Can Cellulosic Fermentable Sugars Compete
Economically Against Established Glucose
Supply Chains?
Dr Sarah Hickingbottom
LMC International
World BIO Congress, Montreal
July 21st 2015
24/07/2015
©LMC International, 2015
1
LMC International – we develop unique, independent
research in agricultural commodities, bio-based
chemicals, biofuels, foods & industrial materials as well
as their end-use markets
For 35 years LMC has delivered in-depth, specialist analysis to leading
international companies & organisations
Our research covers a wide range of industry sectors:
Bio-based Chemicals
Grains
Coffee
Sugar & Sweeteners
Feed Ingredients
Food ingredients
Oleochemicals & Glycerine
Biofuels & Biomass
Veg Oils & Oilseeds
Cocoa
Starch & Fermentation Sugars
Rubber & Tyres
Recognized by many of the world’s major companies as experts, LMC
provides business with strategic insights unavailable elsewhere
As the bio-based chemicals industry emerges at a
commercial scale, feedstock strategy has proven
fundamental to economic success – yet even before the
industry has had a chance to develop, questions and
expectations are being asked…
 “Will your chemical production switch to second generation feedstocks?”
Often the answer given is:
“Yes. The plant will switch when it s economically feasible – in other words,
the cellulosic fermentable sugar supply must be delivered at a price point
compatible with carbohydrate sugars.”
With this strategy in mind, we ask if a future, mature 2nd generation sector
can supply sufficient cellulosic sugars to meet both fuel & chemical
demand? And in reliable commercial quantities and at competitive prices?
But why move away from 1st generation materials? One
driver is land use: 2002 world arable (oilseeds & grains)
land area was comparable to 1980 – but demand growth
then exceeded yield growth resulting in ~90 million new
hectares being used between 2002-2013
Other drivers include:
Million hectares
100
80
• Food vs. non-food & sustainability
60
• Feedstock diversification
40
• Belief in lower price &/or volatility
20
• End-user/consumer demands
0
• The biofuel experience
-20
• Government polices
-40
1980 1984 1988 1992 1996 2000 2004 2008 2012
24/07/2015
• Myths and legends…
©LMC International, 2015
4
Cellulosic Raw Materials – Wood & Residues:
Supply, demand, competing end-uses, logistics, price
After examining numerous regions (in collaboration
with Ecostrat), the 5 lowest cost woody biomass
supply chains were identified – based on supply
volumes and logistical infrastructure
Canada – South BC Interior
Scandinavia –
South Finland
Russia –
Northwest Russia
US – Mississippi/Alabama
Brazil – Tocantins/Goiás
24/07/2015
©LMC International, 2015
6
Agricultural residues and their cost drivers:
• By 2030, under high yield scenarios, US corn stover supply could
reach ~ 245 million dry tonnes – strong potential supply
• Residues tend to have a lower energy density than woody
biomass – limiting their transport distance
• Whereas woody biomass is available all year round, residues must
be stored – the exception being palm biomass
• The value of straw/stover is determined by its cost of collection
and its nutrient replacement – however, where markets have
developed, prices exceed these price points
• Principally, the value of bagasse and palm biomass are
determined by their opportunity costs as electricity sources –
particularly in Brazil
24/07/2015
©LMC International, 2015
7
Cellulosic Biomass Processing Technologies & Costs:
Gasification, Pyrolysis & Enzymatic Hydrolysis
24/07/2015
©LMC International, 2015
8
US$ real 2013/kg C5&C6 sugars (dry basis)
Cellulosic sugar production costs, for a US standalone
hydrolysis plant, are projected to fall by 35% between
2012-2025 – largely based on cheaper enzymes
Biomass
2012
Enzymes
Other Cash Costs
2025
Depreciation
Concentration
Note: Based on a fixed price for delivered biomass of $65 per bone dry tonne
24/07/2015
©LMC International, 2015
9
US$ real 2013 per litre of ethanol/equivalent
Comparing estimated ethanol production costs, on an
ethanol equivalent basis, cellulosic hydrolysis should
be competitive with gasification and pyrolysis.
2012
2025
Enzymatic Ethanol
(Standalone)
Biomass
24/07/2015
2012
2025
Gasification Ethanol
Variable Costs
Cash Fixed Costs
©LMC International, 2015
2012
2025
Fast Pyrolysis
Depreciation
10
So? Can cellulosic sugars be cost
competitive with glucose?
24/07/2015
•24/07/2015
©LMC
2015
•©LMCInternational,
International, 2013
11
• 11
sugars (kg) per tonne of corn or
biomass feedstock
Fermentable sugar yields from corn (wet milling) are
~1.5X higher today than from corn stover hydrolysis –
this yield differential should narrow over time as shown
by plotting sugar yields from both corn (blue) & corn
stover (yellow)
2013
2015
2017
2019
2021
2023
2025
However, no matter
advancements in
biomass process
technology, 1st gen
fermentable sugar
yields will exceed their
2nd gen counterparts
because of raw
material stoichiometric
differences
Fermentable sugar yield from corn
Fermentable sugar yield from biomass
24/07/2015
©LMC International, 2015
12
To rank fermentable sugar production costs, it is
necessary to determine their production cost profiles,
which differ significantly between 1st & 2nd generation
processes – as shown here for the US
1st Gen: Fermentable sugar cost
profile (corn, wet milling)
2nd Gen: Fermentable sugar cost profile
(corn stover, enzymatic hydrolysis)
Raw Material Cost
Capital
Labour
Enzymes
Energy
Other
Burning lignin by-products provides energy self-sufficiency for enzymatic hydrolysis
24/07/2015
©LMC International, 2015
13
By forecasting (2025) raw material, logistics and
processing costs before benchmarking against
projected glucose costs, we can conclude certain 2nd
gen strategies should be highly competitive
Brazil Bagasse (LP)
Brazil Bagasse (HP)
Indonesia Molasses
Brazil Clean Chip
Malaysia PKS
Russia Clean Chip
Malaysia Pressed EFB
Russia Corn
US Corn Stover Cost
Poland Straw
Canada Clean Chip
Brazil Cane
US Clean Chip
US Corn
Canada Corn
0
50
100
150
200
250
300
US$ per dry tonne of biomass sugars or glucose
First generation
Russia
Corn US glucose
Corn Stover Cost
24/07/2015
US
Cleangeneration
Chip US Corn
Canada
Second
biomass
sugarsCorn
©LMC International, 2015
14
Final thoughts…
supply chains, integration, logistics, trade, competition
24/07/2015
©LMC International, 2015
15
Implications for the bio-based chemical sector as the
cellulosic ethanol industry commercialises:
• Initial capacity is based primarily on hydrolysis – potentially
creating cellulosic sugar volumes which can be diverted
towards chemicals & aid in the technology commercialisation
– Cellulosic ethanol uses a subsidy/mandate as it competes
against gasoline/glucose-derived ethanol, hence its
outlook could change as political support weakens in the
US & EU – creating opportunities for chemicals perhaps?
– The old adage: why make a $1 fuel when you can make a
$5 chemical?
24/07/2015
©LMC International, 2014
16
2nd gen supply chain strongly favours downstream
production at source – creating barriers for an
imagined merchant market supplying plants located
anywhere
• Processing biomass is expensive and renders otherwise
cheap raw materials more costly
• Frequently, biomass prices will be determined by alternate
values, such as power generation or animal feed,
increasing the price above the collection cost
• Logistics costs add significantly to the delivered cost of
biomass
• The most promising cellulosic feedstocks are Brazilian
bagasse & US corn stover with processing local to raw
material source – arguably downstream to the final
chemical material
24/07/2015
©LMC International, 2015
17
Outlook for 1st gen feedstocks: The main challenge
facing global agriculture is growing crop demand
from income growth & government-backed biofuel
demand – but:
•
If demand grows too fast to avoid sustained price increases,
demand will slow:
• Higher crop prices dampen income growth & thus weakens
demand for some foods
•
• Biofuel programmes are government led – can be rolled
back if demands on agriculture are too high
•
Crucially, agricultural demand is reactionary – the outlook for one
crop is outlook for all (possibly not palm)
•
However, currently, there are sufficient supplies to meet demand
if the industrial consumer can afford a price point set by
subsidised biofuel players
24/07/2015
©LMC International, 2015
18
A final shout out to some of the companies active in
the commercial development of second generation
cellulosic sugars:
SucreSource
24/07/2015
©LMC International, 2015
19
Thank you for your kind attention
sarah@lmc.co.uk
www.lmc.co.uk
LMC carries out bespoke consulting projects for bio-based
chemical, fuel & material players as well as producing ‘offthe-shelf’ reports, including:
• 2nd Generation Bio-based Feedstocks – how viable are they?
• Feedstocks for Bio-based Chemicals – which will be competitive?
• Biomass Availability & Price
• Global Crop Outlook
• Carbohydrate Outlook: Prices & Processing Costs
• Global Markets for Starch & Fermentation Products
• The Outlook for Oleochemicals & Glycerine
• The Global Oilseeds & Oils Market
• Fuel & Industrial Ethanol
• The Global Market for Industrial Ethanol
• The Global Sugar Outlook – including life after EU sugar quotas
4th
Oxford
Floor, Clarendon House
52 Cornmarket Street
Oxford OX1 3HJ
UK
T +44 1865 791737
F +44 1865 791739
info@lmc.co.uk
New York
1841 Broadway
New York, NY 10023
USA
T +1 (212) 586-2427
F +1 (212) 397-4756
info@lmc-ny.com
Kuala Lumpur
B-03-19, Empire Soho
Empire Subang
Jalan SS16/1, SS16
47500 Subang Jaya
Selangor Darul Ehsan
Malaysia
T +603 5611 9337
Singapore
16 Collyer Quay #21-00
Singapore 049318
Singapore
info@lmc-kl.com
info@lmc-sg.com
Tel: +65 6818 9231
© LMC International, 2015
All rights reserved
www.lmc.co.uk
This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in
any manner, to a third party without the prior written consent of LMC International.
While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation,
any decisions based on them (including those involving investment and planning) are at the client’s own risk.
LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.
24/07/2015
©LMC International, 2015
22