Promotion of BioFuels

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Promotion of BioFuels BioProducts in Europe

• Steffen Preusser
• Trade Commissioner (ST)
• Canadian Embassy - Berlin

2
Development of Biodiesel Production Capacity in
Germany
Source Verband Deutscher Biodieselhersteller e.V.
3
Current Biofuels Market

• German biodiesel market largest in Europe at 1.3
  million tons production p.a. - expected to
  increase to 2.0 million tons p.a. by end of 2006
• Bioethanol production went from zero to 500,000
  tons p.a. within 1.5 years

4
Topics

• Govt. Policy
• Marketing
• Standards
• Oil Companies
• Innovations
• Opportunities

5
Government approach

• EU targets for biofuels
• 2 by the end of 2005
• (about 1.17 million tons for Germany)
• 5.75 by the end of 2010
• (about 4.07 million tons for Germany)

6
Green Policy

• Subsidy programs
• 4 X 25 by 2020
• 25 renewables for fuels
• 25 renewables for heat generation
• 25 renewables for electricity generation
• 25 renewables for industrial materials(Weg vom
  Öl - Away from oil)

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Subsidies (How high are they?)

• For natural fibre-based insulation 35 / cubic
  metre (CAN 56)
• Takes price from 140 (CAN 224) / c.m. to 105
  (CAN 168) / c.m. regular insulation 60
  (CAN 96) / c.m.
• For biofuels, the mineral oil tax exemption works
  out to 0.50 / litre (CAN 0.90 / litre)
• Higher taxes ? larger subsidies
  (exemptions)Ireland put 0.15 tax on plastic
  bags resulted in 95 reduction in use

8
At the pump

• Biodiesel sells at 0.10 / litre less than
  regular diesel
• 0.889 / litre ? CAN 1.42 / litre

9
Leveling the playing field

• Petrochemical feedstock used in the manufacture
  of plastics are often exempt from taxes (hidden
  subsidy) amounts to 0.10 to 0.15 / kg (CAN
  0.16 - 0.24 /kg)
• Recycling fees amount to 1.20 / kg (CAN 1.92
  / kg) yet bioplastics are not recycled (ditto
  for container deposits)
• Diesel for EU farmers subsidised no incentive
  to use biodiesel
• Oil companies receive depletion allowances

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Proposed BioProducts Program

• Based on Renewable Energies Act
• Preferential (subsidised) prices for approved
  bioproducts
• Degressive subsidies (i.e. over 10 years)
• Must pass through a clearing agency
• Producers users of fossil fuel-based materials
  pay for system and subsidies

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Proposed BioProducts Program

• Problems
• Bureaucratic
• Confrontational (bio-based vs. fossil fuel
  manufacturers)
• Distorts market
• Interventionist
• Prone to inconsistencies

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Topics

• Govt. Policy
• Marketing
• Standards
• Oil Companies
• Innovations
• Opportunities

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Marketing

• Intensive public marketing of bioproducts
• Attendance at agricultural fairs and home shows
• Advertising campaigns to create awareness and
  demand

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Biodiesel marketing (UFOP)

• Biodiesel is produced from native oilseed rape
  and is an economic alternative to the grain
  markets
• Pure biodiesel offers a set of environmental
  advantages biologically degradable, decrease in
  emissions, etc.
• Biodiesel is a technically mature high quality
  fuel, which is subject to regular quality
  controls from the manufacturer to the gas station

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Convenient Vocabulary

• In German bio also refers to organic
• Hence biofuels also have a positive
• image (i.e. good for the environment)
• Currently particulate content in urban air is a
  cause for concern
• Biodiesel evidently has lower values than
  petrochemical diesel

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Bioplastics

• Are sold based on commercial advantages not on
  LCAs or as green substitute
• Agricultural films do not need to be collected,
  cleaned and disposed of
• Packaging of organic produce (bio for bio)
• Used for frozen meat because bioplastics has a
  high oxygen and moisture permeability
• Supermarkets use biodegradable bags

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PLA vs PVC

• PLA has lower processing temperature (80C vs
  160C for PVC) saving energy
• PLA stiffer permitting the use of thinner gauges
  (200µm vs 320µm for PVC)
• Hence PLA results in higher processing rates (24
  cycles vs 18 cycles for PVC)
• Net cost of PLA comparable to PVC
• Still manufacturer planning to charge surcharge
  for biodegradability property

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Topics

• Govt. Policy
• Marketing
• Standards
• Oil Companies
• Innovations
• Opportunities

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Standards make the market

• Biodiesel was accepted by the car makers once
  reliable standards were introduced by the
  producers (DIN EN 14214 certifying body AGQM)
• UFOP worked together with VW-group (incl. Audi,
  Seat, Skoda) to get blessing for rapeseed methyl
  ester (RME) for their cars
• Other types of methyl esters are not approved and
  the testing is the responsibility of the fuel
  manufacturer

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Existing and anticipated demand for biodiesel
capacity in Europe

kt
5.00
5.75
2.75
3.50
4.25
2.00
Source Verband Deutscher Biodieselhersteller e.V.
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Expected Development of Biodiesel Market in
Germany
Source Verband Deutscher Biodieselhersteller e.V.
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Wholesale Prices of Biofuels

• Biodiesel sells for about 0.65 / litre (CAN
  1.00 / litre) wholesale
• Bioethanol sells for about 0.50 / litre (CAN
  0.80 / litre)
• 2/3 of the price is dependent on the cost of the
  feed
• Note Only 40 of biodiesel is sold through gas
  stations balance used in private fleets

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Exporting canola oil or biodiesel to Germany

• Shortages will occur as production rises
  (insufficient quantities grown in Germany)
• Offset higher European prices oil prices
• GMO not an issue as it is imported as industrial
  oil (16 duty)
• Glycerine has to be labelled if for cosmetic or
  medical use
• Some reluctance from the sector As imports rise,
  finance ministry may cut subsidy (currently
  driven by Farmers Union)

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Topics

• Govt. Policy
• Marketing
• Standards
• Oil Companies
• Innovations
• Opportunities

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• The worldwide demand for automobiles will not
  exceed 1 million if only due to the lack of
  chauffeurs
• Gottfried Daimler (1901)

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Blending

• No labelling required for
• Biodiesel blends up to 5 (V/V)
• Bioethanol blends up to 5 vol or 15 (V/V)
  ETBE
• Could serve as an incentive for oil companies as
  they have the option to use or not use biofuels
  depending on their price and availabilty
• Only biogenous part is exempted from the mineral
  oil tax

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Bioethanol derivatives

• ETBE (Ethyl tertiary butyl ether) to comply with
  vapour pressure specifications for gasoline (60
  kPa summer)
• TAEE (tertiary-amyl ethyl ether) also being
  considered

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Liquid Biofuels
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VW / Shell Fuel Strategy
Sun, Wind
Diesel, Gasoline SynFuel SunFuel
Hydrogen fossil based GtL / CtL
renewable renewable
Biomass
Fossil
Car Technology / Time
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Marketing of Fuel
Contains app. 5 GtL
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BtL Timetable

• 13,000 ton plant in 2006
• 200,000 ton plant in 2008 (4 more by 2010)
• Takes 5 tons of biomass for 1 ton fuel
• Germany has 1 million ha of set-aside land can
  generate 4 million tons of fuel or 13 of current
  diesel use
• Daimler-Chrysler expects 10 market share in
  Europe by 2015
• Synthetic fuel, Sundiesel (VW), designer fuel,
  Biotrol (DaimlerChrysler)

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Topics

• Govt. Policy
• Marketing
• Standards
• Oil Companies
• Innovations
• Opportunities

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Fuel innovations

• Biogas from the fermentation of biomass
• To be used in natural gas cars
• E85 for hybrid cars (Sweden leads)
• Biodiesel / Fossil biodiesel fuel sensor (VW)

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BioProduct Innovations

• New 5 ton/hour hemp/flax decortication line
  coming on line in August
• PLA development centre opening
• Pilot plant biorefinery being built for lactic
  acid (using hydrolyzed rye and green liquor from
  lucerne)

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Biocomposites

• Tecnaro is a producer of high-quality
  thermoplastics for injection moulding
• Made from lignin, natural fibres (e.g. flax,
  hemp) and some natural additive
• Current capacity 300 tons p.a.
• Marketed as liquid wood

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New Trends

• Industrial Biotechnology (even GMO-bacteria) is
  receiving funding
• Bio-refineries are receiving considerable
  attention to increase renewables in the area of
  energy and chemical production

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Some new products

• Danisco launches vegetable oil-based plasticiser
• Producing biogas without slurry (at 55C)
  fermentor produces 1.5 million cubic metres p.a.
• A tannin-starch resin for chip board panels for
  exterior use

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Ag-fibres

• Price of hemp fibres 0.50-0.60 / kg (CAN
  0.80-0.96 / kg)
• 64 used in thermoplast press moulding
  applications, 35 in thermoset press moulding and
  1 for injection moulding
• Injection moulding applications to increase
  rapidly

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Ag-Fibre applications

• BMW uses a 5050 mix of hemp and flax fibres in
  their interior panels. The coarse, long hemp
  fibres hold the small, finer flax fibres in
  place.
• Ag-fibres will come under pressure from fibres
  from biodegradable polymers (e.g. PLA, PHA,
  cellulose fibres) they have the advantage of
  reproducible physical dimensions and properties

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Topics

• Govt. Policy
• Marketing
• Standards
• Oil Companies
• Innovations
• Opportunities

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Problems on the horizon (1)

• Shortage of canola oil for food industry in
  Europe
• Uses for the canola cake (prices are dropping)
• Fewer cattle in Germany
• Distillers Grain (DGS) entering market from
  bioethanol plants
• As emission standards are strengthened, fewer
  cars will be able to run B100 (motors become more
  specialised)

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Problems on the horizon (2)

• Uses for glycerine (prices are dropping)
  possible use in production of 1,3 propanediol
• Insufficient acreage competition with other
  crops rapeseed prices remained steady despite
  doubling of harvest (130 / t or CAN 205 / t)
• Danger of supply if poor harvest

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Problems on the horizon (3)

• Competition for feedstock straw (i.e. for biomass
  power plants, ethanol, construction, bedding)
• Analyst estimates that German farmers will only
  grow biomass if they can earn minimum of 150 /
  ha (CAN 240 / ha or CAN 97 / acre)
• Translates to straw price of 40 to 75 / ton
  (CAN 64 to 120 / ton)

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Biogas

• German farmers will be investing 2 billion Euro
  in 2005 on biogas fermentors
• Average investment per farm 216,000 (CAN
  345,000)
• Subsidies for construction and for generated
  electricity
• Farmers becoming power generators

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Other Opportunities

• RD Cooperation should be investigated with the
  Agency for Renewable Resources (FNR) has
  received funding increase to 50 million (CAN
  80 million) from 30 million
• Major chemical companies (three have signaled
  interest) are looking for companies with
  innovative products that fit into their business
  plan to invest in

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Summary

• Consumer, corporate and political marketing is
  key
• Standards play a major role in obtaining consumer
  and manufacturer support
• The use of subsidies depends on the nature of the
  market
• Can a govt. afford large subsidies?
• Is such an intervention wise (sustainable)?

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Contact Information

• Steffen Preusser
• Canadian Embassy
• Leipziger Platz 17
• D-10117 Berlin
• Germany
• Tel. [phone]
• Fax [phone]
• E-mail steffen.preusser_at_international.gc.ca

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Thank you!
We promote renewable resources City. State.
Green!