A spring-board for your exports

SECTOR HANDBOOK

BIOFUELS
A spring-board for your exports.

Prepared by the CrossBorder Bioenergy Working Group on biofuels

Cross Border Bioenergy supports the bioenergy industry in going international to diversity its sales markets

Cross Border Bioenergy supports the bioenergy industry in going international to diversify its sales markets.

Interested in Cross Border Bioenergy Project? This project is designed to help SMEs to evaluate markets in Europe and support their decision-making process to invest in them. Join the Cross Border Bioenergy network and benefit from exclusive information on European markets. There are absolutely no cost associated with the use of the network. www.CrossBorderBioenergy.eu

Swedish Bioenergy Association (Svebio) Lena Dahlman Torsgatan 12 SE-11123 Stockholm Tel.: +46 (0)8 77441 83/80 Fax: +46 (0)70 6211 955 Email: lena.dahlman@svebio.se URL: www.svebio.se

Cross Border Bioenergy Project

SECTOR HANDBOOK

BIOFUELS

Prepared by the CrossBorder Bioenergy Working Group on biofuels

1. INTRODUcTiON TO MaRKET
sEcTOR

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The main commercially available biofuels are bioethanol and biodiesel, mostly used as low-grade blend. A few EU-27 nations have a high-grade blending alternative (i.e. E85, ED95 or B100). This sector handbook is focused on available and commercially viable biofuel technology on the European market, but also provides information for stakeholders interested in establishment of new techniques. The main focus of the handbook is places on bio-ethanol and biodiesel. Both biofuels can be used in heavy and light vehicles. The fuels can used as a low-blend in gasoline or diesel but there are also available engines that can be run on high blends (E85;ED95) and as pure fuels (B100;E100). This makes both fuels very versatile and attractive as their market potential is not as limited as other biofuels. Both fuels can also be produced by various production methods and various feed-stocks, both in large-scale and smale-scale plants. The versatility makes the fuels attractive for an export market as production can adjusted according to region conditions and market structure. According to EU 20:20:20 targets this sector will grow rapidly. New feed-stock and production methods based on more

Discussions on the climate and environmental effect combined with an un-clear legal and policy situation is reducing the investments in the sector. Low-grade blending is the easiest way forward for the sales of large quantities but highgrade is needed for vehicle and market innovations. The sector handbook provides information mainly for biofuel producers, consultants and providers of production plants. But also provides information to other interested stakeholders in the development of the biofuel market segment in EU27.

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cellulosic biomass are on the verge of commercialization, so called second generation biofuels. Todays market and the market on a foreseeable future will be based on 1 generation sugar and starch rich feed-stock. The market will be affected by the development of domestic biofuel production, global trade patterns as well as the phase of the commercialization of new fuels and production methods.

2. CHaRacTERisaTiON Of MaRKET sEcTOR

2.1 Biofuel technologies

Today the development in the biofuel market is very interesting with quick improvements in production techniques and available feed-stocks. There is also a multitude of available turn-key productions on the market and both light and heavy trucks that can be run on both high-blends and low blends. The majority of production is today based on agricultural products providing farmers with an increased market for their products and bi-products from the food industry thereby sustaining a active and profitable agricultural sector. This handbook is focused on biodiesel and bioethanol production. 2.1.1 Bioethanol Ethanol is a colorless liquid that is a volatile, flammable. The most commonly known type of alcohol found in alcoholic beverages. But it is also used in thermometers, as a solvent, and as a fuel. Ethanol is a straight-chain alcohol, and its molecular formula is C2H5OH. Ethanol is often abbreviated as EtOH. The use focused on in this report is as a motor fuel, mainly as a biofuel additive for gasoline. Feed-stock Ethanol is produced via fermentation of sugar rich or starch rich crops. The major crops are sugar beets, sugar cane, corn, potatoes or cereal crops, mostly

wheat in Europe. The use of different feed-stock requires different production processes leading to that production plants cannot easily substitute its feed-stock. The chose of production- processing-method is therefore dependent of the feed-stock suitable for the specific production site. Feedstock analyses on availability and price range is therefore crucial in the establishment of bioethanol production site. Main production methods Ethanol production can be achieved through a multitude of path-ways, the below is a very general generic description of the process. The production normally begins with drying and milling of the feedstock. After this the sugar is either dissolved out of the material, or the starch is converted into sugar. The sugar is then fed to yeast in a closed, anaerobic chamber. The yeast secretes enzymes that digest the sugar (C6H12O6), yielding several products, including lactic acid, hydrogen, carbon dioxide (CO2), and ethanol (C2H5OH). The main focus on development of improved ethanol production both with regards to; cost, increased yields, and use of more cellulosic feed-stock is on enzyme improvements. 2.1.2 Biodiesel Biodiesel is a vegetable oil- or animal fat-based diesel fuel consisting of longchain alkyl (methyl, propyl or ethyl) es-

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ters. Biodiesel is a liquid that varies in color depending on the feedstock used to produce it. It is incapable of mixing with water, has a high boiling point and low vapor pressure. Biodiesel can be used alone, or blended with petrodiesel. Biodiesel can also be used as a low carbon alternative to heating oil. Feed-stock Most vegetable or animal oils can be used to produce biodiesel. The feed-stock can be subdivided into three categories: Primary oils pure vegetable oils collected from oil-rich agricultural crops that are crushed Residual oils oils that are produced as by-products by other refining processes of the feed-stock. Waste oils oils that are collected as waste The feed-stocks chemical properties will affect the chemical properties of the biodiesel, particularly in regards for temperature tolerance and corrosion. The choice of feed-stock is therefore very important when choosing the market for your product. Main production methods Biodiesel is produced, through either transesterification or alcoholysis. Biodiesel is typically made by chemically reacting lipids (e.g., vegetable oil, animal fat (tallow)) with an alcohol. The production varies depending on scale of production and feed-stock but can

2.2 Biofuel policy, incentives and targets

Within EU 27 there is two directives that have an imminent effect on the development of renewable energy. The RED directive with its target of 10 percent renewable energy in the transport sector 2020 is the front driver of development in many EU 27 countries. The fuel quality directive also has an potential of becoming an additional driver for the development, with a market development of more and more energy and climate efficient biofuels used to reduce the GHG impact of fossil fuels. Mostly by blending but also through the sales of pure biofuels by oil companies.

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generically be described as: The feedstock is pre-treated, i.e. seeds are crushed, water is removed and the material and filtered to produce a suitable material for biodiesel production. The oil is then chemically changed trough esterification into biodiesel. The production also generates by-products such as, soap, glycerin, excess alcohol, and trace amounts of water. All of these byproducts must be removed, though the order of removal is process-dependent, to purify the end product.

The full implementations of the two directives are not in place within EU 27 leading to that the markets are affected differently dependent of country specific implementations. However there is an active process to harmonize the sustainability demands within the EU 27. So the main drivers will most probably the political ambitions within each country on how fast the development shall be and if the 2020 targets should be exceeded.

feedstocks, both in large-scale and smale-scale plants. The versatility makes it attractive for an export market as production can be adjusted according to region conditions and market structure. According to EU 20:20:20 targets in combination with the targets of increased energy efficiency in vehicles this fuel will grow rapidly. New feed-stock and production methods are on the verge of commercialization, so called second generation biofuels. The market will be affected by the development of domestic biofuel production, global trade patterns as well as the phase of the commercialization of new fuels and production methods. 2.3.1 Biodiesel low blend In most EU 27 countries theyre a discussions regarding implementation of a Sector handbook biofuels 8

2.3 Biodiesel markets

Biodiesel can be used as a low-blend in diesel but there are also available engines that can be run on pure diesel (B100). This makes the fuel versatile and attractive, as the market potential is not as limited as other biofuels. Biodiesel (FAME) can also be produced by various production methods and various

low blending of biodiesel (FAME) into gasoline or there is already a practice of blending in FAME in the diesel. With the implementation of the fuel quality directive it is now allowed to sell B7 (Diesel with a 7 percent blending of FAME). Within the EU 27 countries there are two major strategies for implementation of B7: Quote system, where fossil fuel providers are forced to blend in biofuel in their products otherwise a fine is placed on the economic operator. Tax subsidies, biofuels are subsidized and fuel tax is not placed upon renewable fuels. 2.3.2 Biodiesel high blend The market for B100 has risen and fallen over the years due to unstable targets and incentives, this has lead to that the production capacity of biodiesel in Europe exceeds the market. There are however a few regional B100 markets left within EU 27.

2.4.1 Bioethanol low blend In most EU 27 countries theyre a discussions regarding implementation of a low blending of ethanol into gasoline or there is already a practice of blending in ethanol in the gasoline. With the implementation of the fuel quality directive it is now allowed to sell E10 (Gasoline with a 10 percent blending of Ethanol or up to 3 percent of Methanol and 7 percent Ethanol). However the companies still need to provide a protective grade for older cars (E5). Within the EU 27 countries there are two major strategies for implementation of E5 and E10: Quote system, where fossil fuel providers are forced to blend in biofuel alco-

2.4 Bioethanol markets

Bioethanol can be used in both heavy and light vehicles. The fuel can used as a low-blend in gasoline but there are also available engines that can be run on high blends (E85;ED95). This makes Ethanol very versatile and attractive as its market potential is not as limited as other biofuels i.e. biogas or DME. The fuel can also be produced by various production methods and various feed-stocks, both

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in large-scale and smale-scale plants. This versatility makes the fuel attractive for an export market as production can adjusted according to region conditions and market structure. According to EU 20:20:20 targets this sector will grow rapidly. New feed-stock and production methods based on more cellulosic biomass are on the verge of commercialization, so called second generation biofuels. Todays market and the market on a foreseeable future will be based on 1 generation sugar and starch rich feed-stock. The market will be affected by the development of domestic biofuel production, global trade patterns as well as the phase of the commercialization of new fuels and production methods.

hol in their products otherwise a fine is placed on the economic operator. Tax subsidies, biofuels are subsidized and fuel tax is not placed upon renewable fuels. 2.4.2 Bioethanol high blend There are two commercially available high-blends today that have vehicles that are available on the open market. However, the fueling system and pump logistics are not available on a large scale. ED95 is mostly sold to vehicle fleets with a fixed distribution system i.e. for collective transport or regional product delivery services. In a few countries there is a developed E85 pump system for private vehicles but in most countries the introduction of E85 is still on a trial bases.

2.5 Trade Patterns

Global trade of biofuels is still under a rapid development and the number of exporting countries is increasing steadily. The trade is believed to continue its development however the patterns of trade will change over time as new producing countries enters the arena. 2.5.1 Bioethanol The percentage of traded Bioethanol is relatively small, compared to its production, only 13 percent (FO Licht 2010). The main reason for this is ethanol is a global commodity that can be produced almost any where in the world and most installation are targeted on the domestic market. The trade of bioethanol is also restricted by trade barriers such as customs for imported ethanol and incentives for domestic production and farming of feed-stock. The bioethanol production is relatively smaller compared to the EU 27 biodiesel production, 2009 the domestic bioethanol production was 3599 000 m3 compared to the domestic biodiesel production of 10016 000 m3. The usage of bioethanol 2009 was 4480 000 m3, given that approximately 20 percent of the bioethanol use was from non-EU27 sources. EU27 consumed in 2009 6 percent of the global consumption and produced 5 percent of the production. On the global markets USA and Brazil produced almost 90 percent of the global production, other major producers

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are China, Canada, Germany and France. The global production has increased steadily and doubled between 20052009. 2.5.2 Biodiesel The biodiesel production is larger compared to the EU 27 bioethanol production, 2009 the domestic biodiesel production was 10016 000 m3 compared to the domestic bioethanol production of 3599 000 m3. The usage of biodiesel 2009 was 10016 000 m3, given that approximately18 percent of the bioethanol use was from non-EU27 sources. EU27 consumed in 2009 70 percent of the global consumption and produced 60 percent of the production. The European biodiesel market is there for of higher global relevance relative to the bioethanol market.

2.6 Vehicle development

There are several dedicated vehicles on the market for Ethanol and pure Biodiesel. The dedicated private small cars are mostly Ethanol-Gasoline Flexi-fuel cars. On the other side the B100 cars are heavy-duty vehicles for the regional distribution markets.

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3. CRiTERia aND iNDicaTORs fOR MaRKET aTTRacTiVENEss

1. Country profile (geography, demographics, logistics, etc.) 1.1 Geography and Climate Total land area What is the average summer temperature across regions in target country over the last 10 years? Total number of inhabitants Population density Total number of personal transport vehicles 1.2 Wealth/economic status of population What was the average GDP real growth rate between 2008 - 2010? GDP per capita for 2010 1.3 Logistics - road and rail network What is the density of rail-network? What is the density of road-network? What is the density of water ways-network? What is the density of the electricity transmission and distribution networks? What is the density of the gas transmission and distribution networks? 2. Energy Policy (political will, nREAP, etc.) 2.1 The nREAP is ambitious and proposes appropriate measures There are high-volume targets for RES There are high-volume targets for biofuels Proposed measures for biofuels in nREAP are appropriate and convincing 2.2 A political will to develop the RES-sector is clearly recognisable and stable Does the government provide an appropriate budget for the targeted market growth for Biofuels? Have the support schemes/framework conditions for investments in biofuels changed within the last 2-4 years? Is a revision of the framework conditions announced, which could affect the biofuels market development?

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Market handbook biofuels

 2.3 Proximity of elections What is the period of time before the next general (national) elections. 3. Feedstocks 3.1 The agricultural structure is beneficial for biogas and/or biofuel projects What is the available farmland per inhabitant? 3.2 Feedstocks are available for biofuel production Amount of oil seeds produced nationally in 2010 Amount of organic wastes and residues (waste vegetable oil + fats) in 2010 3.3 The solid biomass potential is sufficient to realise small scale heat/CHP/DH projects? Amount of domestic demand for cereal for biofuels in 2010 Amount of domestic demand for oil grain for biofuels in 2010 Share of oil grain demand for biofuels compared with total domestic production Did the cereal production of 2010 exceed the domestic demand? Did the oil seed production of 2010 exceed the domestic demand? Area of fallow/abandonned land available for agricultural expansion 4. Economic instruments (prices, support schemes/guarantee, subsidies, etc.) 4.1 Financial support schemes can be claimed for investments What proportion of the investment in biofuel production plants can be claimed in subsidies (cumulative, including tax advantages)? When does the scheme end granting funding for biofuel production plants? Subsidies for investments in logistic/Infrastructure for high blend/ pure biofuels are in place Investment subsidies for green vehicles procurements are in place 4.2 Financial support schemes can be claimed for operation Tax is reduced for bioethanol in high blends (E85) Tax is reduced for bioethanol in low blends (E5,E10) Tax is reduced for biodiesel in pure/high blends (B30 - B100)

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 Tax is reduced for biodiesel in low blends (B5,B7) 4.3 Prices of fossil fuels are high and heavily taxed What is the average end customers price for petrol fuel over the last year (2010)? What is the average end customers price for fossil diesel over the last year (2010)? How high is the total energy tax on petrol fuel to the end consumer? How high is the total energy tax on fossil diesel to the end consumer? 5.Market aspects (volume, access to grid, etc.) 5.1 The energy sector is large and expected to grow Amount of diesel used for road transport Expected growth in diesel use from 2009 to 2020 Amount of petrol fuel used for road transport Expected growth in use of petrol fuel from 2009 to 2020 5.2 Access to the electricity grid is guaranteed Is there in general an electricity grid available with sufficient capacity? Is there in general an electricity grid available with regulated grid access? Is there in general an electricity grid available with regulated costs for grid connection? Is there in general an electricity grid available with priority for RES? Is the grid operator obliged to connect all renewable energy installations? Sector handbook biofuels 14 14

5.3 The Framework conditions for fossil fuels do not impair market development What is the contribution of imported oil to primary energy supply in real terms? What is the percentage contribution of imported oil to primary energy supply? 5.4 Availability of energy to supply a biofuels plant is not problematic How reliable is the electricity supply?

Supply of excess electricity classed as green from biofuel plant is possible Electrical distribution networks can cope with increased energy feedin from biofuel plants What is the share of biofuels compared to total road fuels How does the national total amount of ethanol consumed compare to the target for 2020 (NREAP)? How does the national total amount of bio-diesel consumed compare to the target for 2020 (NREAP)? What is the ethanol consumption growth rate in the last 4 years (CAGR) What is the biodiesel consumption growth rate in the last 4 years (CAGR)

5.5 Biofuel has access to competitive downstream flow Logistics available for high blend / pure biofuels (e.g. B100 or E85 filling stations)? 5.6 An intense competition is not recognisable Number of competitors providing (already building or selling) ethanol production plants Number of competitors providing (already building or selling) biodiesel production plants Number of established distributors already (re-)selling biofuel bought in national and international markets Total amount of bioethanol capacity sold (by existing competitors) over the last 4 years Total amount of biodiesel capacity sold (by existing competitors) over the last 4 years 6.Regulations (laws/mandatory targets for bioenergy, permitting, emission thresholds, etc.) 6.1 Regulatory instruments to support bioenergy markets have successfully been introduced Obligation for inclusion of biofuel as proportion of all transport fuels in market Obligation for inclusion of a specific quantity of biofuel (per litre) in total fuel consumptoin is in place Sector handbook biofuels 15

 6.2

Obligation for inclusion of biodiesel as a proportion of total diesel consumption is in place Obligation for inclusion of a specific quatity of biodiesel in total diesel consumptoin is in place Obligation for inclusion of bioethanol as a proportion of total petrol consumption is in place Obligation for inclusion of a specific quatity of bioethanol in total petrol consumptoin is in place The approval procedure by the authorities is adequate in terms of time How long does the approval process last in average for biofuel production plants

7. Project financing context (economic situation, loan, banks, etc.) 7.1 The country has a solid financial position Standard and poors rating 7.2 Export friendliness Euler Hermes rating 7.3 Level of transparency in the market Corruption perception index 7.4 Country risk Country risk as reflected by the @rating country of COFACE 7.5 Ease of doing business Ranking of feasibility of starting a business in the IFC-World Bank Doing Business Index

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6.3 Specific regulations are favourable for bioenergy market developments National biofuel standardisation and certification schemes for Sustainability in place National biofuel standardization allows for low blends (e.g. E10:B7) National biofuel standardization allows for pure blends (E85:B100) 6.4 Existing emission thresholds can be fulfilled with the applied technology Extra information Biofuels

Ranking of Feasibility of getting credit in the IFC-World Bank Doing Business Index

7.6 The banks are familiar with bioenergy technology and support its development Is the support of bioenergy projects highlighted in official papers of the banks, like annual reports etc.? Are Governmental guarantees for loans for bioenergy investements in place? 7.7 Foreign investments are supported in the target country Are there any programmes implemented in the region to attract foreign investments? 7.8 The banks in the target country provide attractive conditions for bioenergy projects Can bioenergy plants benefit from interest rates for credits lower than usual in the market? Are the support conditions feasible in an adequate scope? 7.9 The market is liquid and transparent Extra information Biofuels 7.10 The value of the investment is stable due to a low currency exchange risk Is the market part of the Euro Zone? Was the inflation rate of the coutry more or less stable within the last 4 years (CAGR)? 8.Readiness for uptake (public acceptance, stakeholder networks, etc.) 8.1 Efficient networks and information are accessible National and regional agencies are providing effective help to foreign companies wishing to invest Is there a biofuels association (with a minimum of 10 company members) assisting the market? Public web sites/ information/market reports on bioenergy

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 8.2 Public acceptance/knowledge of technology Are biofuels known to and well-regarded by general public? Have any biofuel prodcution project permissions been declined due to public opposition in the last four years?

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Participating companies of the biofuels working group

Werling Consulting
Kenneth Werling Persgatan 139B, 602 30 Norrkping, Sweden Phone: +46 (0) 76 / 773 1139 www.wercon.se

Enbio AB
Kristian Eriksson Sdra Grytsgatan 4, 60233 Norrkping, Sweden Phone: +46 (0) 70 / 970 94 35 www.enbio.se

COWI AB
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Karin van der Salm, Business Development Manager Bioenergy Skrgrdsgatan 1, SE-402 41 Gothenburg, Sweden Phone: +46 10 / 850 10 00 www.cowi.se

Benet Ltd
Dan Asplund Asko Ojaniemi Piippukatu 11, 40100 Jyvskyl, Finland Phone: +35 (0) 8400 / 640460 www.benet.fi

Nordisk Etanol & Biogas AB

Mikael Runeson Biblioteksgatan 4 37435 Karlshamn, Sweden Phone: +46 (0) 454 12006 www.nordisketanol.se

CTS Engtec Oy
Kirsi Juura Manager, Marketing and Corporate Communications Kaikukatu 7, FI-45101 Kouvola, Finland Phone: +358 (0) 207 / 567 268 www.ctse.fi

Sustainable Systems
Kristian Fex, Senior Sustainable Consultant

Benet Ltd
Dan Asplund Asko Ojaniemi Piippukatu 11, 40100 Jyvskyl, Finland Phone: +35 (0) 8400 / 640460 www.benet.fi

Nordisk Etanol & Biogas AB

Mikael Runeson Biblioteksgatan 4 37435 Karlshamn, Sweden Phone: +46 (0) 454 12006 www.nordisketanol.se

CTS Engtec Oy
Kirsi Juura Manager, Marketing and Corporate Communications Kaikukatu 7, FI-45101 Kouvola, Finland Phone: +358 (0) 207 / 567 268 www.ctse.fi

Sustainable Systems
Kristian Fex, Senior Sustainable Consultant Drottninggatan 120, 113 60 Stockholm, Sweden Phone: +46 (0) 72 / 328 25 16 www.sustainablesystems.se Jan Lindstedt, Market & Commersialization Box 286, 891 26 rnskldsvik, Sweden Phone: +46 (0) 660 / 751 93 www.sekab.com

SEKAB E-Technology AB

BDI BioEnergy International AG

Martin Krenn, Regional Sales Manager Parkring 18, 8074 Grambach, Graz, Austria Phone: +43 (0) 316 / 4009 100 www.bdi-bioenergy.com

CHOREN Industries GmbH

Ines Bilas Frauensteiner Str. 59, 09599 Freiberg, Germany Phone: +49 (0) 3731 / 2662-226 www.choren.com

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Acknowledgements: Special thanks are expressed for their contriburions to all industry stakeholders of the biogas working group who took part in the discussions during the elaboration of the list of criteria and indicators. Photos: Flickr.
www.CrossBorderBioenergy.eu

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