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The Advanced Biofuel andBiochemical OverviewJune 2012
Silicon Valley Bank Cleantech Practice
Table of Contents
I. Introduction
I. Biofuel/Biochemicals Outlook – Macro Observations 3
II. Biofuel/Biochemicals Outlook – Micro Observations 4
III. The Cleantech Ecosystem 5
IV. Market Snapshot: Global Ethanol Production 6
V. Market Snapshot: Global Biodiesel Production 7
VI. Market Snapshot: Ethanol and Biodiesel Production Landscape in the U.S. 8
VII. Market Snapshot: Global Biochemical Production 9
II. Biofuels/Biochemicals Overview
I. What are Biofuels/Biochemicals? 11
II. Types of Biofuels 15
III. Biofuel Feedstocks 16
IV. Comparative Yields 18
V. Petroleum Replacement Overview 21
VI. Conversion Technologies 22
III. The Importance of Biofuels/Biochemicals
I. Compelling Market Opportunity 28
II. Drivers of Biofuels/Biochemicals Growth 29
III. Liquid Demand Statistics 32
IV. Energy Market Growth 34
The Biofuels
and Biochem
Industry 2
III. The Importance of Biofuels/Biochemicals (Cont.)
V. Liquid Demand Growth from Non-OECD Countries 36
VI. Biofuels for Transportation 38
VII. Increasing Marginal Cost of Production 39
VIII. Oil Market Price and Saudi Breakeven Threshold 42
IX. U.S. Renewable Fuel Standards 43
X. Biofuel Blending Mandates by Country 46
XI. Cellulosic Ethanol Pricing Model 47
IV. Biofuel/Biochemicals Landscape
I. Advanced Biofuel and Biochemicals Value Chain 49
V. Where Are They in Development?
I. Investments in Biofuels/Biochemicals 52
II. Global Players – Milestone Update 54
III. Biofuel/Biochemical IPOs in Pipeline 56
IV. Strategic Partnerships 57
V. Projects to Watch in 2012–2013 58
VI. Appendix 61
VII. Selected Due Diligence Questions 69
VIII. Silicon Valley Bank Cleantech Team 70
Biofuel/Biochemicals Outlook – Macro Observations
• Multiple very large and growing markets— Total markets will top $1+ trillion. Beyond the well-known fossil-fuel replacement markets is growing demand for non-fuel products like
food supplements, personal care products, and packaging.
• Positive supply/demand dynamics around crude— The fundamental underlying demand is exacerbated by oil exporting countries’ economic reliance on oil revenue. Meanwhile, the cost of
crude production continues to increase. Biofuels/biochemicals will play an increasingly important role to fill that need.
• Demand drivers – mandates and markets— Mandate: Primarily for fuels, government mandated goals proliferate with varying degrees of adherence and enforcement. Subsidies of
all types remain important in attracting capital and shifts in policy could alter business plan direction between fuels or chemicals.— Markets: Growing economic justifications are intersecting with other market demand factors. For example, the U..S Navy’s goal of 50%
energy consumption from alternative sources by 2020 or the Air Force’s initiative to acquire 50% of aviation fuel from alternative blends by 2016 are policy influencers that also have purchasing power.
• The role of strategic corporate investors— Always important, corporates from a variety of industries (and led by big energy, chemicals/materials, and consumer products) have
become critical parties in the development and scale-up of the sector. Taking multiple forms of straight investment, joint venture, and collaboration, investors search for innovation, growth, and information.
• Commodity markets— Fuels in particular are ultimately commodities. Without policy enhancements, the impact of commodity cycles will continue to challenge
scaling of new technologies.
• Business life cycle— While the underlying trends and fundamentals may be inexorable, development of the industry and market dynamics is a very long term
process and investment cycle.
OBSERVATIONS
The Biofuels
and Biochem
Industry 3
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Biofuel/Biochemicals Outlook – Micro Observations
• Platform technologies— Venture investors and companies favor platforms where multiple markets can be addressed. Single product fuel companies like ethanol
are challenged. The platform companies may ultimately seek to enter fuel markets but may opt to defer that step in order to access higher margin, less commoditized markets first.
• Feedstock flexibility — Access to multiple feedstock types and sources is critical to scaling facilities, particularly in margin constrained markets where supply
and logistics can have great impact.
• The scale-up conundrum— Given the capital required to achieve economies, and the fact that most investors want both scale and capital efficiency, the choice
between build/own and licensing is becoming acute. To truly reach scale requires enormous financing. The conundrum is how to get licensees without experience at scale. And what scale is necessary to attract the right investors? Does the project need to demonstrate revenue scale, cash flow positive, or just output?
• Understand the value chain— In addition to sources and location of feedstock, proximity to off take and associated logistical costs are important for certain markets like
ethanol. In concert with the scale-up conundrum above, are these links in the value chain of a size to support large facilities? Additionally, to attract investors companies must demonstrate the ability to reduce costs of collection, distillation, and extraction through operational or technological advances.
• Milestone sensitivity — At these development stages, sensitivity around scale-up milestones is palpable. Whether due to supply or technical aspects, such
delays in any project are not unusual but there seems to be heightened sensitivity here that often results in further delays or hurdles to funding.
• Financing strategy — Financing strategies, with minimal reliance on government support, must be devised at the outset. Today this likely means earlier and
more active role from strategic investors which may limit some flexibility. It also means determining the license/own decision. IPOs really are not exits but financing events much like that seen in the biotech sector. Some combination of strategic investor with access to public markets may be necessary to complete the demo and first commercial funding challenge.
OBSERVATIONS
The Biofuels
and Biochem
Industry 4
TABLE OF CONTENTS
The Cleantech Ecosystem
The Biofuels
and Biochem
Industry 5
Ap
pli
cat
ion
Be
ne
fits
Commercial
Industrial
Utilities, Government and Others
• Batteries• Fuel Cells• Utility Scale grid
storage
Materials and ManufacturingE
nd
Use
r
• Building materials• Lighting• Demand response
systems• Energy
Management
• Smart Grid Hardware
• Smart meters• Transmission
• Agriculture• Air• Water
• Improved and economical source of energy
• Less pressure on non-renewable resources (oil and gas)
• Energy security• Grid/ Off Grid
• Improved power reliability
• Intermittency Management
• Increased cycles/longer storage
• Efficiency
• Reduced operating costs
• Lower maintenance costs
• Extended equipment lives
• Reduction in wastage
• Reduce outage frequency / duration
• Reduce distribution loss
• Economic in nature - well-run recycling programs cost less to operate than waste collection and landfilling
• Organic pesticides / fertilizers
• Water purification
• Water remediation
• Purification• Management
Residential
• Alternative fuels• Biomass• Solar / Thermal• Wind• Hydro
Energy Generation
Energy StorageEnergy
EfficiencyEnergy
Infrastructure
Recycling & Waste
Management
Agriculture, Air & Water
Materials & Manufacturing
• Waste to energy• Waste
repurposing
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Market Snapshot: Global Ethanol Production
Top Five Countries (2010) Ethanol Production (millions of gallons/year)1
The Biofuels
and Biochem
Industry 6
Source: 1NREL (National Renewable Energy Laboratory) Data Book, 2011.Note: Gallons to Liters conversion ratio at 1:3.78.
The Global Renewable Fuels Alliance (GRFA) forecasts ethanol production to hit 88.7 billion litres in 2011
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Market Snapshot: Global Biodiesel Production
Top Five Countries (2010) Biodiesel Production (millions of gallons)1
The Biofuels
and Biochem
Industry 7
Source: 1NREL (National Renewable Energy Laboratory) Data Book, 2011.Note: Gallons to Liters conversion ratio at 1:3.78.
TABLE OF CONTENTS
Market Snapshot: Ethanol and Biodiesel Production Landscape in the U.S.
U.S. Ethanol Production1 U.S. Alternative Fueling Stations2
The Biofuels
and Biochem
Industry 8
Source: 1,2NREL (National Renewable Energy Laboratory) Data Book, 2011.
• Corn ethanol production continues to expand rapidly in the U.S. Between 2000 and 2010, production increased nearly 8x
• Ethanol production grew nearly 19% in 2010 to reach 13,000 million gallons per year
• Ethanol has steadily increased its percentage of the overall gasoline pool, and was 9.4% in 2010
• In 2010, there were 1,424,878 ethanol (E85) fueled vehicles on the road in the U.S and 7,149 alternative fueling stations in the U.S.
• Biodiesel has expanded from a relatively small production base in 2000, to a total U.S. production of 315 million gallons in 2010. However, biodiesel is still a small percentage of the alternative fuel pool in the U.S., as over 40x more ethanol was produced in 2010
• Biodiesel production in the U.S. in 2010 is 63x what it was in 2001
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Market Snapshot: Global Biochemical Production
Overview of Biochemicals
• Like the biofuels industry, the biochemical industry uses bioprocesses and biomass to replace petroleum as the important building block for a number of products including plastics, lubricants, waxes and cosmetics.
• According to the American Chemistry Council dated July 2011, the market size of the global chemical industry (Basic Chemicals, Intermediate Chemicals, Finished Chemical Products)1 was approximately $3.0 trillion as of July 2011
• Specialty chemicals compete more on desired effect than cost and as a result present less price‐sensitive, higher ASP markets for renewable chemical firms to target
• In the U.S. ~200,000 barrels of oil per day are required to fulfill demand for plastic packaging
Specialty Biochemicals
The Biofuels
and Biochem
Industry 9
Source: Elevance Renewable Sciences Filings.
Note: 1Basic Chemicals include Butadiene, Propylene, Ethylene, Benzene; Intermediate Chemicals include Butanediol, Acrylic acid, Ethlyene glycol; Finished Products include BR, PBT, SBR, Polyacrylics, PE, PET, Nylon-6.
Name Characteristics Uses
Adhesives Liquid or semi-liquid compound that bonds items together via drying, heat or pressure
Paper products, labeling, packaging, plastic bags, stamps, lamination
Cationic Surfactants Organic compound consisting of phospholipids and proteins with positively charged heads that lower the surface tension between liquids and other surfaces
Soaps, detergents, shampoos, toothpastes
Geraniol Clear to pale yellow that is insoluble in water Commonly used in perfumes or fruit flavoring
Industrial Lubricants Oil-based compound that reduces friction between moving surfaces
Used in operation of manufacturing, mining and transportation equipment and more
Linalool Naturally occurring alcohol found in flowers and spice plants
Scents for perfumes and cleaning agents, insecticides, used to make Vitamin E
Nonionic Surfactant Organic compound consisting of phospholipids and proteins with non-charged heads
Lower the surface tension of liquids or between liquids and another surface
O2 Scavenger Compounds that inhibit oxidation or other molecules Used to prevent the corrosion metal by oxygen
Plasticizer Additives that increase the workability, flexibility and fluidity of a substance allowing for easier changing of shape
Used for plastics, concrete and dry wall
Specialty Emollients Lipids that attract water and retain moisture Used in lotions and make-ups to prevent dry skin
Squalane Saturated form of squalene making it less susceptible to oxidation
Used in personal care products such as moisturizers
Consumer Products
Polymers and
Coatings
Lubricants and Additives
4.6 MM tonnes/yr
4.0 MM tonnes/yr
73.0 MM tonnes/yr
• Specialty surfactants
• Soy petrolatum
• Performance waxes
• Candles
• Base oils
• Fuel additives
Building blocks for
• Specialty polymideds, polyols, polyesters
• Epoxies and polyurethanes
• Coatings and cross linkers
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Biofuels/Biochemicals Overview
The Biofuels
and Biochem Industry
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TABLE OF CONTENTS
What are Biofuels/Biochemicals? – Summary
• The Biofuels and Biochemicals industry refers to the set of companies focused on developing fuels and chemicals from Biomass rather than from fossil fuels
• In 2010, approximately 700 million barrels of biofuels were produced globally. Over 45% of this was corn‐based ethanol in the U.S. and >25% produced was sugarcane‐based ethanol in Brazil
• Biofuels/ Biochemicals are distinguished as either first , second or third generation. Focus is more on second generation and beyond as first generation is a mature technology
— Corn and sugarcane will continue to be the most abundant feedstock for biofuels and biochemicals in the near term— Companies utilizing food‐competitive feedstock (e.g., corn, soy, wheat) face higher price volatility and potential for societal push‐back— Cellulosic feedstock does not face the “food‐vs.‐fuel” argument but requires more specialized and expensive enzymes that are yet to be
completely commercialized— Waste is a unique feedstock and companies that can successfully convert the biomass to fuels and chemicals will benefit significantly— “Energy‐dedicated” crops are emerging and will be vital to the growth of cellulosic biofuel and biochemical production— Algae offer the highest oil yields of any biofuel feedstock, but challenges around cost have created challenges for commercial use
• Due to the importance of feedstock to the overall value chain, several companies are developing business models and technologies focused on the “upstream” segment of the value chain
• Numerous conversion technologies exist each with distinct advantages and disadvantages
• The United States and Brazil currently produce and consume the vast proportion of global biofuels due to size of ethanol industries, and is expected to remain the most important countries for biofuel production/consumption in the near‐term
• Biofuel and Biochemical companies are aiming to compete in large established markets in fuels and specialty chemicals
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and Biochem
Industry 11
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What are Biofuels/Biochemicals?
Renewable Energy Share of Global Final Energy Consumption, 2010
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• A biofuel/ biochemical is a product made from biomass – organic material with stored chemical energy. Biofuels/Biochemicals can be made from plant materials such as sugarcane, corn, wheat, vegetable oils, agriculture residues, grass, wood and algae.
• Biofuels/Biochemicals currently comprise only a small part of today’s global energy consumption. Liquid biofuels accounted for a modest 2.7% of global road-transport fuels in 2010 and only 0.6% of the global final energy consumption. However, by 2030, this is forecast to increase to 9%, equivalent to 6.5 million barrels of oil a day.
• Renewable energy overall (bio-energy, hydro, solar, etc) represented 16.0% of total energy demand in 2010.
Source: Renewables 2011, Global Status Report.Note: 1Traditional biomass means unprocessed biomass, including agricultural waste, forest products waste, collected fuel wood, and animal dung, that is burned in stoves or
furnaces to provide heat energy for cooking, heating, and agricultural and industrial processing, typically in rural areas.2Modern bioenergy comprises biofuels for transport, and processed biomass for heat and electricity production.
While traditional biomass1 constitutes an important part of the energy mix, so far modern biomass2 use makes up only a small share of total global energy consumption
Several economical, political, technological, and environmental factors will drive growth in the Biofuels/ Chemicals industry
Nuclear 2.8%
Fossil Fuels 81%
Renewable 16.2%
Wind/Solar/Biomass/Geothermal Power Generation 0.7%
Transport Biofuels 0.6%
Biomass/Solar/Geothermal/Hot Water/Heating 1.5%
Hydropower 3.4%Traditional Biomass 10%
16.2%
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Global Average Annual Growth Rates of Renewable Energy Capacity and Biofuels Production, 2005–2010
Biofuels/Biochemicals Growth Rates
The Biofuels
and Biochem Industry
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• Global energy consumption rebounded strongly in 2010 after an overall downturn in 2009, with annual growth of 5.4%. Renewable energy, which had no downturn in 2009, continued its strong growth in 2010 as well.
• During the period from the end of 2005 through 2010, total global capacity of many renewable energy technologies – including solar photovoltaic (PV), wind concentrating solar power (CSP), solar water heating systems, and biofuels – grew at average rates ranging from around 15% to nearly 50% annually.
• Solar PV increased the fastest of all renewables technologies during this period, followed by biodiesel and wind. For solar power technologies, growth accelerated during 2010 relative to the previous four years.
• At the same time, growth in total capacity of wind power held steady in 2010, and the growth rates of biofuels have declined in recent years, although ethanol was up again in 2010.
• Hydropower, biomass power and heat, and geothermal heat and power are growing at more ordinary rates of 3–9% per year, making them more comparable with global growth rates for fossil fuels (1–4%, although higher in some developing countries). In several countries, however, the growth in these renewable technologies far exceeds the global average.
Source: 1Renewables 2011, Global Status Report.
Solar PV
Solar PV(grid -connected only)
Wind Power
Concentrating Solar Thermal Power
Geothermal power
Hyderopower
Solar hot water/heating
Ethanol production
Biodiesel production
72%
81%
25%
77%
3%
3%
16%
17%
7%
49%
60%
27%
25%
4%
3%
16%
23%
38%
Year-end 2005-2010 (5-year Period)
2010
In 2010, approximately 700 million barrels of biofuels were produced. Over 45% of this was corn‐based ethanol in the U.S. and >25% produced was sugarcane‐based ethanol in Brazil
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Main Feedstock Sources
Crops used for Biofuels/Biochemicals
Biofuel Vehicle and Pumps
Feedstock is typically the largest component of biofuel &
biochemical production cost. Feedstock cost is estimated to
represent >30%‐50% of the operating costs of most projects.
The main sources of biofuels are:
1. Oil-seed crops: Oil –seed crops include soybean, rapeseed and sunflower. These go through a process called “transesterification” and the oils of these oilseeds are converted into methyl esters. Methyl esters are liquid fuel that can either be blended with petro-diesel or used as pure biodiesel.
2. Grains, cereals and starches: These come from corn, wheat, sugar cane, sugar beet and cassava, which undergo a fermentation process to produce bio-ethanol.
3. Non oilseed crops: Oil from the Jatropha fruit shows most promise. The fruit is poisonous, so it is not affected by the “food-or-fuel” tug of war; and it grows well on arid soils which means it does not need felling of forests. It is very resilient and needs less fertilizer and it can be developed into plantations like any oilseed crop.
4. Organic waste: Waste cooking oil, animal manure and household waste. Waste cooking oils can be converted into biodiesel while the rest are converted to biogas methane.
5. Cellulosic materials: These are grasses, crop waste, municipal waste and wood chips that are converted to ethanol. The conversion process is more complex than the two process aforementioned. There is also the option of converting these to gases such as methane or hydrogen for vehicle use or to power generators.
The Biofuels
and Biochem Industry
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Source: Broker Research and websites.
TABLE OF CONTENTS
Types of Biofuels
Biofuels/Biochemicals are
distinguished as either first, second
or third generation.
Most of the Biofuels today come from
corn-based ethanol and sugar-based
ethanol.
The current debate over biofuels/
biochemicals produced from food
crops has pinned a lot of hope on
"2nd-generation processes"
produced from crop and forest
residues and from non-food energy
crops.
Second generation conversion
technologies are key to progress and
sustainability.
The Biofuels
and Biochem Industry
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Source: UNEP Assessing Biofuels Report.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
First generation: Commercially produced using conventional technology. The basic feedstock are seeds, grains, or whole plants from crops such as corn, sugar cane, rapeseed, wheat, sunflower seeds or oil palm. These plants were originally selected as food or fodder and most are still mainly used to feed people. The most common first-generation biofuels are bioethanol (currently over 80% of liquid biofuels production by energy content), followed by biodiesel, vegetable oil, and biogas.
Second generation: Produced from a variety of non-food sources. These include waste biomass, the stalks of wheat, corn stover, wood, and special energy or biomass crops (e.g. Miscanthus). Second-generation biofuels/biochemicals use biomass to liquid (BTL) technology, by thermochemical conversion (mainly to produce biodiesel) or fermentation (e.g. to produce cellulosic ethanol). Many second-generation biofuels/biochemicals are under development such as biohydrogen, biomethanol, Fischer-Tropsch diesel, biohydrogen diesel, and mixed alcohols.
The commercial-scale production costs of 2nd-generation biofuels have been estimated by the IEA to be in the range of US $0.80 - 1.00/liter of gasoline equivalent (lge) [US $3.02-$3.79 per gallon] for ethanol and at least US $1.00/liter [$3.79 per gallon] of diesel equivalent for synthetic diesel. This range broadly relates to gasoline or diesel wholesale prices (measured in USD /lge) when the crude oil price is between US $100-130 /bbl . (However, many companies within SVB’s universe are estimating crude oil parity without subsidy of between US$60 -80/bbl or $1.50 to $2.00/gal at scale).
Third generation: Algae fuel, also called oilgae, is a biofuel/biochemical from algae and addressed as a third-generation petroleum replacement. Algae is a feedstock from aquatic cultivation for production of triglycerides (from algal oil) to produce petroleum replacement products. The processing technology is basically the same as for biodiesel from second-generation feedstock. Other third-generation biofuels include alcohols like bio-propanol or bio-butanol, which due to lack of production experience are usually not considered to be relevant as fuels on the market before 2050.
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First Generation Feedstocks
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and Biochem Industry
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Source: Clean Tech Energy Report by Robert Baird.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
Sugar cane has been used to produce bioethanol in Brazil since the 1970s. It is a perennial plant that needs few inputs, such as fertilizers, and has long root systems that can store carbon in the soil. It has a good net Greenhouse Gases (GHG) balance (up to 90% reduction in GHGs from ethanol produced from sugar cane, compared with conventional gasoline). Sugar Cane is one of the most heavily utilized feedstock for biofuels production and the highly developed infrastructure of the sugarcane industry in Brazil will continue to make the country a hot‐spot for Biofuel/BioChemical firms. According to the U.S. Department of Energy, Brazilian Sugarcane is not only the most abundant, but the cheapest available feedstock for ethanol production. Brazilian sugarcane offers several economic advantages to corn, which in the Unites States is the principal ethanol crop. Sugarcane produces around 15 dry tons per acre per year yielding roughly 600 gallons of ethanol per acre.
Corn is a cereal grain that was domesticated in Central America. Corn can be used as a feedstock to make biobutanol and bioethanol. Corn is the most abundant crop grown in the U.S. and the backbone of the current U.S. Biofuel industry. Approximately 80 million acres of land in the U.S. are dedicated to growing corn, and the U.S. accounts for ~20% of global corn exports. For 2010, the USDA estimates the national corn crop to yield 154.3 bushel/acre, which corresponds to a dry weight of ~3.7 t/acre. Currently, one bushel of corn produces around 2.75 gallons of ethanol equating to 400 to 500 gallons per acre. Corn yields have experienced a long term general uptrend from 70 bushels/acre in 1970 to the current yield as a result of enhanced seed research and development following the mapping of the corn genome. Corn ears are widely used as a feedstock for first‐generation ethanol, but corn stover, the above‐ground portion of the plant that is left in the field after harvest, is increasingly being utilized for second generation ethanol production.
Wheat is a grass that is cultivated worldwide. Wheat grain is used to make flour for breads, biscuits, pasta and couscous; and for fermentation to make beer, alcohol or vodka. Wheat can be used as a feedstock to make bioethanol, and it has few sustainability issues. Wheat can also be used to make biobutanol.
Sweet sorghum is one of the many varieties of sorghum which have a high sugar content. Sweet sorghum will thrive better under drier and warmer conditions than many other crops and is grown primarily for forage, silage, and syrup production. Sorghum has a very limited breeding history and as a result there has not been the same degree of testing for yield improvements through genetic optimization as in other major biofuel feedstocks such as corn and sugarcane. While sorghum isn’t as well‐suited as sugarcane for the production of refined sugar, it has value for ethanol, and its high lignocellulosic biomass content opens up the potential for use in the production of additional biofuels.
Soybeans are a class of legumes native to East Asia. The crop is primarily harvested as a food source due to its exceptionally high protein content (~40% of dry weight). In addition to their protein, soybeans are also valued for their oil content which accounts for ~20% of the dry weight of the beans. According to the USDA, approximately 17% of soy oil is used in industrial products. These products include biodiesel, inks, paints, plasticizers and waxes, among many others. China is the world’s largest producer of soybeans oil with more than 10M tons in 2010. Global production of soy oil exceeded 41 million metric tonnes (90 billion pounds) in the 2010/2011 season.
Rapeseed is a yellow flowering plant of the mustard family that produces a seed which yields ~40% oil. It naturally contains 45+% euracic acid which is mildly toxic to humans. Rapeseed is often grown as a high‐protein animal feed and also used in lubricants, soaps, and plastics manufacturing. According to the USDA, approximately 30% of rapeseed oil is used in industrial products. In Europe, Rapeseed has become a preferred feedstock for biofuels as it has higher oil yields per unit of land than other crops including soy beans, which only contain ~18‐20% oil. According to the Agricultural Marketing Resource Center, worldwide production was 61million tons in 2011 with China and India being the largest producers at 14.7 million and 7.3 million tons respectively. The European Union accounted for 23 million tons of rapeseed output.
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Second and Third Generation Feedstocks
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Source: Clean tech Energy Report by Robert Baird, June 2011.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
Miscanthus is a tall perennial grass closely related to sugar cane. Though native to the tropical and subtropical climates of Africa and Southeast Asia, it is also being grown by at least 10 countries in Europe explicitly for use as an energy feedstock. It has entered into favor due to its high expected commercial yields of 12-13 BDT/acre (as reported by Mendel Biotechnology in LA and MS) with low moisture content in the range of 15‐20% if harvested in late winter or spring.
Waste is a unique feedstock since it can often generate additional revenue from tip‐fees, but its heterogeneous characteristic makes it difficult to convert to biofuels and chemicals. Municipal Solid Waste (MSW) and Commercial & Industrial (C&I) waste are two waste streams that several companies in the industry are working to convert into fuels and chemicals. According to Pike Research, the market research and consulting firm that provides in-depth analysis of global clean technology markets, the global market for thermal and biological waste-to-energy technologies is set to reach at least $6.2 billion in 2012 and grow to $29.2 billion by 2022.
Jatropha is a genus covering ~150 types of plants, shrubs, and trees which produce seeds with oil content of up to 40%. Making it even more attractive as a feedstock is its ability to grow on poor quality land and its resistance to drought and pests. It is native to South America and typically only grows in tropical or subtropical environments. One drawback of Jatropha is that it also contains toxic matter which necessitates it be carefully processed before use in production. It is estimated that Jatropha nuts are capable of providing up to 2,270 liters of biodiesel per hectare, and the plant is currently the subject of several trials for use in biodiesel applications including a collaborative effort between Archer Daniels Midland, Bayer CropScience AG, and Daimler AG.
Southern pine presents a rich biomass source in the Southeastern portion of the U.S. These trees typically reach heights of 60‐120 feet (depending on species) and are characterized by their rounded tops, long needles, and rapid growth rates. According to the DOE, there are roughly 200 million tons of no-merchantable forest material alone and total forestland in the US is estimated to be 750 million acres.
Switchgrass is a perennial warm season grass native to North America. It can grow to heights of almost nine feet and an established stand has a lifespan of up to 10 years. One of its defining characteristics is its large, underground root system which can weigh as much as 6-8 tons per acre, making the plant particularly adept at accumulating carbon dioxide .The energy efficiency of producing ethanol from switchgrass is estimated to be much higher than corn with an energy input to output rate of 1:4 vs. 1:1.3. As reported by the USDA, various switchgrass crops yield 5-9.4 tons per acre.
Algae offer the highest oil yields of any biofuel feedstock, but issues around capital cost have created challenges for commercial use: Algae are simple‐celled organisms capable of creating complex organic compounds from inorganic molecules through photosynthetic pathways. Interest in using algae as a feedstock for biofuel production has increased rapidly and more than 30 U.S. based firms are now working to commercialize such technology. Algae offer attractive yields estimated to be upward of 4,000 to 5,000 gallons per acre. The DOE considers open pond algal configurations to have the most promise estimating 2012 fuel costs to be $9.28/ gal with a roadmap to $2.27/ gal.
Camelina is an annual flowering plant and member of the mustard family, regarded for its oil properties. It typically stands 1‐3 feet tall, is heavily branched, and produces small seeds high in oil content. It is able to grow effectively on land of marginal quality, needs minimal water input, and can withstand cold climates. Because of its high oil‐yield of 35‐38% (~2x that of soybeans), it is specifically being studied for use in biodiesel applications.
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Comparative Yields
Energy density refers to the amount
of energy stored in a given system or
region of space per unit volume
Among all the edible oils used for
manufacturing biodiesel, palm oil is
also the most efficient in terms of
land use, pricing and availability
Algae offer the highest oil yields of
any biofuel feedstock, but issues
around cost have created challenges
for commercial use
The Biofuels
and Biochem Industry
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Source: 1Global Change Biology, 2Robert Baird Biomass Almanac July 2011.Note: 3,4MJ & GJ: Megajoules and Gigajoules (derived unit of energy or work in the International System of Units, equal to the energy expended (or work done) in applying force through a distance).
Energy Density for Biofuels per Unit of Required Land for Various Feedstock1
CropCrop Yield
(tons/hectare)
Crop Required
(kg raw/kg fuel)
Fuel Produced
(tons/hectare)
Fuel EnergyDensity (MJ/kg3)
Fuel Energyper Hectare
(GJ/hectare4)
Oil Rapeseed 3.0 4.7 0.64 43.7 28.0
Pyrolysis / wood 10.0 2.0 5.0 25.0 125.0
Wheat 2.6 6.2 0.43 35.0 15.0
Corn 4.2 3.9 1.1 35.0 37.0
Sugarcane 61.8 18.9 3.3 35.0 115.0
Sugarbeet 60.0 18.9 3.2 35.0 11.0
Wood Chips 10.0 8.6 1.2 35.0 41.0
Wheat Straw 1.9 7.9 0.25 35.0 9.0
Comparison of Yields for Typical Oil Crops2
Crop: Soybean Camelina Sunflower Jatropha Oil Palm Algae
Oil Yield:(g/acre/yr)
2.6 6.2 0.43 35.0 15.01,000-6,500
TABLE OF CONTENTS
Comparative Advantages and Disadvantages of Feedstock
The Biofuels
and Biochem Industry
19
Source: Robert Baird Biomass Almanac July 2011.
Corn Sweet Sorghum Sugarcane Soybean Oil Rapeseed Oil Pine Oil
POSITIVES
Ethanol industry experienced with using corn as a feedstock
Corn stover offers potential for use in cellulosic fuel applications
Annual crop – short growth cycle (90‐120+ days) allows for multiple cuts (2‐3) to be made in a given year
Low water requirements and adaptable to wide variety of environments
Less residual waste biomass from harvesting
Cheapest available crop (non‐cellulosic) for ethanol production
Does not have to be transitioned from a complex carbohydrate to a simple sugar prior to fermentation
Does not compete as a food source
Good oil content makes it suitable for biodiesel production
Seeds have very high oil content by volume at ~40%
Can be used as an animal feed as well as in lubricants and plastics manufacturing
High energy density and saturated fat content
ISSUES
Use for corn in biofuels stokes the “food vs. fuel” argument
Subject to commodity pricing volatility
High quality land required as well as significant water and fertilizer needs
Lower sugar yields compared to sugarcane
Yields mixed sugars as opposed to pure sucrose, making it less conducive for production of refined sugars
Due to harvest timelines, average mills only operate an average of ~185 days per year
Requires high quality land and significant water and fertilizer inputs
Vegetative propagation can lead to overcrowding
Competes as a food source
Oil content lower than many competing crops used as targets for biofuels
Production of biodiesel from soybean oil results in a net energy loss of ~30%
Shares significant demand with Canola oil which could add to price volatility
Burning of peatland to clear room for new plantations leading to significant deforestation and GHG emissions
TABLE OF CONTENTS
Switchgrass Camelina Miscanthus Municipal Solid Waste Jatropha Southern Pine
POSITIVES
Reliable biomass yields due its propensity for accumulating CO2
Higher energy content than corn for ethanol production
Wide adaptability and capable of growth in dry climates
ESelf‐seeding, requiring no replanting after harvesting
Can be grown on marginal lands, in cold climates, and with minimal water
Short crop that can be rotated with wheat
High oil yields of 35‐38%
Reliable biomass yields
Capable of relatively high yields today
Can be grown effectively without fertilizers – less leaching
Can generate a significant revenue stream from tip‐fees
Continuously generated – no need for agriculture and spending
Collection and hauling logistics and infrastructure is in place
Can be grown on low quality land
Naturally resistant to drought and pests – though yields shown to be significantly higher when irrigated
Does not compete as a food source as it is non‐edible
Shuttering of paper & processing mills in U.S. have led to a growth surplus
Wood waste offers an inexpensive source of biomass
Trees have longer growth cycles than other energy crops
ISSUES
Additional research required before commercially viable
Additional time/research needed before commercially viable
Limited adoption thus far in North America
Studies have found it dries up soil more than other crops which can reduce surface water supplies
Heterogeneous characteristic makes conversion difficult
Often requires gasification which can carry high CAPEX requirements
Contains toxic matter which must be separated before used in production
Still requires significant yield improvements before economically viable at commercial scale
Collection processes for residual wood waste still need development
Rising demand for pulp globally could provide upward pricing pressures
Cannot be utilized as feedstock by non‐cellulosic conversion technologies
Comparative Advantages and Disadvantages of Feedstock (con’t)
The Biofuels
and Biochem Industry
20
Source: Robert Baird Biomass Almanac July 2011.
TABLE OF CONTENTS
Petroleum Replacement Overview
The Biofuels
and Biochem Industry
21
Source: ZeaChem,, Inc..
Market Size Customers
Conversion Technology
Propionic C3
Propanol Propylene
Butyric C4
Acetic C2
Butanol Butene
Alkylate/Polygas
Poly-propylene
Acrylics
Alkylate
Acetic Sales
Ethanol Ethylene
Drop-in Gasoline/Alkylate
Automative/ Packaging
Rayon/Filters
VAM
Acetic Anhydride
Paint/Adhesives
Packaging
PET
Rubber/Plastics
Drop-in Gasoline
Gasoline Blending
Jet/Diesel
Cellulosic Acetate
Ethylene glycol
Linear a-olefins
EVA
Poly-ethylene
Super-Absorbents
$485 billion Refiners
$110 billion
Consumer ProductsChemical Companies
$180 billion
Consumer ProductsPaint Companies Chemical Companies
$245 billion
$60 billion
$1 billion
Airlines/Dod Refiners
Refiners
Consumer Products
TABLE OF CONTENTS
Conversion Technologies – Fermentation and Fluid Catalytic Cracking
The Biofuels
and Biochem Industry
22
Fermentation Fluid Catalytic Cracking
TECHNOLOGY
Definition: Fermentation is the process by which bacteria such as yeast, convert simple sugars to alcohol and carbon dioxide through their metabolic pathways. The most common input for fermentation in the United States is corn, but in warmer climates sugarcane or sugar beet are the principal types of feedstock. Resulting alcohols such as ethanol and butanol can be utilized as blendstock with gasoline or in the case of butanol, can act as a gallon for gallon replacement
Feedstock: Simple sugars – corn and sugarcane are most commonly used today in the production of ethanol
Output : Alcohols including ethanol and butanol, and distiller’s grains
Definition: Fluid Catalytic Cracking (FCC) is a proven process in the petroleum industry used to convert crude oil into higher value products such as gasoline and naptha. FCC reactions occur at extremely high temperatures (up to 1,000+ F°) and use fine, powdery catalysts capable of flowing likely a liquid which break the bonds of long‐chain hydrocarbons into smaller carbon‐based molecules. FCC technology is applied to organic sources of carbon such as woody biomass to convert the cellulosic content into usable hydrocarbons with equivalence to crude oils – this process is referred to as Biomass Fluid Catalytic Cracking (BFCC). FCC was first commercialized in 1942, and is presently used to refine ~1/3 of the U.S.s’ total annual crude volume
Feedstock: Feedstock agnostic – can utilize cellulosic biomass
Output: Biocrude, gases
POSITIVES
Ability to genetically modify metabolic pathways of organisms to yield different carbon molecule outputs (ethanol, butanol)
Process already demonstrated at commercial scale via first‐generation ethanol production
Common outputs such as ethanol / butanol have existing markets in both fuels and chemicals
Commercially proven technology in the petroleum industry Can process low‐cost cellulosic biomass
ISSUES
Costly to develop/purchase enzymes to break down cellulosic materials to make simple sugars available for fermentation
First‐generation feedstock susceptible to commodity price volatility
High capital costs for facilities Proven for petroleum but limited to demonstration testing for
biomass
Source: Robert Baird, Clean Tech report July 2011.
TABLE OF CONTENTS
Conversion Technologies – Anaerobic Digestion and Gasification
The Biofuels
and Biochem Industry
23
Source: Robert Baird, Clean Tech report July 2011.
Anaerobic Digestion Gasification
TECHNOLOGY
Definition: Anaerobic digestion is the process by which bacteria decompose wet organic matter in the absence of oxygen. The result is a byproduct known as biogas which consists of ~60% methane and ~40% carbon dioxide. Biogas can then be combusted in the presence of oxygen to generate energy. Effectively any feedstock can be converted to biogas via digestion including human and animal wastes, crop residues, industrial byproducts, and municipal solid waste. Anaerobic digestion is the same process that created natural gas reserves found throughout the world today
Feedstock: Starches, celluloses, municipal solid waste, food greases, animal waste, and sewage
Output: Biogas
Definition: Gasification is a process by which carbon‐based
materials such as coal, petroleum coke, and biomass are
separated into their molecular components by a combination of
heat and steam, forming a gaseous compound known as
synthesis gas or syngas as it is commonly called
Feedstock flexibility: Feedstock flexible including use of
municipal solid waste
Output: Syngas which has the capacity to be used in a variety
of applications including the production of transportation fuels,
electricity, and heat. Other byproducts include sulphur and slag
POSITIVES
Commercially proven technology Can be used to process wet organic matter Resulting materials can be processed into valuable fertilizer Utilization of methane to produce biogas reduces impact of
GHG emissions from landfill gas Low capital and costs and potential for low operating cost
Input flexibility allows costs to be reduced through lower cost feedstock
Energy conversion ratio potentially higher than competing technologies because biomass‐to‐liquid (BTL) gasification can convert all of the cellulosic material into transportation fuels
Lower emission levels than traditional power production
ISSUES
Slower process than many alternatives Cannot be used to convert lignin Accumulates heavy metals and contaminants in the
resulting sludge Gas clean‐up has disrupted projects in the past
Gas quality suffers from irregularity due to challenges in removing tar content– energy density ~50% of natural gas
High capital and operating costs – this could be reduced in future by co‐location next to feedstock sources
TABLE OF CONTENTS
Conversion Technologies – Pyrolysis and Transesterification
The Biofuels
and Biochem Industry
24
Source: Robert Baird, Clean Tech report July 2011.
Pyrolysis Transesterification
TECHNOLOGY
Definition: Pyrolysis is the process by which organic materials
are decomposed by the application of intense heat in the
absence of oxygen to form gaseous vapors which when cooled
form charcoal and/or bio‐oil can potentially be used as a direct
fuel substitute or an input for the manufacture of transportation
fuels
Feedstock: Capable of using a wide variety of feedstock
including agriculture crops, solid waste, and woody biomass
(currently most common)
Output: Bio‐oil (energy density of ~16.6 megajoules/liter) which
must be processed further before it can be utilized as a
transportation fuel. It also yields syngas and biochar
Definition: Transesterification is the process by which a
triglyceride is chemically reacted with an alcohol to create
biodiesel and glycerin. While there are a few variants, the
predominance of biodiesel is created through base catalyzed
transterification because of its high conversion yields and
comparatively low pressure and temperature requirement.
Transesterification is necessary because vegetable oils/animal
fats cannot be used directly to run in combustion engines
because of their high levels of viscosity
Feedstock: Soybean oil, palm oil, jatropha oil, rapeseed oil,
animal fats, food grease, etc.
Outputs: Biodiesel and glycerol
POSITIVES
Flexibility of feedstock diversifies risk related to feedstock supply/demand pressures
Marketable biochar output provides secondary revenue stream from production
Results in lower‐viscosity biodiesel allowing it to replace petroleum in diesel engines
Glycerin byproduct can be sold to generate secondary revenue stream
Low cost and high availability of methanol and sodium hydroxide reduces input costs
Relatively low reaction temperature of 60 degrees C keeps utility costs down
ISSUES
Potentially corrosive characteristics requiring specialized components in fuel systems to adequately house it
Viscosity increases during storage meaning it must be used more frequently than traditional fossil fuels
Requires separation/recovery of base catalyst / glycerin from solution
Free fatty acid and water contamination can result in negative reactions
TABLE OF CONTENTS
Conversion Technologies – Syngas Fermentation
The Biofuels
and Biochem Industry
25
Source: Coskata Inc, LanzaTech Inc, Advanced Biofuels USA “Syngas Fermentation, The Third Pathway for Cellulosic Ethanol.
Syngas Fermentation
TECHNOLOGY
Definition: Syngas Fermentation is the process by which
gasification breaks the carbon bonds in the feedstock and
converts the organic matter into synthesis gas. The syngas is
sent to bioreactor where microorganisms directly convert the
syngas to a fuels and/or chemicals
Feedstock: Capable of using a wide variety carbon containing
feedstocks including agricultural crops, solid waste, woody
biomass and fossil fuels such as coal and natural gas
Output: Ethanol, 2.3-BDO, Acetic Acid, Acetone, Propanol,
Butanol, MEK, Isoprene, Acrylic Acid, Butadiene, Succinic Acid
POSITIVES
Process does not rely on expensive enzymes or pretreatment chemicals thus operating costs should be lower than non-gasification based technology
Ability to convert nearly all feedstock into energy with minimal by-products. Microorganisms are able to produce only one fuel/chemical under low temperature and pressure
ISSUES
Imperative to keep the right nutrient and chemical balance in order to keep the microorganisms alive and productive. Any contaminants could spread quickly through the bioreactor
Reliability and Continuous Operations: Since the organisms live off the energy contained in the synthesis gas, it is critical that they continue to be through a well operating system design
TABLE OF CONTENTS
The Importance of Biofuels/Biochemicals
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26
TABLE OF CONTENTS
Biofuels/Biochemicals Growth – Summary
• The sector has received increasing attention from both public and private investors due to several growth drivers including the desire for energy independence, the increasing demand for liquid fuels for transportation especially in emerging markets, technological advances across the industry’s value chain and environmental concerns (Green house gas (GHG) emissions). The most important driver, however, spurring investment in the industry is the continued volatility and high price of crude oil.
• Biofuels/Biochemicals constitute a 3% share in the total global chemicals & fuels market in 2010 and is expected to touch 17% in 2025.
• As “easy“ conventional oil resources continue to decline and more expensive nonconventional liquid sources make up the difference, biofuels/ biochemicals will play an increasing role in diversifying the liquid energy landscape.
• Liquids demand is growing mainly driven by rapidly-growing non- Organization for Economic Co-operation and Development (OECD) economies and will be met by supply growth from Organization of the Petroleum Exporting Countries (OPEC) and the Americas. China (+8 million barrels per day), India (+3.5 million barrels per day), and the Middle East (+4 million barrels per day) account for nearly all of the net global increases.
• Liquid biofuels accounted for a modest 2.7% of global road-transport fuels in 2010 , but will play an expanded role of meeting liquid demand.
• OPEC’s critical position in the oil market grows given its oil reserve position while the Americas also play an expanding role by utilization of new recovery technologies in tight oil formations and Canadian oil sands.
• Exporting oil producing nations, “petro-states”, rely heavily on oil revenues to support their economies (50-90% of GDP). Oil price decreases can cause major deficits, budget cuts, considerable social turmoil, and political change creating an incentive for petro states to keep production in line with demand.
• Government legislation is driving the adoption of renewable fuels— In February 2010, the US Environmental Protection Agency (EPA) submitted its final rule for Renewable Fuels Standard 2 (RFS-2),
setting forth volume targets of 36 billion gallons of renewable fuels produced in the U.S. by 2022 with 21 billion being advanced biofuels.— The EU is targeting 10% of transport energy from renewables by 2020, counting both sustainable biofuels and electric vehicles.
The Biofuels
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TABLE OF CONTENTS
Compelling Market Opportunity
Bio Based Market OpportunityOpportunities for bioproducts will
not only be fuels based but focused
on the whole barrel. The gasoline
market accounts for about 45% of
the barrel of crude while there are
many different chemicals inside a
barrel of oil.
A 42-U.S. gallon barrel of crude
equates to about 45 gallons of
petroleum products which includes
(as a % of the total barrel) motor
gasoline (45%), distillate fuel oil
(29%), jet fuel (9.4%) petroleum
coke (5.5%), still gas (4.4%).
The Biofuels
and Biochem Industry
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Source: Renmatix, International Energy Outlook 2009, Industrial biotechnology analysis 2010, Arthur D. Little – ICIS; World Energy Outlook 2009, International Energy Agency 2010; USDA Biobased Product Projections 2008; US Energy Information Administration.
Total Chemicals & Fuels Market $5.0 trillion $8.0 trillion
Bio-based Share 3.0% 17%
2010 20250.0
0.5
1.0
1.5
Fuels (Bio) Chemicals (Bio)
CAGR16%
Tri
llio
ns o
f D
olla
rs (
U.S
.)
Bio Based Market$148 billion
Bio Based Marketapprox.$1.4 trillion
TABLE OF CONTENTS
Drivers of Biofuels/Biochemicals Growth
The rising cost of oil will create an
incentive for producers of petroleum‐
derived products to seek renewable
alternatives that provide greater
stability in pricing.
Strong public sentiment for the U.S.
to reduce its dependence on foreign
petroleum reserves is thus one of the
major drivers of the renewable fuel
industry.
U.S. oil imports drop due to rising
domestic output & improved
transport efficiency; EU imports to
overtake those of U.S. around 2015
and China expected to be the largest
importer by 2020.
The Biofuels
and Biochem Industry
29
Source: 1Bloomberg, 2World Energy Outlook 2011.
Crude Oil Monthly spot prices ($ per barrel)1
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0 The volatility and price increases of oil are the most significant drivers in the growth of the Biofuel/Biochemical Industry: The increasing demand for petroleum products, supply shocks, and other factors have led to volatile and high oil prices over the past decade. In January 2000, European Brent Crude spot prices were below $24/barrel before peaking at over $140/barrel in 2008. After some price relief in the midst of the global economic downturn, Brent Crude is ~$97/barrel currently, representing a CAGR of ~13.5% from 2000‐2011.
Net Imports of Oil2
Biofuels and Biochemicals help reduce U.S. dependence on foreign oil: U.S. reliance on foreign imports has increased significantly since the mid‐1980’s. It can be argued that as the world’s current economic superpower and the largest consumer of petroleum, the U.S. will continue to command a reliable oil supply from producing nations. However, with the emergence of rapidly growing and industrializing economies in China and India, the global supply of oil may be spread increasingly thin putting additional upward pressure on energy prices
China India EU U.S. Japan0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.02000 2010 2035
Million barrels/day
TABLE OF CONTENTS
Drivers of Biofuels/Biochemicals Growth (con’t)
By 2035, the EIA projects that
transportation sector will account for
73% of all liquid fuels consumption.
Key drivers of transportation growth
include population expansion and
rising real disposable income which
leads to more frequent travel .
The global passenger vehicle fleet
doubles to 1.7 billion in 2035; most
cars are sold outside the OECD by
2020, making non-OECD policies key
to global oil demand.
The development and subsequent
scale‐up of cellulosic technologies
offers a clear advantage to reducing
price volatility of biofuel feedstock
and will play major role in driving
down the costs of renewable
fuels/chemicals.
The Biofuels
and Biochem Industry
30
Source: 1World Energy Outlook 2011, 2Bloomberg, 3EIA, DOE, Timber Mart-South.Note: OECD- Organization for Economic Co-operation and Development.
Vehicles per 1000 people in Selected Markets1
Increase in transportation applications driving growth in liquid fuels consumption: The Energy Information Administration (EIA) projects that U.S. consumption of liquid fuels will increase from 19.1 million barrels per day in 2009 to more than 21.9 million gallons per day by 2035. The increase is expected to be driven almost entirely by an increase in the use of liquid fuels for transportation applications which is forecasted to grow from 13.6 million barrels per day in 2009 to 16.1 million barrels per day by 2035 .
Cellulosic biofuel technologies unlock non‐food feedstock and reduce input cost volatility: Cellulose (corn stover, switchgrass, miscanthus, woodchips etc) is not used for food and can be grown in all parts of the world. The entire plant can be used when producing cellulosic products. While the U.S. is the world’s largest producer of the crop, corn competes as a food source and is subject to significantly more price volatility than residual waste biomass. Over the past decade the value of the IMF’s Commodity Food Price Index increased at a CAGR of 8.7% annually. This is ~3.6x faster than the rate of inflation as measured by the Consumer Price Index which had a CAGR of 2.4% annually over the same period. From 2000 to 2011, the maximum 12-month price increase was 18% for pine woodchips versus 50% for corn, 46% for sugar and 51% for West Texas Intermediate crude according to average quarterly data from Timber Mart-South, the USDA and the EIA.
Million barrels/day
United States
European Union
China India Middle East0
100
200
300
400
500
600
700
800
2010 2035
Commodity Food Price Index vs. CPI2
Million barrels/day
Relative Prices of Wood, Sugar, Soy Oil, Corn, Nat Gas and Crude Oil Since 20003
0
50
100
150
200
250
300
350
400
450
500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Inde
x (Q
1 20
00=1
00)
World raw sugar (No.11, spot) Corn (No.2 yellow, Chicago spot)
US Nat Gas Industrial Price WTI Crude (Spot, FOB Cushing, OK)
Pine Pulpwood (Delivered AL)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Commodity Food Price Index CPI
TABLE OF CONTENTS
Drivers of Biofuels/Biochemicals Growth (con’t)
While in the near term proven
reserves are expected to increase
with new exploration efforts and
technological developments that
increase certainty of quantity, in the
long term, new sources of energy
must be discovered to satisfy global
energy demands.
Lifecycle GHG emissions are the
aggregate quantity of GHGs related
to the full fuel cycle, including all
stages of fuel and feedstock
production and distribution, from
feedstock generation and extraction
through distribution and delivery and
use of the finished fuel. The lifecycle
GHG emissions of the renewable fuel
are compared to the lifecycle GHG
emissions for gasoline or diesel.
The Biofuels
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31
Source: 1BP Website, 2EPA.Note: GHG - Greenhouse Gas.
Biofuels in Transportation1
Petroleum is a finite resource and substitutes must be found: Petroleum is naturally formed by the anaerobic decay of organic matter in the presence of intense heat and pressure which is thought to occur over hundreds of thousands or even millions of years. With such a long formation cycle, the earth is not capable of regenerating its reserves of oil at the same rate to which humanity draws upon them for energy use.
Biofuel Lifecycle GHG Impact Relative to Gasoline2
Environmental concerns, particularly with regard to global warming driving adoption of “cleaner and greener” alternatives: The EIA projects that CO2 emissions from the combustion of liquid fuels will grow by ~28% from 2007 to 2035. China is the largest contributor to the rising pollution levels with CO2 emissions growth estimated to be 2.9% annually driven by its rapidly expanding demand for liquid fuels in its industrial and transportation sectors. The U.S., however, is expected to remain the world’s largest polluter with ~2.6 billion metric tons of emission in 2035. A wider push to renewable fuel sources is viewed as a major step towards reversing the pattern of global warming.
100%105%
82%
134%
82% 74%104%
20%
74%
-24% -16%
-40.0%
0.0%
40.0%
80.0%
120.0%
160.0%
Gas
olin
e
Co
rn E
than
ol(N
at. g
as d
ry
mill
)
Co
rn E
than
ol(B
est C
ase
Nat
.gas
dry
mill
)
Co
rn E
than
ol (C
oal d
ry
mill
)
Co
rn E
than
ol (B
iom
ass
Dry
M
ill)
Co
rn E
than
ol (B
iom
ass
Dry
M
ill w
ith C
HP
)
So
y-b
ased
Bio
dies
el
Was
te G
reas
e B
iodi
esel
Sug
arca
ne
Eth
anol
Sw
itch
gras
s E
than
ol
Co
rn S
tove
r Eth
anol
2010 2035
Other fuels: 91.0%
Other fuels: 97.3%
Biofuels: 2.7% Biofuels: 9.0%
TABLE OF CONTENTS
1990 1995 2000 2005 2010 2015 2020 2025 20300.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
5000.0
North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific
Liquid Demand Statistics
Total Liquids Consumption by Region1Liquids demand growth from non-
OECD countries will be met by
supply growth from OPEC and the
Americas
Liquids demand growth is driven by
non-OECD transport while OECD
demand falls across all sectors
Overall consumption growth will be
constrained by stronger crude oil
prices seen in recent years,
technological advances, a range of
new policies, and the continued,
gradual reduction of non-OECD
subsidies
The Biofuels
and Biochem Industry
32
Source: 1BP Energy Outlook 2030: January 2012.Note: OECD- Organization for Economic Co-operation and Development.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
3,148 3,271 3,571 3,908 4,028 4,166 4,378 4,562 4,719Total Liquids Consumption (MTOE)
Million tones of oil equivalent (MTOE)
7.1
153.2
9.2
90.0
8.5
116.8
19.9 59.3
188.0of which biofuels
TABLE OF CONTENTS
Liquid Supply Statistics
Total Liquids Production by Region1Rising supply to meet expected
demand growth should come
primarily from OPEC, where output is
projected to rise by nearly 12 Mb/d.
The largest increments of new OPEC
supply will come from NGLs2, as well
as conventional crude in Iraq and
Saudi Arabia
OPEC’s critical position in the oil
market grows while the Americas
also play an expanding role
Non-OPEC supply will continue to
rise, growing by 5 Mb/d, due to
strong growth in the Americas from
U.S. and Brazilian biofuels, Canadian
oil sands, Brazilian deepwater, and
U.S. shale oil, offsetting continued
declines in a number of mature
provinces
The Biofuels
and Biochem Industry
33
Source: 1BP Energy Outlook 2030: January 2012, 2Natural Gas Liquids.Note: OPEC- Organization of the Petroleum Exporting Countries. Mb/d – Million Barrels per Day.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
1990 1995 2000 2005 2010 2015 2020 2025 20300.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
5000.0
North America South & Central America Europe & Eurasia Middle East Africa Asia Pacific
3,172 3,284 3,612 3,907 3,914 4,089 4,263 4,398 4,512Total Oil Production(MTOE)
Million tones of oil equivalent (MTOE)
7.1
153.2
9.2
90.0
8.5
116.8
19.9 59.3
188.0of which biofuels
TABLE OF CONTENTS
Energy Market Growth
Boom, bust, or both, global demand
for energy looks set to increase by at
least 50% over the next 20 years
(CY2030), driven by population
growth and rapid industrialization in
developing economies. Global
supply of fossil fuels is already
consolidating, with 70% of the
world’s oil now sourced from just six
countries and 50% of natural gas
produced in just three
By 2040, oil and natural gas will be
the world’s top two energy sources,
accounting for about 60% of global
demand, compared to about 55%
today. Gas is the fastest growing
major fuel source over this period,
growing at 1.6% per year from 2010
to 2040. Investments and new
technologies, applied over many
years and across multiple regions,
will enable energy supplies to grow
and diversify
The Biofuels
and Biochem Industry
34
Source: 1,2BP Energy Outlook 2030: January 2012.
Total Energy Production by Fuel Type 2010 vs. 20301
Total Energy Consumption by Fuel Type 2010 vs. 20302
Million tones of oil equivalent (MTOE)
Million tones of oil equivalent (MTOE)
Oil Natural Gas Coal Nuclear Energy Hydroelectricity Biofuels Renewables 0.0
500.01,000.01,500.02,000.02,500.03,000.03,500.04,000.04,500.05,000.0
Oil Natural Gas Coal Nuclear Energy Hydroelectricity Biofuels Renewables 0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
5,000.0
20102030
2010
2030
TABLE OF CONTENTS
Energy Market Growth (con’t)
The Biofuels
and Biochem Industry
35
Source: 1,3BP Energy Outlook 2030: January 2012, 2World Energy Outlook 2011.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
Total Energy Consumption by Region1 Shares of Energy Sources in World Primary Energy Demand2
1990
1995
2000
2005
2010
2015
2020
2025
2030
0.0
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
30,000.0
OECD Non-OECD European Union Europe Former Soviet Union US China
Total Growth of Energy Consumption to 20303
Million tones of oil equivalent (MTOE)
Total energy consumption will increase from 12,002.4 mtoe in 2010 to 16,631.6 MTOE in 2030. Global energy demand is expected to increase by one-third from 2010 to 2035, with China & India accounting for 50% of the growth
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
0%
10%
20%
30%
40%
50%
Oil Coal Gas Biomass & waste Nuclear
Other Renewables Hydro
Total Growth of Energy Consumption to 20303
Transport Industry Other0.0
0.5
1.0
1.5
2.0
2.5
Coal Oil Biofuels Gas Electricity
Transport Industry Other
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
China & India OECD Middle East ROW
Billion tones of oil equivalent (BTOE)
Billion tones of oil equivalent (BTOE) Final Energy Use Final Energy Use
By Sector & Region By Sector & Fuel
TABLE OF CONTENTS
Liquid Demand Growth from Non-OECD Countries
Crude Oil is expected to be the
slowest-growing fuel over the next 20
years. Global liquids demand (oil,
biofuels, and other liquids)
nonetheless is likely to rise by
16Mb/d, exceeding 103Mb/d by 2030
according to BP’s 2012 Energy
Outlook.
Growth in demand comes exclusively
from rapidly-growing non-OECD
economies. China (+8Mb/d), India
(+3.5Mb/d), and the Middle East
(+4Mb/d) account for nearly all of the
net global increases.
The Biofuels
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Source: BP 2012 Energy Outlook 2030.
Non-OECD: Countries that are not included in the Organization for Economic Cooperation and Development (OECD). OECD is an international organization helping governments tackle the economic, social and governance challenges of a globalized economy. Its membership comprises about 34 member countries. With active relationships with some 70 other countries, non-governmental organizations (NGOs) and civil society, it has a global reach. Members include many of the world’s most advanced countries but also emerging countries like Mexico, Chile and Turkey. Mb/d – Million Barrels per day.
Demand and Supply by Region
TABLE OF CONTENTS
Biofuels’ Expanded Role in Meeting Liquid Demand
Global liquids supply growth will match
expected growth of demand with OPEC
accounting for 70% of incremental
supply; the group’s market share will
approach 45% in 2030, a level not
reached since the 1970’s
Four-fifths of oil consumed in non-OECD
Asia comes from imports in 2035,
compared with just over half in 2010.
Globally, reliance grows on a relatively
small number of producers, mainly in the
MENA region, with oil shipped along
vulnerable supply routes. In aggregate,
the increase in production from this
region is over 90% of the required growth
in world oil output
Supply from the Americas will also
expand, by 8Mb/d, as advances in drilling
technologies unlock additional resources
in the Canadian oil sands (2.2+Mb/d),
Brazilian deepwater (+2Mb/d, and US
tight oil basins (+2.2Mb/d). In addition,
the US and Brazil contribute over half of
total biofuels production growth (of
+3.5Mb/d) expected by 2030
The Biofuels
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Source: BP 2012 Energy Outlook 2030.Note: MENA – Middle East Northern Africa; Mb/d – million barrels per day; OPEC – Organization of the Petroleum Exporting Countries.
Liquids Supply and Growth Estimates
TABLE OF CONTENTS
Biofuels for Transportation
• Demand for liquid transport fuels is expected to increase by 2 million barrels per day over the next two decades and nearly 40% of the growth will be supplied by biofuels, the first time that non-fossil fuels will be the major source of supply growth.
• Liquid biofuels make a small but growing contribution to fuel usage worldwide.
— Provided about 2.7% of global road transport fuels in 2010— Accounted for higher shares in some countries (e.g., 4% in the
U.S.) and regions (3% in the EU) and provided a very large contribution in Brazil, where ethanol from sugar cane accounted for 41.5% of light duty transport fuel during 2010
• The U.S. was the world’s largest producer of biofuels, followed by Brazil and the EU. Despite continued increases in production, growth rates for biodiesel slowed again in 2010, whereas ethanol production growth picked up new momentum.
• In 2010, global production of fuel ethanol reached an estimated 86 billion liters, an increase of 17% over 2009— The U.S. and Brazil accounted for 88% of ethanol production in 2010, with the U.S. alone producing 57% of the world’s total— Long the world’s leading ethanol exporter, Brazil continued to lose international market share to the U.S, particularly in its traditional markets in
Europe — Adverse weather conditions hampered global harvesting of sugar cane, pushing up prices. As a result, U.S. corn-based ethanol became relatively
cheaper in international markets (although it was subsidized, unlike Brazilian ethanol)
• Global biodiesel production increased 7.5% in 2010, to nearly 19 billion liters, a five-year average (end-2005 through 2010) growth of 38%— Biodiesel production is far less concentrated than ethanol, with the top 10 countries accounting for just under 75% of total production in 2010— Germany remains the world’s top biodiesel producer at 2.9 billion liters in 2010, followed by Brazil, Argentina, France, and the U.S.— The EU remained the center of biodiesel production, but due to increased competition with relatively cheap imports, growth in the region continued to
slow. The diversity of players in the advanced biofuels industry continued to increase with the participation of young, rapidly growing firms, major aviation companies, and traditional oil companies
The Biofuels
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38
Ethanol and Biodiesel Production, 2000–20101
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0
10.020.030.040.050.060.070.080.090.0
100.0
17.0 19.0
21.0
24.029.0 31.0
39.0
52.0
66.0 73.0
86.0
0.8 1.0 1.4 1.9 2.43.7 6.6
11.0
16.0
17.0
19.0
Ethanol Biodiesel
Billion liters
World ethanol production for transport fuel tripled between 2000 and 2007 from 17 billion liters to more than 52 billion liters, while biodiesel expanded eleven-fold from less than 1 billion liters to almost 11 billion liters
Source: 1F.O. Licht (world-renowned renewable fuels research agency).Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
TABLE OF CONTENTS
Increasing Marginal Cost of Production
Advanced biofuel and chemical
companies are projecting crude oil parity
un-subsidized at $60-$80/ barrel at scale1.
The cost of bringing oil to market rises
as oil companies are forced to turn to
more difficult and costly sources to
replace lost capacity and meet rising
demand.
Oil Shale, better known as “tight oil”, is
expected to continue to increase
domestic oil production. Well costs
alone have doubled in the last 5 years to
$8-10MM per well with steep reservoir
decline curves (<5yrs) requiring more
wells drilled each year to sustain existing
production.
The U.S. EIA projects world oil
production to grow 1.0% per year from
2008 to 2035 reaching 112.2 mbpd in
2035. Total non-conventional resources
and specifically biofuels are projected to
make up 13.1mbpd and 4.7mbdp,
respectively.
The Biofuels
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Source: Booz Allen Hamilton analysis based on information from IEA, DOE and interviews with super-majors.1Vinod Khosla 1/27/11 “What Matters in Biofuels & where are we?”, Company estimates, SVB estimates.Note: EOR - Enhanced Oil Recovery is a generic term for techniques for increasing the amount of crude oil that can be extracted from an oil field, GtL – Gas to Liquids, CtL – Coal to Liquids, FSU – Former Soviet Union.
Total Production Costs ($/Bbl)
Conventional oil: Crude oil that is produced by a well drilled into a geologic formation in which the reservoir and fluid characteristics permit the oil and natural gas to readily flow to the wellbore.
Non-conventional liquid sources: include biofuels, gas-to-liquids, coal-to-liquids, and unconventional petroleum products (extra-heavy oils, oil shale, and bitumen) but do not include compressed natural gas (CNG), liquefied natural gas (LNG), or hydrogen.
TABLE OF CONTENTS
Ethanol Operating Margins2
Cost of Production Analysis
Conversion yields for cellulosic
production can range from 70 gal/ BDT to
160 gal/BDT depending on technology
and feedstock1.
Despite favorable projected conversion
yields, advanced fuels/chemicals will
need to show economies of scale in
regards to operating and capital costs.
Corn prices have risen in the past few
years further increasing the cost of
ethanol. According to the IMF, a
combination of low inventories, volatile
weather, rising China demand and
increased corn use in biofuels raises the
prospect of further corn price spikes
over 2012-2013.
The USDA estimates CBOT corn prices to
average around $5.00/ bushel out to
2022.
Analyst predict energy crops (such as
timber) are poised to drop in price, which
are in the $50-$65/ton range in the US, as
biomass crops, agronomy and logistics
ecosystem evolve, more competition
develops and yields per acre improve.
The Biofuels
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40
Source: 1Estimates based on private and publicly announced projects, 2International Monetary Fund 2011 World Economic Outlook.Note: Bone Dry Ton (“BDT”).
Biofuel/Biochemical Cost of Production
Corn vs. Biomass Delta
Corn Cost of Production
Corn $ Bushel ("Bu") $5.00
Ethanol Conversion (gal/Bu) 2.8x
Assumed Corn Ethanol $ $1.79
Cellulosic Cost of Production
Biomass $ Bone Dry Ton ("BDT") $55.00
Conversion (gal/BDT) 100.0x
Assumed Cellulosic Fuel/Chemical $ $0.55
Corn vs Biomass Delta 3.3x
$ Bu
$4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50
$BDT
$50 3.2x 3.6x 3.9x 4.3x 4.7x 5.0x 5.4x
$55 2.9x 3.3x 3.6x 3.9x 4.2x 4.6x 4.9x
$60 2.7x 3.0x 3.3x 3.6x 3.9x 4.2x 4.5x
$65 2.5x 2.8x 3.0x 3.3x 3.6x 3.9x 4.1x
$70 2.3x 2.6x 2.8x 3.1x 3.3x 3.6x 3.8x
$75 2.2x 2.4x 2.6x 2.9x 3.1x 3.3x 3.6x
$80 2.0x 2.2x 2.5x 2.7x 2.9x 3.1x 3.4x
Price in U.S. Dollars a Gallon
1) Current price of corn is $6.95 Bu; Prices have ranged from $2.00 to $7.00/ Bu over the last 10 years; Source: USDA.
2) According to Timber Mart South, Timber prices over the last 10 years have ranged from $40.00-$60.00 a BDT delivered depending on cut and quality.
TABLE OF CONTENTS
Gasoline Price Influencers
High crude oil prices are the most
important long-term demand growth
driver for substitutes (drop-ins) such as
biomass derived gasoline and ethanol.
Researchers at Iowa State found that US
ethanol production reduced wholesale
gasoline prices by an average of $1.09
per gallon in 2011 amounting to over
$143.0 billion in consumer savings.
Essentially, gasoline in 2011 could have
topped out at over $6 a gallon1.
The Biofuels
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41
Source: 1Iowa State University Working Paper, 2SVB estimates, 3Bloomberg, 4The Annual Energy Outlook 2011 prepared by the U.S. Energy Information Administration (EIA),
SensitivityPetroleum Gasoline Conversion2
Crude Oil vs. Gasoline vs. Ethanol4Crude Oil vs. World GDP vs. U.S. GDP3
WTI Price BBL $90.00
WTI Price gal (42x) $2.14
Refining Margina 16.0%
Refined Gasoline before Transportation Costs and Taxes $2.49
National Average Taxesb $0.49
Refined Gasoline before Transportation Costs $2.97
Oil Price Refined Gasoline*
$100.00 $2.76
$110.00 $3.04
$120.00 $3.31
$130.00 $3.59
$140.00 $3.87
*before transportation cost and taxes.
aNational average wholesale gasoline prices / WTI crude oil since 2000 as reported by EIAbJanuary 2012 American Petroleum Institute - taxes vary by state.Note: Litre: Gallon = 1:0.26; Gallon: Barrel = 1: 0.0322; Tonne of Oil Equivalent (toe): Barrel of Oil Equivalent (boe) = 1: 7.4.
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
Crude Oil World GDP US GDP
2008 2009 2015 2020 2025 2030 2035$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Imported Crude Oil Ethanol Wholesale Price
Motor Gasoline
TABLE OF CONTENTS
Oil Market Price and Saudi Breakeven Threshold
Prices are expected to reach USD 200 per barrel by 2030 but fall well below Saudi Arabia’s breakeven price, threatening oil market stability
Oil Market Price and Saudi Breakeven ThresholdIn the Middle East, oil exports account
for a substantial portion of GDP growth
for the region’s key economies. For
example, Saudi Arabia relies on oil
revenue for fully 80% of their budget. A
sharp decline in world oil prices from
their peak in mid-July 2008 had a
significant impact on the region in 2009.
Since then, oil prices have continued to
rise—in part because of the recovering
demand for liquids but also as a result of
the political unrest that began with
protests in the African countries of
Tunisia and Egypt and then spread to
Libya and to the Middle Eastern
countries Bahrain, Yemen, Iran, and
Syria.
For oil-importing countries, an oil price
collapse is a boon for consumers.
However for oil exporting countries
(“petro-states”), it is a crisis as oil
revenues support their economy.
The Biofuels
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42
Source: U.S. Energy Information Agency, Annual Energy Outlook 2012 Early Release; Jadwa Investment, 2011; “The Quest,” by Daniel Yergin.
Saudi Arabia breakeven priceEIA referenceHistorical
0
50
100
150
200
250
300
350
2030202520202015201020052002
USD per barrel (nominal)
There are two possible responses if Saudi breakeven is far above market price
• Saudi debt increases massively, threatening fiscal stability
• Saudi spending is severely cut, threatening political stability
Both options could be cataclysmic for global oil markets and economies
TABLE OF CONTENTS
U.S. Renewable Fuel Standards (RFS)
The Renewable Fuel Standard (RFS,
also referred to as RFS-1) is a
provision of the US Energy Policy Act
(EPA) of 2005 that mandated 7.5
billion gallons of renewable fuels
production by 2012.
The Biofuels
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43
Source: www.epa.gov.
History Activity
2005
• RFS program was created under the Energy Policy Act (EPA) of 2005
• Went in to effect in September 2007
• Also called the RFS-1 program
Under the Energy Independence and Security Act (EISA) of 2007, the RFS program was expanded in several key ways:
• Expansion of the RFS program to include diesel, in addition to gasoline
• EISA increased the volume of renewable fuel required to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022
• Established new categories of renewable fuel, and set separate volume requirements for each one
• EISA required EPA to apply lifecycle greenhouse gas performance threshold standards to ensure that each category of renewable fuel emits fewer greenhouse gases than the petroleum fuel it replaces
2010
• RFS-2 final rule submission
RFS-2 lays the foundation for achieving significant reductions of greenhouse gas emissions from the use of renewable fuels, for reducing imported petroleum, and encouraging the development and expansion of the nation's renewable fuels sector
• In February 2010, the EPA submitted its final rule for RFS-2, its revision to the previous renewable fuel standards (RFS-1)
• The ruling set forth volume targets of 36 billion gallons of renewable fuels produced in the U.S. by 2022 with 21 billion being advanced biofuels (non‐ corn based ethanol)
In order to qualify for eligibility under RFS-2, the various categories of biofuels must meet specified Greenhouse Gas (GHG) reduction thresholds
• These targets are not just a function of the gases emitted during burning, but apply to the entire lifecycle of the fuel including feedstock production, distribution, and end‐use
• The EPA estimates that by 2022, the RFS will reduce GHG emissions by up to 138 million metric tons
Cellulosic biofuels and Biomass‐based diesel both fall under the overarching umbrella of advanced biofuels which is essentially anything other than corn ethanol. Renewable fuels in turn cover the entire scope of fuels derived from renewable sources which in turn encompasses advanced biofuels
U.S. – Renewable Fuel Standards (RFS)
TABLE OF CONTENTS
U.S. Renewable Fuel Standards (RFS) (con’t)
The Biofuels
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44
RFS-2 Biofuel Volume Standards2
Billions of Gallons
Renewable Fuel
CellulosicBiofuel
Biomass BasedDiesel
Advanced Biofuel
2008 9.0 n/a n/a n/a
2009 11.1 n/a 0.5 0.6
2010 13.0 <0.1 0.7 1.0
2011 14.0 <0.1 0.8 1.4
2012 15.2 <0.1 (8.65 million gallon) 1.0 2.0
2013 16.6 1.0 (a)3 2.8
2014 18.2 1.8 (a) 3.8
2015 20.5 3.0 (a) 5.5
2016 22.3 4.3 (a) 7.3
2017 24.0 5.5 (a) 9.0
2018 26.0 7.0 (a) 11.0
2019 28.0 8.5 (a) 13.0
2020 30.0 10.5 (a) 15.0
2021 33.0 13.5 (a) 18.0
2022 36.0 16.0 (a) 21.0
2023+ (b)4 (b) (b) (b)
Source: 1Pew Center on Climate Change, Robert W. Baird, 2EPA, 3(a) to be determined by EPA at a later date (not less than 1.0 billion gallons), 4(b) to be determined by EPA at a later date.
Summary of EPA Biofuel Definitions1
Renewable fuel Fuel produced from renewable biomass; Includes conventional biofuel which is predominately ethanol derived from corn starch
Advanced Biofuel Any type of renewable fuel other than ethanol from corn starch
Cellulosic Biofuel Fuel derived from cellulose, hemicelluloses, or lignin
Biomass-based Diesel Includes both biodiesel (esters) as well as non-ester diesel; Does not cover biomass co-processed with petroleum
Due to the lack of any commercial cellulosic facilities in the U.S., the EPA conducts an annual review of total cellulosic capacity to evaluate the feasibility of its production targets and subsequently makes adjustments. In December 2011, the EPA set cellulosic volumes for 2012 at 8.65 million gallons. Significant progress must be made in facilitating the scale‐up of cellulosic technologies in order for the U.S. to meet the 2022 cellulosic fuels production target of 16 billion gallons.
In February 2010, the EPA submitted its final rule for RFS-2, setting forth volume targets of 36 billion gallons of renewable fuels produced in the U.S. by 2022 with 21 billion being advanced biofuels.
TABLE OF CONTENTS
U.S. Renewable Identification Number (RIN)
Renewable Identification Number (RIN) is
a renewable fuel credit. A RIN credit is a
serial number assigned to each gallon of
renewable fuel as it is introduced into
U.S. commerce
RINs essentially act as credits for
“obligated parties” to meet requirements
under the RFS. An obligated party is any
company that provides a finished
gasoline or diesel fuel product to the
retail marketplace
The EPA assigned RIN values to
renewable fuels based on both energy
content in relation to ethanol as well as
renewable characteristics. As a result,
one gallon of one fuel is not necessarily
equivalent in terms of the RINs it
generates in relation to another. Corn
ethanol serves as the base and has a RIN
value of 1.0 on a per-gallon basis.
Biomass-based diesel, however, has RIN
value of 1.5, due to its higher energy
content and improved carbon footprint
The Biofuels
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45
Source: www.epa.gov, www.rinbroker.com.
RIN credits were created by the EPA as part of the Renewable Fuel Standard (RFS) to track U.S.s’ progress toward
reaching the energy independence goals established by the U.S. Congress. RIN credits are the currency used by
obligated parties to certify compliance they are meeting mandated renewable fuel volumes. All gasoline produced for
U.S. consumption must contain either adequate renewable fuel in the blend or the equivalent in RIN credits. EPA
regulations require that the RIN be tracked throughout each link in the supply chain, as title is transferred from one
party to the next. RINs are assigned and travel with renewable fuel until the point in time where the biofuel is blended
with petroleum products to produce gasoline. Once the renewable fuel is in the gasoline, the RIN is separated and is
then eligible to trade as an environmental credit.
Transportation Cost• The cost to transport ethanol and other bio fuels plays a key role in the
overall RIN value
RFS Mandate• The mandated level of renewable fuel (the Renewable Fuel Standard) for the
specific year establishes the demand and drives price
Blend Properties• The physical properties of bio fuels, such as octane, vapor pressure, etc.,
compared with that of petroleum products is a consideration
Petroleum Product Prices• The price of bio fuels compared with the price of petroleum products is a factor
in the RIN value
Sustainability Purchases• RINs purchased and then retired as a mechanism to support a sustainability
initiative result in higher overall RIN prices
Year-end Deadlines• The year end deadline and the overall readiness by industry can result in last
hour panic and a resulting price increase. RIN prices have seen a dramatic increase from when the RFS program originally started in September 2007
Factors Influencing Price of RIN Credits
TABLE OF CONTENTS
Biofuels Blending Mandates by Country
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46
Source: Renewables 2011 Global Status Report.Note: “E“ denotes ethanol, “B“ denotes biodiesel; “E5“ is a blend of 5% ethanol and 95% regular gasoline. Where no target date is provided, the mandate is already in place. List shows binding obligations on fuel suppliers; there are other countries with future indicative targets that are not shown here, example - Chile has voluntary guidelines for E5 and B5. Bolivia has an indicative mandate under the 2005 Biodiesel Act. Ecuador has instituted an E5 pilot program in the province of Guadalajara. South Africa has proposed mandates of B2 and E8 by 2013. Mozambique has an approved but unspecified blend mandate.
U.K. U.S. India Italy Netherlands
Mandate
B3.25 National biofuels blending mandate of 13.95 billion gallons (53 billion liters) for 2011 and 36 billion gallons (136 billion liters) annually by 2022
B10 and E10 as of 2008; B20 and E20 by 2017
4% for 2011;
4.5% for 2012;
5% by 2014
Renewable fuel share 4%
Belgium Brazil Canada China Germany
Mandate
As of mid-2009, all registered fossil fuel companies in Belgium must incorporate 4% of biofuels in fossil fuels that are made available in the Belgian market
B5 by 2013; E20–E25 currently National: E5 by 2010 and B2 by 2012
Provincial: E5 and B3 currently, and B5 by 2012 in British Columbia; E5 and B2 in Alberta; E7.5 in Saskatchewan; E8.5 and B2 in Manitoba; E5 in Ontario
E10 in nine provinces Biofuels share of 6.75% by 2010 and 7.25% by 2012; biodiesel 4.4%; ethanol 2.8% increasing to 3.6% by 2015
Spain Argentina Thailand Columbia
Mandate
Biofuels share of 6.2% currently; 6.5% for 2012; biodiesel 6% currently, increasing to 7% by 2012
E5 and B5 B3 and E10 B7; B20 by 2012; E8 by 2010
TABLE OF CONTENTS
Cellulosic Ethanol Pricing Model
The compliance value of cellulosic
ethanol will be determined by the RFS
administrative rules and enforcement
mechanisms. A key EPA-enforced
compliance mechanism for cellulosic
ethanol is the cellulosic waiver credit
(CWC).
Obligated Parties under RFS (such as
refiners) must purchase a CWC and a
gallon of another renewable fuel to the
extent they have failed to produce or
purchase mandated volumes of
cellulosic biofuels.
The per gallon value of the CWC is
determined by a statutory formula to be
the greater of $0.25 or $3.00 less the
wholesale price of gasoline (adjusted for
inflation since 2008).
Fundamentally, the CWC mechanism
provides the industry with a valuable
source of price support given its inverse
relationship with crude oil.
The Biofuels
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Source: 2011 Biotechnology Industry Organization (“BIO”) ; “ The Value Proposition for Cellulosic and Advanced Biofuels Under the Federal Renewable Fuel Standard.
Cellulose Ethanol Price in RFS2
As the graph depicts, the higher the price of oil the less tax refiners (obligated parties) are required to pay. Above $130/bbl crude oil, the refiner starts to benefit from the price of advanced ethanol compared to gasoline
TABLE OF CONTENTS
Biofuels/Biochemicals Landscape
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TABLE OF CONTENTS
Advanced Biofuel and Biochemicals Value Chain
The Biofuels
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49
Seeds/Crops Genetics
Feedstock Providers
Sugar FermentationSyngas
Fermentation
Gas-Phase Thermo
chemicalPyrolysis
TransesterficationSolar to Fuel precursors
Marketing, Distribution and
Blending
Refining (Obligated Parties)
RetailingChemical
Companies
Consumer Product
Companies
Upstream Midstream Downstream
Diamond Green Diesel
Source: SVB and Bloomberg New Energy Finance.
Venture Backed
TABLE OF CONTENTS
Key Players – Where Are They in Development?
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TABLE OF CONTENTS
Where Are They in Development? – Summary
• Public and private financing activity within the Biofuels and Biochemicals industry has increased significantly over the last two years and the momentum is expected to continue.
• In addition to significant investment in private companies by private equity, venture capital investors, and strategic investors, there have been six IPOs within the industry, over the last two years: Codexis (CDXS )in April 2010; Amyris (AMRS) in September 2010, Gevo (GEVO) in February 2011, Solazyme (SZYM) in May 2011, and Kior (KIOR) in June 2011, and Renewable energy group (REG) in Jan 2012.
• The success of those who have gone public (i.e. meeting or exceeding development milestones) will be vital for continued investment in the industry
• IPOs currently on file focus predominately on the chemical markets given the higher valued end products.
• In 2011, biofuels and biomaterials companies raised a total of $1.04 billion across 53 venture capital deals, a slight increase over 2010’s $964 million.
• Many of the major integrated oil companies, including BP, Chevron, Petrobras, Statoil, Shell, Total, Valero, have made early investments or entered into partnership positions in biofuels/biochemical companies.
• The biofuel/biochemical industry itself is still in its early growth stage, and the value chain has yet to be fully defined and constructed. With such fragmentation in the value chain, the market looks prime for deep pocketed strategics and corporates to capitalize on inefficiencies.
• Based on a reference capacity of 50 million U.S. gallons, it is expected that 1,300 Biorefineries requiring between $325-650 billion in capital will be needed to meet existing international targets.
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TABLE OF CONTENTS
Investments in Biofuels/Biochemicals
2011 Sector Share by Amount1 2011 Number of VC Deals by Sector2
Global Cleantech VC Investment in Biofuels and Biomaterials3 2011 HIGHLIGHTS
• In 2011, biofuels and biomaterials companies raised a total of
$1.04 billion across 53 deals, a slight increase over 2010’s $964
million.
• Several notable companies in the sector priced or filed for IPO in
2011, including venture-backed Solazyme, Gevo, KiOR.
• Waste-to-energy technologies played a big role in the sector;
corporations like Waste Management were more willing to invest
in 2011.
The Biofuels
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52
Source: 1,2,3Cleantech Group’s i3 Platform.
Solar Energy Efficiency Transportation Biofuels & Biomaterials
Energy Storage Materials Recycling & Waste Other
Wind Water & Wastewater Smart Grid Air & Environment
Agriculture
$1.82 Billion 20%
$1.46Billion 16%
$1.24Billion 14%$1.04
Billion 11%
$1.01Billion 11%
$630 million 7%
$630 million 7%
$520 million 6%
153
114
62
55
53
53
50
42
40
31
29
27
18
0 20 40 60 80 100 120 140 160 180
Energy Efficiency
Solar
Transportation
Materials
Biofuels & Biomaterials
Energy Storage
Other
Water & Wastewater
Recycling & Waste
Smart Grid
Wind
Air & Environment
Agriculture
$966
$993 $969
$543
$964 $1,041
50
71
54
49
54 53
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
$0.0
$200.0
$400.0
$600.0
$800.0
$1000.0
$1200.0
2006 2007 2008 2009 2010 2011
Mill
ions
Num
ber
of D
eals
TABLE OF CONTENTS
Crop Development Phases Leading up to Market Launch
• Advances in seed technologies are vital to cost reductions and the development of “energy dedicated” crops. Increasing crop productivity, is essential to the reduction of feedstock costs.
— Since the 1930’s, advancements in genetics have resulted in significant improvements to crop yields— New biotechnologies capable of more targeted trait improvements including disease resistance, and biomass accumulation will be major
drivers of the next leg of yield growth as well as the development of crops exclusively dedicated to the production of renewable fuels/chemicals
The Biofuels
and Biochem Industry
53
Source: Monsanto and Robert Baird Biomass Almanac July 2011.
Pre-launch (Duration 12-36 months)
Probability of Success: 90%
# of Candidates: 1
Activities
• Regulatory submission
• Seed bulk-up
• Pre-marketing
Gene/Trait Identification (Duration 24-48 months)
Probability of Success: 5%
# of Candidates: 10,000+
Activities
• High-throughput screening
• Model crop testing
Proof of Concept (Duration 12-24 months)
Probability of Success: 25%
# of Candidates: 1,000+
Activities
• Gene optimization
• Crop transformation
Advanced Development (Duration 12-24 months)
Probability of Success: 75%
# of Candidates: <5
Activities
• Trait integration
• Field testing
• Regulatory data generationEarly Development (Duration 12-24 months)
Probability of Success: 50%
# of Candidates: 10+
Activities
• Trait development
• Pre-regulatory data
• Large scale transformation
TABLE OF CONTENTS
Global Players – Milestone Update
The Biofuels
and Biochem Industry
54
2011 2012 Ongoing
Amyris produces specialty chemical and fuel products through its proprietary technology platform which uses genetic engineering to modify the metabolic pathways by which organisms process sugars
• First renewable product sale and finishing operations online (1Q)
• Biomin contract manufacturing online (2Q)
• Antibiotics S.A. and Tate & Lyle contract manufacturing online (3Q)
• Closing of U.S. Ventures JV (Target 3Q)
• Announcement of first Novivi customer (Target 4Q)
• First Lubricant sale (Target 4Q)
• Complete construction of Sao Martinho Plant (Target 2Q target - could be pushed to 2013)
• Parasio facility complete (Target 2H12)
• First product sales under take-off with Proctor & Gamble (Target 4Q)
• Analyst project farnesene sales of 7 million liters and 51 million liters in 2012 and 2013, respectively
• New off-take agreements
• New supply agreements for feedstock access
• New partners announced for bolt-on facilities
• Conversion of Letter of Intent (LOI’s) for both feedstock supply and product off-take to signed contacts
• Introduction of new products (C-10, C-5, molecules)
Biotechnology company focusing on the development of catalytic enzymes to optimize industrial processes
• 20K liter scale-up of cellulase enzymes(Complete)
• 150K liter scale-up with Logen (Complete)
• Launch CodeXymes (Complete)
• Achieve Shell technical milestones (Complete)
• First-gen ethanol agreement with Raizen (Complete)
• Extend Shell R&D agreement which expires in November 2012
• 10MT bagasse pilot with Chemtex
• First–gen ethanol pilot with Raizen
• Cellulosic ethanol pilot
• 650L detergent alcohol pilot
• Provide commercial samples of CodeXyme to chemicals industry
• Commercial CodeXyme production
• First–gen ethanol commercialization
• Demonstration-scale detergent alcohol production
• Cellulosic ethanol demonstration (Target 2014)
• First 60,000MT detergent alcohol facility online (Target 2015)
Gevo is focused on the development of fuel and petrochemical alternatives using isobutanol through its proprietary Gevo Integrated Fermentation Technology
• Begin Luverne plant retrofit (Complete)
• First JV with ethanol plant- Redfield (Complete)
• Convert first LOIs to signed contacts (Complete)
• Begin retrofits at Redfield (Complete)
• First sales from Luverne plant (Target 1H12), currently shipping product to Sasol.
• Add new plants via JV or acquisition (Target 1H12)
• Commercial sales from Redfield JV plant (Target 2H12)
• First sales of advanced biofuels
• Production using cellulosic feedstock
• 58 million gallons of annual isobutanol sales (Target 2015)
• Full-year profitability (Estimated 2014)
China Integrated Energy is a leading non-state-owned company in China engaged in wholesale distribution of finished oil and heavy oil products, production and sale of biodiesel, and operation of retail gas stations
• 50K ton production facility in Tongchuan (Complete)
• Production scheduled to commence at Tongchuan Phase 2 plant (3Q)
• Upgrade Chongqing production line (2Q)
• Complete construction of 200,000-ton Tongchuan Phase 2 (4Q)
• NA
Source: Company reports and Robert Baird Biomass Almanac July 2011.
TABLE OF CONTENTS
Global Players – Milestone Update (con’t)
The Biofuels
and Biochem Industry
55
2011 2012 Ongoing
KiOR is an alternative fuels company that uses Fluid Catalytic Cracking technology, commonly deployed in the petroleum industry, to convert non‐food biomass to renewable crude. Its "drop-in” biocrude can be refined into gasoline and/or diesel using current refineries and transported using existing infrastructure
• Construction of Columbus plant (Complete)
• 500 BDT1 / day Columbus plant online (Target 2H12)
• Break ground on 1,500 BDT / day Newton plant (Target 2H11)
• First material product sales from Columbus
• Complete construction of Newton plant (Target 2H13)
• Break ground on third plant (Target 2H13)
Ongoing
• Sign feedstock agreements for Newton
• Additional off-take agreements for first cluster
Solazyme uses microalgae to convert abundant plant sugars into oils. The company’s technology platform allows it to tailor its oils to meet the required specifications of its end markets and its products are “drop‐in” oil alternatives, meaning they are compatible with existing infrastructure for refining, finishing, and distribution
• Manufacturing partnership for fuels
• 300 MT facility online under Roquette JV (Complete)
• New products as part of Algenist line (Complete)
• Announcement of JV with Bunge (framework signed in 3Q11 - official formation in 1H12)
• DOE biorefinery online
• Begin construction on 100K MT plant
• 5,000 KMT facility at Roquette JV
• Launch of algalin flour
• 100K MT fuels & chemicals facility operational
• EBITDA positive in fuels and chemicals by year-end
• Begin construction on 50K MT facility under Roquette JV
Ongoing
• Conversion of LOI’s into firm contracts
Renewable Energy Group is the largest producer of biodiesel in the U.S.
As a fully integrated producer, Renewable Energy’s
capabilities include feedstock acquisition, facility construction management, facility
operations and biodiesel marketing
• Acquired SoyMor cooperative and SoyMor Biodiesel
• Renewable Energy is the largest domestic producer of biodiesel with ~ 15% market share in ‘11
• Upgrade the Albert Lea plant to run on crude and high free fatty acid oils and fats over the next 12+ months
• Has three plants with a nameplate capacity of 135M GPY. Management estimates it will cost ~$130-140M to complete construction on all three plants, with current plans calling for 75M GPY of capacity on line in H2/13, with the remaining 60M GPY of capacity online in H1/15
• New capacity online through ’15
Source: Company reports.Note: 1One bone dry ton (BDT) is a volume of wood chips (or other bulk material) that would weigh one ton (2000 pounds, or 0.9072 metric tons) if all the moisture content is removed.
TABLE OF CONTENTS
Selected Biofuel/Biochemical IPOs in the Pipeline
The Biofuels
and Biochem Industry
56
Business Description Investment Highlights
PROPOSED OFFERING:$150 MILLION
• Produces renewable succinic acid from agricultural feedstock using an organism developed by and exclusively licensed from the U.S. Department of Energy
• Has signed a JV agreement with Mitsui for construction of a commercial plant in Sarnia, Ontario with construction to begin in 2012 and initial production in 2013
• Signed supply agreements in place for more than 84,000MT of bio-succinic acid and its derivatives over the next five years (BioAmber’s process requires 50% less sugar to produce a pound of succinic acid than a pound of ethanol)
PROPOSED OFFERING:$100 MILLION
• Modifies the metabolic pathways of organisms to produce intermediate and basic chemicals from renewable feedstock
• First two target products will be bio-BDO1 and butadiene
• Process reduces capital costs of BDO plants. Genomatica estimates that its processes will allow for the construction and operation of a commercial-scale BDO facility at 30%-60% of the costs a plant using incumbent petroleum-based routes
• Partnered with M&G’s Chemtex to produce BDO from cellulosic biomass
• Partnership strategy for scale-up - Genomatica’s first commercial-scale production plant will be a 35 million lb/year facility owned and operated by Novamont with operations targeted for year-end 2012
PROPOSED OFFERING:$125 MILLION
• Developed an anaerobic fermentation platform to produce drop-in chemicals from renewable feedstock
• Agreements with process technology and engineering firms could help facilitate adoption of biosuccinic process
• Off-take agreements in place to meet substantially all production from first phase of Louisiana plant
• Constructing a 30 million lb succinic acid plant in Louisiana with start-up slated for 1Q13, and intentions to expand the plant’s capacity to 170 million lbs by 1Q14
PROPOSED OFFERING:$100 MILLION
• Uses olefin metathesis to produce specialty chemicals and materials from renewable oils addressing three principal markets - Consumer Ingredients & Intermediates, Engineered Polymers & Coatings and Lubricants, Fuels & Additives
• First facility full-funded and under construction – in process of retrofitting second plant
• Cost advantages over incumbent processes to allow operation without subsidies or green premium
• Metathesis technology capable of creating specialty chemicals with unique characteristics
PROPOSED OFFERING:$100 MILLIONIPO CLOSED FEB 2012
• Developer of seeds for energy crops used as feedstock in the production of alternative fuels
• Sweet sorghum has been the company’s first commercial-scale product
• Commercialized seed products offer attractive cost structure
• Focused on the Brazilian opportunity
• Collaborations with industry participants to drive adoption
PROPOSED OFFERING:N.A.
• Utilizes a multi-step gasification and fermentation process to produce ethanol and other chemicals from biomass, agricultural residues, natural gas, and municipal waste
• Gasification technology is feedstock agnostic, reducing input costs – proprietary organisms also offer cost advantages over chemical alternatives
• Based on its demonstration plant, Coskata estimates it could be a leader in the industry in terms of conversion efficiency
• Flagship, Coskata’s first commercial plant, will produce fuel-grade ethanol
Source: Robert Baird Biomass Almanac December 2011.Note: 1BDO – Butanediol, a chemical used to make everything from the plastics in consumer electronics to cars.
TABLE OF CONTENTS
StrategicPartnerships
2010 and 2011 were years that
showed a bevy of blue chip
partners that have a desire to
enter the sector (P&G, Total,
Shell, etc.). Many of the major oil
companies, including BP,
Chevron, Petrobras, Statoil,
Shell, Total, Valero, have made
early investments or entered into
partnership positions in biofuels
companies.
The Biofuels
and Biochem Industry
57
Source: Company Reports.
( Cosan JV)
TABLE OF CONTENTS
Projects to Watch in 2012-13 – U.S.
The Biofuels
and Biochem Industry
58
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
2012
8
MSW, ag waste
Syngas Fermentation
Ethanol
2012
16
Corn starch
Fermentation
Isobutanol
2012
12
Wood
Pyrolysis
Diesel, jet
2012
137
Animal residue
Hydrotreating
Diesel, jet
2013
36
Mixed Cellulosic
Enzymatic hydrolysis
Ethanol
2013
25
Mixed Cellulosic
Enzymatic hydrolysis
Ethanol
2013
25
Mixed Cellulosic
Enzymatic hydrolysis
Ethanol
2013
25
Mixed Cellulosic
Enzymatic hydrolysis
Ethanol
2013
6
Mixed Veggie Oil
Olefin Metathesis
Specialty Chemicals
2013
37
Corn Starch
Fermentation
Isobutanol
2013
10
MSW
Thermocatalytic
Ethanol
2013
2
Sugar
Fermentation
Diesel, fatty alcohols
2013
20
Wood
Consolidate Bioprocess
Ethanol
2013
16
Wood
Syngas Fermentation
Ethanol
2013
18
CO2, Water
Helioconversion
Ethanol, diesel
Nevada Florida Michigan Alabama New Mexico
Florida Minnesota Mississippi Louisiana Florida
Iowa IowaKansas South DakotaMississippi
2013
6
Mixed Cellulosic
Enzymatic hydrolysis
Ethanol
2013
2
Miscanthus
Biomass Fractionation
Gasoline
California
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
Iowa
Diamond Green Diesel
Source: Biofuels Digest, Broker Research, Company SEC filings.Note: Mg/y- million gallons per year.
TABLE OF CONTENTS
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
2012
10
MSW
Thermocatalytic
Ethanol
Alberta
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
2012
13
Ag waste
Fermentation
Ethanol
2012
10
Mixed Cellulosic
Yeast Fermentation
Succinic acid
Crescentino Cassano Spin
2013
15
Mixed Cellulosic
Enzymatic hydrolysis
Ethanol
2013
33
Industrial Waste Gas
Syngas Fermentation
Ethanol
Hei Long Jian Shanghai
2012
2
Sugar
Algal fermentation
Renewable oils
Lestrem
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
COFCO
Year >>
Capacity (Mg/y)>>
Feedstock >>
Technology >>
Product(s) >>
2012
13.2
Sugar Cane Juice
Sugar Fermentation
Biofene
Paraiso
Projects to Watch in 2012-13 – Non-U.S.
The Biofuels
and Biochem Industry
59
TABLE OF CONTENTS
Projected Biorefineries by Country
1300+ Projected Biorefineries by 2025
Based on a reference capacity of 50
million US gallons, it is expected that
1,300 Biorefineries will be needed to
meet existing international targets.
Given the complexities and
specialized nature associated with
first of its kind technology, advanced
biofuel and chemical facilities
currently have a capital costs 3 to 5
times greater than conventional corn
and sugarcane facilities which cost
around $2/gal of capacity. With
maturity, it is expected that the costs
will normalize.
The Biofuels
and Biochem Industry
60
Source: Biofuels Digest : “Biofuels mandates around the world” July 2011. SVB estimates.
700
200
130
135
60
4060
40
U.S.
Brazil
EU
India
China
Other EMEA
Other Asia-Pacific
Other Americas
Capital Requirement
# of Biorefineries 1,300
Capital Cost/gal $10.00
Avg Capacity (mgy) 50
Total Capital Cost ($B) $650
*before transportation cost and taxes.
Capital Cost
Capital Cost/gal Total Capital Cost ($B)
$5.00 $325
$7.50 $488
$10.00 $650
TABLE OF CONTENTS
Appendix
The Biofuels
and Biochem Industry
61
TABLE OF CONTENTS
Ethanol Production – The Dry Mill Process
Conversion Technologies Detail – Fermentation
The Biofuels
and Biochem Industry
62
Grain Receiving
Carbon Di-oxide
Fuel Ethanol
Wet Distillers Grains
Dried Distillers Grains
Hammer Mill
Cook / Slurry Tank
Jet Cooker
Liquefaction Tanks
Ethanol Fermentation
Solids
Centrifuge Grain Recovery
Liquids Evaporation System
Syrup Tank
Grain Drying
Denaturant
Ethanol Storage
Distillation
Molecular Sieve
Gra
in
Sto
rag
e To atmosphere or recovery facility
Definition: Fermentation is the process by which bacteria such as yeast, convert simple sugars to alcohol and carbon dioxide through their metabolic pathways. The most
common input for fermentation in the United States is corn, but in warmer climates sugarcane or sugar beet are the principal types of feedstock. Resulting alcohols such as
ethanol and butanol can be utilized as blendstock with gasoline or in the case of butanol, can act as a gallon for gallon replacement.
Feedstock: Simple sugars – corn and sugarcane are most commonly used today in the production of ethanol.
Output : Alcohols including ethanol and butanol, and distiller’s grains.
Source: Broker Research.
TABLE OF CONTENTS
Conversion Technologies Detail – Fluid Catalytic Cracking
The Biofuels
and Biochem Industry
63
Definition: Fluid Catalytic Cracking (FCC) is a proven process in the petroleum industry used to convert crude oil into higher value products such as gasoline and naptha. FCC
reactions occur at extremely high temperatures (up to 1,000+ F°) and use fine, powdery catalysts capable of flowing likely a liquid which break the bonds of long‐chain
hydrocarbons into smaller carbon‐based molecules. FCC technology is applied to organic sources of carbon such as woody biomass to convert the cellulosic content into usable
hydrocarbons with equivalence to crude oils – this process is referred to as Biomass Fluid Catalytic Cracking (BFCC). FCC was first commercialized in 1942, and is presently
used to refine ~1/3 of the U.S.s’ total annual crude volume.
Feedstock: Feedstock agnostic – can utilize cellulosic biomass
Output: Biocrude, gases
Source: KiOR (founded by Khosla Ventures and a select group of scientists) and Robert Baird Research.
Fluid Catalytic Cracking Process
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Conversion Technologies Detail – Anaerobic Digestion
The Biofuels
and Biochem Industry
64
Definition: Anaerobic digestion is the process by which bacteria decompose wet organic matter in the absence of oxygen. The result is a byproduct known as biogas which
consists of ~60% methane and ~40% carbon dioxide. Biogas can then be combusted in the presence of oxygen to generate energy. Effectively any feedstock can be converted to
biogas via digestion including human and animal wastes, crop residues, industrial byproducts, and municipal solid waste. Anaerobic digestion is the same process that created
natural gas reserves found throughout the world today.
Feedstock: Starches, celluloses, municipal solid waste, food greases, animal waste, and sewage
Output: Biogas
Source: KiOR (founded by Khosla Ventures and a select group of scientists) and Robert Baird Research.
Anaerobic Digester Mechanism
Engine GeneratorHeat Recovery
Anaerobic Digester
Auxiliary Use
Liquid Effluent
Biogas
Manure
ElectricityHot Water
Plants
TABLE OF CONTENTS
Conversion Technologies Detail – Gasification
The Biofuels
and Biochem Industry
65
Definition: Gasification is a process by which carbon‐based materials such as coal, petroleum coke, and biomass are separated into their molecular components by a
combination of heat and steam, forming a gaseous compound known as synthesis gas or syngas as it is commonly called.
Feedstock flexibility: Feedstock flexible including use of municipal solid waste
Output: Syngas which has the capacity to be used in a variety of applications including the production of transportation fuels, electricity, and heat. Other byproducts include
sulphur and slag.
Source: AlterNRG (owns the industry leading plasma gasification company, Westinghouse Plasma Corporation, that provides clean and renewable energy solutions from a variety of low-value inputs such as waste and biomass).
Gasification
FermentationPlasma
Gasification Gas Cooling Syngas Clean-up Product Options
TABLE OF CONTENTS
Conversion Technologies Details – Pyrolysis
The Biofuels
and Biochem Industry
66
Definition: Pyrolysis is the process by which organic materials are decomposed by the application of intense heat in the absence of oxygen to form gaseous vapors which when
cooled form charcoal and/or bio‐oil can potentially be used as a direct fuel substitute or an input for the manufacture of transportation fuels.
Feedstock: Capable of using a wide variety of feedstock including agriculture crops, solid waste, and woody biomass (currently most common)
Output: Bio‐oil (energy density of ~16.6MJ/liter) which must be processed further before it can be utilized as a transportation fuel. It also yields syngas and biochar.
Source: Biomass Technology Group (www.btgworld.com).
Pyrolysis Process
TABLE OF CONTENTS
Conversion Technologies Detail – Transesterification
The Biofuels
and Biochem Industry
67
Definition: Transesterification is the process by which a triglyceride is chemically reacted with an alcohol to create biodiesel and glycerin. While there are a few variants, the
predominance of biodiesel is created through base catalyzed transterification because of its high conversion yields and comparatively low pressure and temperature
requirements.Transesterification is necessary because vegetable oils/animal fats cannot be used directly to run in combustion engines because of their high levels of viscosity.
Feedstock: Soybean oil, palm oil, jatropha oil, rapeseed oil, animal fats, food grease, etc.
Outputs: Biodiesel and glycerol
Source: Energy Systems Research Unit - University of Strathclyde.
Transesterifcation Process
OH
RBiodiesel
CH2O
CH
CH2O
C
O
O
C
O
C R
R CH3OH OHO R3CH3O C
O
CH2OH
CH
CH2OHGlycerol
EstersCatalyst
AlcoholGlyceride
TABLE OF CONTENTS
Conversion Technologies Detail – Syngas Fermentation
The Biofuels
and Biochem Industry
68
Definition: Syngas Fermentation is the process by which gasification breaks the carbon bonds in the feedstock and converts the organic matter into synthesis gas. The syngas is
sent to bioreactor where microorganisms directly convert the syngas to a fuels and/or chemicals.
Feedstock: Capable of using a wide variety carbon containing feedstocks including agricultural crops, solid waste, woody biomass and fossil fuels such as coal and natural gas.
Output: Ethanol, 2.3-BDO, Acetic Acid, Acetone, Propanol, Butanol, MEK, Isoprene, Acrylic Acid, Butadiene, Succinic Acid
Source: Coskata, Inc.
Syngas Fermentation Process
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Selected Due Diligence Questions
The Biofuels
and Biochem Industry
69
Feedstock Cost, Availability and Flexibility
• Any feedstock agreements or LOI’s?• What has the Company proven with what feedstock at what level?• Feedstock logistics (inventory, pricing volatility, yield per acre)?• Do they have feedstock study; What is the feedstock cost they are assuming?
Production Cost
• Other than feedstock, what does their process rely on (i.e. water, natural gas, chemical additives, nutrients, catalyst, electricity)?
• What are their current yields (i.e. how many gallons per ton of biomass, cost per lb); How close to theoretical and what needs to be done to get to ideal yields?
Scale-up Ability
• At what scale has the Company proven their technology. How confident can we be on process and cost estimates?• Has the Company tested their end product with a third party and does it meet standards (such as ASTM)?• Are the products fungible with existing infrastructure or will new infrastructure need to be implemented to support
product deployment?
Business Plan
• What makes them unique to its peers?• Business model – build and operate or license? • Are they planning to vertically integrate or partner with strategics? Do they have any corporate relationships?
Value Flexibility of End Products
• How many end products do they produce through the process? Are they planning on monetizing all the end products? Any byproducts?
• Can they supply the market at prices competitive with traditional energy sources?• Are the markets they are aiming for big enough and who are the market leaders?• Any off take agreements or LOI’s?
Financing
• What is the amount and timing of the financing needed to get to commercial scale?• What levels of government support are included in the financing plan?• What level of engineering design have they conducted to estimate fund uses?• If building a project, what are the expected sources and uses?
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Silicon Valley Bank Cleantech Team
Matt MaloneyHead of Cleantech PracticeSilicon Valley Bankmmaloney@svb.com
Matt Maloney is Head of Silicon Valley Bank’s national Cleantech Practice. He has over 20 years of experience investing in and lending to the technology industry. Prior to joining Silicon Valley Bank in 2002, Maloney co-founded Enflexion Capital, a specialty debt provider for alternative communications companies. From 1989 to 2000, Maloney held several business development and senior management positions in GATX Capital’s Technology Services group that grew from zero to more than $500 million during his tenure. Among other roles, he developed, structured and managed numerous technology investment joint ventures, spearheaded strategic acquisitions and founded the company’s Telecom Investments group.
Prior work experience includes investment banking and money center commercial banking. Maloney earned a bachelor’s degree from Guilford College and a master’s of business administration from Kellogg Graduate School of Management.
Quentin FalconerNational Cleantech CoordinatorSilicon Valley BankNorthern Californiaqfalconer@svb.com
As National Cleantech Coordinator, Quentin Falconer leads the business development efforts for the cleantech industry at Silicon Valley Bank. Formerly an engineer with Bechtel Corporation, Falconer began his commercial banking career in 1990 and has been with Silicon Valley Bank since 1999 working with emerging and mid-stage technology companies. He provides and oversees commercial and merchant banking, investment management and global treasury services for his portfolio of clients.
Falconer sits on the Advisory Council for the Berkeley Entrepreneurs Forum and is a member of Financial Executives International. He earned bachelor’s degrees in mechanical engineering and music from Tufts University and a master’s of business administration from UC Berkeley’s Haas School of Business. He is also a Chartered Financial Analyst (CFA).
Frank AmorosoSenior Relationship ManagerSilicon Valley BankRocky Mountain U.S.famoroso@svb.com
Frank Amoroso is a senior relationship manager with Silicon Valley Bank. In this role, Amoroso is responsible for Cleantech business development in the Northwest, Southwest and Midwest regions of the United States. Amoroso has twenty years of banking experience with Silicon Valley Bank, working with emerging technology, bioscience and cleantech companies nationwide. Amoroso joined Silicon Valley Bank in 1992 to handle financial analysis and loan underwriting for clients on the East Coast, in the Pacific Northwest, and in California. He helped found SVB’s Colorado office in 1996, and was named the Central Division Cleantech Coordinator for the company’s nationwide Cleantech Practice in 2006.
Prior to his current position, Amoroso was responsible for new business development and ongoing portfolio management of early stage, hightech, bioscience, and cleantech companies in Colorado. Amoroso holds a bachelor’s degree in finance from Santa Clara University.
Bret TurnerRelationship ManagerSilicon Valley BankRocky Mountain U.S.bturner@svb.com
Bret Turner is a relationship manager in Silicon Valley Bank’s Cleantech Practice and is SVB’s National Petroleum Replacement Expert. In these roles, Turner is mainly focused on project-related financings, advancing clients from demonstration scale to first commercial. Turner has been with Silicon Valley Bank since 2007 working with emerging and mid-stage technology , life science, and cleantech companies in Colorado. Prior to joining SVB, Turner worked as a research analyst for Sterne, Agee, and Leach with published research reports on exploration and production companies in the oil and gas industry. Prior to that, Turner worked for a private equity firm in New Orleans investing in numerous companies in the oil and gas, shipping, transportation and gaming industries. Turner started his career as a sales trader in Credit Suisse First Boston’s stock lending and prime brokerage practices in London.
Professional security certifications held include Series 7, 86, and 87. Turner earned a bachelor’s degree in business and a master’s in finance from Louisiana State University.
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