Biorefinery feasibility study Amsterdam, 20 October 2011

Background of feasibility study Feasibility study on establishment of integrated, demonstration scale, bio-refineries in Europe, focusing high value add products and second generation feedstock Focus on vision, value chains and required capital investments, funding options, governance and implementation paths What Europa Bio Team Dalberg (external consultant) Bio-based industry: Who

2nd generation biorefineries align with EU priorities Strong alignment with EU core priorities…. … but interventions need to be targeted, and aligned with other initiatives The EU has defined three ambitions for 2020, which are linked to the biobased economy and 2nd generation biorefineries: Smart growth: developing an economy based on knowledge and innovation Sustainable growth: promoting a more efficient, greener and more competitive economy Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion There is much research on 2nd generation biorefineries, but the “valley of death” between early stage research and commercialization, especially outside bio-fuels (Chemicals, materials and fibres) remains Europe is well positioned to spearhead the development of a new bio-economy but risks falling behind the global competition European decision makers expressed interest in seeing more demonstration scale activity and asked for a fact base on options and funding needs The industry is willing to invest but lacks public funding support to realize demonstration projects 2 2

Overcoming the gap from research to funding (called the “valley of death”) requires co-investments from public and private stakeholders Governments and Industry Markets Financing, technology, ideas Research and Development Number of projects Demonstration Deployment Diffusion Graphics: Mercer

Brazil, China and the US are making significant public investments in bringing biorefineries to commercial scale EU High targets for the replacement of fossil transportation fuels Focus: biodiesel/ biochemicals Public support last 5 years1: ~€ 200 million US High targets for the replacement of fossil transportation fuels Wide range of support schemes including grants, tax credits, loan guarantees, etc Focus: bioethanol Public support last 5 years: ~ € 1.2 billion BRAZIL World leading first generation biofuel production Some commercial 2G bagasse refineries in operation Aggressive government growth targets for bioethanol by 2025 CHINA Large-scale investment in biorefineries Plan to substitute 20% of crude oil imports by 2020 Target of 1.7bgy ethanol by 2010 Estimated funds provided by FP6 and FP7 to biorefinery-related projects Source: US Department of Energy, EU, World Economic Forum, Bio-economy.net

For example the US has multiple support mechanisms for the biorefinery industry focusing on demonstration and commercial application Low High US approach to bio-refineries Government institution Estimated Program (start year) Description Impact* Potential Mainly for solving national security issue of foreign oil dependency Focused on bio-fuels and bio-ethanol in particular Started under Bush administration and continued under current Support programs boosted with the Economic Recovery Act or 2010 granting USD 564 million to bio-refinery projects Renewable Fuel Standard Goal to produce 36 billion gallons of bio-fuels by 2022 US gov Bio-preferred procurement (2002) Act to favour bio-based products over alternatives in public procurement Dep. Agriculture Demand Bio-preferred labelling (2002) Cataloguing and labelling products based on biorefinery ingredients Dep. Agriculture Biomass Crop Assistance Program (2008) Lucrative support for farmers to transition to energy crops Dep. Agriculture Biomass Program USD 2-300 million per year support to 2nd generation biorefineries (mainly demo) Dep. Energy Clean Energy Loan guarantee (2007) Loan guarantee to finance commercial scale bio-refineries Dep. Energy Supply Bio-fuels Loan guarantee Loan guarantee to finance 2nd generation bio-refuel plants Dep. Agriculture Corn Ethanol tax Credit Applies to all bio-fuels 0.45 $/gallon IRS Cellulosic Ethanol tax Credit 1.01 $/gallon production tax credit terminates 2012 IRS * Impact to date – some programs have only been starting slowly and are therefore not showing too much impact yet Source: interview with BIO; Dalberg analysis

Current landscape of biorefinery initiatives in the EU Funding mechanisms Fuel Current landscape of biorefinery initiatives in the EU Chemicals Mixed outputs NER300 EuroBioRef European Union NOT EXHAUSTIVE FP6 - FP7 BioSynergy EuroBioRef BioCoup BioCore EIBI SupraBio SupraBio Research projects Belgium (>20) Finland (>50) France (>20) Germany (>10) Sweden (>10) Leibniz Inst fur Agrartechnik Icelandic biorefinery Icelandic biomass Biorefinery Ireland BioMCN Nuon Europe BioHub Rotterdam Member States National funding (e.g. FNR - Germany, Nordic Energy Research, BOF - Belgium, BBSRC -UK, etc.) Inbicon Biogasol Brensbach NSE Biofuels Abengoa BioAmber Solvay Roquette/DSM Bio T-Fuel FMS Innventia ARD Biodemo GoBioGas BPS TMO Inbicon DTU/BioGas Procethol 2G Sekab Company Research Pilot Demonstration EU is still far from a biobased economy despite the number of initiates and funding mechanisms: Most facilities focus on biofuels and first generation feedstock Most funding is for research activities, rather than demonstration facilities Source: Star Colibri, Dalberg research

EU Support should address multiple challenges Push mechanisms Public support to overcome “valley of death”, and to co-invest together with the private sector Agricultural policy Policies to promote production of RRM for all industrial uses (material and bioenergy) to secure sustainable renewable feedstock. Support for resource efficiency (land use, climate action) of RRMs, including support for “cascade utilisation” Need for financial incentives to improve logistical capacity to collect biomass residues in EU Ag and forestry policies Pull mechanisms Need for innovative incentives (e.g. tax or state aid measures) to support the development of new sustainable bio-based product production processes Binding political framework for supporting biobased economy in the long-term

Study findings : Capital requirements, Technical design and Funding model There are different technological and commercial options for technologies and feedstock to create the 2nd generation bio-based economy Biological enzymatic conversion of into C5 and C6 sugars and ultimately chemicals, materials and energy. Thermochemical conversion of wood and black liquor into chemicals, materials, fibres and energy. Thermic conversion of agricultural residue, hard wood and energy crops into syngas and subsequent biotechnological transformation to chemicals and energy carriers There are different objectives for 2nd generation bio-refineries Different foci along the value-chains (e.g. input, conversion technologies, output) Different beliefs in optimal technological pathways There are two main models for public-private collaboration, with distinct costs and benefits A joint, consensus-focused design in which a wide range of private and public actors work together to develop 2-3 designs Competing coalitions (sub-consortia) of private sector companies vying for public sector funding (match-fund) 1. For a new biological enzymatic biorefinery the size of 10 tons of dry biomass per day the capital investment required will be in the range of € 25-50 million. For a new thermochemical facility at 100 tons per day the capital investment is likely to be € 150-200 million. If feasible to build on existing facilities investments required will drop substantially

Summary of principles for ideal location for a biorefinery The locations of the bio-refinery is a complex decision-making process, incorporating feedstock availability, capital costs, clusters, co-location synergies, member state involvement and logistic capabilities The importance of the location variables depends on the scale of the plant and the time horizon considered. It should optimize the plant’s economics and operations in order to provide the best simulation for larger-scale plants Early stage facilities are very sensitive to Capex. Commercial scale plants, however, are much more sensitive to operating costs External financial support and co-location synergies have a high impact on funding needed and are key for demonstration scale facilities Feedstock costs are especially important for commercial scale facilities In the medium to long-term, different EU regions might improve their cluster landscape, funding schemes, feedstock availability or transportation network. This would increase the number of potential good hosting regions for the biorefinery In the short-term, some EU countries (e.g. France, Germany, Belgium, the Netherlands, Denmark, UK, Sweden and Finland) are more attractive locations for a biorefinery (agriculture-based in the heart of Europe and UK, wood-based in Scandinavia) In the long-term – and as full commercial scale biorefineries emerge - other regions could become attractive locations for a biorefinery provided improvement in key location variables (e.g. Eastern Europe) Source: Interviews, Dalberg analysis

Steps to define location of demonstration biorefinery Decision 2 (if decided to build a new facility) Funding mechanism Feedstock, technical route, output What needs to be tested Decision 1: Build on existing facility and/or Build a new facility Decision 3: Selection of attractive clusters (co-location synergies) Decision 4: Selection final candidates to host the biorefinery Specific biorefinery location Economic synergies Operability, access to talent pool and expertise Feasibility to join the cluster (regulation, capacity, etc.) Existence of local feedstock market close to cluster Degree of industrialization of agriculture/forest processing Crops/forest residues yields Access to transportation network Open funding windows Member states’ support Consortia’s private interests, state the technology Availability of time and financial resources Project match with existing facilities Decision Criteria: Decision outcome: Decision to build a new plant and/or to join an existing facility Selection of country or high-level region Selection of most attractive clusters within the selected regions Selection of key clusters offering the best co-location synergies, feedstock availability and transportation costs Source: Dalberg analysis

Where does this lead Establishing a dedicated platform for biorefineries through a possible ERANET + Scheme Investigating funding for biorefineries through PPPs and Horizon 2020 (EC Framework programme for research and innovation 2013-2020) Input into recently published Star-COLIBRI Vision document and Research Roadmap and ambitions for the future Feasibility study findings integrated into the Commission’s consultation on the Common Strategic Framework for EU Research and Innovation Funding

Funding options Primary recommended options High Low Best alternative options Estimated match Timing of grant Program/facility Options to use CPI, BE-Basic, BioBase Europe, ARD, etc. Work with/build on existing facility with potential support from FP7 call Short term (2011-13) European Industrial Bioenergy Initiative (EIBI) Establish consortia to answer EIBI call for demo facility Tailored European Biorefinery Initiative (EBI) Engage EC to include this initiative under the European Strategy for Bioeconomy Establish demonstration scale ligno-cellulosic bio-refineries producing chemicals and materials Medium term (2013-15) Structural funds Invoke a member state to support a biorefinery project FP8 call for biorefineries focused on non-fuels Engage in FP8 dialogue to help define early FP8 call for demo biorefineries Long term (2015-) PPP for demo bio-refineries focused on non-fuels Help design new PPP instruments Form coalition to apply in 2014 NER300 Establish consortia for next NER300 call Article 185 Invoke national research support to form partnership ERA Net Plus Invoke national research institutions to establish joint call

Steering group and external experts Yvon Le Henaff ARD Jean-Marie Chauvet ARD Chris Dowle CPI Jerry Cooper CPI Ana-Maria Bravo Danisco/Genencor Marcel Wubbolts DSM Ward Mosmuller DSM Andreas Jung Evonik Manfred Kircher Evonik Matthias Moll Evonik Lars Hansen Novozymes Anders Kristoffersen Novozymes Vincent de Jong Purac Peter Baets Purac Johan Elvnert Star Colibri Irina Sterr SüdChemie Ulrich Kettling SüdChemie Clas Engstrom Processum SE Other experts interviewed Peter Axegard Innventia Pascal Bailleul Chamtor Greg Arrowsmith NER300 Birger Kerckow FNR, EIBI member Bruno Schmitz DG RTD Andreas Pilzecker DG Agriculture Maria Fernandez DG Research and Innovation Jean-Emmanuel Faure DG Research and Innovation Brigitte Weiss Research and Innovation Giulia del Brenna DG Enterprise and Industry Andrew Hagar World Economic Forum Thomas Pscorn Andritz Corry van Driel BE-Basic Project Team – EuropaBio Dirk Carrez Jasmiina Laurmaa Antoine Peeters Camille Burel