ESTA World Biofuels

8/8/2019 ESTA World Biofuels

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Science. Solutions. Service .

This is what we call the new energy paradigm

CompaniesGovernments

End of easyand cheap oil

Challenging demandgrowth

Convergence of

Energy Producers

Climate Change

Energy Security

Politics and economicsbecome more

interconnected

Mutual interdependence

CompaniesGovernments

Energy Consumers

and


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We need alternatives to oil

Energy security

Climate change

Energypriceshike

Higher public & privateinvestment in

alternative energy

Resource nationalism &global competition for

resources


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Biofuels already represent competitive clean energy

And we have them

ClimateChange

EnergySecurity

To fight against climatechange and itspotentially catastrophic

effects

Charting a new energyfuture by embracingalternative and renewableenergy, playing as a global

actor and endingdependence on fossil fuels


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Biofuels: essential player in the energy matrix

Biofuels are critical for meeting current and future fuel demand

JeroenJeroen VanVan DerDer Veer ( ShellVeer ( Shell PresidentPresident )) World demand is increasing and needs all kind of available fuels, includingbiofuels

The high prices of crude oil are not enough to reduce fuels demand

Christophe deChristophe de MargerieMargerie (Total CEO)(Total CEO)

It will be difficult for the World to reach an oil production of 100 barrels/day

BPBPBased on announced targets and pending regulations, BPs assessment is thatbiofuels could account for between 11 and 19% of the transport fuel market by2030. The company also thinks there is a possibility, if the industry can addresssome of the land, feedstock and technology issues that exist today, for up to 30%biofuels penetration into transportation by 2030, according to Susan Ellerbusch,

VP Global Biofuels for BP.

IEAIEABiofuels account for more than half of the extra fuel coming to the market from

sources outside OPEC.


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Even sobiofuels are still controversial


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Current controversies on biofuels

The energy balance for biofuels is similar orworse than fossil fuel they substitute

Biofuels will mean deforestation ofrainforest and biodiversity

Biofuels destroy the worlds aquiferreserves

Biofuels are responsible for the increase inworld food prices

Biofuels jeopardize food security in manycountries

Energy Efficiency

Deforestation and Biodiversity

Water Consumption

Food Prices

Food Security

Main Controversies

Biofuels GHG associated emissions are similaror higher than fossil fuels they substituteGHG Savings


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GHG emissions

Biofuels GHG associated emissions are similaror higher than fossil fuels they substituteThe Controversy

Biofuels contribute significantly to reduce the

GHG in respect of fossil fuels

The Facts

Life cycle analyses and more recent studiesperformed by US DOE, A. Farrel of University

of Berkeley, Joint Research Centre (JRC) forthe European Commission and CIEMAT,conclude that ethanol reduces significantlyGHG emissions in comparison with gasoline.

The International Energy Agency (IEA) hasstated that biofuels, no matter they are used

individually or blended with other fuels,improve the air quality.

US Energy Bill defined biofuels only thosethat imply a 20% GHG reduction on fossilfuels. New legislation from the EuropeanCommission coming up, consider biofuelsonly those that reach a minimum greenhousegas emission saving of at least 35%.

Source: EPAGHG Emissions g CO2 equivalent

per MJfuelGasoline 94

Ethanol today 77

Cellulosic Ethanol 11 S o u r c e :

A . F

a r r e

l(110)

(70)

(30)

10

50

90

Gasolinebaseline

DrymillNatural gas

ethanol

DrymillBiomassethanol

Braziliansugarcane

ethanol

SwitchgrassBiochemethanol

Corn stoverBiochemethanol

G H G E m i s s i o n s

( 0 0 0

g C O 2 - E Q / M M b T U )

GHG emmision footprint (EPA on RFS2)% - Reduction vs. gasoline

-21%-38%

-61%

-110%

-129%


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Energy Balance

The energy balance for biofuels is similar orworse than fossil fuel they substituteThe Controversy

Biofuels save more energy than fossil fuelsThe Facts

US DOE, A. Farrel of University of Berkeley and CIEMAT studies show that biofuelhave in all cases a better energy balance than fossil fuels, which means that incomparison to gasoline, ethanol saves primary and fossil energy.

The U.S. Department of Energy study shows that ethanol provides an average netenergy gain of at least 67% in respect of the energy used in its production.

Source:DOE

Net Fossil Inputs Net Fossil Ratio Petroleum Input

MJfossil neededfor each MJ fuel

MJfuel producedfor each MJ fossil

input

MJpetroleumneeded for each

MJfuel

Energy Balance

Gasoline 1,19 0,84 1,10

Ethanol today 0,77 1,30 0,04

Cellulosic Ethanol 0,10 10,0 0,08Source: A. Farrel


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Deforestation and Biodiversity

Biofuels will mean destructing rainforest andbiodiversityThe Controversy

Bioethanol targets will be reached withoutdestroying rainforest and biodiversity

The Facts

Despite increased demand, the land dedicated to grain production globally has actuallyfallen steadily since the early 1980s. From 2008 to 2009 alone, the global cropland areafor grain dropped nearly 9 million acres as a result of significant increases in productivityper unit of land. In the US, average corn yields have increased 72 bu per acre in 1970 to165 bu in 2009 (130%)

90% of the incremental

agricultural production in theworld for the oncoming years

will come from existing cropland through yield increases and

agricultural infrastructureinvestments.

Source: Monsanto

2009 = 164.9 bu/acre


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Deforestation and Biodiversity (2)

New legislations have proposed that no bioethanol would count towards a members states usagetarget if it does not meet strict sustainability criteria. This would exclude bioethanol coming fromland with a high biodiverstity value or land with high carbon stocks.

IPCC already warned in 2004 ofdeforestation issues in Brazil, showingthat this in a old problem that can not be

blamed on bioethanol (nor even indirectlybecause of crops displacements). Raw

material demand for bioethanolproduction has barely direct influence in

rainforest deforestation in Brazil.Moreover, Amazon Rainforest dont

comply with agronomics conditions toproduce bioethanol

Brazil has managed to substitute 50% of gasoline consumption just with 1% of totalland used for ethanol sugar cane.

Bioethanol targets will be reached withoutdestroying rainforest and biodiversity

The Facts


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Water Consumption

Biofuels destroy the worlds aquifer reservesThe Controversy

0

5

10

15

20

M a i z

e

W h e a t

B a r l e

y R i c

e

P o r k

C h e e s e

C o t t o

n

B e e f

L e a t h e

r

C o f f e

e S o u r c e :

U N E S C O

Virtual Water Content of Farm Products (M liters / tonne)

It takes 8000 liters for a leather shoes

It takes 3 liters of water to produce 1 literof ethanol

It takes 94 liters of water to proccess crudeoil into 1 liter of gasoline

It takes 560 liters to produce a Sundaynewspaper

S o u r c e :

U N E S C O

Yield response and water requirements in irrigated andnon irrigated agriculture :

EU, US and Brazil have a negative evolution intheir irrigation balance in the last 10 years. Thanksto the biotechnology we will reach the same yieldwith less water requirements.

The Facts


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Food Prices

Biofuels are responsible for the increase inworld food pricesThe Controversy

Bioethanol, in the worst case scenario, has a much morelimited impact in terms of significance and time thanargued

The Facts

2,149

51

2,284

71

2,238

83

2007 2008

2009

Sources: USDA, FO LIchts, RFA, eBIO. (Million Metric tons)

2% 3%

4%

There are other factors behind : growing demandin developing countries, dietary changes, commodity

funds, energy prices, exchange rates

World cereals consumption for biofuels accountfor only 2-4% on World cereal 2007-2009

Need to take into account that aprox. 30% ofbioethanol cereal consumption is reintegrated in thefood chain for animal consumption through DGS

The overall improvement in the global supply and demand balance of cereals is underscored

by the ratio of world cereal stocks to utilization, an important indicator for global foodsecurity, which is expected to remain unchanged from the previous season at an above-average level of 23%, FAO

Cereal consumption 2007-2009 (Mtn)


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Sources: USDA-ERS; Urbanchuk,The Relative Impact of Corn andEnergy Prices in the Grocery Aisle.2007

Food Prices (2)

A $1 per gallon increase in the price of gasoline has three times the impact on retail food prices asa $1 per bushel increase in corn prices. J.M. Urbachunk, LECG

Farm Inputs =19% of FoodDollar

F a r m V a l u e

1 9 %

L a b o u r c o s t s 3 8 %

P a c k a g i n g 8 %

T r a n s p o r t a t i o n 4 %

E n e r g y 4 %

P r o f i t s 4 %

A d v e r t i s i n g 4 %

D e p r e c i a t i o n 3 %

R e n t 4 %

I n t e r e s t s 3 %

R e p a i r s 2 %

T a x e s 3 %

O t h e r s 4 %

Energy prices having the heavier impact.The Facts

Energy Inputs =over 60% ofFood Dollar


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0

50

100

150

200

250

300

350

1998 2000 2002 2004 2006 20070

10

20

30

40

50

60

70

80Cost of fertilizer ($/ton)

Oil price ($/bbl)

Source: Financial Times, Bloomberg, EIA

$/ton $/bbl

Food Prices (3)

Biofuels are responsible for the increase in worldfood pricesThe Controversy

High crude prices are causing a severe price increase infertilizers. This is limiting and will limit the Worldresponse for achieving higher crop outputs, mainly indeveloping countries.

Bullish fertilizers prices having big impact in food pricesand jeopardizing yield increases in developing countriesThe Facts


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Food Prices (4)


Source: USDA

Change in World Wheat and CornConsumption (2005- 2007)

74%

10%16%

Rest World

China

India

World Population is expectedto increase in more than3.000 million people by 2050from current seen figures.This increase will take placemainly in China and India,which for instance, have thegreater impact on cerealworld consumption trends.

Emerging economies are notonly eating more but moremeat. This exacerbates grainconsumption as it can take upto 9 Kg of grain to produce 1Kg of meat.

S o u r c e :

B i o f u e

l s D i g e s t

World Population growth and dietary changes make thereal challengeThe Facts


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Food Prices (5)


1. US corn production has leftplenty for people, livestock

and for ethanol.2. Chinese meat consumptionis still 45% less than averageconsumption in US.

3. If the Chinese people hadconsumed the same amount ofmeat, per person, in 2007 as in1995, there would have beenenough grain left over tosupport 927 million hungrypeople with enough grain foran entire year.

Grain for US ethanol, China Meat, vs. US corn

Production (1995-2007) (mn t grain)

0

50

100

150

200

250

300

350

400

US Ethanol China Meat US corn Production

19952007

Source: Biofuels Digest

World Population growth and dietary changes make thereal challengeThe Facts


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Food Security

Biofuels jeopardize food security in many countriesThe Controversy

1.- Price increases can mean good news for the worlds poorestas it is more cost-effective to import food aid than to produce itlocally.

2.- As FAO admits, there are risks but biofuels can contribute toincrease energy and food security in developing countries.

3.- There are large portions of unutilized arable land andsubstantial potential for yield improvement in many countries.

High grain prices will represent a great opportunity for

rural economies in developing countriesThe Facts

(bu/acre) US Brazil ARS Mex EU27 India3 year avg yield per acre 157 59 110 52 105 35


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Food Security (2)

Biofuels jeopardize Food Security in manycountries

The Controversy

Source: US Departamentof Agriculture

Historically, in the

cereal clasic supply /demand situation,when production fallsbelow demand, pricesare forced upincentiving futureproduction increases

Despite high increase indomestic uses of corn for

ethanol use, production in UShas managed to supply both

domestic market and exports,thus not affecting food needs

in developing countries

US Corn Exports (MM bu)

0

500

1000

1500

2000

2500

03/04 04/05 05/06 06/07 07/08 08/09 09/10

Source: USDA, National Corn Growers Association


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Food Security (3)

Biofuels jeopardize Food Security in manycountries

From the early 90s both the US and EU have been discouraging cropproduction by:

- Restricting the area used for food crops- Lowering support prices- Imposing stricter standards

We are now suffering the outcome of more than two decades ofagricultural policies which are totally devoid of economic logic.

Source: FAO

Some clear erroneousmeasures, i.e.:- Tariffs and subsidieshave distortedinternational markets- EU has changed fromhaving strategic

reserves to a cero stockpolicy- Spending on farmingas a share of totalpublic spending indeveloping countriesfell by half between1980 and 2004

The Controversy

World Trade Policies are responsibleof current food shortages; they havebeen distorting international marketsand preventing development of poorcountries for decades. Now we arepaying the price

The Facts


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Food Security (4)

S o u r c e :

M c k

i n s e y

& C o m p a n y

2nd Biofuels2nd Biofuels GenerationGeneration

At $70 to $80 abarrel, thereplacement of upto 50% of alltransportation fuel

will beeconomicallyviable

2nd generation will be possible only through 1st generation cash flowsonly


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Food Security (5)

20152005

202

94

55

53

112

70

62chicken

beef

pig

103

67

58

2010

228

244

20152005

84

2010

9197

World Meat Consumption in Mtn World Oil Consumption in Mb/d

The World needs solutions for both

Abengoa Bioenergy is both a renewable ethanol producer and a proteinproducer, thus Abengoa Bioenergy is providing sustainable solutions to

both the Food problem and the Energy problem

Food & Energy

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