EPCA ’15: Big challenges ahead for next-gen biofuels

Focus article by Vicky Ellis

BERLIN (ICIS)–For well-travelled European business executives, the simple act of sipping on a Belgian wheat beer on the Eurostar – or even a German schooner after landing in Berlin ahead of 49th annual European Petrochemical Association (EPCA) meeting – is a fitting prompt to reflect on the promise, and challenges, facing the advanced biofuel market.

As an alcohol from renewable sources which are not food crops, be that leftovers from crops (such as corn stover), vegetation such as Elephant Grass (miscanthus), or even waste products, so-called second generation ethanol holds enormous promise for the transport sector in the quest for alternatives to oil-based fuels.

And in some ways Europe is a promising location for the toddler industry which is taking its first steps into the commercial ethanol world.

The Crescentino bioethanol plant, Italy opened in 2013. Image: Novozymes

Europe has abandoned farmlands which could churn out a steady stream of raw material, while much technology and research has been developed on the continent, thanks to R&D grants from the European Commission and industry.

But Brussels, the powerbase of the Commission, is also at the heart of some challenges facing the industry. There is room to celebrate successes: The pilot and demonstration plants which are built or being built.

Besides getting bogged down in policy, other hurdles are more technical in nature: choking up plants, not getting big enough, and perhaps an elephant in the room, surprisingly low oil prices.

One challenge is not only about quality, but quantity. As an ethanol buyer who had previously been offered some second generation or “2G” ethanol said last week, for a sales contract based on second generation fuels, bigger volumes need to be available.

The ethanol market player said: “Lignocellulosic? It’s all quite new. It’s not available in large volumes. I’ve been offered some, trucks for 25 tonnes. But you can’t feed a plant for 1,000 tonnes with trucks. Large availability is a problem.”

Choking up

There are some hiccups in scaling up factories from small test-phase to large commercial sized plant. What is euphemistically called “choking” is actually when these vats of churned up mulch (that’s no technical term but helps describe the marmite-coloured sludge which contains broken up plant matter, plus enzymes to break it down) get bits of this sludge stuck.

Privately, some in the industry admit demo plants have not been able to hit their nameplate capacity because of this sort of issue. Sidestepping these problems by breaking down the material with acid or chemicals means higher costs, not just because of the price of those chemicals but also the containers they may need to use with more corrosive add-ins. Consistency of product is key.

Industry gathered in Brussels at the 5th International Lignocellulosic Ethanol conference in September to discuss these issues.

Speaking at the event, Dario Giordiano of Proesa told of his and colleagues’ challenges: “Every day we produce the soup of the day and the soup of the day every day is different! So it’s a big challenge.” He is upbeat about the current situation, saying the industry is beyond the “so-called valley of death”, the gap between R&D work and making its way to the marketplace.

Some are forging the way, such as the 50 million litre Crescentino plant in Italy run by Beta Renewables. And as Rabo Bank’s managing director of sustainable business development Daan Dijk put it, as a means of encouragement: “If beer brewers can do it, why can’t you?”

There are examples of higher ethanol blends at petrol pumps, such as in Finland where ST1 Biofuels Finland has 100 service stations offering E85, containing 85% ethanol.

Mika Aho of ST1 Finland Biofuels said: “There’s a lot of discussion about chicken and egg here. Do you need the vehicles first, or get the fuel for cars to be available? We brought E85 in the Finnish market five years ago. If there’s a will to put in market, you can do it. It doesn’t require a whole lot of changing logistics.”

Meanwhile, heavy duty truck-maker Scania believes biofuels “will be a key” for its sector, as a “key way of creating energy security”, its Jonas Stromberg, head of sustainable solutions told the Brussels conference. Over the last 20 years it has made engines for all types of biofuels. His take on Europe’s policy is telling: “With confusion around policy, European market had basically died for us, Scandinavia the exception, but maybe not for long.”

The firm has made headway in sub-Saharan Africa, India, and Latin America not including Brazil. A wrong move from the European Commission on CO2 emissions policy could be the “death knell”, he warned.

Bioethanol at the pumps, 2012. ImageBROKER/REX Shutterstock

A policy quagmire

Many agree a crucial hurdle is policy: they fear the ground industry is built on threatens to turn into swamplands, a boggy mire of policy which is “slowing things down” tremendously, according to Aho.

This was recently acknowledged by the European Commission’s own director of Renewable Energy, Marie Donnelly. Europe is “perhaps lagging behind” on environmental policy for transport, she told the Brussels conference earlier in September, admitting to “ILUC fatigue” – a reference to the debate over Indirect Land Use Change which stopped any meaningful laws about biofuels in their tracks for nearly four years.

Industry has also felt ILUC fatigue and alongside this, there are fears investors won’t take the risk of stranded investment without clear signals from the Commission. Concern revolves around transport targets for biofuel which were recently ruled out.

Eric Sievers, chief executive of Ethanol Europe said there is “zero argument” the industry “could roll out on any scale and come close to meeting half the Commission’s ambitions on the sector, without an enabling regulatory environment”.

There were hints from Donnelly that much more could be done to “mobilise” groups who are particularly good at lobbying to get behind the ethanol cart and start pushing it in Brussels. She expressed surprise that farming and oil were not speaking up more supportively for the biofuels cause.

European oil majors could certainly be more “proactive”, was the warning from one biofuels chief executive earlier this year.

Low oil price

Adam Brown of the International Energy Agency (IEA) put it succinctly when he said in September: “A major issue is the big reduction in the price of oil.”

US wholesale ethanol prices were cheaper than gasoline until September 2014 when the great crude plunge began. “The switch puts pressure on things,” said Brown, adding: “We’ve not seen an impact in the market so far. By and large ethanol utilisation is protected by policy measures which ring fences around it. Low oil prices make it difficult for producers.”

Revenue streams

One final thought on the future of next-gen biofuels fits in snugly with the current discussion around European petrochemical refineries and how ageing plants can stay competitive globally. In petchems, there has been emphasis on “clusters”.

Some believe similar consolidation and looking at revenue streams from different by-products should work in the biochemical sphere.

As Rabobank’s Dijk said: “Brussels and Europe are lagging behind. Look at bio-based investments, we’re lagging behind. This is a pretty hard game, a strategic thing. I don’t believe all in DG Agri understands the strategic importance to Europe in this. China, India, Thailand, US, investments are picking up there faster, growth faster, and financing is often easier.”

Innovators have their eye on new markets such as bio-plastics for example using the lignin to chemical process, and recovering aromatics to go towards polymers.

While the oil price is difficult to influence, said Martin Lersch, chief technology officer at Borregard, one option would be opening up large new markets for lignosulfonates.

So while survival of European petrochemicals is talk of the day at EPCA in Berlin this week, it is worth sparing a thought for the parallels it shares with its younger bio-based sibling in the fuel and chemicals business.

The annual EPCA meeting runs from 3-7 October.