Biofuels in DNV

DNV Biofuels Position Paper – Main findings

By DNV R&I project group (GPH, LARMA, SBRY, SENO)

June 2008
 Presentation outline
„ Evaluation of the value chain (production, transport, consumption)
„ Market outlook
- Volumes, size, main characteristics
- Important decision gates

„ DNV business opportunities

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 2
 The Biofuels Value Chain - challenges

Biomass
Biomass Inbound
Inbound Biofuel
Biofuel Distribution
Distribution Customers/
Customers/
Production
Production logistics
logistics Production
Production Important
Important
market
market
players
players

Sustainability
Sustainability Challenges Technological Transport - -Governments/
Challenges Challenges Technological Transport Governments/
Challenges Challenges Challenges authorities
authorities
- -Transport
Transportofof Challenges Challenges
- -f(feedstock),
f(feedstock), feedstock - -Energy
feedstock - - Production - -Technical Energy
Crops/by- Production Technical
Crops/by- standards? challenges Companies
Companies
products - -SCC,
SCC,corrosion
corrosion standards? challenges
products depends
etc depending
etc depending - - Footprint
Footprint dependson on - -”New”
”New”Fuel
Fuel
- -Competition
Competitionwith on source of Producers
Food
with
Production onbiofuel
biofuel - - Tracing
source of Producers
source, biofuel,
biofuel,/ /”fuel
Food Production source,i.e.
i.e.”fuel
”fuel Tracing ”fuel - -Engine
quality” - - Development quality” Engine
- -Land
Landuse.
use. quality” Developmentofof quality” Manufacturers
Manufacturers
Biodiversity
Biodiversity - -Intermediates, new
newand
and - -Material
Intermediates, Material - -Tranport
e.g. improved compatibility, Tranport
- -Traceability
Traceability e.g.pyrolysis
pyrolysisoil
oil improved
production
compatibility,
production SCC,
SCC,corrosion
corrosion - -Maritime
- -Social technologies Maritime
Socialaspects,
aspects, technologies - -Blending,
CSR
CSR
2nd
2nd++gen
++gen Blending,tracing
tracing - -Consumers
Consumers
plants…
plants…
- -GHG
GHG
© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 3
 Market outlook

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 4
 Key market issues and outlook
„ Global biofuels industry by 2016
- Global bioethanol share to reach about 5% of world motor gasoline use by
2016

„ “Imperfect market” – largely driven by governmental incentives

„ Key drivers – energy security – GHG – domestic agriculture - high energy
prices
„ 2nd generation production technologies – commercial introduction around
2012 - require technological breakthrough
- 3rd ++ technologies – large potential – uncertain timescale
- Biosafety challenges

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 5
 Market outlook – 2006 – 2016
USA, Brazil and EU dominates
2006 ∆ 2016

100
Production volume in billion litrer per year

Bioethanol Production Biodiesel Production

90
8% global trade of bioethanol Virtually no trade in biodiesel
80

70

60

50

40

30

20

10

l
ol

l
ol

l
l

el

l
no
no

no

se
no

se

se
an

es
n

ie

ie

ie
ha
ha

ha
ha

ha

di
th

od

od

od
et
et

et
et

et

o
le

bi

bi

bi
lb
a
na
25
ld

SA

zi

di

ld

SA

25
or

ra

zi
hi
EU

In
U

or

ra
W

EU
W

B
02 July 2008 Slide 6
© Det Norske Veritas AS. All rights reserved
Source: UNCTAD 2007
 Market potential show a differences in import/export potential.
New actors likely to emerge in the global biofuel market
Regional trade potential
Import, domestic consumption Import, domestic consumption

Domestic increase?
Global exporter?

Global export

Market outlook: Increased demand in USA, EU, China and Japan. Increased
production and potentially export from S.C.America, Africa and Asian Pacific

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 7
 Key legislative environment give indication of
responsible actor(s) in the supply chain
National target for production through blending Responsible:
USA
requirements “blenders”

Blending requirement for biodiesel (2% - 40% (2035)). Responsible:

Brazil
Smaller requirement for ethanol. suppliers (?)
Must sell minimum quota of biofuels + tax privileges for Responsible: gas
Germany
residual sale. Can be meet through mixture or pure fuel stations
Partial tax exception for an agreed production volume Responsible: “biofuel
France
determined each year. plant owners”
Specific percentage of overall fuel sales must come from Responsible:
UK
biofuels (5% within 2010) suppliers
Large petrol stations (more than 1000 litres) must sell Responsible: gas
Sweden
biofuels stations
Responsible:
India 5% blend requirement expected soon
suppliers (?)
State-run program. Biodiesel to be sold in state-owned gas Responsible: state-
Indonesia
stations (Pertimina) owned suppliers

5% palm oil requirement in all diesel. Car manufacturers Responsible:

Malaysia
urged to produce biofuel-running cars suppliers?

Responsible: car
Philippines 1-2% coconut oil blend requirement on diesel
manufacturers(?)
© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 8
Cost Comparison
biofuels versus diesel/gasoline

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 9
 Investment into renewable energy: biofuel
investment mainly into production capacity
30

Total invesment in
25 renewable energy
Investment in $US Billion

“Pure” capacity expansion in 2006 by

technology
20 Asset financing
activity
Some new tech, but most
capacity expansion
15
Public market

10
VC/PE
5

0
Biofuels

Biomass and

Solar

Wind

renewables

efficiency/other
low carbon
Other
waste

Energy
© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 10
 GHG reduction must be documented

Level of reduction depends on:

ƒ Fuel type
ƒ Feedstock
ƒ Growth practices
ƒ Location

Documentation needs driven by

ƒ Customer demand
ƒ Legislation
ƒ GHG reduction incentives

„ www1.eere.energy.gov/biomass/environmental.html
© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 11
 Map of competence needs and DNV
opportunities related to biofuels

Sustainability Risk management solutions

Competition with Maritime
Food Production
Emissions Technical
Land use/Biodiversity CO2, NOX, Qualification Transport
SOX, etc
Sustainability “New” Fuel
Crops/ by-products Biofuels Standards Producers

GHG
Fuel Established Energy
Quality Quality Actors
Standards
CSR Government/
authorities
Traceability
Biomass Production Customers
Management systems

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 12
© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 13
 Current Bioethanol Market

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 14
 Current Biodiesel Market

© Det Norske Veritas AS. All rights reserved 02 July 2008 Slide 15