A public-private partnership is about to inject €3.8bn into Europe’s industrial biotechnology and bio-based products sector, aiming at the entire value chain
Industrial biotechnology and bio-based products – using enzymes and microbes through fermentation to produce materials – is already maturing as a valid way to produce chemicals on a commercial scale.
With the right approach, white biotechnology could grow to as much as 30% of the chemical industry by 2030
But that situation could be about to change thanks to a new public-private partnership (PPP), which will pour billions of euros into the development of new technologies to a commercial scale of production.
If exploited successfully, white biotechnology has the potential to grow from around 10% of the chemical and plastics industry today up to 25-30% by 2020-2030. Already some sectors such as fine and specialty chemicals are successfully exploiting the technology, with it accounting for 60% of turnover there.
Although the figure is a lot less for bulk chemicals, one of the fastest-growing bio- plastics technologies is polyethylene (PE), polypropylene (PP) and polyvinyl chloride (PVC) from ethanol, which can be bio-based.
According to Dirk Carrez, managing director at Clever Consult, there are two major issues in Europe: investment in innovation and feedstock availability. The cost of biochemical production also constrains development.
However, the situation is improving in Europe. On 10 July it was announced that a PPP known as the Biobased Industries Initiative is being set up with a €3.8bn ($5.1bn) budget. It now has to be approved by member states and it should start up in 2014, running until 2020. A consortium of almost 60 companies has committed €2.8bn to the project while the EU will inject €1bn.
The initiative will focus on the entire supply chain for biochemicals, covering agriculture, agro-food, biotechnology, forestry, pulp and paper, chemicals and energy.
Carrez is a director of the industrial consortium and says the aim of the project is to focus on the development of new products to commercial-scale production. “We will aim to fund pilot, demonstration and at least five to six flagship [commercial-scale] production facilities over the next 10 years. These flagship facilities will be the first of their kind in Europe and will be focused on different value chains and advanced second or third generation feedstocks such as cellulosic forest waste, agricultural non-food waste,” he said.
The EU has many tax incentives for biofuels but nothing for bio-based products. The European Commission’s Lead Market Initiative for bio-products is an attempt to generate a synchronised approach to stimulating demand for bio-based products. But it has been operating since 2008 and does not yet seem to have achieved much in terms of concrete policy initiatives.
Carrez points out the challenges it faces: “This does take a joined-up approach from feedstocks to markets but it’s quite slow. If an incentive stimulates one sector then it may have a negative impact on another one. For many companies conventional production is their main business [and there may be a conflict] so it may take a while to develop.”
The other challenge is that this does not belong to just one policy area but covers environment, transport and energy, and all of these have separate ministries. It is difficult to bring them together in a coordinated approach to incentives.
Carrez says second-generation feedstocks are a challenge because although the technology has been developed, it is not as tried and tested as for first generation. The EU faces particular feedstock challenges compared with the US. “The US has a corn-based economy but in the EU we have more diversity – we don’t have vast areas of corn like the US. In Europe we also need to invest in logistics. To transport cellulose is expensive. It is better to convert it locally and then transport it in a condensed form.”
Because of the limitations to feedstock availability, Carrez believes biochemicals will be more suited to the fine and specialty sectors where they have the potential to form a significant proportion of the industry in Europe. “Because our feedstocks are limited it will be more expensive to focus on bulk chemicals because we don’t have the resources. It will be better to focus on smaller volume, higher value-added products,” he added.
Carrez believes that EU policy-makers do see the potential that biotechnology presents and are taking a thoughtful approach through the new PPP framework. “Convincing the Commission to invest €1bn creates a huge opportunity. We will take a step-by-step approach as there is no point inventing a technology if there is no market. We need a horizontal approach from feedstocks to logistics, innovation and market introduction. We don’t want to make the GMO [genetically modified organism] mistake again.”
According to Carrez there has been a lot of public money invested in research in Europe but the link to the market was not made. The US, Brazil and China all had public funding for demonstration plants. Now, thanks to the PPP initiative companies from the US are asking if they can participate. The project covers the whole value chain allowing companies such as Coca-Cola – which wants to develop plant-based bottles – to cooperate across the entire value chain almost to the feedstock provider.
SHALE GAS IMPACT?
Shale gas has lowered the cost of energy and chemical feedstocks significantly in North America, making biochemical feedstocks and processes less competitive. But Europe is a long way from developing viable shale gas fields, and may take decades to do so. If and when it is developed, Carrez still sees opportunities arising from the fact that, for instance, aromatics production is not easy from shale gas. Also, if shale gas use does increase there may be less demand for biomass so the price might drop for biotechnology feedstocks.
If shale gas and oil production hits oil prices significantly, it could reduce the competitiveness of white biotechnology. Carrez says that as long as the oil price is $80/tonne or above biochemical production can be competitive. He points out that with the current oil price quite a lot of biochemical production is already competitive: for example DSM/Roquette’s bio-succinic acid production in France. However the oil price does affect production for biochemicals because it requires energy input.
Asked whether white biotechnology faces a lot of opposition from green groups and other non-governmental organisations, Carrez says: “Sustainability is one of our key criteria: as long as we use sustainable processes and feedstocks then we don’t get so much opposition from NGOs. In fact they support us. Our first objective is to produce food, followed by higher-value-added materials such as chemicals. Fuels and bio-energy come last because they are burnt. We respect this pyramid.”
He points out that biotechnology can have a big impact on reducing carbon emissions. Conventional chemical production processes take place at much higher temperatures than fermentation and therefore use more energy. Together with the use of renewable feedstocks, biotechnology has a positive impact on carbon dioxide emissions control. He adds: “There are some companies using microbes to consume carbon dioxide or carbon monoxide to produce useful chemicals: this could be an important trend for the future.”
Industrial or white biotechnology uses enzymes and micro-organisms to make bio-based products such as chemicals, food and feed, healthcare, detergents, paper and pulp, textiles and bioenergy. It transforms agricultural products, biomass or organic waste into other substances.
Bio-based products already on the market include biopolymer fibres used in construction, bioplastics, biofuels, solvents and industrial enzymes. Biotechnological processes play an important role in the manufacture of some antibiotics, vitamins, amino acids and other fine chemicals used in pharmaceuticals.
Assessing the impact of industrial biotechnology
Since the industrial revolution economic growth has risen in tandem with an increasing burden on the environment. Industrial biotechnology breaks this cycle by re-thinking traditional industrial processes.
Although it is in its infancy white biotechnology already avoids the creation of 33m tonnes/year of CO2 whilst emitting 2m tonnes/year. The World Wildlife Fund estimates biotechnology and bio-based products could save 1.0bn-2.5bn tonnes/year of C02 equivalent by 2030, more than Germany’s total reported emissions for 1990.
IDENTIFYING END USES AND APPLICATIONS
For decades enzymes have been used in food manufacture and as active ingredients in washing powders. The highest production volume for industrial biotechnology is bioethanol.
Starch, sugar from corn, sugar cane and wheat are used to produce ethanol as a substitute for gasoline. But this first generation biotechnology competes with food so the alternative is to use cellulosic material found in wood, grass, agricultural and food processing waste as a feedstock. This can produce a 90% reduction in greenhouse gas emissions.
In chemicals bio-based intermediates such as fumaric, malic, succinic and itaconic acid are already used as food acidulants and in polyester manufacture.
They could find new applications for new polymers and biodegradable plastics.
A number of other bio-based polymers are increasing in importance and produce biodegradable polymers and non-biodegradable plastics such as polyethylene and polyethylene terephthalate (PET). Global production capacity reached 1.2m tonnes/year in 2011 and is projected to reach 6m tonnes/year by 2016 according to trade group European Bioplastics.
BIO-BASED ECONOMY STRATEGIES IN EUROPE
In 2012 the European Commission approved a plan called “Innovating for Sustainable Growth: a Bioeconomy in Europe”. It aims to develop new technologies, markets and boost the competitiveness of the bioeconomy. It aims to encourage a coordinated approach between member states.
RESEARCH AND INNOVATION
Describes EU and member states efforts at stimulating innovation. This includes Horizon 2020, a new financial instrument aimed at boosting European competitiveness from 2014 – 2020 with a budget of €70bn. The Biobased Industries Initiative (see main text) is part of this scheme.
THE POLICY FRAMEWORK
The main drivers for developing bio-based products differ between regions. In the US, resource scarcity and use are important, whereas in Japan producing products with a green image is the main driver.
For Europe, resource utilisation, greenhouse gas emission reduction and compostability support policy development. Subsidies are available for biofuels but not biochemicals at present.
THE EUROPEAN FORUM FOR INDUSTRIAL BIOTECHNOLOGY AND BIOBASED ECONOMY
This is an important forum for business and policymakers to shape the future of the sector.
Dirk Carrez is managing director at Clever Consult