Inputs2.3.ii. Biomass Production2.3.iii. Biomass Trading2.3.iv. Biorening Inputs2.3.v. Biorening Outputs

3. Strategic Relevance or Industry 20

3.1 Long-term Trends Driving Adoption o Biouels 20

3.1.i. Demographic Growth and Rising Economic Aspirations of Developing Countries3.1.ii. Need for Increased Geopolitical Energy Security3.1.iii. Deteriorating Economics of Fossil-based Products3.1.iv. Increasing Public Pressure for Environmental Sustainability


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Contents

3.2 Strategic Relevance or Selected Industries 203.2.i. Agriculture3.2.ii. Automotive Industry3.2.iii. Aviation Industry3.2.iv. Chemical Industry3.2.v. Energy Industry3.2.vi. Transportation

4. Key Challenges o Commercialization 25

4.1 Technical Challenges 254.1.i. Feedstock Yield and Composition of Biomass4.1.ii. Efcient Enzymes4.1.iii. Microbial Cell Factories4.1.iv. Processing and Logistics

4.2 Commercial and Strategic Challenges 254.2.i. Integration into Existing Value Chains4.2.ii. Funding Difculties4.2.iii. Uncertainty Facing a New Field4.3 The Sustainability Challenge 264.3.i. Land-use Change and Its Effect on GHG Emissions4.3.ii. Link between Commodity Prices and Bioreneries4.3.iii. Reputational Risks4.3.iv. Legislation-driven Deforestation

5. Conclusions and Recommendations 32

Glossary 36

Additional Notes 37

Bibliography 38


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ForewordThe Collaborative Innovation Initiative was launched in 2009 by the World Economic Forum Chemicals IndustryPartners Community to engage a community of chief innovation ofcers on the challenges and opportunitiesrelated to innovation. Together with innovation executives from other industries, policy-makers, experts,academics and NGOs, the initiative aims to explore the key issues facing the world where collaboration-basedsolutions between business, government and civil society are required. It recognizes that these issues, whetherdue to the complexity, risks or investments involved, cannot be solved by industry or government alone; actionon a broader and more holistic level is required.

Initial efforts in this initiative identied the key global mega-trends and related challenges and innovation needs,providing a roadmap on the key issues that need to be addressed in the context of improving the state of theworld. Issues where the Forums power to convene different stakeholders would be particularly valuable werehighlighted. Bioreneries ts well within this context as a rst issue to be explored in depth. Climate protection,environment and energy are just some of the areas where bioreneries could provide a solution, and thetechnical, commercial and strategic challenges highlighted in this report will require collaboration if bioreneriesis to realize its potential.

Beginning in 2009, a series of virtual meetings as well as a gathering in Dalian, Peoples Republic of China,took place over 18 months to explore the key obstacles, challenges, hurdles and enablers involved. The globaloverview is presented in this report, with work ongoing in 2010-2011 to explore the unique challenges andopportunities specic to different geographies.

Collaborative Innovation and the concept of division of RD&D mirroring division of labour is becomingincreasingly prominent as technologies and issues become too complex and costly for one company orindustry to tackle alone. Indeed, government as the representative of society is demanding that industryinnovate and nd solutions. In a way, this makes government a client of industry. By placing its demands onindustry and not on individual companies, a new customer-supplier dynamic is established, with industry as thesupplier. This has the potential to create an opportunity for industry to act as a whole in a collaborative manner,and to meet these innovation demands in a non-competitive way as truly corporate global citizens.

Andrew Hagan Alex WongHead, Chemicals Industry Community Senior DirectorWorld Economic Forum Head, Center for Global Industries

Head, Basic IndustriesWorld Economic Forum


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based products are expected to grow very stronglyglobally over the next few years due to fourunderlying, irreversible trends. First, the economicsof fossil-based products are deteriorating sinceconventional crude oil resources are getting scarce.Second is the growing need for national energysecurity and geopolitical security. Third, publicpressure for environmental sustainability is increasing

due to an increasing environmental awareness. Last,but not least, rapid demographic growth will drivedemand supported by rising economic aspirations ofdeveloping countries.

These fundamental trends triggered a vast interestin bio-based products and placed them high onthe strategic agenda of most players in a variety ofindustries. In agriculture, for example, new economicopportunities will emerge from the rising demandfor biomass. In the chemicals industry, bio-basedinnovative products outside the conventionalpetroleum-based product family trees will confer anadvantage to players who manage to nd the rightmolecules and insert them into existing or new valuechains.

In the automotive and aviation industries,corporations are looking at biofuels as an importantmeans to reduce the GHG emissions of their eetsto comply with regional or national regulations,while utilities are making high investments in theexpansion of their renewable power generationassets, with biomass coming third after solar andwind investments.

Despite the great relevance of bio-based productsfor many industries, experts still see numeroustechnical, strategic and commercial challengesthat need to be overcome before any large-scalecommercialization of the industry can succeed.

Most importantly, bioreneries will have to employthe best possible technologies (for fermentation,gasication and chemical conversion, and also forpre-treatment and storage) to ensure that bio-based products break even. This will require the

concerted action of many non-traditional partners such as grain processors, chemical companies,and technology players to cover all aspects ofthe complex biomass value chain, from feedstockproduction to end-user distribution.

Executive Summary

The world is facing many serious challenges. Afast-growing human population and the consequentgrowing demand for food, energy and water are themost serious. In addition, anthropogenic climaticchange is a severe threat to mankind and requiresthat we signicantly reduce our current greenhousegas (GHG) emissions to avoid detrimentalconsequences for the globe. Only the use of new

technologies will allow us to bridge the gap betweeneconomic growth and environmental sustainability inthe long run.

Over the course of many multistakeholderdiscussions driven by the Chemicals IndustryCommunity at the World Economic Forum in 2008and 2009, industrial bioreneries were identiedas one potential solution that may help mitigatethe threat of climate change and the seeminglyboundless demand for energy, fuels, chemicals andmaterials.

Bioreneries are facilities that convert biomass biological materials from living or recently livingorganisms into fuels, energy, chemicals andmaterials (and feed). To date, the industry is stillin a nascent state, with most second-generationbiorenery plants (using cellulosic material) onlyexpected to be ready for large-scale commercialproduction in a few years. The landscape of activeplayers is rather scattered and fragmented with manyrelatively small technology players, but there is anever increasing number of large players starting toinvest.

Two of the main industry drivers, in addition toenergy security and environmental concerns, aremandates and policies. Fuel regulations, such as theLow-carbon Fuel Standard introduced in Californiain 2007, are examples of potential industry drivers.The Standard requires fuel providers to reduce GHGemissions of the fuel they sell, to achieve a 10%reduction in the carbon intensity of transport fuelsby 2020. Additionally, the Renewable Fuel Standardintroduced in the US in the same year sets anemissions threshold that includes direct and indirect

emissions from land use changes.

Regardless of these legislation-based regionaldifferences in thestatus quo of industrialcommercialization, generally the markets for bio-


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Another signicant challenge is to establishthe necessary infrastructure (supply chain anddistribution infrastructure) and raise the high capitalcosts required. The latter are typically beyond thenancial reach of individual private companies, andmay therefore require public funding.

In the United States, a recent report from Sandia

showed that the US can produce 90 billion gallons ofbiofuels to replace oil (total use today is around 110billion gallons). With improvements in mileage, thatmeans that US could run solely on biofuel in 2030-2050. The limitation is not the supply of biomassbut, rather, a complete infrastructure built around oil,expected low oil prices at least between now and2020 and a lack of political decisions.

To overcome these challenges, various stakeholdersneed to play different roles in the industrializationprocess of biorenery systems. Governments

interested in supporting bioreneries for reasonsof environmental protection and energy securityshould make signicant investments in R&D, supplychain and distribution infrastructure as well asconversion capacity, while carefully regulating theimplementation process to ensure food security andavoid land-use change.

Companies highly exposed to fossil feedstock andfuels will need to develop petroleum-replacementstrategies to manage their risk, and explore thenew business opportunities created by innovativeconversion technologies and novel molecularoutputs. Retail and business consumers need tobe better educated about the benets of bio-basedproducts both from an environmental sustainability

and business opportunity perspective.

Finally, NGOs and public authorities must beinvolved from an early stage to ensure developmentof the industry in a manner compatible with thehighest environmental and social standards. Withoutthe latter, broad public acceptance and the adoptionof bio-based products will be hard to accomplish.


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of many starch crops also delivers valuable animalfeed rich in protein and energy as a side product(e.g. Distillers Dried Grains with Solubles DDGS).According to a recent study by the IEA, DDGS couldeven replace protein-rich feed such as soy, with 20%higher land-use efciency than conventional feed.[2]

This could become an important issue in relationto the land use of rst-generation sugar/starchcrops. There are approximately 400 operational

rst-generation bioreneries around the world yet,despite the efciency and overwhelming success ofthis biofuel feedstock, there are still limitations whenland-use change and its effect on GHG emissionsare taken into account (see 4.3).

1.1.ii. Vegetable Oil.Vegetable oil is mainly used forthe production of biodiesel by transesterication.There are two categories: pure plant oil (PPO) andwaste vegetable oil (WVO). Pure plant oil stemsfrom dedicated oil crops such as palm, soybean,rapeseed and sunower seeds. The production ofthis is limited only by the agricultural capacity of thecountry. Use of waste vegetable oil, for examplecooking oil or animal fat, is an effective method ofrecycling our daily wastes; however, it does needrenement as well as hydrogenation to becomeusable biodiesel.

Sustainable and economic production of biodieselfrom vegetable oils has proved a challenge. Thisis due to the signicant land-use change andsustainability issues as a result of pure plant oilproduction, and the high costs associated withthe renement of waste oil due to its unavoidable

impurity. Fuels derived from vegetable oil are widelyused; however, its use is likely to be most effectiveas a supplement to other energy forms, not as aprimary source.[3]

1.1.iii. Lignocellulosic Biomass.Lignocellulosicbiomass refers to inedible plant material mainlycomposed of cellulose, hemicellulose and lignin. Itis deemed likely that this type of second-generationfeedstock will be used for the production of biofuelsand bio-based chemicals in the future using differentconversion technologies. However, it is more difcult

to convert lignocellulosic biomass into a usableoutput than other types of biomass; the main reasonfor this is that the protective shield of hemicelluloseand lignin that surrounds cellulose has to be brokendown, which is a highly energy intensive process.

1. Basic Biorenery Concepts

The term bio-based products refers to threedifferent product categories: biofuels (e.g. biodieseland bioethanol), bio-energy (heat and power) andbio-based chemicals and materials (e.g. succinicacid and polylactic acid). They are produced by abiorenery that integrates the biomass conversionprocesses. The biorenery concept is thus analogousto todays petroleum reneries that produce multiple

fuels, power and chemical products from petroleum.

Biorenery systems generally work by processing abio-based feedstock input to create fuel, a chemical,feed or power/heat as an output (see Figure 1).Bioreneries thus use a wide variety of differentinputs/feedstocks and conversion technologies.

1.1 Biomass Feedstock

Bio-based products can be manufactured fromvarious feedstocks. However, at present there isno feedstock or process that would make thesea clear alternative to fossil-based products. Thereare many options available, each with advantagesand disadvantages. Two categories of feedstockdominate research: rst and second generation.First-generation products are manufactured fromedible biomass such as starch-rich or oily plants (seei-ii). Second-generation products utilize biomassconsisting of the residual non-food parts of currentcrops or other non-food sources, such as perennialgrasses or algae (see iii-v). These are widely seen aspossessing a signicantly higher potential to replacefossil-based products.

1.1.i. Sugar/Starch Crops.The most common typeof biorenery today uses sugar- or starch-rich crops.Sugar crops such as sugar cane, sugar beet orsweet sorghum store large amounts of saccharose,which can easily be extracted from the plant materialfor subsequent fermentation to ethanol or bio-basedchemicals. Sugar cane is currently the preferredfeedstock from an economic and environmentalperspective due to the relative ease of production.However, this feedstock is restricted to certainlocations due to weather and soil requirements.

Starch-rich crops such as corn, wheat and cassavacan be hydrolyzed enzymatically to deliver a sugarsolution, which can subsequently be fermented andprocessed into fuels and chemicals.[1] The processing


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On the pro side, it can be derived from many differentsources, including forestry waste (e.g. wood chips),agricultural waste (e.g. straw, corn stover), paper andmunicipal waste, as well as dedicated energy cropssuch as switchgrass, miscanthus or short-rotationpoplar. These feedstocks exclude direct land-usechange and minimize indirect land-use change, videinra. Cellulosic ethanol is ready for deployment dueto recent signicant breakthroughs in the enzymaticconversion process.[4]

1.1.iv. Jatropha Oil.The Jatropha Curcas treefrom Central and South America contains 27-40% inedible oil, which can be converted tobiodiesel via transesterication. An assessment ofj.curcas sustainability reveals a positive effect onthe environment and GHG emissions, providedcultivation occurs on wasteland or degraded ground.

The factors inuencing the environmental impactof using jatropha are much the same, as any otherbiomass feedstock, cultivation intensity and distanceto market are all expected to have an impact. Itis thought that jatropha is one of the main driversfor rural development due to its labour-intensiveproduction chain, a reminder that social impactscannot be ignored. The exact nature of cultivation ofjatropha and its effects on the environment are notfully understood, making it difcult to determine itsfuture as a fuel alternative.[5-8]

1.1.v. Micro-algae.Micro-algae are a large anddiverse group of unicellular photo- and hetero-trophic organisms that have attracted muchattention in recent years due to their potential value

as a renewable energy source. Focus has beenon storage lipids in the form of triacylglycerols,which can be used to synthesize biodiesel viatransesterication. The remaining carbohydratecontent can also be converted to bioethanol viafermentation.

The advantages of using algae-derived fuels as analternative are numerous. First, they can providebetween 10 and 100 times more oil per acre thanother second-generation biofuel feedstock and theresulting oil content of some micro-algae exceeds

80% of the dry weight of algae biomass, almost 20times that of traditional feedstock. They are safe,biodegradable and need not compete with arableland. In addition, they are highly productive, quick tocultivate and simply require CO

2, sunlight and water

to grow.

However, numerous barriers remain to be overcomebefore the large-scale production of micro-algae-derived biofuels can become a commercial reality.Producing low-cost micro-algal biodiesel primarilyrequires improvements to algal biology throughgenetic and metabolic engineering, to achieveoptimum attributes such as high growth rate, highlipid content and ease of extraction.

Advances in photobioreactor engineering are

expected to lower the cost of production. Biofuelsproduced from the mass cultivation of micro-algaepotentially offer a highly attractive and ecologically-friendly fuel resource; however, the challenges stillremain to close the cost gap between micro-algaederived fuels and fossil fuels.[9-11]

1.2 Conversion Techniques

Depending on the feedstock and the desiredoutput, bioreneries employ a variety of conversiontechnologies, transforming the raw biomassinto commercial energy sources. These mostcommonly include fermentation, gasication andtransesterication. New and less traditional methodsare constantly being investigated, particularly in thedevelopment of synthetic biofuels such as biomass-to-liquid (BTL). Novel chemicals and materialsproduced from biomass are also currently available,but are much less developed at a commercial levelcompared with fuels (see 3.2.iv).

1.2.i. Fermentation o Sugar/Starch Crops.Thefermentation of sugar solutions originating fromeither starch crops or lignocellulosic material requires

pretreatment of the feedstock to liberate the sugarsfrom the plant material. Starch is usually hydrolyzedenzymatically to deliver sugar solutions, followedby the microbial fermentation stage to producebioethanol. Sugar crops such as sugar cane can bedirectly fermented to produce ethanol.[12]

1.2.ii. Fermentation o Lignocellosic Biomass. Whenusing lignocellulosic biomass, feedstock processingneeds to separate the cellulosic and hemicellulosicmaterial from the non-fermentable lignin, which arestrongly bonded by covalent cross-links.[13]This is

usually done mechanically, followed by acid, alkaliand/or steam treatment. While the lignin is currentlymostly combusted to deliver energy, the cellulosicand hemicellulosic components are hydrolyzedenzymatically to deliver sugar solutions, followed byfermentation.


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1.2.vi. Fischer-Tropsch Synthesis. The conversion ofsyngas via the Fischer-Tropsch process into syntheticfuel involves the catalytic conversion of syngas intoliquid hydrocarbons ranging from C1 to C50. Aselective distribution of products is achievable withcontrol over temperature, pressure and the type ofcatalyst.[1]Although this process is widely recognized,there is a possibility of catalyst shortages in large-scale productions if catalyst regeneration is notimproved. This technology is commonly found in the

commercial generation of electricity and syntheticfuels from conventional fossil fuels.

However, the same principles can be applied tobiomass and biofuels production; it is thereforecommonly referred to as BTL. Gasication of biomasshas had little commercial impact owing to competitionfrom other conversion techniques. There has,however, been renewed interest in this process, yeteconomically viable examples are rare. [16]

1.2.vii. Hydrogenation.A more energy-efcient

alternative of producing synthetic biofuel, involvinghydrotreatment of bio-oils to produce hydrotreatedrenewable jet fuels (HRJ). Hydrogenation removesoxygen and other impurities from organic oils. Theseoils can be extracted directly from feedstocks withhigh oil content, such asjatropha, camelina or algae,or produced through pyrolysis (see 1.2.v).

Hydrotreating bio-oils with hydrogen at medium tohigh temperatures converts bio-oils to hydrocarbonfuels, such as HRJ. The resultant fuels are purehydrocarbon and have indistinguishable physicalproperties from fossil-based fuels. HRJ fuels tend

to have better combustion performance and higherenergy content, similar to Fischer-Tropsch fuels and,most importantly, have good low-temperature stability,making them ideal as a renewable source of jet fuel(see 3.2.iii). In December 2009, the rst aviation testight powered by biofuel sourced from jatropha oilwas undertaken by Air New Zealand. [1, 17, 18]

1.2.viii. Conversion o Syngas to Methane. Methanecan be produced from syngas as a result of thermalgasication and a variation of the Fischer-Tropschreaction. It can also be found as a by-product of

Fischer-Tropsch biofuel synthesis. Synthetic naturalgas (SNG) is a substitute for natural gas that canbe fed directly into the national grid, and used as atransport fuel if liqueed.[19-21]

As opposed to the fermentation of pure C6 sugars(as in starch or saccharose), fermentation ofbroken-down hemicellulose also requires specialfermentation organisms capable of converting C5sugars such as Xylose.[14] At present, there is a needfor more efcient and robust microorganisms thatcan withstand higher temperatures and pressures todeliver the fermentation product for both of the abovebiomass feedstocks (see 4.1.ii).

1.2.iii. Transesterifcation o Triglycerides.Transesterication of plant or algal oil is astandardized process by which triglycerides arereacted with methanol in the presence of a catalyst todeliver fatty acid methyl esters (FAME) and glycerol.Waste vegetable oil can also be converted, butrequires renement. Both acid and alkali catalystscan be used, although the alkali catalysed reactionproceeds 4,000 times faster than the same reactionwith acid.

The main problems associated with using

triglycerides as a diesel replacement tend to behigh viscosity, low volatility and polyunsaturatedcharacter. Transesterication is a method of reducingthe viscosity of the triglycerides and enhancing thephysical properties of the fuel. As a result, FAMEbiodiesel is the most common form of biodiesel usedtoday.[15]

1.2.iv. Gasifcation: Formation o Syngas. Gasicationof biomass allows the breakdown of carbonaceousmaterials into their synthesis gas compounds, namelyH

2and CO, known assyngas. Gasication can be

achieved by thermal decomposition in the presence

of a limited amount of oxygen. The resultant mixtureof hydrogen and carbon monoxide is then convertedby partial oxidation at elevated temperature or viaa Fischer-Tropsch reaction (see 1.2.vi) into themolecules of choice.[16]

1.2.v. Fast Pyrolysis. Similar to the formation ofsyngas, pyrolysis is the thermal decomposition ofthe biomass into a liquid bio-oil containing varioushydrocarbons and an oxygen content of 35-40%,which can then be converted via hydrogenation (see1.2.vii) or via gasication into the target hydrocarbon.

The use of pyrolysis and the properties of the bio-oilproduced are still in development, but it is thoughtthat it can reduce the costs of gasication comparedwith feeding solid biomass directly into the gasier.[16]


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1.2.ix. Anaerobic Digestion.SNG production can also involve the conversion of biodegradable waste or energycrops into a gaseous fuel called biogas, made up largely of 50%+ methane and carbon dioxide. Commercialconversion processes typically run via anaerobic digestion or fermentation by anaerobes. This biologicalprocess is used as a renewable substitute for commercial natural gas and is estimated to have a conversionefciency of 70%.[21]

Figure 1: Biouel Flow.The multiple synthetic conversion routes of major biofuels produced from rst andsecond-generation biomass feedstock. Roman numerals correspond to the conversion processes describedinsection 1.2.


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Logistics. Optimizing the efciency of thesupply chain will require feedstocks to bedeveloped with characteristics that increasethe efciency of the conversion process andhave the necessary characteristics to producethe end products. The logistics of bioreneryoutputs must also be considered, includingtransportation and supply chain infrastructure(e.g. deep-water ports, roads, etc.), organizationof storage facilities and identication of new

trade routes. Bioreneries that are designed tobe exible and modular will be able to take awider range of feedstock or adapt to changesin demand for specic chemicals without largecapital costs. This exibility will also mean thata biorenery will be able to cope with a varietyof feedstocks that mature at different times ofthe year. A modular installation will also be ableto change its processing technologies as newfeedstocks are developed.

From a research perspective, the emphasis mustbe on the development of a set of capabilities thatare independent of particular fuels, chemicals andmaterials.

The economics andsustainabilityof bioreneries aredependent on their efciency and can consequentlybe improved by optimization of the entity:

Economics.The cost of production of bio-basedproducts and, in particular, the investmentneeded for infrastructure and supply will have adirect bearing on their success as an alternativeto fossil-based products. An efcient biorenery

will ensure cost minimization and a costcompetitive end product. At present, efciencyis difcult to dene since an efcient bioreneryis still a concept. However, if one describesbiorenery efciency in terms of utilizing localresources and the existing infrastructure,maximizing biomass-to-product conversionrates, ensuring exibility in the productsproduced by the renery and streamlining supplychains, then it is clear it will have a large impacton the economic viability of bioreneries.

Sustainability. How the various processes inthe conversion stage are combined will havesignicant impacts on the sustainability of bio-based products. Throughout the biorenery,there is the opportunity for improved recycling of

1.3. Bioreneries

1.3.i.Optimization and Efciency. A biorenery is afacility that integrates biomass conversion processesand equipment to produce fuels, chemicals, feed,materials and energy from biomass.The objective ofa biorenery is to optimize the use of resources andminimize wastes, thereby maximizing benets andprotability.

Bioreneries will encompass a variety of conversionprocesses and different sized installations due tothe range of processes biological, chemical andthermal that can be employed. Optimization andhigh efciency are the keys to making bioreneriessustainable and economically viable.[22, 23]Optimization can be achieved by future developmentin key areas and the efcient exploitation of chemicalenergy from biomass:

Technology.Developments in conversiontechnologies will lead to more of the plant beingused to produce a wider, more exible range ofproducts for example, chemicals and materials in addition to fuels. Much of this developmentis technology dependent and will lead toimprovements in environmental and economicperformance of the production processes. Theconversion processes and the end productsthat can be produced are dependent on thefeedstocks available and how they are exploited.

Exploitation.The challenge is to nd theoptimum method of exploiting the chemicalenergy embedded in the biomass. Developing

highly efcient conversion techniques suchas development of new microbial strains for thedirect conversion of hemicellulose and advancedcatalyst development to improve regenerationafter transesterication is a vital component ofimproving the conversion process. There are alsoexisting technologies available for improving thecrops that produce feedstocks for bioreneries.These include fast-track breeding (non-GM) andthe use of GM to increase yield and to facilitateconversion of lignocellulose. Although multipleproducts can already be gained from a single

feedstock, it is important to vastly increase thediversity of these products using a GM strategyfor the development of new crops. [1]


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Algae biofuels occupy a third MicroorganismPlatorm, where cultivation and extraction occur onthe same site. The two main methods of cultivationare within:a) Raceway-type ponds cheap, high capacity

open air ponds exposed to the elementsb) Photobioreactors closed systems providing a

light source and all required nutrients

Photobioreactors provide a greater oil yield per

hectare due to their higher volumetric biomassproductivity. In addition to oils, micro-algalbiomass contains signicant quantities of proteins,carbohydrates and other nutrients. A micro-algalbiorenery can simultaneously produce biodiesel,animal feed, biogas and electrical power. Thecost of producing micro-algal biodiesel can bereduced substantially by using a biorenery basedproduction strategy, improving capabilities ofmicro-algae through genetic engineering, designingnew synthetic microorganisms and advances inengineering of photobioreactors.[11, 25]

Two important concepts are guiding NRELs effortsto create novel, successful bioreneries: To take maximum advantage of intermediate

and by-products to manufacture additionalchemicals and materials

To balance high-value/low-volume bio-basedchemicals and materials with high-volume/low-value biofuels

A biorenery might produce one or several low-volume, but high-value, chemical products and alow-value, but high-volume liquid transportation

fuel, while simultaneously generating electricity andprocess heat for its own use and perhaps enoughfor the sale of electricity. The high-value productsenhance protability, the high-volume fuel helps meetnational energy needs, and the power productionreduces costs and avoids GHG emissions.[24]

Around a dozen additional chemicals apart fromsyngas and fuels may currently be produced perrenery but, ultimately, the local market value forthe nal products will determine which products willbe produced. The production of chemicals will be

an important part of the economics of a biorenery(exibility to adapt to timely market needs), as the

heat/energy or the regeneration of catalysts in anintegrated approach, which will have an impacton the carbon footprint of the overall processand resulting products. New bioreneries areoften generating excess energy from wasteproducts, which is then fed into the grid, oftenlowering the net CO

2emissions from the overall

process. Just as efciency had an effect on theeconomics, the efciency will also have an effecton the sustainability. The optimal biorenery

should be capable of utilizing biomass as arenewable energy source that can sustain ourenergy needs in the long term.

1.3.ii. The Biorefnery Concept.Adapted from theNational Renewable Energy Laboratory (NREL),[24]a simple biorenery concept has been devised thatis built on three different platforms to promotedifferent product routes (see Figure 2).

The Biochemical Platorm is currently based onbiochemical conversion processes and focuseson the fermentation of sugars extracted frombiomass feedstocks. The production of bioethanolrequires three main steps: fermentation of thesugars, distillation to remove the bulk of the waterand dehydration to further remove water from theremaining azeotropic water/ethanol mixture.

Starch-based feedstock requires saccharicationto produce fermentable sugars. Lignocellulosicbiomass requires steps to separate the lignin fromthe cellulose before the sugars can be extracted. Thelatter (second generation) process may be viewedas a bolt on to the former (rst generation) process

using the same fermentation processes but requiringan additional enzymatic step to extract the sugars.

The Thermochemical Platorm is currently basedon thermochemical conversion processes andfocuses on the gasication of biomass feedstocksand resulting by-products. Where gasication ofcarbonaceous materials is widely used (e.g. syngasproduction from coal), gasication of lignocellulosicbiomass is still a developing technology. Thoughtmust given to how this process would t in to thebiorenery concept, and how heat and power can be

combined from both platforms as by-products.


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composition of plant material allows easy derivationof primary chemicals, quite different to those derivedfrom oil. Consequently, a bio-based chemicalindustry will be built on a different selection ofplatform chemicals than those in the petrochemicalindustry.[12]

At present there is no denitive answer to determinethe optimal biorenery. A highly efcient,

sustainable and economically viable one, however,can be achieved by making conversion processesmore efcient, designing with exibility in mind,maximizing the exploitation of chemical energyfrom feedstock and developing a set of conversioncapabilities that are independent of particular fuels,chemicals and materials.

Figure 2: The Biorefnery Concept. A simple three platform concept adapted from a model devised by the

National Renewable Energy Laboratory to include a microorganism platform. This concept demonstrates howany number of conversion processes can take place within one biorenery, analogous to todays oil renery.


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legislations, subsidies or mandates are expected topromote the establishment of second-generation pilotbioreneries by 2011 or later, while experts estimatethat cellulosic biofuels will be fully commercial on alarge scale in ve to 10 years.

2.2. Industrialization

The biorenery industry is gathering pace, with mostsecond-generation plants expected to be ready for

large-scale commercial production in a few years.Furthermore, the landscape of active players consistsmainly of relatively small technology players, butalso an increasing number of large multinationalcompanies willing to invest in sustainable energy.Nonetheless, a number of technology clusters,networks and partnerships are developing, oftencomposed of partners with complementary expertisealong the biomass value chain, particularly with regardto second-generation technologies.

National mandates and policies are among themain industry drivers, which is why the status ofindustrialization differs substantially between countriesor regions. Before some of the inter-regional orinternational differences are explored below, someremarks about regulatory regimes in general arewarranted. Generally speaking, all biofuel-producingcountries have a mix of mandates and subsidies inplace to support their national biofuel industries as ameans to increase fuel supply security, CO

2reduction

or local farm revenues. Biomass-based powerproduction is supported by similar measures.

Subsidies can be generous, but vary from country

to country, even within the same region. Italy, forexample, guarantees feed-in tariffs of 280 euros/MWh, which is substantially higher than the averagepower price in Europe.[26] Bio-based chemicalsgenerally do not enjoy a lot of regulatory supportbeyond research grants and statements of politicalwill. While EU targets also support an increasing shareof bio-based materials in chemicals production, norelated subsidies or mandates exist in the chemicalindustry.

As mentioned above, national legislations and

regulatory regimes are the main drivers of regional ornational differences in the industrial commercializationof bio-based products (see Figure 3).

2. Current Status oIndustrialization

2.1. History o Bio-based Products

In contrast to current public perception, convertingbiomass into energy or fuels has a very long history.As early as 1860, the German Nikolaus August Ottoinvented the Otto engine using ethanol as automotivefuel. Similarly, during the early decades of the 20th

century, Rudolf Diesel invented the diesel engine,built to run on peanut oil, while Henry Ford designedhis Model T car to run on hemp-derived ethanol.

However, biofuel use declined dramatically as large-scale exploration of crude oil began in the 1930s,marking the start of an industrial era dominated byoil that has remained unchallenged to this day. Forthe rest of the last century, biofuels surfaced onlytwice during relatively short periods, where externalcircumstances forced a partial replacement ofpetroleum. One such period was World War II, where

the shortage of fuels led to various inventions, suchas the use of gasoline along with alcohol derivedfrom potatoes (Germany) or from grain (Great Britain).

The second period was the oil crisis in thelate 1970s, where the high oil price attractedgovernments and scientists to the reuse of biofuelsas a means of increasing energy security. In 1977,for example, the Brazilian scientist Parente inventedand submitted a patent for the rst industrial processconverting biomass into biodiesel. Yet, it still tookanother decade until the Austrian company Gaskokserected the rst biodiesel pilot plant in 1987.

Bioreneries were built in many European countriesduring the last decade of the 20th century. Aboutthe same time, concerns about global warming andclimate change were emerging on public agendasworldwide. These concerns began to translateinto national and regional legislation during thebeginning of the 21st century, further pushing theindustrialization of bioreneries. For example, theEU adopted its biofuels directive in 2003, which seta reference value of 5.75% for the market share ofbiofuels in 2010.

In 2007, the EU council adopted a 10% bindingminimum target for the share of biofuels in petroland diesel consumption in transportation by 2020(see 2.2.ii). In the near future, additional national


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2.2.i. United States. In the US, the biofuels industryhas undergone signicant expansion in recentyears. The focus has been on achieving increasingefciencies of rst-generation biofuels production,which invariably means reductions in the use ofenergy and other resources. The majority of facilitiesin the US run at an efciency rate of some 60%, withimprovements derived, as in all processes, throughknowledge and experience over time.

Furthermore, the US has in many instances been atthe forefront of developing sustainability standardsfor biofuels. The active role played by the USDepartment of Energy has made the country aleading player in the emerging biofuel industry. Thishas been achieved by a large number of publictechnology grants, not just to domestic companies,but also to investors worldwide.

The US government has also committed to hightargets for the replacement of fossil transportationfuels 36 billion gallons of biofuels by 2022 in the

following proportions: 15 billion corn-based, 16billion from cellulosic ethanol and 5 billion fromadvanced processes (In 2008, US biofuel and

Figure 3: Worldwide Mandates and Subsidies. Current policy status in ve major world regions. (*) denoteskey feedstock.[29]

ethanol production amounted to 9 billion gallons).There are, however, no subsidies for other bio-basedproducts so far.[27]

2.2.ii. Brazil.In Brazil, the promotion of the sugarcane industry has led to the highest penetrationworldwide of ex-fuel vehicles (FFVs) that can run onany mixture of bioethanol with gasoline. However,while domestically a tremendous success, the exportof ethanol or sugar is still very limited due to tariffs

imposed on these products by other regions, e.g. theUS and the EU.

The highly developed sugar cane and ethanol industryis now attracting additional investments in bio-basedplastics, for example via the conversion of bioethanolinto ethylene and subsequent processing to materialssuch as HDPE and PVC. Second-generationtechnologies making optimal use of the biomassgenerated in sugar cane farming (conversion of thebagasse into ethanol instead of burning it) are alsoseeing strong growth, despite the wide availabilityof sugar cane. With Braskem about to start a newbiorenery, and more in the pipeline, the industry isexpected to gather pace in Brazil and globally.[28]


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Brazil has also instigated a policy of agriculturalzoning for sugar cane, which will block the expansionof sugar cane production on native vegetation.There are also moves to mechanize the harvestingof all sugar cane by the middle of this decade.The Brazilian bioenergy industry is working withinthe framework of a voluntary agreement with theGovernment of the State of So Paulo home tothe vast majority of sugar cane production in Brazil to achieve this goal. To date, some 55% of sugar

cane is now harvested mechanically and a separateprogramme to retrain workers into other positions isalso underway.

2.2.iii. European Union.In contrast to the leadingpositions of the US and Brazil, the EUs ambitiousgoals for the establishment of renewable energiesand transportation fuels have so far been met onlyto a moderate extent, and have not effectivelypositioned the EU in a leading role globally, despitepublic policy incentives, direct investments andresearch grants. This is because, on an industrial

level, fewer bioreneries are being establishedin the EU than in the US. This is partly due tothe fragmented nature of the EUs R&D effortsand insufcient funding and resources for largedemonstration plants.

As a result, a large portion of the knowledge onbiorenery technologies generated by Europeanuniversities, research institutes and industry playersis currently being shifted overseas because of thelack of development projects in Europe.[30] By 2020,the EU expects 20% of its power to come fromrenewables, part of which will have to be delivered

by power derived from biomass. Additionally, 10% ofall transportation fuels should come from renewablesources, which will require a substantial increase inpenetration of biofuels.[31]

2.2.iv.Asia.The situation is similar in Asia. Despitedeclarations of ambitious biofuel plans and repeatedsupport for biofuels by many Asian governments(e.g. India), actual achievements have been modestso far. Inconsistent implementation of biofuel policiesalso makes it impossible to forecast whether thebiofuel targets announced will be achieved.

China,however, is an exception. It appears intent oninjecting large sums into biorenery projects due tothe importance assigned to biomass-derived energyproduction in its latest Five-Year Plan. With regard to

bioethanol, for example, China has licensed ve fuelethanol plants (mostly state reneries) for operation,all of them based on starch crops. Chinas fuelethanol production was consequently forecast torise to 1.70 million metric tons (MMT) in 2009, anincrease of 8% compared to 2008.

That said, food security concerns have recentlyled the Government of China to restrict ethanolproduction from grain processing and to turn to

supporting non-grain-based fuel ethanol productioninstead.[29] While limited feedstock supplies andcompetition with land use for grain productionmay still be an issue, several lignocellulosic biofuelplants are being developed, e.g. by COFCO.Indeed COFCO, Sinopec and Novozymes recentlyannounced plans to construct the largest cellulosicbiofuel demonstration facility in China by 2011.

Chinese biodiesel production plants, on the otherhand, are small scale and often use waste cookingoil instead of dedicated oil crops, operating only a

few months of the year due to the lack of sufcientfeedstock supply. Therefore, while overall 2008biodiesel production capacity in China (four plants,mostly private ownership) was estimated at threeMMT, actual biodiesel production in 2008 was only250,000 MT due to a feedstock deciency.[32]

Compared to China, Indias national biofuels policy isstill under debate. However, drafts of future blendingtargets have already been drawn up that aim for5% penetration of biofuels in India by 2012, 10% by2017 and 20% long term (2017+).[33]

2.2.v.Arica.Africa has recently come into focusas a potential production hub for bioreneries,particularly biofuel production. This is mainly due tothe strong raw materials position that many Africancountries could have, provided four main challengesare addressed. One is their low agriculturalproductivity caused by suboptimal agriculturalpractices, such as lack of fertilizers, decient cropprotection, shortcomings in the education andknow-how of farm workers, insufcient irrigation andthe dominance of smallholder subsistence farming.Another is the scarcity of food in some regions, with

concomitant social/ethical concerns about foodsecurity (i.e. the food vs fuel debate).

Infrastructural limits to the production andtransportation of bio-based goods (roads and


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2.3.ii. Biomass Production.Actual biomassproduction offers farmers and grain processingcompanies new business opportunities in additionto traditional land uses. This includes the cultivationof energy crops for biofuels (e.g. miscanthus) orfor biogas (e.g. white sweet clover), cultivation ofshort rotation forestry or cultivation of sugar cane, inparticular for biorening chemicals.

Overall, it is estimated that the additional business

potential amounts to approximately US$ 90 billionby 2020, which is the largest single businesspotential along the entire biomass value chain.Improved farming practices will help produce andextract the optimal amount of biomass from theeld. First innovative collaborations are emerging,as the partnership between Archer Daniels Midland,John Deere and Monsanto on corn stover researchdemonstrates.[35]

2.3.iii. Biomass Trading.Between biomassproduction and biomass conversion, numerous

logistical challenges offer new opportunities fortraditional or emerging niche players. To reduce thebulk load of biomass, for example, new densicationtechniques (e.g. briquetting or pelletization) areneeded to handle logistics economically, particularly,when biomass is imported from abroad.

Second, highly-coupled supply chains have to be setup to manage seasonal nature of harvesting. Third,new preservation techniques are needed to controlmolecular composition of biomass throughout thesupply chain (i.e. harvesting, transportation andstorage). Finally, the trade of biomass itself offers

a substantial revenue potential to the respectivetrading parties. It is estimated that the accumulatedrevenue potential of these opportunities amount toUS$ 30 billion by 2020.

2.3.iv. Biorefning Inputs.Prior to the actualbiorening conversion process, new businessopportunities are, for example, offered by improvedmethods of biomass pre-treatment (e.g. dilute acidpre-hydrolysis and hydrothermal methods), whichcan help improve the biomass accessibility todownstream enzymatic and fermentative processes.

In addition, the development of more efcientenzymes and fermentation organisms will bringdown biomass conversion costs. Several playershave already emerged in this area successfully (e.g.Danisco/DuPont, Novozymes, DSM).

harbours, for instance) also play a major role.Additionally, there is political instability in some Africancountries, which makes investments less attractive.However, some African countries have recentlystrongly encouraged investments in biotechnology,particularly biofuels. This has led to a large numberof projects in Mozambique, Tanzania, South Africa,Ghana and other African nations. The predominanttype of bio-based company produces biofuels especially bioethanol from sugar cane, and

biodiesel from jatropha.[6] While some investmentshave been made by foreign companies with thelong-term goal of exporting biofuels to Europe, mostprojects target domestic markets.

Irrespective of these regional and national differences,it is expected that the markets for bio-basedproducts will grow very heavily over the next fewyears. Biofuels markets are estimated to more thantriple by 2020. The combined sales of biodiesel andethanol will surge to around US$ 95 billion in 2020due to mandates alone. The resulting combined US

and EU27 demand for biomass in the elds of heatand power is also expected to more than double by2020.

Finally, bio-based chemicals are expected to growsignicantly and increase their share in overallchemicals production to some 9% of all chemicals.However, this growth will be less than in biofuels andbiopower because (as mentioned previously) thereare no mandates and no incentive schemes in placein the chemicals arena.[34]

2.3. Revenue Potential

In addition to the revenue potential offered by theabove-mentioned output categories (fuels, energy,chemicals and materials), the biomass value chainalso offers attractive revenue potentials at its otherstages, of which a signicant portion may becaptured by the chemicals industry (see Figure 4).

2.3.i.Agricultural Inputs. On the input side, newtypes of energy crops, including the development ofnew traits such as drought and disease resistance,crop protection and fertilizers are needed to improve

volume and the quality of biomass output suchas energy density and molecular composition. Allthree offer interesting complementary businessopportunities for the chemicals industry. According toestimates these opportunities amount to a businesspotential of US$ 15 billion by 2020.


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In February 2010, Novozymes launched acommercial enzyme mix for large-scale productionof advanced biofuels. It will enable second-generation production at a production cost ofUS$ 2 when the rst commercial scale comesonline within the next couple of years.[36] Overall, themarket for pre-treatment chemicals, enzymes andnew organisms is estimated to yield US$ 10 billionin revenues and chemicals companies are well-positioned to establish new businesses in all three

areas by 2020.

2.3.v. Biorefning Outputs (uels, chemicals, powerand heat).Finally, the actual ownership of biomassconversion and the respective sale of end productsis estimated to yield revenue potentials of US$ 80billion for biofuels, US$ 10-15 billion for bio-based

bulk chemicals and bioplastics alone, and US$ 65billion for power and heat by 2020. Here, chemicalscompanies are well-positioned to run their ownconversion plants.

However, some highly integrated traditionalchemical companies will be somewhat less exiblewith respect to bio-based feedstock than others.Companies ideally positioned may be thosebackward-integrated into feedstocks. Braskem,

for example, has large petrochemical operationsbut owns access to sugar cane and ethanolmanufacturing through its controlling companyOdebrecht, which established ETH Bioenergia in2007 a sugar cane ethanol operation. This led tothe generation of the rst green polyethylene in2007.[37]

Figure 4: Revenue Potential. There are signicant revenue potentials along the entire biomass value chain. Thevalues given are approximate business potential in US$ billions by 2020.


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in the long run, bioethanol is expected to break evenat US$ 0.35/litre, effectively making it cheaper thancurrent gasoline.

3.1.iv. Increasing Public Pressure or EnvironmentalSustainability.Mitigation of the risk of catastrophicclimate change requires the reduction of globalGHG emissions. Since bio-based production routesto fuel, chemicals and power could deliver at leastpart of the GHG savings necessary to mitigate thedangers of catastrophic climate change, the use

of bio-based sources of energy and feedstock isstrongly encouraged by regulation and is elicitingincreasing pull from consumers.

3.2. Strategic Relevance or Selected Industries

The fundamental trends sketched out abovehave put bioreneries and bio-based productshigh on the strategic agenda of most industryplayers. In addition, the innovation potential ofbio-based technologies will allow the productionof new molecules for fuel, chemical and material

applications, which are not currently availablefrom fossil resources and harbour true innovationpotential. The following points summarize thestrategic consequences for six industries.

3.2.i.Agriculture.The increasing demand andregulatory push for biomass will increase the overallmarket size for agricultural and forestry productssubstantially, and may shift the relative economicsof food/feed production vs other land uses, such ascellulosic energy crops, opening up new economicopportunities for farmers, particularly in developingcountries. Agricultural commodity prices may also beinuenced by the increased production of bio-basedmaterials in bioreneries.

However, the impact on food prices stronglydepends on the kind of feedstock used in theproduction process. Second-generation feedstock(such as lignocellulose or jatropha) tends to havevery little inuence on food prices. By contrast, rst-generation feedstock (particularly, corn, wheat, palmoil and rapeseed) could contribute to increasingfood prices if used excessively without providingadditional capacity for the production of this input. [38]

Technology-wise, the growing global demandfor biomass will lead to an increasing focus onagricultural productivity across the globe. New plants

3. Strategic Relevance or Industry

As the above mentioned revenue potentials along thebiomass value chain have indicated, there are manynew business opportunities, and some industrialsectors may be better positioned to seize theseopportunities than others. That said, offering newbusiness opportunities is not the only way in whichthe production of bio-based products will affectdifferent industries. The newly established value chainwill have room for non-traditional partnerships: grain

processors integrating forward, chemical companiesintegrating backwards, and technology companieswith access to key technologies, such as enzymesand microbial cell factories joining them.

In addition, a number of underlying trends have putbio-based products high on the strategic agenda ofplayers in many industries. This chapter examinesthose fundamental trends and then describes thestrategic consequences for six key industries.

3.1. Long-term Trends Driving Adoption o

Biouels

Bio-based products are likely to become ever moreimportant for various key industries in the future dueto four underlying, irreversible global trends:

3.1.i. Demographic Growth and Rising EconomicAspirations o Developing Countries.The constantlyescalating consumption of fossil fuels and feedstockin combination with tremendous demographic andeconomic growth in emerging regions is resultingin exponentially increasing demand for these rawmaterials. Given the limited availability of fossilreserves, alternative, sustainable sources to satisfythe needs of humankind may be the only viablealternative.

3.1.ii. Need or Increased Geopolitical EnergySecurity.Many countries strive to reduce theeconomic and geopolitical exposure associated withtheir need for oil by replacing at least part of their fueland feedstock demand by the domestic productionof bio-based alternatives.

3.1.iii. Deteriorating Economics o Fossil-based

Products.Increasing prices for crude oil have madethe production of selected bio-based productseconomically attractive. Some biofuels, for example,break even below US$ 50/bbl without subsidies and,


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and novel traits (e.g. drought and salt resistance)will make it possible to use less fertile land. Thismay open new opportunities for developingcountries, especially in Africa, to participate in a newagricultural revolution.

This greater focus on agricultural productivity willalso lead to a substantial increase in fertilizer use,especially in places where best practices are not yetin place in farming, for example, in Africa. Nitrogen

fertilizers can easily be manufactured and mineralfertilizers can be found as naturally occurring rockphosphate. However, it is worth noting that the

carbon footprint of fertilizers is high and can havedetrimental effects on water supply another scarceresource in many African countries.[39]

As a result, a new international division of labourin agriculture is likely to emerge between countrieswith large tracts of arable land and thus a likelyexporter of biomass or densied derivatives versuscountries with smaller amounts of arable land (i.e.biomass importers, e.g. Holland). The biggest

biomass export hubs are expected to be Brazil,Africa and North America.

Figure 5: Expected Biomass Trade Routes. Values represent nal energy demand in 2020.

3.2.ii. Automotive Industry.The replacement ofconventional gasoline and diesel by biofuels istechnologically straightforward. So-called ex-fuelvehicles being sold in Brazil and the US can cope

with pure fossil fuel and pure biofuel and any mixtureof the two.[40] Moreover, OEMs anticipate that the careet can be renewed at cost. Renault, for example,claims that exible engines increase the total cost ofa car by only US$ 300.

Additionally, engines of cars already in use can beupgraded to make them into FFVs at cost.

The automotive industry is facing strict upcoming

regulations to reduce the tailpipe GHG emissionsof their passenger vehicle eet. OEMs are thereforelooking at biofuels as one potential means to meetthese targets.


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consumption and CO2

emissions, they also reducethe cost of driving, resulting in a stronger incentiveto drive, thus offsetting any savings made inemissions. Regulations such as this also promotealternative means of reducing tailpipe CO

2emissions

that are also very much at the centre of attentionof automotive OEMs, such as downsizing motors,using lightweight materials (including bio-basedplastics) in vehicles, and intelligent motor electronics.

All in all, the automotive industry is currently mostconcerned with the threat posed by non-fuelpropulsion systems. New propulsion systems/energycarriers (e.g. hydrogen or electric vehicles) thechoice of which may depend on different regulatoryregimes in different countries could jeopardize theindustry leadership of traditional OEMs whose corecompetence is fuel-powered engines, giving focusto the development of new fuel technology that mayallow these to continue to dominate the automotiveindustry. The aspiration to partially replace existingplastics with bio-based plastics in vehicles shouldalso be noted.

3.2.iii. Aviation Industry.Replacing kerosene thatis used in commercial aviation is more challengingthan replacing fuels that are used in road vehicles.Alternative fuels for aviation have to have a highenergy density, a low freezing point and mostimportantly, at least as reliable as Jet A1 kerosene.Just as alternative fuels for the road transportationsector, alternative aviation fuels should be drop-infuels, miscible with petroleum-derived kerosene atany percentage.

Of these alternatives, a drop-in low-carbon fuel thatinclude fuels derived from biological feedstocksmanufactured using the Fischer-Tropsch processor via hydrogenation of oils is preferred. A numberof ight tests have recently occurred, the rst testundertaken in February 2008 by Virgin Atlantic ina Boeing 747 powered by GE engines. Here an80:20 mix of Jet A1 and a palm oil/babassu nut fuelwas used.[45] The ight gave some important dataon burning biofuels in modern commercial enginesallowing for the later tests to occur. The next ighttest used a fuel derived from Jatropha.[46]

The following month an algae-based biofuel wastested in one engine of a Continental 737-800with a CFM-56 engine. It ew with a blend ofalgae and jatropha oil in a 50:50 mix with Jet A1.

In Europe, regulations to limit tailpipe emissions ofthe passenger vehicle eet will take effect as earlyas 2013. The EU proposal would require 65% of theEuropean eet to emit a maximum of 120 grams ofCO

2per kilometre in 2012, and 100% of the eet to

meet this standard in 2015.[41] Current versions of thelegislation imply that every gram of CO

2/km emitted

on top of this value will be met with penalties of up to95 euros for the OEM. It is currently being discussedwhether bio-based/renewable fuels may count

towards achieving this target.

In the United States, the Obama administration issignalling that it intends to tackle climate changevigorously. The US Congress has just passed theWaxman-Markey Act, setting an open fuel standardthat essentially requires US auto producers tomanufacture an increasing share of exible fuelvehicles.[42]

This is considered a major regulatory breakthrough ina country with very low energy efciency in individualtransportation. Equally, the Low-carbon FuelStandard introduced in California in 2007 requiresfuel providers to reduce GHG emissions of the fuelthey sell. The programme intends to achieve a 10%reduction in the carbon intensity of transport fuels by2020.[43]

In other countries such as Brazil, FFVs already havea market share of 90%; in France, the penetration ofFFVs has risen to almost 10% from 0% in the pasttwo years; in Sweden, tax exemption for distributorsfor installing biofuel dispensers has increased themarket share of FFVs. By contrast, in Germany,

the instability of tax exemption for biodiesel andbioethanol has restricted the blended bioethanolshare to 4%, and biodiesel to 6%.[40]

The US already has signicant regulations in place,most notably the Corporate Average Fuel Economy(CAFE) standard. Designed to improve the averagefuel economy of cars and trucks, it is the averagefuel economy (in mpg) of a vehicle under 4,500 kg, Ifthe calculated value for a manufacturers annual eetof vehicle production falls below the standard valueset by Congress, then a penalty must be paid by the

manufacturer.[44]

CAFE standards in the US have been technologyforcing, which has pushed technological advancesforward. But, although they may reduce fuel


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However, while these fuels may help to increasesecurity of supply, they are very CO

2intensive

technologies. For instance CTL fuels have a carbonfootprint higher than that of conventional fossil fuelseven when their synthesis is combined with carboncapture and storage (CCS). An example of thisis CTL produced by SASOL of South Africa. It isalready used in aviation, although its current benetto reducing emissions is minimal as the process isheavily carbon intensive.[49]

Logistically, aviation may be better positioned thanother industry sectors (e.g. automotive) to replace jetfuel by BTL as the aviation industry has fewer fuellinglocations (1,679 airports handle 95% of the worldspassengers vs 161,768 retail petrol stations in theUS alone) and vehicles (23,000 aircraft vs around580 million road vehicles globally).

3.2.iv. Chemical Industry.The dominatingcurrent approach of the chemical industry tobiorening limits the use of bio-based chemicalsto the substitution of traditional petroleum-basedchemicals with a green alternative of the samefunctionality and performance. Rather than buildingentire bioreneries, chemical companies operatingin this eld have therefore mostly chosen toreplace selected chemical intermediates in theircurrent product portfolios. This is mostly drivenby economics (not regulation) and sustainabilityconcerns.Based on this approach, the followingtypes of player may emerge in the future:

Traditional chemical companies that replacefossil chemicals with green alternatives along

existing chemical product trees, often withintheir existing product lines

New players focused on the production ofcompletely novel productsout of biomass;however, the main challenges will be to integratethese new molecules into existing value chains,and the related long commercialization process

Technology players that deliver technologies likecell factories designed by metabolic pathwayengineering, with the potential to deliver both

existing and novel chemical compoundsintothe value chain without producing the chemicalsthemselves; for many of these companies,a royalty-based business model would bepreferred

The bio-fuelled engine burned less fuel than theconventionally fuelled engine, showing that mixingbiofuels has no detrimental effects on performance. [47]

The nal ight test used a fuel derived mainlyfrom camelina (camelina 84%, jatropha 16% andalgae less than 1%) in a Japan Airlines 747-300.[48]Camelina is of interest as it can be grown in rotationwith wheat in temperate climates.

Current, commercial bio-based fuels are nottechnically and economically suitable as drop-in fuels for aviation. Ethanol is not miscible withkerosene, which has fuel properties closer to dieselthan gasoline. Biodiesel has issues too, in that it doesnot usually come at a quality reliable enough to useat a large scale mainly due to the varying propertiesof different feedstocks. While some tests have beenperformed to assess the suitability of these fuels in jetengines, the technical challenges around ethanol andbiodiesel make it likely that they will not be used on alarge scale for aircraft propulsion.

Nevertheless, the aviation industry is intensivelylooking for alternative fuels suitable for jet propulsion(e.g. Fischer-Tropsch liquids such as BTL, as well ashydro-treated vegetable oil) as a means of reducingthe industrys carbon footprint, given the challenginggoal of reducing its CO

2emissions by 50% by 2050.

By 2050, second-generation biofuels, in the form ofBTL are expected to contribute 30% of the aviationfuel mix.[2] First-generation biofuels that are madefrom crops rich in sugars or starch are not typicallysuitable for use in aircraft as they do not have the

necessary performance and safety attributes for usein modern jet engines.

Despite the ongoing efforts to promote biofuels,the greatest and economically most attractive levertowards carbon abatement for the aviation industryremains the reduction of fuel consumption (byreducing the weight of aircraft, for example). This isbecause fuel costs make up approximately 50% ofthe operational costs of airlines. The industrys goalwill be to achieve efciency improvements of 1.5%per year through to 2020. Other alternative (non-bio-

based) fuels such as coal-to-liquid (CTL) or gas-to-liquid (GTL) have better economics than BTL.


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concerns about supply chain management:should utilities manage the biomass supply chainthemselves despite this not being their corecompetence?

The related supply security issue also makes it riskyto allocate large-scale investments to this noveltechnology. One approach to mitigate this risk hasbeen taken by RWE, which has invested in growingshort-rotation poplar itself for combustion in its

power plants to secure production and supply chainmanagement.

3.2.vi. Transportation. Transportation constitutesalmost 60% of global oil demand, of which freighttransportation such as shipping drives a signicantand growing share. What is more, three-quarters ofthe expected increase in global demand for oil by2030 (45% increase = average 1.6% per year) isexpected to come from the transportation sector.[2]

It is fair to say that todays transportation industry

is addicted to oil. Thus, as with the aviation andautomotive industries, the transportation industryis looking at biofuels as a means to reduce thecarbon footprint caused by its huge oil consumption.However, this is a small lever when compared toother measures that improve the energy efciencyof transportation, for example, increasing the valuedensity of shipped products by reducing theirweight, size or packaging.

It is important to note that materials, namely greenplastics and other biodegradable materials, can alsobe made from non-fossil-based sources. Lee Sang-Yup, Distinguished Professor, Director and Dean,Korea Advanced Institute of Science and Technology-KAIST, Republic of Korea, has developed polylacticacid (PLA), a bio-based polymer that holds the keyto producing plastics from natural and renewablesources.

Previously, producing plastics of this kind involveda two-step fermentation and a chemical hydrolysis.This has now been replaced by a single stepenzymatic process using a metabolically engineeredstrain ofE.coli. Although this is not yet a commercialprocess, strategies like this will be useful indeveloping and manufacturing new materials fromrenewable sources.[50]

Reliance on oil does not just affect transport needs,but also material needs, most notably plastics. Ifefcient polymer producing strategies such as the

one designed by Professor Lee can be developed,then there is a strong case for integrated bioreneriesthat are capable of producing chemicals andmaterials from biomass alongside biofuels (see 1.3).

3.2.v. Energy Industry.Renewable power generationhas been gaining strong momentum over the last fewyears. Between 2000 and 2007, renewable powergenerating capacities (excluding large hydropowerplants) increased by almost 16% worldwide. Eventhough biomass-based technologies have notgrown as fast as wind and solar photovoltaics, theircontribution will be essential to meet political targets

for renewables.[2, 51, 52]

Given the increasing share of renewables in thepower generation industry overall, almost all majorplayers active in conventional power generationhave started to capture a share of the market orat least take stakes for the future. Many Europeanenergy utilities have already put the expansion of theirrenewable power generation assets high on theirstrategic agenda and have allocated considerableamounts in their investment plans.[53]

The fundamentals of power generation from biomassare economically quite attractive when comparedto other renewable power options, and will requirelower subsidies in contrast to wind and solar power.Hurdles to overcome include the above-mentioned


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combination of metabolic pathway engineering withbioinformatics and engineering for fermenter designis the key. Once a compound can be producedvia fermentation, it has to be recovered from thefermentation broth. New recovery methods areneeded for most novel compounds to achieve this.Further novel heterogeneous catalysis technologiesare also needed to transform the chemicalintermediates into commercial products.

4.1.iv. Processing and Logistics. The secondgroup of technical challenges relates to optimizingfeedstock processing and logistics. This includes anumber of different areas: developing densicationtechniques (e.g. briquetting and pelletizing) is one,allowing the transport of originally low-densityfeedstocks at low cost. Establishing preservationtechniques to control physical and chemicalmodication of biomass during pre-conversionprocessing (i.e. harvesting, storage, transportation)is another.

Developing highly coupled feedstock logisticssystems that can deal with the seasonal nature offeedstock production economically is also vital.Investments in this kind of infrastructure may provedifcult to make for individual companies due to thecapital required, as well as the difculty of capturingthe value of IP.

Finally, setting up a bio-based product distributionnetwork is another necessity, ideally making useof existing infrastructure, e.g. using oil pipelines, orupgrading petrol stations to allow distribution of ahigher share of biofuels. The US is currently funding

the retrotting of former corn-based biofuels plantsand giving R&D money to accommodate newtechnologies and processes.

4.2. Commercial and Strategic Challenges

The commercial challenges facing theindustrialization of bio-products fall into three maincategories: issues with integration into existing valuechains, funding difculties and other challengesrelated to the uncertainty associated with a novel,unconventional eld.

4.2.i. Integration into Existing Value Chains. Oneof the main commercial challenges is to integratebiorenery output into existing value chains. One candistinguish two different classes of products.

4. Key Challenges oCommercialization

Despite the strategic relevance of bio-basedproducts for many industries, numeroustechnological and strategic challenges still hampercommercial industrialization. Overall, many of theindividual steps of biorening are still considered tobe suboptimal, and very few attempts have beenundertaken to make bioreneries work at scale.

Additionally, the industry will have to adhere to thehighest social and environmental standards to gainbroad public acceptance.

4.1. Technical Challenges

Technical challenges are multiple; covering feedstockyield, enzyme improvements, microbial cell factories,and processing and logistics:

4.1.i. Feedstock Yield and Composition oBiomass.It is crucial to improve feedstock yieldand composition of biomass for optimal conversionefciency. This involves plant genomics, breedingprogrammes and the chemical engineering ofdesirable traits (e.g. drought resistance, photo-cycleinsensitivity, cold-tolerance, sugar compositionC5/C6). By making feedstock more robust, furtherimprovements can be made to the economics andsecurity of feedstock availability around the year.

4.1.ii. Efcient Enzymes.A related technicalchallenge is the need to develop more efcient androbust enzymes, particularly for the conversion oflignocellulosic material from a variety of feedstock

like corn cobs, stover, wheat straw, bagasse,rice, woody biomass, etc. (see 2.3.iv Novozymessuccessul enzyme mix). Additionally, utilizationof a larger part of the biomass will require newprocesses that allow conversion of materials toextract their maximum value. For example, lignin isthermochemically converted into power/heat ratherthan into value-adding chemicals. There are someindications that lignin could be used as a value-adding component of slow-release fertilizers and asa starting compound for vanillin fermentation.

4.1.iii. Microbial Cell Factories.A further yield-related challenge is the need to develop microbialcell factories, i.e. production hosts that producea desired product be it a biofuel or biochemical in high yields and with high productivity. A


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4.2.ii. Funding Difculties.A second challenge isthat funding is becoming increasingly tight. Becauseof the current nancial crisis, both venture capitaland private equity funding have become tougher toaccess, making it difcult to nance pilot commercialplants and to obtain follow-up bank loans.

This also holds true for the funds required forinvesting into building full-scale commercial plantsand infrastructure. Given the overcapacity the

chemical industry has been facing in some productsegments in 2009, the willingness to invest in newassets has further shrunk.

In addition, venture interest in the biorenery/biotechbusiness has been decreasing independently ofthe current nancial crisis, as funds are beginningto realize that large amounts of capital are neededto commercialize the technology. This tendency isexacerbated further by high uncertainty with respectto the protability of a biorenery, since governmentsonly provide nancial support and incentives on a

relatively short-term basis (years), while the horizonfor success is long term (decades).

4.2.iii. Uncertainty Facing a New, UnconventionalField. Other commercial hurdles include the riskaversion of rst movers, the inability to get a pricepremium for bio-based products when comparedto conventional petroleum-based products, andinsufcient, uncertain public incentives. And thenthere is the uncertainty about which technology toback, if any at all: biofuels for combustion engines,electric vehicles, or the hydrogen economy?

4.3. The Sustainability Challenge

While one of the original intentions of switchingto production of bio-based products is theconservation of resources, caution is advised toensure that the implementation of bioreneries doesnot jeopardize the environment. The following issuesare of most concern:

4.3.i. Land-Use Change and Its Eect on GHGEmissions. It has previously been established thatthe impact of bio-based products on GHG emissions

strongly depends on feedstock, land-use impact andsynthesis efciency. Assessing the GHG emissions ofthese products using a full life cycle analysis crit icallydepends on the inclusion of emissions caused byland-use change.

On one hand, there are bio-based products thatdirectly replace molecules in existing value chains,e.g. bio-based succinic acid that replaces petroleum-based succinic acid in polyester manufacturing, orbiobased acrylic acid. A recent example is greenpolyethylene (PE), the rst real commodity chemicalmade from a renewable resource, namely, ethanolfrom sugar cane by Braskem. In these cases,no or limited change of processing technologieswill be required by the customer, provided quality

requirements are met. Another example is co-ringwood chips in coal-red power plants, which can bedone without or with only limited modication of theboilers in most cases. The two key parameters forsuccess are price and performance both have to atleast equal the existing petrochemical compound.

On the other hand, there are bio-based productsthat are novel or that cannot easily be integratedinto existing value chains. Bioethanol, for example,can only be mixed into conventional fuel up to avolume share of around 15%[54] without modication

of a standard engine. Flex-fuel vehicles canaccommodate higher blends. They are widelydistributed in Brazil and are emerging in some othercountries, e.g. in Sweden, where one in three newcars are FFVs.

Also, novel chemical intermediates such as levulinicacid are very promising chemical compounds.However, no established large-scale chemicalprocesses exist for this molecule, which makes ithard to integrate into current production networks.Additionally, novel products based on newintermediates, e.g. bio-based polymers, usually have

different properties to existing polymers, potentiallyrequiring a tedious and lengthy commercializationprocess. Some of the better known examples of thisphenomenon are the polymers polylactic acid (PLA)and polyhydroxyalkanoates (PHAs), which have beenknown for a long time.

Several companies are working on thecommercialization and large-scale production ofPLA and PHA, with some success. However, thespeed of volume build-up has usually lagged behindexpectations for reasons of performance and pricing

issues, resulting in problems with value-chainpenetration. This is why Brazil is so well placed as abiofuel producer, as markets already largely exist sothere is little trouble with value chain penetration.


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Land-use change affects the GHG balance byconversion of native ecosystems often by slashand burn and release of soil carbon. This keyfactor in determining the realistic life cycle emissionswas recently established and is characterized intotwo main types.[55]

Direct land-use change (DLUC) occurs if feedstockfor biorenery purposes (e.g. soybean for biodiesel)displaces a prior land-use (e.g. forest), thereby

generating possible changes in the carbon stockof that land. This effect is well studied, but defaultvalues can often differ substantially from actualvalues and, furthermore, depend on an arbitrarychoice of accounting period. It is, however, widelyaccepted that deforestation due to increaseddemand for biomass feedstock is a direct land-usechange that should not occur if we are to makebiomass a sustainable energy source for the future.

The second type of land-use change has beenlong overlooked, mainly due to the inaccuracies in

Figure 6: Land-Use Change Induced GHG Emissions. The data from the Oeko-Institute, Darmstadt, isfor indirect and direct changes in GHG emissions excluding life cycles.[56] (only indirect [25%] = if ILUCdisplacement risk of feedstock is 25%)

identifying and quantifying it. These too must beaddressed to maintain a healthy GHG balance.

Indirect land-use change (ILUC) occurs if pressureon agriculture due to the displacement of aprevious activity from the production of biomassfeedstock induces land-use changes in otherlocations. The displacement of current land-use toproduce biofuels and other bio-based products cantrigger direct land-use changes elsewhere. There

are four types of ILUC: Spatial, Temporal, Use andDisplaced Activity, all of which describe the differentmechanisms by which biomass production putspressure on land activity.

Studies into the effects of land-use change, inparticular on US corn ethanol production, cometo a variety of conclusions. Previous estimates bySearchinger put US corn ethanol GHG releases at100 g CO

2e/MJ. Later estimates by Hertel indicate a

release of only 27 g CO2e/MJ, roughly one-quarter

of the previous estimate. However, it was concluded


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Dependent on the methodology employed, land-use chang

future industrial bio refineries report 2010

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