Biofuels international January/February 2017

January/Februry 2017 Issue 1 • Volume 11

international

Carnival time for renewables

Paving the way towards sustainable fuels in Brazil

Outlook for 2017 What’s in store for biofuels this year?

Regional focus: biofuels in southeasxxxxxralasia Regional focus: biofuels in South America

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international Issue 1

Volume 11

January/February 2017 Woodcote Media Limited Marshall House 124 Middleton Road, Morden, Surrey SM4 6RW, UK www.biofuels-news.com

c ntents 4 News 10 Incident report 11 Plant update 12 Current price index

MANAGING DIRECTOR Peter Patterson Tel: +44 (0)208 648 7082 peter@woodcotemedia.com EDITOR Liz Gyekye Tel: +44 (0)208 687 4183 liz@woodcotemedia.com DEPUTY EDITOR Ilari Kauppila Tel: +44 (0)208 687 4126 ilari@woodcotemedia.com INTERNATIONAL SALES MANAGER Matthew Clifton +44 (0)203 551 5751 matthew@biofuels-news.com US SALES MANAGER Matt Weidner +1 610 486 6525 mtw@weidcom.com PRODUCTION Alison Balmer Tel: +44 (0)1673 876143 alisonbalmer@btconnect.com SUBSCRIPTION RATES A one-year, 6-issue subscription costs £150/€210/$275 Contact: Lisa Lee Tel: +44 (0)208 687 4160 Fax: +44 (0)208 687 4130 marketing@woodcotemedia.com

No part of this publication may be reproduced or stored in any form by any mechanical, electronic, photocopying, recording or other means without the prior written consent of the publisher. Whilst the information and articles in Biofuels International are published in good faith and every effort is made to check accuracy, readers should verify facts and statements direct with official sources before acting on them as the publisher can accept no responsibility in this respect. Any opinions expressed in this magazine should not be construed as those of the publisher.

ISSN 1754-2170

biofuels international

13 Market analysis 16 Regional focus

Big goals are set for South American renewables – but can the region deliver?

18 An end of an era

Opportunities and challenges on the eve of the abolition of EU sugar quotas 19 The Brazilian experience

Paving the way towards sustainable fuels 21 Outlook for 2017

Market leaders from around the world reflect on 2016 and make their predictions for the year ahead 24 Simulating success

Tools and techniques in process simulation and modelling for biofuel production 27 A taxing issue

How will a possible US tax reform and border adjustability affect ethanol producers’ businesses?

29 Cracking the kernel

US ethanol diversifies with kernel fibre 32 Moving Thailand’s biorefining forward

Recognising opportunity, Thailand has formed a partnership to advance the region’s bio-based economy 34 All life is fermentation

Can we fulfill the potential of microbial conversion for biofuels and biomanufacturing?

36 Industrial handling of straw bales

Straw feedstock must undergo several processing steps before it can be used in ethanol production 38 Nanoparticles under the spotlight

A US company develops nanotechnology combining ethanol with corn oil for a new blendstock that reduces diesel emissions

January/Februry 2017 Issue 1 • Volume 11

international

Carnival time for renewables Paving the way towards sustainable fuels in Brazil

Outlook for 2017 What’s in store for biofuels this year?

Regional focus: biofuels in southeasxxxxxralasia Regional focus: biofuels in South America

Front cover image: ©Celso Pupo. Image from bigstockphoto.com

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biofuels guest comment

Pat Gruber, CEO and guest editor, Gevo

Aviation is a growing new market for biofuels

I

n business school, one of the first things we are taught is that when introducing a new product, it is much better to target a growing market rather than a declining market. There is more opportunity to avoid win-lose scenarios and less of a possibility to fight a zero-sum game over market share. For biofuels, jet fuel provides such an opportunity.

Air travel is expected to boom in coming years, with a doubling of passengers and flights predicted by 2030. The airlines industry uses on the order of 80 billion gallons per year of jet fuel, which is expected to grow about 3 billion gallons incrementally each year for the foreseeable future.

This means that additional production capacity will need to be brought online over time.

The growth in petro-jet fuel consumption drives growth in fossil greenhouse gas (GHG) emissions, particulates, and other trace chemical pollutants both from the burning of the fuel during flight and from the production of the fuel in the first place. This growth is making the industry one of the fastest growing polluters. The airlines industry recognises that it needs to do something about GHG and ensuring that alternatives to petro-based jet fuels are available in the future.

Taking a proactive approach, the airlines industry, through the International Air Transport Association (IATA) and working with the UN’s International Civil Aviation Organization (ICAO), has decided to limit GHG emissions from 2020

onward. The idea is to hold flat at the 2020 greenhouse gas emission level even as the industry grows.

While initially the limits are voluntary, they would become mandatory by 2027.

In order to obtain neutral growth in GHG discharges, renewable low-carbon jet fuels will need to be used.

The combination of industry demand for low-carbon fuels and fundamental growth of the airline industry creates a good opportunity for renewable resource-based biofuels.

But, these fuels simply can’t be turned on instantly. They take years to develop and build to a meaningful scale relevant to the quantities of the fuel needed by the aviation industry. 2016 marked the start of this process that should continue to grow substantially in 2017.

In April, ASTM International, the world’s largest standard setting body, released a new version of ASTM D7566, the standard that governs jet fuel with synthesised hydrocarbons. The new standard approves the use of alcohol-to-jet synthetic paraffinic kerosene (ATJSPK) derived from renewable isobutanol. Through the course of the ASTM certification work, it was found that ATJ has technical performance advantages as well such as higher energy output per weight of fuel, which means that it could be possible to fly farther on a load of fuel.

ATJ is jet fuel made via a chemical process from an alcohol called isobutanol.

The isobutanol itself can be

made from carbohydrates by a fermentation process.

This product is referred to as alcohol-to-jet, or ATJ. There are three other approved biofuel options, but data shows that ATJ is the most effective in terms of operating cost, capital cost, feedstock availability, scalability and translation across geographies.

The process to produce ATJ, pioneered by Gevo, is very high yielding, and therefore cost effective. ATJ can be made from any carbohydrate source that can be fermented.

To date, commercial flights have been made using ATJ made from corn and from wood. This means ATJ can provide a solution in many parts of the world.

The cost to deploy ATJ is estimated to be about $7/gal (€6.62) at a brownfield site, which means it should be able to compete on a straight-up economic basis at about the $70/bbl oil range, given the Renewable Fuel Standard (RFS) and current US biofuels policy. And this is without considering any value for an improved carbon footprint.

ATJ has the potential to address growing demand, an improved GHG footprint, and deliver improved fuel performance. The combination of these things creates a different and attractive dynamic opportunity for biofuels. It is about performance and competitive cost, in a growing market.

Pat Gruber CEO, Gevo

2 january/february 2017 biofuels international

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bioethanol news Denmark approves 0.9% mandate for advanced biofuels blending mandate Denmark has agreed plans to implement a 0.9% advanced biofuels blending mandate by 2020 for use in transportation.

This new plan puts Denmark ahead of European countries such as Italy, which has an advanced biofuels blending mandate of 0.6%.

According to the Danish government, the requirement will be made to all suppliers of transport fuels, including petrol, diesel and gas, and will be met with all kinds of advanced biofuels.

The news follows publication of the European Commission’s revised Renewable Energy Directive (RED) late last year, which proposed a mandate for advanced biofuels by 2030.

The revised RED will introduce a cap on the contribution of food-based biofuels towards the EU renewable energy target, starting at 7% in 2021 and going down progressively to 3.8% in 2030.

As a result, the European Commission will promote advanced biofuels.

The European Commission also proposed a binding blending obligation of 6.8 % to promote other “low emissions fuels” such as renewable electricity and advanced biofuels used in transport.

Speaking about the news that the Danish government will introduce a 0.9% advanced biofuels blending target, Thomas Schrøder, VP of Biofening Novozymes – a Denmark-based

The Danish Parliament is located in Christiansborg Palace in the heart of Copenhagen

biotechnology company, said: “This is an ambitious and progressive decision taken today by the Danish government.

“Together with conventional biofuels, advanced biofuels used in Danish vehicles are the most obvious way to reduce immediately CO2 emissions from a sector, which accounts for a third of all of the country’s emissions.

“By this agreement, Denmark has become a frontrunner – also with an advantage when the EU agrees on a longer-term mandate for advanced biofuels by 2030. The agreement

sends a clear signal to the market and to investors; the technology for production of advanced biofuels is available today and the political framework now supports investments.”

Speaking to Biofuels International, Bo Gleerup, CEO and co-founder of Denmark-based Nordic Green, said: “It is great to see Denmark leading the way on this. They could have even gone for a 2-4% blending target because the market can easily follow this. It’s great to see that we are the most ambitious country in Europe when it comes to this.” l

Petrobras sells ethanol stake to sugar producer Tereos Petrobras Biocombustível has announced an agreement to sell its shares in Guarani, a Brazilian sugar and ethanol producer, to Tereos Participations, an arm of French group Tereos, for $202 million (€192m).

According to Petrobras Biocombustível, a wholly-owned subsidiary of Brazilbased oil company Petrobras, Guarani is the third largest sugar producer in Brazil. It operates eight production facilities, including seven in Brazil and one in Africa.

Tereos, a partner of Petrobras Biocombustível in Brazil, is the third largest sugar producer in the world.

For the 2016/17 crop season, Guarani produced around 20 million tonnes of sugarcane to 1.6 tonnes of sugar. It also produced about 630 million litres of ethanol and commercialised more than 1GWh of bio-based electricity to the grid.

Petrobras first announced it was beginning negotiations with Tereos in October 2016 regarding the sale of its 45.9% interest in Guarani.

Guarani has sugar and ethanol facilities located in Andrade, Cruz Alta, São Jose, Severinia, Mandu,

Tanabi and Vertente and has two refineries in Cruz Alta and Andrade.

Tereos CEO, Alexis Duval, said: “This transaction follows Petrobras’ announcement to refocus on its core business of oil and natural gas exploration and production.

“For Tereos, this acquisition is an opportunity to strengthen its foothold in Brazil, the number one sugarproducing country in the world.”

The transaction is related to Petrobras’ plan, announced in 2016, to withdraw from biofuel production and several other industrial segments, allowing the company to focus on oil and gas. l

4 january/february 2017 biofuels international

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november/december 2016 0

bioethanol news Toray Industries to build ‘world’s largest’ bagasse plant Toray Industries, a Japanese synthetic fibres company, is planning on constructing the world’s largest bagasse processing plant in Thailand in order to produce a feedstock for bioethanol.

The company plans to spend 5 billion yen (€40m) to 6 billion yen on constructing the demonstration facility, according to the Nikkei Asia Review. Bagasse is the fibrous remnant obtained from crushing sugarcane to extract juice for sugar production.

Thailand is one of the foremost producers of sugarcane in the world and is the largest exporter of sugar in

Thailand is one of the foremost producers of sugarcane in the world

Asia. Toray considers Thailand a growth market for biofuels.

The plant will have a capacity to handle 15 tonnes of bagasse per day (dry weight) and will manufacture about 4.2 tonnes of cellulosic sugar annually for bioethanol after going through the processes of pre-treatment,

Philippines government arm calls for industry to produce more bioethanol form sugarcane The Sugar Regulatory Administration (SRA), an agency run by the Philippines government, is urging players in the industry to invest more in power co-generation and production of bioethanol from sugarcane amid volatile sugar prices in the world market.

SRA policy and planning manager Rosemarie Gumera said the agency is strengthening its product diversification by encouraging stakeholders to invest more in the manufacture of bioethanol, according to Philstar.com.

“We need more products from sugarcane that would benefit our farmers so that in case of sudden drop in sugar prices, they would have a fallback industry,” Gumera told reporters.

Gumera said two additional bioethanol plants, Cavite Biofuels Producer and Progreen Agricorp (former Emperador Distillery), would operate next year with more than 60 million litres of combined capacity.

Therefore, the industry will bring total bioethanol production capacity of the existing eight facilities to up to 340 million litres, which is around 50% of the mandatory requirement. l

enzymatic saccharification and membrane separation.

The plant will employ concentration technology that uses Toray’s water treatment membranes to produce cellulosic sugar while conserving energy.

Toray places environment

as the linchpin of its business strategy so as to contribute to the realisation of a sustainable low-carbon society, and under this management policy, the company has established itself as a pioneering comprehensive chemical manufacturer in Japan to promote LCM environment management based on the life cycle analysis concept.

The company is known as a maker of synthetic fibres, but it sees biofuels as a nextgeneration revenue source leveraging these technologies.

The news of Toray’s plans to build a plant comes as the Thai government announced proposals to subsidise bioethanol-blended petrol as part of a policy to promote the use of plant-derived fuels and reduce oil imports. l

Filipino students produce bioethanol from taro plant According to media reports in The Filipino Times, Joji Tateoka, John Cyril Paco, Gregory Jones Ochoada, John Paul Galong, and Keanu Verzosa received the Business and Idea Development Award 2016 in October 2016 from the Philippines Chamber of Commerce and Industry for their biofuel invention dubbed as “Bio-Gab”.

“Bio-Gab” biofuel was produced by extracting the oil from wild taro and fermenting it for several weeks, according to the group. They tested their invention in a spare Jeep-like engine and found that it is as effective as other petroleum products

commonly used in cars.

Wild taro is rich in substances necessary for the creation of bioethanol, which can fuel cars in a cleaner way. The plant can also grow anywhere, can thrive in almost any type of soil, and is highly resistant to floods and drought.

The group is now aiming to have their invention patented.

Ochoada told the news website: “At present, the country is using rice, coconut, and corn to create bioethanol.

If we use wild gabi, which is an abundant yet inedible crop, we could maximise the use of the said agricultural products. We would also like to promote corporate social responsibility by providing jobs to the community.”

According to Paco, wild gabi is an inedible type of taro, which is hazardous to humans and animals. l

6 january/february 2017 biofuels international

biofuels international

january/february 2017 7

biodiesel news General Motors expands its B20 biodiesel line-up with new cars Car giant General Motors is providing more of its customers with choices to use car models that can use B20 biodiesel blends.

With eight new diesel vehicle options hitting the roadways in 2017 – 2018, General Motors now offers a full line-up of twenty different diesel models, from passenger cars, to pickups and SUVs, to commercial vans and low-cab forward trucks - all of which are approved for use with B20.

John Schwegman, director of commercial product and medium duty product for

PROCESSBIO – SPECIALIZED IN HANDLING OF STRAW BALES FOR INDUSTRIAL APPLICATIONS Crane unloading of trucks Computerized barn management Infeed De-stringing De-baling Separation of foreign objects Straw milling Processbio A/S Fiskerhusvej 20 DK-4700, Naestved Denmark +45 23 30 38 70 hb@processbio.com www.processbio.com

General Motors, delivered the news to attendees of the National Biodiesel Conference & Expo in San Diego, which took place in January, 2017.

“Diesel propulsion deserves wider consideration by fleet managers across the country,” Schwegman said.

“With biodiesel production and retail distribution expanding, and so many proven benefits, we believe more fleets will embrace the technology as part of their sustainability plans. If our diesel customers fuelled exclusively with biodiesel, we estimate that consumption of petroleum-based fuels would be reduced by hundreds of million gallons annually.”

General Motors is expanding its B20-approved car range

GM’s announcement, along with additional new diesel model introductions this year, sends a strong signal that diesel remains an important option for meeting the current and future needs of US

drivers. Including 2017 and 2018 models, Chevrolet and GM will offer one of the largest portfolios of vehicles capable of running on B20, a blend of 20% biodiesel and 80% ultra-low sulphur diesel. l

Abengoa sells its Spainbased biodiesel operation to oil firm Cepsa Ethanol producer Abengoa’s San Roque division has sold its 200,000tpy Cadiz-based biodiesel operation to Spanish oil company Cepsa for €8 million.

According to media reports in El Economista, Abengoa sold its Spanish biodiesel operations via the courts.

In a ruling dated 22 December, 2016, Judge Ana Marín Herrero approved the liquidation plan proposed

by Abengoa Bioenergía San Roque, the company that owns the biodiesel plant that requested a creditors’ contest on 30 September, 2016. The production unit is located in the industrial estate of Palmones de San Roque, Cadiz.

In the feasibility plan,

Abengoa Bioenergía San Roque points out that Cepsa’s binding offer, which was presented on 2 September, 2016, affects practically all of the company’s assets, with the exception of treasury and other financial assets.

The oil company will also have to pay for the stock of raw material and finished product (biodiesel) from the plant.The company that directed Pedro Miró has offered money in liquid, a condition very well valued by the creditors, according to El Economista.

Cepsa will assume all of the 51 employees of Abengoa Bioenergía San Roque, who will retain their current working conditions. However, the oil company is exempt from the obligation to pay any insolvency liabilities. l

8 january/february 2017 biofuels international

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biofuels incident report A summary of the recent explosions, fires and leaks in the biofuels industry Date

Location

24/12/2016 Iowa, US

Company Incident information Iowa Renewable Energy

A small fire broke out in a single piece of equipment at IRE’s biodiesel facility in Washington, Iowa.

No serious injuries occurred as the three employees present quickly acted according to safety training, but two were treated for smoke inhalation.

The cause of the fire and cost of damages were unknown at the time of writing.

12/12/2016

South Dakota, N/A US

A broken rail has been deemed the probable culprit of a fiery train derailment near Scotland in 2015, causing more than $1 million in damage.

Seven cars of a Burlington Northern Santa Fe Railroad train derailed on 19 September, 2015.

Three cars leaked ethanol onto a pasture, causing a fire to spread along an adjacent creek bed.

10/12/2016

New York, US

N/A

A trailer tanker rollover with an ethanol spill shut down both directions of Interstate 690 in Baldwinsville for nearly nine hours.

The driver of the tanker, which was said to be carrying about 11,000 gallons of ethanol, suffered minor injuries.

Imperial Petroleum, E-biofuels

Two ex-biofuel bosses in Indiana have been sentenced to prison for their roles in a multi-million dollar fraud scheme involving biodiesel.

Jeffrey Wilson, Imperial Petroleum’s ex-CEO, and Craig Ducey, a co-owner of E-biofuels, were sentenced to serve prison terms of 120 months and 74 months.

In addition to the prison sentence, Wilson must also pay $16 million (€14.8m) in restitution.

N/A

A flipped tanker spilled diesel fuel near a trout stream in Winona County, but the affected area was cleaned and no damage was done to the stream.

None of the 800 gallons of ethanol the tanker was carrying was spilled in the accident.

Thai Agro Energy

A Thai Agro Energy ethanol plant was ordered to partly suspend operations until it corrects procedures after local residents complained of hydrogen sulphide emissions.

An industry ministry inspection at the plant found hydrogen sulphide levels exceeding the allowable limit.

It ordered the factory to close parts of its operation to solve the problem by 26 December.

6/12/2016 Indiana,

US

6/12/2016

Minnesota, US

28/11/2016 Dan Chang,

Thailand

23/11/2016

Minnesota, US

N/A

A truck carrying ethanol slid off the road and overturned near Hastings due to icy conditions.

The tanker ruptured in the incident, spilling 8,000 gallons of ethanol on the roadway.

No injuries were reported and the road was reopened after having been closed to morning traffic.

20/11/2016

Indiana, US

N/A

A tanker carrying 7,000 gallons of ethanol overturned near Muncie.

One of the three tanks ruptured, causing it to spill its contents onto the roadside. The truck was emptied and hauled away during the same day, but the removing the ethanol contamination took hazmat teams several days.

Early Kentucky, Love’s November US Travel

Stop

Thousands of fish have been killed by 3,000 gallons of biodiesel that leaked into a river from a truck stop in Sadieville.

The cleanup of the leak, the exact source of which has not been determined, is in progress and will take a “long time”.

About 2,000 fish were killed as a result of non-toxic biodiesel absorbing oxygen from water, causing aquatic life to suffocate.

10 january/february 2017 biofuels international

plant update biofuels Green CMYK c76 m0 y100 k0 Pantone 362 c rgb r61 h164 b42

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Plant update: biodiesel in South America Archer Daniels Midland Location Minas Gerais, Brazil End product Bioethanol Feedstock Sugarcane Capacity 37,000 gallons annually Construction / expansion / Archer Daniels Midland (ADM), a acquisition US-based global food processing and commodities firm, has struck a deal to dispose of its sole Brazilian ethanol plant Project start date April 2016 Completion date Q2 2016

Benchmark Renewable Energy Location Jamaica End product Bioethanol Feedstock Sugarcane Capacity 10 million gpy Construction / expansion / Florida-based biofuel developer acquisition Benchmark Renewable Energy is planning to develop a large-scale bioethanol operation in Jamaica Project start date March 2016 Completion date Q4 2017 Investment $95 million (â‚Ź86.7m)

Petrobras Location Quixada, Brazil End product Biodiesel Construction / expansion / Petrobras announced that it will cease acquisition production activities at its biodiesel Petrobras Biocombustivel plant as part of leaving the biofuel business Project start date November 2016

Summit Agricultural Group Location Lucas do Rio Verge, Brazil End product Bioethanol Feedstock Corn Capacity 60 million gpy Construction / expansion / Summit Agricultural Group has broken acquisition ground on the first large-scale corn ethanol production facility in Brazil Project start date April 2016 Completion date Mid-2017 Investment $115 million (â‚Ź101m)

*This list is based on information made available to Biofuels International at the time of printing. If you would like to update the list with any additional plant information for future issues, please email liz@woodcotemedia.com

Gevo Location Argentina End product Isobutanol Capacity 5 million gpy Construction / expansion / Gevo, a US biofuels producer, has acquisition signed a joint agreement with alcohol producer Porta Hnos to develop several isobutanol plants in Argentina Project start date February 2016 Completion date Unscheduled

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biofuels market analysis SCB Commodity Brokers global biofuels prices Prices quoted: 13/07/17 Product

Mid Price

URL: www.starcb.com

Product

Mid Price

EU biodiesel RED ($/mt)

US biodiesel B100 ($/gal)

FOB ARA RME

1,012.50

Houston SME

2.956

FOB ARA SME

1,007.50

Houston TME

2.846

FOB ARA PME

972.50

NY Harbour SME

3.046

FOB ARA FAME 0

992.50

NY Harbour TME

2.966

Mid West SME

2.856

FOB ARA FAME -10

1,012.50

EU biodiesel non-RED ($/mt)

US ethanol ($/gal)

FOB ARA RME

997.50

NY Harbour Barges

1.570

FOB ARA SME

992.50

Argo ITT Illinois

1.450

FOB ARA PME

957.50

FOB USGC

1.548

FOB ARA FAME 0

977.50

Rule 11 TWS (Railcar)

1.445

FOB ARA FAME -10

997.50

Rule 11 NWS (Railcar)

1.445

EU ethanol (â‚Ź/m3)

RINs ($/RIN)

T2 FOB Rotterdam

602.50

2017 Ethanol (D6)

0.695

CIF Duisburg 60% GHG

585.00

2017 Biodiesel (D4)

1.065

US ethanol ($/m3)

2017 Advanced (D5)

1.040

FOB US ANP

429.94

Emission Credits ($/mt)

FOB Santos

575.00

LCFS Credits

99.50

Current price index

T

he new year has seen increasing mandates and higher greenhouse gas (GHG) requirements across many countries within the EU. Coupled with a resurgent mineral oil sector, the year has started with enthusiasm. Waste grades continue to be the focus for many buyers, as we have seen good volumes trading in the Amsterdam-RotterdamAntwerp (ARA) region, Spain, and inland Germany towards the end of December and the beginning of January, but since then volumes have slowed dramatically.

Buyers continue to peg UCOME against FAME 0c, and whilst FAME 0c has followed vegetable oils

downwards. Used cooking oil (UCO) aggregators and UCOME producers are looking at higher gasoil levels as a reason to increase prices. This has led to a wide bid vs. offer spread.

Whilst there is healthy interest on the buy and sell side, we have been unable to cross that bid vs. offer spread, leaving us with a rather stagnant market.

Producers of UCOME have been complaining of a lack of feedstock, but with the US biodiesel market now so weak, we are starting to see UCO from North America being offered into the EU and Asian product, which last year flowed into the US, may now be diverted into the EU. The majority of the buyers

for UCOME have been the international oil companies who, when bidding for product, ask for all the double counting options and high GHG requirements to give them maximum optionality to take product into various locations across Europe. Demand from the individual countries, however, has been slower. Whilst happy to pay a premium for high GHG product, German buyers are reluctant to pay the premium for UCOME and in the end may opt for higher GHG rapeseed or palm-derived biodiesel. The demand from France remains healthy but limited, and the UK are yet to start blending for 2017 due to the difficult winter specifications.

Standard RME and FAME grades continue to trade on a FOB ARA basis with the end of day assessment window the main point of liquidity.

The RME vs. FAME spread, whilst now wider than it was during the summer of 2016, is now at near historical lows for the winter period. There remains a lack of blendstock available to traders and although PME imports from Malaysia and domestic European PME production are starting to look attractive for the second half of 2017 (due to the backwardation in palm), we are struggling to find any alternative to rapeseed feedstock and as a result, the RME vs.

FAME spread continues to trade in a tight range. l

12 january/february 2017 biofuels international

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After the rollercoaster that was 2016, what can biofuels operators expect in 2017?

US biodiesel in 2017: A market trumped?

by Brian Milne

Brian Milne, product manager, Schneider Electric

T

he surprise election of Donald Trump as the 45th President of the United States has sparked concern that the ten-year old Renewable Fuel Standard (RFS) might come under attack by his administration, despite Trump’s repeated comments during his campaign and after his November win that he supports ethanol in US transportation fuel. Ethanol is the primary renewable satisfying the RFS, with biomass-based diesel the second largest contributor in meeting the mandate.

The RFS has several nested categories including cellulosic fuel. The renewable industry’s failure in producing enough cellulosic fuel to meet the mandate – or should we assign blame to unrealistic legislators in setting the target too high? – has allowed the RFS to come under criticism.

The high volume requirement for the renewable fuel nested category, overwhelmingly satisfied by corn-based

biofuels international

ethanol, is another area of protest against the RFS. The increasing volume required to satisfy this portion of the RFS cannot be met with E10 alone, a 10% concentration of ethanol in petrol, while restrictions remain for a higher concentration for conventional fuel vehicles.

Meanwhile, flex-fuel vehicles that allow for a variety of higher ethanol blends in petrol have only modestly added to US ethanol consumption.

Biodiesel rising This reality has triggered adjustments to the statutory volume mandates under the RFS, and also spiked costs for many of the oil refiners that are obligated to meet the mandate through their purchase of Renewable Identification Numbers (RIN) – the credit used to show compliance with the RFS. RINs, which are generated with the renewable and move through the supply chain with the blendstock, can be separated and sold in the open market. RIN values surged in 2016 in a repeat performance from 2013 when ethanol neared the 10% “blend wall”, prompting the US Environmental Protection Agency (EPA) to downgrade the volume requirements under the RFS. Biomass-based diesel, primarily biodiesel made from soy oil, fats, and grease while renewable diesel volume continues to increase, has largely been shielded from these criticisms. Indeed,

biomass-based biodiesel has moved into the breach, covering volume shortfalls in other nested categories to more closely align annual RFS volume obligations issued by the EPA with the statute.

On 23 November, 2016, EPA, the administrator of the RFS, finalised 2017 volume requirements for obligated parties – oil refiners and importers of petroleumbased transportation fuels – that remain below statute level, although above their proposal issued earlier in the year in May. For 2017, the total renewable fuel volume requirement is 19.28 billion gallons, 2.6% above the 18.8 billion gallons proposed in May 2016, while 19.7% less than the 24.0 billion gallons stated in the statute. For biomass-based diesel, the final renewable volume obligation remained as proposed at 2.0 billion gallons and at 2.1 billion gallons for 2018, the only nested category with the renewable volume obligation (RVO) determined for 2018.

This is well above the 1.0 billion gallons stated in statute that is the minimum annual RVO for biomassbased diesel since 2012.

suggested a cap on ethanol content in petrol at 9.7%, which has previously been proposed in the US Congress to satisfy concerns by the oil and gas trade group.

API highlighted how the US energy landscape has changed since the current RFS – the first RFS was enacted in 2005 – was passed into law as part of the Energy Independence and Security Act, with the US moving from energy scarcity to a potential position as net-energy exporter. The trade group said US crude oil and natural gas resources are 63% higher than forecast by the Energy Information Administration (EIA) when the current RFS was passed into law. Demand for refined fuels is also below EIA projections, with US petrol demand 10% lower than what was forecasted ten years earlier.

“As we approach the 10% ethanol threshold in our fuel mix, which could mean substantial economic harm to American consumers, it is imperative that Congress revisit this broken RFS policy,” said API in its 2017 State of American Energy report.

The petroleum stance

RIN prices were volatile in November and December 2016 following the election of Trump, tumbling in midNovember on the uncertainty of what his presidency means to the RFS before rallying in response to the EPA’s finalised 2017 volume requirements and sentiment that Trump will

American Petroleum Institute (API) president and CEO Jack Gerard reiterated the trade association’s position to end the RFS, saying at API’s annual luncheon on 4 January in Washington, DC: “Repeal it, or significantly reform it.” He

The Trump effect

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biofuels market analysis not change the programme.

However, several of Trump’s nominees for positions in his administration have been critics of the programme, triggering selloffs in the RIN market. They include Oklahoma’s attorney general Scott Pruitt nominated to head the EPA, an agency he has legally challenged on several occasions. Former Texas Governor Rick Perry has been nominated as head of the Energy Department, which he said in 2012 he would eliminate if president during a failed run to win the Republican nomination.

In 2008, as the governor of Texas, Perry petitioned the EPA for a 50% waiver of the RFS volume requirements, because enacting the full RFS would cause “severe economic harm”, which was denied by the EPA. Trump chose billionaire Carl Icahn to be a special advisor on rationalising regulations. Icahn, a majority owner of an independent oil refiner, famously opined in an editorial in 2016 that Pablo Escobar, the now deceased Columbian drug lord, would have found speculating in the RIN market more profitable than trafficking cocaine.

Independent refiners that lack blending capacity have seen profits evaporate because they must purchase RINs. However, Iowa Governor Terry Branstad, an ardent supporter of the RFS and Trump’s choice to be the US ambassador to China, has said Trump continues to support the RFS, calming the renewable fuels industry to a degree.

Adding to the worry for the biodiesel industry is the lapse of a $1 (€0.95) tax credit paid to blend biomass-based diesel into petroleum-based diesel, which expired on the last day of 2016. This credit has been a critical bridge between higher costing biodiesel and petroleum-based diesel, and the uncertainty on whether

it would be extended into 2017 greatly limited trading for forward physical deliveries through the later part of 2016.

“There is a clear correlation between the tax incentive and increased biodiesel production, which has grown from about 100 million gallons in 2005, when the tax incentive was first implemented, to a more than 2.5 billion gallon market in 2016,” said Anne Steckel, VP of federal affairs for the National Biodiesel Board (NBB) in a news release.

“With less than a decade of commercial-scale production, biodiesel remains a young and maturing industry that needs stable, long-term tax policy to continue meaningful growth.”

Considering Trump’s plan to close tax loopholes and expectations that Republicans, who control both the Senate and the House of Representatives, would rewrite the US tax code, there is speculation that this credit will not be reinstated.

If this assessment is correct, spot transactions could remain constrained, although imports would likely decline.

Change in US GDP from quarter one year prior

Distillate fuels supplied to US market

EPA qualified biomass-based diesel production

Grow or no grow?

Scott Irwin and Darrel Good with the Department of Agricultural and Consumer Economics at the University of Illinois contemplated the “push” for the advanced biofuels nested category within the RFS was due to the shortfall in the cellulosic nested category, with the write-down greater than for advanced biofuels.

“That difference is 520 million gallons in 2017, much larger than in the previous two years,” they wrote in their farmdoc daily on 7 December, 2016. “An important issue with regards to future implementation of the RFS, then, is the magnitude of the advanced mandate push, if any, under a new Administration.”

In addition to the biomass-

Market analysis spot prices

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based diesel nested category, biodiesel can be counted against the advanced biofuels mandate. EPA set the final demand requirement for advanced biofuels in 2017 at 4.28 billion gallons, 7% above its May 2016 proposal of 4 billion gallons, which is still less than half of the statute’s 9 billion gallons for this year.

In their analysis under multiple scenarios, Irwin and Good set implied demand for biomass-based diesel at 3.083 billion wet physical gallons in 2017 that could decline to 2.883 billion gallons in 2018 or increase to as high as 3.363 billion gallons, depending on how the Trump administration addresses the RFS. By 2022, the year when volume increases under the RFS end, biomass-based diesel demand could range from 3.316 billion gallons to 4.329 billion gallons.

“While annual production of and consumption of biomass-based diesel and its feedstocks will likely increase substantially by 2022 in order to fulfil the advanced mandate, the magnitude of the increase could vary over a wide range depending on how much of the cellulosic mandate is effectively converted into additional biomassbased diesel mandate,” said Irwin and Good.

In its most recent Shortterm Energy Outlook, the EIA projects distillate fuel consumption to grow 1.5% to 3.94 million bpd in 2017, after dropping 3% to 3.88 million bpd in 2016 and 1% to 4.0 million bpd in 2015. The projected pickup in demand comes alongside expectations for quicker economic growth in the US in 2017, with the latest data available from the US

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Bureau of Economic Analysis estimating a 3.5% annualised growth rate for the US economy in the third quarter 2016 – the greatest quarterly expansion in two years.

In the US, growth in diesel demand correlates closely with an expanding economy since diesel is primarily used in commercial and industrial settings. Freight movements in November 2016 suggest the trend continued into the fourth quarter, with the American Trucking Associations’ (ATA) advanced seasonally adjusted For-Hire Truck Tonnage Index climbing 5.7% from year prior.

“While I think the November gain overstates the strength in the freight markets, I do believe we are seeing some improvement that will continue into 2017. Retail sales are good, the housing market is solid, and the inventory

overhang throughout the supply chain is coming down, all of which will help support truck freight volumes in 2017,” said ATA chief economist Bob Costello.

Trucking serves as a barometer of the US economy, representing 70.1% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. l

For more information: This article was written by Brian Milne, who manages the refined fuel’s editorial content, spot price discovery activity and cast market analysis for Schneider Electric. Milne has nearly 20 year’s experience in the energy industry as an analyst, journalist and editor. Tel: +1 952 851 7216

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With the purpose of gathering the main representatives of the North American financial market, the International Sugar Organization (ISO), in partnership with DATAGRO held the ISO DATAGRO NEW YORK SUGAR & ETHANOL CONFERENCE. Enshrined as the official technical event of the New York Sugar Dinner, it has become traditional in the global sugar & ethanol calendar.

conferencia@datagro.com +55 11 4133 3944

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biofuels regional focus Big goals are set for South American renewables – but can the region deliver?

The land of possibilities

By Colin Ley

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razil is committed to doubling its domestic usage of ethanol over the next 15 years, a goal which undoubtedly sounds good for investors in the sector. The big question, of course, is can such an expansion be achieved, especially from what has become an extremely volatile national starting point both politically and economically.

The country’s ethanol growth plan is part of the Brazilian government’s response to the global Paris accord, which was agreed at the end of 2015 and signed by the world’s leaders “at the time”. Some of the Paris

accord leaders have already departed the scene, not least in Brazil. The future of others remains open to debate, or the ballot box, depending on the election processes in place across the world.

For the moment, however, Brazil has set itself some very ambitious ethanol targets – advanced by the country’s current President Michel Temer – which are designed to lift the country’s use of ethanol from 28 billion litres per year in 2015 to around 50 billion litres by 2030, substituting a considerable volume of potential petrol consumption.

“While this obviously sounds encouraging for the

ethanol industry, a doubling of usage in 15 years will only be achieved if sufficient people and businesses can be persuaded to make substantial investments in new cane production and in new milling capacity,” Andy Duff, global sugar strategist with Rabobank International in Brazil, tells Biofuels International, adding that there is certainly not enough capacity in place at present to meet the government’s 15-year goal.

Pedro Parente, CEO of Brazil’s state-run oil company Petrobras, the country’s only refiner of oil, made a similar point late last year,

commenting on what he termed the “growing deficit” in the country’s refining capacity. Addressing a major ethanol and sugar conference hosted by Brazil’s cane industry association UNICA, Parente said he expected the gap between national petrol demand and his own group’s refining capacity to reach three billion litres a year by 2030.

For such a gap to be closed, existing and potential ethanol investors will need to be convinced that it will be financially attractive for them to invest in the 15-year plan. Industry commentators are agreed, however, that such a case has not been made so far.

“The sector is waiting to see whether the government, having set its ambitious targets, is going to be able to come up with the necessary additional measures to encourage private investors to put more money into new capacity,” says Duff.

Bittersweet sugar market

Andy Duff, global sugar strategist at Rabobank International

All of this is taking place against the background of a pretty rotten decade for ethanol. Having begun with boom conditions for the sector, sparking the development of substantial new capacity, most of the last ten years has been tough on industry participants, old and new, leaving many with chronic indebtedness. The

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production of ethanol in Brazil, of course, is inextricably linked with sugar production, with the country’s millers converting sugarcane into both sugar, largely for export, and ethanol, largely for domestic use.

In general, Brazil’s mills have a degree of production flexibility which allows them to operate on a 60/40 sugar/ ethanol basis when sugar prices are high and vice-versa when output profitability shifts towards ethanol. Thus, the higher global sugar prices mean that less raw material is available for ethanol, and sugar prices have been spectacularly high for the past two years. Driven by a world sugar price that broke through $0.22 (€0.19)/lb in 2016, the goal of doubling ethanol output in 15 years is clearly starting from an extremely low point, with millers having recently maximised their sugar output at the expense of ethanol.

Add in questions about the strength of the sugarcane harvest, alongside Brazil’s economic and political issues, and the 2017 picture begins to look extremely “muddy”.

“A bit of the air does appear to be coming out of the global sugar market, at present,” says Duff, without going so far as to suggest that the price downturn is particularly dramatic so far.

“Once the sugar prices start coming down, however, the arbitrage between ethanol and sugar will begin to become a factor again in terms of future production decisions.

For many mills that really means looking at how much to adjust within a 10% degree of flexibility between sugar and ethanol, even though some can go as far as 60/40 in favour of either output.”

Asked at what point a slowly declining sugar price would begin to tip production back towards ethanol, however, Duff settles on a sugar price of $0.16/lb to $0.17/lb as the short-term profitability balancing point between sugar

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and ethanol as the preferred destination for raw cane crops.

He also stresses that this point is a moving target that depends on the interaction of volatile commodity markets (sugar and oil) and the BRL/ USD exchange rate.

the country’s fragile economy.

Although the long-term goals set for Brazil’s ethanol usage are impressive with clear benefits in prospect for producers, investors are still to be convinced that it’s really all possible.

Persuading motorists

Action and ambition in Argentina

Another unknown which will continue to interest investors as the year develops is how much the Brazilian government is willing, and able, to encourage motorists to fill up with hydrous ethanol as opposed to petrol via differential

Renewable energy ambitions are also being given fresh government focus and support in Argentina, where President Mauricio Macri is pressing ahead with a programme designed to increase the role of renewables across

‘Current biofuels opportunities in South America are based on good land availability and an excellent climate’ Marcel van Heesewijk, founder and CEO of Investancia

tax treatment of petrol and ethanol, for example.

The market for anhydrous ethanol, blended with petrol at a 27% rate under longstanding Brazilian legislation, provides a guaranteed market for producers. The same is certainly not true for hydrous ethanol, which is a substitute for petrol.

Even though flex-fuel cars account for 60-70% of Brazil’s vehicles, creating a massive potential demand for hydrous ethanol, the sector is extremely price sensitive. Given, for example, that ethanol delivers around 70% per litre of the energy content of petrol, demand for hydrous ethanol ceases to grow when its price at the pump approaches 70% of the price of petrol.

Forecasting how rising global oil prices and fluctuating currency rates may impact on Brazil’s hydrous ethanol pump price in 2017 is therefore a complex issue, further complicated by the government’s management of

the country’s energy matrix.

Currently, just 1.8% of power needs in Argentina are met through renewable energy sources, an energy share which the government wants to raise to 20% by the end of 2025.

Action is also being taken to increase the percentage at which ethanol is blended into petrol in Argentina. Having already moved from a 10% to 12% (E12) in early 2016, the aim now is to progress towards an E26 blend, almost the same as already applies across the border in Brazil.

Once again, however, potential investors will want to know that Argentina’s increased commitment to renewable sourcing is achievable, first and foremost, and sustainable in the longer term.

One business that has already decided it can commit to Argentina’s new policies with fresh investments of its own is NexSteppe, a USbased company dedicated to pioneering the next generation of sustainable

feedstock solutions for bio-based industries.

Already well established in Brazil, NexSteppe is looking to expand into other counties in Latin America, adding Argentina, Colombia, Paraguay, and Uruguay to its current 20 plus country network.

“We are particularly excited with the Argentinian market, based on new policies which have emerged to support renewable energy and biofuels,” says Ricardo Blandy, NexSteppe’s VP of business development in Latin America, adding that commercial operations in each of the new countries are scheduled to begin within the next six months.

Paraguayan pongamia Current biofuels opportunities in South America are based on good land availability and an excellent climate, making the region the world’s best environment for the high volume production of both first- and, more importantly, next-generation non-food feedstocks, says Marcel van Heesewijk, founder and CEO of Investancia, whose expanding pongamiabased development is located in Paraguay.

“South America is also poised to become an important end-user market for biofuels,” he adds, pointing out that Brazil’s 30-year development of a 10 million hectare sugarcane industry means that the country is potentially able to provide its 26 million flex engine cars with locally-produced biofuel.

Van Heesewijk also believes that increasing production of hydrogenated vegetable oil-based renewable diesel is set to become the “next tremendous opportunity” in South America, adding that the region is well set to welcome investors, including business-friendly and open economy countries such as Paraguay. l

january/february 2017 17

biofuels market outlook Opportunities and challenges on the eve of the abolition of EU sugar quotas

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Estimates for beet growing areas and production in the EU28 from 2016/17 to 2021/22 roduction2016 quotas for The most2019 significant increases 2017 2018 2020 2021 isoglucose will take place area (kha) sugar and1499 1610 1635 1657in France 1686and 1713 production (Mt) 110 130 134 production 138 will be eliminated in 125 the Germany, where is 143

EU as of 1 October, the most competitive. Poland 2017. Sugar beet growers should also play its part, as will no longer benefit from a well as Belgium, the UK, and guaranteed minimum purchase countries of central and northern price for their crop and sugar Europe. On the contrary, production and exports will some of the least competitive no longer be capped. The countries (Italy, Greece, and reforms will generate major Croatia) will see their area changes in terms of market decrease. In total, EU sugar conditions within the EU and beet area should increase by indeed the equilibrium of 7 % in 2017/18. With normal Bioethanol consumption forecasts in the EU (Mtoe) Consumption the global sugar market. growing2016 conditions, this should 2005 2010 2015 2017 2018 (Mtoe) Sugar manufacturers, beet lead to a 14 % increase in sugar Gasoline associations, 115.2 97.4 83.2 growers and beet- 83.3 beet production, to82.6 125Mt. 81.9 ethanol producers are preparing Prospects are also good 3.1 Bioethanol 0.5 2.7 2.8 2.8 2.9 actively for the transition. in the longer term. Global Bioethanol 0.50% 2.80% 3.30% 3.70% Stratégie demand3.40% for sugar3.60% is projected content in Grains has used its expertise in the analysis of to grow sharply between now agricultural commodity markets and 2021/22, driven upwards to establish a detailed forecast by growing population and for the five years following the changing consumption patterns abolition of quotas. The working in developing countries. This hypotheses and explanations demand growth will ensure that of the forecasts are available global sugar inventories remain in a 70-page report published quite low for several seasons. in November 2016.

This should keep beet prices at relatively attractive levels for EU sugar beet production beet growers. Sugarbeet area to increase in the EU should continue to expand steadily after 2017/18 According to Stratégie Grains, and European beet production the elimination of quotas comes could reach 143Mt in 2021/22. at an auspicious time for the global sugar market. The world Optimisation of beetbalance sheet exhibits a sugar based ethanol production deficit in 2015/16 and 2016/17 and the tension has sustained For more than 10 years, some prices since late 2015. In the of the large sugar manufacturers first season of the post-quota have diversified into ethanol period (2017/18), sugar beet production at sites adjacent to cultivation will remain profitable their sugar factories, adding for growers in the EU and value to their infrastructure growing areas should increase by using sugar juices and in almost all producer countries. molasses (by-products of

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2020 long-term trends for fossil fuel 81.5 81.0 consumption and countryby-country forecasts for 3.2 3.2 incorporation rates (based 3.90% on national4.00% mandates), bioethanol consumption in the EU is forecast to increase by 13% between 2016 and 2020. Bioethanol content in petrol would increase from 3.4% in energy in 2016 to 4% in energy in 2020.

Although that increase in consumption can partly be met by imports, notably from the US, EU bioethanol production could increase. No new unit based on sugar beet is expected in coming years as they require big investments, policy support, and are usually linked to a sugar factory. However, the increasing ethanol demand is expected to lead to optimisation of sugarbased ethanol production.

In 2016/17, beet-ethanol production is being limited by the low sugar beet harvest (disappointing yields in the main producing countries) and tightness on the sugar market meaning that manufacturers

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favour sugar production to the detriment of ethanol production. With the sharp increase of beet availability forecast from 2017/18 onwards, there should be enough feedstock for all sugar beet outlets, including ethanol.

After 2020?

The future of beet-based ethanol is much more uncertain after 2020, as the 2030 biofuel targets are not yet decided at the European level. Late November, the European Commission published its proposal for the 2030 biofuel roadmap. It proposed a reduction of the contribution of conventional biofuels in transport from a maximum of 7% in 2021 to 3.8% in 2030. At the same time, low emissions fuels (renewable electricity and advanced biofuels) should raise their share to 6.8%.

This proposal is already highly contested by first-generation ethanol producers, including beet-ethanol manufacturers.

It will probably take some time to reach a satisfactory agreement between the European Commission, the European Parliament and the European Council. l For more information: This article was written by Madeleine Breguet, sugar and biofuel analyst at Tallage/Stratégie Grains. Visit: www.strategie-grains.com

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Brazil sugarcane plantation

Paving the road toward sustainable fuels

The Brazilian experience

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s the global ethanol industry works to expand production, tackle climate change challenges, and grow a sustainable economy, it should consider the “Brazilian experience” with biomass and biofuel. Over the past 30 years, renewable fuels from sugarcane have become a cornerstone of Brazil’s economic and environmental policy.

By becoming the world’s second-largest biofuels producer, Brazil has reduced its oil dependence and increased domestic energy security – all while improving the environment. While challenges remain, lessons from past policy successes can keep biofuels thriving.

Outside observers may be surprised to hear ethanol and bioenergy produced from sugarcane already constitute 15.7% of Brazil’s energy mix.

Since the national ethanol programme began in the 1970s, Brazil’s avoided more than 550 million tonnes of

biofuels international

carbon dioxide emissions, multiplied production 20fold through technological innovation, doubled cane yields, and cut prices in half.

Sugarcane on the grow Just this past harvest season, Brazil produced 7 billion gallons of advanced ethanol.

Brazil typically makes between 400-800 million gallons of annual production available for exports, and Brazilian consumers have chosen to replace almost 40% of national petrol needs with sugarcane ethanol. Flex-fuel vehicles capable of running on either petrol (which in Brazil is E27) or ethanol comprise about 90% of domestic new vehicle sales.

Self-sufficient sugarcane mills in Brazil also use leftover material from the refining process (called bagasse) instead of fossil fuels to power their operations. These plants often produce enough power to sell renewable electricity back to the grid,

and in 2015 they generated 15 million MWh of bioelectricity from cogeneration.

Sugarcane ethanol’s benefits come without sacrificing wider environmental quality. Sugarcane fields store roughly 55 tonnes of carbon per hectare, including aboveand below-ground and soil organic carbon. Additionally, sugarcane only needs replanting every six years, reducing land tilling and the amount of carbon released from soil. Each hectare of sugarcane produces around 7,000 litres of ethanol, roughly twice corn’s yield, creating more energy on less land with less fuel burned for harvest.

These combined overall environmental impacts underpin Brazil’s participation in the Paris Agreement on climate change. The country’s intended nationally determined contribution (INDC) targets 37% lower emissions by 2025 compared to 2005, with further reductions by 2030. These targets assume biofuels supply approximately

18% of Brazil’s energy mix by 2030 through greater sugarcane ethanol production, expanded second-generation biofuels, and additional biodiesel for transportation.

Learning from the past While Brazil’s INDC and overall biofuel production goals are ambitious, the Brazilian experience shows they are realistic. As in the past, future success will rely on three fundamental pillars: predictable policy, sustainable production, and technological innovation.

First, clear and stable government policy fostered well-established rules and led Brazil’s biofuels industry through the first wave of sugarcane ethanol growth from the 1970s to the 1980s.

The second growth wave started in the early 2000s, driven by the introduction of flex-fuel vehicles. While in recent years regulatory uncertainty has reduced investments and slowed

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biofuels sugarcane feedstock technological development, UNICA is optimistic Brazil will maintain its regulatory framework incorporating the positive externalities of renewable fuels into prices via consumption mandates or tax differentials favouring biofuels over petrol.

Second, sustainable production has been the foundation of the Brazilian experience and must

Ethanol and bioenergy produced from sugarcane already constitute 15.7% of Brazil’s energy mix continue expanding in an environmentally-friendly way. Brazil’s agro-ecological

zoning policy prevents sugarcane expansion in the most sensitive biomes and

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in native vegetation, while authorising expansion into 64.7 million hectares of suitable land – about 7.5% of Brazil’s territory, compared to the 1% of land currently used for sugarcane production.

Brazil’s current approach to production includes the Council of Sugarcane Industry and Growers creating clear rules for cane prices, paying growers fair prices, and minimising potential conflicts. UNICA also supports innovative models like selfregulatory commitments and third-party certifications.

Third, research and development have unlocked next-generation biofuels and must be enhanced to increase ethanol’s competitiveness.

Second-generation ethanol is already a reality in Brazil, with Raizen producing ethanol from cane bagasse in Sao Paulo. The Center for Sugarcane Technology has demonstrated optimising production, advancing genetic enhancements and expanding agronomy to increase feedstocks, and industrial re-engineering first-generation production to second-generation ethanol can raise production from 1,850 gallons per hectare to 6,500 gallons per hectare.

Brazil has shown what is possible when policies are right, when markets are open, and when trade and innovation are encouraged.

Working with other countries, Brazil will continue building a global biofuels market providing clean, affordable and sustainable solutions for the planet’s growing energy needs. l

For more information: This article was written by Leticia Phillips, North American representative at the Brazilian Sugarcane Industry Association UNICA. Visit: www.sugarcane.org

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What kind of year will 2017 be for biofuels?

Market leaders from around the world reflect on 2016 and make their predictions for the year ahead and motivate consumers to demand cleaner, more affordable options at the pump. In fact, from 2015 to 2016, the number of states where consumers could find a station selling E15, a 15% ethanol blend, doubled to 28.

Prime the Pump

Another gamechanging year for biofuels Emily Skor, CEO at Growth Energy

2016 was a game-changing year for America’s biofuel industry. From exports to the production of cellulosic biofuels, we set a new pace for success. And for the first time in years, the Environmental Protection Agency (EPA) announced targets for conventional ethanol consumption that meet the goals set forth by Congress in 2007. None of these achievements would have been possible without a groundswell of support from dedicated advocates and our industry’s ongoing partnership with key retailers to bring higher blends to the market

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As we look to 2017, accelerating growth in use of biofuels will remain a top priority for our industry. In December, a strategic plan issued by the Department of Energy projected that biofuels can comprise 25% of America’s transportation fuels by 2040. This could be just the beginning. To make this goal a reality, Growth Energy is reintroducing consumers to the benefits of ethanol through targeted outreach and social media-friendly platforms like GetEthanol.com.

We’re also expanding our partnerships with retail allies to bring higher ethanol blends like E15 to new markets through initiatives like Prime the Pump, which supports the installation of biofuel pumps at local gas stations.

As always, the Renewable Fuel Standard (RFS) will remain vital to protecting consumer options, and Growth Energy will continue to

lead the charge in educating policymakers regarding the importance of a strong RFS and regulatory certainty in the fuels market. We’re also working closely with regulators to break down the remaining barriers that have prevented biofuels from reaching their full potential. Chief among these are EPA rules related to Reid vapor pressure (RVP).

Current rules are hopelessly out of date, having been enacted before E15 was part of the conversation, and they require cleaner fuels to meet tougher vapour standards than traditional blends during summer months. As a result, many retailers do not offer E15 during the very months when Americans spend the most time on the road.

New administration We also will work closely with the new administration to ensure that new barriers are not erected by those seeking to protect the market share of fossil fuels. For example, despite opposition from the broader oil industry, some refiners and their allies in Washington are pressing the EPA to shift the point of obligation under the RFS. Under this plan, many refiners and fuel importers would be

exempted from renewable fuel standards with the burden of compliance passed onto fuel retailers and distributors.

In practice, the effort would only destabilise the incentive to offer higher ethanol blends at the pump, potentially raising prices on consumers and interrupting America’s progress toward clean energy.

On this and other fronts, we will continue to rally our champions on Capitol Hill and engage with the new administration to reinforce the economic, environmental, and energy security benefits of America’s vibrant biofuels sector. According to a poll Growth Energy released in January, more than eight in ten Trump voters in the battleground states agreed with the President’s vocal support for ethanol, and we’ll spare no effort in reminding this administration and other leaders of the mandate delivered by probiofuel voters. Consumers want and deserve cleaner fuels that increase engine performance, protect the environment, and save them money. With their support and hard work, the seeds sown in 2016 promise to make 2017 another groundbreaking year for biofuels.

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biofuels outlook 2017

US biodiesel industry faces record market potential and challenges in 2017 Donnell Rehagen, CEO at National Biodiesel Board

The year ahead is one of challenges and tremendous growth potential for the US biodiesel industry.

Biodiesel is already the most widely available advanced biofuel in the country and as a collective industry, we continue to achieve more than we ever have before.

The market for advanced

UK bioethanol industry hopeful for the future Mark Chesworth, managing director at Vivergo Fuels 2017 is set to be a pivotal year for the bioethanol industry in the UK. With the right government support, it has the potential to become a flagship post-Brexit industry and

biofuels to replace petroleum diesel is larger than ever.

The year 2016 saw an estimated 2.7 billion gallons of biodiesel and renewable hydrocarbon diesel used in the US, a sixth consecutive year of record volumes.

The US Environmental Protection Agency’s (EPA) action in November to finalise the 2017 Renewable Fuel Standard (RFS) volumes and 2018 biomass-based diesel volumes helps provide stability within our industry. The growth in the total renewable fuels and advanced biofuels categories above the volumes originally proposed last spring were a welcome sign. Combined with a 2 billion gallon volume for biomass-based diesel in 2017, we are likely to see volumes of biodiesel and renewable hydrocarbon diesel approach three billion gallons in the marketplace this year – another record.

State and regional markets also continue to use biodiesel and other low-carbon fuels as a way to reduce emissions

and improve air quality. The growing body of research supporting this conclusion includes noteworthy analysis published by the National Renewable Energy Laboratory, Argonne National Laboratory, the EPA, the US Department of Agriculture, and the California Air Resources Board. Each of these institutions has affirmed that US biodiesel reduces GHG emissions by at least 50% and often as much as 85% compared to petroleum diesel fuel on a full life cycle basis.

Recent vehicle announcements from American auto manufacturers show that diesel remains an important option in the passenger vehicle segments with new options coming from Ford and General Motors in the light duty pickup, SUV, and passenger car segments for the 2018 model year.

And diesel engines remain the undisputed primary power source for medium and heavy-duty on and off road vehicles, rail, marine, industrial, agriculture, and

construction applications.

One major challenge ahead of our industry this year is reinstatement of the biodiesel tax incentive. This critical policy is a key factor in reaching that three-billiongallon market potential.

Allowed to lapse again on 31 December, 2016, NBB and its members worked exceptionally hard to secure a seamless transition. While we weren’t successful in doing so, with the help of our champions in Congress, we laid the groundwork for enacting legislation to extend the incentive through 2019 and to provide a key reform to a domestic production credit versus a blender’s credit.

Under the new Congress we anticipate tax reform talks to heat up once again early this year. NBB and its members will be deeply involved in those discussions.

Even with the challenges we face, 2017 has the potential to be a banner year for biodiesel.

deliver significant economic value to the British economy, as well as set the agenda for future advancement.

Now that the government has outlined recommendations to set the Renewable Transport Fuel Obligation (RTFO) level at 9.75% for 2020 and beyond, we’re increasingly hopeful that we will see the introduction of E10 fuel – a 10% blend of bioethanol in petrol – at UK pumps in the near future. This is not only the cheapest, simplest and most practical solution to help meet this renewables target, but would also deliver a significant environmental impact. Transport represents 24% of total greenhouse gas (GHG) emissions, higher than any other sector in the UK economy and this has been increasing. A commitment to upping the bioethanol

blending levels will play a vital role immediately and at significant scale. To put this into context, the introduction of E10 would be the carbon reduction equivalent of taking 700,000 cars off UK roads.

What’s more, the introduction of E10 would bring certainty to this important British industry and to UK investment as a whole, boosting British business, jobs, farming, and fuel security at a crucial time for the country. Our bioethanol creates an alternative domestic market for UK farmers at a time when the international trading scenario looks increasingly precarious. We use non-feed grade wheat in our production and, as a result, are boosting the fortunes of farmers to the value of £1 million (€1.15m) per month, compared to the smaller export value they would receive.

Vivergo Fuels represents a £350 million investment into the Humber region, where we currently produce 420 million litres of bioethanol every year.

If given the right support, including a crop cap in line with other European countries, the bioethanol industry can play a key role in encouraging more positive economic growth, as well job creation and retention in the energy industry and related supply chains.

Here too lies opportunity for the advancement of the industry. As pioneers of greener fuel, existing biofuels producers are in the best position to invest in research and development projects that will determine the future of biofuels, but require the investor certainty and stability from government to enable this.

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Rapid adoption of E15 Rachel Gantz, communications director at the Renewable Fuels Association The industry experienced record demand for ethanol in 2016 and we expect that to continue into 2017. We expect ethanol demand to be driven by a host of factors, both domestically and abroad.

Thanks to Environmental Protection Agency (EPA) fully implementing the 2017 conventional biofuel renewable volume obligations (RVO) at its statutory 15 billion gallon level, domestic demand will continue to escalate and US refiners and blenders will increase their use of ethanol in blends like E15 and flex fuels like E30 and E85. Obviously, this is good news for consumers, as more ethanol in the US fuel mix will further help reduce

greenhouse gas emissions, boost octane, lower our dependence on foreign oil and lower prices at the pump.

We also expect US ethanol exports to continue to grow.

Some of the largest markets in 2016 were China, Brazil, Canada, Mexico and India, and with more countries around the world recognising the numerous benefits of ethanol, we expect US ethanol exports to expand further.

On the road with E15 We think octane will continue to be a big trend in 2017, as the global fuel market is short on octane and new automobiles are increasingly requiring or recommending the use of higher octane fuels.

We think automakers will embrace higher-octane petrol as a means of helping to meet more stringent fuel economy standards in the future. With a 113 octane rating, ethanol is the cleanest and lowest-cost high-octane fuel component in the marketplace. We also think a major trend in 2017 will be more rapid adoption of E15. We saw great progress with E15 in 2016, as the United States Department of Agriculture (USDA) grant programme and an industryfunded Prime the Pump effort helped fund infrastructure development. Now that

hundreds of new stations have put in the pumps to dispense E15, we expect to start seeing E15 sales volumes take off.

With a new administration taking the helm and a new Congress, the ethanol industry will be intensifying its efforts to educate and inform policymakers about the many benefits of ethanol and the RFS. There is a tremendous amount of misinformation out there and a number of biofuel opponents are ramping up efforts to attack the RFS and our industry. We can’t let them succeed and we can’t let them define who we are and what we do as an industry. It will be more important than ever in 2017 for everyone in our industry to work together to ensure our new leaders have a proper understanding of the enormous contributions we make to the nation’s economy, energy security and environment.

Stimulating meaningful dialogue The industry’s biggest challenge is to continue to grow demand for ethanol in the face of more stringent fuel economy standards in the face of flagging public support for low-carbon programmes and unrelenting attacks from the oil industry. The industry will need to invest in new technology

JOIN THE DISCUSSION…

and more infrastructure to encourage higher level ethanol blends. Thanks to USDA’s Biofuel Infrastructure Partnership funding and the industry-funded Prime the Pump programmes, retailers are expanding their offerings of E15 and other higher level blends, but a stable and strong RFS is needed to help meet growing demand for the biofuel. We also need to stimulate a meaningful dialogue with the auto industry about vehicle technology and higher octane fuels. Finally, the industry’s efforts to expand exports must continue.

The RFA will continue to lead the way when it comes to growing our industry.

What can you expect from us in 2017? A lot. We will ensure that a strong RFS is maintained, lead safety seminars on the proper handling of the fuel, issue world-class analysis on regulations that affect our industry, promote high octane fuels, boost expansion of retail infrastructure to allow more higher level ethanol blends, ensure the growth of secondgeneration biofuels and grow US ethanol exports. The RFA remains committed to growing our industry through multiple avenues and we look forward to a thriving industry in years to come. l

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biofuels process optimisation Tools and techniques in process simulation and modelling for biofuel production

Simulating success

M

aximising profits by operating the most efficient process possible is the primary goal of all biofuel companies. To help create efficient operations, companies use process simulation, which is the application of a range of software tools to analyse complete processes, not just single unit operations.

Process engineers and scientists use simulation models to investigate complex and integrated biochemical operations, without the need for extensive experimentation.

Simulation tools can be used at all stages of process development, from initial concept through design to final plant operation.

Early in the design history, process models are used for technoeconomic analysis of competing processes. Once the facility is operational models are used to optimise the process.

Process simulation encompasses a range of tasks, including creating process flow diagrams, generating material and energy balances, determine equipment sizing, and estimating capital and operating costs. Although standard in the chemical industry, the application of process simulation to industrial bioprocesses is not widespread. However, some large-scale bioprocesses have been studied for many years. For example, the National Renewable Energy Laboratories (NREL) in Denver, Colorado, has been modelling biomass-to-ethanol processes for more than 20 years.1,2 In the early days of the cornto-ethanol processes, several engineering companies offered

complete processes under license. A license enables the plant developer to readily acquire the design knowledge and legal rights to build and operate a plant. Operating a licensed process can have some legal restrictions and for the plant operators there was little incentive to employ tools to optimise the process.

These facilities were also rarely run by operators experienced in running chemical processes, and so

validation of the model to generate a “base case”.

However, once built the model can be used to study many aspects, including: • Effect of process variations • Effect of feedstock variations • Effect of key process parameters • Effect of new unit operations The level of detail in any model depends on the questions asked. It is always important when building

Simulation is best applied to tackle complex problems where solutions are not obvious and where the investment is justifiable there was little experience with process simulation. In recent years, the situation has changed, and there has been some consolidation of early phase corn-ethanol plants. There is also increased involvement from the major oil companies, and the introduction of next-generation cellulosic ethanol processes.

Developing models for process simulation Building accurate process models involves getting data from many sources.

Characterising a facility requires inputs from several groups, and experience is needed to find the right data in addition to manipulating the flowsheet software packages.

Considerable effort is required for the initial generation and

process models to not overcomplicate the models, but to include only the level of detail required to answer the questions being addressed.

Too often modelling exercises fail to deliver a sufficient return on investment because the models become too complex or there is insufficient knowledge to apply the models effectively.

Many process modelling exercises often focus solely on the specific generation of the end product. However, often it is the ancillary activities that are equally important – activities such as cleaning vessels, preparing media and processing waste.

Simulation is best applied to tackle complex problems where solutions are not obvious and where the investment is justifiable. For a

typical corn-to-ethanol biofuel plant that has been operating successfully, there may be little value in a complex process model. In the course of operations plant operators tweak the conditions to optimise the process, leading to optimisation by evolution.

Even in this case the plant manager will have a spreadsheet with simple formulae to compute yield values, such as the number of gallons of ethanol per bushel of corn, and maybe the number of gallons of water per gallon of ethanol, and the energy consumption in MMBTUs per gallon of ethanol. The MS Excel spreadsheet is the most widely used platform for creating this rudimentary process model.

If more process detail is required because of a proposed plant expansion or process change, then a more detailed model becomes necessary. Flowsheet models offer the best way to study the effect of all the individual unit operations in the overall process, such as: - Evaporator configuration - Centrifuge operation - Distillation reflux ratio - Molecular sieve regeneration conditions - Fermenter turn-around time - Percent inoculum for the fermenter Flowsheet simulation packages Simulation can be used at many levels, from simple mass balances providing an overall analysis for process audits and using spreadsheets, to complex descriptions of specific operations. There is now a range of tools available for process simulation.

Selecting the appropriate tool

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Flowsheet simulation – level of detail and corresponding areas of applicability Overview analysis

Detailed simulation

Dynamic simulation

Conceptual design

Equipment design

Effect of process upsets

Process economics

Process configurations

Emission profiles

Waste stream management

Heat integration

Start-up/shutdown

Resource utilisation

Debottlenecking

Process control options

Labour requirements

Process optimisation

Operator training

depends on the level of detail required for the model and the questions being answered.

The table labelled ‘Flowsheet simulation’ highlights the areas where different simulation approaches are used.

Modelling complex flowsheets requires purposebuilt software, and there are a range of software packages that have been developed.

SuperProDesigner from Intelligen (Scott’s Plain, New Jersey) combines drawing, calculation and scheduling features in a moderately priced package. From its inception, the product had an emphasis toward the bioprocess industry. The simulator can be used to study both batch and continuous processes, making it ideal for biofuel processes, which are typically a blend of both.

The SuperPro model for a corn-to-ethanol facility was developed ten years ago by the USDA-ARS3, and is now included as an example file in the SuperPro Designer software. A section of the flowsheet is shown in the figure one , where the connectivity for different unit operations is illustrated.

Aspen Technology (Burlington, Massachusetts) offers a more extensive suite of products. For biofuels, it is possible to use the conventional Aspen Plus simulator, but it requires customisation for some bioprocess operations. There

biofuels international

are several other chemical process simulation packages that can also be adapted to biofuels processes, e.g.

ProSIM (Toulose, France) and ChemCAD from Chemstations (Houston, Texas).

Another package for developing models is gPROMS from PSE (London, UK). This package solves complex systems of differential and algebraic equations and can be used for dynamic flowsheet simulations or for modelling single-unit operations.

Sometimes the performance of a process is highly dependent on the operation of a single unit. In this case, a detailed mathematical model may be required. Popular tools for writing such models include Excel (Microsoft) and MATLAB from Mathworks (Natick, Massachusetts).

Of course, mathematical models can be written in many software languages, but there is the problem of solving equations and maintaining and documenting the code. Hence it is often more convenient to use a commercial software package.

A recent development in bioprocess modelling is the use of computational fluid dynamics (CFD).

Commercial packages exist, such as FLUENT from Ansys (Canonsburg, Pennsylvania), or Star-CD from CD-Adapco (New York, NY) that can model mixing effects by

incorporating physical properties of the fluids with detailed information on the vessel internals, such as impeller geometry and baffle location. CFD programs can calculate the velocity profiles within the fluid to model gas dispersion, calculate residence time distributions, and visualise the mixing process.

Results from these models highlight such phenomena as areas of poor mixing or areas of high fluid shear.

The interest in CFD is due to several reasons. First, computationally intensive CFD models now run on inexpensive workstations and even laptops. Secondly, as companies operate at larger scales, flow phenomena such as degree of mixing become more important. At small scale it is easy to ensure vessels are well mixed, but at large scale good mixing is more difficult to achieve. Engineering companies are now using CFD for the design of vessels and impeller geometry.

Process simulation case studies Once a flowsheet model has been developed, there are many case studies that can be developed, such as: • Energy audits • Water audits • Inputs for Life Cycle Analysis (LCA) models • Overall water usage • Scheduling issues

• Waste generation and minimisation • Process modifications • Coproduct development Overall water usage All bioprocessing operations consume significant quantities of water as part of the process, for cleaning purposes and as steam for sterilisation.

Some operations use several different qualities of water and all require varying degrees of processing. It is important to size the water systems such that multiple uses will not completely drain the system.

The general approach today is to reduce, recycle and reuse as much water as possible.

Scheduling issues As the front end of the biofuel process operates in batch-mode there are many scheduling issues, such as feedstock delivery, batch preparation of media and other additives, and batch cleaning of equipment. Cleaningin-place (CIP) systems are required to clean multiple pieces of equipment, but can only clean one piece at a time, so it is important to develop an optimum CIP schedule.

Waste generation The end product will contain little water. Therefore, most of the water used in the process requires disposal, treatment or recycle. If the water streams contain significant amounts of biomaterial, then this contributes to a high BOD value for the stream and is a pollution hazard. Design of on-site treatment plants may be required. Additionally, it may be desirable to segregate wastewater streams and recycle the cleaner streams with minimal purification.

Process modification Enzymatic corn wet milling (E-milling) is a process derived from conventional wet milling for the recovery and purification of starch and co-products using proteases to eliminate the

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need for sulphites and decrease the steeping time4.

A process model developed

by USDA-ARS for this compares the new approach to the original wet mill.

Co-product development As studies continue to look at new value-added uses of ethanol co-products, it is important to have a means of easily determining the feasibility of the processing steps involved. Computer simulations provide a tool for such determinations to gain a complete understanding of how changes in material prices, market prices and the adjustment of basic coproduct processing (oil extraction and drying of DDGS) affect the economics of a base ethanol plant model.5

allows the what-if questions to be addressed without extensive experimentation.

As the process becomes well characterised and plant operation becomes routine, the next phase is to minimise cost of production. Oil

targets. Biorefineries are not yet at that scale, but this is the future direction.

In addition to the models that have been developed for corn ethanol facilities, models have been developed for other types of biofuel processes,

For more information: This article was written by Ian Gosling, CEO at Chemsim.

Visit: www.chemsim.com References 1. Wooley, R.J. and Putsche, V. Development of an ASPEN PLUS Physical Property Database for Biofuels Components, NREL Report MP-42520685, National Renewable Energy Laboratory, Golden, CO, April 1996.

2. Wooley, R., Ruth, M.,Glassner, D., Sheehan, J., “Process design and costing of bioethanol technology: A tool for determining the status and direction of research and development:, Biotechnol. Progress Vol 15, 1999, pp794-803

Summary Often plant operators know where processes can be improved, but need help communicating this and quantifying the benefits to upper management. Process modelling provides a tool to aid this communication.

Process simulation can also help provide early justification for capital projects, often before an engineering company is involved. Process simulation

Process simulation is routinely used in the operation of petrochemical complexes and oil refineries.

These simulation tools are now available to be deployed to provide efficient operations for today’s biofuel operations, and the design of tomorrow’s facilities. l

Maximising profits by operating the most efficient process possible is the primary goal of all biofuel companies

refineries and petrochemical companies all employ process simulation to achieve these goals. For the massive refinery operations, even fractional percentage gains in throughput translate into millions of dollars, so process simulation is used to target these throughput

such as for levulinic acid, ABE (Acetone, Butanol, Ethanol), as well as biodiesel and other ethanol processes from different feedstocks.

Developing a range of processes from a common basis allows comparisons to be made and economic processes to be selected.

Fig 1. Section of Corn to Ethanol flowsheet from Ref 3 – constructed in SuperPro Designer

3. Kwiatkowski, J. R., A. McAloon, F. Taylor, and D. B. Johnston.

2006. Modeling the process and costs of fuel ethanol production by the corn dry-grind process. Ind. Crops and Products 23: 288-296.

4. Ramirez, EC, McAloon A.J., andSingh V. 2009. Enzymatic corn wet milling: engineering process cost and model. Biotechnol. for Biofuels 2:2 5. Wood, C, Aubert, P, Rosentrater KA, Muthukumarappan K, 2012.

Techno-economic modeling of a corn based ethanol plant in 2011. Agricultural and Biosystems Engineering Conference Proceedings and Presentations. Paper 97. http:// lib.dr.iastate.edu/abe_eng_conf/97

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Fig 1. Section of Corn to Ethanol flowsheet from Ref 3 – constructed in SuperPro Designer.

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How will a possible US tax reform and border adjustability affect ethanol producers’ businesses?

A taxing issue

A

s the 115th US Congress begins in Washington, DC, comprehensive tax reform is set to be one of the top priorities for congressional leadership and for the new Trump administration. There is a high likelihood that comprehensive tax reform legislation will become law during 2018 and that much of the debate and formulation of the legislation will occur throughout this year.

Because of this, it is critical that ethanol producers are engaged in this discussion now and that they begin planning for how tax reform could affect their profitability and competitiveness.

In the US House of Representatives, tax reform discussions will be based on the Republican Tax Reform Blueprint released by speaker Paul Ryan in June of 2016.

This blueprint proposes to lower the top corporate tax rate to 20%, provide for the immediate expensing of capital purchases, and place significant limits on the deduction of interest expenses.

One of the most significant changes proposed by the blueprint would be for the US to adopt a tax system that includes “border adjustability.” Under border adjustability, the US would move toward a destinationbased tax system similar to a value-added tax (VAT) used by many other countries (except with continued deductibility for wages).

Under border adjustability, if a US plant were to sell ethanol or distillers grains to a domestic purchaser, the revenue from those sales would be taxed as income.

biofuels international

A comprehensive tax reform is likely to become one of the top priorities for the new Trump administration

However, if the plant were to sell ethanol or distillers grains overseas, the revenue from those sales would not be treated as income under the Internal Revenue Code (IRC).

By extension, if a US refinery or blender were to purchase ethanol from a domestic plant, the cost of that purchase would be deductible as a business expense. By contrast, if the refinery or blender were to purchase ethanol from Brazil or other foreign sources, the cost of that purchase would not be deductible as a business expense under the IRC. The practical effect of this new tax structure is to increase the cost of imports by 25%. If a US company were to purchase $100 (€95) of ethanol from a domestic producer, the true cost of that purchase would actually be $80, since the cost of that purchase would be deductible as a business expense and would reduce

the purchaser’s income tax by $20. By contrast, if one were to purchase $100 of ethanol from a foreign producer, the actual cost of that purchase would be $100, since it would not be deductible as a business expense. As a result, the foreign-sourced ethanol would have an effective cost 25% higher than domestic-sourced ethanol.

Concerning developments While this sounds like a great thing for domestic producers (and not such a good thing for importers), proponents of border adjustability argue that the real cost increase on imports will be negligible or non-existent, since the US dollar will strengthen as a result of this change to the US tax code, thereby offsetting any cost increases.

Putting aside the concerns that a strong US dollar would make agricultural exports

less competitive, other analysts are not optimistic that appreciation of the US dollar will perfectly offset increased prices on imports. Among their concerns is that many US trading partners, including China, have currencies that do not float freely. Because of concerns that the tax system would disadvantage industries reliant on imports, some of the nation’s largest importers, including retail stores and the petroleum industry, have begun lobbying against the border adjustability plan.

Another key concern with border adjustability is that it could trigger retaliatory tariffs under the World Trade Organization (WTO). Under the WTO, countries are permitted to adopt a tax that is border adjustable if it is an “indirect” tax. By contrast, a border adjustable “direct” tax is considered an export subsidy that is prohibited by WTO rules. While the House Republican plan argues that

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biofuels opinion the US border adjustable tax would be indirect and thus WTO compliant, others are convinced that the tax would be direct and would violate WTO rules. Regardless, it is a near certainty that if the US adopts the border adjustability proposal, the law will lead to WTO challenges.

This, in turn, could result in retaliatory tariffs being placed on US-sourced ethanol and other agricultural products.

With these concerns about border adjustability and with large retailers and the petroleum industry lining up against the proposal, it may be tempting to assume that border adjustability will end up on the cutting room floor when Congress finalises the rewrite of the tax code. There is good reason why that may not be a safe assumption.

Since the US is a large net importer, shifting toward a border-adjusted tax system

is projected by the Tax Policy Center to generate almost $1.2 trillion in federal revenue during the first decade. Given this, border adjustability is best seen as integral to the House Republican tax plan – without the federal revenue generated by border adjustability, Congress will not be able to reduce taxes to the pledged 20% corporate rate.

Adapting to the changes So how will comprehensive tax reform affect ethanol producers’ businesses?

The only way to answer this question is to conduct an analysis that considers their individual circumstances. If a producer is a US company currently paying income taxes, it will want to consider the combined effect of all of the proposed tax code changes (lower rates, immediate expensing of equipment,

border adjustability, etc.).

Another thing to consider is the effect of changes in the strength of the US dollar and potential retaliatory tariffs that could impact the business.

If the company is a foreign corporation that currently does not pay US income taxes, it will want to recognise that the revenue from its imports may become subject to US taxation and that purchasers of the products may no longer be able to deduct such purchases as business expenses.

Fortunately, whether a US or foreign company, there are many steps ethanol producers can take today to position themselves to maximise their profitability and competitiveness under a new US tax system.

As the US’ leading agricultural accounting and consulting firm representing corn producers and the ethanol industry, K·Coe Isom

recognises that the outcome of the tax reform debate will have dramatic effects on many businesses. The company’s objective is to help customers analyse and understand how tax reform could affect their operations, while helping them to design adjustments to their businesses to best position them for growth in the coming years.

K·Coe Isom’s federal affairs team in Washington, DC, has been working behind the scenes with Congress and with key organisations such as the National Corn Growers Association to analyse the effects of tax reform and to shape legislative proposals to protect our industries’ interests. l

For more information: This article was written by Brian Kuehl, director of federal affairs, and Donna Funk, principal at K·Coe Isom. Visit: www.kcoe.com

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28 january/february 2017 biofuels international

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US ethanol diversifies with kernel fibre

Cracking the kernel

T

he 2017 growth edge for the US ethanol industry will be the implementation of kernel fibre technology and product diversification to include D3 cellulosic ethanol.

Kernel fibre technology has inherent advantages since it does not require additional collection, harvesting, transportation, or storage of fibre. Instead, it converts the lowest value component of the corn kernel to a high value ethanol product. The result is more ethanol from the same bushels of corn and diversification of ethanol products to include high value D3 cellulosic gallons.

Additional advantages include higher production of corn oil and production of higher protein distillerâ&#x20AC;&#x2122;s grains.

Kernel fibre diversification is driven by strong business proformas benefiting from the US Environmental Protection Agency (EPA) announced 2017 cellulosic waiver credit of $2.00 (â&#x201A;Ź1.89) and 2017 D3 RIN prices recently quoted at $2.70 to $2.75. Approval of the Tax Extenders Package would provide an additional $1.01 per gallon advanced biofuel producer tax credit. For ethanol marketed to California, a carbon intensity below 40g of CO2 per megajoule (g CO2e/MJ) would add an additional $0.44 per gallon of D3 ethanol (based on CI=30 and $92.50/tonne). These incentives should attract the attention of producers both inside and outside the US.

Jim Ramm, professional engineer at EcoEngineers

Renewable Fuel Standard (RFS) Pathways II. This rulemaking also allowed for D3 cellulosic Renewable Identification Numbers (RINs) for fuel produced from renewable natural gas and electricity from landfills and certain anaerobic digesters.

The original 2007 RFS called for production of more than 15 billion gallons of cellulosic

fuels by 2022. While this growth has not occurred, the EPA has continued to encourage and give priority to the development of cellulosic fuels derived from cellulose, hemi-cellulose, and lignin and considered to reduce carbon emissions by at least 60% compared to fossil fuel-derived petrol.

The EPA set the 2016 renewable volume obligation (RVO) for D3 RINs at 230 million gallons. The actual 2016 D3 RIN production fell below that mandate and consisted primarily of renewable natural gas with some kernel fibre ethanol from Quad County Corn Processors, Galva, Iowa, and Pacific Ethanol, Stockton, California. The proposed 2017 D3 RVO is 312 million gallons. The EPA places the priority for registration review and approval on D3 pathways

and this is evidenced by the recent expedited approvals using the Edeniq Pathway Technology of both Flint Hills Resources, Shell Rock, Iowa, and Little Sioux Corn Processors, Marcus, Iowa, D3 kernel fibre pathways.

Under RFS Pathways II, the EPA defined two types of kernel fibre technologies, including in-situ processing and separate processing. Insitu processing provides for cellulosic ethanol production from the same hydrolysis and fermentation equipment as traditional starch ethanol production. The Edeniq Pathway Technology is the first registered in-situ processing technology. Insitu processing technologies can be used to generate a 1-3% cellulosic ethanol lift.

The EPA has defined an in-situ processing protocol, which establishes

Federal RFS support of kernel fibre At the federal level, EPA finalised rulemaking for D3 cellulosic kernel fibre ethanol in August 2014 under the

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Quad County Corn Processors â&#x20AC;&#x201C; home of Cellerate technology

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biofuels diversification and other countries in the world to fulfill the increasing demand of low-carbon fuels in the state. In addition, producers outside the US could also begin producing and shipping D3 kernel fibre ethanol to the US. The end result is that low-carbon intensity D3 ethanol will have a strong appeal to the California LCFS marketplace.

Furthermore, other states are also implementing or considering similar low carbon fuel standards, including the state of Oregon. Lowcarbon intensity D3 ethanol will likely play a significant role in those states too and US ethanol producers can assist in meeting state carbon reduction goals.

Quad County Corn Processors product spotlight

Edeniq laboratory in Visalia, California

requirements to register the initial converted fraction of cellulosic ethanol and the recalibration that must be performed within ten days of every 500,000 gallons of cellulosic ethanol produced.

A distinct advantage of insitu processes is that capital equipment investment and installation is optional under the pathway described

by RFS Pathways II. The Edeniq Pathway Technology was successfully used for D3 RINs validation at the Pacific Ethanol Stockton, Flint Hills Resources Shell Rock, and Little Sioux Corn Processors Marcus plants.

Under separate processing, the cellulosic feedstock stream plus de minimus adhered starch is directed to separate processing equipment for hydrolysis and fermentation. The Quad County Corn Processors technology is the first registered separate processing technology, which can result in higher oil yield and higher protein feed content compared with the in-situ process. Separate processing can be used to produce a

7-10% cellulosic ethanol lift. The EPA requires best practices for starch separation to de minimus levels and mass balance based on feedstock and process data. Distinct advantages of separate processing are higher cellulosic ethanol yield and no requirements for recalibration of converted fraction at 500,000 gallon intervals.

State Low Carbon Fuel Standard support of kernel fibre Zhichao Wang, Ph.D at EcoEngineers, considers kernel fibre technology to have a number of life cycle analysis advantages. According to Wang: “At the state level, based on previous pathways approved by the California Air Resource Board (CARB) under the Low Carbon Fuel Standard (LCFS) programme for corn oil to biodiesel, corn oil does not need to share the indirect land use change (ILUC) emissions or corn farming and transporting burdens.

It is reasonable to assume that kernel fibre ethanol should be treated similarly

because both kernel fibre and corn oil are co-products produced during the corn starch ethanol production.”

This means kernel fibre ethanol should have a much lower carbon intensity (CI) than the regular corn starch ethanol which usually has a CI in the high 60s to mid-70s (g CO2e/MJ), as the combined emissions from ILUC and corn farming/transporting are about 50g CO2e/MJ. Based on preliminary research conducted by EcoEngineers with the data support of several technology providers, kernel fibre cellulosic ethanol could have a CI in the range of 20-40 g/MJ, depending on the conversion technologies used by the ethanol facility, the methodologies adopted for the life cycle analysis, and the operational data from different ethanol plants. This agrees with the determination of RFS on the D3 threshold of 60% reduction or more.

This CI is lower than most sugarcane ethanol currently being consumed in California, and could potentially displace, at least partially, the sugarcane ethanol imported from Brazil

Quad County Corn Processors (QCCP) was the first technology provider and producer to register a kernel fibre production process in the US and generated its first D3 RINs in October 2014. Since then, QCCP has produced close to 6 million gallons of D3 kernel fibre cellulosic ethanol, which represents approximately 90% of total US cellulosic ethanol production (D3 RINs) in the last three years.

In 2014, Syngenta announced an agreement with Cellulosic Ethanol Technologies, a wholly-owned subsidiary of QCCP, to be the exclusive marketer of Cellerate process technology to ethanol plants in North America.

During 2016, QCCP reported a 26% increase in ethanol production by combining Cellerate process technology and Enogen corn. With today’s enzyme and yeast technology, the Cellerate process can help dry grind ethanol producers increase ethanol yield by up to 6% – or up to 900 million gallons, if used across the industry. When a C5 yeast is available, an additional 1-5%

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yield increase is expected, depending on the cellulosic enzyme activity on hemicellulose conversion to sugars.

Adding corn fibre-tocellulosic ethanol technology at every existing dry mill ethanol plant across the US would have a significant effect on greenhouse gas (GHG) reductions. The potential reduction would be equivalent to removing as many as 2.98 million passenger cars from the road, or 4.1 average coalfired plants, or the amount of carbon sequestered by as many as 13.3 million acres of forest. QCCP was honoured with the Renewable Fuels Association 2015 Industry Award at the 20th Annual National Ethanol Conference for its work in developing Cellerate process technology.

Edeniq product spotlight

Cellulase enzyme storage tanks at Little Sioux Corn Processors, Marcus, Iowa

Edeniq was the first technology provider to successfully implement insitu processing technology.

Edeniq has headquarters and laboratory in Visalia, California, and sales and field support in Omaha, Nebraska. The Edeniq Pathway Technology is comprised of field sampling methods, laboratory analytical protocols, and mass balance models that have been successfully implemented at commercial scale and are protected by trade secret status and patent filings.

The Edeniq analytical protocols have also been successfully peer reviewed and vetted by multiple external subject matter experts. Jim Kacmar indicates that Edeniq has a “pretty robust pipeline with 20-30 plant batch trials conducted or planned in 2017 and favourable economics meaning that 15-20 of these plants will eventually register to produce D3 ethanol.”

Little Sioux Corn Processors (LSCP) is the latest ethanol producer to register the D3 Edeniq Pathway Technology.

Steve Roe described LSCP’s decision making saying: “We

trialled the cellulase enzyme for ADM. We saw positive overall corn to ethanol conversion rates, increased corn oil yields, lower BTUs per gallon, and decreased fouling of piping and evaporator equipment. When the Edeniq Pathway Technology became available, we saw it as a way to produce D3 RINs, thereby increasing shareholder value.”

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Market advantages of kernel fibre cellulosic ethanol Product diversification can allow for marketing advantages for ethanol producers. Market strategies, which allow for ownership of the D3 ethanol at the point of blending, will allow the ethanol producer to separate and sell the D3 RIN and retain a potentially greater portion of the value of renewable energy credits. Examples of new market strategies include E85 blending and shipping by ethanol producers.

Optional quality programmes, including EPA approved Q-RIN programmes, may be a requirement

of downstream market participants purchasing the RINs. While the ethanol industry has done a good job and never needed a Q-RIN programme for D6 RINs, downstream parties have demonstrated a strong preference for Q-RIN on D3, D4, D5, and D7 RINs. It is recommended that ethanol producers who plan to produce D3 talk to their downstream marketers and begin Q-RIN programmes early to begin upon registration approval.

The majority of ethanol producers now producing D3 have opted for Q-RIN. The future of kernel fibre Kernel fibre diversification by US producers has the potential to produce 450 million to 1.5 billion D3 cellulosic gallons annually. This is a significant volume of low-carbon intensity fuels and creates diversification and market advantages for ethanol producers. Insitu technologies, such as that provided by Edeniq, provide producers with the opportunity to begin

production and marketing of D3 ethanol with less capital investment. Separate processing technologies, like the production scale Cellerate technology

by Quad County Corn Processors and Syngenta, are primed to expand.

Additional technology providers will go to pilot and productions scales in the coming year. D3MAX will be a separate processing technology bringing up to 10% ethanol with plans to build a pilot-scale plant. ICM Gen 1.5 Technology will be a separate processing technology bringing up to 10% added cellulosic ethanol with plans to build a production-scale plant.

Other technology providers will join the effort for kernel fibre diversification. Together, technology providers and the EPA have provided a pathway to turn kernel fibre into low-carbon intensity D3 ethanol and diversify the ethanol industry. l For more information: This article was written by Jim Ramm, professional engineer at EcoEngineers.

Visit: www.ecoengineers.us

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biofuels biofuels in Thailand Recognising opportunity, Thailand has formed a partnership to advance the region’s biobased economy

Moving Thailand’s biorefining forward

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he Asia-Pacific region is a large growth market for green energy. To name a few, China, India, and the Philippines are all working to further develop local production and consumption of biofuels. But Thailand, in particular, stands out. Due to existing capacity and its robust domestic ethanol market structure, Thailand is looking more and more like the model of a country that has embraced fuel ethanol. The system, based on government economic policies, manages to successfully and sustainably drive both consumer demand and local production.

Even given its ambitious targets, little seems to stand in the way of Thailand achieving whatever goals it sets for its bio-based economy.

That is why Novozymes, a global enzyme producer and bio-innovator, is actively contributing to the growth of ethanol production in

Thailand – and, in turn, the surrounding region as a whole.

Novozymes has long been a strategic partner for Thailand’s ethanol producers.

Last September, however, the company took its efforts a step further, facilitating a roundtable discussion forum at the Danish Ambassador’s residence in Bangkok with stakeholders from across the value chain to exchange ideas, insights, concerns, and aspirations. Issues discussed ran the gamut from political to technical, innovation and production, though everyone in attendance had a shared purpose in mind – charting a roadmap to take Thailand’s biofuel industry forward.

“We wanted to not only look at the current state of the biofuels industry in Thailand, but also see what we could learn when we take that snapshot and put it into context, both globally and historically,” says Bas Melssen, biorefining director for the AsiaPacific region at Novozymes.

To see the opportunity as they see it, it is critical to understand the road that brought Thailand – and Novozymes – to where they are today.

Ethanol policies in Thailand today Whereas countries like the US employ an ethanol blending mandate, Thailand has largely created its bioethanol economy through commercial incentives.

Blenders, for instance, are provided rebates for selling ethanol-blended petrol at their stations. The higher the ethanol percentage included, the higher the rebate. These types of subsidies are all paid for by the State Oil Fund. As of 2015, E10 was available throughout the country, and, according to the Ministry of Energy, there were more than 3,000 stations offering E20, with an additional 807 offering E85.

Consumers, meanwhile, are rewarded through their purchasing practices. Not only are higher ethanol blends less

Biorefineries: Feeding and fueling a growing world

A variety of feedstocks

Biorefinery process

Flexible plants with optimized processes

A wide range of products to feed and fuel a growing world

costly than lower percentage blends, but E10-, E20- and E85-compatible vehicles are made less expensive by tax incentives. These policies work together to create a demand.

But what about the supply side? Further up the value chain, the importation of ethanol is prohibited, and locally-produced ethanol is set at a premium to global market prices. Ethanol and feedstock producers, then, have a readymade market to sell to, and favourable market conditions in which to do business.

Reconsidering cassava’s potential Thailand’s two primary ethanol feedstocks are molasses, a by-product of sugar production, and cassava, one of the country’s biggest Make all icons cash crops. Currently, about larger.

75% – or 2.7 Arrows milliononlitres left per should point TO day – of locally-produced biorefinery ethanol comes molasses Putfrom headlines on top Place on image and cane juice, while background cassava represents about 25% of the total. A series of recent market changes may, however, change that.

Increased international demand for molasses is leading to supply constraints on the feedstock in Thailand.

This is resulting in higher molasses prices, relatively lower margins for molassesbased ethanol producers, and limited local availability of the feedstock.

The opposite, however, is true for cassava. Due to a drop in export demand, particularly from China, there is now an oversupply of cassava in Thailand, and

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its price has dropped. For ethanol producers, that means falling input costs and bigger production margins – a good situation that just seems to be getting better. But, truly, for nearly everyone who plays a part in Thailand’s biofuel economy, cassava-based ethanol is looking a lot more attractive.

That is because for years costs of production of cassava-based ethanol have been higher than molassesbased ethanol, for reasons that include both the higher feedstock costs and the competing uses of cassava.

Consequently, only 4–5% of the country’s cassava is used for ethanol production.

It should come as no surprise, then, that the Thai government is pushing for cassava ethanol to play a larger role in the local supply.

What may be more surprising, though, are Thailand’s ambitions. The agriculture and cassava supply chains’ policies are targeted to increase overall cassava production by 100%. And while the portion dedicated to ethanol will remain about the same, the Ministry of Energy’s 2015 Alternative Energy Development Report targets cassava ethanol to comprise about a third of the total ethanol supply by 2026. By 2036, the goal is to have that number nearly double to more than 50%.

At the same time, the government will be further encouraging the use of higher percentage blends like E20 and E85, and an existing policy mechanism will kick in should oil prices recover from their current lows. If oil prices increase, Thailand’s blenders will see increased incentives and the pump price of blended petrol will fall accordingly.

Helping Thailand’s producers advance Novozymes is a strategic partner for Thailand’s government, oil companies,

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and cellulosic and starchbased ethanol producers, whether their product uses molasses or cassava as a feedstock. Novozymes’ strategic partner role in Thailand is part of the greater enabler role in the AsiaPacific region, also covering Vietnam, India, Philippines, Malaysia and Australia.

Part of Novozymes’ contribution is to introduce Thailand’s ethanol producers to the latest innovations and enzyme technologies, many of which are already being implemented by its producing partners in the US and Europe.

By taking advantage of these best practices, Thailand’s producers can reduce their processing costs and increase ethanol yield. In fact, some of Thailand’s producers are already using enzymes developed specifically to optimise the conversion rate of cassava starch into ethanol.

The company also connects producers in Thailand with their global commercial and technical senior management, even facilitating visits to key partners in the US and Europe. Furthermore, producers can get industryspecific training via Bioenergy University, a Novozymes’ online platform offering webinars, course modules, and videos about many aspects of ethanol production, from enzyme functionality to laboratory practices and process troubleshooting.

Building an even better bioeconomy But the area where Novozymes may bring the most value to Thailand’s ethanol equation is as a thought leader and industry enabler. “We see a tremendous opportunity for Thailand to take their bio-based economy to the next level,” says Melssen.

“It’s all about sustainability.

We want to maximise the sustainable GDP impact this industry can have, and at the same time create jobs

and keep the environmental impact at a minimum.”

As demonstrated by September’s roundtable discussion at the Danish Embassy, Novozymes puts a high value on the exchange of information and ideas. Having been invited by think tanks and research institutes in Thailand, it provided insight and strategic recommendations to the Ministry of Energy on the role of cellulosic and conventional ethanol in The Danish Ambassador Uffe Wolffhechel (left) with Bas Melssen, director of Biorefining AP in Novozymes

driving their bioeconomic aspirations. Being a global business, the company was also able to share insights on global regulatory policy that has driven ethanol industries, both starch-based and cellulosic, around the world.

And the latter of those industries, cellulosic, will also play a key role going forward.

As it has done with starchbased ethanol, public policy will help shape Thailand’s future cellulosic ethanol industry. Novozymes has been able to share its insights here, too, on government strategies to convert agricultural residues and biomass into high-value industries.

Biomass, it is worth noting, is the largest single source of renewable energy available today, and countries are just beginning to take advantage of its capabilities. But as the potential of cellulosic biofuel industries reveals itself, countries globally will start seeing the real results they can bring, from sustainable economic multipliers to new jobs, energy security, environmental protection, and reduced carbon emissions.

Giving partners a foot in the door In the ethanol industry, making connections can be just as important as having a solid business plan. Novozymes

understands that in growing markets, this is especially the case. Accordingly, part of the company’s strategy to advance Thailand has been connecting process technology suppliers to the producers who are interested in ethanol production or need new technology to further their business.

Novozymes also directs its efforts toward supporting the key infrastructure development – from roads to the biorefineries themselves – that is required for the commercial opportunities to take place. And, for those with ambitions in the cellulosic ethanol space, Novozymes helps introduce companies to important concepts and best practices to help guide their business to success.

Where opportunity and capability meet If the Asia-Pacific region is a growth market in the world of fuel ethanol, then Thailand is the growth engine driving it forward. With a robust market, demonstrated initiative and favourable government policies, Thailand ticks all the right boxes that make for a successful long-term bioeconomy.

It is for these reasons that Novozymes is working to advance Thailand’s ethanol industry. What Thailand needs is strong partners that are ready to talk – not only about starch-based ethanol, but about biodiesel, cellulosic ethanol, biorefining, and more. It is not every day that a country shows both the willingness and the capability to take its bioeconomy to the next level. And that is why Thailand and Novozymes are encouraging others to join them at the table. l

For more information: This article was written by Shanthan Selvakumar, senior manager at Novozymes Malaysia’s Biorefining division. Visit: www.novozymes.com

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biofuels fermentation Can we fulfill the potential of microbial conversion for biofuels and biomanufacturing?

All life is fermentation

M

icrobes can convert everything from agricultural waste to urban refuse into molecules of great value – food, medicines, useful chemicals, and, perhaps most ambitiously, fuels. Not very long ago, a microbe that can use oil to grow helped clear a vast oil spill that was the result of the Deep horizon BP spill.1 Meanwhile, another microbe converts milk to yoghurt and has been, since ancient times, an integral part of one of the most delicious and healthy foods known to humans. Microbial conversion may be our secret ally to clean water, better health, reliable environmental stewardship, and a strong bioeconomy.2 There are certainly impediments to the use of microbial platforms in industry, in biotechnology, and in the production of fuels, and the examples earlier provide us some insight into these challenges. The oilconsuming microbe showed an innate capability that surpassed human technology or intervention. However, to

implement this ability in a reliable and scalable manner will require an extensive examination of the microbe as well as investment into the development of processes that use this capability.

In the case of yogurt, the bacterial strains used routinely today are the result of centuries of cultivation and optimisation. It is fair to say that we need to expedite our ability to develop scalable technologies that harness microbial manufacturing capabilities. The roadmap for this work, and systematic approaches for this effort, are only just beginning to take shape.

Looking back Human use of microbes in food and drink go back to ancient times, independently documented across the world from Greece to Asia. Use of budding yeast for wine, sake, and beer can be tracked back to these times. Our discovery of microbially derivable medicines is more recent, going back only a century or © Lawrence Berkeley Nat’l Lab - Roy Kaltschmidt, photographer

Microbial cultures at the Advanced Biofuels and Bioproducts Process Demonstration Unit (ABPDU), Lawrence Berkeley National Lab

so to penicillin – debatably the most significant step forward towards the betterment of human health.3 Even more recent is the development of microbial platforms that produce life-saving hormones like insulin.4 These examples are encouraging to contemplate, but they also provide no clear path of how, as scientists, we can expedite the discovery and the development of efficient processes, especially for a product such as biofuel that must compete in the current petrochemical marketplace.

Development of microbial platforms for biomanufacturing commodity chemicals is a very young enterprise. In 2005-06 with crude oil prices inching towards record highs of over $60/barrel (€57.3) and its impact on the burgeoning energy dependent economies across the world, it was clearer than ever that our lives and our futures were inextricably dependent on petrochemically derived fuels and materials. This impacted our daily lives, our environment, our jobs, and the energy security of nations.

At that time, biotechnology was primarily focused on human health. However, in 2007 federal agencies in the US, especially the Department of Energy (DOE), took a visionary and strategic step of investing in the development of biological platforms to generate alternate fuels.5 Key funding opportunity announcements were made on the topic of microbially converting cellulosic biomass to ethanol – the most prevalent biofuel at the time. Industry also made considerable investments into similar efforts during this time. The result was a massive stimulus investment in research that

led to the development of microbe-based technologies that went beyond ethanol and led to processes to produce fungible advanced fuels – biopetrols, jet biofuels, and biodiesels. This was accomplished by leveraging and optimising key pathways such the isoprenoid, amino acid, fatty acid biosynthetic pathways in microbial strains that were then optimised for enhanced utilisation of carbon sources derivable from cellulosic biomass, and with characteristics required for resilience to process byproducts and accumulation of final products.

These programmes have led to an incredible period in basic science where we advanced our understanding of plants, discovered mechanisms of novel enzymes to simplify plant materials to sugars and other monomers, and made important inroads into understanding microbial physiology and enhancing microbial metabolic and strain engineering. These developments are critical in achieving the primary purpose of the research – renewable advanced biofuel production – but are an equally important foundation for advancements in a range of other fields such as the production of chemicals, commodities, and pharmaceuticals, a variety of synthetic biology applications, and the development of energy crops.

The US situation The federal stewardship of these programmes has positioned the US at the global forefront of these valuable technology advancements, is the backbone for this scientific progress, and has supported the training of

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hundreds of future scientists in biotechnology and microbial metabolic engineering. Equally importantly, the development of technologies in support of biofuel production have led to numerous broadly useful intellectual properties in biotech and an impressive surge in entrepreneurship.

These start-up endeavours have received both federal, industrial, and private support.

An example is Zymergen, a data science-based microbial strain engineering start-up that has received significant Defense Advanced Research Projects Agency (DARPA; US Department of Defence) support, the latter relying in great part on similar microbial conversion biotechnology platforms for new and novel biosynthetic materials.

Even more recently, Lygos, another California-based company, received $13 million of private industry funding to carry their technology forward. Lygos, a biotech company that uses microbial conversion to manufacture Malonic acid, is an excellent example of a business that was founded on basic research conducted through federally funded National Lab programmes, and one that received the initial necessary support from several federal agencies, including the DOE, Department of Agriculture, and the National Science Foundation.

In other parts of the world, the Brazilian company Braskem is developing new materials for automotives and Praj Industries in India is setting up second-generation bioethanol plants, while American Genomatica is scaling up the production of its GENO BDO to 30,000 tonnes in Italy6. All of these are examples of microbial conversion processes. Bioderived fuels from alternative sources have already begun to be tested for high performance engines by the US airforce.7 Microbial fermentation and conversion platforms are now

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poised to provide drop-ins for an immense array of the chemicals that surround us, including plastics, polymers, adhesives, surfactants, lubricants, cleaners, flame retardants, and fuels.

From Stone Age to the future Thomas Friedman, an economist, is known to quote Sheik Ahmed Zaki Yamani who said: “The Stone Age didn’t end because we ran out of stones”. We, as a culture, gravitate towards technologies that are better and are more efficient – despite pre-existing technologies and economies.

Microbial conversion is one such powerful technology for our future. The use of an optimised microbial platform serves at least three separate but important purposes: 1) Biological conversion uses less energy and generates less toxic waste 2) Biological conversion is more precise, benefiting from nature’s elegant biological pathways 3) Biological conversion can be done anywhere using diverse starting materials – paving a path to decentralisation of manufacturing.

This is true of most platforms that use microbial conversion, if not all. To add to this list, the staggering diversity in biologically achievable molecules allows design of materials and compounds that cannot yet be achieved via the petrochemical route. The possibilities range from new polymers to new antibiotics.

It is easy to argue that microbial conversion is worth research, development, and commercialisation investment.

But the endeavours to generate fuels via microbial conversions has only just begun. The lion’s share of current research and development efforts have focused on discovery of novel catalytic activity naturally present in microbes, or that we can engineer into

microbes to produce valuable products. For efficient biofuel production, specifically, the research community is actively focused on maximising the use of not only sugars but also the lignin in the plant and renewable biomass, understanding the impact of scaling on microbial cultures, developing biomass deconstruction methods that are highly efficient and can scale with rest of the process, and developing techno-economic and lifecycle models to assess the pinch points of the process.

Cost-effective biofuel production will entail an equally dedicated focus on high throughput strain engineering that goes hand-in-hand with process development – two aspects critical to scaling. Obtaining the most efficient strains for a product entails the optimisation of multiple genes in a pathway along with the rest of the host chassis to obtain relatively complex performance features. This is an endeavour that can be greatly assisted if we can couple high throughput strain engineering with analysis and machine learning. Data science is poised to play a key role in how fast these platforms mature and are usable in industry. Cost effective processes can also be realised by developing processes that leverage both chemistry and biology. These are inherently interdisciplinary areas of basic research – another aspect valued and supported by federal funding especially via their support of national labs.

New solutions The biggest challenges of our times facing the US and the world are around energy, water, food, and disease.

These are also the areas where new solutions will be found and new industries and jobs will be created.

Biological microbial-based

platforms provide solutions that decentralise and expand innovation, making it possible to be undertaken across regions and not only where fossil-based reserves are rich.

Microbial conversions are inherently scalable, broadly deployable manufacturing platforms.

The discovery and basic science for this approach have great momentum and have demonstrated huge potential as a result of support from federal funds, as well as industry. As our mechanical understanding of the biological processes grows stronger and our ability to use large systematically collected data sets becomes more sophisticated, microbial conversion can provide powerful implementable solutions for large scale biomanufacturing for commodities, material, food, pharmaceuticals, and fuel.

Richard Feynman is reported to have said, “There, in wine, is found the great generalisation; all life is fermentation”.8 This may well prove true. l For more information: This article was written by Aindrila Mukhopadhyay, VP for fuels synthesis and director of host engineering at the Joint BioEnergy Institute. Visit: www.jbei.org References: 1. https://www.scientificamerican. com/article/how-microbeshelped-clean-bp-s-oil-spill/ 2. https://www.whitehouse.gov/sites/ default/files/microsites/ostp/national_ bioeconomy_blueprint_april_2012.pdf 3.https://www.acs.org/content/ acs/en/education/whatischemistry/ landmarks/flemingpenicillin.html 4.https://www.nlm.nih.gov/exhibition/ fromdnatobeer/exhibition-interactive/ recombinant-DNA/recombinantdna-technology-alternative.html 5. http://genomicscience. energy.gov/centers/ 6.http://biomassmagazine. com/articles/13742/novamontopens-plant-for-production-ofbiobased-1-4-butanediol 7.http://www.executivegov. com/2016/09/navy-tests-biofuelin-ea-18g-growler-aircraft/ 8.Volume I; Lecture 3, “The Relation of Physics to Other Sciences”; section 3-7, “How did it get that way?”; p. 3-10

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biofuels straw feedstock Straw feedstock must undergo several processing steps before it can be used in ethanol production

Industrial handling of straw bales

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lants using large quantities of straw as feedstock have existed for a while, and due to the CO2 reduction schemes around the world, more will come. Straw is a natural and non-uniform product, which is a challenge to handle and process. Straw from grain (barley, wheat, maize, rice, etc.) varies from species to species, year to year, field to field, as well as in moisture content. Each grain straw has different optimal moisture contents due to storage requirements, but the moisture content will vary due to difficult harvest and weather conditions or other issues.

The moisture content is the most critical issue about straw.

Wet straw sticks and creates blockages and can cause severe problems throughout an entire processing system.

Another critical factor are foreign objects. Stones, dirt, metal, wood, and other materials can be found in the straw bale and must be removed as soon as possible

to prevent damages through the processing line and the risk of unintended stops.

Engineers designing industrial straw processing plants look to separate bad straw bales even before they appear at the gate or at least before they are unloaded on site. The most common system is a microwave-based moisture probe together with an electronic weighing scale to detect bad bales to reject. The same system can be used to gather feedstock data to settle supplies and to track straw bales throughout the plant.

It starts with truck drivers swiping their radio frequency identification (RFID) card before entering the unloading area, as well as confirming the feedstock species.

Six-bale bridge crane at a district heating plant

Preparing the bales “Large square bales” are suitable for industrial applications whereas “the round bale” is a no-go for several reasons. Large square bales are 120cm wide and

12 bale crane including weighing scale and moisture probes

50t/h infeed at power plant

approximately 240cm long.

The height is either 70, 90, or 130cm. The straw bales can be stacked from six to 12 bales high in a “pyramid” shape with a bridge crane carrying either a one-, sixor twelve-bale gripper. A microwave-based moisture probe and the weighing scale are incorporated. The same crane feeds bales into the debaling and processing plant.

Any process with straw bales starts with an infeed and de-stringing. These processes can be full- or semi-automatic.

Thereafter, the straw bales are de-baled with a shredder.

Since the straw bales may contain foreign objects, the shredder needs to be designed to cope with stones and such. However, it is important that the foreign objects are removed straight after the de-baling process.

The shredder must produce an even and continuous flow of de-baled straw without lumps to maintain a high capacity throughout the whole processing plant.

The removal of foreign objects starts with a separation based on an air stream taking the light products and leaving heavy

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Industrial shredder type SP-6

items behind. Stones, metal, dirt, and grain can easily be separated afterwards when the straw is loose.

The density of dry straw in large square bales is around 150kg/m3 and de-baled straw without lumps has a density of approximately 30kg/ m3. When designing straw processing plants, the density should be recognised as a dynamic value with respect to the material movement.

Preparation of straw for different purposes, such as second-generation bioethanol or pelletising, may also require hammer milling of the debaled straw to any fineness between 10 and 50mm.

Another issue is dust control, which is very important when processing straw. The system must be completely sealed and the air used for conveying has to be filtered before being blown into the atmosphere. Straw dust is quite unhealthy to employees and represents an explosion risk if exposed at high levels within the plant.

Rotors inside industrial shredder type SP-6

fact that the shredded or milled straw may clump – settle inside a container and solidify – with the result that it will not come out again.

Large applications for straw processing should operate with a “just-in-time” principle. Storage of straw remains in the straw barn and preparation/processing must

be done instantly. The material must move straight to the final process, be it a combined heat power (CHP) power station or second-generation bioethanol production.

The logistics of straw supply are essential. They must be organised and deliveries must be spread throughout the operating hours of the facility.

Milled straw stocked inside large storage silo

The importance of logistics To avoid bridging and blocking of straw, it is important to keep the straw handling process simple with minimum numbers of joints and connections as well as any intermediate storage of straw. Intermediate storage or buffering can be disadvantageous in the handling process due to the

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It took a month to clear – the silo was filled only once and then decommissioned

Unloading a truck with, for example, 24 large square bales (approx. 12 tonnes) takes about 20 minutes with a fast-operating 12-bale crane.

When finished, the truck must be cleaned from straw spillage before leaving the premises.

Calculating the logistics with the daily numbers of incoming trucks, the required plant capacity and operating hours determine the size of storage facilities. Feedstock supply will often not take place during weekends and there might be days of bad weather making supplies impossible.

Therefore, the size of the storage stock and the speed of infeed/outfeed are very important to handle optimally.

Today, companies like Processbio offer complete straw handling and preparation systems including fully automatic cranes with fully automatic unloading and computerised barn management software.

This includes logistics from entering the bale into the infeed and distribution, de-stringing, de-baling, stone and metal separation, hammer milling, and delivery for final processing in a CHP power station or bioethanol production. In addition this, the company offers consultancy and computer real time simulation of the straw logistics. l For more information: This article was written by Hans Bossen, partner at Processbio.

Visit: www.processbio.com

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biofuels company profile A US company develops nanotechnology combining ethanol with corn oil for a new blendstock that reduces diesel emissions

Nanoparticles under the spotlight

T

he world is shifting inexorably – if at an uncertain speed – away from fossil fuels. One Californiaheadquarted company is aiming to help with bringing a low-cost solution to some of the world’s growing problems in the environment and energy sector. Sylvatex has developed a renewable nanochemistry platform that makes nanoparticles out of plant-based inputs and can be used to coordinate the interactions between materials that are normally immiscible – not forming a homogeneous mixture when added together.

These nanoparticles have a myriad of applications ranging from fuels to cosmetics, industrial stabilisers to production of nanomaterials for energy storage solutions.

Sylvatex currently focuses on nanoscale delivery system of oxygenates for alternative fuel products that reduce particulate matter and carbon intensity for a healthier environment. The company’s second application is a solution for the energy storage industry for nanomaterial production of cathode material in lithium-ion (Li-ion) batteries.

Ethanol, water, and polar hydrophilic compounds have limited solubility with diesel and are therefore prone to phase separation.

Sylvatex’s technology uses high concentrations of combustible, renewable fatty acids that act as a surfactant to form inverse micelles where the ethanol components are concentrated inside of a bubble to result in

a nanoscale system that is thermodynamically stable.

While traditional processes require harsh catalysts or expensive equipment, Sylvatex’s process reduces costs by leveraging a fundamental understanding of chemical interactions and complexity. The benefit of this for the company’s fuel application is that the oxygenates have a “cooling effect” on the combustion temperature of the fuel, thereby reducing unwanted side products of particulate matter (PM) and nitrogen oxides (NOx).

One other energy application of this platform is to generate more ordered structures of smaller particle size and a carbon coating that provides a continuous electrical network for Li-

ion batteries. The cathode material produced with Sylvatex technology has shown competitive capacity to what is currently available in the market, at lower cost.

Sylvatex is currently evaluating limited partners and strategic investors to collaborate on larger-scale commercialisation.

Co-location commercialisation model in North America Ethanol producers have invested considerable resources into technologies that extract corn oil during the ethanol production process.

The resulting commodity product, distiller’s corn oil (DCO), provides additional revenues to ethanol producers through sales into the feed and biodiesel markets.

Sylvatex’s mission is to harmonise product, nature and industry

Although producers with extraction technologies welcome this additional revenue stream, only about 37% of the DCO is sold into the biodiesel market, with the remainder going to lower value feed markets or simply discarded.

Sylvatex’s renewable blendstock provides ethanol producers greater utilisation for their extracted DCO co-product, upgrading its value as an advanced biofuel through a single offtake partner. It also expands the market for producers’ primary product, ethanol. The production process for making the blendstock intermediate has been designed to be quite simple. Utilising two key renewable inputs, ethanol and free fatty acids (FFA) are blended together, along with trace amounts of proprietary components, in a two-step chemical reaction that takes place at room temperature in the company’s blending module.

Sylvatex and its process development partners have designed a way of converting DCO into the FFAs necessary for the production of the company’s blendstock intermediate. With Sylvatex’s co-location model, this process provides greater utilisation for the ethanol producer’s DCO co-product.

Sylvatex can provide a single offtake for its partner’s DCO production, eliminating the shipping and logistics costs associated with distributing this commodity product to the animal feed and biodiesel markets, while increasing its

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value through carbon credits.

Since the key components to the production of Sylvatex’s blendstock come from ethanol production, the company has developed a co-location model to source the necessary inputs and produce its blendstock at corn ethanol biorefineries in North America. Both the DCO conversion and blendstock production processes are modular, low-cost, and have a small footprint (less then 15x15ft). This is welcome news to ethanol producers when space at the biorefinery may be at a premium.

The small size of the company’s bolt-on production modules and “off-the-shelf” operating processes result in lower operational expenses compared to adding other onsite production facilities. The simplicity of the production and blending process lowers both risk and capital expenses, leading to a higher internal rate of return (IRR) for both Sylvatex and its colocation commercial partners.

Partnering with Sylvatex also allows biorefineries to expand their ethanol distribution beyond petrol into the mid-distillate and specialty chemicals markets. By gaining access to these markets, ethanol producers can distribute their excess ethanol production domestically and reduce their margin loss to exportation. This expansion opportunity can justify plant capacity expansions, as producers will be able to deliver more low-carbon fuel,

Sylvatex MicroX production process

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Nano material production

generate more carbon credits, and achieve greater per gallon value for their ethanol product.

Although Sylvatex’s initial focus has been on developing partnerships with North American corn ethanol plants, the company’s technology is flexible and can utilise inputs sourced from a variety of feedstocks, allowing Sylvatex to implement its co-location model in biorefineries worldwide.

Low emissions diesel fuel demonstration Diesel engines are widely used in mining and construction operations because of their high power output and mobility. However, the use of diesel equipment results in exposure to toxic emissions, especially in confined spaces such as underground mines. Diesel PM is especially of concern, as it has been directly linked to respiratory issues. A recent report shows underground production workers, including diesel loader operators and shotcreters, face the highest risk for lung

cancer – and researchers are calling for strict controls to limit their exposure1.

In 2016, Sylvatex partnered with an underground coal mine in Queensland, Australia, to see if its nanoparticle blendstock could be a solution to this lung epidemic.

This mining company is working on initiatives to reduce PM emissions from their equipment by a third (33%). It had been using diesel particulate filters, but these filters are expensive to regenerate and still do not provide the reductions in PM emissions that are needed.

When using a 20% blend of Sylvatex’s alternative fuel, diesel emission “snaptesting” in a freshly tuned loader showed reductions as high as 33% at idle and 58% at stall compared to the baseline diesel previously in use. When tested in an untuned, out-of-spec vehicle, reductions as high as 50% and 73% were seen, which also allowed the vehicle to meet standards without even having had a tune-up.

The outcome of this project provided proof-of-concept

results that the fuel formulation that Sylvatex has developed to meet Low Carbon Fuel Standard initiatives in California using locallygrown feedstocks could also work as a quick solution for reducing toxic emissions that workers in coal mines are exposed to. The next step is to design a formulation that can be produced sustainably in those regions.

A solution for China’s growing diesel usage Worldwide, liquid fuels consumption in the transportation sector will continue to grow substantially.

Diesel fuel usage is expected to show the largest gain.

The US Energy Information Administration reported that in 2012, the world consumed approximately 26 billion barrels of diesel fuel per day, with China topping the world’s diesel consuming countries.

Barclay’s Capital Commodities Research Report states that in 2011, China consumed north of 1.7 billion barrels of diesel fuel, with more than 70% of that consumption coming from the transportation industry.

However, China is also looking to dramatically increase its production of ethanol for use in the transportation sector. As published by the National Energy Administration, China has a goal of producing 4 million tonnes of ethanol annually by the year 2020, nearly doubling its current annual output of 2.1 million tonnes. In addition, China’s National Energy Administration’s new five-year plan calls for the “promotion and application of fuel ethanol”, as reported

by Dominique Patton and Muyu Xu in Reuters Oil Report from 5 December, 2016. Sylvatex believes its renewable blendstock intermediate provides a significant opportunity to facilitate the application of China’s increased ethanol

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biofuels company profile production into its diesel fuel market and overall reduce tailpipe emissions.

Cathode material synthesis There is a growing demand within the lithium-ion (Li-ion) battery industry for advanced technologies that will improve electric vehicle battery and energy storage systems.

Currently, industry trends are to reduce overall production cost, reduce the carbon life cycle of the supply chains, and increase battery performance.

The Li-ion battery market is expected to grow over 15% to more than 300,000 tonnes by 2022, representing a total addressable market of approximately $6 billion (€5.7bn), with LiFePO4 (LFP) and LiMnxNiyCozO2 (NMC) cathode material production accounting for more than 50% of the total market.

Utilising the same production process as the fuel applications, Sylvatex has developed a renewable biobased medium to synthesise cathode materials for Li-ion batteries through solutionbased chemistry, rather than through the standard process

as well as enhancing the carbon coating of the cathode particles, all of which impact a battery’s performance. The Sylvatex technology is used to produce Li-ion (LFP and NMC) cathode materials of discrete size and morphology via a cost-effective, green,

Ethanol producers have invested heavily into technologies that extract corn oil during the ethanol production process today – a high temperature, multi-step, thermodynamic production process.

Sylvatex’s renewable bio-based reaction medium allows for nano-scale cathode material production, offering the ability to tune cathode particle size and morphology,

and recyclable process of key inputs to produce high yields of high performance material.

The company’s reaction medium technology will provide cathode material producers with a recyclable processing solution that will lower overall production

costs and reduce the volume of toxic waste chemicals by replacing them with a safe and renewable alternative, while providing higher performance. In addition, the company’s solution-based synthesis process will readily allow doping of new metals into the production matrix, which can further optimise battery performance. Liion battery producers will be able to market their products as having been produced through green chemistry, while providing superior performance to batteries produced through traditional chemistries. l For more information: This article was written by Virginia Klausmeier, CEO at Sylvatex.

Visit: www.sylvatex.com Reference: 1) Citation: http://www.abc.net.au/ news/2016-11-18/study-showsminers-face-high-lung-cancerrisk-from-diesel/8035798

Don’t miss your chance to appear in the March/April 2017 issue of Biofuels International magazine Editorial topics will include:

Deadline for artwork:

• Regional focus: Europe – how is the industry reacting to current legislative amendments?

• Cellulosic ethanol: What are the cutting-edge processes currently in use In this field?

• Biochemicals & by-products: Is the industry diversifying?

• Sustainability: Who is doing what to improve this important part of the biofuels process?

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