Post on 21-Aug-2019
transcript
CREATING PROFITABLE NEW BUSINESS IN BIOFUELS
Heikki Vappula
President
Energy and Pulp Business Group
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BIOFUELS
Four megatrends drive demand for biofuels
2
Energy security Climate change
Higher energy prices Rural development
Biofuels are an effective way to increase
energy security, reduce dependency on oil
imports
Together with improving fuel efficiency,
biofuels are the most important low-cost way
of reducing CO2 emissions in the transport
sector
Biofuels can create new sources of income
for rural areas. Increased competition for
arable land has raised awareness of
sustainability issues
Increasing cost for the marginal barrel of oil
(ultra deep water drilling, oil sand etc.)
supports demand for substitutes including
biofuels
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BIOFUELS
Regulation is stabilizing and will favour
advanced biofuels
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– 2003 2003 – 2010 2010 – 2017 2017 –
Source: Hart Global Biofuels Outlook 2010 – 2020; IEA Technology Roadmap, Biofuels for Transport; Directive 2009/28/EC; UPM
European biofuels
industry is born
Unstable
regulation due to
non-binding
targets and
unhealthy industry
Stable demand
growth from stable
regulation
Tax incentives still
remain a source of
uncertainty
Stable demand
that favours
advanced biofuels
Non-binding
targets
Tax incentives and
import tariffs
Binding targets
with penalties for
non-conformance
Tax incentives and
import tariffs
Advanced targets
• Greenhouse gas
reductions
• Indirect land use
• Sustainability
Taxation driven by
CO2 reductions
Regulatory
framework in
the EU
Implications
for biofuel
producers
No regulation
Biofuels marginal
in Europe
Industry is born in
Brazil in 1970s
with Pró-álcool
program
0
5
10
15
20
25
30
35
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mill
ion
to
nn
es
Biodiesel Ethanol
Up to 2010 use of biofuels driven by voluntary country specific regulation
2010 -17 use of biofuels regulated by EU legisalation
2017- EU legislation favours advanced biofuels
Legislation favours advanced targets beyond 2017 • Greenhouse gas reductions • Indirect land use • Sustainability • Taxation driven by CO2 reductions
BIOFUELS
Use of transportation biofuels in the EU(*
*) Future demand is based on existing legislation, figures from National Action Plans 4
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BIOFUELS
Demand for biofuels expected to grow
Source: Hart Global Biofuels Outlook 2010 – 2020; IEA WEO 2010; Pike Research; BCG analysis
Global biofuel demand is expected to grow
by 9% annually over next 10 years
European market is driven by biodiesel –
robust growth expected
Global biofuel
demand (Mtons)
200
150
100
50
0
+9%
2020
195
156
39
2015
132
104
28
2010
84
66
19
2008
66
Share of
traffic fuels 6% 8% 10%
Ethanol
(cons.)
Biodiesel
(cons.)
Total
(cons.)
Total (IEA)
CAGR, 10-20
(consensus range)
7-11%
7-16%
7%
8-9%
Biodiesel demand, EU-27 (Mtons)
60
40
20
0
+7%
202
0
22
201
5
15
201
0
11
National action plans (NREAPs) Consensus range
Ethanol demand, EU-27 (Mtons)
60
40
20
0
+10%
202
0
7
201
5
5
201
0
3
5
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BTL (Gasification and Fischer Tropsch)
BIOFUELS
Several paths from feedstock to biofuels
Feedstock
Corn
Sugarcane
Wheat
Algae
Jatropha oil
Vegetable oils
Animal fats
Other
Sugars & starches
Vegetable oils and animal fats
Advanced feedstock (lingocel., waste, residues)
Wood
biomass
Switch grass
Corn stover
Other
Tall oil
Conversion End product
Fermentation & distillation
Ethanol
Hydrocarbons
Fermentation & distillation Sugar extraction
Bio
-industr
ials
/ c
hem
icals
Transesterification
Hydrotreatment
FAME biodiesel
HVO biodiesel
Pyrolysis and upgrading
Advanced biodiesel
Ethanol
Hydrotreatment
Sugar extraction with advanced pre-treatments,
i.e.. enzymes
Pre-treatment
Fuels with inferior properties to conventional oil products
Fuels with comparable or better properties to conv. oil products
UPM focus
Ad
va
nce
d te
ch
no
logie
s
Con
ve
ntio
nal
tech
no
logie
s
6
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BIOFUELS
UPM with clear competitive edge in biofuels
• Ethanol is the most cost efficient way to produce
biofuels. However, ethanol can only be blended to
gasoline and only up to 10% of gasoline volumes
• Advanced biodiesel is highly competitive against 1G
FAME biodiesel due to lower cost, better product
quality and higher sustainability. In addition, the
blending of FAME is limited to 7 %
• Tall oil as a low-cost non-food feedstock is a
competitive solution for advanced biodiesel. The
blending limit of the biodiesel is >50%
• UPM is in a unique position in tall oil based biodiesel
due to its technology IPR and secured access to low
cost feedstock
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Substitution from ethanol
Competition against 1G
FAME biodiesel
Direct competition in
hydrotreated biodiesel
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BIOFUELS
UPM invests in wood-based biodiesel
• UPM invests in the world’s first advanced wood-based biodiesel
production in Lappeenranta, Finland
• Main product is advanced, 2nd generation biodiesel
• Commercial scale industrial investment
− Total investment of approximately EUR 150m
− Production 100,000 tonnes/a of advanced biodiesel
− Production starts in 2014
• Raw material is sustainably produced crude tall oil,
a residue from pulp production
• Technology is based on UPM’s innovations and
long term development work
• Potential for UPM to triple capacity by 2020
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UPM Biofuels
Low-cost raw material
Valuable end product(*
BIOFUELS
Incentive for distributors to pay a premium for
UPM’s biofuel over reference product
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Raw material cost Margin
1st generation biofuels
Expensive raw material
Expensive end product
CTO (crude tall oil) fractionation
Low-cost raw material
Cheap end products
*) Deserves a premium on reference product (from tax advantage & product properties)
to get the same value for the distributor.
– +
+ –
+ +
Creating a new value chain
+
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BIOFUELS
UPM's biofuels significantly reduce
GHG emissions compared to fossil fuels
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*Source: Directive of the European Parliament and of the Council on the
Promotion of the Use of Energy from Renewable Sources
0
10
20
30
40
50
60
70
80
90
100
Fossil diesel* Rapeseed biodiesel* Palm oil biodiesel(with/without methane
capture)*
UPM's biofuels
%
EU 2011
EU 2017
EU 2018
(new plants)
62
81
44
20
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BIOFUELS
Achievement in key targets
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1 Vision and business plan in place • Major player in advanced biofuels in Europe • Produce advanced biofuels with premium value
at competitive costs
2 Own process technologies in place • Hydrotreatment of crude tall oil
• BTL (Gasification and Fischer Tropsch) from energy wood
3 Investing into first biorefinery
• EUR 150m investment to produce advanced biodiesel from
crude tall oil, start-up mid-2014
• Raw material sourcing and distribution partnerships
4 New technologies and broader feedstock
• Develop a concept to produce transportation fuels through
pyrolysis and by upgrading of pyrolysis oil
• Potentially cost competitive against fossil oil products
• Process development to operate with broader feedstock