Biofuels Landscape

Dr Geraint Evans Head of Biofuels and Bioenergy 29th November 2012 NNFCC Current energy supplies are compartmentalised – very little integration across sectors Agriculture Food/feed

Gas North Sea Gas Gas grid Heat treatment

Petrochems Petro materials

Heating/heavy Oil

Crude Oil Refineries Marine/Rail Road / Off Transport Road

Air Coal

Power Nuclear Power stations Electricity grid

Renewables

building sustainable supply chains © NNFCC 2011 NNFCC Biomass can serve all sectors – integrated production of heat, power, fuels, and chemicals including recyling of bio-based chemicals and food/feed wastes. System is complex

Agriculture Food/feed

Gas grid Heat

Pellets / chips Heating/heavy Biomass Oil (from Ag, biorefineries biofuels Transport Forestry, waste etc) biochems Bio materials Power stations

Elec grid Power

building sustainable supply chains © NNFCC 2011 NNFCC

Today

• UK fuels market

• Why we use biofuels

• Today’s biofuels

• Meeting the 2020 targets

– Alternative resources

– Technology options and timescales

– UK scenarios

– Value to the UK

• Roadmap and issues building sustainable supply chains NNFCC

Sales of petrol have dropped from 33 bnL in 1990 to 18.9 bnL in 2012. Diesel sales have increased from 12.5 bnL in 1990 to 25 bnL in 2012 – more recently, diesel growth has slowed. Fuels refinery

• Seven operating UK refineries supply about

Net product flows 64% of UK oil product demand • UK consumes approximately (2012): Scotland Diesel/gasoil o 13.9 MT petrol (7.6% decline since 2010/11, excess capacity) Petrol o 26.0 MT diesel (0.4% decline since 2010/11 usually growing / limited production capacity), and

England o 11.4 MT jet fuel (1.5% growth since 2010/11

Wales - growing / limited capacity – 4.8 mtoe imported) – growing at 4% year on year

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Drivers for using biofuels vary regionally

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First generation biofuels – what we do now

• Made from vegetable oils such as rape, palm, soy (but also potentially algae oil): • Biodiesel – a diesel substitute • Synthetic diesel – “pure” diesel; made in Rotterdam • Biojet (HRJ) – “pure” jet fuel that needs chemical modification to avoid freezing • Made from sugars and starches such as sugar cane, wheat, corn, cassava: • Ethanol • Butanol

building sustainable supply chains NNFCC Latest biofuels statistics from DFT (April to December 2011 for year 4)

• About 3.2% of total road transport fuel is biofuel, majority (88%) is imported • Use of bioethanol is trending up • Most biodiesel is UCO derived • Most bioethanol is now ex US corn

Biogas, 0.04%

Year 3

Bioethanol, 44%

Biodiesel, 56%

year biodiesel bioethanol total Biodiesel (ML) (ML) (ML) Bioethanol 4a* 837 653 1,490 Biogas 3 899 618 1,517 2 1,113 455 1,568 Year 2 • Pro rata building sustainable supply chains NNFCC Year 4a: 435 ML of bioethanol recorded; 81% supplied from USA – significant sugar cane reduction

1% 3% 8% Wheat, Sugar cane, 0% 4% 5% 2% 0%

Barley Year 3 Corn EC Corn Non EC Molasses Corn Non EC, 77% Sugar beet Sugar cane Sweet sorghum Wheat Unknown Year 2

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Year 4a: 548 ML of biodiesel recorded; 89% ex UCO; 28%, 18% and 16% from Netherlands, UK and USA (note that UK production capacity is 550 kT).

1% 1% 0% 2% 4% 0% 3%

Oilseed rape Year 3 Palm Used cooking oil, 89% Soy Tallow - category 1 Tallow - category 3 or unknown Tallow - except category 3 Used cooking oil Unknown

UCO use represents 650 kmt/yr UCO Year 2 Already >NNFCC 2010 estimation of availabilities [UK produces ~250 kmt/yr UCO] building sustainable supply chains NNFCC Recent EU (17th October) ruling to control indirect land use change caused by biofuels expansion - likely to damage existing and future investments • Limit crop based biofuels to 5% by energy content max • Remove all support for crop based biofuels post 2020 • To only support biofuels that provide a minimum greenhouse gas saving of >60% • To apply estimated iluc carbon intensity figures to oil, starch and sugar based biofuels derived from theoretical land use modelling • To allow biofuels made from non-land using feedstocks to count four times towards the achievement of the 10% biofuels inclusion target (virtual biofuels) – MSW – Algae – Residues – Waste cooking oil will still count twice.

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1st generation biofuels will not be sufficient in themselves to permit 2020 RED transport targets to be met. There is more potential to expand the production of first generation bioethanol than first generation biodiesel BUT demand for biodiesel will be greater

Bioethanol Diesel/mid-distillate production potential demand incl. jet fuel

Petrol demand Biodiesel production potential

• Options to increase the use ethanol are limited (97% of petrol used in cars) • Options to increase the production of diesel and mid distillate fuels are more restricted, primarily due to limitations on vegetable oil supply. – Such fuels are used across all transport modes including aviation and their use is increasing year on year.

In 2020, EU RED will require 15% of the UK’s energy to be supplied from renewable sources with a sub target requirement of 10% of the UK’s transport energy (% of road and rail) to be renewable

65 Mtoe total transport fuel demand in UK by 2020 2009 MT Road petrol 16.4 67% diesel and other mid distillates excluding heat/power Road diesel 20.6 32% petrol Road LPG 0.1 Rail gas/diesel oil 0.7 Shipping gas/diesel oil 1.0 RED (2020) – the share of renewable Shipping fuel oils 0.6 energy used in all transport modes to 39.9% Aviation 12.2 0.2% be at least 10% of the final UK Road petrol consumption of energy used in road 1.3% road diesel Road diesel and rail transport 1.9% Road LPG 3.6-4.0 Mtoe depending on petrol electric vehicle uptake. 1.2% 31.8% Rail gas/diesel oil 1.8-2 MTOE first generation Air Shipping gas/diesel 0.45-0.5 MTOE from wastes 23.6% oil Shipping fuel oils Aviation

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4,000 Sugar Beet Estimated UK Bioenergy/Biofuel Resources UK OSR 3,500 UK and Imported Tallow

3,000 UK and Imported Waste Cooking Oil

UK Green Waste 2,500 UK Food Waste

Imported oils (all types) 2,000

UK Straw

1,500 Imported Agricultural Residues

UK and Imported Forestry Products 1,000 Wheat PJ/year Biomass Energy (food waste as methane) as waste (food Energy Biomass PJ/year 500 UK Energy Crops

2011 NNFCC2012 2013 2014 2015 2020 Assumptions: Technologies available at large Lignocellulosic ethanol scale from 2012 onwards - UK plant could be available 4 years after.

Assumptions: Butamax plan to convert existing ethanol plants . Butanol from ABE Butanol (for fuel) plants goes to chemicals markets.

Assumptions: Various projects around the world planned but high Gasification derived biofuels costs to overcome. BA/Solena plant planned for 2014/15

Assumptions: Small scale UK Ineos Bio project on Syngas fermentation Teesside remains "spade ready" - financing remains an issue to resolve. Expansion planned for 2015

Assumptions: Small scale at present. Hydrocarbons from sugars No apparent project interest in UK.

Assumptions: Pyrolysis plants have been built , Pyrolysis derived biofuels upgrading may become economical later this decade.

Assumptions: NNFCC workshop indicated that algal biofuel technologies (micro) for biofuels could be available outside UK from Algae derived biofuels 2015 onwards. UK will be limited by lack of light and heat.

Assumptions: No UK project plans identified; would take 3 Hydrogenated Vegetable Oil years for a UK refinery to mobilise and build a plant.

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Individual technologies are commercially available, particularly the applications. More work is needed to prove the gasification step, to develop enhanced gas clean up for the more advanced applications. The key risks are at the interfaces. Gas cleaning /polishing /polishing Gas cleaning and conditioning and

Syngas All applications are proven but not for Gasification cleaning & biomass – boilers and engines are conditioning most viable in near term

NNFCC Modest Development Scenario– equivalent to about five UK 2nd generation biorefineries including three BTL plants incorporating gasification • Producing 0.35 Mtoe per 600 annum of advanced biofuels by 2020 (excl. butanol) 500

– Contributing up to about 3.2 percentage points 400

towards the RED target Butanol (counted four times) 300 • Saving 1.6M tonnes CO eq FT Diesel 2 200

per annum (incl. butanol) FuelThousandtoe Jet Fuel • Creating or securing 1,240 100 Ethanol jobs 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

© 2011 NNFCC NNFCC Strong Development Scenario – equivalent to nine UK 2nd generation biorefineries including six BTL plants incorporating gasification 1,200 • Producing 0.7 Mtoe per annum of advanced 1,000 biofuels by 2020 (excl.

butanol) 800 – Contributing up to 7 Butanol percentage points 600 towards the RED target

(counted four times) 400 FT Diesel Thousand toe Fuel toe Thousand • Saving 3.2M tonnes CO2eq Jet fuel per annum (incl. butanol) 200 • Creating or securing 2,190 Ethanol jobs 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

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Net present value calculated between 2010 and 2030 compares the incremental revenue required to support an advanced biofuels industry in the UK to the potential benefits in terms of higher value employment and GHG emissions.

• Additional benefits from royalties have been identified separately

£M (2010 prices) Central Fuel Price High Fuel Price NPV NPV incl. NPV NPV incl. Royalties Royalties Modest Development 284 490 364 570 Scenario

Strong Development 252 458 729 935 Scenario

Cost Benefit Comparison for Mid-point Feedstock Prices Source: Deloitte analysis

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Although an advanced biofuel industry is needed and could bring value to the UK, support (£/tonne biomass process) where the market drivers are strongest, are weakest – policy inaction could be a derailer

250

200

150

100

0 power (direct power (gas engine power (IGCC) road fuel (at aviation fuel biomass firing) from syngas) from syngas current approx. Product value, £/tonne dry biomass processed biomassdry £/tonne value, Product RTFC price) - no elec fuel value RO value CCL value RTFO (2 certs where appropriate) EU ETS (from 2013)

NNFCC Gasification Roadmap: projects of all types will deploy out to 2050 – work needed on energy crops

NNFCC New routes to biofuels need market and policy certainty

• First generation biofuels could deliver up to around 10% of the energy used in road and rail but might be now limited to 5% • Non land using biofuels are available now but more widespread adoption will require policy intervention: – Support timeframes beyond 2020 – Independent trajectory from 1st generation fuels - volume or energy based – A guaranteed financial mechanism – ideally one which helps to secure funding and lower investor risk. Not clear how counting 4 times will actually help in transition phase • If we want high GHG saving biofuels, a clear strategy and delivery plan is needed soon – Policy needs to help lower cost and technical risk factors

NNFCC Issues

• Policy uncertainty, inaction and lack of support (aviation) • Transition to EMR (2017) – Future uncertainty in power sector impacts gasification project deployment • Scale mis-match – World scale advanced biofuels plant needs around 1MT biomass – Preference not to move wastes • Lack of ports and transport infrastructure – For handing, storing and transporting feedstocks • Lack of security for international feedstock suppliers – Not attracting inward investment and supply • EU Sustainability Criteria – Unknown, potentially different to UK-own criteria

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NNFCC Consultancy Services :

 Future market analysis  Resource planning  Feedstock sustainability appraisal  Technology evaluation and due diligence  Project feasibility assessment  Business to business introductions  Investor to developer introductions  Policy and regulatory support

Contact details: +44 (0) 1904 435182 [email protected] www.nnfcc.co.uk

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