Germany is the leading country within the European Union in many respects. It not only bailed out Greece in 2011, but was the first country to abandon nuclear energy in the same year after the Fukushima nuclear disaster. The replacement costs in Germany are estimated to be around €30 billion. Soon afterwards,

Second Generation Biofuels and Biomass: Essential Guide for Investors, Scientists and Decision Makers, First Edition. Roland A. Jansen. r 2013 Wiley-VCH Verlag GmbH & Co. KGaA.

Published 2013 by Wiley-VCH Verlag GmbH & Co. KGaA.

Switzerland, Italy, and Belgium canceled nuclear energy as well. This all means that governments are stimulating and subsiding investments in renewable ener­gies, from solar to wind, from biofuels to biomass. The “climate” is extremely favorable to invest in renewables. Let me underscore this with a few facts.

The biggest investors in renewables are not in the United States or Europe. They are the developing countries. Global investments in green energy in 2010 were up nearly a third compared to 2009, totaling $211 billion. For the first time, devel­oping economies overtook developed economies in terms of “financial new investment” — spending on utility-scale renewable energy projects and provision of equity capital for renewable energy companies.

Biodiesel feedstock markets worldwide are in transition from increasingly expensive first-generation feedstocks like soybeans, rapeseed, and palm oil to alternative, lower-cost, non-food feedstocks. As a result, a surge in demand for alternative feedstocks from plants, algae, and biomass is driving new growth opportunities in the sector.

China has set aside an area the size of England to produce Jatropha and other non-food plants for biodiesel. India has up to 60 million hectares of marginal, non-arable land available to produce Jatropha, and intends to replace 20% of diesel fuels with Jatropha-based biodiesel. In Brazil and Africa, there are significant programs underway dedicated to producing non-food crops like Jatropha and castor for biodiesel.

In the United States and the European Union, algae-based biodiesel ventures are growing in response to demands for clean fuels. Each of these endeavors clearly demonstrates increased public — and private-sector interest in non-food, second — generation markets.

An increasing number of second-generation biodiesel projects are now emer­ging in anticipation of growing sustainability concerns by governments, and in response to market demands for improved process efficiencies and greater feed­stock production yields.

22.3

British Airways has announced that it is constructing a 19-million-gallon-per — year waste biomass gasification plant in East London, close to London City Airport and close to the Olympic Games facilities (www. biofueldigest. com/ bdigest/2010/02/15). This factory will produce renewable aviation biofuels from London’s waste and the plant will commence operations in 2015. It will utilize 500 000 tonnes of waste biomass to produce 50 000 tonnes of jet fuel. The facility will be constructed by the US Solena Group and will use the Fischer- Tropsch process. It will reduce the airline’s annual carbon emissions by 145 000 tonnes or 2% per year. Quantas also intends to build a commercial BTL, commercial-scale aviation biofuel plant with Solena. Thus, Solena becomes a very popular partner, because it produces biokerosene from waste and circum­vents all the problems with oils derived from plants, land clearance, and rising food prices.

202 | 19 Airline Jest Results with Biofuels

19.8

Under the umbrella of Mother Earth Investments AG you can invest in a private equity fund under Luxemburg law, which manages plantations and invests in biofuels, biomass projects, high-tech biofuel companies, and so on. You will enjoy the expertise, the research, and the contacts of Mother Earth Investments and Biomass Partners Ltd. worldwide. Roland A. Jansen is a shareholder in Mother Earth Investments AG and Biomass Partners Ltd.

Private equity investments are for sophisticated and well-capitalized investors only.

20.2.6

Biofuel Companies

My idea of a group decision is to look in the mirror.

Warren Buffett — investor.

20.2.6.1 introduction

Stocks worldwide fell substantially in 2011 and bioenergy stocks were no excep­tion. Many renewable energy stocks are now at least 50% cheaper than at the start of 2011. I think they have fallen more because of a gloom and doom mood in general then because of bad company results. Hence, you can buy these stocks today at bargain prices.

Biofuels production, as a winning investment theme, also has the benefit of many governments pushing for its use as a way to boost their farm sectors and to reduce reliance on foreign oil. In the United States, for instance, the Environ­mental Protection Agency is increasing the amount of renewables required to be blended into transportation fuel nearly 4-fold from 34 billion liters in 2008 to 136 billion liters by 2022 (www. epa. gov/cleanenergy). About 40% of the total in 2020 could come from corn-based ethanol. However, I expect that in the near future ethanol production from corn will be forbidden in the United States, just like in China. This world is on the verge of a food crisis and I think that food crops should not be used to produce energy for our cars. The exception is Brazil, where only 2.5% of all present cultivated agricultural land is used to grow sugarcane.

I project that worldwide output of bioethanol from trees, agricultural residues, and non-food plant residues could have a value of $80 billion by 2022, up from virtually nothing currently.

Among specific companies, Weyerhaeuser can benefit because the supply of biomass will be the limiting factor in this type of fuel production and the company, as a large timberland owner, will ultimately command a position of strength.

The big winners are expected to be enzyme makers, forest companies, cellulosic ethanol producers, and the agricultural sector. I expect that second-generation ethanol and biodiesel from new technologies will become the predominant renewable sources of energy for transportation by 2020.

US Congress has decreed that the country must be using 21 billion gallons of “advanced” biofuels a year by 2022. Washington is backing that goal with tax breaks, loan guar­antees, and scores of millions of dollars in grants, with more support expected in upcoming energy bills. These inducements and the vast potential market have stimulated investments of more than $3 billion and spawned a new industry.

More than 200 companies, from 12-person start-ups to oil giants, are developing next-generation biofuels using a bewildering array of technologies. Pilot and demonstration plants are operating or are under construction worldwide. Meeting the 2022 goal in the United States is unlikely. It would require not only building hundreds of fuel factories — at a cost of $500 million or more each — but also surrounding each one with thousands of acres of land planted with energy crops such as prairie grass.

These difficulties do not mean that advanced biofuels are not coming or that they will not play a crucial role in fighting climate change. However, everything will happen more slowly than many venture capitalists say.

18.1

New Generation

Enzymes and hydrocarbons are the biotechnology tools to used produce biofuels. I predict that new-generation biofuels will experience a tremendous success in freeing the world from fossil fuels on a large scale.

18.2

What are Hydrocarbons?

Hydrocarbon are organic compounds consisting entirely of hydrogen and carbon. The majority of hydrocarbons found naturally occur in crude oil. Hydrocarbons are one of Mother Earth’s most important energy resources. The predominant use of hydrocarbons is as a combustible fuel source. Extracted hydrocarbons in a liquid form are referred to as petroleum (literally "rock oil”) or mineral oil, whereas hydrocarbons in a gaseous form are referred to as natural gas. Oil refineries are key to obtaining hydrocarbons. Crude oil is processed in several stages to form desired hydrocarbons, used as fuel and in other products.

18.3

One man’s trash is another man’s treasure.

Old proverb.

Waste is also known as rubbish, trash, garbage, junk, or litter. Humans produce and dispose of waste. With a global population of 7 billion and growing we are producing more and more waste. Human behavior and industrial development are directly linked to waste materials. Luckily, more and more forms of waste have economical value and can be recycled into new products.

When it gets dark in a city like Buenos Aires a new world wakes up and an army of garbage collectors roams the city to collect waste with a potential economic value

(e. g., wood, copper, aluminum, PET bottles, etc.). If you are living an envir­onmentally responsible life and travel regularly you can witness how much waste mankind is producing, especially in developing countries, where waste remains waste, due to a lack of knowledge or capital.

Luckily, technology can now convert several waste types like woodchips, seed­cake from plants like olives, Jatropha and even municipal waste into valuable types of energy like biodiesel, biogas, ethanol, and even biokerosene.

Figure 22.1 provides a good picture of how much waste is produced per head in the European Union and, more importantly, what proportion of the personal waste is recycled.

• Amazingly, the United Kingdom produces 592 kg waste per person per year, well above the EU average of 577 kg. On top of that honor, only 18% of this waste is recycled, well below the EU average of 36.4%.

• Greece is the worst offender in terms of landfill, dumping 90% of its municipal waste.

• In Holland, 64.4% of all waste is recycled — the highest rate in Europe.

• In squeaky clean Singapore the recycling rate is an amazing 57%. What is the figure in your city?

We have not even touched Africa, Asia, the United States, or South America. You can now understand that the potential to recycle waste is truly gigantic. I receive offers from Brazil and Malaysia to collect wood waste out of forests and pelletize it. We are doing on-site studies and hope to realize these projects in the near future.

230 | 22 The Future

22.4

According to a presentation at World Biofuel Markets in Rotterdam in 2011, Lufthansa had a total kerosene consumption of 11.2 million m2 (94 million US barrels) valued at €5.2 billion in 2010, which translates in 1000 road tanker trucks per day! If Lufthansa would use 10% biokerosene, Lufthansa would have a biofuel demand of around only 1.1 million tonnes a year. One tonne of kerosene Jet A-1 fuel at Lufthansa equals an emission of 3.15 tonnes of carbon dioxide.

Air traffic and carbon dioxide emissions will go up sharply in the coming 40 years. According to the global consulting firm Booz & Company (www. booz. com), today’s carbon dioxide emissions from airlines of 0.4 billion tonnes might rise to 2.0 billion tonnes by 2050. Next to more aerodynamically designed airplanes, using less fuel, more efficient engines, and better equipped airports, the biggest reduction of 1.4 billion tonnes of carbon dioxide must come from clean biokerosene.

Lufthansa wants to become the world’s first airline using biokerosene on a regular basis, which is an admirable and courageous initiative. Instead of one single demonstration show flight, Lufthansa took the decision to make over 1000 short flights with biokerosene and test the results extensively. Initially, daily flights from April 2011 onwards using a biofuel blended jet fuel were scheduled, but Lufthansa had to postpone the launch because for a second time the testing body, the American Society for Testing and Materials (ASTM), delayed its approval to use biokerosene in commercial traffic and its delay aggravated the airlines con­siderably. On 10 June 2011, ASTM gave its preliminary approval to use biofuels like algae and Jatropha as biokerosene, and Lufthansa started flying with biofuel.

Starting in the summer of 2011, Lufthansa flew 8 times a day over a period of 6 months between Frankfurt and Hamburg using an Airbus A321 with one engine running on a 50/50 blend of ordinary kerosene and Jatropha biokerosene. Other fuels like biokerosene derived from tallow were used as well. Tallow is an animal fat derived from beef, mutton, or pigs that conforms to certain technical criteria. The big advantage of using tallow is the avoidance of the “food-or-fuel” debate.

The fuel came from sustainable feedstock sources in Indonesia and was refined into kerosene under a long-term agreement with Finland-based Neste Oil. Indeed, Lufthansa is the world’s first airline to utilize biofuel inflight operations. Lufthansa made 1187 flights, consumed 1556.9 tonnes of biokerosene, and reached a reduction in carbon dioxide emissions of 1471 tonnes. You can see and read more about Lufthansa’s biofuel flying at www. puresky. de, and see more about LH Biofuel in practical tests and be on board the 747-8F’s record-breaking biofuel flights on clips on YouTube.

Lufthansa needs around 530 000 tonnes of biofuel a year to meet its Interna­tional Air Transport Association (IATA) goals for 2020 and will start flying with biokerosene again only when it can secure supplies of these sustainable green fuels.

Neste Oil is a refining and marketing company concentrating on low-emission, high-quality traffic fuels, and claims to be the world’s leading supplier ofrenewable

diesel (www. nesteoil. com). The company’s proprietary NExBTL hydrogenization technology produces jet fuel from renewable raw materials such as vegetable oil and animal fat. The fuel will only be produced from sustainable feedstock sources to ensure they do not compete for food, water, or land. Neste Oil says the greenhouse gas emissions of NExBTL renewable jet fuel, as calculated over the fuel’s entire lifecycle, are 40-80% lower than those of fossil-based jet fuel. The company is a member of the RSB.

An airline like Lufthansa is faced will a carbon credit bill of around $250-350 million annually, when the load factor, routes, and carbon price remain stable. Mid-2012 carbon prices are very low, with European Unit Allowances (EUAs) trading around €7. However, during the tsunami and nuclear reactor meltdown in Japan in March 2011, the price of carbon permit prices (per tonne) on the ICE Futures Market Europe shot up 12% in 3 days. Such an event increases the carbon credit bill for a big airline by around $28-30 million.

I think for a big airline it is advisable to hedge its carbon credit exposure and invest in the complete value chain starting with biofuel projects that lower carbon dioxide emis­sions, secure feedstock supply in long-term off-take agreements, and deliver a positive return on investment as well. Biofuels lower carbon credit emissions and therefore offset carbon credit costs.

In general, carbon credits are not directly reinvested in the green development of airline biofuels. Therefore, the price of passenger tickets will increase by €10-30 for continental flights in Europe. I expect the price of carbon per tonne to rise over time above €20. Such a development will increase the airline’s ticket prices sub­stantially more and reduce its competitiveness.

19.9

The probable winners will be those with deep pockets and patience, such as Royal Dutch Shell, BP, DuPont, agriculture giant Archer Daniels Midland, or the rare

start-up with revenues from another business, such as a drug or chemical pro­ducer. For the rest, the demonstration biorefineries now being built are more like pilot plants that are more demonstration plants for conglomerates to be gobbled up. The business model that makes sense for most of the small companies is demonstrating the technology and getting it into the hands of those who have balance sheets.

The first challenge is growing enough green plant material. The numbers are daunting. Producing 30 billion gallons of fuel takes 300 million or more tonnes of plant material — more than the total weight of cars and light trucks sold in the United States over the past 10 years. Growing this much cellulose would take at least 30 million acres of land.

As a result, some biofuel players are looking at other sources of non-food material. One of the cheapest sources now is garbage, such as municipal waste. Weyerhaeuser is exploring growing energy crops in its forests, along with using wood waste. Range Fuels will tap into forests in the southeastern United States for its Georgia facility. Another example of the value of waste comes from the city of Naples, Italy, which has a huge waste problem. Naples does not have enough plants to turn waste into gas or other recycled products. For centuries the Dutch have been traders, and the waste of Naples is now loaded onto trucks and brought to Holland where it is recycled! The Dutch know the value of waste!

Large financial resources and patience will also be essential when it comes to turning these enormous amounts of cellulose into liquid fuel. It is a far more complex process than fermenting starch or sugar into alcohol, which humans figured out how to do millennia ago.

"Big Oil” is now teaming-up with second-generation fuel producers. Shell is joining up with Iogen (which already has a pilot plant making cellulosic ethanol), with Codexis (a producer of man-made enzymes), with algae company HR BioPetroleum and with Virent.

Among the major players, two of the most promising efforts are the DuPont — Danisco joint venture in Tennessee and BP-backed Verenium, which plans a commercial cellulosic ethanol facility in Florida. Both of these already have expertise in every step of their complicated processes, putting them ahead of start­ups that only have some of the pieces.

The future of biofuels, therefore, probably looks like this: farmers will grow millions of acres of switchgrass and other energy crops on land not taken out of food production; those crops will help fight global warming and improve soil quality by adding carbon to the soil; and they can be processed into low-carbon fuels that are seamlessly delivered to filling stations and pumped into the gas tanks of trucks and cars.

The following paragraphs list some companies that are at the forefront of second-generation biofuels. Be aware that I do my research under the highest pro­fessional standards, but the information should nevertheless not be taken as a guidance for investments, unless fully at your own risk. Investments in stocks can go up or down.

Stocks or private equity may carry a high degree of risk that may or may not be suitable for you. I cannot be held responsible for any losses or damages that may arise from wrongly interpreted information.

Weyerhaeuser (NYSE: WY; www. weyerhaeuser. com), the forestry giant, might be able to turn trees no longer needed for paper in the digital era into fuel. Weyer­haeuser today manages 20.5 million acres of forests.

Danisco (www. danisco. com). This stock has been delisted, but it is a good example how well a second-generation biofuel stock can develop. The Swiss are the best watchmakers and the Danes are the best enzyme producers. Danisco is a great enzyme producer and specialty food ingredients company, whose products make it possible to breakdown tough plant fibers into ethanol. Novozymes (see below) and Danisco, the two Denmark-based companies, are two of the world’s leading enzyme technology companies, with about 90% of the market for the chemicals that are needed in ethanol production.

In early 2011, DuPont announced it had entered into a definitive agreement for the acquisition of Danisco for $5.8 billion in cash and assumption of $500 million of Danisco net debt. Today, DuPont is a clear leader in industrial biotechnology with science-intensive innovations that address global challenges in food pro­duction and reduced fossil fuel consumption. The stock of Danisco went from €20 on 1 January 2010 to €93.12 on 16 June 2011 when it was delisted. This takeover scenario can play out for other bioenergy stocks as well (Figure 20.1).

Danisco is a leading technology-driven organization, with outstanding research and application development capabilities. The company has specialty food ingre­dients, including enablers, cultures, and sweeteners that generate about 65% of total sales; and Genencor, its enzymes division, represents 35% of total sales. Danisco and DuPont are already joint venture partners in the development of cellulosic ethanol technology. Danisco has nearly 7000 employees globally with operations in 23 countries.

Novozymes (NZYM #B; www. novozymes. com) is the second enzyme producer with headquarters in Denmark. Novozymes main goal is to reduce the costs and enlarge the availability of enzymes as a basis for cellulosic ethanol. Novozymes produces the following enzymes:

• Household enzymes: enzymes used in laundry detergents and automatic dish­washing machines.

• Food and beverage enzymes: enzymes for the baking, brewing, fruit juice, wine, and other food industries, including dairy, oils, and fats industries.

• Bioenergy enzymes: enzymes used for the conversion of cellulosic material and organic waste into fermentable sugars for the bioenergy industry.

• Feed and other technical enzymes: enzymes used by the starch, textile, and the animal feed industries.

Novozymes is now expanding strongly in China and has created a joint venture with the Shengquan Group to produce cellulosic ethanol.

Bioenergy International (Security number: AOLAXT), Graz, Austria is building biorefineries worldwide where not only vegetable oils but also animal fats can be converted into biodiesel.

SCA (Security number: 856193; www. sca. com) from Sweden, an abbreviation of Svenska Cellulosa Aktiebolaget, is the largest forest owner in Europe and will likewise benefit from energy production out of cellulose.

Linde (Security number: 856193), a German producer of industrial gases, had a record year in 2011 and is very optimistic for the coming years. Linde had a turnover of around €12.4 billion in 2011 and strives to grow to a turnover of €14 billion by 2014. Linde is developing practical ways of extracting biofuels from algae. Algenol Biofuels (www. algenol. com), of Bonita Springs, Florida and the technology organization The Linde Group have agreed to collaborate in a joint development project in order to identify the optimum management of carbon dioxide and oxygen for Algenol’s algae and photobioreactor technology. The companies will cooperate to develop cost-efficient technologies that capture, store, transport, and supply carbon dioxide for Algenol’s proprietary process for the production ofbiofuels from carbon dioxide, salt water, and algae, as well as remove oxygen from the photobioreactor.

The goal ofthe joint venture is to deliver sustainable low-cost alternative biofuels and green chemistry. It is possible to produce green hydrogen out of microalgae, although the yield does not yet justify large industrial-scale production. With the help of light-absorbing mechanisms, the algae use sunlight, water, and carbon dioxide to generate oxygen and sugar. The sugar is then converted to starch or biomass. If the algae are deprived of oxygen, they use solar energy to create hydrogen instead.

This hydrogen production process has great potential to become a key tech­nology for sustainable hydrogen. After all, microorganisms in nature generate approximately 200 million tonnes of hydrogen each year, which is immediately consumed by other neighboring single-cell organisms. However, if microalgae produce hydrogen on a large scale in controlled environments, it could be segre­gated, captured, and used commercially.

There are also a number of other companies leading the way in “drop-in” technologies, as listed in the following paragraphs.

Codexis (Security number: A0Q2S4; www. codexis. com), based in Redwood City, California, is one of the leaders in the “the drop-in fuels” field and makes spe­cialized enzymes that rearrange molecules. In collaboration with Shell and Cosan, Brazil’s third-largest sugar producer, Codexis plans to build a factory capable of producing 400 million liters (2.5 million barrels or 105 million gallons) of drop-in fuel every year. The other companies will provide money, reaction vessels, and sugar. Codexis will provide the enzymes and genetically engineered bacteria and microorganisms needed to make the drop-in fuel.

The project is part of a joint venture by Shell and Cosan, who own a 16.4% stake in Codexis. Codexis’ enzymes and bacteria can turn sugar into molecules called straight-chain alkanes. Such alkanes are the main ingredients of diesel fuel. So sugar is converted into a diesel fuel! In April 2010, Codexis became the first start­up involved in drop-in fuels to float itself on a stockmarket — which in this case was NASDAQ (NASDAQ: CDXS), America’s main market for high-tech stocks. Codexis is a very promising company, but the stock has dropped dramatically.

Amyris (NASDAQ: AMRS; www. amyris. com) has a product that it claims is a drop-in biodiesel and it has hooked up with an oil company, Total of France, which owns 17% of the firm. Amyris’ biodiesel is made of genetically engineered yeast, rather than bacteria. However, Brazilian sugar is again used as the raw material. Amyris has formed a joint venture with Santelisa Vale, Brazil’s second-largest sugar company, and is busy refitting some of that firm’s ethanol plants in order to make drop-in diesel. The Codexis-Cosan-Shell and the Amyris-Santelisa-Total partnerships are the furthest along of the drop-in fuel businesses. Amyris has also taken a beating since its initial public offering (IPO) on the NASDAQ, but it has very strong links with the sugar and oil industry.

Gevo (NASDAQ: GEVO; www. gevo. com) of Englewood, Colorado makes “better bugs”. The company will use enzymes and genetically engineered bugs to produce butanol. The aim is to turn out an annual 2 billion liters of butanol by 2014. BP is building a butanol pilot plant to do this near Hull in the north of England and also has big ambitions for the fuel. Like ethanol, butanol is an alcohol. Butanol has four carbon atoms in its molecules, whereas ethanol has two. Proportionately more of the energy from the feedstock ends up in the final fuel. Gevo went public in March 2011 (NASDAQ: GEVO). The relationship between GEVO and BP has turned sour, since GEVO is suing BP over patent infringements. GEVO itself has 11 patents issued by the U. S. Patent and Trade Office (USPTO) with approximately 400 additional patent applications. GEVO is backed by the French oil company Total SA (FP) and the specialty chemicals maker Lanxess AG (LXS).

Solazyme (Security number: A1H8LA; solazyme. com), another firm based in South San Francisco, is the last of the Bay-area drop-in contenders and is, in many ways, the most intriguing biotechnology company. It wants to use single-celled algae to make its fuel. Solazyme’s approach is unusual, though. Instead of growing its algae in sunlit ponds, it keeps them in the dark and feeds them with sugar. At first sight this seems weird as the attraction of algae lies in the fact that algae photo — synthesize. That means that they can be engineered with the whole sunlight-to — fuel process in one genetically engineered package. Sunshine being free, this looks

a brilliant idea. However, looks can be deceptive. If you keep your algae in ponds the rays of sunlight do not always strike them at the best angle, because even algae sometimes shade one another if they are growing densely. Photobioreactors — complicated systems of transparent piping through which alga-rich water is pumped — overcome those problems, but they cost a lot and are hard to keep clean.

In May 2011, Solazyme did an IPO on the NASDAQ (NASDAQ: SZYM) and netted $227 million — a new record in second-generation biofuels.

Solazyme has signed a contract with the American Navy. The Navy intends that, by 2020, half the fuel it uses (over 6 billion liters a year, mainly diesel and jet fuel) will be from renewable sources. Solazyme is arguably the most prominent leader in the field of algae-derived oils. Solazyme has been providing it with trial quan­tities of both from its production facilities in Pennsylvania and Iowa. The algal oils are not themselves good fuel; however, the UOL refinery in Houston takes care of that, producing shipshape alkanes of the sort the Navy likes.

DSM (Security number: A0JL27; www. dsm. com), the Dutch life sciences and chemicals company, is moving into the embryonic, but potentially huge, market for second-generation biofuels. DSM’s second-generation technology has two components. (1) An enzyme, derived from a fungus discovered originally in a Swiss compost heap, which breaks down the cellulose in wood, plant stalks, and other agricultural waste. (2) This produces a range of sugars, which are then converted by DSM’s "advanced yeast” strain into ethanol — the standard biofuel.

Although DSM believes it will generate substantial revenues from selling the enzymes and yeast required to make second-generation biofuels, the company is also considering playing a more central role in biofuel production.

The first stage in second-generation biofuels production involves mashing up biomass into a hot "stew,” in which the enzyme converts the cellulose fibers into a mixture of sugars. DSM’s new enzyme comes from a fungus that evolved to do this in the steamy environment of rotting compost; it works at temperatures as high as 65°C, adding to the efficiency of the conversion process. The second stage uses DSM’s "all you can eat” strain of yeast. It can make ethanol from sugars produced from second-generation biomass.

DSM aims to break the dominant market position that the two Danish-owned companies, Novozymes and Danisco, hold in enzymes for first-generation bio­fuels. It has formed a joint venture with POET, in the United States, to produce cellulosic ethanol from agricultural waste.

Dynamic Fuels (dynamicfuelsllc. com), a joint venture between Syntroleum and Tyson Foods, is an exciting company. Dynamic Fuels is not publicly traded but you can buy stock of the two parent companies Syntroleum (NASDAQ: SYNM) and Tyson Foods (NYSE: TSN). Syntroleum produces synthetic fuel by the Fischer-Tropsch process, which can use natural gas, coal, or biomass as feedstock. Tyson Foods is one of the world’s largest processors and marketers of chicken, beef, and pork food pro­ducts. Tyson has around 2.3 billion pounds (1 billion kg) of fat to use as feedstock and is pushing the biofuels industry to explore use of cheap animal fats.

A new plant has been built under the Dynamic Fuels flag that converts inedible fats and greases into renewable fuels like biokerosene. With an investment of over $150 million and the creation of over 300 jobs, the initial 75 million gallons (280 000 m3)

per year plant will contribute much-needed incremental clean and environmentally friendly fuel to the U S transportation fuel supply.

Biomass also continues to emerge as a significant potential source for clean, renewable fuels. The US Departments of Agriculture and Energy estimate that over 1.3 billion dry tonnes per year of biomass can be produced — enough to produce biofuels to meet more than one-third of the current demand for trans­portation fuels. Syntroleum’s Fischer-Tropsch and Bio-Synfining™ processes are ideally suited to produce ultra-clean, renewable fuels from biomass, and the company is pursuing projects in this area.

This plant is nationally recognized as the very first “commercial-scale” biofuels plant to open in the United States. Dynamic Fuels is also producing jet fuel at the facility for the USAirForce. It was also stated that during marketing efforts for the new Dynamic Fuels plant, major US and international oil, chemical, and consumer companies expressed significant interest in products produced at the facility.

On 15 March 2011, Syntroleum made the official announcement that the Dynamic Fuels plant in Geismar, Louisiana had reached full production capacity and was producing at design rates of 75 million gallons (280 000 m3) per year or 5000 barrels (790 m3) per day. The company stated the Dynamic Fuels facility achieved 100% conversion of 20 different renewable feedstocks into American Society for Testing and Materials (ASTM)-quality diesel. The Dynamic Fuels facility is able to produce high — quality products ranging from jet fuel to summer grade diesel.

In September 2011, KLM starting flying more than 200 flights between Paris and Amsterdam using biokerosene (see Chapter 19). Hydroprocessed renewable jet fuel is processed using used cooking oil and handled by Dynamic Fuels at its Geismar plant and supplied by SkyNRG.

Rentech (NYSE: RTK; www. rentechinc. com) is producing synthetic jet fuel and renewable diesel at its demonstration plant in Commerce City, Colorado. This facility currently produces Jet A fuel for commercial aviation and it has made its first commercial sale to the US Air Force. This facility also produces Rentech’s clean diesel (“RenDiesel”). It takes urban yard and woody green waste to produce ultra-clean and renewable fuels. It is estimated that Rentech will produce 600 barrels per day of synthetic fuel as well as 35 MW of renewable power.

Sustainable Oils (www. susoils. com), Sustainable Oils, LLC. Sustainable Oils, LLC is a joint venture between Targeted Growth, Inc. and Green Earth Fuels, LLC. A producer of Camelina-based fuels, announced that it has been awarded a con­tract by the US Defense Energy Support Center (DESC; now renamed the Defense Logistics Agency Energy) for 40 000 gallons of Camelina-based jet fuel. The fuel will be delivered to the Naval Air Systems Command fuels team and will support the Navy’s certification testing program of alternative fuels. The contract includes an option to supply up to an additional 150 000 gallons of Camelina-based jet fuel.

Camelina was selected by the DESC because it does not compete with food crops, has been proven to reduce carbon emissions by more than 80%, and has already been successfully tested in a commercial airline test flight. In addition, Camelina has natu­rally a high oil content, is drought tolerant, and requires less fertilizer and herbicides.

AltAir Fuels (www. altairfuels. com). AltAir Fuels is a privately held company. AltAir Fuels and the USDA have established the Biomass Crop Assistance

Program ("BCAP") for the production of the oilseed crop camelina sativa as a feedstock for sustainable, low carbon aviation fuel, renewable diesel and specialty chemicals. The BCAP program will cover over 50,000 acres Washington, Montana and California. Farmers who participate in the program are eligible to receive reimbursement of a majority of the cost of their camelina acreage for up to five years. In December 2009, the Air Transport Association of America announced that 14 airlines from the United States, Canada, Germany, and Mexico (Air Canada, American Airlines, Atlas Air, Delta Air Lines, FedEx Express, JetBlue Airways, Lufthansa German Airlines, Mexicana Airlines, Polar Air Cargo, United Airlines, UPS Airlines, and US Airways) had signed Memoranda of Under­standing with AltAir for the entire output of a new biofuel facility that will be constructed in Mississippi and Washington state. In addition, Seattle-based Alaska Airlines and Honolulu-based Hawaiian Airlines signed MOU with AltAir Fuels.

Solena (www. solenafuels. com). One of the leading pioneers in producing syn­thetic drop-in fuels is the Solena Group from Washington, DC. Solena bioker­osene allows airlines and shipping companies to utilize a sustainable energy source without any changes to their engines or infrastructure. Solena’s feedstock is municipal waste that does not compete with crops or use water.

The advantages of Solena’s biomass-to-liquid (BTL) solution include:

• Reduced greenhouse gas emissions. Carbon emissions are recognized as a detriment to the environment and, when emitted at the upper levels of the troposphere via jet fuel exhaust, are more harmful as a greenhouse gas. The overall equivalent carbon dioxide reduction as a result of a Solena BTL facility producing sustainable energy is approximately 2.4 million tonnes per year.

• Reduced landfilling of waste. Solena facilities can utilize post-recycled urban waste normally destined for landfill as feedstock. Landfilling presents several problems including: the pollution of surface and underground (aquifers) water resources due to toxic substances leaching from the waste, and methane emissions from the decomposing waste, which contribute significantly to greenhouse gas effect and are 20 times more potent than carbon dioxide;

• Increase in air quality at airports and harbors/ports. Sustainable fuels generated through the Fischer-Tropsch process burn cleaner than crude-based jet fuels, resulting in lower levels of emissions with no sulfur oxides, minimum particulate matter, and lower nitrogen oxides levels during take-off at local airports and docking at harbors and ports.

• Non-competing biofuels. Crop-based biofuels are believed to produce harmful side-effects such as creating inflationary price pressures on basic food supplies and/or the use of otherwise arable land. Furthermore, the nature of crop-based fuels dictates that the facilities be located far from the end user of the finished biofuel product. By utilizing urban, agricultural, and forestry wastes near the fuel’s point of use, Solena hope to eliminate many of the disadvantages associated with first-generation/crop-based fuel and minimize the emissions footprint associated with transporting it.

Solena is investing over $300 million to build a waste-to-biofuels plant in East London, close to London City Airport and the venue of the 2012 Olympic Summer Games. British Airways has entered a purchase agreement with Solena and will

buy all of the plant’s 16 million gallons of biofuel annually for up to 10 years in an effort to cut its carbon emissions under the cap-and trade system operating in the European Union.

Biofuel production from waste should begin in mid-2015. However, knowing the United Kingdom I would not be surprised if the permission and construction time will take longer. The biofuel, with a carbon footprint 95% lower than con­ventional airline fuels, will be blended with jet fuel. The amount produced will be about 2% of British Airways’ annual fuel consumption.

Solena is negotiating with London’s four biggest waste management companies to obtain feedstock for the plant. Solena will take plastics, paper, and food leftovers that would otherwise go to landfill. It saves the waste companies from paying taxes on trash. The company will use about 1500 tonnes of waste a day and, in addition to creating biofuel, the plant will generate about 40 MW of electricity. Half of that will be used to run the plant and the other half exported to the power grid. Solena is developing a similar project with Qantas.

20.2.7

Bacterial enzymes can catalyze key steps in the conversion of plant sugars into hydrocarbon compounds for the production of green transportation fuels. These enzymes can rearrange molecules chemically, so they are much more similar to those hydrocarbons that already power planes, trains, and automobiles. The result is called "drop-in” fuel.

Second Generation Biofuels and Biomass: Essential Guide for Investors, Scientists and Decision Makers, First Edition. Roland A. Jansen. r 2013 Wiley-VCH Verlag GmbH & Co. KGaA.

Published 2013 by Wiley-VCH Verlag GmbH & Co. KGaA.

194 | 18 Fermenting Fuels

18.4

Global production of biodiesel has reached 2.5 billion gallons with a monetary value of $35 billion. I estimate that the worldwide biodiesel market will have a value of $110 billion by 2016. Combined, the global renewable energy sector including biofuels, photovoltaic solar cells, and wind turbine revenues will triple, reaching $335 billion by 2018.

The world faces "Peak Oil” production and the global demand for renewable energy worldwide, including China, India, Brazil, and Europe, is accelerating.

Governments target to achieve 15% of all diesel fuel sold as biodiesel by 2020. However, the road for Jatropha and other feedstocks is not without stiff compe­tition: from new biofuel research and development advances in algae oil, cellulosic ethanol from switchgrass and sugar and palm oil sectors both have also seen significant growth. Larger and larger quantities of biodiesel and biokerosene made of algae are being delivered to the US Marine and US Airforce. In South America the sugar industry produces ethanol, biokerosene and biodiesel as well. Cellulosic ethanol plants are opened in 2012, which make ethanol out of switchgrass, mis — canthus and napier grass. In 2013 several new biorefineries will be opened in Brazil and China as well.

One of the primary attractions of the non-edible Jatropha plant is that it does not need to grow on agricultural land and does not compete with the food supply, as the world population increases by another 1.4 billion people by 2025.

Additionally, the quality of the biodieselfrom Jatropha is superior to corn or soybean oil at much lower costs. Its quality is also better because it does not require extensive refining for use in cooking stoves, fuel vehicles, and diesel engines, among other applications.

The immediate focus of research is on determining the best agronomic methods of sustaining high yields both for the oilseeds and the oil content over the expected lifespan of a Jatropha plantation. This may appear basic, but it is a fundamental step to take before Jatropha can be developed on a full commercial basis. Laboratories are evaluating cultivars and improving the genetic material, and generally advancing our understanding the plant and its performance in various agro-ecological environ­ments. Other areas include mechanized harvesting, oil expelling, development of byproducts, and end-product utilization both for fuel and medicinal applications.

Testing bio jet fuels is at very preliminary stage. As we have seen, it has to be blended and properly treated to withstand the cold temperatures at high altitudes. Considerable interest has been focused in this direction, but the main issue will be that of sufficient feedstock. Presently, there is simply just not enough production of Jatropha oil projected in the next few years to see Jatropha oil used in aviation biofuels on a large commercial scale.

In the longer term, the biofuels industry has to move toward using more second — generation feedstock that is not food and does not compete with food crops, uti­lizing more of the agricultural biomass and wastes. Such feedstocks include algae and Jatropha curcas. While J. curcas is to be promoted as the most commercially promising potential biofuel feedstock at the moment, investors will have to find

the best available technology, expertise, and management approaches to ensure that risk is minimized, and to maximize productivity and revenues.

We cannot deny the fact that the economic crisis has affected our planet. However, climate change remains as one of the main challenges for humanity. The latest news from the biofuels industry seems to put biofuels as one of the most important alternatives in the fight against global warming. How do you identify the main trends for the market for the next 12 months?

The green benefits ofalternative fuels continues to help drive the industry forward because it appeals to the social agenda of most countries, especially as non-food-based feedstocks like energy crops, waste biomass, and cellulosic and woody biomasses become more prevalent. Going forward, the economics of alternative fuels will be a main driving factor to continued project development in industry. Currently, most developed economies import a significant quantity of their energy from other coun­tries and, with that, a vast amount of wealth is transferred out of that local economy. An alternative fuel or energy source that is produced locally from locally grown and harvested feedstocks helps retain that wealth within the economy. For newly devel­oping economies this may give them an opportunity to literally grow their own energy.

The Jatropha industry is still at a very early stage. Although approximately 900 000 hectares of Jatropha have already been planted, mainly in Asia, but increasingly in Africa and Latin America, very few projects survive the first three years and hardly any project can demonstrate significant production of Jatropha oil.

Jatropha is not a "wonder crop,” but it does have wonderful potential. The Jatropha industry is rapidly developing through seed science and improved agr­onomy. The global potential is substantial: I expect a harvest of 20 million tonnes of biofuels by 2020. Jatropha could therefore become as widely traded as sunflower oil with a liquid futures market in Singapore and China. This demand means Jatropha not only has a "wonderful potential,” but a real future!

Driven by climbing crude oil prices and energy costs, the Jatropha industry structure is expected to change dramatically to meet accelerating government and consumer demand for biofuels. On a global scale, political support for Jatropha cultivation is growing as approximately 50 governments worldwide have announced national biofuel targets. In many countries, specific policies have also served a strategic role to promote Jatropha as a means to secure energy supply, to improve the livelihoods of the rural poor, or to protect the environment. Jatropha will see enormous growth as 13 million hectares are expected to be planted by 2015. Production is typically focused on domestic markets rather than for export, especially in Asia. For many domestic markets, the use of unrefined Jatropha oil is seen equally important as the transesterification into biodiesel.

22.5

Most airlines invest in new planes, kerosene, personnel, and infrastructure, but not in agriculture or plantations to produce biokerosene. They still think that they can secure sufficient feedstock supplies from third parties. Personally, I do not think this is feasible in the near future. Meanwhile, starting 2012, the airlines face big carbon credit bills, which will reduce their net profits substantially, but most airlines still remain fairly passive.

I think that Cathay Pacific, based in Hong Kong, is one of the few airlines that really is one of the first movers, is proactive, and is prepared to make financial commitments, invest, and secure biofuel supplies in the near future. Cathay Pacific is a leading airline in Asia and, contrary to most airlines, it wants to be high up in the supply chain. Therefore, I think as a first mover Cathay Pacific will have an edge over the competition. The reason is simple: Cathay Pacific belongs to the SWIRE conglomerate and SWIRE has a big agricultural department. Among other things, they own agricultural land in Australia and palm oil plantations. So for the SWIRE group it is natural to weigh its options, to think outside the box, to invest in biofuel-producing plantations, and simultaneously to invest in a "biofuel drop-in”

204 | 19 Airline Jest Results with Biofuels

infrastructure at the airport. The new ultra modern Hong Kong airport is already fully equipped today to receive biokerosene as a drop-in fuel. Close by, on the island of Lantau, the airport has built the so-called New Permanent Aviation Fuel Facility. There are eight state-of-the-art storage tanks with a 264 000 m3 (2.2 million barrels) fuel storage capability dedicated for biofuels. Two supertanker berths have been built to offload the fuels and a dual undersea pipeline system connects the storage tanks with the airport. In the future the biokerosene can really be "dropped in” directly into Cathay planes. I do not think that any other airport in the world has already built such a comparable infrastructure!

The world’s airlines are going to spend more than $200 billion on kerosene yearly and the demand for sustainable biofuels is growing exponentially as well. Asian governments have a unique opportunity to stimulate and subsidize energy crops and waste conversion, and kick-start the development of new sources of green energy for the airline industry. Asia has a huge advantage over Europe: plants and trees grow very fast around the Equator all year round, and energy crops can deliver the lacking biomass for biofuels within 1-2 years. This is not possible in Europe.

Thus, Asian governments and Asian airlines have a one-and-only opportunity to take advantage of the hot and humid climate in Asia and the vast stretches of marginal land, and grow energy crops for sustainable aviation biofuels.

The Asia-Pacific region, with important hubs like Jakarta, Manilla, Taipei, Singapore, Kuala Lumpur, Bangkok, and Hong Kong, is one of the fastest-growing aviation regions in the world. It became the largest aviation market in 2009. Economic growth can be achieved in a more sustainable way if Asian airlines take advantage of reducing their carbon footprint substantially by using biofuels, and invest in the complete value chain from plantations, refining, and logistics. This of course requires a different mind set!

Governments should be taking advantage of the potential boost to the green economy with home-grown jet fuel, and save on the energy bills from the oil — producing countries and oil majors.

In addition to energy crops, there is the exciting prospect of using municipal waste to produce biofuel. The mega-cities of Asia produce vast amounts of waste, and they can supply millions of tonnes of organic waste material and convert it into aviation biofuels.

At present, biofuels are far more expensive than jet fuel — often 3 times the price — and are available only in small quantities. I am sure that if the Chinese Government becomes involved in biofuel production in a big way, it will kick start developments across the region from other governments and the private sector as well.

Logistically, it is a much more simpler issue than providing biofuels for cars. Globally, aviation uses only 10% of the liquid fuels used for transport. It is also distributed through only 1600 airports worldwide, which fuel 95% of the world’s flights. This compares to over 161 000 gas stations in the United States alone.

The airline industry has a great opportunity to decarbonize air transport. The first movers will leave the other airlines standing. The oil giants are not providing

79Л7 Alaska Airlines

the airlines with low-carbon, cost-effective, sustainably sourced fuel so the airlines and the governments have to do it themselves.