Biorefinery Scoping Study

REPORT

Biorefinery Scoping Study: Tropical Biomass

Prepared for: Department of Innovation, Industry,

Science & Research (DIISR)

December 2010

Prepared by:

Co r el l i Co n su l t in g B IOSCIEN CE

Dr Dianne Glenn

Corelli Consulting December 2010

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Confidential information in this report has been redacted. These redactions do not change the conclusions of the report.


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CORELLI CONSULTING REPORT TO DIISR


TABLE OF CONTENTS

EXECUTIVE SUMMARY 7

OBJECTIVE 13

CHAPTER 1 TROPICAL SOURCES OF BIOMASS SUITABLE FOR BIOREFINING 14

1.0 DEFINITIONS 14

1.1 SUGARCANE 19

1.1.1 Industry structure 22

1.1.2 Value and pricing 24

1.1.3 Crop cycle 25

1.1.4 Sugarcane production 25

1.1.5 Sugarcane Processing 26

Bagasse Refining 27

1.1.6 The Future: Drivers For Change Within The Sugarcane Industry 30

CHAPTER 2 INDUSTRIAL BIOTECHNOLOGY: AN OVERVIEW 33

2.1 INVESTMENT IN BIO-BASED PROCESSES 34

2.2 THE CHEMICAL INDUSTRY: HUGE INDUSTRY WITH GLOBAL REACH 36

2.3 BIO-PRODUCTS: OVERVIEW 39

2.3.1 Candidate Biorefinery Products 40

2.4 PROCESS TECHNOLOGIES: OVERVIEW 44

2.4.1 Thermochemical 45

2.4.2 Biotransformation 45

2.4.3 Fermentation 46

2.4.4 In-planta

2.4.5 Choice of Production Pathway

46

46

CHAPTER 3 AUSTRALIAN INDUSTRIAL BIOTECHNOLOGY: THE VALUE CHAIN

FROM CROP TO CHEMICALS

47

3.1 APPROACH 47

3.2 AUSTRALIAN BIO-INDUSTRY PARTICIPANTS 47

3.2.1 Research 47

Crop improvement 48

Refining technologies 48

Microbial strain development 49

Materials Science 50

Wastewater Bioremediation 50

Process engineering: Proof of concept and Scale of production 50

3.2.2 Development: Pilot facilities 51

Mackay Biofactory 51

3.2.3 Investment Community 52



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3.2.4 Manufacturing: The Chemicals and Plastics Sector 54

Sector Profile 54

Sector impact on the economy 55

Imports and exports 58

Information Sources 61

Stakeholder response 62

3.2.5 State Government 64

Queensland state government 64

NSW state government 65

CHAPTER 4 KEY COMPONENTS AND HURDLES 66

4.1 FEEDSTOCK 66

4.2 ESTABLISHMENT BARRIER 68

4.3 LIFE CYCLE ASSESSMENT 69

4.4 REGULATORY 69

4.5 LOSS OF CORPORATE KNOWLEDGE 71

4.6 LACK OF KNOWLEDGE AND LACK OF COORDINATION 71

4.7 POLICY GAPS 71

4.8 SKILLS AND CAPABILITY 72

4.9 MARKET AWARENESS 73

CHAPTER 5 ROLE OF GOVERNMENT 74

5.1 VISION 76

5.2 POLICY DEVELOPMENT 76

5.3 GREEN DOOR: THE CONCEPT OF A SINGLE DESK 77

5.4 INVESTMENT 78

5.5 INCENTIVES 80

5.6 INFORMATION 81

5.7 REGULATORY 81

5.8 CHAMPION, COORDINATION AND COMMUNICATION 81

5.9 FEEDSTOCK PRICE 82

5.10 SKILLS AND CAPABILITIES 82

5.11 MARKET CREATION 83

CHAPTER 6 BIO-BASED INDUSTRY DEVELOPMENT 85

6.1 POTENTIAL STRATEGIES TO BUILD AUSTRALIAN BIO-BASED INDUSTRY SECTOR 85

6.1.1 Scenario: Sharpening the sword 88

6.1.2 Scenario: Mill-centric value-add model 90

Proserpine Cooperative Sugar Milling Association Limited (Proserpine Sugar) Furfural

plant REDACTED

6.1.3 Scenario: Development collaboration 90

Crystalsev/Dow 93

ARD/DNP 93

Amryis Biotechnologies 94

6.1.4 Strategy: Large scale manufacture 94

6.1.5 Strategy: Biorefinery Precinct 98

6.2 COST BENEFIT ANALYSIS 99

6.2.1 Bio-based plastic monomers 100

6.2.2 Platform molecules 100



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6.2.3 Consortium 101

6.3 NATIONAL BENEFITS 105

6.3.1 Direct Benefits 105

6.3.2 Indirect Benefits 107

CHAPTER 7 CASE STUDIES 108

7.1 INDUSTRIAL RESEARCH CENTRES 108

7.1.1 Victorian AgriBiosciences Centre 108

7.2 STRATEGIC PLANNING AND ROADMAP DEVELOPMENT: INDUSTRY 109

7.2.1 Sustainable Aviation Fuel Initiative (SAFI) 109

7.2.2 Sustainability Leadership Framework - PACIA 111

7.3 STRATEGIC PLANNING AND ROADMAP DEVELOPMENT: STATE GOVERNMENT 114

7.3.1 Queensland state government 114

7.4 PRECINCT 115

7.4.1 China Free Trade Zone model 115

7.4.2 Amberley 115

CHAPTER 8 SUMMARY 117

TABLES AND FIGURES

Table E1: Recommendations of the Biorefinery Scoping Study to the Federal

Government

10

Table E2: Recommended levels of investment in bio-based chemicals and plastics

sector

REDACTED

Table1: Perspectives on sustainability metrics 14

Table 2: Australian cane and sugar production 1999-2010 21

Table 3: The major mills in Queensland 23

Table 4: Yields of feedstocks from sugarcane 30

Table 4b: An overview of chemicals derived from established or possible biotech

processes, based on a number of bio-based renewable feedstocks

38

Table 5: Bio-based chemicals already produced on bulk scale (>20kt/yr) 39

Table 6: Candidate biorefinery products, the route to manufacture and applications 41

Table 7: The top 12 sources of Australian chemicals and plastics imports in

2005/2006

59

Table 8: The top 12 sources of Australian chemicals and plastics exports in

2005/2006

60

Table 9: Global Trade in Chemicals & Plastics: 2005 Shipments/Turnover 60

Table 10: Major companies within the Australian chemicals and plastics sector 62

Table 11: Potential Strategies to Build Australian Bio-Based Industry Sector 86

Table 12: Some bio-based products in commercial production in Australia to date 89

Table 13: Prospective commercial production of bio-based chemicals and polymers:

some examples

92

Table 14: Industrial production of bio-based chemicals and polymers: some examples 96

Table 17: Total value up-lift for a two-product consortium based at one mill 102

Table 18: Estimated outputs of bio-products from a projected sugarcane biorefinery 103

Table 19: Biorefineries: comparison between prospective chemical and aviation

facilities

111



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Figure 1a: Biomass processing: The steps for the processing of industrial feedstocks

and extraction of value-added products from agricultural and crop biomass

17

Figure 1b: Sugarcane in Brazil: Lowest cost producer 18

Figure 2: World Sugar Production by region 20

Figure 3: Australian cane area and yield 20

Figure 4: World sugar indicators 25

Figure 5: Sugar cane milling 27

Figure 6: Sugarcane bagasse processing: an overview 28

Figure 7: Comparative production of platform and high value compounds based on

petrochemical (black carbon) and agricultural (green carbon) feedstocks

33

Figure 8: VC investment in companies with a renewable chemicals aspect 34

Figure 9: Value of VC investments by process technology 2004 to 2009 35

Figure 10: Succinic acid as a platform molecule 42

Figure 11: Lactic acid as a platform molecule 43

Figure 12: Life Cycle of Chemicals and Plastics 54

Figure 13: The key position of the chemicals and plastics industry within Australian

supply chains.

56

Figure 14: Australia's chemical industry 1905 - 1995. Value added as % GDP. 57

Figure 15: Level of feedstock imports by Australia's chemical industry 1990-2006 58

Figure 16: The Australian chemical industry: Balance of Trade 1990-2006 58

Figure 17: Sugarcane biorefinery 104

APPENDICES

APPENDIX A: INTEREST OF KEY STAKEHOLDERS: FEDERAL GOVERNMENT

CONSULTATIONS - REDACTED

128

APPENDIX B INNOVATION WITHIN THE PLASTICS AND CHEMICALS SECTOR 130

APPENDIX C STAKEHOLDER CONSULTATION REDACTED

GLOSSARY 131

REFERENCES 142



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Final Report

EXECUTIVE SUMMARY

BACKGROUND

The global chemical industry is a huge enterprise with global reach, reporting revenues in 2007 of

US$2,122 billion, with strong growth prospects in the Asian jurisdictions of China and India. The

global chemicals industry is responding now to the profound signals to transition from

petrochemical-based manufacture to one based on sustainable bio-based feedstocks, which include

the outputs of agriculture and forestry.

The transition from petrochemical-based feedstocks to renewable and sustainable feedstocks is

already evident in the major global chemical companies in a product portfolio, both actual and

potential, comprising bulk commodities, fine and platform chemicals and plastics. The chemicals

industry is turning to industrial biotechnology as a route to new commercial opportunities to

maintain their future market share, delivering significant improvement in process profitability and

potential for considerable market growth and competitive positioning. The future shape of the

global chemicals industry may be the result of a transition initiated now from a refiner of fossil fuel

substrates to a biomass-based biorefinery.

OPPORTUNITY

In this context, Australia has the opportunity to

Establish an industrial biotechnology sector based on agricultural feedstocks;

Value-add and diversify existing agricultural products and stabilise revenues from the sector;

Generate global export revenues, especially from the burgeoning Asian markets; and

Secure a reputation as a global centre for industrial biotechnology and bio-based

manufacturing.

This Study suggests a staged route to establishing an Australian bio-based sector. The first stage

needs to be one which provides the lowest investment risk, lowest technical hurdles, short time to

revenues (3-5 years) and clear route to market. This may be achieved by means of an

international chemicals or technology company which:

brings proprietary technology, process engineering skills and know-how;

establishes a facility co-located with feedstock supply; and

manufactures at volumes to meet the Asian export market.

High value fine or platform chemicals offer the best return on the available domestic feedstocks

supply for the expanding Asian market. Platform compounds have a market value of ~ US$1,000-

$10,000/ tonne. High value, low volume molecules have values ranging up to ~US$1,000/kg. By

comparison, the average value of exported raw sugar, for example, has been A$289/tonne over

the last 5 years.

COMPETITIVE ADVANTAGES

National advantages: Australia provides distinct competitive advantages for commercial production

of industrial chemicals, recognised as attractive by industry stakeholders, which include:

Proximity to significant Asian markets;

Rigorous IP and regulatory environment;



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Western business practices;

Stable financial and political environment; and

Educated and skilled workforce.

Agriculture: Australia offers an array of alternate and second generation feedstocks for bio-based

manufacturing. The sugarcane industry is particularly well positioned to provide feedstocks to bio-

based industries for high value chemicals and plastics:

High productivity crop: the output of a single sugar mill provides sufficient feedstock for global

scale production of a medium to high value bio-product.

Well-established and efficient industry with transport and logistics infrastructure, integrated

process with energy and power requirements: a co-located bio-products manufacturer may

leverage: the mill’s feedstock processing and storage assets; the critical facilities of logistics

and transport infrastructure, from field to mill to port; and electrical power and steam co-

generated within the mill from sugarcane bagasse.

High ratio (85%) committed for export: Therefore, the use of sugar as an industrial feedstock

will generate the benefit of value-adding sugar in Australia while not competing with other

domestic industries based on sugar.

Non-food production: Sugar is a food additive rather than a food staple or feed, in contrast

with corn and wheat.

Clean feedstock: suitable for high value chemicals and plastics.

The sugar industry is under pressure: This agricultural industry may be ready to consider

change, due to volatile world market prices, market constraints and single-product portfolio.

CHALLENGES

The hurdles to the establishment of a bio-based industry in Australia include:

Vision: Lack of vision at Federal level is a barrier to a national industrial biotechnology sector.

Feedstock price: Securing an economically feasible feedstock price for both buyers and

sellers of biomass is critical. The cost of industrial feedstock can be ~20% of the cost of goods

and the bio-based chemicals manufacturing industry requires a benchmark price for sugar,

which may be slightly or significantly below that of the prevailing market price. Industry

requires a stable long-term price at commercially feasible levels (A$220-280/tonne); however,

the export price of sugar in 2010 is at a record high (A$470/tonne) but fluctuates greatly in

response to global pressures.

Sugar industry inertia: Current high market value for sugar may increase the impediments

to change within the cane growing sector in the short term.

Regulatory: The pathways for approval of genetically altered organisms and for new chemical

registration, essential for bio-product manufacture, are anticipated to be problematic in

Australia.

Establishment barrier: A vigorous domestic market can drive the establishment of a new

industrial sector. In contrast, the domestic market for chemicals and plastics is small by world

standards and Australia’s manufacturing capability in this sector appears to be contracting.

Skills and capability: Although not considered a “deal breaker” for overseas companies,

there is limited national experience in process development, chemical engineering, and scale-

up and operational capability in industrial biotechnology in Australia.

Technical capacity and capability: There is a substantial lack of pilot and demonstration

scale facilities in Australia to scale up innovative technology; so little if any national technology

is investment-ready with proven value as a commercial operation.

Investor confidence: The Australian investment community reports a high level of interest in

technology-based industrial projects. However, those technologies are struggling to attract



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investment, because private sector investment, especially in infrastructure, critically depends

on a proactive vision for the technology-based sector, a stable and supportive policy

environment and Government participation in de-risking the venture.

International competition: Ambitious neighbours able to provide a low cost manufacturing

environment based on tropical agricultural feedstocks in Thailand, Indonesia and China

challenge Australia’s capacity to attract overseas chemical and technology companies.

INNOVATION

This Study perceives Australian research efforts in industrial biotechnology as individual pieces of a

grand work which need an overarching national scheme to collect and assemble those pieces to

capture maximal value from the research investment.

In overview, the research sector in Australia is fragmented and underfunded, but in many cases

generates world-class outputs. Australia has research capability across most aspects of the value

chain for a bio-based industry: in crop improvement, life cycle analysis, refining crude biomass,

microbe design, fermentation technology, product recovery, and materials science.

NATIONAL BENEFIT

This Study proposes that there are considerable direct and indirect national benefits to be derived

from a mature biomass-based industrial sector in Australia:

Creating export revenues for bio-based products: A bio-based industry sector is

anticipated to contribute significantly to Australia’s export earnings and to replace imports.

o Within 3-5 years: The export value of two medium value, platform chemicals is estimated

at ~A$120-140m pa for ~40,000tpa.

o At maturity: The export value of fine and niche bio-compounds generated by the biomass-

based manufacturing precinct is anticipated to be ~A$1bn-$1.5bn for medium value,

platform and fine compounds and US$50m-$100m for high value niche compounds,

achieved within a 10-15 year timeframe. This revenue is predicated on the consumption by

rapidly growing Asian markets of a significant proportion, if not all, of Australian

manufacturing.

Driving economic growth: nationally, but particularly in rural and regional centres:

o stimulating employment, particularly in regional centres: creating direct jobs in

construction and operation of the bio-products facility; indirect jobs in support services and

agriculture;

o initiating precinct development in rural regions; and

o stabilising rural economies.

Stabilising the agricultural sector: generating new, secure and diversified markets for the

agricultural sector such as the sugar industry, value-adding existing crops and providing the

rural sector with stable agricultural revenues, decoupled from volatile world markets.

Stimulating Australian manufacturing: improved market opportunities, and hence the

profitability and sustainability of Australian manufacturing enterprises participating in a mature

bio-based industry. This may flow through to reinvigorate the nation’s chemicals and plastics

industry and reduce the threat of de-industrialisation of manufacturing within that and

collateral sectors. Furthermore, any benefits felt in the chemicals and plastics sector have

ramifications across the Australian economy as these products are key enablers in a broad

array of domestic industrial sectors from mining to agriculture to construction.

Translating Australian and imported innovation into economic growth.



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Sustainability and climate change mitigation: Awareness of green carbon is linked not

only to issues of sustainability and renewable resources including water, but in avoidance of

the environmental impacts of fossil fuel use, including greenhouse gas emissions.

ACTIONS FOR DELIVERING TROPICAL BIOMASS VALUE CHAINS

The role of Government is to provide an enduring market mechanism by means of vision, a stable

and supportive policy environment and investment. The findings of this Study on actions for

delivering tropical biomass value chains are summarised in the following table.

Table E1: Actions for delivering tropical biomass value chains

ISSUE CORE REQUIREMENT ISSUES

Vision An overarching national

vision and commitment

To recognise

environmental and sustainability impacts of a

bio-based industry

value proposition this sector may offer in

building future national wealth,

To balance

rural and regional development

agriculture objectives, food assurance and

production.

Policy

development

A stable policy

environment is key to

providing a framework

for corporate and

venture investment

An emissions trading environment: Carbon

trading, CPRS and carbon tax initiatives

National ethanol mandates; broadened ethanol

legislation to include other bio-based products

Guidance for allocation of crop biomass to meet

energy, fuel and bio-products applications;

export of raw biomass as an industrial bio-

feedstock to overseas competitors; balance

current domestic and export commitments.

Feed-in tariffs, mandated quotas for bio-based

chemicals and plastics as for renewable energy,

and off-take agreements.

Chemicals regulation harmonisation

Other policy considerations as: antidumping

provisions; actions to speed up planning

approvals; and land tax considerations.

Green door

A single interface with

all government

agencies

To simplify the forms and action steps essential for

industry to establish and undertake commercial

operations



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Investment

Investment in

research sector

education & training

infrastructure assets

transition innovation

into Australian

businesses

To build a bio-based industry in Australia

Address gaps in the value chain

Attract commercial parties to transition

advanced or well-established operations to

Australia

Stimulate the domestic chemicals & plastics

sector

Incentives

To attract commercial

participants to build the

industrial bio-economy

value chains

Such as:

tax incentives & accelerated depreciation;

stable & appropriately priced carbon market;

funding programs (similar to ACRE for

alternative energy)

Regulatory

Robust, capable &

globally relevant

regulatory environment

Critical capabilities upgrade of both the gene

(Office of the Gene Technology Regulator

OGTR) and chemicals regulators

Consistent & harmonised regulatory guidelines

between State & Federal agencies

International harmonisation of standards for

bio-based products destined for export markets

Information

Industry-relevant

information from

government sources

Collating existing reports and databases re

mapping of land use and ownership;

land suitability; and

water availability

Champion,

Coordination &

Communication

Putting a face on the

Government’s vision in

industrial biotech

Technology advocates: extend the current

program

Coordinated interaction between related

initiatives: aviation fuel working group (SAFI);

Climate Change Action Group; Pulp and Paper

strategy paper; Renewable energy policy; and

CPRS.

Feedstock price Addressing the

feedstock price gap

Consider underwriting and guaranteeing the

feedstock price, particularly in the early stages of

bio-products sector development.

Market

development

To create a domestic

market for bio-based

products

Procurement programs with set performance

standards for bio-based products.

Sustainability National sustainability

standards

Performance metrics:

agriculture & bio-based products;

water resources: use and quality;

biodiversity conservation & management;

chemical use patterns;

weediness; and

land use patterns

Globally relevant

AREAS FOR FURTHER ANALYSIS

Detailed data was not available to this Study to quantify and itemise:



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Market dynamics, volumetric consumption and value of bio-based platform and high value

plastics or chemicals within the domestic sector, either directly or as replacements for existing

products;

Technical hurdles limiting uptake of platform molecules within the domestic market;

Costs of production and recovery of the case study bio-based products (here 1,3PDO and

adipic acid) to support a more in-depth analysis of the value proposition of the different scales

of production using existing industrial data;

Energy balance of modelled scales of production to determine the value of additional revenues

from electricity co-generation using bagasse;

Total capital expenditure, and with inputs and infrastructure shared between consortium

partners to support a detailed evaluation of the value proposition and the economic impact of

precinct development. A key input is the energy balance of the precinct, which will be strongly

influenced by mill process efficiencies and boiler capability in terms of bagasse availability.

CONCLUSION

For all the limitations and hurdles, and skills and capabilities gaps, Australia offers a sound and

attractive opportunity to the international chemicals industry to collaboratively establish a bio-

mass based industry. Based on sugar feedstocks, the industry has the potential to produce niche,

high value and medium volume platform molecules for the export chemicals, plastics and other

markets, generating regional employment, stable agricultural revenues and providing a portal for

the deployment of Australia’s research and technology sectors. The principle requirement to

assemble all participants into the new bio-based sector is the need for an overarching national

vision from the Federal Government, with commitment and an attendant policy framework to

provide high level strategic direction and support for initiation and support of this future economy.



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Final Report

OBJECTIVE

The overall aims of this Study is to provide the background and scope of the establishment of

biomass-based value chains, including biorefineries, in Australia, and the capacity of those

biorefineries to manufacture fine and high value niche chemicals and/or polymers from tropical

feedstocks.

The purpose of the Study is to provide background information and context for the development of

policy framework(s) under consideration by DIISR.

The Scoping Study intends to:

1 Identify and provide analysis of exemplar process and biorefinery technologies that could

be relevant or adopted for Australian tropical biomass sources;

2 Consult with key stakeholders on issues such as

2.1 Environmental resource management;

2.2 Regulatory and policy frameworks;

2.3 Research funding;

2.4 Commercialisation and industry engagement;

2.5 IP management;

2.6 Co-ordination and collaboration across the energy, chemical, manufacturing,

biotechnology and biomass production sectors;

2.7 Work skills and employment; and

2.8 Access to international technology and best practice.

3 Identify and assess the key barriers relating to the development of value chains including

bio-refineries based on biomass in Australia;

4 Provide an indication of the size of the potential domestic and international markets for

products from the biomass-based value chain;

5 Undertake gap analysis of the current skills and capabilities and determine the

opportunities for infrastructure and capabilities to be adopted in biobased value chains;

6 Examine both synergies and potential linkages between development of the use of biomass

sources, biorefinery and other bio and chemical technologies relevant to the Australian and

global context including appropriate regional case studies;

7 Propose and outline opportunities for the development of policy and economic frameworks

that would enhance the development of the biomass based value chains and biorefineries

within Australia; and

8 Provide recommendations on mechanisms to encourage increased collaboration and

linkages between biomass industry research providers, partners from manufacturing

industries, government(s) and the community.



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CHAPTER 1 TROPICAL SOURCES OF BIOMASS SUITABLE FOR BIOREFINING

1.0 DEFINITIONS

Tropical

Australia comprises a land area of almost 7.7 million square kilometres, with 39% of that land

designated as within the tropical zone. The tropical zone is commonly defined according to the

traditional Cartesian method as the portion of the Earth’s surface that lies between the Tropic of

Cancer at 23.5 degrees north latitude and the Tropic of Capricorn at 23.5 degrees south. However,

various definitions of the tropics exist such that climatologists use different indicators to define the

boundaries of the tropics, commonly based on surface temperature and precipitation patterns, and

so more informally define the tropical zone as 30 degrees latitude north and south of the equator.

Australia’s tropical zone occurs mainly in Queensland, Northern Territory and Western Australia[1].

Sustainability

There is increasing activity internationally to develop sustainable industry and bio-economies

based on sustainable sources of feedstocks. However, different agencies and ventures may have a

different perspective on what is meant by sustainability.

The commercial success of a biorefinery venture might depend on issues related to cost

effectiveness and processing configurations such as the integration of resources, optimisation of

inputs, minimising of environmental impacts, and flexible production of multiple outputs or bio-

products based on a multifunctional processing capability, responsive to market demand. While

most groups are clear on the issue of renewable energy and the use of bio-based feedstocks,

different sustainability priorities may exist among stakeholders, commercial manufacturing

partners, policy makers and environmental managers (see Table 1).

Table1: Perspectives on sustainability metrics

SUSTAINABILITY CRITERIA

CHEMICAL INDUSTRY* GOVERNMENT** ENVIRONMENT***

Cost effective Energy security Land use

Reliability of supply to

meet

volumetric productivity

Food Security Biodiversity

Continuity of supply of

materials

and chemicals

Water

Soils and soil health

Air quality

Weediness



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*Chemical major respondents; **US Dept of Energy [2]; *** Australian Federal Government DEWHA, this

report

This Study is then aware that the term sustainability may raise a subset of different issues among

different stakeholders within the biorefinery value chain. While clearly a sustainable resource to

provide alternative feedstocks for manufacturing may be reasonably understood to mean a

renewable source of carbon with reduced greenhouse gas emissions compared with petrochemical-

based carbon, there may be additional metrics of concern to each group. Commercial

manufacturers require a feedstock which can meet the volumetric demands of production in a

cost-effective manner. Government policy makers are concerned with the competition between

demand for feedstocks for energy and for food production, and long-term land productivity.

Environmental managers may need to assess the sustainability of the biomass crop production as

impacts on land use, water soil and air quality and the conservation of biodiversity.

Biorefinery

The scope of a biorefinery has some analogy with a petrochemical refinery in that flexible delivery

of product may be generated from a multiple product portfolio depending on market demand,

contractual obligations and plant capacity. Furthermore, a bio-based biorefinery may be developed

to process various biomass feedstock options to generate a mix of fuels, high value products

and/or electricity [3].

The chemical industry has a clear vision of the future of that sector and the significance of bio-

based manufacturing in that vision. DuPont, for example, anticipates that 25% of its chemical

products will derive from renewable feedstocks by 2020. The chemical industry’s view of bio-based

feedstocks is that they are renewable and widely available globally as a sustainable resource for

decentralised manufacturing. Furthermore, unlike fossil fuels, these feedstocks have low inherent

toxicity but desirable functionality to support (generally) safer chemical processing. Industry

considers bio-based feedstocks to have good raw material economics and may underpin the

development of new proprietary intellectual property for a company to maintain or improve its

competitive position in the marketplace. Nonetheless, life cycle analysis (LCA) needs to confirm

how “green” are these feedstocks, and industrial sustainability requires feedstocks with high

productivity per hectare per year [4, 5].

The commercial success of a bio-based venture may be enhanced by a number of criteria, which

include:

Vertical integration of resources: streamline integration of the manufacturing component of the

biorefinery with feedstock refining, to leverage associated facilities, power and infrastructure;

Optimisation of inputs: match the supply and nature of feedstock to manufacturing process

outputs to keep cost of goods low;

Minimal environmental impacts: use of renewable energy to reduce greenhouse gas emissions,

sustainable water use, materials recycling etc as part of the triple bottom line accountability by

the chemical industry to stakeholders;

Production of multiple products: with the capability for switching between outputs: flexibility

between feedstock processing and bio-product depending on market demand, as Brazil’s

sugarcane-based ethanol biorefineries switch between ethanol and sugar.

Biomass /biorefinery feedstocks

“Biobased economies are recognised as key to (national) sustainable development with renewable

resources as carbon neutral feedstocks” [6], or, at least, feedstocks with an improved

environmental profile.



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Various bio-based feedstock options are available from the agricultural and forestry industries.

These feedstocks provide renewable sources of carbon or starting materials for bioconversion,

either by with some modification into derivatives or transformed into entirely new products (See

Figure 1a).

Various agricultural and forestry feedstocks are composed of carbohydrates such as sucrose,

glucose, starch or cellulose, or vegetable oils and proteins. Bio-based materials are also

categorised as first and second generation feedstocks, dependent on the extent of pre-processing

required prior to conversion into accessible carbon (refining) for subsequent modification or

transformation into new products. First generation feedstocks provide simple carbohydrates such

as sugars and starches with minimal pre-treatment required for refining: for example, sugar from

sugarcane and sugar beet, starch from corn and wheat. Second generation feedstocks, such as

lignocellulose, require extensive pre-treatment which is costly, both in terms of energy and

materials, to release accessible sugars and other compounds, such as lignin. Until cellulose refining

technology improves, simple sugars, particularly from sugarcane, are the preferred feedstocks for

cost effective production of industrial chemicals (See Figure 1b).

In addition, bio-based feedstocks provide the chemical industry with novel starting materials with

built-in oxygen functionality, and safe to use in comparably benign processes. Furthermore, the

development of new conversion technologies and processes to generate industrial chemicals

provide ample opportunities for industries to establish competitive proprietary positions to

reinforce market advantage [4].



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Figure 1a: Biomass processing: The steps for the processing of industrial feedstocks and extraction

of value-added products from agricultural and crop biomass (Image adapted from industry

sources).

Crops forestry , agricultura l crops

harvest

Crude biomass sugar cane, corn kernels,

soy beans, wood chips

Refined biomass glucose, sucrose, cellulose, starch,

vegetable oils, prote in

refine

modify transform

Derivatives Eg ce llulose acetate

Platforms Eg lactic acid,

sorbitol


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Figure 1b: Sugarcane in Brazil: Lowest cost producer

Source: SRI Consulting, Process Economic Program Report 149A – Ethanol production in Brazil (Oct 2006); Biochemical Cellulosic Ethanol (Dec 2008)


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A number of research approaches have been taken to meet the challenge of cost-effective biomass

processing to provide industry with bio-based feedstock. Some strategies propose the

development of high-yielding crops as chemical feedstocks, specifically bred to minimise pre-

processing costs for the release of accessible sugars, or to improve fibre yield [7, 8]. Other

approaches advocate re-directing investment from such specialty feedstocks into the development

of a refining process that works universally [9]. The preferred strategy may be the one which is

able to provide carbohydrates or oils for modification or transformation into more valuable

products, cost effectively and reliably, in volumes and timeframes in line with industry demands.

This Study is considering the design and nature of a possible relationship between Australia’s

tropical agricultural industry and the chemical industry in the shape of a bio-based biorefinery. The

chemical industry favours the process, and ultimately economic, advantages conferred by vertical

integration of manufacturing with feedstock [4]. The infrastructure of a biorefinery complex needs

to accommodate: feedstock pre-processing and storage; manufacturing facilities; product

separation and purification; secondary refinement; and cogeneration of energy. These advantages

may be achieved by the co-location or proximal location of bio-manufacturing with feedstock

refining and stockpiling.

Sugarcane is a crop with considerable attractions in this context. Australian sugarcane is a well

established agro-industry with highly efficient agronomic practices. By co-locating with sugarcane

mills, a biorefinery may leverage the mill’s processing and storage infrastructure, as well as the

critical facilities of logistics and transport infrastructure, from field to mill to port. Furthermore, a

co-located biorefinery could take advantage of the electrical power and steam co-generated within

the mill from sugarcane bagasse. In other words, co-location of a biorefinery with sugar mills will

provide the biorefinery facility with direct access to sugar and cane juice, fibre, steam and

electricity.

1.1 SUGARCANE

The sugarcane industry was established in Australia in the early 1800s, and quickly developed into

one of the most efficient and highly mechanised sugar industries in the world. The sugar industry’s

major single product is refined sugar.

Australia is one of the world’s major sugar producers behind Brazil, India, the EU1 and Thailand,

with the largest proportion (85%) of its annual sugar production committed for export. Australia’s

sugar exports generate between A$1-2 billion in export income annually (A$1.3bn in 2009) [10].

Australia’s major markets for raw sugar in bulk (by volume) are: Korea (1000 kilo tonnes); Japan

(610 kilo tonnes); Indonesia (536 kilo tonnes); Malaysia (520 kilo tonnes) and Chinese Taipei (238

kilo tonnes) [11]. Australian sugar exporters do not have access to European markets.

Sugarcane is grown predominantly along Australia’s eastern coast, from Mossman in Northern

Queensland to Grafton in northern NSW. Queensland is responsible for 95% of national sugar

production and 90% of exports; NSW generates 5% of national production and the most of the

sugar for domestic consumption.

1 The EU sugar crop is derived from sugar beet.



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20

Sugarcane production was initiated in the Ord River Irrigation Scheme in Western Australia, and,

while high yielding, ceased in 2007 when many growers stopped planting cane and the sugar mill

closed because of low sugar prices[12].

Figure 2: World Sugar Production by region

(ABARE Australian commodities vol 16 no 3, Sept quarter 2009

www.abare.gov.au/interactive/09ac_sept/htm/sugar.htm)

The area of sugar cane harvested in Australia is projected to stabilise at around 402,000 hectares

by 2014-15, just 46,000 hectares less than the record harvest in 2002-03 [13]. Over the last 10

years, Australia has recorded harvests of between 28-38 million tonnes sugarcane annually or 80-

112 tonnes cane /ha [14], producing 4.1-5.5 million tonnes of sugar at a productivity of 10.3 -

12.5 tonnes sugar/ha (see Table 2).

Figure 3: Australian cane area and yield

abare.gov.au

http://www.abare.gov.au/interactive/09ac_sept/htm/sugar.htm


BIOSCIENCE

Table 2: Australian cane and sugar production 1999-2010

Unit 1999-

00

2000-

01 2001-02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10f

Area harvested for

crushing ’000 ha 428 403 426 448 448 434 415 409 381 380 379

Cane yield t/ha 89.2 69.8 73.8 82.6 82.6 87.1 92 89 85.6 83.5 82.7

Cane crushed kt 38 165 28 117 31 424 36 995 36 993 37 822 38 169 36 397 32 621 31 732 31 338

Commercial canesugar % 13.72 13.33 14.09 14.1 13.49 13.9 13.39

Sugar production a kt 5 448 4 162 4 987 5 461 4 994 5 196 5108 5 026 4 763 4 634 4 425

Sugar yield t/ha 12.7 10.3 11.7 12.2 11.1 12 12.3 12.3 12.5 12.2 11.5

Cane to sugar ratio 7.01 6.76 6.3 6.77 7.41 7.28 7.47 7.24 6.8 6.8 7.1

Sugar price A$/t 253.7 407.2 287.3 282.0 196.5 247.4 246.8 276 330 450 431-471

a Raw tonnes actual.

Sources: Australian sugar cane ABARE 08.8, ABS, Value of Agricultural Commodities Produced, Australia, Cat. No. 7503.0, Canberra; Australian Sugar Milling Council,

Annual Review, Brisbane; Rural Press Ltd, Australian Sugar Year Book, Brisbane; ABARE.


21


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22

1.1.1 Industry structure

Australia's sugar industry directly employs some 22,000 people and about 110,000 in ‘upstream’

and ‘downstream’ dependent economic sectors [15].

Growers

The majority of Australian sugarcane is grown on small, privately owned farms (3,264 sugar farms

in Queensland, 409 in NSW in 2008) [16]. The average area operated in each farm was ~184 ha,

with an average of 8,251 tonnes of cane harvested from 87 ha [12] ranging up to farms producing

more than 50,000 tonnes of cane.

While 78% of the small farmers (15,000 tonnes or less of cane) were responsible for just over half

the cane harvest, a small number of very few larger growers produced up to 12% of the total

national harvest.

Ongoing review of the financial performance of Australian sugarcane producers reported a dynamic

and unsettled industry undergoing change in response to sector pressures, mainly the world sugar

price, with both attrition of smaller growers from agriculture, and a trend to larger sugar growing

properties by merger and acquisition. Sugar industry statistics report that farm profitability favours

larger (more than 50 kilo tonne production), rather than smaller, farm sizes consistent with

economies of scale [11]. The trend in the industry is for the number of growers in Australia to

continue to decline and cane farms increase in size. The number of cane growers in the Australian

sugar industry has declined from around 6,300 in 2000 to less than 4,000 in 2010, while cane

production per grower has increased from 5,000 tonnes to 9,000 tonnes over the same period

[17].

Millers/Processors

Mill operational structure and ownership has been reviewed recently by the Sugar strategy group

2004 [15]. Mills are either privately held, such as CSR or Bundaberg Sugar Ltd, or are growers’

cooperatives, such as Proserpine and Tully. Ten companies own and run all Queensland raw sugar

mills and all belong to the peak body, the Australian Sugar Milling Council.

Sugar regions are characterised by growers in radial clusters around the mill which processes the

harvest. Grower–mill districts are structured such that growers are generally within 50km of their

mill, a radial distance determined in the early days of the industry to minimise deterioration of the

cane once cut. Transport of the cut cane to the mill from the field involves either road (truck) or

narrow gauge tramway, an investment in operational infrastructure established and maintained by

the mills in previous decades.

Mills operate mainly from winter to spring to coincide with the sugar cane harvest in July to

November. Mills operate 24 hours a day 7 days a week and at or close to full capacity during this

20-25 week period [15]. Most mills each crush an average 10,000 tonnes of cane daily and employ

around 150 people during the season.

The major national sugar producing area of Queensland has four major cane-growing regions of

Northern, Central, Burdekin, and Southern regions, with 22 associated mills (listed in Table 3).



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23

Table 3: The major mills in Queensland: cane and sugar outputs and hectares harvested (2009

season)

Region Mill area Mills Cane Kilo tonnes

Refined Sugar Kilo tonnes

Hectares

Northern Mossman Mossman 468 65 7,050

Tableland 595 690 6,716

Atherton Mulgrave 1,061 159 12,843

Babinda 548 100 7,507

Mourilyan

South

Johnstone 1,085 234 16,076

Tully 1,667 240 22,181

Victoria

Lucinda/Herbert

River Macknade 3920 579 51,171

Burdekin Burdekin Invicta

Pioneer

Kalamia

Inkerman

7233 1156 67,457

Central Mackay Proserpine 1,569 241 21,342

Marian

Racecourse 5,289 802 71,159

Farleigh

Plane Creek 1,267 168 16,700

Southern Bingera 1,511 219 18,727

Bundaberg Millaquin

Isis 1,031 155 12,318

Rocky Point 245 35 3,764

Maryborough Maryborough 687 97 10,038

Sources: http://www.canegrowers.com.au/icms_docs/70449_BMP_Harvesting__Ratoon_Management.pdf

http://www.daff.gov.au/__data/assets/pdf_file/0011/183449/final_sugar_vision.pdf; B. Milford pers comm.

Canegrowers 2009 production data.

Each region is characterised by different sugar productivities. For example, in 2009 the Mackay,

Proserpine and Sarina region of Queensland produced 1.2 million tonnes raw sugar, 1.2 million

tonnes (dry) bagasse, ~1 million tonnes (dry) trash, from 8 million tonnes cane annually from

109,000 hectares (Table 3). Sugar production in this district is currently under the jurisdiction of

three sugar mill owners: CSR, Mackay Sugar and Proserpine Sugar2.

The Burdekin/Townsville/ Herbert region is responsible in 2009 for the annual production of ~1.7

million tonnes sugar, 1.7 million tonnes bagasse, 1.2 kilo tonne trash, from 11 million tonnes cane

(Table 3). Sugar production, from cane irrigated in the Burdekin, is controlled solely by CSR [8].

2 Cooperative Research Centre (CRC) for Sugar Industry Innovation through Biotechnology


http://www.canegrowers.com.au/icms_docs/70449_BMP_Harvesting__Ratoon_Management.pdf

http://www.daff.gov.au/__data/assets/pdf_file/0011/183449/final_sugar_vision.pdf


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24

The New South Wales sugar industry occupies approximately 34,000 hectares of the Northern

Rivers region and extends from near the Queensland border in the north to Grafton in the south.

The NSW sugar industry accounts for A$230 million of regional economic output, and is one of the

region’s biggest employers. The growers’ New South Wales Sugar Milling Co-operative has mills

located at Condong on the Tweed River, Broadwater on the Richmond River and Harwood on the

Clarence River. In addition, the Co-operative now operates the Harwood Refinery which supplies

25% of the Australian domestic sugar market [18] due to ready access to the Sydney and

Melbourne markets.

Harvesting Contractors

Cane is harvested in each growing region by harvesting contractors, who are private operators

with owned or leased equipment. Cohorts of (~10) growers and harvesting contractors in

Queensland are bound together with so-called equity agreements [19] to ensure an equitable

program of revenue and a shared wet weather risk for all growers within the contractor’s group. All

farms within a contractor’s group are harvested according to a pre-agreed program which

schedules the start dates for the harvest, rotational harvesting order, amount of cane cut, etc. The

equity agreement is overseen by a miller’s committee, which coordinates with harvesters for the

provision of transport of the cane to the mill, which is the responsibility of the millers. Millers are

paid a fixed fee for processing the cane (the first 4 CCS units). Sugar is purchased from the mill by

sugar traders such as Queensland Sugar Ltd. The price for sugar is that traded on the world

market.

Under these agreements, harvesting contractors cut ~75-80% of the total cane per grower, ie

opportunity exists to improve the total harvest in a region by increasing the amount cut under

these supply agreements. Contractors are paid around A$6-7/tonne of cane cut, or alternately for

smaller fields, 66% of this tonnage fee plus fuel costs3.

Sugar marketing

Queensland Sugar (QSL) is Australia's largest sugar exporter, managing ~ 90% of sugar sales

from Australia, the industry’s seven bulk sugar terminals, and sugar price and foreign exchange

exposure. Up until 2006, the Australian sugar industry enjoyed a ‘single desk’ arrangement where

all sugar was compulsorily acquired by QSL so that the national bulk sugar volumes could be used

to leverage better deals for Australian sugar on the international market. Although this

arrangement was deregulated on 1 January 2006, the majority of growers reportedly retain group

marketing arrangements with QSL [20].

1.1.2 Value and pricing

The World sugar indicator price paid via the sugar marketers to the Australian sugar cane industry

is determined by the international harvest and by policy decisions made in the major global sugar

producing countries.

The price for sugar for the current 2009-2010 harvest is predicted to be the highest since 1989-

90. This bumper price is a result of the current world sugar deficit, driven by the late monsoon in

India and excess rain in Brazil, the two major global sugar producers. Policy decisions in Brazil and

in Europe can also apply substantial pressure on the world prices. Brazil is a major ethanol

producer from sugarcane and has recently increased the mandated level of ethanol in domestic

fuels from 20% to 25%. Brazil produces 40% of the world’s transport ethanol in addition to

3 CRC Sugar Industry Innovation through Biotechnology



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25

meeting domestic production. Therefore, interim decisions made in Brazil regarding the allocation

of that nation’s sugarcane harvest to ethanol or to refined sugar can substantially influence the

world sugar supply and hence price. Therefore, ethanol prices are important in determining world

sugar production, mainly because these influence how much Brazilian cane is allocated to ethanol

production rather than to sugar production. In addition, the EU plans to loosen the limits on that

region’s sugar exports by 500 kilo tonnes in 2009-10 due to an improved harvest under favourable

seasonal conditions [13].

In many harvest years, despite a mediocre world sugar indicator price, the return to Australian

growers has benefited by a favourable Australian dollar. In the 2009-10 season, the tight world

sugar supply is anticipated to give the Australian sugar sector greatly improved returns. As a

result, it is expected that the hectares planted with cane will increase by at least 7%, countering

the decline in the national cane cultivation footprint since 2002-03. Therefore, the crop harvested

for 2010-11 is anticipated to be up to 4.8 million tonnes, and, although the price may fall over the

next few years, it is anticipated to remain above the low of 1997-2003 [17].

Figure 4: World sugar indicators

Source: ABARE [10]

1.1.3 Crop cycle

Sugarcane is a tropical crop with a high water and fertilizer requirement, and is grown in rich soils

of the eastern coast of Australia. Sugarcane has a planting–ratoon-harvest cycle of 12-14 months:

sugarcane is planted from setts once every 4-6 years and harvested by cutting down the plant at

the base; from this ratoon the next crop is harvested. The growth cycle between harvests is 12-14

months, which is much longer than other crops such as sweet sorghum (3-4 months). Sugarcane’s

long crop cycle can cause cash flow hardship for growers who then rely on other diversified crops,

particularly tropical fruit but also soybeans and peanuts, for revenue in between sugar harvests. In

addition, many sugarcane producers have small beef cattle herds [11].

1.1.4 Sugarcane production

Cane productivity within different growing regions varies widely and from year to year. Productivity

can vary between cane growing regions within the one season. In 2007-2008, New South Wales

reported the highest sugar cane yields of 131 tonnes per hectare, reflecting the longer growing



BIOSCIENCE

26

season in this state. In Queensland, the highest cane production and yields were achieved in the

Burdekin, with producers on average harvesting between 115 and 118 tonnes per hectare in the

three years to 2007-08[11].

Sugarcane production is a function of both yield of sugar (tonnes/ha/year) and the hectares under

cultivation. The sugar yield is influenced by seasonal factors such as water availability and timing,

temperature and incidence sunlight, and by crop age and harvest length. The number of hectares

under sugarcane cultivation is largely determined by the international sugar price. The ramification

of the current high world sugar indicator price and supply deficit is that it is that it will drive an

increase in Australian planting by an anticipated 7%, which will influence the national sugar

harvests for the following 6 years, given the long sugar crop cycle.

Cane yields are influenced [19, 21] by:

Rainfall: Cane needs 1100-1500mm of rain in the growing season followed by a dry season for

cane ripening and maximal sugar production - periods of drought or high rainfall during

growing season affect yields. Cane growing regions vary in the extent of irrigation.

Sunlight: Long hours of bright sunlight during the growing season favours sugar recovery.

Cane areas with high daytime rainfall patterns tend to have lower sugar yields than areas

which rely on irrigation or receive rain at night.

Average temperature: warm and dry weather at the end of the growing season (32-38C)

favours sugar production

Crop age: Crop cycles are limited to 4-6 years to maximise sugar recovery

Harvest period and duration: an early finish in 2009 suggests that the longer growth period

will boost cane yields for 2010 [22]

National industry averages for cane productivity over the last 10 years are in the range of ~82.6-

92 tonnes /hectare/yr, excluding two remarkably poor successive harvests of 69.8-73.8

tonnes/hectare in the two seasons to 2002 (Table 2).

1.1.5 Sugarcane Processing

Sugarcane in Australian is harvested from July to November and is delivered to the mill by road or

rail transport in small cane segments ready for crushing. Raw sugar is recovered from sugarcane

in a series of process stages. The cane is first crushed to extract the raw juice and bagasse; the

juice is clarified and concentrated by evaporation; the raw sugar is then crystallised from the

clarified juice followed by separation of the sugar by centrifugation and drying (See Figure 5).



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27

Figure 5: Sugar cane milling (image adapted from [4]).

Raw canejuice

Clarified cane juice

wash / shred

Bagasse Fuel for sugar cane factory

press Cane (12-14% sucrose)

evaporate

filter

clarify

crystallise

centrifuge

Molasses

Raw sugar

96-98% sucrose

Sugarcane refining produces a number of product streams, which can be used directly or after pre-

treatment as fermentable or accessible sugar: cane juice, from which sucrose is derived, molasses,

and bagasse.

The major commercial product of sugarcane refining is raw sugar, with a yield (in 2009) of about

12.2 tonnes /ha derived from 31.7 million tonnes of crushed cane (See Table 2).

Once the cane juice is pressed from the cane, bagasse or the cane fibre remains. Up to 50% of the

dry mass of bagasse is consumed as an energy source to fuel sugar processing, and the remainder

stockpiled.

Bagasse is used within the mill to generate process steam and electricity, with surplus power sold

into the state’s grid. Queensland sugar mills currently produce approximately 1100 gigawatt hours

of electricity, equivalent to around 2% of Queensland’s total electricity use. With appropriate

financial incentives, the Queensland sugar cane industry is predicted to be capable of supplying up

to 20% of Queensland’s electricity requirements [10].

Molasses is derived from sugar processing by repeated crystallization. The major constituents of

molasses are sucrose and invert sugars (40-60%). The yield of molasses from sugarcane varies

considerably, caused mainly by differences in the soluble non-sugar content of the juice and each

mill’s sugar recovery process. The yield of molasses per tonne of sugarcane varies from 3.5 to

4.5%.

Molasses is mainly used to manufacture ethanol (70% industrial ethanol, 30% potable alcohol),

yeast (from the ethanol fermentation) and as cattle feed. Industrial ethanol has value as a

platform molecule which is used to produce downstream value-added chemicals such as acetone,

acetic acid, acetic anhydride, butanol etc.

Bagasse Refining

Refining sugarcane bagasse into sugars for fermentation or transformation (refer Figure 1) is a five

step process Figure 6):

Biomass pre-treatment



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28

Cellulose hydrolysis

Detoxification

Fermentation of hexoses

Separation and effluent treatment

The cost of raw materials in fermentations using readily fermentable sugars is estimated generally

at 40-70%. Therefore, the use of the fibrous material, bagasse, which remains after sugar

processing, is attractive for use as a bio-based feedstock because it is abundant and cheap.

Bagasse as a bio-based feedstock does not compete with an established food use, although it may

be used as an animal feed. Furthermore, with the co- or proximal location of a biorefinery with the

sugar mill, bagasse would require no further transportation before processing. However, the cost

and complexity of pre-treatment and processing of bagasse is high, energy intensive, complicated

and incompletely developed [23]. Consequently, conversion efficiency of lignocellulosic feedstock

such as bagasse to a clean, readily accessible form of carbon, a critical parameter for an

industrially viable process for fine chemicals, is low (eg [9], [7]).

Figure 6: Sugarcane bagasse processing: an overview

(Based on Cardona et al 2010 [23])

Bagasse is an abundant source of lignocellulose, with about 280 kg bagasse generated per tonne

of cane [24]. The sugar industry utilises ~50% bagasse to generate steam and electricity to meet

the needs of sugar processing (some mills are able to generate additional revenues by selling

electricity to the main grid); the remaining bagasse is stockpiled. Other recognised uses of

bagasse are the fermentation of fuel ethanol, extraction of chemicals such as furfural, and

production of other potentially high value products such as enzymes.

As a feedstock, the main limitation to the use of bagasse is its composition and structure.

Sugarcane bagasse has a relatively low lignin content of 20-30%, as well as cellulose (40-45%)

and hemicelluloses (30-35%) [23]. Cellulose and hemicelluloses are polysaccharides made up of

glucose and pentoses, respectively, which are bound by lignin molecules in a crystalline structure.

To release the fermentable sugars from the constraints of this structure requires considerable

application: pre-treatment of the lignocellulose, followed by hydrolysis to release the sugars, is



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29

required. Hexose or 6-carbon sugars, mainly glucose, are released from cellulose, and 5-carbon

pentose sugars, mainly xylose but also arabinose, are released from hemicellulose.

The purpose of pre-treatment is to solubilise the lignin and hemicellulose and loosen the cellulose

fibers. Pre-treatment technologies include steam explosion; solvent extraction; thermal pre-

treatment with dilute acid or base; or enzymes. Typical (published) yields of reducing sugars for

laboratory studies of most chemical technologies are between 11.6–37.2% (w/w of sugarcane

bagasse). The technology of choice is dilute acid (sulphuric or phosphoric) which generates high

yields of sugars (35.4–37.2% reducing sugars), although this presents a higher cost than other

methods. Enzyme pre-treatment, while requiring ambient temperature and pressures and

generally mild pH conditions, is currently too slow and too costly to be considered industrially

applicable. The commercial choice of pre-treatment technology is a balance between release of

sugars, degradation of those sugars, generation of toxins, maintaining the integrity of the

hemicelluloses, and cost of enzymes, chemicals and equipment [23].

Pre-treated cellulose can then undergo hydrolysis to release the component hexose sugars from

the cellulosic polymer, usually by the addition of acid and/or enzymes. Acid treatment improves

the access to the cellulose fibers by the hydrolytic enzymes, that is, improves the enzyme

convertibility of the cellulose and the release of sugars. This is critical for the economic success of

any subsequent fermentation step. A combination treatment of acid with cellulases has been

reported to produce high glucose yields of up to [23] and more recently, higher than [25], 69%.

Detoxification of the hydrolysate is required to remove or reduce the concentration of inhibitors. As

well as sugars, pre-treatment and hydrolysis release sugar derivatives, aliphatic acids (acetic,

formic and levulinic acids), furan derivatives, furfural from the pentoses in hemicellulose and

phenolics compounds, all of which have the potential to inhibit subsequent fermentation or

biotransformation steps. There are a number of detoxification technologies in use and under

investigation: neutralisation, overliming with calcium hydroxide, activated charcoal, ion exchange

resins and electrodialysis. However, no single technology removes sufficient quantities of all

inhibitors, and the detoxification method(s) used need to be optimised for the specific pre-

treatment process applied, net sugar recovery and the subsequent application of the hydrolysate

[23].

An estimation of the amount of reducing sugars which might be generated from bagasse residue

after extraction of the cane juice is presented in Table 4. The assumptions associated with these

estimations are: ~32 million tonnes of cane is harvested from 380,000 ha; the extraction of each

tonne of cane generates 280 kg bagasse, 50% bagasse (at 48% moisture) remains after power

and steam production for milling; 40% of bagasse is cellulose from which is extracted reducing

sugars at different conversion efficiencies by conventional and/or enzymic pre-treatment and

hydrolysis [25].

The total potential amount of available sugars released from bagasse by this approach ranges from

~3% to 15% of the sucrose yield, which may make a considerable contribution to the amount of

available feedstocks.

This estimation will need refinement of the assumptions in terms of: conversion efficiencies;

percentage of sugar recovery; and cost of pre-treatment, hydrolysis and detoxification steps.

Furthermore, the amount of bagasse available for hydrolysis depends on the (perhaps flexible and

mill-dependent) rate of uptake for power and steam generation to meet demand from both the mill

and potentially the biorefinery.



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30

Therefore, allocation of bagasse for hydrolysis and sugar release (or for product extraction) needs

to be based on the balance of demands and relative value from each outcome, such as the market

demand and price of potential end-product(s), cost of carbon as feedstock and value of energy

generation and potential carbon credits. To date, this Study understands a comparable model has

been developed to determine the switch point for feedstock between energy generation and

ethanol production for the Mackay facility4.

Table 4: Yields of feedstocks from sugarcane

Sugarcane

Product

Crude

Biomass

kilo tonnes

Conversion

efficiency

Refined

sugars

kilo tonnes

Yield

tonnes/ha

harvestedg

Cane crushed

(2008-09)a 31732 83.5

Sugar 4634 kt

sucrose 12.2

Bagasse b,c,d,e 2310 low 148 kt

hexose 0.4

medium 323 kt

hexose 0.9

high 693 kt

hexose 1.8

Molassesf 162 - 208 kt

molasses 0.4

a: ABARE data for the 2008-09 harvest

b-e: Assumptions are b:280kg bagasse/tonne cane; c:50% bagasse used for cogen, 48% moisture; d: 40%

cellulose; and e: 16, 35, 75% conversion of cellulose to reducing sugars by conventional pre-treatment in the

low, medium and high conversion efficiencies, respectively [23]

f: Molasses is 3.5 - 4.5% sucrose yield g: ABARE (2008-09) Area harvested for crushing 380,000 ha.

However, the measure of effectiveness of industrial pre-treatment and hydrolysis is that cellulose

provides bio-based feedstocks for large scale ethanol production. The top 10 US companies were

recently reported to generate 32 million gallons (121 million litres) of cellulosic ethanol in 2010, a

total which is expected to rise to nearly one billion gallons (3.7 billion litres) by 2014 [3].

1.1.6 The Future: Drivers for Change within the Sugarcane Industry

Environmental impacts of sugarcane

Protection of the environment is a critical issue facing the sugarcane industry and its region as a

whole. In Queensland, sugarcane is the dominant agricultural practice in the catchment area for

the Great Barrier Reef. The management of the environment, from soil erosion, use of fertiliser

and other agricultural chemicals, particularly the herbicide diuron5, has become an important issue

for the industry.

4 The University of NSW 5 Consultation with DEWHA, April 2010.



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31

Land use

Expansion of the cultivation footprint for sugar cane is limited in Australia. Availability of arable

land is tightly constrained and its deployment for agriculture must compete with biodiversity

conservation and forestry. In contrast, Brazil proposes an immediate expansion of that nation’s

sugarcane plantation by 35% [13] and proposes expansion of the current land under cultivation

from 50 million hectares to 380 million hectares, most of that under sugarcane [26].

Water availability

As well as having limited arable land in which to expand the area under sugarcane cultivation,

Australia is water constrained. Australia’s annual renewable water resources are ~500 km3/year

[27], one twelfth of the enormous water resources available to Brazil at 5400 km3/year [28].

Narrow product range from sugarcane processing

The majority of income from sugarcane processing is derived from raw sugar (78%) while refined

products and ethanol account for 13%, and electricity cogeneration and molasses sales account for

less than 10% [6]. Therefore, this narrow product range contributes little in the way of creating

additional value for agricultural production outside of the extraction of sugar. Consequently, the

sugar industry is exposed to the fluctuations in the value of the Australian dollar compared with

the US dollar and is vulnerable to the volatility of the world sugar indicator price.

Crop substitution

Traditional sugar growing regions such as the Burdekin have a high degree of water security. As a

result, cane growing in this region may be challenged by cotton and a range of new industries,

including horticulture. Genetically modified (GM) cotton can now be grown in more northern

districts of Australia, and has a lower requirement for and seasonal distribution of herbicides and

insecticides than sugarcane. One of the attractions of GM cotton to the farmer is its high market

price of ~A$1200 -1500/hectare, compared to the average return to the grower for sugar of

A$300-$400/hectare (at price to the grower of A$26 - $36/tonne sugar) [11].

Vulnerable industry structure

Sugar mills are dependent on cane throughput for financial viability, and are reimbursed with a

fixed fee for processing the crop. This makes the mill vulnerable to land-use diversification or

reductions in sugar cultivation, and, because of the tight interconnectedness within the

protagonists in the sugar industry, this vulnerability flows through to the stability of the entire

sugar region [15].

Innovation implementers

To meet the challenges within the sugar industry, Australian growers have historically been

proactive innovators, introducing mechanisation into the industry early last century (unlike other

sugarcane competitors, particularly Brazil), developing improved cane varieties and achieving high

levels of agricultural efficiency. It is likely that this level of early adoption will continue, with such

innovations as new gene technologies for crop enhancement6 and novel technical processes for

extraction and downstream refinement [6].

6 http://www.commodityonline.com/commodity-stocks/DuPont-BSES-tie-up-to-boost-sugar-cane-yields-2009-11-13-22922-3-1.html DuPont and BSES Limited announced a research, development and commercialization alliance to improve productivity and use of sugarcane varieties in November 2009. The intended outcomes will be “technologies to improve current planting technology and agronomic practices to enable productivity growth


http://www.commodityonline.com/commodity-stocks/DuPont-BSES-tie-up-to-boost-sugar-cane-yields-2009-11-13-22922-3-1.html

http://www.commodityonline.com/commodity-stocks/DuPont-BSES-tie-up-to-boost-sugar-cane-yields-2009-11-13-22922-3-1.html


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Economies of scale of production

The trend over recent years in the Australian sugar industry has been towards larger grower-

operated sugar farms, providing individual growers with a larger cultivation footprint and

economies of scale of operation [10]. This has arguably been in response to the “cost–price

squeeze”, where decreasing sugar prices, determined by international forces, outpace the

improvements in agronomic efficiencies.

and reduced cost of production”, most likely for a biorefinery related purpose. The terms of the agreement were not disclosed. Similarly, GM sugar cane has already been trialled in Australia, under the guidance of the Office of the Gene Technology Regulator (OGTR). Traits under examination are herbicide tolerance, nitrogen use efficiency, altered sugar production and drought tolerance [17. ABARE, Australian Commodities, March 2010 abare.gov.au



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CHAPTER 2 INDUSTRIAL BIOTECHNOLOGY: AN OVERVIEW

Industrial biotechnology provides the means to replace or supplement conventional chemical

processes to produce materials and energy or to achieve what chemical means cannot [29].

Industrial biotechnology uses living cells and enzymes to produce innovative bio-products and

bioprocesses based on renewable feedstocks for the production of niche and fine chemicals and

bulk commodities. This approach harnesses the capacity of an array of diverse and complex

biological pathways to transform fermentable sugars into medium volume or high value (niche or

fine chemical) products, in place of strictly chemical syntheses based on petrochemical feedstocks.

Bio-based processes are capable of producing a multitude of products from renewable or

agricultural raw materials: such bio-products may be an exact replacement for an existing product

with a well-established market; a functionally-improved product which delivers new value into an

existing market; or a novel product for new and innovative applications. Furthermore, biological

production of commodity and fine chemicals from renewable or “green” carbon provides

manufacturers with not only a more flexible and sustainable source of feedstock but one with

stability of supply and price, essentially unfettered by the insecurity of the petrochemicals market.

More importantly, bio-based manufacturing processes impose a lower environmental burden, and

incur lower production costs in terms of energy, water and capital cost by operating at lower

temperatures, pressures, and generally milder conditions than conventional processes (Figure 7).

Both the process technologies and the products generated by means of industrial biotechnology

have application within the chemical, agricultural, pharmaceutical, nutraceutical, cosmetic textiles

and leather, detergent and food industries.

Figure 7: Comparative production of platform and high value compounds based on petrochemical

(black carbon) and agricultural (green carbon) feedstocks

INTERMEDIATESe.g. Acetylene Maleic anhydride 1,4, diacetoxy,2 butene

PLATFORM MOLECULES

e.g. 1,4, butenediol

2500oC

GREEN CARBONe.g. Sugar Cellulose

PLATFORM MOLECULESe.g. Succinic Lactic Organic acids

HIGH VALUE COMPOUNDS

e.g. Nutraceuticals

30oC

200oCPETROCHEMICAL e.g. Oil Natural gas Coal

(From “Australian Integrated Biorefinery Complex: Green manufacturing to Future-proof

Australia”, by the CRC Sugar Industry Innovation through Biotechnology, 2009, with permission)



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2.1 INVESTMENT IN BIO-BASED PROCESSES

International venture capital (VC) investors have been interested in ventures specialising in both

renewable chemicals and process technologies for some time. However, in 2010, observations of

the US venture capital scene is that money is “most definitely starting to roll in” to support

development curves to get bio-based products and innovative process technologies to market7.

In the renewable chemicals space, analysts and industry report that 2010 may be a record year for

venture investment in the US, with investments growing from US$50m in 2005 to potentially

$700m in 2010, if the same high rate of investment continues through the second half of the year

(1H 2010 US$361m reported). Both the number and size of investments have increased, from ~7

deals of US$14m average size in 2005, to around 4 times the number of deals at ~US$23m each

in 2010 (see Figure 8). This more confident rate of investment is underpinned by similar

investments by the venture arms of chemical majors, such as DSM Ventures, and by corporate

partnering by the chemicals industry, both seen as reducing investment risk for VCs as those

investors build their understanding of the bio-based chemicals sector [16].

In process technologies, the strategy driving venture capital investments has matured over the

last 6 years. In 2004-2005, US-based VCs placed seed investments in early-stage, emerging

technologies such as synthetic biology (see section 3.2.1), with small deal sizes typically around

US$10m. However, investors recognised that successful exit from these investments was

predicated on the investee company achieving scaled production. In 2006-2007, that awareness,

and the US Energy policy (2005) mandating ethanol fuel production, triggered a radical change of

Figure 8: VC investment in the US in companies concerned with renewable chemicals

Reproduced with permission from Cleantech Group www.cleantech.com [16]

investment strategy within the US venture sector. Substantial investments were made by the

venture community in very large scale ethanol fermentation plants run by companies with little or

no technology differentiation. A total of US$859.2m was invested in this period in corn-based

ethanol with little or no return to the investor. As a consequence, analysts report that the VC

community reconsidered their investment criteria. In 2008-2009, investments moved from

7 Verdezyne LLC


http://www.cleantech.com/


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enormous size ventures to those with more strategic value. Investors focused less on just the end

product, preferring investment candidates which were well positioned for a successful exit. The

criteria for investment are now focused on:

Innovative and flexible process technologies;

Capital light business models;

New geographies; and

Corporate partnering.

Consequently, 2009 saw US-based VCs invest a total of US$877m in 51 deals for biobased fuels

and materials in a wide range of technologies, from synthetic biology to gasification (see Figure 9).

The quantum for VC investment was smaller, with key investments in a range of strategic

technologies which support flexible inputs (i.e. feedstock) and outputs (i.e. a portfolio of products

rather than a single product). Examples of ventures in a range of technologies include [30]:

cellulosic fermentation (Qteros US 3.5m, 2007)

algal photobioreactors (Sapphire Energy US$50m, 2008)

bio-based chemical processes (Segetis US$5m).

Figure 9: Value of VC investments by process technology 2004 to 2009

Reproduced with permission from Lux Research Inc. [30]

Private investors are attracted to opportunities in industrial biotech because of the perceived

reduction in risk represented by the reduced developmental timelines to get products to market,

compared with drug development in pharmaceutical and life sciences ventures.

However, investors are still alert to the risk represented by a lack of demonstrated track record of

exit strategies in industrial biotechnology, seen as an impediment to investment. As the exit

windows for bio-based product companies are anticipated to open this year8, the market expects

investors to be more comfortable with the prospect of a return for invested funds. The Shell

Codexis IPO early in 2010 was one of the first of a number of “green technology” companies

8 Chemical industry respondent



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looking to exit in the US, raising US$78m, and pointing the way for others, such as Amyris (raising

US$100m) and Gevo (filed for IPO August 2010 to raise US$150m), to follow [31].

Private investors in the US actively investing in the bio-based products and processes for

chemicals plastics speciality products and biofuels include: Khosla Partners, Keating Capital,

Braemar Energy Ventures and new investor, Morgan Stanley Lightspeed Venture Partners, The

Roda Group, Harris and Harris Group, VantagePoint Venture Partners, Zygote Ventures and CTTV

Investments LLC, the venture capital arm of Chevron Technology Ventures LLC.

Investors elsewhere include Sofinnova Partners, a leading European venture capital firm, and,

interestingly, Mitsui & Co Venture Partners, the venture arm of the Japanese trading powerhouse

Mitsui & Co, Samsung Ventures, the venture arm of the Samsung Group, one of Asia’s largest

industrial groups, and AquaRIMCO, a Japanese investment fund.

2.2 THE CHEMICAL INDUSTRY: HUGE INDUSTRY WITH GLOBAL REACH9

The global chemical industry produces over 70,000 different chemical substances valued at over

US$1.5 trillion per annum or 9% of total global trade. In more recent times the industry has faced

some serious problems with the evolution of global markets, the growth in regulatory controls, the

slowing down of innovation as exhibited in diminishing returns to R&D, and skills shortages [32,

33].

More recently, the chemical industry worldwide is predicted to be moving into a more buoyant

period after production and sales were negatively impacted by global financial markets in 2009.

The US, responsible for ~19% of the world’s chemicals production, reported total sales of the top

50 chemical companies in 2005FY of US$247.5 billion [34, 35]. The European chemicals industry

reported total sales of €58 billion (US$71.8 billion) in 2004 and produced ~70m tonnes of

petrochemicals [36].

The demand for industrial chemicals globally continues to grow. The bulk of industrial chemicals

are produced by industrialised countries, with 80% of the world production from just 16 countries,

particularly the US, China, Japan and Germany (See Table 9). In contrast, the OECD expects the

drivers for the expansion of the for industrial chemicals market to come from the developing

world, with consumption patterns from these nations expanding from 23% in 1995 to 33% of

world chemical markets in 2020 [32].

The chemical industry embraces the manufacture of basic chemicals (including chemicals derived

from coal and/or oil), other chemical products (including medicinal and pharmaceutical products),

rubber and plastic (or polymer) products. In most cases, chemical and plastic products are derived

from petroleum refining [33].

Major players within the global chemical industry recognise the value of implementing innovation,

investing in both in-house R&D programs and by in-licensing, joint venture or acquisition to

maintain continued strong growth and competitive advantage.

Globally, the drivers for innovation in the chemical industry are overtly threefold: environmental,

economic and a response to technological developments themselves. As result of the Kyoto

9 Based on “Australian Integrated Biorefinery Complex: Green manufacturing to Future-proof Australia”, by the

CRC Sugar Industry Innovation through Biotechnology, with permission.



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protocol of 1997, industry in Europe, in particular, needs to respond to government imperatives to

reduce greenhouse gas emissions by 2008-2012 by 7.5% of 1990 levels. Industrial biotechnology

may provide an effective means to reduce manufacturing’s environmental footprint: The EU

Industrial Association of Biotechnology in 2003 reported that bio-based bulk and fine chemicals

could be produced with 50% less CO2 emission, and 20% less energy and 75% less water

consumed. The capacity for bio-based approaches to provide very substantial opportunities to

reduce non-renewable energy use and emissions of greenhouse gasses has been recently reviewed

[36]: cradle to factory gate processes with current technology based on maize are estimated to

generate energy savings of 30%, while those based on lignocellulosic feedstocks and sugar from

sugar cane may generate energy savings up to 75% and 80% respectively.

Therefore, alternate economic feedstocks are sought to replace or reduce those derived from crude

oil, as petrochemical costs increase and supplies become unreliable, and, arguably, increasingly

limited10.

As a consequence of these drivers, the chemicals industry is turning to industrial biotechnology as

a route to new commercial opportunities to maintain their future market position, by delivering

significant improvement in process profitability and potential for considerable market growth in the

future.

The relationship between the chemicals industry and industrial biotechnology may be illustrated by

considering plastics production. Chemical majors Cargill (as Cargill/Dow, then Cargill/Teijin11) and

DuPont have both invested in long-term research programs and the subsequent deployment of

that research in large-scale biodegradable polymer manufacture for bioplastics production. The

Cargill plant produces lactic acid by fermentation for the biopolymer polylactic acid

(NatureWorks®) in a 190,000 tonnes pa plant. The DuPont fermentation process produces 45,000

tons pa of 1,3 propanediol for the Serona™ range of fibre products, implementing 10 years of

microbial genetics research and development with Genentech.

The total market for plastics in the United States and Europe is about 73 million tons and is

growing at an annual rate of 3 – 5%12.

McKinsey and Co recently estimated that chemical products made at least partly by biotech

methods accounted for 6% of the US$2,122 billion chemicals market (i.e. US$127bn) in 2007 and

would account for 9% of the projected US$2387 billion pa chemical market in 2012. The report

predicts that as much as 10-20% of all bulk chemicals, especially polymers, and 60% of all fine

chemicals, will be produced using biotech means. The report suggests additional value generated

is anticipated due to lower production costs for raw materials and processing, and by additional

revenues from new products, or products with enhanced performance.

10Reports of diminishing oil recovery abound (“Shell reports an oil production peak in 2005”, Degussa report to

investors, November 2005) although Shell itself invested US$15.6bn in 2005 in exploration, including

“unconventional” sources, to meet demand (Shell Sustainability report 2005). 11 3rd July 2009 "Teijin Limited announced the termination of its joint venture (JV) with Cargill, Incorporated,

through the transfer [of] its 50% ownership in NatureWorks, LLC to Cargill." No details of the transaction were

provided. Regulatory approval for formation of the 50/50 JV was reportedly received in third quarter 2007.

(Datamonitor Financial Deals Tracker)



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The future for bio-based feedstocks and/or processes within the chemical industry seems

inevitable. Extensive efforts have been invested in recent years by both the US Government and

the European Commission to scope product opportunities for the implementation of industrial

biotechnologies within the chemical industry within those jurisdictions. Both reviews predict

between 10 and 50% of the platform molecules marketed by 2050 will be bio-based chemicals,

driven by both economic and environmental imperatives [36-38].

These reviews have outlined the as yet untapped potential for bio-based processes to generate a

large number of compounds and chemicals (See Table 4b).

Table 4b: An overview of chemicals derived from established or possible biotech processes, based

on a number of bio-based renewable feedstocks.

Source: Patel et al 2006 [36]. Note: C2 refers to molecules with a 2-carbon backbone; similarly for C3 to C6.

There is already a well-established pathway for the chemicals industry to put more sustainable

technologies into place, and on a large scale of manufacture. A number of bulk chemicals (up to

20kt/yr) based renewable feedstocks and bio-based processes are already in production (Table 5).



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Table 5: Bio-based chemicals already produced on bulk scale (>20kt/yr)

BIO-BASED CHEMICALS

190kt->34kt 25kt-150kt

Ethanol Lactic acid

Glucose Polylactic acid

Fructose Propionic acid

Acetone Gluconic acid

L-Glutamic acid Vitamin C

Butanol Alkylpolyglycosides

Sorbitol L-sorbose

Citric acid Xanthan

Glycerol Sugar alcohols eg

erithritol

L-Lysine L-Threonine

Furfural Vitamin B2

Acetic acid Malic acid

(From Patel et al 2006 [36])

These bulk bio-products have found a place within the global chemicals marketplace either by

substitution for petrochemicals (e.g. ethanol) or based on additional characteristics such as

chirality or biodegradability. In a similar way, other niche bio-products which bring new or

additional functionality are establishing a market position, for example, polylactic acid.

2.3 BIO-PRODUCTS: OVERVIEW

Consideration of the potential product portfolio generated from green carbon within the well-

established biorefinery complex may encompass: platform molecules; high value commodities;

and complex compounds not produced by chemical synthesis.

Platform compounds are those molecules which are used industrially as precursors for a family of

both bulk and fine chemicals. An example of a platform compound is succinic acid, used as a

starting material to generate an array of more complex products used in plastics and fibers, resins,

solvents, and paints.

High value molecules are generally produced in lower volume processes. These products may

require little if any further transformation to be marketed directly. Examples include amino acids,

nutraceuticals, vitamins, enzymes and polymer monomers such as lactic acid or polylactic acid

(PLA).

Both platform and high value compounds may be well-known industrial products with an

established market. The third category of bio-products for potential production from a bio-based

biorefinery is that of complex compounds which are not currently amenable to chemical synthesis.

These compounds or their derivatives may be marketed directly for new applications. An example

of such novel compounds is the class of polyhydroxyalkanoates (PHAs), which can only be

produced by fermentation, and are utilised in bioplastics manufacture.



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2.3.1 Candidate Biorefinery Products

Recent extensive reviews have examined in depth the array of candidates which may be produced

from a bio-based biorefinery. Those reviews have been sponsored by the US Government and the

European Commission, and also by some of the largest of the chemical companies, Dow, DuPont

and BASF [36, 39-44].

This Study does not intend to comprehensively scope the product opportunities for a biobased

biorefinery, nor to specify or define the candidate molecules produced. The approach taken here is

to provide examples of bio-based chemicals which may potentially satisfy the criteria of niche or

platform molecules with established market opportunities within the global chemical industry.

Definition of the candidate bio-products for manufacture in a bio-based biorefinery will require

detailed analysis to evaluate such issues as market data for both platform compounds (and their

high value derivatives) and the niche bio-products, and the technical complexity and availability of

synthetic pathways, both thermochemical and biochemical.

However, there is also a case that selection of candidate bio-products, as undertaken by this

Study, would be as exemplars only: it is questionable whether Australia has domestic

manufacturers in place to undertake bio-product synthesis on a commercial scale, or whether the

process technologies, separation technologies or scale-up capabilities reside in this country (see

Chapter 3). Exemplar product scenarios would be of use firstly to examine the case of whether

Australia could provide a renewable feedstock of sufficient volumetric productivity to meet the

demands of industrial scale production, and in doing so, attract an international partner from

within the chemical industry (see Section 3.6). Final product selection based on available in-house

technologies would undoubtedly be the purview of a future industrial partner.

Platform compounds will be those for which productivities from medium production volumes are

sufficient to meet demand, and have a market value of around US$1000-$10,000/ tonne. Such

platform compounds may include organic acids, complex alcohols, and monomers. Similarly,

selection of candidate high value bio-products will be those that meet demand from low production

volumes, and with values ranging up to ~US$1000/kg, such as nutraceuticals, cosmeceuticals,

essences, and flavours. Bio-products of interest may include industrial enzymes, vitamins, amino

acids (other than lysine, glutamic acid and aspartic acid) and polymers, especially those which are

made by direct modification of biomass polymers such as modified starches and cellulose

derivatives [36].

A small number of candidates are overviewed in Table 6.


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Table 6: Candidate biorefinery products, the route to manufacture and applications

Conventional production Biotechnology production Product Uses

Feedstock Synthetic

route

Feedstock Synthetic

route

Structure

Xylitol Sugar

substitute

Hemicellulose

(from sugar

cane

bagasse,

straw, seed

husks, etc)

Catalytic

hydrogenation

of the sugar

xylose into an

alcohol.

Hemicellulose

from sugar

cane

bagasse,

straw, seed

husks, etc

Fermentation

OH

OH

HO

HO

OH

Sorbitol Sugar

substitute

Platform

molecule

Glucose Catalytic

hydrogenation

of glucose

Cellulose Catalytic

conversion

Succinate Platform

molecule

Crude oil Catalytic

hydrogenation

and

subsequent

hydration

Glucose Fermentation

HO

HO OH

HO OH

HO

Isosorbide Pharmaceutical

applications

Platform

molecule

Glucose Heterocyclic

compound

derived from

glucose.

Sorbitol double

dehydration

Polylactic

acid (PLA)

Polymer None None Sugars or

starch

Fermentation

(Cargill)

1, 3

Propanediol

(PDO)

Polymer: also

platform

molecule

Petrochemical

ethylene

oxide

Shell process maize-based

glucose

Fermentation

(DuPont)

O

OH

O

HO

HO

H

O

O

H

OH



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Xylitol

The sugar alcohol, xylitol, is the first rare sugar to have established a global market, with

applications in the food industrial as a sugar substitute and as an inexpensive starting

material for the production of other rare sugars [45]. Xylitol is conventionally synthesized

from the pentose sugars released from the hydrolysis of hemicellulose from sugar cane

bagasse, straw, seed husks, etc, using metal catalysts. The fermentation of the pentose

sugar, while slower than those based on hexose sugars such as glucose due to metabolic

bottlenecks, has recently been reported in research papers under low oxygen tension from

yeast [46]. The annual world market for xylitol, which is priced at $4–5 per kg, is

estimated at US$340 million [47]. The largest manufacture internationally is the Danish

company, Danisco, with several other suppliers based in China.

Sorbitol

While sorbitol has well-established uses in the food industry as a sugar substitute, it has

more interest within the chemical industry as a platform molecule from which a family of

other industrially significant compounds can be derived, such as vitamin C, surfactants,

and polyurethanes. The conventional synthesis of sorbitol is achieved via the catalytic

hydrogenation of glucose, currently established on a 1.1 million tonne /yr scale [36].

However, sorbitol can also be derived via the catalytic conversion of cellulose into sorbitol

by supported metal catalysts under hydrogen environment [48], or by direct fermentation

from glucose. In November 2008, Roquette and partner DSM announced the initial

successful production of ”bio-sorbitol” at the Industrial Biotechnology Pilot P17, a

demonstration unit of several hundred tonnes, operational end of 2009 in Lestrem, France

[49].

Succinate

The platform molecule succinate is the building block for family of molecules including 1,4-

butandiol, tetrahydrofuran, biodegradable polymers and fumaric acid (see Figure 10). The

petrochemical succinate may be synthesized from crude oil by means of the catalytic

hydrogenation of maleic anhydride to succinic anhydride and a subsequent hydration [50].

The bio-product succinate is produced from glucose by fermentation [51]. Succinate is

potentially a high value bio-product with a market value of US$5.9–8.8 /kg or US$6000-

8800/tonne and is currently manufactured at 15,000 kilo tonne/yr [36].


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Figure 10: Succinic acid as a platform molecule

Isosorbide

Isosorbide is a heterocyclic compound with well-established clinical applications as a

pharmaceutical to treat angina and as a diuretic. However, isosorbide has potential as a

platform molecule for a new family of multifunctional polyesters and polyethers [52]; and

as novel or niche non-ionic solvent for a variety of reactions [53]. There is considerable

industrial interest in isosorbide for new applications as a co-monomer for new

thermoplastic polymers for use in multiple markets. Isosorbide can be substituted for other

diols to create new formulations of polyesters, polycarbonates and polyurethanes that then

are partially or even completely bio-based.

As a bio-product, isosorbide is derived from glucose via sorbitol by a double enzyme-

catalysed dehydration. Industrial interest in this platform molecule has been expressed by

both DuPont and Cargill [54]. Roquette manufactures isosorbide from sorbitol for

pharmaceutical use but recognises its potential in the polymer manufacture. Roquette is

also developing derivatives of isosorbide as a substitute for phthalates13 in the form of

isosorbide diesters for polyvinyl chloride plasticisers and as a green solvent in the form of

dimethyl isosorbide [55].

Polylactic acid PLA

Polylactic acid is a polymer of lactic acid used intermediate in the production of the bio-

degradable polymer, NatureWorks™. This biopolymer finds commercial applications in

fibres and nonwoven fabrics, for packaging, manufacturing films, extruded and

thermoformed containers, and extrusion and emulsion coatings [56].

13 Phthalates are a large family of organic chemicals derived from petrochemical sources which are

used as plasticizers in plastics manufacture (especially in polyvinyl chloride) to introduce softness and

flexibility. An estimated 2 million tons of phthalates are produced globally each year, with more than

20 different types of in common use. There are now health concerns internationally with respect to the

use of phthalates, which have resulted in products containing phthalates being banned in Europe and

in the US. http://www.productsafety.gov.au/content/index.phtml/itemId/972486

http://www.productsafety.gov.au/content/index.phtml/itemId/972486


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PLA is not amenable to chemical synthesis nor is it derived from petrochemical feedstocks,

unlike its closest competitor, polyethylene terephthalate (PET) [36]. PLA is a bio-product

derived only from the fermentation of glucose, molasses, sucrose or starch hydrolysates.

The Cargill-Teijin joint venture is the first global large-scale facility producing PLA, with a

140,000 tonnes pa capacity based on corn starch.

Figure 11: Lactic acid as a platform molecule

1, 3 Propanediol (PDO)

1, 3 Propanediol (PDO) has applications as a solvent and polymer and as a chain extender

or to provide thermal stability to conventional polymers such as urethanes. PDO is also a

platform molecule for other bio-based monomers such as polybutylene terephthalate, used

in the electronics industry [36]. PDO may be manufactured conventionally from the

petrochemical ethylene oxide by means of the proprietary Shell process [57] . Bio-based

PDO has been produced from maize-based glucose by fermentation by the DuPont and

Tate & Lyle joint venture on a 45.5 million tonne scale. The DuPont plant reportedly uses

40% less energy and produces 56% less greenhouse-gases emissions to produce bio-

based PDO than does the petroleum-based (glycol) process.

Extractables

Crop-based biomass also provides the opportunity for extraction of an array of metabolites

as part of the potential biorefinery product portfolio. One example is plant waxes which can

be used as recyclable waterproofing for cardboard and paper [8]. Extraction of high value

compounds from engineered sugarcane is under development: for example high molecular

hyaluronic acid (~4.5-5.4MDa) (a larger molecule that that used in the cosmetic industry

(2.5MDa)) and polyhydroxyalkanoates (PHA) [8].

2.4 PROCESS TECHNOLOGIES: OVERVIEW

There are a number of process technologies for implementation within a bio-based

biorefinery: thermochemical, biotransformation, fermentation, and in-planta approaches.


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2.4.1 Thermochemical

The processes for the manufacture of compounds by conventional chemistry have been

established since the late 1800s. Traditional chemical syntheses are based on a series of

individual steps, each responsible for the transformation of a starting material or

intermediate to the next intermediate required in the chain of synthetic steps required for

product manufacture. These conventional thermochemical processes are energy-intensive,

often with extreme temperatures, pressures and pH conditions required for the chemical

conversion. Chemical transformations may be inefficient, with separation of the desired

compound from a reaction mix required at each step. Nonetheless, conventional chemical

synthetic pathways are well established and well understood, and are responsible for the

production of the extraordinary array of bulk commodity and fine chemicals currently on

the market. Traditionally, the chemical industry has been reliant on oil and gas to provide

both energy and raw material to drive product manufacture.

2.4.2 Biotransformation

Enzymes are proteins with the ability to catalyse chemical changes in other compounds

without being changed themselves, that is, enzymes are catalysts. Individual enzymes,

which catalyze a single, specific biotransformation step, are increasingly finding a role

within conventional chemical manufacturing processes.

By 2003, the chemical industry produced around 500 products using industrial

biocatalysts. The bulk and fine chemical industries use manufacturing processes

characterised by thousands of diverse molecules, each requiring individual catalysis. As a

consequence, enzymes are used in an extraordinary array of applications, not limited by

nature, context, scale or complexity, from feedstock generation from agricultural crops, to

making or breaking a single bond within a complex molecule. Biocatalysts find use in

simple reactions such as chiral resolution, to complex multistep transformations such as

glycoprotein and oligosaccharide synthesis.

The scale of commercial applications of biocatalysts ranges from the kilotons used in

detergent and food industries, to the sub-gram quantities used in biosensors, in

diagnostics or to synthesize kilograms of chiral pharmaceutical intermediates.

Biocatalysts are of particular interest for their specificities, including regio- and enantio-

selectivity. The value-add of biocatalysts to industry are essentially based on their capacity

to complement or replace multistep or inefficient chemical processes, to reduce energy

costs and environmental impact, to create a more sustainable process by the use of non-

petrochemical feedstocks, or to achieve transformations unachievable by traditional

chemistry.

The cellulolytic enzymes used in the hydrolysis of cellulose and hemicellulose components

of sugarcane bagasse include xylanases, and β-glucosidases. These enzymes may be

generated by submerged fermentation on bagasse growth medium as an economically

feasible approach to reducing pre-treatment and hydrolysis costs, or as additional value-

added products from bagasse. Xylanase production has been reported from the bacterium

Bacillus circulans D1 (8.4 IU/ml); and cultures of the fungi Penicillium janthinellum and

Trichoderma viride have produced high levels of xylanase (130 IU/ml) and β-glucosidase

(2.3 IU/ml) on pre-treated bagasse medium [23].


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2.4.3 Fermentation

Industrial fermentation refers to the large-scale cultivation of a microbe on a feedstock,

usually a sugar, to take advantage of the diverse and complex biosynthetic capabilities of

microbial metabolism to generate a product. For example, antibiotics, amino acids, organic

acids and ethanol are all produced from individual microbial fermentations. As each step in

these metabolic pathways is catalysed by an enzyme, microbial fermentation reliably

produces specific forms of the product and does so under mild conditions. Many

commercial compounds once produced by multistep chemical reactions are now produced

within industrial-scale, single-step fermentation processes, e.g. vitamin B12. The

technology for microbial strain engineering and optimisation for targeted product formation

and high yields is well established.

2.4.4 In-planta

The array of interactive metabolic pathways within living plant cells, like microbial cells,

can be utilised for the production of complex molecules of commercial significance. The

technology for crop plant engineering and optimisation for specialised product formation in

commercial yields within the plant (i.e. in planta) is advancing, and is an area in which the

achievements by Australian researchers are internationally recognised.

2.4.5 Choice of Production Pathway

Bioprocesses based on agricultural or forestry feedstocks may require one or a

combination of these process technologies to generate a pipeline of bio-based products.

For example, the end-product of a fermentation process may require further

transformation step(s), using a chemical or biological catalyst, to derive a more valuable

fine or niche compound, or a family of compounds.


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CHAPTER 3 AUSTRALIAN INDUSTRIAL BIOTECHNOLOGY: THE VALUE CHAIN

FROM CROP TO CHEMICALS

3.1 APPROACH

The approach taken in this section of the Study was that of a broad-based series of

stakeholder consultations. The majority of consultations were conducted on a one-to-one

basis and, where possible, on-site. The selection of organisations was intended to broadly

represent both the immediate participants in a prospective bio-based manufacturing

venture value chain, as well as contributors and facilitators. The views of regional, national

and international organisations within industry, government and research sectors were

captured within the time constraints of the Study. The participating organisations (listed in

Appendix B) include:

Bio-based industry value chain:

o Cane growers

o Millers

o Chemical and plastics industry (Australia)

o Chemical majors (international)

o Technology-based bio-products companies (international)

Contributors to and facilitators of the value chain

o Design engineers

o Investors

o State governments

o Federal government

o Technology developers

o Industry associations

o University and research institutes

3.2 AUSTRALIAN PARTICIPANTS

3.2.1 Research

This Study does not attempt to provide a definitive review of Australia’s research and

development capability.

In overview, the research sector in Australia is fragmented and underfunded, but in many

cases generates world-class outputs. In overview, Australian research efforts in industrial

biotechnology may be seen as individual pieces of a grand work which need an overarching

national scheme to collect and assemble those pieces to capture maximal value from the

research investment. Industry considers that Australian research sector needs to be

consolidated and resourced around a framework to build critical mass around strategic

research targets.

Industry respondents to this Study, while assessing Australia’s research capability well,

were mindful of the absence of any national demonstration scale-up capability to prove up

laboratory outcomes. As a result, respondents consider that Australian industrial

biotechnology research is now 10 years behind the leading nations of the US and Europe,

and would be poorly positioned to initiate and develop a commercial sector independently.

In the absence of a commercial partner to bring the technology, process and skill-sets


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needed to initiate a working sector; industry considers that Australia may remain a crude

feedstock and technology exporter only14.

Research in Australia is across a wide range of aspects of the value chain for a bio-based

industry, from crop improvement, refining crude biomass to accessible sugar, microbe

design, including synthetic or systems biology, fermentation technology and product

recovery. Some examples are provided as illustration only.

Crop improvement

Australia has a long-established world-class reputation in crop genetics and optimisation,

and offers significant capability for crop improvement within the context of a bio-based

industry. Some few examples include:

genetically modified oilseeds (CSIRO)15

high fibre crops, particularly sugarcane16

crops producing extractable polymers for bio-plastics production or waxes for

cardboard manufacture17

sugarcane for in situ rapid refining to accessible sugars by means of inducible

promoters18

Refining technologies

Technologies for converting crude biomass to accessible sugars (refer to Figure 1) include:

ionic solvent technologies in combination with enzymes19

enzyme engineering: to develop enzymes which are fit for purpose for industrial

applications (CSIRO and Applimex)20,21

hydrothermal liquefaction project to produce high value chemicals and biofuels22.

pyrolysis: create bio-based aromatic compounds from feedstocks such as waste,

excess plant oils (CSIRO)23

14 Chemical industry respondents 15 Business Development & Commercialization CSIRO; Macquarie Biomolecular Frontiers Research

Centre, Macquarie University 16 CRC Sugar Industry Innovation through Biotechnology; Centre for Tropical Crops and

Biocommodities, Syngenta Centre for Sugarcane Biofuels Development, Queensland University of

Technology 17 CRC Sugar Industry Innovation through Biotechnology 18 Centre for Tropical Crops and Biocommodities, Syngenta Centre for Sugarcane Biofuels

Development, Queensland University of Technology 19 Centre for Tropical Crops and Biocommodities, Syngenta Centre for Sugarcane Biofuels

Development, Queensland University of Technology; Climate in Primary Industries, Primary Industries

Science and Research, Industry & Investment NSW 20 www.applimexsystems.com Applimex Systems Pty Ltd is a private company based in Sydney

developing optimised enzymes for use in the pulp & paper, fermentation, oil and other industries. To

achieve commercial scale operations, Applimex has established a strategic alliance with an overseas

company with experience and facilities for large scale fermentation and bulk enzyme production. The

majority of Applimex’s clients are overseas firms. 21 Business Development & Commercialization CSIRO; Macquarie Biomolecular Frontiers Research

Centre, Macquarie University 22 Centre for Tropical Crops and Biocommodities, Syngenta Centre for Sugarcane Biofuels

Development, Queensland University of Technology

http://www.applimexsystems.com/


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steam explosion with acid pre-treatment and enzyme hydrolysis24

Microbial strain development

Australia has a substantial track-record in strain development and now in systems biology

to improve or redesign the microorganisms which convert sugar to a valuable product by

fermentation.

Strain developments at Macquarie University and the University of NSW have led to

individual strains attracting the commercial attention of chemical majors such as DuPont

for large scale applications or commercial development outside of Australia25, but further

strain development may potentially find an outlet for deployment within an Australian

venture.

The systems biology capability in the University of Queensland’s Australian Institute for

Bioengineering & Nanotechnology (AIBN) has similarly attracted international industrial

interest. Synthetic biology is considered a technology capable of transforming chemical

manufacturing. Industry now recognises that geneticists have amassed an increasingly

sophisticated set of tools to harness and manipulate the productive capacities of

microorganisms through genetic engineering [58]. “The synthesis of genes, genomes, and

entire organisms from basic chemicals has immediate applications in medical research,

biofuels, specialty chemicals, and food. As gene sequencing and synthesis costs plummet

exponentially, manpower and money are flooding the field: at least 23 U.S. university labs

have formal synthetic biology programs, and the EU is investing millions of euros in

academic and economic projects.”[59].

Researchers from AIBN, led by Professor Lars Nielsen are collaborating with Amyris

scientists to develop microbial cells capable of converting sugar (sucrose) into long chain

alkanes of use in sustainable jet fuels (Dec 2010)[60]. In a second industrial project with

international support, this team is manipulating bacterial cells to utilise sucrose. This is the

first step in constructing an industrial bacterium able to convert sugar from sugarcane to

industrial molecules such as bio-plastic monomers.

Furthermore, industry respondents consider that the AIBN’s systems biology group is one

of the very few research teams of “industry standard”26, characterised by:

Breadth of skills: a multidisciplinary team of researcher with expertise from

microbiology, transcriptomics and genetics to chemical engineers and

biomathematicians;

Critical mass sufficient to meet industry timelines;

Funding;

Purpose and focus: for example the application of systems biology to develop strains

on industrial feedstocks for industrial products; and

23 Business Development & Commercialization CSIRO 24 Climate in Primary Industries, Primary Industries Science and Research, Industry & Investment

NSW 25 School of Biotechnology and Biomolecular Sciences University of NSW; Macquarie Biomolecular

Frontiers Research Centre, Macquarie University

Chemical industry respondent


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Industrial collaboration with US-based companies Metabolix, DuPont, Boeing and Dow,

and with a South Korean company27.

On the other hand, this group at AIBN still does not have any downstream capability to

prove up the developed strains larger than 10 litre scale fermentation.

Materials Science

Consistent with the theme of performance enhancement as Australia’s role within industrial

biotechnology, CSIRO research has developed substantial materials science platform

technologies for specialty chemicals. One example is a platform technology for the alpha

hydroxylation for any fatty acid, a technology able to modify bio-based plastics such as

polylactic acid (PLA) and starch based polymers to improve the usability of the resultant

plastic product28.

Wastewater Bioremediation

Cognisant of the constraints on water availability within Australia, research capability has

been developed in wastewater bioremediation to recover usable industrial water from

waste streams. Significant investment in wastewater bioremediation research and field

trials has been made at CSIRO and the CRC for Environmental Biotechnology, for example,

for removal of range of organic contaminants in water29.

Australia’s research sector will have an ongoing role in all the strategic options of sector

building (see section 6.1). Whether a national, an international chemical major and/or a

technology-based company are the keystone participants in the prospective bio-industry

sector, a robust and innovative Australian research sector is well-positioned to support

further process and product development. Reciprocally, mature commercial participants in

an Australian bio-industry sector may provide Australian research with a portal for

commercial translation of outcomes of publicly-funded national research and technology.

Process engineering: Proof of concept and Scale of production

In the pharmaceutical and life sciences industry, the term “proof of concept” is somewhat

differently understood by the research sector (bench experiments generally in rats) than it

is by the prospective commercial partner, who consider proof of concept to be confirmed at

the successful conclusion of Phase 2a human clinical trial.

In the chemical industry, there is an analogous set of scale-up commitments to confirm

proof of concept for potential commercial production. The scale required for confirmation of

the technology depends both on what molecule is being produced and what the type of

process engineering is demanded, that is, whether a fermentation or thermochemical

process. Therefore, in some respects there are two sets of proofs of concept required

within the chemical industry. The first verifies that the compound can be made by a given

route (transformation, fermentation or thermochemical) which would be in the 5-10L

27 Australian Institute of Bioengineering & Nanotechnology 28 Business Development & Commercialization CSIRO 29 Business Development & Commercialization CSIRO, the CRC for Environmental Biotechnology


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a

volumes. The larger volume (5-10,000L) confirms that the engineering process itself can

be scaled up to commercial production volumes30.

Generally in the chemical industry, the sequential scale of development of a compound via

a specific process engineering route is:

Proof of concept done at laboratory scale (~5-10 litres)

Pilot scale (~5-10,000L)

Demonstration scale (~20,000L)

Commercial scale production (~60,000L to ~600,000L)

At times, commercial partners will accept that pilot and demonstration scales may be

combined, depending on the confidence of engineering to consequently scale-up directly to

commercial size. In this instance, the process engineering needs to be well-known, that is,

only the compound is innovative. For example, in the case of well-established fermentation

technology, there is a general rule of “10x scale”, in that process engineers consider that a

100L scale fermentation can be taken to predict production parameters at 1000L etc31.

In contrast, in thermochemical processes, the same confidence does not necessarily apply

because some unit operations can be scaled from laboratory directly to commercial scale

while others need to be proven at each successive intermediate production volumes32.

3.2.2 Development: Pilot facilities

Pilot scale facilities are few in Australia, and demonstration scale non-existent, for proving

up Australian research. There are, however, commercial scale fermentation facilities

nationally, all for ethanol production, such as those at Manildra (NSW) and Sarina (QLD).

Demonstration plants in the US may provide guidance as to the establishment costs of

comparable facilities in Australia:

Verenium established a pilot plant33 at a cost of US$7-8 a few years ago (considered

to compare well with Mackay plant at A$10m in 201034), and is planning to move to

dedicated demonstration facility (US$80m)

DuPont’s Tennessee demonstration facility for ethanol production: US Government

committed US$70m to a greenfield plant: US$35m for basic infrastructure; US$35m to

support feedstock production (switch grass cultivation; testing of corn cobs).

30 Dow Chemical Michigan US; Verdezyne LLC 31 Ventures and Business Development, Dow Chemical, Michigan US 32 Ventures and Business Development, Dow Chemical, Michigan US 33 http://www.bnet.com/blog/clean-energy/bp-and-biofuels-why-the-verenium-buy-is-so-risky/2083

Pilot plant in Louisiana; demonstration scale facility in San Diego as a 50:50 joint venture with BP in

2008; anticipated to build a commercial scale facility in Florida at US$300m. July 2010: BP Biofuels

North America, a division that announced last week it will pay $98.3 million for Verenium Corp.’s

(VRNM) cellulosic biofuels business….. Verenium is the real winner in this deal. The company finally

gets to shed its money-losing cellulosic ethanol unit and focus on its enzymes business instead, which

is actually generating revenues.

http://files.shareholder.com/downloads/ABEA-2SX1A7/0x0x321639/71b02f8c-d2c3-46e5-b2cd-

eb362399e046/VRNM_Rodman_Renshaw_Conference_Sept_2009.pdf see appendix 34 Centre for Tropical Crops and Biocommodities, Syngenta Centre for Sugarcane Biofuels

Development, Queensland University of Technology

http://www.bnet.com/blog/clean-energy/bp-and-biofuels-why-the-verenium-buy-is-so-risky/2083

http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7063758

http://files.shareholder.com/downloads/ABEA-2SX1A7/0x0x321639/71b02f8c-d2c3-46e5-b2cd-eb362399e046/VRNM_Rodman_Renshaw_Conference_Sept_2009.pdf

http://files.shareholder.com/downloads/ABEA-2SX1A7/0x0x321639/71b02f8c-d2c3-46e5-b2cd-eb362399e046/VRNM_Rodman_Renshaw_Conference_Sept_2009.pdf


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Mackay Biofactory

The Mackay Biofactory facility comprises stirred tank (up 10,000L) and airlift (up to 1000L)

capacity co-located at the Mackay Racecourse sugar mill, the largest sugar mill in

Australia. This facility provides the means for researchers to understand the scale-up

requirements of their refining and transforming technologies and to develop skills and

capability for small scale processing. However the facility may not allow for optimisation of

commercial production, which requires demonstration scale of ~20,000L.

The business model for Mackay facility is contract research, potentially from international

partners35. Mackay may be considering ethanol production to commission the facility and

generate early revenues36. One advantage offered by the plant is integration with a

sugarcane mill and therefore ready access to feedstock. Co-location of the plant with the

sugar company and its provision of the land for the facility confirm the vision and

commitment of the company to value-add sugarcane.

The facility was co-funded by Federal and State Government in a public private partnership

of more than A$10m37, and “represents a step change for the sugar industry”38.

3.2.3 Investment community

Respondents from the Australian investment community report a high level of interest in

technology-based projects, such as those within the cleantech sector39. However, those

technologies are struggling to attract investment because private sector investment,

especially in infrastructure, critically depends on a supportive policy environment.

Investors expect these technologies will be able to capitalise on a price on carbon, once

established.

Investors report the key criteria to consider an investment is a proactive vision for the

technology based sector, stable and supportive policy environment and Government

participates in de-risking the venture40.

Investment, especially in infrastructure assets, requires a level of confidence about the

level of future cash flow. Many Australian technology-based propositions are generally at a

very early stage of developing and demonstrating their technologies, so there is a

disconnect between the investor, who is concerned with revenue generation and the

technology, which is still at lab-based scale. This means the evaluation of the relationship

between risk and return is one which discourages investment in Australian technology

ventures at this stage.

35 Mackay Sugar, at the facility opening 9th July 2010 36 Centre for Tropical Crops and Biocommodities, Syngenta Centre for Sugarcane Biofuels

Development, Queensland University of Technology 37 Invest Queensland , State Development, Trade and Innovation, Queensland Government; Invest

Queensland , State Development, Trade and Innovation, Queensland Government 38 Chair, Mackay Sugar, at the facility opening 9th July 2010 39 Cleantech projects reportedly under evaluation include: water technologies, renewable energy

advanced batteries, low carbon cement, carbon trading and carbon sequestration. 40 Financial sector respondents


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The investment community considers that, like cleantech, bio-based chemicals and

polymer ventures would be evaluated with respect to the inherent level of risk in:

Technology: whether this technology been deployed elsewhere or is it first-in-class

technology;

Inputs: whether the technology has been demonstrated elsewhere, have the inputs

been changed for deployment in Australia (e.g. change from starch to sugar);

Scale: is the project the first deployment at this scale;

Product: new product or one with a established market; and

Process: a proven process or new process design.

Projects assessed with a high level of risk in technology-based projects such as those in

industrial biotechnology in Australia will not attract the scale of capital attracted by lower

risk, more conventional infrastructure projects because investors are not comfortable that

the returns are commensurate with the level of inherent risk.

Investors see an opportunity for Government to participate in the investment and “adjust

the risk/return equations”, which might be by provision of grant funding. However, large

scale projects may need more than this level of input, and so how the Government then

acts may depend on their commitment to the outcome of the project.

Governments may consider providing a “backstop” to the project, for example by off-take

agreements and other performance guarantees to provide a minimum level of return,

which is the core principle for the investor.

The investment sector is aware that governments around the world now recognise the

need for a level of participation greater than funding to underpin strategic technology-

based ventures. There are different models for government participation, exemplified by

the renewable energy sector:

The EU has a feed-in tariff approach, such that the delivered energy earns a defined

return, which, while not high, is sufficient for project viability.

In the US, mandated quotas for renewable energy are set by the individual states and

which the major electricity companies must meet. In the US, mandates are

acknowledged to both create the market and the price for the product by providing

certainty.

The Chinese Government directly engages in power purchase agreement or off-take

agreements.

For private sector investment in bio-based projects, especially in terms of infrastructure,

Australia needs to have policy mechanism(s) in place to provide investors with confidence.

These policies may underpin the ability of the venture to produce a marketable product;

create a market for the product; and secure the returns for the venture.

Within the strategic framework and roadmap developed by the Sustainable Aviation Fuel

Initiative (SAFI), investors see many of these issues addressed by this industry-led

initiative. Consequently, investors see their role in the project as both investment in

infrastructure and in “corporate farming” to stimulation development of feedstock

plantations for woody biomass, oilseed and algae. The Infrastructure vision for this

initiative which is attractive to the investment community is to invest in the transition of


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existing and operating assets, such as that represented by the Caltex refinery, to a new

biomass-based business model.

3.2.4 Manufacturing: The Chemicals and Plastics Sector

At present, there is no bio-based chemicals sector per se in Australia. Relevant activities

are limited to the Mackay Biofactory pilot plant and the furfural plant in Proserpine which is

being commissioned at the time of writing.

Sector Profile

The domestic chemicals industry was established in Australia in response to the needs of

the agricultural and mining sectors for fertilizers and explosives, respectively, since 1878.

The plastics industry was established later to produce simple moulded plastic products

from imported feedstocks in 1927 [32].

The life cycle of the current domestic chemicals and plastics industry is to convert raw

materials into basic organic chemicals, with further transformation into speciality chemicals

and consumer products. Different sector participants are engaged in activities at different

stages of this cycle, i.e. some specialise in one refining or transformation stage, other

companies are more integrated (Figure 12).

Figure 12: Life Cycle of Chemicals and Plastics

(Source: Productivity Commission 2008 [32])


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Australia’s chemicals and plastics industry generates ~A$32.5 billion in revenue per

annum, directly employs 85,000 people supported with wages and salaries of A$4.7 billion.

The sector is responsible for approximately 10% of Australia’s total manufacturing activity

[61] and 1% of the nation’s GDP [32]. Of this output, 62% is chemicals production, 32%

plastics production and 6% rubber manufacture [32].

The industry body, Plastics and Chemicals Industry Australia (PACIA) represents a

membership which includes chemicals manufacturers, importers and distributors, logistics

and supply chain partners, raw material suppliers, plastics fabricators and compounders,

plastics and chemicals recyclers and service providers to the sector.

The Australian chemical industry is highly diverse in terms of company size, products,

long-term trends and total revenues [32] (Figure 10). In overview, the sector consists of a

large number of small and medium sized companies and just a few sizeable companies.

There are some 3,800 enterprises operating across the full spectrum of the chemical and

pharmaceutical industries. More than 80% of these are small and medium-sized

businesses, each employing less than 200 people. The industry is extensively linked to the

global chemical industry, through international trade and the Australian operations of

several multinational companies such as DuPont, Dow Chemical, and Huntsman. There are

just a few large local companies such as CSL, Orica, Nufarm, and Incitec [33].

The chemical industry is also geographically dispersed, with the majority of national

activity in Victoria and NSW. Victoria has the highest proportion of chemicals and plastics

manufacturing activity as a proportion of total manufacturing capacity [32]. Manufacturing

activities within each state tend to be co-located in manufacturing precincts, such as those

in NSW in Botany, Auburn and Penrith [33, 62].

Sector impact on the economy

The chemicals and plastics industry is a diverse manufacturing sector comprising of base

and feedstock products, speciality and refined chemicals, intermediate goods and

components as well as finished products. Although the Australian industry is not large on a

world scale, it plays an important role in the national economy and is integrated with the

global industry through the presence of multinational companies and the trade in

chemicals. The domestic industry is important in several niche areas, for example,

explosives, pharmaceuticals and agricultural chemicals [33], while having inputs into most

national industries, particularly manufacturing and construction [32].

The Australian chemical industry is one of the country's key strategic and enabling

industries. The chemicals industry provides “the building blocks of a modern economy”,

with 70-85% of its outputs, both process technologies and the products, used as essential

inputs to other Australian manufacturing and industrial sectors. Those sectors include

automotive, building and construction, packaging, aerospace, defence, healthcare and

pharmaceuticals, consumer products, nutraceutical and cosmetics, agriculture, water

industry and treatment, detergent and food industry, mining and resources, building and

infrastructure, education and information technology, packaging, construction and

consumer appliances [32, 63, 64](See Figure 13).


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Figure 13: The key position of the chemicals and plastics industry within Australian supply

chains.

(Source: PACIA 2008 [63])

In contrast with its keystone industrial position, over the last 20 years the Australian

chemicals and plastics sector has confronted increasing challenges, especially those posed

by globalisation, by the changing patterns of production and trade, and most particularly,

by high value and the volatility of the Australian dollar. Industry analysts have also noted

that recognition of the sector’s national strategic significance is overlooked by State and

Federal Governments. As a consequence of these effectors, recent reviews and industry

observers have noted the reduction in vitality within the sector, with many companies

reporting a disinclination to invest in new ventures [62], [64].

The contraction in the domestic chemicals industry has been evident for about two

decades. Peaking in the mid 1970s, after three-quarters of a decade growing strongly to

represent 3% of national GDP, the economic significance of the chemical industry within

the Australian economy collapsed to just one-half in two decades (See Figure 14).

By 1985, the chemicals sector, including plastics, paint and pharmaceuticals, reported a

turnover of A$10.8 billion, an added value of A$3.9 billion and 83,630 jobs. In 1986,

investment by the sector was estimated to have exceeded A$2.5 billion, and accounted for

21% of research done in manufacturing sector nationally [64].


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Figure 14: Australia's chemical industry 1905 - 1995. Value added as % GDP,

(Source: Van Santen 1998 [65])

With the reduction in tariffs and the undoing of protectionism, by the end of the 1980s, the

chemicals and plastics sector began a decline which is still evident [64].

By 2004/05, the sector’s annual turnover was over A$30 billion, representing 9% of the

nation’s total manufacturing. The industry employed over 82,000 or about 8% of the total

manufacturing industry workforce. The sector added about $9 billion in value or about 9%

of the total value of national manufacturing. Despite the revenues generated, the

chemicals and plastics sector is strongly import-dependent, with annual imports of about

A$14 billion, or 9% of the total Australian manufacturing industry’s import bill (See Figure

15). Furthermore, imports have grown at an average annual rate of 3.4% in the three

years to 2004/05. Thus, even with annual exports of chemicals and plastics of around A$4

billion, a significant annual deficit in the balance of trade remains [32, 64] (See Figure 16).


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Figure 15: Level of manufacturing feedstock imports by Australia's chemical industry 1990-

2006


Figure 16: The Australian chemical industry: Balance of Trade 1990-2006


Imports and exports

Australia’s trade profile shows that the nation is a significant net importer of chemicals and

plastics, with the ratio of imports to exports of 4:1. In 2000-2001, A$14.5 billion of


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chemical products (including medicines and pharmaceuticals) were imported and

A$4.4 billion worth of chemical products were exported, with a net deficit of over

A$10 billion. The Australian chemical and plastics sector accounts for only about 1% of

world chemical production [32].

Imports: Imports form a significant proportion (37%) of the domestic supply of

chemicals and plastics. The US was Australia’s largest single country source of

chemicals and plastics imports (21%). The combined total of the 27 countries of the

European Union accounted for 22% of Australia’s total imports, and the APEC region

countries contribute 55%. The total chemicals and plastics imports were valued at

A$14.7 billion (2005/06), a reduction in imports from 2000 by more than A$400

million [32, 63] (See Table 7).

Table 7: The top 12 sources of Australian chemicals and plastics imports in 2005/2006

Source of Imports $m %

1 US 3,088 21%

2 China 1,553 11%

3 Japan 1,020 7%

4 Germany 810 6%

5 United Kingdom 698 5%

6 New Zealand 513 3%

7 South Korea 476 3%

8 Malaysia 427 3%

9 France 419 3%

10 Taiwan 361 2%

11 Thailand 325 2%

12 Singapore 302 2%

(Adapted from PACIA 2008 [63])

Exports: Australia manufactures only “modest” volumes (9%) of chemical and plastic

products for export compared with the domestic manufacturing sector in total (15%)

[32]. New Zealand was Australia’s largest single country destination for exports (22%)

followed by China, the US, Indonesia, Japan, Korea, Hong Kong, and India with other

countries each contributing less than 3% to total exports. Exports to the 27 countries

of the European Union were 9.5% of total exports. Country members of APEC

accounted for 69% of Australia’s total chemicals and plastics exports. The total

chemicals and plastics exports were valued at A$3.7 billion in 2005/06 [63] (See Table

8).


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Table 8: The top 12 sources of Australian chemicals and plastics exports in 2005/2006

Exports Destination A$m %

1 New Zealand 804 22%

2 China 307 8%

3 US 295 8%

4 Indonesia 166 5%

5 Japan 143 4%

6 South Korea 136 4%

7 Hong Kong 135 4%

8 India 124 3%

9 Thailand 110 3%

10 Finland 105 3%

11 Singapore 84 2%

12 UK 77 2%


The domestic chemicals and plastics sector contributes less than 1% to the international

trade worth ~US$1500 billion, with Australian ranking 21st amongst the industrial

producers of these products (See Table 9) [32, 63].

Table 9: Global Trade in Chemicals & Plastics: 2005 Shipments/Turnover:

Rank Country Shipments/Turnover (US $billion)

% World Total

21 Australia 22 0.86

1 US 558 21.8

2 Japan 270 10.5

3 China 223 8.7

4 Germany 190 7.4

5 France 120 4.7

6 Korea 98 3.8

7 UK 97 3.8

8 Italy 95 3.7

9 Brazil 70 2.7

10 India 68 2.7


Industry stakeholders and analysts, however, have concluded that the future success of

the domestic chemicals and plastics industry in Australia will depend on its capacity to

change through innovation, to introduce competitive new and innovative products,

processes and services, and meet the demands of both existing and new markets [33, 62-


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64]. However, the chemicals and plastics sector is reportedly [62] disinclined to invest in

infrastructure for new ventures based on the risks associated with imported feedstocks,

which expose domestic manufacturers to constraints in delivery to meet the demands of

manufacturing, and price, under the current conditions of high value of the Australian

dollar. These risks would be ameliorated substantially by domestic source of feedstock as a

manufacturing input [62], which may represent an opportunity which the bio-based

manufacture of select products may meet.

The establishment of a bio-based manufacturing sector in Australia and opportunity for

uptake of bio-based product(s) may expose gaps in the capability and/or capacity within

the domestic chemicals and plastics sector. Those gaps may be in the transformation of

the bio-based platform molecules, such as adipic acid, succinate, etc into compounds

appropriate as feedstock inputs into speciality products within the domestic sector (see

Figure 12). The scope of this Study does not encompass an understanding of this sectoral

capacity and/or capability, and further work may be of value, to:

Expand the capacity and capability of the domestic chemicals and plastics industry to

take up any bio-based product directly as a feedstock or process input;

Transform platform molecules to derive other molecules for use as feedstocks; and/or

Track the uptake and consumption of these platform and derived molecules within the

domestic market as a whole.

Information Sources

Detailed sources of information about Australia’s chemicals and plastics sector are not

readily available. One may be the National Institute of Economic and Industry Research

(NIEIR) which compiles an industry database, a proprietary resource based on surveys

conducted by that organisation since 1991 (See Section 4.7). This Study understands that

the industry association for the chemicals and plastics sector (PACIA) reportedly relies on

NIEIR for economic statistics to monitor sector health. The Australian Bureau of Statistics

has not maintained manufacturing data since 2007, certainly due to budgetary restraints,

a move seen by industry as reflecting the decline in the Federal Government’s perception

of importance of manufacturing within the Australian economy [62].


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Table 10: Major companies within the Australian chemicals and plastics sector

Company Location Feedstock Products Capacity (tpa)

Australian

Vinyls

Corporation

Altona,

Victoria

vinyl chloride

monomer

(imported)

polyvinyl

chloride resin 220,000

BHP Wyndham,

Victoria natural gas methanol 60 000

propylene

oxide

(imported),

butadiene

(from

Kemcor)

62,000tpa

propylene oxide

for polyols. Dow

Chemical

Altona

Victoria

styrene

(Huntsman)

polystyrene,

polyols, SB

latex, epoxy

and vinyl ester

resins 20,000 tpa

polystyrene (JV

with Huntsman)

Huntsman

Corporation Botany

ethylene

(ethylene

oxide)

Ethoxylate

surfactants,

glycols,

ethanolamines

ethanolamines

35,000 tpa

ethylene 260,000

LDPE 90,000 Orica

Botany,

New

South

Wales

ethane

ethylene

LDpolyethylene,

LLDpolyethylene LLLDPE120 000

ethylene 220,000

propylene 60,000

HDPE 100,000 &

90,000

Kemcor

Australia Altona, Vic

gas oil &

ethane

ethylene

butadiene

ethylene

propylene

butadiene LLD

polyethylene HD

polyethylene

SBR rubber BR

rubber polypropylene

45,000

Basell

Australia

Clyde,

NSW &

Geelong,

Victoria

refinery gas polypropylene

resins

120,000 tpa (Vic)

& 70,000 tpa

(NSW)

Source: www.chemlink.com.au/industry.htm

Stakeholder response

The industry body, Plastics and Chemicals Industry Australia (PACIA) represents a

membership which includes chemicals manufacturers, importers and distributors, logistics

and supply chain partners, raw material suppliers, plastics fabricators and compounders,

plastics and chemicals recyclers and service providers to the sector.

http://www.chemlink.com.au/industry.htm


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The plastics and chemicals sector provide “the building blocks of a modern economy”,

underpinning many other sectors, including automotive, aerospace, defence, healthcare

and pharmaceuticals, consumer products and cosmetics, agriculture, water industry and

treatment, food industry, mining and resources, building and infrastructure, education and

information technology, packaging, construction and consumer appliances.

Industry analysts and organisations consider that the move to the bioeconomy is market-

pulled and industry-driven41. The Australian domestic chemicals manufacturing sector

makes a major investment in plant and equipment with a 50-year working life, although

that investment may have occurred some time in the past. The sector recognises that

there are environment issues anticipated to arise which will change the commercial

landscape dramatically within the next 50 years and that the sector will need to be able to

respond to that change in the context of existing infrastructure. The sector recognises that

innovative technologies offer the possibility of new opportunities, although that may

require an upgrade of existing capacity. Companies within this domestic manufacturing

sector recognise the need to act fast and soon in order to capture competitive edge, or be

left behind. The sector also recognises that the first step to arrest the clear decline in

Australian manufacturing is the Federal Government’s commitment to a vision, so that

industry can start planning42, but is discouraged and frustrated by an uncertain or

changing policy landscape43.

In PACIA’s view, the Australian chemicals and plastics manufacturing industry is directly

driving the change to the bioeconomy and “greener” processing technologies. However,

companies within the sector are individually in different stages of: recognising the potential

opportunity; iterating a corporate strategy for future development; mapping out the

actions needed; and initiating the actions44.

Industry groups are anticipating a price on carbon will likely be legislated in the near

future, at a price closer to A$26-28/tonne than the initially proposed A$10/tonne.

Furthermore, the manufacturing sector is aware of future increases in the prices of water,

gas and power. Therefore, industry groups report there is a strong sense of the value of

innovating current process design to capture economic benefits. However, many

companies are capital constrained with little financial resources to fund innovation45.

The following two examples of recent industrial innovation (Australian Vinyl, Qenos)

illustrate that within the Australian chemicals and plastics sector there is an emerging

“clear understanding of (future) opportunities”46 to deploy research outcomes:

Spectrum of possibilities for the plastics and chemicals sector driven by innovative

technologies.

Industry-research partnerships work synergistically:

41 National Institute of Economic and Industry Research; Plastics and Chemicals Industries Association 42 National Institute of Economic and Industry Research 43 Plastics and Chemicals Industries Association; Australian Industry Group 44 Plastics and Chemicals Industries Association 45 Australian Industry Group 46 Plastics and Chemicals Industries Association


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o Industry does not have the capacity or capability to generate innovation in

feedstocks and technology improvements

o Research cannot design products in the absence of industry inputs.

Incremental changes can be made within a company to match products with alternative

feedstocks. A more managed rate of change may help a company manage leveraged

risk, especially in the commodity marketplace.

The role of industry groups such as PACIA is to help industry to iterate an overall sector

strategy and to match inventors with deployers of innovation. PACIA’s industry

membership considers Australia to be research-rich, which is an achievement in itself

considering the nation’s small population and industry base. PACIA sees research as

industry-friendly and the means to an innovative and sustainable industrial future47, so no

substantial hurdle appears to exist between innovation and industry in Australia. The

Australian manufacturing industry has an existing footprint of aging equipment; so is

looking for ways to either back new technologies into the existing equipment, or to

integrate current technologies into existing processes. Therefore, industry is investing in

research to achieve the overall outcome of flexible product range, alternative feedstocks

and process efficiencies: e.g. conversion from batch to continuous process for reduced

downtime or solvent-less conversions48.

However, Australian manufacturers recognise that as this sector represents ~1% of global

production, with limited revenues to invest in innovation directly. Therefore the sector

considers that it needs to be “takers and adapters” of innovation, irrespective of whether

that innovation is derived from national or overseas-sourced research49.

3.2.5 State Government

This Study restricted review of State activities to those pertinent to the development of the

bio-based industry.

Queensland State Government

The Queensland state government has a long-standing ambition to develop an industrial

biotechnology sector for the State and particularly to add value and provide stability to the

agricultural sector50.

To this end, Invest Australia and DEEDI have worked collaboratively to undertake to

develop a strategic discussion paper, the “Strategic directions for development of the

Queensland bio-based industrial products sector”, circulated widely in July 2010. These

agencies organised interdisciplinary and interdepartmental (government) teams to

workshop the State’s industrial biotechnology strategy [66] (see case study 7.3.1).

The Queensland State Government reports that it proactively seeks out international

companies and companies with products based on sugar to offer the attractions of

47 Plastics and Chemicals Industries Association 48 Plastics and Chemicals Industries Association 49 National Institute of Economic and Industry Research; Plastics and Chemicals Industries Association 50 Invest Queensland , State Development, Trade and Innovation, Queensland Government;

Department of Employment Economic Development and Innovation, Queensland State Government


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Australia via Invest Queensland. Industrial biotechnology or the bio-based economy is

seen as a major opportunity for Queensland to attract investment: over the last few years,

Invest Queensland has been in discussions with global chemical majors, and with

international technology innovators. Co-investment with an industry participant for a large

scale industrial investment and other are considered attractive by industry51.

Both DEEDI and Invest Queensland have managers who consider themselves as champions

of biotechnology in general and vocal advocates for the benefits of building an industrial

biotechnology sector leveraging the resources of the state. Both agencies recognise that

the “sugar industry (has) the potential to transform the State’s economy”52.

Consequently, Queensland is seen by industry as the state most likely to establish a

biorefinery sector, prepared to negotiate incentives with industry and facilitate the range of

planning and approvals needed by industry to establish a venture53.

NSW State government

The NSW State Government reports no ambition with respect to developing a biobased

economy. Consequently, there is no plan for proactive policy development with the State

government, although respondents consider that relevant policy development in this area

would follow the lead of the Federal government in this regard.

Respondents, both within and outside of the NSW State Government, consider that there is

no evidence of coordination between the NSW State-based agencies with respect to the

opportunity of bioeconomy, and that where these agencies act, they do so in isolation.

Agencies within the NSW state government are developing information resources on

biomass availability and sustainability in the context of potential value-adding of

agricultural feedstocks, for example, to ethanol. Furthermore, the National Centre for Rural

Greenhouse Gas Research is investing considerable effort in developing life cycle analysis

toolsets, in collaboration with RIRDC, DEWHA and other Federal agencies54.

Currently, Industry and Investment within the NSW State Government has contracted

NIEIR to review the State’s chemical industry and provide guidance on approaches to

stimulate the sector. The review is considering the importance of the chemicals industry

within the NSW economy, and the extent and duration of the sector’s recognised decline.

The review is collecting industry feedback from surveys considering the nature of the

obstacles to arresting deindustrialisation and what approaches might be applied by the

State Government to promote positive growth in the chemical industry in NSW. Although

the review is incomplete, industry responses to date establish a clear recognition that

innovation is key to sector invigoration and that “there is not much to be done (in terms of

future-proofing the sector) based on traditional technologies”55.

51 Invest Queensland , State Development, Trade and Innovation, Queensland Government, Chemical

industry respondents. 52 Minister Mulherin at the opening of the Mackay biofactory Facility 9th July 2010 53 Australian Industry Group 54 National Centre for Rural Greenhouse Gas Research 55 National Institute of Economic and Industry Research


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CHAPTER 4 KEY COMPONENTS AND HURDLES

Respondents to this study concur that the key components which need to be in place to

establish a bio-based industry include:

Investment and incentives;

Stable strong clear policy environment; and

Stable feedstock pricing.

Unlike Governments, industry has a clear understanding of the hurdles to overcome (“an

uphill battle”) to establish an industrial biotechnology sector. Respondents from the

chemical industry stress that no Western business sector has ever been build up solely on

the basis of government incentives although collaborative participation of both government

and industry in developing the commercial sector is critical.

Australian State and Federal Governments are not seen by national and international

industry as reacting to the opportunity presented for developing a globally significant bio-

based manufacturing sector, the iteration of which needs a coordinated Federal

Government vision and action. Respondents remarked on the need for a “big push” in a

purposeful way. The Federal Government may need to consider a number of actions

including co-investment with chemical majors56. These and other companies are

considering Australian agricultural feedstocks for chemicals manufacture, but need

Government to be an active participant in initiating a venture in Australia.

In other sectors, the Federal Government has proven itself ready and able to “prime the

pump” when required. The Government has recently allocated A$1.5bn to solar power

station ventures via its Solar Flagships programme: a dramatic demonstration of “pump

priming” with a considerable quantum of investment committed. Therefore, with this

investment, the Federal Government establishes a track record in recognising:

o the need for investment to build a national industry;

o size of the investment required; and

o value of investment in new technologies.

Industry respondents are not certain, however, that to date all State and Federal

Governments clearly understand the value of the industrial biotechnology opportunity for

Australia, and the competitive advantages being offered by our near neighbours in

Thailand, Indonesia and China.

4.1 FEEDSTOCK

To the question “does Australia have sufficient biomass to provide a sustainable feedstock

stream for the development of a bio-based industrial sector” the response from the

chemicals industry is firstly “Absolutely yes” and secondly that industries “don’t need a lot

of sugar to build a sector on chemicals”57. Sustainable feedstocks supply is not considered

rate-limiting by industry respondents to the development of a bio-based sector in

Australia.

56 Chemical industry respondents 57 Chemical industry respondents; Sugar Research and Innovation, Queensland University of

Technology


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Respondents to this Study have commented that the chemical industry is not focused on

the “cost of conversion (to valuable bio-based products) but on the credibility and cost of

feedstock in the long term”.

Respondents uniformly recognise the advantages of sugarcane as a tropical biomass to

provide sugar and cellulose as industrial feedstocks. Sugarcane is considered by industry

to remain an important feedstock in the short term (see Table 14) with minimal pre-

processing, limited competition with food uses, high productivity and well established

process infrastructure. Most of Australia’s sugar crop is exported rather than used as to

underpin major domestic industries. Therefore, the use of sugar as an industrial feedstock

will generate the benefit of value-adding sugar while not impacting on other domestic

industries downstream which are dependent on sugar as an input. Sugar is the preferred

feedstock for the production of a clean sugar stream for chemicals and, particularly, plastic

monomers: clean feedstocks minimise the very expensive downstream processing of fine

chemicals and monomers which are essential for their function. (“..even the most

optimistic industry player only looks at cane sugar..”58). In contrast, lignocellulosic

materials would only be considered as a feedstock for transformation to high value

chemicals by fermentation, once breakthrough process technology is achieved technically

and at a commercially realistic price. Therefore, cellulose liquors may continue to be used

to provide a “black” liquor stream for products recovered by distillation, such as fuel

ethanol and butanol59.

Industrial biotechnology ventures based on sugarcane, however, face one potential

challenge, which is the discontinuous supply of feedstocks, based on annual crop cycles.

Industry operates on a continuous basis (24 hours a day, 7days a week) and needs to

operate at least at 80% capacity to remain profitable. Therefore, a seasonal operating

plant may not be a realistic proposition. However, industry respondents felt this issue was

manageable by stockpiling feedstocks and by using multiple feedstock streams, so long as

the price was “right”.

The challenge of lignocellulose feedstocks continues. Lignocellulosic sugars look more

expensive but there may be significant added value in extractables such as lignin to bring

down the overall cost of refining to accessible sugars. The predominant challenge is cost.

Lignocellulose raw material is considered waste at zero or very low cost, but the costs of

this raw material as a feedstock are significantly impacted by any costs of transport, but

particularly by the costs of processing and refining, which are complex and inefficient to

date compared with sugar production from cane.

Furthermore, one chemical major reported outcomes of an in-house review on global

feedstock production and supply. Feedstock production is reported as optimal in tropical

climates: temperate climates not have the light intensity and heat units to provide the

58 Chemical industry respondents 59 Sugar Research and Innovation, Queensland University of Technology; Australian Institute of

Bioengineering & Nanotechnology; DuPont (Australia) Centre for Tropical Crops and Biocommodities,

Syngenta Centre for Sugarcane Biofuels Development, Queensland University of Technology; Chemical

industry respondents


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volumes of feedstock required by a viable large scale process, and on that basis that

company’s view was that a bio-based biorefinery concept may more suited to tropical

regions. A recent McKinsey report suggested that on the basis of feedstock supply, the

“bioscience revolution” would occur within a narrow band between the tropics.

Respondents reflected on the countries within that band and their investment suitability:

Australia stands out in that context.

The rate limiting aspect of feedstock supply for industrial chemicals production is price.

The key driver for a biomass-based chemicals proposition to be commercially feasible in

Australia is the issue of separating fermentable sugars from the market for that sugar. The

cost of feedstock can be ~20% of the cost of goods and industrial respondents require a

benchmark price for sugar of around 10-14 cents/lb (A$220-$308/tonne), which may be

slightly or significantly below that of the prevailing market price. Therefore, chemical

industry respondents consider that the role of government in guaranteeing an economically

feasible feedstock price to both buyers and sellers of biomass is critical.

The water demands of a bioprocess need to be assessed as part of site evaluation; taking

into account processing needs, capacity for recycling and water efficiencies of the bio-

based process. However, the issue of the water availability and life cycle in the context of

the biorefinery value chain is outside of the scope of this Study.

4.2 ESTABLISHMENT BARRIER

Australia faces inherent difficulties in establishing a new industry in bio-based

manufacturing or biorefineries. One challenge is that there are no multiple product

biorefineries in commercial operation anywhere in the world to date: the current state of

bio-based initiatives are single product ventures undertaken by chemical major DuPont

(1,3 PDO) agricultural giant Cargill/Teijin’s Natureworks (PLA), and Roquette (sorbitol).

There is an emerging understorey of innovative industrial biotechnology-based companies,

but these are not quite at commercial manufacturing stage: e.g. Amyris, Solazyme,

Verdezyne and others. Amyris has nothing as yet at commercial scale60, and Solazyme is

“close to getting pilot scale up”61 yet to be undertaken in the Mackay plant62 with US

government funding.

Australia needs to be planning how to put a roadmap together to build a bio-based

manufacturing sector while the commercial technology gap closes. That is, the iteration

and refinement of a national bio-based industry strategy and roadmap is timely.

60 http://www.smartplanet.com/business/blog/smart-takes/amyris-shell-strike-deal-for-renewable-

diesel-fuel/8415/ Jun 28, 2010 …(despite agreements with significant players such as the energy giant

Shell) the company has yet to demonstrate that it can profitably expand its fuels to commercial scale 61 algae-based renewable diesel from sugar products from sugarcane

http://www.cabinet.qld.gov.au/mms/StatementDisplaySingle.aspx?id=68260 62 Queensland Government-funded Renewable Biocommodities Pilot Plant in Mackay

http://www.cabinet.qld.gov.au/mms/StatementDisplaySingle.aspx?id=68260

http://www.smartplanet.com/business/blog/smart-takes/amyris-shell-strike-deal-for-renewable-diesel-fuel/8415/

http://www.smartplanet.com/business/blog/smart-takes/amyris-shell-strike-deal-for-renewable-diesel-fuel/8415/




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4.3 LIFE CYCLE ASSESSMENT

Unlike life cycle analysis (LCA), life cycle inventory (LCI) does not extrapolate the potential

impact of life cycle outputs on health, air, soil and water quality, and is therefore a simpler

inventory of inputs and outputs of a process or system. LCI may be used to achieve a

standardised assessment if based on input or output measures from Government-set

values or the producer’s (grower or manufacturer’s) evidenced values. An LCI is expected

to generate an inventory statement of the renewability or sustainability of the bio-based

product (fuel or chemical, for example). The benefit of LCI to the manufacturer is

avoidance of the emissions trading penalty; therefore, the introduction of the LCI, as part

of the Government’s bio-based strategic framework, is anticipated by respondents to

receive both market and sector support. However, this Study understands that the LCI

process has yet to be established for bio-based industries in Australia.

4.4 REGULATORY

The pathways for approval of genetically altered organisms and for new chemical

registration, essential for bio-product manufacture, are anticipated to be problematic in

Australia.

Decisive action is called for: regulatory issues may be the biggest barrier to establishing a

bio-based products sector and to the take-up of new materials and processes within the

domestic chemicals and plastics industry.

Firstly, a critical upgrade of the capabilities of both the gene and chemicals regulators

(Office of the Gene Technology Regulator (OGTR) and Chemicals and Plastics Regulation

Reform) is essential to deal with industrial scale of operations. Reinforcement of the

regulators is urgently required: the current framework of the Office of the Gene

Technology Regulator (OGTR) has shortcomings which may make this regulator unable to

meet the challenges posed by the implementation of industrial biotechnology processes. In

addition, chemicals and plastics regulatory pathway may be a future obstacle for bio-based

chemicals.

Secondly, there is an urgent need to provide consistent and harmonised regulatory

guidelines between State and Federal agencies. Consultation with stakeholders revealed a

significant disconnection between Federal and State governments in terms of policy and

regulatory framework and responsibilities.

Lastly, there is an urgent need to ensure the international harmonisation of standards for

bio-based products destined for export markets. Stakeholders within the manufacturing

sector expressed concern that the mismatch in legislative and regulatory environments

between Australia and competitor countries, such as China and India, means take-up of

bio-products or processes by Australian manufacturers may competitively disadvantage

those manufacturers.

There is concern that international regulatory and/or sustainability standards have the

potential to become barriers to trade for Australia. There was stakeholder disquiet that the

standards of our international trading partners might of necessity become imposed on

Australia. The strongly-held opinion discerned by this Study was that Australia needs a


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“sovereign view” with respect to regulatory and sustainability policythat accounts for

national circumstances.

Office of the Gene Technology Regulator (OGTR)

The pathway for approval of genetically altered organisms through the OTGR is anticipated

to be problematic in Australia when challenged by the level of genetic change reported for

industrial microbes developed and used elsewhere.

The framework and processes within the OTGR were established to deal with genetic

manipulation and biomass production on a small research scale within universities and

research institutes. This approach and capability is in complete contrast to that needed to

address the demands of the industrial biotechnology sector.

Industrial respondents are of the view that the current framework of the OTGR will be

“unable to cope” with the requirements of industrial biotechnology in terms of the extent of

genetic manipulation of producer microbes or crop plants, or to deal with containment

issues on commercial scale of production in a non-aseptic industrial environment. The

OGTR may not have the capability to deal with the scale of release associated with

industrial strains: for example multiple gene alterations for two microbes are cited as

responsible for the two commercial bio-based products currently launched on the market.

Despite the anticipated capability gap in the Australian gene technology regulator,

overseas regulatory agencies in the US and EU have developed and implemented

frameworks to meet the challenge of industrial bio-based production. This Study

recommends that the framework and processes of these international agencies be

investigated for solutions to the issue of reinforcing the capability of the Australian

regulator.

Chemical registration

As for the OTGR, the route for new chemical registration is recognised by industrial

stakeholders as a hurdle to sector development.

Within DIISR, the Industry and Small Business Policy Division is currently undertaking a

Chemicals and Plastics Regulation Reform involving the standardisation of 144 separate

sets of legislation of chemicals and plastics. Other Federal agencies commented to this

Study that this reform process may take up to 5 years to complete.

It is likely that registration and use of bio-based chemicals and plastics will involve the

same industry bodies as conventional chemicals and plastics, namely, PACIA, ACCORD63,

Croplife etc. Depending on the nature and/or use of the chemical, that compound may still

need to seek regulatory approvals from APVMA64, TGA65, NICNAS66, and FSANZ67.

63 http://www.accord.asn.au/ ACCORD Australasia is the national industry association for the

consumer, cosmetic, hygiene and specialty products industry. 64 www.apvma.gov.au The APVMA is an Australian government authority responsible for the

assessment and registration of pesticides and veterinary medicines 65 Therapeutics Goods Administration 66 http://www.nicnas.gov.au/Chemicals_In_Australia.asp

http://www.accord.asn.au/

http://www.apvma.gov.au/

http://www.nicnas.gov.au/Chemicals_In_Australia.asp


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However, in the future, it may be conjectured that a registration process, analogous to

that established for pharmaceutical ‘bio-equivalence’, will be available for chemicals made

from bio-based processes that are identical to those made from petrochemicals.

Decisive action is called for: PACIA reports that regulatory issues may be the biggest single

barrier to take-up of new materials and processes within the Australian chemicals and

plastics industry. In addition to regulatory harmonisation, a single regulatory desk may be

attractive to industry by providing a simplified approvals process68.

The strategic industrial roadmap, being developed within the SAFI consultation, provides

clear articulation of the step-wise process of how the program will deliver product to the

market. The roadmap recognises the limitation of existing regulatory frameworks and

makes recommendations to establish pathways for globally-relevant regulatory approval of

the bio-based industrial products.

Furthermore, as is the case for the gene technologies regulator, the issue of chemicals

regulation has been addressed in overseas jurisdictions in which global scale bio-based

industries have been established, particularly in the US. This Study recommends that the

framework and processes of these international agencies be investigated for solutions to

the issue of reinforcing the capability of the Australian regulator.

4.5 LOSS OF CORPORATE KNOWLEDGE

Loss of corporate knowledge, especially of public service-based champions, occurs within

Government, resulting from internal transfer within agencies as well as resignation. Staff

turnover incurs an obvious loss of dedicated and informed staff, but more particularly a

loss of a strategic champion, as well as history, relationships, and intellectual property.

4.6 LACK OF KNOWLEDGE AND LACK OF COORDINATION

Respondents report a lack of knowledge and lack of coordination around the opportunities

for Australia in industrial biotechnology, particularly in the Federal Government, with the

exception of biofuels69. Respondents were firmly of the view that the Federal government

needs a coordinated view on future bio-based industry development, for renewable

products other than bio-fuel ethanol, and provision of appropriately scaled infrastructure

required to produce those products.

4.7 POLICY GAPS

Respondents were strongly of the view that legislation with respect to ethanol needs to be

broadened to include other renewable bio-based fuels and products. Carbon trading was

widely seen as essential to provide incentives to drive bio-based manufacturing70.

67 http://www.foodstandards.gov.au/scienceandeducation/aboutfsanz/ Food Safety Australia New

Zealand 68 Plastics and Chemicals Industries Association 69 Invest Queensland , State Development, Trade and Innovation, Queensland Government; University

of Queensland; Rural Research and Development Council; 70 Invest Queensland, State Development, Trade and Innovation, Queensland Government;

Department of Employment Economic Development and Innovation, Queensland State Government;

http://www.foodstandards.gov.au/scienceandeducation/aboutfsanz/


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The National Institute of Economic and Industry Research (NIEIR) is currently undertaking

a review of the NSW chemicals and plastics industry and shared with this Study some early

feedback from that sector. Policies considered by the sector to be relevant in attracting

major new investment to reinvigorate the sector were ranked by interviewees. Industry is

aware of the need for support for innovation to address sustainability issues and the need

for policies to provide for stability and sustainability of resources71.

CPRS and carbon tax initiatives were ranked of highest importance by the sector. NSW

chemicals and plastics companies consider that the “back flip” on CPRS by the Rudd

Government had a serious and negative impact on the manufacturing sector. Government

decisions on CPRS had “destroyed business confidence” in the Government by the

manufacturing sector, as many companies reportedly had already progressed “relatively

sizeable investments” in their businesses to meet the demands of the CPRS in the build-up

to the legislation being enacted. The NSW chemicals and plastics industry had a high level

of expectations of the legislation being enacted.72

Other policy positions of significance to the sector included: antidumping provisions; the

need for OH&S and chemicals regulation harmonisation; actions to speed up planning

approvals; and land tax73.

4.8 SKILLS AND CAPABILITY

Not unexpectedly, in the absence of a vigorous domestic chemicals and plastics

manufacturing sector, there is limited national experience in process development,

chemical engineering and scale-up in the industrial biotechnology, outside of ethanol

fermentation (either as bio-fuel or commercial brewing fermentations). Respondents from

chemical majors report that in the absence of an industrial fermentation and chemical

manufacturing sector in Australia (one exception is Dulux), there is no local source of the

operational capability to run an industrial scale facility. DuPont’s Tennessee plant

producing 1,3 PDO uses “the best of the best” in-house operational staff: out of 3000 staff

at that facility, the key operational staff is a team of 20. The chemical majors producing

fermentation products, ie Dow, DSM and DuPont, reportedly have the best fermentation

engineers in the world74. Consequently, the chemical majors interviewed consider one of

the limiting steps to establishing new ventures in Australia is processing and scale up

capability (bio-processing and chemical engineering) rather than crop or strain

development and genetics.

The drain on existing Australian engineering and skilled blue collar worker capabilities

experienced within the bio-based sector is largely due to the mining boom75. However, the

manufacturing sector has long recognised the shortage of professional engineering and

Sugar Research and Innovation, Queensland University of Technology; Rural Research and

Development Council; Mackay Sugar; Chemical and other industry respondents. 71 National Institute of Economic and Industry Research 72 Plastics and Chemicals Industries Association 73 National Institute of Economic and Industry Research 74 Technology sector respondents 75 Proserpine Cooperative Sugar Milling


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related skills: the University of Sydney estimates that there is a shortage of ~1000

engineers for existing workloads (reported by Engineers Australia [67]). The existing

shortage may be driven by the lack of opportunity to build a career in engineering in

Australia, which is a disincentive for local students to take up training or undertake the

degree. However, the skills shortage is not a “deal breaker” for overseas companies in the

context of establishing ventures in Australia: the opportunity for employment (as a result

of establishing an industrial biotechnology sector) is anticipated to drive the expansion of

the pool of skilled people: this represents yet another opportunity for government

investment76.

Issues identified by the NSW chemicals and plastics sector are comparable to those noted

in this Study by consultations with the chemical majors, investors and others.

4.9 MARKET AWARENESS

Lack of consumer awareness, scepticism about performance, and switching costs serve as

effective industry barriers for Australian investors, manufacturers and consumers to

embrace industrial biotechnology. Private sector firms are especially hesitant to embrace

new practices without compelling proof of its probable success. This thereby restricts the

investment required by established Australian manufacturers to research and develop

renewable and sustainable products.

76 Office of Science and Medical Research (OSMR), NSW Government, Australian Industry Group;

Respondents from chemical majors.


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CHAPTER 5 ROLE OF GOVERNMENT

The role of Government is to provide an enduring market mechanism by means of vision

and a stable and supportive policy environment to support investment. This Study

recommends the following as roles of Government:

Vision

Policy development

Single desk

Investment

Incentives

Information

Regulatory matters

Champions

Feedstock price

Skills and capabilities

Market drivers

5.1 VISION

The provision by Government of an enduring market-shaping mechanism is essential and

critical to the establishment of an economically viable bio-based industry in Australia.

National and international industries are prepared to invest in Australia to build plant

assets; spending millions on plant infrastructure with the reassurance of a stable policy

environment77. The primary issue for the industrial biotechnology sector is that

Government provides a clear vision “right from the top” and demonstrates commitment to

developing the sector. Investors similarly require a stable policy environment to provide

the confidence to invest in the biobased products and renewable fuels industry78 [68].

Strong government policy in the US has initiated and supported a bio-based sector,

predominately producing ethanol, but now maturing into a significant global player in bio-

based polymers for plastics manufacture. That US policy position (the Farm Bill)

underwent several iterations before an appropriate policy environment was developed to

support the acceleration of the US industrial biotechnology sector. However, arguably, the

inverse may also true: in the absence of policy development in Australia, no bio-based

industry will be established79.

More recently the vision of the Joint Workshop of the US Dept of Energy and the European

community was for agriculture in the 21st Century to transition to become the “oil wells of

the future” [69].

77 Invest Queensland, State Development, Trade and Innovation, Queensland Government; Plastics

and Chemicals Industries Association; Rural Research and Development Council; Respondents from

chemical majors 78 Financial sector respondents. 79 Invest Queensland, State Development, Trade and Innovation, Queensland Government; Plastics

and Chemicals Industries Association; Sugar Research and Innovation, Queensland University of

Technology; Rural Research and Development Council; Financial sector respondents; Respondents

from chemical majors


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An overarching national vision and commitment is needed for Federal, State and local

governments to act in concert to establish and nurture a bio-based sector in Australia. The

national vision statement needs to recognise the environmental and sustainability impacts

of a bio-based industry as well as the value proposition this sector may offer in building

future national wealth. The vision needed is one which embraces the grand challenge of

the future sustainable economy and how each sector of the economy should respond:

where each (research) project fits in meeting the challenge across a whole development

program in the research sector, and which balances the complex issues of rural and

regional development and bio-based industry with agriculture objectives and food

assurance and production.

With the high level central vision in place to determine the locus of coordination of the bio-

economy, a national strategic framework and roadmap, to clearly iterate the series of

actions to roll out the strategy, need to be formulated. The strategic framework and

roadmap may iterate: the general objectives; the outcomes, both short and long term; key

performance metrics; and the timeframes over which performance is measured. The

framework will need to provide for better interaction between Federal and State agencies

with respect to overarching national vision.

The central vision is essential to maintain community awareness and a national

consciousness of the value inherent and as yet untapped within the rural sector, especially

in the new role of agriculture as a significant national resource in the bio-economy. Ad hoc

commercial decisions made in the absence of this consciousness, such as the recent sale of

CSR’s sugar assets (Sucrogen) to the Singapore-based Wilmar International [70] and

contracts to sell forestry assets to the EU for co-generation, might be reconsidered within

this larger framework. This Study notes that Wilmar reportedly has strategic plans in place

to value-add its agricultural assets to bio-based products.80

PACIA’s recently developed sustainability framework and roadmap for its industry

members may provide a useful model for the development of a Federal strategy and action

plan for a national bio-based sector. PACIA’s sustainability framework and partnership

with State Government reduces the risks associated with investment in the chemicals and

plastics industry. PACIA considers the Victorian EPA81 as “enlightened” in its attitude to

innovation within manufacturing and has put into place sustainability covenants82 with

80

http://www.platts.com/RSSFeedDetailedNews.aspx?xmlpath=RSSFeed/HeadlineNews/Petrochemicals/

7745657.xml Wilmar, Asia's leading agribusiness group has formed a joint venture with US-based

Elevance Renewable Sciences to construct a biorefinery in Indonesia. The facility, which will be able

to refine multiple feedstocks such as palm, mustard, soybean, jatropha and waste oils, will have an

initial capacity of 180,000 tonnes/year when it comes online next year, with the ability to expand up

to 360,000 tonnes/year of refined, high-value performance chemicals. 81 Environmental Protect ion Agency http://www.epa.vic.gov.au/ 82 http://www.epa.vic.gov.au/bus/sustainability_covenants/pilkington.asp Viridian sustainability

covenant: This Sustainability Covenant is a voluntary, four-year statutory agreement under section

49AA of the Environment Protection Act 1970 between Viridian (formerly Pilkington Australia), EPA

Victoria, the Australian Industry Group (Ai Group) and Sustainability Victoria.

http://www.platts.com/RSSFeedDetailedNews.aspx?xmlpath=RSSFeed/HeadlineNews/Petrochemicals/7745657.xml

http://www.platts.com/RSSFeedDetailedNews.aspx?xmlpath=RSSFeed/HeadlineNews/Petrochemicals/7745657.xml

http://www.epa.vic.gov.au/

http://www.epa.vic.gov.au/bus/sustainability_covenants/pilkington.asp

http://www.epa.vic.gov.au/about_us/legislation/epa.asp


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various Victorian businesses. Furthermore, the Victorian State government has provided

funding (A$1m pa) to support industry-driven programs to innovate and improve the

sustainability of plant and equipment within the State’s chemical and plastics

manufacturers83 (see Section 7.2.2).

5.2 POLICY DEVELOPMENT

Many respondents to this Study called for a policy environment to provide a framework for

investment and “to lay a base for establishing a chemicals-based industry which generates

energy as a by-product”.

Respondents felt strongly that bio-based industries are going to be ultimately profitable in

an emissions trading environment, especially if no one sector is shielded from the true cost

of emissions. Further, “early movers” are much more likely to be successful in the

international market. Agriculture may be excluded from an emissions trading scheme but it

is likely that industry will press the agricultural sector to comply with sustainability criteria

in order for industry to meet life-cycle metrics and key performance indicators (KPIs) such

as those developed by the aviation initiative84 (see section 7.2.1).

The Federal government may be able to provide significant investment funding as well as

incentives by means of the tax and excise systems. Renewable energy certificates85 (REC)

are significant in the evaluation of feedstock availability at a sugarcane mill. Process and

co-generated energy is generated at the sugar mill by burning bagasse. However, while

this is REC-eligible, the boilers are very inefficient and were in fact designed to incinerate

bagasse to prevent stockpiles accumulating. Replacing or upgrading those boilers is

expensive. Currently, the conversion of bagasse into renewable fuel directly is REC

ineligible, so there is a cost disincentive for bio-ethanol and bio-products synthesis.

To date, the NSW State government leads the way nationally with the establishment of

mandates for bio-ethanol content in conventional fuels. Many respondents recognised that

a Federal program of ethanol mandates may provide a decisive driver for the development

of the ethanol industry. Fermentation of ethanol from bio-based feedstocks may be

considered an initial step in building a bio-based sector in Australia, to build capability and

drive capacity to generate more diverse and differentiated range of products, including fine

and platform chemicals, enzymes, and polymers for the chemical, agricultural, human and

animal health industries86.

83 Plastics and Chemicals Industries Association 84 National Institute of Economic and Industry Research; Plastics and Chemicals Industries

Association; Sugar Research and Innovation, Queensland University of Technology; Boeing Research

and Technology – Australia; Australian Industry Group 85 https://www.rec-registry.gov.au/aboutRec.shtml A Renewable Energy Certificate (REC) is an

electronic, tradeable commodity equal to 1 Megawatt hour of renewable energy generation. A REC is

similar to a share certificate as it represents a unit of value and may be traded for financial return. 86 National Institute of Economic and Industry Research; Plastics and Chemicals Industries

Association; Boeing Research and Technology – Australia; Centre for Tropical Crops and

Biocommodities, Syngenta Centre for Sugarcane Biofuels Development, Queensland University of

Technology; Respondents from chemical majors

https://www.rec-registry.gov.au/aboutRec.shtml


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Earlier reports have sensibly emphasized the benefits of a coordinated policy architecture

to underpin a national vision for change [68]. Such architecture would integrate and

coordinate the policies and activities around the national research agenda (for example

based on the Australian Research Council ARC framework), the Federal Government’s

innovation policy, policies supporting industry, especially manufacturing, and the national

trade agenda. This level of coordination would provide critical support for technology

development, the deployment of innovation within industry, product manufacture and

export market development; all the component activities required to build a secure

industrial biotechnology sector in Australia based on market drivers.

5.3 GREEN DOOR: THE CONCEPT OF A SINGLE DESK

The creation of a single desk or “Green Door” may facilitate delivery of services to all

stakeholders against the Federal Government’s clear vision for the sector development.

This prospective intra-state and inter-governmental desk would pull together the best that

each State Government offers and would facilitate access to the assistance provided by

both State and Federal Governments.

The “Green door” model is already a component of the Victorian State Government’s

biotechnology framework (Green Door for Renewable Energy87) as an interface with

industry for planning and development approvals. This access portal to services is seen as

a clear demonstration to industry and the community at large of a State government

supportive of that sector88.

The “Green door” may represent two points of leadership in the prospective rollout of the

Federal Government’s prospective industrial biotechnology strategy. This is modelled on

the intra-departmental team approach which mediated the development of the Queensland

State government bio-based products strategy (see Section 7.3.1). The “single desk”

approach provides an interface between the different levels of government and with

industry89:

Single point of leadership within Government, that is, within a State Government and

between State and Federal Government. The single point of leadership facilitates

Federal, State and local governments to move to a uniform vision and to agree, for

example, on provisions for approvals and permissions required by industry. The State

Government respondents considered that it was not easy from within the State

Government to cover all issues required by industry, so a point of contact within the

Federal government is needed, such that a comparable single desk within Federal

government may also be required.

87

http://www.business.vic.gov.au/busvicwr/_assets/main/lib60262/green%20door%20for%20renewabl

e%20energy%20-%20final.pdf “The Green Door for Renewable Energy is a one stop shop to facilitate

investment and streamline existing approval processes for renewable and low emission energy

projects” 88 Australian Industry Group 89 Invest Queensland , State Development, Trade and Innovation, Queensland Government;

Department of Employment Economic Development and Innovation, Queensland State Government;

Rural Research and Development Council

http://www.business.vic.gov.au/busvicwr/_assets/main/lib60262/green%20door%20for%20renewable%20energy%20-%20final.pdf

http://www.business.vic.gov.au/busvicwr/_assets/main/lib60262/green%20door%20for%20renewable%20energy%20-%20final.pdf


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Point of intersection between government and industry: to facilitate the entry of new

industry into the sector, the Federal government needs to appreciate that dealing with

government agencies is time- and resource-consuming and therefore discouraging for

industry. A single interface with all relevant government agencies simplifies the forms

and action steps essential for industry to establish and undertake commercial

operations.

The single desk concept may be particularly valuable with respect to the tight industrial

timelines from inception to full and independent plant operation. Chemical majors schedule

a period of ~3 years from initiating plant design to removing in-house engineers and

operational technicians, by which time the plant needs to be manufactured, commissioned,

operational and stand-alone. The prospect of achieving a commercial operation within this

timeframe may be critical for such prospective keystone participants to site a bio-based

venture in Australia90.

5.4 INVESTMENT

To stimulate a bio-based industry in Australia and to address gaps in the value chain, the

Government may need to consider investment in the research sector, in education and

training and in infrastructure assets needed for technology deployment and industry

building.

Australia already makes significant investment in the research sector to generate IP,

although, in the case of industrial biotechnology, in fragmented and disconnected

programs. However, there is little if any spending in translational research outside of the

medical research sector. With medical research, there is clear recognition that investment

in disease treatment and intervention research brings no national benefit without

translation of that research into clinical practice. The same applies to industrial

biotechnology research and development, in that the development of the capability and

capacity to translate that bench research into meaningful industrial innovation is an

essential step to capturing the value of that research, building future industry and driving

national wealth.

Unfortunately, a well-established approach to date to capture the value of the nation’s

research outputs is to out-license that proprietary knowledge to overseas ventures. This,

however, means that the value of the innovation to Australia may be lost for very small

immediate return while the opportunity cost to Australia’s manufacturing sector in the

longer term may be high.

Some respondents considered that future Government investment in R&D intended to

support the prospective industrial biotechnology sector should consider building new

agroindustry enterprises based on existing agricultural resources, in preference to

investing in new crop development91. This is consistent with the position of respondents

from chemical majors that investment is needed in the process engineering stage of a bio-

based product manufacture rather than feedstock improvement.

90 Respondents from chemical majors and technology based companies 91 Sugar Research and Innovation, Queensland University of Technology


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In terms of corporate investment, the challenge of the national bio-industry framework is

to commercialise the research outcomes at a time when companies have little funds to

invest. Even the chemical majors have suffered the “double whammy” of the global

financial crisis in 2009-2010 in which every global chemicals market, but particularly

plastics, slumped at the same time, and at a time when many international chemical

companies were in the middle of substantial transactions. Despite a corporate excitement

about innovative technology, these companies are likely to remain capital-constrained,

limiting the scale of investment in major industrial biotechnology projects for probably

another 2-3 years. Therefore the asset-light capital model (see Section 6) may be an

attractive one for both government and industry.

The Government may consider direct investment in an industrial biotechnology venture in

collaboration with private investors. However, an alternate approach is to invest in an

innovative venture though assets that are or will be Government-owned and will generate

future revenue, such as an equity investment into water and electricity assets, broadband,

rail, road or port infrastructure which are collateral to a bio-based venture but used by the

venture.

Similarly, to assist in building the skills and capabilities needed within the biobased sector,

investment in education and training infrastructure assets, such as a university sub-

campus associated with a precinct, may be warranted. Consultation with Infrastructure

Australia may be used by the Federal Government to de-risk prospective investment

opportunities for the Government and the broader investment community though robust

analysis, providing confidence to the private investor.

Industry is looking forward to the opportunity to engage with Government to establish new

ventures in Australia by means of public-private partnership, particularly when those

ventures are based on high capital expenditure. Industry reports a willingness to consider

an equity investment with Government in industrial scale-up of research projects

developed in Australia. In this Study, industry reported a lack of willingness of both State

and Federal agencies to make co-investment into specific biomass-based industrial

biotechnology projects, whereas potential industrial partners would consider matching

government funds as a stimulus to their investment and commitment to establish a

venture in Australia. In contrast, industry is aware of Federal Government investments in

automobile and footwear ventures in Australia but not in new technology. The Federal

Government has contributed A$6bn to the car industry, for example, but this investment

does not serve to build future Australian industry92, in that cars are assembled but not

manufactured here. Therefore, this financial injection does not build or innovate the

Australian manufacturing sector. Industry considered that this issue would begin to be

addressed by the iteration of a clear vision for industrial biotechnology to justify sector

building.

92 http://www.caradvice.com.au/18775/rudd-announces-6bn-bailout-plan-headstart-for-2010-tariff-

reduction/ Rudd announces $6bn bailout plan by George Skentzos, November 10th, 2008

..” While we are certainly a patriotic bunch, perhaps it is time to accept the fact that a Government-

funded and American-owned automotive industry is never going to be a positive influence on our

economy.”

http://www.caradvice.com.au/18775/rudd-announces-6bn-bailout-plan-headstart-for-2010-tariff-reduction/




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Although industry respondents consider that in addition to Australia’s other advantages,

the “future for Australia is brains”. However, those same respondents reflected on

Australia’s lack of recognition of the intensity of competition posed by those Asian

countries which go out of their way to attract foreign investment. Thailand and Malaysia

are fast becoming new bio-based economies. Singapore, on the hand, has established

huge incentives to set up manufacturing but does not have the national research assets to

deploy (unlike Australia).

Both Government and private sector expenditure may be required to provide the means

for infrastructure investment to encourage industrial sector development. This concept of

“putting out the doormat” for international industry participants is clearly understood by

Australia’s Asian competitors. Industry respondents to this Study assessed that the

absence of this preparedness to invest in manufacturing and collateral infrastructure may

constitute a major limitation to international companies deciding on Australia as a site for

corporate investment and manufacturing site selection. Government initiatives to invest in

infrastructure and to encourage private sector investment could overcome what industry

regarded as a barrier to Australia developing an industrial biotechnology sector93.

Other nations recognise the driving force of government investment to build sector value.

China has provided the framework to attract private investment and incentives to

encourage private investment and as a result China is now regarded as the “second top

location for investment in the world”94 (see section 7.4.1). In Brazil, the government

provided “soft” loans to sugarcane growers to establish ethanol factories [69, 71].

5.5 INCENTIVES

Establishment of a new sector will benefit from Government incentives within all stages of

the value chain but particularly at feedstock provision, mill efficiency and industry

partners.

There are two approaches that a sugarcane mill could use to maximise energy and

electricity generation from bagasse, which consequently maximises the quantities of

residual bagasse available as a feedstock (e.g. furfural production Section 6.1.2). Firstly,

high pressure boilers are needed to increase operational steam pressures. Most sugar mills

in Australia are 27 bar steam operations, except for two mills in NSW and one in the

Burdekin. Secondly, the upgrade or replacement of existing plant would reduce energy

demand in the milling process. In some mills, REC prices plus existing electricity revenues

justify high pressure boilers, enabling the mill to upgrade existing infrastructure which is

“way beyond its use-by date”. (Using this approach the Mackay mill has reportedly

increased supply of bagasse to 600,000 tonnes /year). However, other mills may need

assistance to capture the total energy content of bagasse to generate additional revenues

from electricity co-generation or to drive a co-located biomass-based manufacturing

venture95.

93 Respondents from chemical majors 94 Respondents from chemical majors 95 Sugar Research and Innovation, Queensland University of Technology; Canegrowers


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Incentives for bio-based manufacturers may include such State-based initiatives as

provision of land for construction of a facility. Federal incentives may include such options

as tax incentives over a 5 year period with a sliding scale and accelerated depreciation

(See section 7.4.1).

5.6 INFORMATION

Industry-relevant information may be provided by Government, mediated by the single

desk or “Green Door” initiative. Information gaps could be addressed by Government

teams collating existing reports and databases, then making this key information available

to interested industry parties: including mapping of land use and ownership; land

suitability; and water availability96.

5.7 REGULATORY

Regulatory issues represent a significant hurdle to the establishment and successful

development of the sector. The two regulatory areas are those that govern genetically

altered organisms (OTGR) and chemicals.

Respondents identified that Federal Government action is urgently needed to provide an

expanded capability in the regulators to meet industrial realities; consistent and

harmonised regulatory guidelines between State and Federal agencies97; and to ensure the

international harmonisation of standards for bio-based products destined for export

markets.

5.8 CHAMPION, COORDINATION AND COMMUNICATION

A champion is needed at State and Federal level for the biorefinery concept and to put a

face on the Federal Government’s vision in industrial biotechnology.

The champion will serve to maintain a high level of interest and commitment between all

stakeholders, particularly those in Government. Furthermore, the Government needs to

maintain a high level of recognition of accomplishments in the sector, communicating,

endorsing and validating national sector achievements and disseminating those

achievements as exemplars within industry and the broader community. A champion for

the Government’s vision and a high level of community awareness of successes is

anticipated to provide private and corporate investors with a high level of comfort that

decisions to invest in industrial biotechnology propositions in Australia are validated and

robust98.

The message to sell life sciences and healthcare-focused biotechnology has always had the

“hook” of life-saving medicine and preventative clinical treatments which are the outcomes

of deployment of research in that area. In a similar way, industrial biotechnology needs a

“hook” to secure public awareness. One approach may be to present bio-based

manufacturing as a means to a more sustainable environment, “greener” manufacturing

practices and products, and as a value-add for Australian agriculture.

96 Department of Employment Economic Development and Innovation, Queensland State Government 97 Plastics and Chemicals Industries Association 98 Financial sector respondents


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The Federal government may consider extending the current program deploying

technology advocates (for example, in clean technology) to promote not only the industrial

biotechnology bio-based products sector but also Federal Government’s strategic vision

and roadmap for the sector.

5.9 FEEDSTOCK PRICE

Certainty of feedstock price is a key driver for industry to participate in the establishment

of a successful commercial bio-based manufacturing sector in Australian in fuels,

chemicals, plastics and other speciality products.

Certainty, however, is not a feature of the agricultural industry in general, and sugar in

particular, with yearly variations in sugar price from ~A$250/tonne to ~A$470/tonne.

Despite bio-manufacturing interest in sugar as feedstock for bio-based fine chemicals and

polymers, no commodity propositions based on sugar at this high market price are value

propositions.

Therefore, the Federal Government may have a role in underwriting and guaranteeing the

feedstock price. The Government may consider options of futures or hedging which limit

exposure to direct subsidy.

Internationally, chemical majors such as DuPont and Dow have a demonstrated interest in

simple carbohydrates such as sugar or starch as a feedstock for bio-based products e.g.

1,3PDO or PLA, but the “right” sugar price (A$220-$308/tonne) is crucial to economically

feasible commercial scale fermentation for both suppliers and consumers of the feedstock.

On the other hand, the stability conferred by a long term contract price negotiated for

sugar with bio-based manufacturers is valuable and attractive to the sugar industry.

However, the price to the grower needs to be competitive with world sugar prices. Analysts

anticipate that 2010 will see a peak in sugar price of ~A$450-470/tonne, but predict that

the world sugar price will be reduced in coming years as the sugar industry in India

recovers (See Chapter 1). This may make long-term industrial contracts look increasingly

attractive to the sugar industry, and may require less hedging by Government in the

future.

A potential hedging mechanism needs to be structured such that no stakeholders are

disadvantaged: that it is not expensive to the Government; provides a market-competitive

price to the cane grower; and provides a sustainable supply of feedstock at a commercially

acceptable price to the bio-product manufacturer. It is likely within some of the strategic

options outlined in this report that hedging mechanism might be required for a finite

timeframe for a biomass-based industry to become established and viable in Australia.

5.10 SKILLS AND CAPABILITIES

Inherent within the bio-based industry models is the opportunity for commercial activity to

act as a catalyst for related research, education and technical training. The Government

may consider offering support to stimulate the recruitment and training of relevant trades,

process and chemical engineering, and management capability for ongoing bio-industry

sector development. Furthermore, experienced professional leaders for these businesses

are also needed: one of the key limitations restricting the development of a viable


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commercial sector in life sciences biotechnology has been the lack of skilled managers and

executives99.

Industry associations such as PACIA and the AI Group report being actively engaged in

addressing skills training on behalf of members. Although both see “significant shortage in

a range of skills” across the memberships, these groups, as well as the chemicals majors,

do not see skills shortages as a serious rate-limiting constraint in sector building.

A number of approaches are possible for the Government to drive skills and capability

training in Australia:

Skilled migration: Facilitate the availability of necessary technical staffing through an

appropriately tailored immigration program;

Expats: Providing incentives for skilled and professional expatriates to return to

Australia;

University funding: Improve and target funding to universities, which, although with a

3-5 year lead time to delivery, could be planned and coordinated for future sector

building;

Research funding for innovation: for example, by means of the Australian Research

Council (ARC) process, with funding eligibility criteria altered to include industrial

biotechnology and sustainable manufacturing; and

Education investment funding: focus on capital investment for education and research

funding, such as a university sub-campus associated with a biomass-based biorefinery

precinct.

Schemes have previously been put into place successfully to incentivise expats (mostly in

research) to return to Australia, and could be applied again to attract back experienced

professions to staff innovative or large scale ventures. The Federation Fellowship scheme

was set up in 2001, under the Australian Government innovation action plan, Backing

Australia’s Ability. The aims of the program were to attract and retain outstanding

researchers of international renown to build world-class research capability in Australia. A

key plank of the scheme was monetary support, with the provision of an internationally

competitive salary for a defined initial period. The selection criteria for Fellowships stress

the importance of the potential of the proposed research to contribute to designated

national research priorities, which at that time included “an environmentally sustainable

Australia, promoting and maintaining good health, frontier technologies for building and

transforming Australian industries, and safeguarding Australia” [72].

In addition, both the National Health and Medical Research Council (NHMRC) and the

Commonwealth Scientific and Industrial Research Organisation (CSIRO) have actively and

successfully provided support for skilled expatriates to return to Australia.

5.11 MARKET CREATION

This Study recommends the Government consider incentives and policies to drive strong

market demand for the domestic consumption of bio-based products manufactured within

Australia. This policy has been successfully pursued elsewhere during the establishment of

99 Rural Research and Development Council


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a new industrial sector: the Brazilian government has invested in recent years in ethanol-

fueled cars to stimulate the consumption of domestically-produced ethanol [69, 71].

Other reports have observed that the take-up of bio-based chemicals and plastics by

Australian domestic industry may be hampered by a “lack of shared vision” with respect to

the benefits of bio-based products and the opportunity to reduce dependence on imports

and to reduce GHG emissions. Therefore, incentives to foster these home-grown industries

may be provided by Government procurement initiatives: for example, for food based

packaging [73]. Procurement programs, however, should demand products meet

performance standards for preferential consideration and price premiums [68].


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CHAPTER 6 BIO-BASED INDUSTRY DEVELOPMENT

6.1 POTENTIAL STRATEGIES TO BUILD AUSTRALIAN BIO-BASED INDUSTRY SECTOR

This Study proposes a number of strategies as potential routes for the development of a

national industrial biotechnology sector.

In all, careful thought to early success is essential to maintain both sector and investor

confidence. Failure of early ventures before a sector matures may be considered to fail

twice: firstly failing the immediate investors in the project as well as failing to build sector

reputation.

Many relevant industrial biobased technologies developed both locally and internationally

are at an early stage of development, despite the promise of substantial commercial

reward: Some have been demonstrated as technically feasible, while others are still not

economically feasible as yet. Therefore, a clear appreciation of the stage of commercial

readiness of a technology is essential prior to investment, especially in the context of

identifying early successes to build a sector.

This Study considers there is more than one possible strategic approach to initiate bio-

based manufacturing. Deployment of any of these strategies is not exclusive, that is, any

combination may be deployed to establish an industrial biotechnology sector in Australia.

All options sketched below are predicated on two crucial elements for success: a strong

and stable national policy environment to provide an enduring market-shaping mechanism,

and certainty of feedstock price. Both of these two critical elements would be actions

resulting from an overarching national vision for bio-based industry development.

Table 11: Potential Strategies to Build Australian Bio-Based Industry Sector


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Model 1 Model 2 Model 3 Model 4 Model 5

Public investment

Public private partnership

(PPP) Private JV Private venture Private venture

Keystone

investor

Federal and State

governments

Government and small to

mid-sized company

Technology company and

feedstock provider Sugar mill

International

chemical

company

Scale of

operation

Pilot or

demonstration scale

Demonstration/commercial

scale ( 20,000L)


scale ( 20,000L)


scale ( 20,000L)

Commercial scale

(350-600,000L)

Capex & opex

funding Public Public and private Private or PPP Private or PPP Private

Feedstock:

sugar, starch,

cellulose

Locally supplied Locally supplied Locally supplied Locally supplied Locally supplied

Refining

technology

Proof of concept for

local technology or

in-license may be

required

Demonstration scale may

be required


be required

Proof of concept for local

technology; in-license may

be required; proprietary

Proprietary

technology in

current

commercial

operation

Transformation

technology


local technology or

in-license may be

required

Proof of concept or

demonstration scale may

be required


be required


be required

Proprietary

technology in

current

commercial

operation

Operational

technicians To be trained Possibly in-house In-house In-house In-house

Downstream

processing

technology


local technology or

in-license may be

required

Proof of concept or

demonstration scale may

be required


be required


be required

Proprietary

technology in

current

commercial


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operation

Marketing,

sales and

distribution

To be established To be established To be established To be established Established

Product

portfolio No Possible Yes Yes Yes

Exemplars

Mackay

Biocommodities

facility 2010

Mackay Biocommodities

facility 2010

Amyris Biotechnologies

(US); Grupo Sao Martinho

(Brazil)

Proserpine Sugar (Aust)

Furfural production

DuPont (US)

1,3 PDO

Role of

Government

Major capital

investor Collaborative investment Collaborative investment Grants

Policy/tax

incentives;

regulatory &

approvals


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6.1.1 Scenario: Sharpening the sword

The opportunity to “sharpen the sword”100 is an approach proposed to lift the maturity of

both Australian bio-products technologies and capabilities by step-wise building the

process capacity for a national industry from the ground up. This capacity-building strategy

gives a fledgling industry time to evolve or mature into an efficient commercially feasible,

stand-alone sector with reduced carbon and energy emissions, and optimised capex and

operating costs /unit product (see Models 1 and 2, Table 11).

This scenario is reflective of the model deployed in the US to initiate that nation’s corn-

based ethanol industry and in Brazil for the production of ethanol from sugarcane. The first

US corn ethanol processes were marginally profitable and with a large carbon footprint but

both the environmental impacts and economics were improved as the production

processes were refined. These two national industries are now the global leaders in ethanol

production, responsible for ~ 90% of the world’s bio-ethanol. The US ethanol industry has

expanded into a sector of more than 200 fermentation facilities producing 39 billion litres

in 2009 [74].

This scenario is one deployed by the chemical majors to roll-out new proprietary

technologies. DuPont has developed proprietary technology for cellulosic ethanol and has

built a demonstration plant in Loudon Tennessee to build refine and prove up the

technology with partner Danisco101,102. DuPont clearly sees value in this asset investment,

despite a core business in chemicals but not ethanol, because the proprietary technology

can potentially be out-licensed to generate revenue, but also because the plant builds in-

house skills in process engineering for this biobased product.

Some chemical majors consider that their key future green manufacturing activities will

focus on such bio-products as the alcohols, propanol and butanol. The attraction of these

“stage 1” products is that the technology to manufacture these products is reasonably well

established from renewable feedstocks.

In this step-wise strategy, innovative technologies for feedstock refining or new production

organisms are trialled for the production of ethanol as a well-established industrial

fermentation. Once the capability and process are established at pilot scale, both facilities

and engineering are then deployed to transition the process for the production of higher

value products at pilot scale. To meet tight commercial timeframes, construction of a

dedicated demonstration facility should be underway during pilot scale, to scale-up the

100 Les Edye pers comm. 2010 101 http://cleantech.com/news/3156/dupont-danisco-tennessee-cellulosic-ethanol-project In 2008 in

US, DuPont & Danisco build a cellulosic ethanol plant and work with Tennessee farmers to develop a

dedicated cellulosic energy crop supply chain for cellulosic biorefineries using switchgrass. The facility

design will be to operate on 2 different non-food biomass feedstocks: corn stover, cobs, fibre and

switchgrass. The initial plant capacity of 250,000 gallons (946,000 litres) is to start 2009, following a

US$40m infrastructure investment. Joint venture with Genencor, division of Denmark-based Danisco. 102 Lux Populi Newsletter --July 11, 2010 DuPont Danisco's 250,000 gal/yr cellulosic ethanol plant in

Tennessee is to produce 432 million gallons of ethanol (worth nearly $1 billion at today's spot price of

$1.98).

http://cleantech.com/news/3156/dupont-danisco-tennessee-cellulosic-ethanol-project

http://mkto-b0229.com/track?type=click&enid=bWFpbGluZ2lkPWx1eHJlc2VhcmNoaW5jQmV0YWN1c3QtMTA5OC0xNzAwLTAtNjA1LXByb2QtMjg5NiZtZXNzYWdlaWQ9MCZkYXRhYmFzZWlkPTI4OTYmc2VyaWFsPTEyNjAwNjM1MzYmZW1haWxpZD1kaWFubmUuZ2xlbm5AY29yZWxsaS1jb25zdWx0aW5nLmNvbSZ1c2VyaWQ9MTMxNDkwJmV4dHJhPSYmJg==&&&http://hayandforage.com/hay/cellulosic-ethanol-0129/?mkt_tok=3RkMMJWWfF9wsRonu6XBZKXonjHpfsX56O0pUKeg38431UFwdcjKPmjr1YUBSdQhcOuuEwcWGog8zBlACOWGeYFS%2Bf1UBUI%3D

http://mkto-b0229.com/track?type=click&enid=bWFpbGluZ2lkPWx1eHJlc2VhcmNoaW5jQmV0YWN1c3QtMTA5OC0xNzAwLTAtNjA1LXByb2QtMjg5NiZtZXNzYWdlaWQ9MCZkYXRhYmFzZWlkPTI4OTYmc2VyaWFsPTEyNjAwNjM1MzYmZW1haWxpZD1kaWFubmUuZ2xlbm5AY29yZWxsaS1jb25zdWx0aW5nLmNvbSZ1c2VyaWQ9MTMxNDkwJmV4dHJhPSYmJg==&&&http://hayandforage.com/hay/cellulosic-ethanol-0129/?mkt_tok=3RkMMJWWfF9wsRonu6XBZKXonjHpfsX56O0pUKeg38431UFwdcjKPmjr1YUBSdQhcOuuEwcWGog8zBlACOWGeYFS%2Bf1UBUI%3D


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process once proven. The technologies to initiate this program may be sourced from

national or international research or industrial agencies.

A feature of this scenario is the economic and process advantages of integration of new

bio-based industry with existing infrastructure. This gives sugarcane a decided advantage

as a tropical industrial feedstock with existing operating plants.

Australia already has components of a bio-based manufacturing sector in place but these

assets are fragmented and disconnected (Table 12). In this context, Australia has a newly

established pilot scale bio-products facility (Mackay Biofactory). However this scenario also

recognises and may leverage existing ethanol fermentation capacity and capability in

Australia. There are a number of commercial scale ethanol plants in production: including

the Manildra Group in NSW, Queensland’s Sarina plant (CSR), Kwinana in WA, as well as at

least 3 large scale ethanol plants reportedly in design stage: based on wheat, sorghum

and sugar.

Table 12: Some bio-based products in commercial production in Australia to date

Product company Volume Export/

Domestic Feedstock

Ethanol

Manildra

Group (Vic);

CSR

Distilleries

(Qld)

~50 000 tpa Domestic Starch

Furfural* Proserpine

Sugar

Potentially

~5000tpa Both Bagasse

Plastic

polymer

Plantic

Technologies Both Starch

Fatty acids

(stearic and

oleic acids)

Symex

Holdings

Oleine: 15,000

tpa

Stearine: 22

000 tpa

Both

Acid

hydrolysis of

animal and

vegetable fats

(local &

imported)

* in commissioning at the time of writing

The outcomes of this scenario are the establishment of infrastructure and capability for

demonstration scale production of first generation bio-based products, which may include

ethanol. In-licensing established technologies from overseas chemicals or technology-

based companies to expand the product portfolio to chemicals and polymers may be a

subsequent step in facility development, leveraging these newly established capabilities

and providing the first step in building a national bio-based chemicals industry.


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6.1.2 Scenario: Mill-centric value-add model

The mill-centric value-add model (see Model 4, Table 9) is based on the agricultural sector

directly value-adding their agricultural output. A feature of this model is that it is industry-

driven, (largely) industry-funded by a cooperative group of growers, with shared equity in

the project. In this model, the mill designs, builds and operates the infrastructure asset

co-located with the operating milling plant, based on in-licensed or purchased technology

to produce a high value product from either sugar or bagasse for the domestic and/or

export market. The benefits of this approach are stability and surety of diversified

revenues from the bio-based product in addition to those from sugar, electricity co-

generation etc; revenues unlinked from the global market pressures for sugar; improved

regional employment prospects; opportunity for expanded regional development in general

from a bio-based chemicals precinct built around the mill-based initiative (see section

7.4.2).

An example of the deployment of this mill-centric value-add model in Australia is the

production of furfural from sugarcane bagasse by Proserpine Sugar in Queensland.

[Text redacted]

“This is all new ground – the transition from a sugar mill into the

chemicals industry”

- Laurie Watson, Business Development Manager, Proserpine

Cooperative Sugar Milling Association Limited

6.1.3 Scenario: Development Collaboration

The opportunity for Australia to establish a bio-based sector by development collaboration

is predicated on the need by overseas technology-based companies to need to work up the

process technology for scale-up their propriety technology to prove commercial readiness

(see Table 13). These technology-based companies have a number of options to achieve

this goal of commercial scale-up:

Within their firms: this is less likely if at all, as the core competency and business

model for such US-based technology-based companies as Amyris and Verdezyne

among others, are systems biology and optimised microbial strain design, not process

and chemical engineering.

As a fee-for-service agreement with toll manufacturers at an established site:

considered unlikely due to the anticipated cost of ~US$7m for pilot scale process

design and manufacture. There are around 34 toll manufacturers of relevant skills in

the US at present.

In collaboration with companies with process engineering capability and pilot or

demonstration scale infrastructure.

There may be an opportunity for Australian businesses to consider establishing

development collaborations with such overseas industrial technology companies. The

differentiation of this opportunity from toll manufacturing is the provision of a stable


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supply of feedstock, at a negotiated price for a specified period, which is critical for the

technology based company. There are a number of companies as potential participants,

producing an array of industrially attractive products including isoprenoids, isoprene, adipic

acid, and acrylic acid. These processes are almost all based on sugar as a preferred

feedstock (Table 13).

The Development Collaboration model embodies both shared risk and shared benefit for

both partners in this venture. The risk is shared between the technology company and its

development partner, as the development partner co-funds the process development of

the collaborator’s technology. Consequently, the benefit is shared between the two

companies, as:

Product, generated at the facility by the development partner using the technology

company’s innovation, then sold into the local domestic market by the development

partner.

Datapack generated for the technology company’s process is jointly owned, such that

the development partner will receive revenues on future technology by means of out-

licensing transactions and a royalty on subsequent sales of product in other

jurisdictions.

The scale, commitment and outputs by development partner in potential development

infrastructure for pilot and demonstration scale might be based on the production of a high

value platform chemical by fermentation from sugar. Pilot scale would require an

investment estimated at ~US$20m in assets of the scale of 1000-2000L. Pilot scale

manufacturing would produce ~5-9 tonnes product pa, with pilot operation for 2 years,

operating at one day per week to provide samples for customers once unit operations and

production efficiencies are established.


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Table 13: Prospective commercial production of bio-based chemicals and polymers: some examples

Company Bio-

product

Feed-

stock Process

Stage of

development

Industr

ial

scale

Application Reference

Amyris (US)

β-

farnesene

(isoprenoid

)

sugar fermentati

on

Demonstration

(38,850L) 2011

pharmaceuticals, nutraceuticals,

flavours and fragrances, industrial

chemicals and chemical

intermediates, and fuels

[75]

Tate &

Lyle/Galactic polylactate sugar

fermentati

on Demonstration 2011-12 plastic [76]

Cargill /

Mitsubishi Erythritol starch

fermentati

on Commercial

First polyol to be manufactured by

fermentation from simple feedstock [77]

Genencor/

Goodyear isoprene

sugar

and

starch

fermentati

on

Pilot/Demonstratio

n 2012

production of synthetic rubber and

other elastomers. [78, 79]

Genomatica

1,4

butanediol

(BDO)

sugar fermentati

on

Pilot/Demonstratio

n (3000L) 2014

spandex, automotive plastics, running

shoes [80]

Verdezyne adipic

acid sugar

fermentati

on

Pilot/Demonstratio

n (3000L) 2014

engineering resin for well-established

markets like automotive, footwear,

carpets & textiles and construction

[81, 82]

OPX Biotechnologies

acrylic acid sugar fermentati

on Pilot 2013

used in paints and superabsorbent

polymers [83]

92



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Demonstration scale or first commercial scale would require an investment in assets

estimated at ~US$100-200m. At this scale, the plant would be expected to generate

export volumes of saleable product of ~22-45,000 tonnes pa. The feedstock requirement

is estimated by technology-based industry respondents as ~45,000 tonnes of sugar (or

32,000 tonnes of vegetable oil) per year to produce ~22,000 tonnes product pa. However,

infrastructure of this dimension is considerable for a single Australian business at this

stage of sector development. Furthermore, the downside of this model is the risk of failure

of new process development at demonstration scale which may be high (~30%)103.

One example of a high value product for this scenario (Table 13) is adipic acid. The price of

adipic acid has been high recently due to booming demand in Asia and low availability: the

spot price in Asia was €2600-2700/tonne (US$3297-US$3424/tonne) including freight, and

in Europe at €1800-1900/tonne (free delivered) (US$ 2,283-US$2410/tonne) in April [84].

At first commercial scale, bio-based adipic acid might provide an import replacement.

Australia imports 15-20million lbs (7000-9000 tonnes) of adipic acid per year, used in for

domestic polyurethane manufacture and coating applications.

The Development Collaboration scenario has been deployed in both Europe and Brazil to

progress the development of a bio-based process: by the Dow Chemical Company and

Crystalsev in Brazil; by the ARD /DNP consortium in Europe and by Amryis in Brazil.

Crystalsev/Dow

Crystalsev is a Brazil-based company responsible for trading more than 2million tonnes of

sugar and 1 billion litres of ethanol (8% of national production of both products), and was

established in 1997. Crystalsev and Dow formed a joint venture in 2007 to produce

350,000 tonnes of polyethylene from sugarcane in Brazil in a world scale facility by 2011

using Dow’s proprietary technology and leveraging Crystasev’s process engineering skill

set and demonstration scale assets in ethanol production from sugarcane. In this venture,

Crystalsev proved up Dow’s proprietary process to dehydrate bio-ethanol to bio-ethylene.

The scale of production was sufficient to generate bio-based ethylene to meet Brazil’s

domestic market demand for polyethylene used in footwear and other manufactured items

[85, 86].

ARD/DNP

Agroindustries-Recherches et Developpements (ARD), the R&D subsidiary of a French

agricultural consortium led by Champagne Cereales, and US-based Diversified Natural

Products (DNP) established a collaborative joint venture (Bioamber) in 2006 to utilise the

carbohydrate resources of ARD to produce ethanol in the largest plant at that time in

Europe. The process skills and capabilities were established in ethanol production from

agricultural feedstocks by the joint venture. The plant subsequently diversified into

succinic acid production from sugar and starch, scaling up production from pilot scale of

5000 tonnes to 80,000 tonnes in 2008 using technology in-licensed by DNP. In this

collaboration, Diversified Natural Products contributed its intellectual property portfolio and

the feedstock provider, ARD, agreed to build an industrial scale production facility in

France, at a cost of €21 million (~US$27 million) as well as provide a secure feedstock

103 Biotechnology industry respondents


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supply [87]. At the start of the venture, ARD’s mission was to add value to the agricultural

crops of an agro-business in the Champagne-Ardennes region of France. The joint venture,

Bioamber, now holds the licenses for the process, and both DNP and ARD collect on-going

revenues from the royalty on sales of succinate. In addition, ARD and DNP have the option

of establishing or investing in other bio-based consortia in Europe, and in building other

biorefinery plants [88].

Amryis Biotechnologies

Amyris Biotechnologies is a synthetic biology technology-based US company with the

ambition of producing a portfolio of renewable fuels and chemicals by fermentation,

including surfactants, lubricants, synthetic rubber, cosmetics, flavours and fragrances [89].

Amyris’ strategy is to achieve commercial production of its renewable fuels and chemicals

by 2012, in sugarcane mills that Amyris plans to own or control. In December 2009,

Amyris bought a 40% stake in Boa Vista mill owned by Sao Martinho, one of Brazil’s main

sugar and ethanol companies, for US$82 million. Subsequently, Amyris opened a

renewable products demonstration facility, from which the company intends to progress to

larger scale production. Amyris has agreements with independent mill owners for “capital-

light” investments: that is Amyris provides the technology and plant design, and mill

owners convert their mills to produce Amyris renewable products. Consistent with this

strategy, Sao Martinho and Amyris have established a joint venture (SMA Industria

Quimica S.A) that will add a new US$50 million industrial unit to Boa Vista where Amyris

will operate to deploy its technology in the area of specialty chemicals. In April 2010,

Amyris expanded its activities in Brazil, with a second factory under agreement with Sao

Martinho and agreements with three additional Brazilian sugar and ethanol producers:

Bunge Limited, Cosan and Acucar Guarani, giving Amyris access to over 12 million tonnes

sugarcane pa crushing capacity.

These joint ventures are based on an integrated business model, leveraging Brazilian’s

existing sugarcane production, cane industry infrastructure and ethanol production

capability through the conversion of ethanol mills to produce higher value industrial

products using Amyris proprietary technology. Amyris will then distribute and market

these products to end customers directly or through the company’s partners. The first bio-

based chemical will be farnesene, a chemical with wide industrial application in surfactants,

lubricants, synthetic rubber, cosmetics [90, 91].

6.1.4 Scenario: Large scale manufacture

Australia has the opportunity as the site for manufacture of new product by large scale

bio-manufacture for the export market (see Model 5, Table 11). Some chemical majors are

currently reviewing a number of sites internationally for de-centralised expansion of global

manufacture of existing bio-products from simple sugars. Proximity to Asia may be an

additional selection criterion in favour of a location in Australia to support the strategic

target of expansion into the Asian market.

Both chemical majors and technology-based industrial biotechnology companies consider

Australia as having commercial potential for products such as fish oils and isoprene

compounds and bio-based polymers by companies such as DuPont, Genencor/Goodyear

and Amyris (see Table 13).


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Since the global financial crisis, the trend in the market for the chemical majors has moved

to a preference for sharing the risk by building smaller plants to service the regional

jurisdiction rather than one or two enormous plants to provide all product required for the

global market. These companies have been considering collaborations with technology and

feedstock partners, bringing with them the process scale-up skill sets, and sales and

marketing networks. In some cases the majors are looking to the collaborative partner to

build the manufacturing asset.

In this scenario, Australia provides a second site for global manufacture of a well-

established process to meet the needs of an expanding market. The manufacturer,

probably a chemical major or large chemical firm, brings with it the operational and

engineering capability, proprietary technology for transformation, product recovery etc,

and the financial capacity to invest in establishing and commissioning the manufacturing

assets. If the process has been established on a substrate such as starch elsewhere,

transitioning the process to a new feedstock such as sugar may be required. The

manufacturer would provide in-house technicians for facilitated plant commissioning, with

plans to transition to local technicians over a relatively short timeframe of 3-5 years.

In this scenario, Australian industries’ role would be for feedstock provision. Co-location of

the large scale manufacturing site with the feedstock, for example, at an operating

sugarcane mill, is considered by chemical majors to make economic and energetic sense.

The selection of first and second generation products would be decided by the

manufacturing partner (see Table 14).

The estimated capital expenditure required to establish a global production plant is based

on DuPont’s 1,3 PDO plant in Tennessee. As the only 1,3 PDO plant in the world, the

Tennessee facility produces 50,000 tonnes pa of polymer from starch in fermentation

vessels, which are reportedly the biggest in the world. A comparable facility in Australia

would potentially require 70,000 tonnes pa of sugar to theoretically meet DuPont’s targets

of double current production to meet increasing global demand for the bio-based plastic.


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Table 14: Industrial production of bio-based chemicals and polymers: some examples

Company Bio-product Feedstock Process Productio

n Industrial scale Application

DuPont &

Tate & Lyle 1,3 propanediol corn starch fermentation 2006

45,000 tonnes

pa

Personal care and liquid detergent consumer

goods; industrial applications such as de-icing

fluids, antifreeze and heat-transfer fluids.

Dow

Chemical &

Crystalsev

(Brazil)

polyethylene sugar cane fermentation 2011 350000 tonnes

pa Identical to petrochemical-based polymer

Solvay polyethylene sugar cane to

ethanol chemical 2010

60,000 tonnes

pa Identical to petrochemical-based polymer

Dow polyols

natural oil

feed-stocks,

eg soy

multi-step

process 2007

Bedding-and-furniture slab foam; memory or

foams; flame-laminate foams for the

automotive industry; and coatings, adhesives,

sealants and elastomers.

Diversified

Natural

Products

(US) & ARD

(Fr)

succinic acid

wheat- and

sugar-beet-

derived

glucose

fermentation 2008 Platform molecule for production of a family of

other chemicals.

Roquette

(Fr) sorbitol starch fermentation 2007

Platform molecule for production of a family of

other chemicals.

Roquette

(Fr) isosorbide sorbitol biotransformation 1000 tonnes pa

Isosorbide can be substituted for other diols to

create new polyesters, polycarbonates and

polyurethanes

Braskem polyethylene sugar cane to chemical early 450,000 tons Identical to petrochemical-based polymer

96



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(Br) ethanol 2011 pa

Dow glycerin

By-product of

biodiesel

prodn

thermochemical

Polyethylene glycol, unsaturated polyester

resins, antifreezes and heavy-duty liquid

laundry detergents

Company Bio-product Feedstock Process Productio

n Industrial scale Application

Global

Biochem

(China)

polyols, amino

acids and

starches

Corn starch

Fermentation,

chemical and bio-

transformation

2004 Food industry

ADM/

Metabolix

(Telles™)

Polyhydroxy-

butryrate Corn starch fermentation 2009

50,000 tonnes

pa Biodegradable polymer (PHB)

Cargill

NatureWorks

™

lactic acid corn starch fermentation 2003 Bioplastics: intermediate in the production of

bio-degradable polymer poly-lactic acid (PLA)

Table 14 (cont): Industrial production of bio-based chemicals and polymers: some examples


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6.1.5 Scenario: Biorefinery Precinct

There is considerable industry support for the development of an industrial biotechnology

precinct, preferably co-located with feedstock supply.

The Precinct consortium scenario de-risks the investment in establishing bio-based

manufacturing at a single site by sharing the venture risk among a number of participants,

including companies and research institutes, along with Government participation. A

proposed consortium of 10-15 companies involved may be medium- to small-sized

industries (SMEs) with one keystone participant, such as a international chemical major

(See Section 7.4.2) which, together as a consortium may represent a favourable approach

to bio-industry development, leveraging risk capital investment, infrastructure and

materials, power, water and processing steam. Furthermore, industry considers that there

is potential for more than one biorefinery precinct or other bio-based opportunity in

Australia104.

Technology deployed by participants within the precinct may be sourced from both Australia

and internationally. Australia’s research investment is a small (~ 3%) proportion of global

investment therefore it is unreasonable to expect Australia to have solved all of the

technical issues in bringing bio-based processing online, justifying the need to bring mature

relevant technologies in from overseas in the first instance. However, Australian research

and development institutes have the skills to bring value to ongoing precinct maturity by

being integrated into the precinct for ongoing process and product support and innovation.

Industrially-relevant research to support a commercial venture might include, for example,

systems biology and strain development, crop development, green chemistry, biocatalysts

optimisation and feedstock refining, all currently undertaken at research institutes such as

AIBN, the University of NSW, Macquarie University, Queensland University of Technology,

University of Queensland Monash University, CSIRO and elsewhere105.

Reciprocally, the precinct brings to Australian innovators a portal for the commercial

translation of the national investment in research and early stage development projects

(see industry research precincts in Section 7.1.1).

A significant economic input into any biorefinery process is energy so sensibly bagasse-

based energy co-production might be integrated within the bio-based precinct. In addition,

a cellulosic ethanol facility might be considered as a precinct participant, producing bio-fuel

for local consumption. Bio-energy coproduction should be a key contribution to the low

carbon footprint of a biorefinery precinct, which would then leverage all outputs of

sugarcane to sugar, cane juice, steam, and power.

Investment in the biorefinery precinct may be justified by production of a portfolio of

products, predominately targeting the export market with particular focus on the

burgeoning chemicals and plastics demand in Asia. Export of bio-based products from

Australia to Asia should not represent an impediment to precinct establishment as Australia

104 Chemical major respondents 105 Business Development & Commercialization CSIRO; Macquarie Biomolecular Frontiers Research

Centre, Macquarie University; Sugar Research and Innovation, Queensland University of Technology;

Centre for Tropical Crops and Biocommodities, Syngenta Centre for Sugarcane Biofuels Development,

Queensland University of Technology; Australian Institute of Bioengineering & Nanotechnology; School

of Biotechnology and Biomolecular Sciences University of NSW

98 Biorefinery Scoping Study: Tropical Biomass


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has sound working relationships with and close proximity to Asia. The development of some

domestic opportunities may warrant additional local investment: these may include

products for use in animal health or as “green” starting materials for Australia’s existing

chemicals and plastics manufacturers, such as adipic acid for polyurethane manufacture.

With time, bio-based manufacturing in the precinct may mature to deploy second

generation technologies, such as:

New refining technologies: for cost-effective processing of cellulose to liberate

accessible sugars;

New transformation technologies for improved production of current products or for

manufacture of new products; and

Bred-for-purpose crops: e.g. energy cane particularly once demand is established for

cellulosic biomass as bio-products feedstock.

6.2 COST BENEFIT ANALYSIS

As part of the Study, a cost benefit analysis of the value uplift from the conversion of

agricultural biomass to industrial chemical or plastic was undertaken. The election of the

candidates for the analysis was restricted by the amount of usable data which was publicly

available, as has been noted by other reviews [36]. During the course of stakeholder

interviews with industry, some production information was collected to guide a high level

analysis of two candidate molecules.

[Text redacted]

Both of these candidates: have expanding global markets, particularly in Asia; both are

platform molecules from which a family of industrial chemicals are derived; are valued at

more than $2500/tonne; have potential markets within the Australian industry as import

replacements; are associated with commercial parties with proprietary processes and

production strains which could be translated to the Australian context; and have production

processes by fermentation from simple carbohydrates either established at commercial or at

pilot scale. The production of these product candidates in an Australian biorefinery may

represent a second commercial site for an established product, or late stage commercial

development as a bio-based replacement for a petrochemical derived compound.

Industry respondents to this Study were focused on sugar from sugar cane as the feedstock

choice, and considered that industry doesn’t “need a lot of sugar to justify a (bio-based

manufacturing) plant”. Respondents from both chemical majors and from technology-based

companies made the point that fermentation liquors using glucose (starch) or sucrose

(sugarcane) are the preferred, clean feedstocks (i.e. with minimal contaminants from

refining) which reduces the significant costs, and improving the efficiencies, of downstream

recovery of the final product. The chemical industry may choose cane juice or syrup, as a

cheaper option than crystal sugar, avoiding the costs of drying and crystallisation. These

companies recognise that lignocellulosic carbon is a carbon source of the future but that the

process technologies are not sufficiently advanced at present for the synthesis of higher

value compounds or polymers. Both case studies are based on industry comments on the

costs of infrastructure, that, is capital and equipment, being borne by the manufacturer.

Co-location of the bio-manufacturing facility with the feedstock is preferred in all cases to

minimise feedstock transport costs, and to leverage the mill’s process infrastructure,

process energy and power.



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Industrial respondents have also considered continuity of feedstock supply. Sugar mills

don’t operate 12 months of the year: industry would consider stockpiling raw sugar and

switching the feedstock from syrup to brown sugar to meet production demands for the 3

months of mill downtime.

6.2.1 Plastic monomers

The domestic uptake of bio-based products such as plastic monomers by the Australian

chemicals and plastics sector is assumed in this Study to be 2% of Australia’s total current

plastic market [92], i.e. 8000t. In addition to export revenues generated by both large and

medium scales of production, the consumption of 8000t of bio-plastics is anticipated to

impact substantially on the balance of trade for the chemicals and plastics sector by

reducing overall import of feedstocks for plastics manufacture. However, detailed data to

quantify and itemise the consumption of such monomers within the sector was not available

to this Study.

An evaluation of the impact of bio-based monomers on the Australian market is hampered

by a lack of reliable market intelligence: information for the chemicals and plastics industry

is fragmented and not up to date. NIEIR reports their proprietary databases as the only one

for the sector, since the ABS stopped collecting information for this manufacturing activity

in Australia in 2007. High level predictions however, are reported: analysts have proposed

that bio-based plastics as a whole may replace up to 10% to 30% of the polyethylene resins

used in packaging, care manufacturing etc. In Australia, this has been predicted to translate

to 41,000-123,000 tonnes of total bio-based plastics by 2010 [92].

6.2.2 Platform molecules

There may be an opportunity for Australian businesses to consider development

collaborations with overseas technology companies for the manufacture of bio-based

products with export market potential. The scale, commitment and outputs by development

partner in potential development infrastructure are modelled here on a platform molecule.

In these models, capital costs are not borne in total by the technology partner. In this case,

total manufacturing infrastructure costs, that is, capital and equipment, may be borne by

the collaborative parties, which may include contributions by Government, whether State or

Federal.

The technology for production of some of the fermentation processes for platform molecules

from a carbohydrate feedstock recently developed has not yet been proven on a commercial

scale. The proposition may be to establish a collaborative partnership with a technology-

based company for the world’s first commercial demonstration of one such production

process.

One example of a platform molecule under commercial development is adipic acid (Figure

10). Australia imports 7000-9000 tonnes of adipic acid per year, used in polyurethane

manufacture and coating applications. The price of adipic acid has been high recently due to

booming demand in Asia and low availability: the spot price in Asia was €2600-2700/tonne

(US$3297-$3424/tonne) including freight, and in Europe at €1800-1900/tonne (free

delivered) (US$ 2,283-US$2410/tonne) in April 2010 [84].

As for bio-based plastic monomers, cellulosic resources are certainly not considered to be

an option as feedstocks for industrial platform molecules due the sensitivity of subsequent



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polymerisation steps (or other reactions) to any contamination106. The provision of

feedstock at a stable rate of supply, having locked in transfer pricing for the carbon over a

fixed period, is critical for technology partners.

The case studies lack input around the costs of manufacture and product recovery, which is

commercial in-confidence. Both models would benefit from a more in-depth analysis of the

value proposition of the different scales of production using industrial data.

6.2.3 Consortium

This Study recognises that an option for the establishment of a bio-based industry in

Australia is by means of multiple bio-products manufacturers forming a consortium, co-

located with the feedstock provider. In the case of sugarcane, the consortium would then be

positioned to leverage the existing process, transport and logistics infrastructure and

process energy and power (from bagasse), as well as direct access to feedstock. A proposed

consortium of industrial biotechnology ventures, co-located at a sugar mill, is presented in

Figure 17. This precinct could potentially be established to generate a diversified and

flexible mix of products, including chemicals and plastic monomers for the export and

domestic chemicals industry, fine chemicals (for example, enzymes and xylitol) and biofuel

(eg ethanol) from the outputs of sugarcane. In this scenario, bagasse is used to generate

process energy (heat and steam) and power for both the mill and the biorefinery precinct, is

processed further to extract such high value chemicals as furfural and the sugar alcohol,

xylitol. Bagasse cellulosic carbon is used in fermentation to produce both enzymes and

ethanol, which is recovered by distillation. Sucrose as sugar or cane juice provides a clean

fermentation liquor to support a number of individual processes, producing platform and

high value chemicals, which may include organic acids, enzymes, succinate, sorbitol and

adipic acid, and/or plastic monomers.

A biorefinery precinct based on a consortium of at least two industrial products, say a

plastic monomer (Product 1) and a platform chemical (Product 2), may generate bio-based

products for consumption by the domestic chemicals and plastics sector, bio-products for

export valued at A$20m-$150m together with export revenues from (residual) crystal

sugar. In the case studies here, the medium scale of production of Product 1 and small

scale of production of Product 2 consumes a total of 42,350 tonnes of sugar or equivalent in

cane juice (Tables 15 and 16), available under current production capacity at a number of

individual mills (Table 3), such as those in Mackay or the Burdekin.

106 Chemical industry respondents



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Table 17: Total value up-lift for a proposed two-product consortium based at one mill

Product

stream Product

Percentage

total sugar

output

Total

export

value

(A$m)

Value per

tonne

sugar

(A$/t)

Fold

uplift/tonne

sugar

Projected

mill

revenue

(A$m)

Product 1

(eg plastic

monomer)

2.5% $50-

60mb Sugar +

two bio-

based

products

Product 2

(eg

platform

chemical)

<1% $20-

25mb

$1650 -

$2010 3.7 - 4.5

$410 -

$425mc

Sugar

only Sugar 100% $ 361m $450a 1 $361m

a 2009/2010 harvest b Estimates based on industry figures

c Based on revenues from sugar and two bio-based products; high level estimates only

In this high-level model for one mill, here the Racecourse mill at Mackay, the outputs of the

mill are diversified from one product, crystal sugar, valued at ~A$361m at current export

prices, to three products: sugar and two bio-products. The value uplift is estimated at 3.7-

4.5 fold/t sugar, which does not take into account additional revenues from power co-

generation from bagasse (Table 17). The establishment of this consortium and validation of

the economic quantum of value-add from bio-based manufacturing may lead the way to

further diversification of the product portfolio and value adding to this agricultural crop (See

Figure 17).

The estimated dimensions of the value uplift from the consortium (Table17) within a

potential biorefinery precinct at a mill justify further examination of the prospect. A detailed

evaluation should consider the value proposition and the economic impact of precinct

development, which accounts accurately for total capital expenditure, and with inputs and

infrastructure shared between consortium partners. A key input may be the energy balance

of the precinct, which will be strongly influenced by mill process efficiencies and boiler

capability in terms of bagasse availability. Furthermore, refinement of the value proposition

of both bio-products individually will need production, operation and refining costs for each

to be factored in for a final decision based on cost-benefit analysis.

A key question in this Survey is whether Australia has sufficient feedstock to support a bio-

based product manufacture. The arguments supporting sugar from sugarcane as an

industrial feedstock, as well as the limitations imposed by the current high market price,

have been examined in this work. The diversity of product from a sugarcane-based

biorefinery from co-located manufacturers is represented schematically in Figure 17. The

estimated capacity of one mill to support this scenario is examined in Table 18, in which the

output of sugar (from 1% to 20%) from one mill (here Mackay’s Racecourse mill) is

converted to high value products ranging in value from $2,500/t to $10,000/t. These



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projections are based on the conversion efficiencies of industrial products established to

date and industry’s price/unit product based on a feedstock price of A$220-280/tonne107.

Table 18: Estimated outputs of bio-products from a projected sugarcane biorefinery

High value platform and fine chemicals and

plastics (pa) b Production

volumea $2,500/t $6,000/t $10,000/t

Low

volume $ 20m $ 48m $ 80m

Medium

volume $ 60m $ 144m $ 241m

$ 200m $ 481m $ 802m High

volume $ 401m $ 962 $ 1,604m

a Based on the sugar productivity of the Mackay Racecourse mill (2009) (see Table 3). b Projected product values are based on industrial conversion efficiencies of platform molecules and

monomers and industry’s price/unit product based on a feedstock at A$220-280/tonne. Capital and

production costs have not been factored in.

Figure 17: Sugarcane biorefinery (acknowledges [69, 93])

107 Chemical industry respondents


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*enzyme hydrolysis acid pretreatment

Bagasse

Furfural

Monosaccarides

Xylitol

Fungi Enzymes

Ethanol

extraction

*enzyme

hydrolysis

Crush

SUGARCANE

Cane juice Brown sugar

Crystal sugar Export market

Fermentation feedstock

Process energy (heat, steam)

Power

(cogen)

Fungi,

*Enzymes

Aspergillus

Organic

Mannheimia

Succinic acid

E.coli E coli

Adipic acid 1,3,PDO

Gluconobacter

Sorbitol

Family of

molecules

E.coli

Lactic acid PLA

Family of

molecules

*enzyme hydrolysis acid pretreatment Yeast

Family of

molecules

Family of

molecules



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6.3 NATIONAL BENEFITS

This Study proposes that there are considerable national benefits to be derived from a

mature biomass-based industrial sector in Australia108.

6.3.1 Direct Benefits

Australia would derive significant and direct benefits from the establishment of a bio-

manufacturing industry in driving economic growth, both nationally but particularly in

regional centres. In the US, the ethanol bio-manufacturing industry has boosted

employment and personal and tax revenues since 2004, stimulating all sectors of the US

economy. The biofuels industry reportedly contributed US$4.4bn to the economy in income

earned, US$1.3bn in tax revenues, and created 147,000 jobs by 2006 [43].

Where the activities of SMEs are consolidated around the biorefinery activities and products,

the bio-based industry precinct is expected to provide improved market opportunities, and

hence the profitability and sustainability of those Australian enterprises. Domestic

technology-based companies such as those specialising in biocatalysts or agriscience would

potentially find uptake of their proprietary products within the biorefinery. Agricultural SMEs

such as sugar cane millers and processors would secure a new and ongoing market for their

outputs.

A bio-based industry sector is anticipated to contribute significantly to Australia’s export

earnings. The export value of fine and niche bio-compounds generated by the biomass-

based manufacturing is anticipated to be in the range of US$1bn-$1.5bn for medium value,

fine compounds and US$50m-$100m for high value niche compounds at maturity, achieved

within a 10-15 year timeframe. This revenue is predicated on the consumption by Asian

markets alone of 150,000 to 400,000 tons pa of medium-value, bio-based chemicals and

polymers, and up to 50,000 tons pa of high value bio-products.

A bio-based industry precinct will stimulate employment, particularly in regional centres

(see Section 7.4.2). The strategic option of a large scale industrial complex will create jobs

in construction for 500-1000 people over a 5–7 year period; in direct operation of the

complex for 100-200 people over the life of the biorefinery; and a further 500-1000 jobs in

indirect services. At the smaller end of industrial activity, a first commercial scale plant may

require ~60 construction jobs with 35-40 flow-on operational jobs for skilled and technical

staff109.

The biomass-based industry may be anticipated to add value to, and expand the market

opportunities for, Australian agricultural commodities. Furthermore, the utilisation of

fermentable and cellulosic carbon from crops will provide the rural sector with stable

agricultural revenues. At maturity, the complex is expected to utilise no more than half of

any one region’s existing sugar production, with potential to utilise other carbon sources

and/or crops as the later stages of biorefinery development are rolled out110. The demand

of the bio-based production for feedstock is anticipated to stimulate the cultivation of

108 From “Australian Integrated Biorefinery Complex: Green manufacturing to Future-proof Australia”,

by the CRC Sugar Industry Innovation through Biotechnology, with permission. 109 Industry respondents 110 Chemical industry respondents



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rghum.

alternate crops, especially those with complementary harvest schedules to sugar cane, such

as sweet so

A mature bio-based industry represents a clear opportunity to translate Australian and

imported innovation into economic growth, a national issue identified in 2008 by the Review

of the National Innovation System (NIS) or the Cutler Review [94]. The NIS Review

describes Australia’s prosperity and high standard of living as one based not only on rich

natural and agricultural resources but also on a demonstrable national capacity for

innovation, which to a large extent has mitigated the problem of Australia’s geographic

isolation. Despite reported successes, the NIS Review considers Australia is “stalled not

sprinting”, an assessment this Study considers as valid in 2010 as in 2008. The Review

reports that for the nation’s economic success and relative prosperity to continue to be

substantially impacted by our innovation performance and deliver real productivity benefits,

a clear conduit for the delivery of research into applications, such as improved products and

services, to the marketplace is essential.

Furthermore, the NIS Review identifies key national innovation priorities to build national

strength: the first identified is agriculture, with key areas as driving agricultural productivity

and yields through research. The need for the Federal and State Governments to champion

a bio-based industry initiative is in line with government interests in these innovation

priority areas and leveraging the deliverables of that innovation into economic value.

The innovative technologies of industrial biotechnology will leverage the outcomes of a

substantial and long-term public investment in research in Australia, as well as exploiting

overseas innovations onshore. As a portal for the deployment of research outcomes, the

bio-based industrial sector will integrate the multidisciplinary research from diverse

organisations as CRCs, CSIRO, universities, ARC Centres of research excellence and

research institutes. Some of these institutes focus on discovery and exploration of new

knowledge; others in the collaborative development of innovation by engagement with

industry (see Section 7.1.1). Technology-based bio-industries will leverage diverse research

outcomes relevant to unit processes within the overall biorefinery, such as:

Innovations in crop genetics and management

Bioprocess technology for chemicals and biofuels

Microbial strain improvements, especially in utilisation of alternate substrates such as

sucrose and cellulose

Biocatalyst technologies

Waste management technologies to reduce the environmental footprint of

manufacturing facilities, in particular, management of resources such as air and water

quality, reduction of energy consumption and value-capture from liquid and solid waste

streams

Process energy generation.

Furthermore, a bio-based industry sector will catalyse and drive investment in and

execution of ongoing applied research relevant to green manufacturing and refinery

activities, thus providing a national framework for industrial biotechnology and countering

the disadvantage of research fragmentation nationally.

In addition, the current Federal Government has repeatedly stressed its interest in

initiatives which address greenhouse gas emissions. Manufacturing which leverages



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innovations in industrial biotechnology, from retro-fitted chemicals and plastics SMEs111 to a

large scale integrated complex112, manufacturing products from agricultural in place of

petrochemical feedstocks, is consistent with this Government’s interest in redressing

Australia’s past reputation on this issue of intense global concern.

6.3.2 Indirect Benefits

By seizing the opportunity to establish biorefinery-based manufacturing, Australia would lay

the foundation of an international reputation as a significant player in global industrial

biotechnology. The biomanufacturing scenarios proposed in this Study, to establish an

industry based on sustainable replacement of petrochemicals-based commodities, may be

positioned for implementation elsewhere in Australia and exported as a model around the

world.

There are substantial public benefits or social goods to be gained by bio-based industry.

There is an intensifying community demand for industry to exchange fossil fuels (or black

carbon) for green carbon as a source of energy and raw materials. Awareness of green

carbon is linked not only to issues of sustainability and renewable resources but in

avoidance of the environmental impacts of fossil fuel use, including greenhouse gas

emissions.

Reliable and continuous consumption of agricultural products as a manufacturing feedstock

will provide market and employment stability to otherwise cyclical agri-industries, such as

farming and milling. The stabilising effect of the biorefinery complex would flow further into

the rural communities as a whole, providing certainty of employment, revenues and general

stimulation of those rural centres.

Nationally, this world-class industrial biotechnology facility will provide improved

opportunities for deployment of Australian technology specialists, which not only leverages

and extracts value from home-grown innovation but discourages the brain-drain of the

brightest of local graduates overseas.

Similarly, industrial biotechnology may provide opportunity to reinvigorate the nation’s

chemicals and plastics industry and reduce the threat of de-industrialisation of

manufacturing within that and collateral sectors.

111 Plastics and Chemicals Industries Association; National Institute of Economic and Industry Research 112 Respondents from chemical majors



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CHAPTER 7 CASE STUDIES

7.1 INDUSTRIAL RESEARCH CENTRES

Australia has seen a number of industrial research collaborations develop recently, some on

a project-by-project basis at a research institute, some a significant investment in

industrially-focused innovation. Both DuPont and Dow have sponsored strain development

projects at University of Queensland’s AIBN laboratories in systems biology. Syngenta has

sponsored a research centre at the Queensland University of Technology, and Dow made a

significant investment in agricultural research in Victoria. Considering the drivers for that

investment may be of interest within this Study. Furthermore, because of the dimensions of

the Victorian facility, this may also be seen as an initiator of precinct development in agro-

industry.

7.1.1 Victorian AgriBiosciences Centre

The Victorian AgriBiosciences Centre (VABC) is intended as major national biotechnology

hub. The Centre is located at Latrobe University and is based on a research alliance

between Dow AgroSciences and the Victorian Department of Primary Industries (DPI) to

expand the company’s commercial research in biomass improvement and modification of

food feed, fibre and oil characteristics in crops113.

The Centre’s research focus is expected to be crops of national and global significance for

both food and bio-based industries.

Dow was motivated to form this research alliance to deliver on the company’s Vision 20 in

Agrisciences in both capacity building and by setting up a regional hub of discovery for the

development of intellectual property. Dow was impressed with working with the Victoria

State Government: Brumby was recognised by the company as “working to a vision that

extended past the normal term of office”. Dow was attracted to site the company’s research

activity at Latrobe due to the research capability in animal and crop genetics at that

institute and the track record of that research team in meeting research milestones.

Consequently, this investment at La Trobe represents the single biggest investment made

by Dow outside of the US114.

This agreement signals the largest international agricultural biotechnology alliance

undertaken by the Victorian government to date. The Victorian Government announced that

research in this facility demonstrates the government’s commitment to “driving world-

leading innovation in science, technology and practice to enable farmers to respond to

pressures such as climate change and to maintain a sustainable agriculture industry for the

benefit of all Victorians" [33] and commitment to building a bioeconomy in that State [93].

The centre is part of Victoria's Future Farming strategy, which aims to boost farm

productivity through the use of technology and changes in farming practices [93].

Investment in the A$280m Centre will be provided by the Victorian Government (A$40

million), the Commonwealth Government (A$28 million), with the remainder from industry.

In other words, Victoria’s investment in capacity building at Latrobe is facilitated by a major

industry participant, in this case Dow, to capitalise the investment. In addition, Dow has a

113 http://blog.invest.vic.gov.au/2010/04/07/victoria-expands-its-agriculture-research-partnership-

with-us-based-dow/ Victoria expands its agriculture-research partnership with U.S.-based Dow. April 7,

2010, Dr. Simon Guttmann 114 Dow AgroSciences


http://blog.invest.vic.gov.au/2010/04/07/victoria-expands-its-agriculture-research-partnership-with-us-based-dow/

http://blog.invest.vic.gov.au/2010/04/07/victoria-expands-its-agriculture-research-partnership-with-us-based-dow/


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significant role as translational portal for commercial development and delivery of

innovation to the market.

The facility will be constructed by a private consortium (2011- 2012) and leased back to the

State for 25 years. The VABC is predicted to have an impact on jobs in the region, with

engagement of up to an additional 30 scientists, technicians and support staff115.

Industry regards Premier Brumby as having worked a vision which extends past the normal

political term in office, and this vision applied within the medical research sector in Victoria

has now established a precinct assessed by industry as “number 5 in the world”116.

7.2 STRATEGIC PLANNING AND ROADMAP DEVELOPMENT: INDUSTRY

Two case studies are provided to illustrate strategic planning and roadmap development,

both of which are industry-driven and outcomes-focused.

7.2.1 Sustainable Aviation Fuel Initiative (SAFI)

This Study considers that the Sustainable Aviation Fuel Initiativemay be a model of

industry-driven strategy development, framework and actions to build a national bio-based

products initiative.

The Sustainable Aviation Fuel Initiative is looking at several ways of producing sustainable

aviation fuel based on bio-derived synthetic paraffinic kerosenes (bio-jet fuels) 117.

The SAFI group draws membership from industry (Boeing, Airbus, Virgin Blue, Amyris,

Mackay Sugar, and Brisbane-based IOR Energy), research (CSIRO, James Cook University,

University of Queensland, and CSIRO) and government (Queensland Primary Industries and

Fisheries).

Although the characteristics of a bio-based production of chemicals and plastics is not

entirely comparable with that of bio-jet fuel (see Table 19), there are valuable lessons from

the process which SAFI has undertaken. The key learnings for this Study from SAFI’s model

are:

Market pull: There is a clear and demonstrable market demand for a renewable aviation

fuel from bio-based feedstocks. The commitment of the global aviation industry is to

develop fuels which are CO2-neutral by 2020, reduced GHG levels to 2005 levels by

2030, by approaches which permit the aviation industry to continue to grow.

Vision: The vision of the SAFI initiative is the establishment of a bio-jet biorefinery

plant, producing both renewable aviation fuel which meets the international aviation

industry sustainability standards but which has economically viability improved by co-

product manufacture.

Strategic framework development: The SAFI initiative was led by industry (major

consumers) responding to market need, in collaboration with research and government

participants. The framework is built on defined outcomes within a prescribed time

frame, and specifies the metrics of success.

115 Dow AgroSciences 116 Dow AgroSciences 117 Boeing Research and Technology - Australia



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Roadmap: The SAFI strategic roadmap provides clear articulation of the step-wise

process of how the program will deliver product to the market. The Roadmap

establishes

o Role and action plan for each participant, from research collaborators to corporate

investors

o Pathways for globally-relevant regulatory approval

Market creation: The strategic Framework provides the signals for end-users to drive

market penetration of the bio-based product. Notably, key industry consumers of the

bio-fuel are SAFI participants.

Information assets: The SAFI working group harnesses and leverages existing

knowledge base to underpin strategy development and action decisions. This includes

using CSIRO reports and resources on feedstock supply in Australia and modelling to

understand feedstock type, availability, and prices.

Route to market: SAFI is reviewing options to leverage existing infrastructure,

processing capability and transport logistics. The strategy most attractive to both the

aviation industry and corporate investors is to transition an existing refinery facility to a

biomass-based biorefinery over time.

Co-product pipeline: The bio-jet biorefinery plant is anticipated to have economic

viability improved by co-product manufacture. The proposed bio-jet plant is anticipated

to have a diversified product portfolio, with a mix of diesel and jet fuel as key products,

with other valuable chemicals extracted from lignocellulose such as lignin, for use in

carbon fibre manufacture, for example.

Life cycle analysis: Decision-making regarding feedstock choice and bio-processing

route is based on life cycle analysis. The Life Cycle Analysis methodology has been

developed by SAFI based on European models adapted for Australian conditions. The

analysis is undertaken by both industry and research participants. Life cycle analysis to

establish the sustainability credentials of the bio-based aviation fuel which is a key

driver for the aviation industry. SAFI has established multi-disciplinary research and

industry teams to provide analysis of the sustainability of the feedstock to meet the

triple bottom line demands of the industry. When completed, SAFI anticipates that the

LCA will be used to support the development of the business case for commercial

development of bio-based aviation fuel. The LCA will underpin the commercial decisions

for investment in two components of the project: the biofuels refinery infrastructure

(est ~A$100m) and feedstock development. SAFI’s LCA considers:

o Economic, social and environmental sustainability

o “Earth to engine”: full value chain from production of feedstock to consumption of

product.

SAFI has implemented processes to standardise the LCA methodology used, based on

the methods used by EU’s Roundtable on sustainable biofuels. Methodology customised

to Australian conditions and is “evolving” as work progresses. However, SAFI asserts

that third party auditing and credentialing of the LCA methodology is essential



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Investment: Investment will be required in two components of the initiative: in

infrastructure (biojet fuel refinery) and in corporate farming, that is, in plantations for

woody biomass, oilseed and algae. Investment of an estimated A$100m to upgrade

existing refinery infrastructure to undertake a different process technology

(hydrotreating/hydrocracking) based on, for example, imported oil plant-based or tallow

feedstocks.

Table 19: Bio-based biorefineries: comparison between prospective chemicals and aviation

facilities

BIOREFINERY ISSUE CHEMICAL INDUSTRY AVIATION

Key driver for feedstock

selection

Input cost per tonne Carbon and energy neutral

(LCA)

Feedstock type Multiple: sugar, oils,

lignocellulose

Initially imported plant oils;

maturing to multiple local

feedstocks: sugar, oils

lignocellulose

Substrate type Carbohydrate eg sugar Hydrocarbon eg alkane

Product portfolio High value and platform

molecules; bio-energy may be

co-products

Transport fuels

bio-jet

diesel

Market Export predominantly with

some import replacement

Domestic + NZ

Deployment Regional production (co-

located with feedstock)

Centralised (refinery)

Infrastructure Additional assets as a bolt- on

to feedstock mill

Conventional refinery

transitioned to biomass-

based facility

Corporate farming Not necessary Might be needed for some

feedstock choices

7.2.2 Sustainability Leadership Framework - PACIA

Both the Australian Industry Group [95, 96] and the Australian Chemicals And Plastics

Industry Association, PACIA, are actively involved in developing sustainability programs and

metrics for their industry members.

PACIA has developed a Sustainability Leadership Framework aimed at developing good

practice within future chemicals and plastics industry in Australia118.

PACIA’s Sustainability Leadership Framework and roadmap are a significant illustration of

how market-driven is the industrial movement to sustainability within the Australian plastics

and chemicals industry, and how change in this sector may be stepped out in that sector.

The principles behind the strategic vision enunciated by the national plastics and chemicals

sector consider that sustainability measures do not necessarily require wholesale

118 Plastics and Chemicals Industries Association



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reinvention of the sector, but may be implemented as incremental changes, retrofitting

equipment or backing innovation into an existing industrial framework.

PACIA’s sustainability framework has as significant participants and signatories to the

framework:

PACIA’s industry membership: 36 companies ranging in size from the large chemicals

and polymers manufactures e.g. Qenos, Orica and BASF Australia, to small plastic

fabricators and recyclers. These companies understand sustainability, want to build it

into their business and are prepared to work with Government to make the industry

more future-ready.

Government: Federal and State, particularly the Victorian Government (through such

agencies as EPA and Sustainability Victoria).

Research partners: PACIA considers the research and development linkages developed

on behalf of its membership as making a significant contribution to the industry’s

sustainability framework. The industry research partnership includes such centres as:

o CSIRO, particularly the Centre for Sustainable Manufacturing [97]

o CRC for Polymers

o Monash Centre for Green Chemistry.

The sustainability goals of the Australian chemicals and plastics manufacturing sector

include:

1 Alternate feedstocks for existing manufacturing plants, and processing capabilities,

and the integration of the technologies associated with those feedstocks.

2 Design guides to the sustainability for materials: information essential to the

environmental impact of the product with respect to the raw materials, the products

market position and use, and the supply chain. Seventy five percent of the

environmental contribution/impact of a product is embedded in that product at the

design stage, by means of material selection, capacity for recycle and the type of

components used.

3 Transformation: how industries need to anticipate adapting to future circumstances,

by means of a change (for example) from batch to continuous culture, alternate

catalysts, and to alternative processing conditions requiring “green” solvents and

lower operating temperature and pressures.

The Sustainability Leadership Framework is “unique in Australia and internationally for its

overarching structure, which integrates environmental challenges with specific industry

priorities such as workforce engagement, innovation, and accountability”. This holistic

approach focuses on positioning the industry for the future and delivering sustainable,

competitive and profitable companies119.

The Framework is scoped to provide deliverables to industry to meet companies’ triple

bottom line expectations “and more”120:

Industry-lead: The Australian manufacturing sector recognises that industry needs to

lead and “create a bow wave” or else to be following in the bow wave of others121.

119 http://www.pacia.org.au/Content/AnnualReports.aspx PACIA’s Annual Report 2008-2009

Launched in June 2008, PACIA’s flagship Sustainability Leadership Framework has become the key

platform for the industry to integrate sustainability as a core business strategy. 120 Plastics and Chemicals Industries Association 121 National Institute of Economic and Industry Research


http://www.pacia.org.au/Content/AnnualReports.aspx


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Government participation: Industry partners to this agreement understand that only by

industry and government working together will the outcomes promised in the

Framework paper be delivered. From the sector’s perspective, partnership with

Government reduces investment risk. The sector views the State Government agency,

Victorian EPA [98], as “enlightened”, having established sustainability covenants122 with

various Victorian businesses. Furthermore, the EPA provides A$1m pa to industry for

programs to improve the sustainability of plant and equipment.

Industry champion: Government may choose to influence a specialist sector by means

of the specialist industry organisation which understands the sector

o The government then leverages its investment for a better outcome by means of

the sector specialist organisation

o Therefore PACIA considers prudent funding then generates meaningful and

demonstrable industry outcomes

Life cycle analysis: The Sustainability Leadership Framework includes a Life Cycle and

Design Program

Vision: Structured approach to the integration of sustainability into business

Roadmap: Sustainability is a journey with a roadmap to “step out the strategy”. PACIA

reports that member companies are at various stages on the pathway to sustainability,

in terms of:

o Conceptual understanding

o Mappable, actionable strategy

o Measurable progress

o Report success

Information: For a company to change to more sustainable practices, there is a need for

information to underpin and drive that decision to change the culture of the

organisation. To provide an information conduit, PACIA has established a leadership

implementation council, headed up by leaders of the plastics and chemicals industry to

initiate the process of change at an executive level for implementation at a company

level.

A mentor program for overseas experts to coach Victorian company chief executives has

been sponsored by the Victorian government to facilitate the transition of industry to

sustainable manufacturing. The mentor program promotes engagement at the executive

level to promote an understanding of the potential of innovation from an industry peer with

direct experience.

A vanguard program of industrial case studies of successful industry programs showcases

the possibilities of sustainability measures and potential economic benefit to sector

members. These practical demonstration projects, funded by Victorian State Government,

include water and energy efficiency improvements at Australian Vinyl and Qenos (see

Appendix A).

These two innovative industrial platforms are in place in the chemicals and plastics sector as

a consequence of the deployment of the PACIA’s Sustainability Framework, illustrating that

not only are these transitions feasible but that they make economic sense within the

122 http://www.epa.vic.gov.au/bus/sustainability_covenants/pilkington.asp Viridian sustainability

covenant This Sustainability Covenant is a voluntary, four-year statutory agreement under section

49AA of the Environment Protection Act 1970 between Viridian (formerly Pilkington Australia), EPA

Victoria, the Australian Industry Group (Ai Group) and Sustainability Victoria.


http://www.epa.vic.gov.au/bus/sustainability_covenants/pilkington.asp

http://www.epa.vic.gov.au/about_us/legislation/epa.asp


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Australian manufacturing sector. These two examples illustrate that there is an emerging

“clear understanding of opportunities” within Australia’s manufacturing sector that:

Spectrum of possibilities exists within innovative technologies within the plastics and

chemicals sector.

Industry-research partnerships work synergistically: Industry does not have the

capacity or capability to generate innovation in feedstocks and technology

improvements, and research community cannot design products in the absence of

industry inputs.

Incremental changes can be made to match existing products with alternative

feedstocks. An incremental rate of change helps industry to manage risk, especially in

the commodities market place.

7.3 STRATEGIC PLANNING AND ROADMAP DEVELOPMENT: STATE GOVERNMENT

7.3.1 Queensland state government

The Queensland State Government is the closest of all state governments consulted to

recognising the opportunity offered by industrial biotechnology for the state to

o Build a strength in a new industry on an (existing) resource base;

o Diversify agricultural industries, particularly sugarcane industry; and

o Achieve regional economic growth, consistent with existing State ambition.

Within Invest Queensland, industrial biotechnology has long been seen as a major

opportunity to attract investment to the State. Over the last few years, Invest Queensland

has proactively sought out international companies in this space123.

Queensland has gone some way to iterating a vision in industrial biotechnology as an

opportunity for Queensland “by 2020 (to) be recognised as a leading producer of bio-based

industrial products and technologies in the Asia Pacific region”.

In 2009-2010, the Queensland Government began a process of strategy development to

progress the State’s interest in this area. The approach to strategy work was for two

agencies, Invest Australia and Department of Employment Economic Development and

Innovation (DEEDI), to organise interdisciplinary and interdepartmental government teams

for development of the State’s industrial biotechnology strategy discussion paper. The State

has embarked on a process of public consultation of stakeholders for input into the draft

strategy and action framework which is expected to progress to Cabinet for approval and

ratification of a budget in 1H 2011. The strategy plan and its rollout have high level

champions within Government by Minister Tim Mulherin and Prof Beth Woods, Chief Science

Officer.

The strategy team anticipate that both incentives and information will be key features to

attract investment to the State as part of the strategy roll out. Incentives may include

assistance to industry in terms of payroll tax among other options. Key information will be

available to industry, including mapping of land use and ownership; land suitability; and

water availability. Although some information gaps may still need to be filled, information

assets will be established by collating existing reports and databases.

The process of strategy development undertaken within the Queensland government is

consistent with the “one desk” scenario (see section 5.3). DEEDI assembled a dedicated

123 Invest Queensland , State Development, Trade and Innovation, Queensland Government



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interdepartmental team in the preparation of the discussion paper, with overarching

responsibility for the discussion paper.

7.4 PRECINCT

7.4.1 China Free Trade Zone model

This Study considers precinct development, especially in a regional area, as an important

component in evaluating the opportunity for the development of an industrial biotechnology

sector in Australia. Consequently, this Study provides two models of precinct development,

one national and one international, for consideration.

One of the chemical majors reported to this Study that the Chinese Free trade Zone model

was an industrially-attractive one for precinct development, and one which Australia might

reflect on as an approach to encourage private investment in industrial biotechnology and

biorefinery development124.

China has long recognised that it is tough for foreign companies to establish business in

that country and has responded in some regions with approaches to deal with the barriers

to foreign investment. Those barriers include lack of currency exchange, lack of security for

investment and the general high business risk in going to China. One approach is to create

a Free Trade Zone (FTZ), removing the economic and business barriers which otherwise

stop foreign investors coming into China. The FTZ invites foreigners to invest (for example,

in Shanghai) by providing the infrastructure (steam, power, road, rail, and access to ports)

required by industry; facilitating regulatory and other approvals; providing access to local

banking; and assisting in setting up a company structure. Furthermore, investing

companies are encouraged by provision of tax incentives over a 5 year period on a sliding

scale, with other forms of subsidy or incentive available, depending on the nature of the

industry, but certainly favouring high technology or future-building industries.

7.4.2 Amberley

In Queensland, Ipswich is a model for regional development consequent to the

establishment of a major international company as a keystone to precinct development at

Amberley airforce base.

The city has established a network of central business districts, major centres, large

enterprise parks and general business areas connected by an efficient transport network to

quality residential and recreational areas. The impact of the keystone participant, Boeing,

being sited at Ipswich has led to a proliferation of commercial activity and the development

of a growing aviatronics industry by recruitment of collateral ventures and spinoffs.

The Ipswich aviatronics precinct has had a notable and continuing impact on the region in

terms of jobs and infrastructure development generally. The precinct is co-located with a

market for its services and products, the air force base. The precinct has education and

training consequences: the development of a tertiary institution adjacent to the park

development, University of Southern Queensland in Springfield Gateway CBD. This campus

has a faculty of Engineering and Surveying; students have as a course component the

opportunity to train within industry-focused projects and/or working with an industry

partner.

124 Industry respondents



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Consequently, Ipswich Aerospace Park at Amberley is regarded as a catalyst for major

economic development in the region.

The Queensland Government (Department of State Development and Innovation) provided

the land; the companies include Boeing Australia Ltd (600 employees) and other smaller

operations including Aerostructures Australia, Rosebank Engineering, Tasman Aviation, VMS

International, Honeywell and QANTAS Defence Services.

Ipswich is currently undergoing a development program which is reportedly one of the

largest per capita development programs being undertaken in any city in Australia [99].



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CHAPTER 8: SUMMARY

Internationally, there is an increasing and irresistible momentum to urgently develop new

process technologies and innovations to transition fossil-fuel based manufacturing, such as

the global chemicals and plastics industry, into sustainable enterprises based on renewable

sources of feedstocks and with a light environmental footprint.

Industrial biotechnology uses living cells and enzymes to produce innovative bio-products

and bioprocesses based on renewable feedstocks for the production of niche and fine

chemicals, speciality products and bulk commodities. This approach harnesses the capacity

of an array of diverse and complex biological pathways to transform fermentable sugars

into medium volume or high value (niche or fine chemical) products, in place of strictly

chemical syntheses based on petrochemical feedstocks.

Bio-based processes are capable of producing a multitude of products from renewable or

agricultural raw materials: such bio-products may be an exact replacement for an existing

product with a well-established market; a functionally-improved product which delivers new

value into an existing market; or a novel product for new and innovative applications.

Furthermore, biological production of commodity and fine chemicals from renewable or

“green” carbon provides manufacturers with not only a more flexible and sustainable source

of feedstock but one with stability of supply and price, essentially unfettered by the

insecurity of the petrochemicals market. More importantly, bio-based manufacturing

processes impose a lower environmental burden, and incur lower production costs in terms

of energy, water and capital cost by operating at lower temperatures, pressures, and

generally milder conditions than conventional processes.

Both the process technologies and the products generated by means of industrial

biotechnology have application within the chemical, agricultural, pharmaceutical,

nutraceutical, cosmetic, textiles and leather, detergent and food industries.

The chemical industry is a huge enterprise with global reach, reporting revenues in 2007 of

US$2,122 billion. The drivers for change in the chemical industry are overtly threefold:

environmental, economic and a response to technological developments themselves.

Economically, a move to bio-based processes is increasingly justified as process efficiencies

improve. Petrochemical feedstocks no longer provide sustainable feedstock supplies,

essential to the viability of global chemicals industry. Environmentally, biomass-based

manufacturing has the potential to significantly alter the environmental impact of the

chemicals industry. Bio-based bulk and fine chemicals could be produced with 50% less CO2

emission, and 20% less energy and 75% less water consumed, according to industry

reports. Bio-based approaches have the capacity to provide very substantial opportunities

to reduce non-renewable energy use and emissions of greenhouse gasses. Increasingly,

consumer demand for “greener” products is creating an irresistible market pull to

sustainable manufacturing. Technical innovations generating additional value are

anticipated from lower production costs for raw materials and processing, and from

additional revenues from new products, or products with enhanced performance.

As a consequence of these drivers, the chemicals industry is turning to industrial

biotechnology as a route to new commercial opportunities to maintain their future market

position, by delivering significant improvement in process profitability and potential for



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considerable market growth and competitive positioning. The future configuration of the

chemicals industry may be the result of a transition initiated now from a refiner of fossil fuel

substrates to a biomass-based biorefinery.

The potential product portfolio generated from green carbon from bio-based processes or a

biorefinery may encompass: platform molecules; high value commodities; and complex

compounds not produced by chemical synthesis, as well as bio-fuels.

Platform compounds are the industrial precursors for families of bulk and fine chemicals,

including the array of complex products used in plastics and fibers, resins, solvents, and

paints. Medium volume, platform compounds have a market value of around US$1,000-

$10,000/ tonne. High value low volume molecules are generally produced from a bio-

process and are ready for the market without further processing, for example, amino acids,

nutraceuticals, vitamins, enzymes, polymer monomers, essences, and flavours, with values

ranging up to ~US$1,000/kg.

The process technologies for use within a bio-based biorefinery are in general well known,

although not all are well established at commercial scale, and include thermochemical,

biotransformation, fermentation, and in-planta approaches. Traditional thermochemical

syntheses are a series of individual steps, each responsible for the transformation to the

next intermediate in the chain of synthetic steps required for final product manufacture.

These conventional thermochemical processes, while energy-intensive and requiring

extreme conditions, are well understood and responsible for the production of the

extraordinary array of bulk commodity and fine chemicals currently on the market.

Biotransformation uses enzymes to catalyse chemical changes to produce often complex

and specific compounds. Industrial fermentations use bacteria or yeast to transform an

often simple sugar into a diverse cohort of complex molecules, such as antibiotics. In a

biorefinery venture, the transformation of agricultural or forestry feedstocks may require

one or a combination of these process technologies to generate a pipeline of bio-based

products.

Biomass offers the prospect of potentially replacing petrochemical-based feedstocks as the

key to the future sustainability within the chemical industry. Furthermore, biomass

feedstocks which underpin biobased economies and biorefineries are increasingly recognised

as key to national sustainable development. These renewable feedstocks resources are

regarded as carbon neutral or have at least an improved environmental profile.

Existing and future agricultural and forestry industries in Australia may provide sustainable

and renewable supplies of industrial feedstocks. These bio-based feedstocks provide sources

of carbohydrate, oils or proteins as starting materials for bioconversion, either with some

modification into derivatives or transformed into entirely new products. Furthermore, a bio-

based venture or biorefinery may be developed to flexibly process various biomass

feedstock options to generate a mix of fuels, high value products and/or electricity.

The commercial success of a biorefinery venture is likely to depend on issues related to cost

effectiveness and processing configurations such as the integration of resources,

optimisation of inputs, minimising of environmental impacts, and flexible production of

multiple outputs or bio-products based on a multifunctional processing capability,

responsive to market demand. The commercial success of a bio-based venture may be

enhanced by a number of criteria, which include:



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Vertical integration of resources: streamline integration of the manufacturing

component of the biorefinery with feedstock refining, in order to leverage associated

facilities, power and infrastructure

Optimisation of inputs: the supply and nature of feedstock matched to manufacturing

process outputs, to keep cost of goods low

Minimal environmental impacts: the use of renewable energy to reduce greenhouse gas

emissions, sustainable water management, materials recycling etc as part of the triple

bottom line accountability by the chemical industry to stakeholders

Production of multiple products, with the capability for switching between outputs:

flexibility between feedstock processing and bio-product depending on market demand

(Brazil’s sugarcane-based ethanol biorefineries switch between ethanol and sugar).

The preferred biorefinery strategy is the one in which carbohydrates or oils are modified or

transformed into more valuable products, cost effectively and reliably, in volumes and

timeframes in line with industry demands. The chemical industry favours the processing,

and ultimately economic, advantages conferred by vertical integration of manufacturing

with feedstock. The infrastructure of a biorefinery complex needs to accommodate:

feedstock pre-processing and storage; manufacturing facilities; product separation and

purification; secondary refinement; and co-generation of energy. The biorefinery complex

may therefore be advantaged by the co-location or proximal location of bio-manufacturing

with feedstock refining and stockpiling.

Sugarcane is a crop with considerable attractions in this context. Australian sugarcane

production is a well-established agro-industry with highly efficient agronomic practices. By

co-locating with sugarcane mills, a biorefinery may leverage the mill’s processing and

storage infrastructure, as well as the critical facilities of logistics and transport

infrastructure, from field to mill to port. Furthermore, a co-located biorefinery could take

advantage of the electrical power and steam co-generated within the mill from sugarcane

bagasse. In other words, co-location of a biorefinery with sugar mills will provide the

biorefinery facility with direct access to sugar and cane juice, fibre, steam and electricity,

infrastructure assets and transport logistics.

Sugarcane is regarded industrially as providing one of the most efficient feedstocks for

commercial biofuel production, and is, in addition, attractive as a renewable resource for

chemicals and plastics manufacture.

The Australian sugar cane industry generates ~A$1-2 billion in export revenues each year.

Sugarcane is a highly productive crop of 80-115 tonnes/hectare produced nationally from

379,000 hectares, producing 4-5 million tonnes of sugar annually, of which 85% is

committed for export.

Sugarcane is grown along Australia’s eastern coast, from Mossman in Northern Queensland

to Grafton in northern NSW. Queensland is responsible for 95% of national sugar production

and 90% of exports; NSW generates 5% of national production and the most of the sugar

for domestic consumption, although each region is characterised by different sugar

productivities.

The sugarcane sector is historically an early adopter of innovation, embracing crop

development, a high level of mechanisation for agronomic efficiency, water, chemical and

energy efficiencies as well as co-generating processes for product milling and refining.



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However, it is also an agricultural sector under pressure. The majority of sugarcane

processing income is derived from a very narrow product range: 78% of revenue is from

raw sugar. Consequently, the sugar industry is vulnerable to the volatility of the world sugar

indicator price, which is in turn determined by international forces and influenced by the

exchange rate for the Australian dollar. Furthermore, this narrow product range contributes

little in the way of creating additional value for agricultural production.

The long planting-to-harvest crop cycle makes it challenging for growers to respond rapidly

to changes in international supply for sugar or to take advantage of annual price swings.

Even so, the amount of arable land and water resources to substantially increase the crop

cultivation footprint is constrained in Australia. Productivity constraints are also imposed by

local harvest agreements which prescribe the amount of the crop which is harvested and

the harvest period. Industry structure may be under threat by changes to land use patterns

(particularly by other high-revenue crops as horticulture and GM cotton) and by stricter

environmental controls. Sugarcane is the dominant agricultural practice in the catchment

area for the Great Barrier Reef, imposing environmental constraints on crop expansion and

agronomic practice.

Challenge also generates opportunity. The Australian sugarcane industry may be well-

positioned to consider providing crop outputs as bio-based feedstocks for the chemical

industry via a biorefinery, and to seize the opportunity to diversify revenue streams within

an industrial market more stable than that for international agricultural commodities.

8.1 THE VALUE CHAIN FROM CROP TO CHEMICALS

The approach taken in this section of the Study was that of a broad-based series of

stakeholder consultations based on participation in;

Bio-based industry value chain: cane growers; millers; chemical and plastics industry

(Australia); chemical majors (international); and technology-based bio-products

companies (international); or as

Contributors to and facilitators of the value chain: Design engineers; investors; State

government departments; Federal government departments; technology developers;

industry associations; and university and research institutes

Australian Participants

In overview, the research sector in Australia is fragmented and underfunded, but in many

cases generates world-class outputs. Australian research efforts in industrial biotechnology

may be seen as individual pieces of a grand work which need an overarching national

scheme to collect and assemble those pieces to capture maximal value from the research

investment. Industry considers that the Australian research sector needs to be consolidated

and resourced around a framework to build critical mass for strategic research targets.

Research in Australia is across a wide range of aspects of the value chain for a bio-based

industry, from crop improvement, refining crude biomass to accessible sugar, microbe

design (including synthetic or systems biology), fermentation technology and product

recovery, microbial strain development and materials science.

Australia’s process engineering, proof of concept and scale-of-production pilot scale facilities

are few, and demonstration scale non-existent. There are no national facilities for proving

up Australian research. There are purpose-built commercial scale fermentation facilities



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nationally, all for ethanol production only, such as those at Manildra (NSW) and Sarina

(Qld).

The Australian investment community reports a high level of interest in technology-based

industrial projects. However, those technologies are struggling to attract investment

because private sector investment, especially in infrastructure, critically depends on a

proactive vision for the technology-based sector, stable and supportive policy environment

and Government participation in de-risking the venture.

The investment sector is aware that governments around the world now recognise the need

for a level of participation greater than funding to underpin strategic technology-based

ventures. In Europe, the US and China, this takes the shape of feed-in tariffs, mandated

quotas for renewable energy, and off-take agreements.

At present, there is no bio-based chemicals sector in Australia. Relevant activities are

limited to the Mackay Biofactory pilot plant and the furfural plant in Proserpine. However,

Australia does have a chemicals and plastics manufacturing sector, which recognises the

need for innovation to be water and energy efficient and to make use of sustainable

feedstocks. Australia’s chemicals and plastics industry generates ~A$32.5 billion in revenue

per annum, directly employs 85,000 people and is responsible for approximately 10% of the

nation’s total manufacturing activity.

The Queensland state government is notable for a long-standing ambition to develop an

industrial biotechnology sector for the State and, in particular, to add value and provide

stability to the state’s agricultural sector. State government agencies have worked

collaboratively to develop a strategic discussion paper, “Strategic directions for

development of the Queensland bio-based industrial products sector”. These agencies,

furthermore, proactively seek out international companies to attract as keystone

participants to develop bio-based manufacturing. Queensland is seen by industry as the

state most likely to establish a biorefinery sector, being prepared to negotiate incentives for

industry and facilitate the range of planning and approvals needed to establish a venture.

The NSW State Government is conducting a review the State’s chemical industry for

approaches to stimulate the sector. The review reflects the importance of the chemicals

industry within the NSW economy, and recognises innovation as a key to sector

invigoration.

8.2 BIO-BASED SECTOR DEVELOPMENT

Key components to underpin the development of a bio-based sector, according to industry

respondents, are provision of:

Investment and incentives;

Stable strong clear policy environment; and

Stable feedstock pricing.

Industry respondents are not certain, however, that to date all State and Federal

Governments clearly understand the value of the industrial biotechnology opportunity for

Australia, and the competitive advantages being offered by our near neighbours in Thailand,

Indonesia and China. The Federal Government has proven itself ready and able to “prime

the pump” to initiate an industrial sector, and respondents consider that the time is ripe for

that approach to be applied to the bio-industry sector.



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The Study considered the hurdles to the establishment of a biobased industry in Australia:

Feedstock: Sustainable feedstocks supply is not considered rate-limiting by industry,

whereas the critical aspect of feedstock supply for industrial chemicals production is

price.

The key driver for a biomass-based chemicals proposition to be commercially feasible in

Australia is the issue of separating fermentable sugars from the market for that sugar. The

cost of feedstock can be ~20% of the cost of goods and industrial respondents require a

benchmark price for sugar of around 10-14 cents/lb (A$220-$308/tonne), which may be

slightly or significantly below that of the prevailing market price. Therefore, the role of

government in guaranteeing an economically feasible feedstock price to both buyers and

sellers of biomass is critical.

Establishment barrier: one challenge is that there are no multiple product biorefineries

in commercial operation anywhere in the world to date.

Regulatory: The pathways for approval of genetically altered organisms and for new

chemical registration are anticipated to be problematic in Australia.

Policy gaps: Respondents were strongly of the view that legislation with respect to

ethanol needs to be broadened to include other renewable bio-based fuels and

products. Carbon trading, CPRS and carbon tax initiatives were widely seen as essential

to provide incentives to drive bio-based manufacturing. Other policy positions of

significance to the sector included: antidumping provisions; the need for OH&S and

chemicals regulation harmonisation; actions to speed up planning approvals; and land

tax.

Skills and capability: there is limited national experience in process development,

chemical engineering and scale-up in the industrial biotechnology, nor is there a local

source of the operational capability to run an industrial scale facility. The drain on

existing national engineering and skilled worker capabilities is largely due to the mining

boom. However, the skills shortage is not considered a “deal breaker” for overseas

companies in the context of establishing ventures in Australia.

Market awareness: Lack of consumer awareness, scepticism about performance and

switching costs serve as effective industry barriers for Australian investors,

manufacturers and consumers to embracing industrial biotechnology.

8.3 ROLE OF GOVERNMENT

The role of Government is to establish an enduring market mechanism by means of vision,

as stable and supportive policy environment and investment. Therefore, this Study

recommends that the role of Government is to provide:

Vision: The primary issue for the industrial biotechnology sector is that Government

provides a clear vision “right from the top” and demonstrates commitment to

developing the sector, providing a stable policy environment for investment. An

overarching national industrial biotechnology vision and commitment is needed for

Federal, State and local governments to act in concert to establish and nurture a bio-

based sector in Australia. The national vision statement needs to recognise the

environmental and sustainability impacts of a bio-based industry as well as the value



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proposition this sector may offer in building future national wealth, and which balances

the complex issues of rural and regional development and bio-based industry with

agriculture objectives and food assurance and production.

Policy development: Many respondents to this Study called for a policy environment to

provide a framework for investment and “to lay a base for establishing a chemicals-

based industry which generates energy as a by-product”. Respondents favoured

broadening of the RET program for the use of biomass feedstock to generate co-

products as eligible for RET funding. Respondents felt strongly that ultimately bio-based

industries are going to be profitable in an emissions trading environment. Policy

initiatives may also include incentives by means of the tax and excise systems, and a

Federal program of ethanol mandates may provide a decisive driver for the

development of the ethanol industry.

Green door: the concept of a single desk pulls together the best that each State

Government offers and facilitates access to the assistance provided by both State and

Federal Governments. The Green door concept would provide a clear demonstration to

industry and the community at large of a government supportive of that sector. A single

interface with all government agencies simplifies the forms and action steps essential

for industry to establish and undertake commercial operations, particularly valuable

with respect to the tight industrial timelines from inception to full and independent plant

operation.

Investment: To stimulate a bio-based industry in Australia and to address gaps in the

value chain, the Government may need to consider investment in the research sector,

in education and training and in infrastructure assets needed for technology deployment

and industry building.

Incentives: Federal incentives may include tax incentives over a 5 year period with a

sliding scale and accelerated depreciation.

Information: Industry-relevant information may be provided by collating existing

reports and databases, then making this key information available to interested industry

parties: including mapping of land use and ownership; land suitability; water

availability, etc.

Regulatory: There is an urgent need to provide consistent and harmonised regulatory

guidelines between State and Federal agencies and to ensure the international

harmonisation of standards for bio-based products destined for export markets. A

critical upgrade of the capabilities of both the gene and chemicals regulators to deal

with industrial scale of operations is essential. Decisive action is called for: regulatory

issues may be the biggest barrier to take up of new materials and processes within the

Australian chemicals and plastics industry.

Champion, Coordination and Communication: A champion is needed at State and

Federal level for the biorefinery concept and to put a face on the Federal Government’s

vision in industrial biotechnology, and to maintain a high level of information, interest

and commitment between all stakeholders, particularly those within Government. The

current program of technology advocates may be extended to promote not only the

industrial biotechnology sector but also the Federal Government’s strategic vision and



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roadmap for the sector.

Feedstock price: Certainty of feedstock price is a key driver for industry to participate in

the establishment of a successful commercial bio-based manufacturing sector in

Australia in fuels, chemicals, plastics and other speciality products. Therefore, the

Federal Government may have a role in underwriting and guaranteeing the feedstock

price. The Government may consider options such as futures or hedging which limit

exposure to direct subsidy. Despite bio-manufacturing interest in sugar as feedstock for

bio-based fine chemicals and polymers, no commodity propositions based on sugar at

this high market price are value propositions.

Skills and capabilities: The Government may consider offering support to stimulate the

recruitment and training of relevant trades, process and chemical engineering, and

skilled managers and executives for ongoing bio-industry sector development. A

number of approaches are proposed to provide staff immediately and to drive skills and

capability training in Australia: skilled migration; incentives for the return of skilled and

professional expatriates; university funding coordinated for future sector building;

research funding for innovation; and education investment funding, with a focus on

capital investment.

Sustainability standards: Establishment of national sustainability policy and metrics for:

agriculture and bio-based produce; water resources; biodiversity conservation and

management; chemical use patterns; land use patterns for agricultural produce.

Australia needs a “sovereign view” with respect to policy, accounting for national

circumstances.

Market development: initiatives to create a domestic market for bio-based products, for

example, through Government procurement.

8.4 POTENTIAL STRATEGIES TO BUILD AUSTRALIAN BIO-BASED INDUSTRY SECTOR

A number of strategies may be proposed as the route for the development of a national

industrial biotechnology sector. In all, careful thought to early success is essential to

maintain both sector and investor confidence. Failure of early ventures before a sector

matures may be considered to fail twice: firstly failing the immediate investors in the

project as well as failing to build sector reputation.

This Study considers there is more than one possible strategic approach to initiate bio-

based manufacturing. Deployment of any of these strategies is not exclusive, that is any

combination may be deployed to establish an industrial biotechnology sector in Australia.

Sharpening the sword: is an approach proposed to lift the maturity of both Australian

bio-products technologies and capabilities by step-wise building the process capacity for

a national industry from the ground up. This capacity-building strategy gives a fledgling

industry time to evolve or mature into an efficient commercially feasible, stand-alone

sector with reduced carbon and energy emissions, and optimised capex and operating

costs /unit product.

Mill-centric value-add model: is based on the agricultural sector directly value-adding

their agricultural output. A feature of this model is that it is industry-driven, (largely)

industry-funded by a cooperative group of growers, with shared equity in the project.



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In this model, the mill designs, builds and operates the infrastructure asset co-located

with the operating milling plant, based on in-licensed or purchased technology to

produce from either sugar or bagasse a high value product for the domestic and/or

export market. An example of the deployment of this Mill-Centric Value-Add model is

the production of furfural from sugarcane bagasse by Proserpine Sugar in Queensland.

Development Collaboration: establishes a bio-based sector predicated on the need by

overseas technology-based companies to work up the process technology for their

propriety technology to prove commercial readiness. The Development Collaboration

model embodies both shared risk and shared benefit for both partners: risk is shared

between the technology company and its development partner, as the development

partner co-funds the process development of the collaborator’s technology.

Consequently, the benefit is shared between the two companies, as product revenues

from domestic sales, and joint ownership of the datapack and therefore shared

revenues on any future technology out-licensing transactions and a royalty on

subsequent sales of product.

Large Scale Manufacture: Some chemical majors are currently reviewing a number of

sites internationally for de-centralised expansion of global manufacture of existing bio-

products to meet the needs of an expanding market. The manufacturer brings with it

the operational and engineering capability, proprietary technology for transformation,

product recovery etc, and the financial capacity to invest in establishing and

commissioning the manufacturing assets. The manufacturer would provide in-house

technicians for facilitated plant commissioning, with plans to transition to local

technicians over a relatively short timeframe of 3-5 years.

Biorefinery Precinct: There is considerable industry support for the development of an

industrial biotechnology precinct, preferably co-located with feedstock supply.

The Precinct consortium scenario de-risks the investment in establishing bio-based

manufacturing at a single site by sharing the venture risk among a number of

participants, including companies and research institutes, along with Government

participation. A proposed consortium of 10-15 companies involved may be medium- to

small-sized industries with one keystone participant, such as a international chemical

major, which, together may represent a favourable approach to bio-industry

development, leveraging risk capital investment, infrastructure and materials, power,

water and processing steam. Furthermore, industry considers that there is potential for

more than one biorefinery precinct or other bio-based opportunity in Australia.

8.5 NATIONAL BENEFITS

This Study proposes that there are considerable direct and indirect national benefits to be

derived from a mature biomass-based industrial sector in Australia:

driving economic growth, both nationally but particularly in regional centres;

improved market opportunities, and hence the profitability and sustainability of

participating Australian enterprises;

uptake of proprietary products from domestic technology-based companies;

new and ongoing market for outputs of agricultural SMEs such as sugar cane millers and

processors; and

addressing the nation’s greenhouse gas emissions.



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A bio-based industry sector is anticipated to contribute significantly to Australia’s export

earnings. The export value of fine and niche bio-compounds generated by the biomass-

based manufacturing is anticipated to be in the range of US$1bn-$1.5bn for medium value,

fine compounds and US$50m-$100m for high value niche compounds at maturity, achieved

within a 10-15 year timeframe. This revenue is predicated on the consumption by Asian

markets alone of 150,000 to 400,000 tons pa of medium-value, bio-based chemicals and

polymers, and up to 50,000 tons pa of high value bio-products.

Industrial biotechnology may provide opportunity for Australia to value-add existing

agricultural crops, such that higher value chemicals and plastic monomers are exported in

place of raw agricultural products such as sugar. The utilisation of fermentable and

cellulosic carbon from crops will provide the rural sector with stable agricultural revenues

and a more diversified revenue stream. At maturity, a biomass-based manufacturer is

expected to utilise no more than half of any one region’s existing sugar production, with

potential to utilise other carbon sources and/or crops as the later stages of biorefinery

development are rolled out.

A bio-based sector may stimulate employment, particularly in regional centres. A large scale

industrial complex is expected to create direct jobs in construction for 500-1000 people

over a 5–7 year period; in direct operation of the complex for 100-200 people over the life

of the biorefinery; and a further 500-1000 jobs in indirect services. At the smaller end of

industrial activity, a first commercial scale plant may require ~60 construction jobs with 35-

40 flow-on operational jobs for skilled and technical staff.

The establishment of a bio-based sector may stimulate Australian manufacturing. The

availability of biomass-derived chemicals and plastics may generate improved market

opportunities, and hence the profitability and sustainability, of Australian manufacturing

enterprises participating in a mature bio-based industry. This may flow through to

reinvigorate the nation’s chemicals and plastics industry and reduce the threat of de-

industrialisation of manufacturing within that and collateral sectors. Furthermore, any

benefits felt in the chemicals and plastics sector have ramifications widely across the

Australian economy as these products are key enablers in a broad array of domestic

industrial sectors, from mining to agriculture to construction.

A mature bio-based industry represents a clear opportunity to translate Australian and

imported innovation into economic growth. Australia would lay the foundation of an

international reputation as a significant player in global industrial biotechnology. Improved

opportunities for deployment of Australian technology specialists not only leverage and

extract value from home-grown innovation but discourage the brain-drain of the brightest of

local graduates overseas.

Awareness of green carbon is linked not only to issues of sustainability and renewable

resources including water, but in avoidance of the environmental impacts of fossil fuel use,

including greenhouse gas emissions.



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FEDERAL GOVERNMENT CONSULTATIONS

This Study undertook a series of consultations with Federal Government departments to

reflect on departmental input into the establishment of bio-based value chains from

biomass feedstock to industrial products, and department and agency interaction to secure

the future supply of chemicals once fossil fuel feedstocks are depleted. Agencies considered

what policy/regulatory actions are required to put biobased value chains in place now.

The feedback and ideas garnered from that consultation process could be crystallised

around the central theme of the need for a national strategy or National Industrial

Biotechnology Vision. The national bio-based industry vision would provide the strategic

oversight to initiate and support a bio-based sector in Australia, setting guidelines to

delineate, for example:

Departmental responsibility for industrial biotechnology, and a coordinated framework

across the whole of government

Commercial opportunities for value-adding biomass as a bio-based feedstock

Roadmap from feedstock to bio-product manufacture, sales and marketing

Guidance to deal with the allocation of crop biomass to meet:

o Energy, fuel and bio-products applications

o Export as biomass as bio-feedstock for chemicals and biofuel generation overseas

o Current domestic and export commitments

National sustainability standards for

o Agriculture and bio-based products

o Water resources: use and quality

o Biodiversity conservation and management

o Chemical use patterns

o Weediness

o Land use patterns

Infrastructure resources required, such as

o Pilot and industry demonstration scale plant

o Refinery and other large capital resources

Coordination of diverse initiatives, such as

o Aviation Fuel Working Group

o Climate Change Action Group

o Pulp and Paper strategy paper

o Renewable energy policy

o CPRS

Initiatives to encourage agriculture and industry to build the industrial bio-economy

value chains: such as tax initiatives; carbon market; and funding (similar to that

available from ACRE for alternative energy)

Reinforcement of Regulators

o Office of the Gene Technology Regulator (OGTR) has shortcomings of the current

framework which may make this regulator unable to meet the challenges posed by

the implementation of industrial biotechnology processes.

o Chemicals and plastics Regulation Reform regulatory pathway may be a future

obstacle for bio-based chemicals

Market development: initiatives to create a domestic market for bio-based products, for

example, through Government procurement.



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CONCLUSION

For all the limitations and hurdles, and skills and capabilities gaps, Australia offers a sound

and attractive opportunity to the international chemicals industry to collaboratively establish

a bio-mass based industry. Based on sugar feedstocks, the industry has the potential to

produce niche, high value and medium volume platform molecules for the export chemicals,

plastics and other markets, especially in Asia, generating regional employment, stable

agricultural revenues and providing a portal for the deployment of Australia’s research and

technology sectors. The principle requirement to assemble all participants into the new bio-

based sector is the need for an overarching national vision from the Federal Government,

with commitment and an attendant policy framework to provide high level strategic

direction and support for initiation and support of this future economy.



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APPENDIX A:

INTEREST OF KEY STAKEHOLDERS

FEDERAL GOVERNMENT CONSULTATIONS



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APPENDIX B:

INNOVATION WITHIN THE PLASTICS AND CHEMICALS SECTOR

Australian Vinyl http://www.ausvinyl.com.au/ is Australia’s sole manufacturer of polyvinyl

chloride (PVC) resin. Australian Vinyl is a private company based in South Australia

servicing the domestic market. Significantly, the company drove the change in

manufacturing practice. The company recognised the potential to retrofit the existing plant

to achieve change in water use although no off-the-shelf solution was available. With

financial support of Rewards grant, a program delivered through the partnership between

PACIA and EPA Victoria (A$100,000), the company used both in-house and external

contractors to design an innovation which was then taken through pilot scale and proof of

concept. The company achieved a reduction of 50% in potable water use which now

“represents world’s best practice”:

Reducing total consumption of potable water by 326 ML

Achieving water efficiencies in processing from 4.5 KL per tonne of product to 2.2 KL

per tonne of product

Qenos125 http://www.qenos.com/ is an Australian subsidiary of Chinese companies which

manufactures the raw materials used in plastics for household, consumer and industrial

products from petrochemical feedstocks. Quenos is the sole Australian manufacturer of

polyethylene (PE). The company recognised that it generated significant volumes of residual

wax waste with very high disposal costs (A$450,000 pa) because the wax was a prescribed

industrial waste (PIW). With the assistance of PACIA, Qenos scoped the opportunity for the

wax as a product or as a feedstock. Consequently the company achieved conversion of the

residual wax from an expensive waste into a revenue stream of ~A$500,000 pa, that is, a

total gain of around A$950,000pa.

125 Qenos (formerly Kemcor Australia and the polyethylenes production part of Orica) is the major

operator at the petrochemical complexes at Altona and Botany with a combined production of 500 000

tpa of ethylene. In October 2005 it was sold for at least A$200m to the China National Chemical Corp.

formed in 2004 by the combination of China National Bluestar Group and China Haohua Chemical

Industrial Corp. (The purchase represents a purchase of an ethane gas supply from Longford (owned by

Exxon) and a business that manufactures and imports polyethylene.) Qenos produces 470,000 tpa

ethylene valued at A$700 million; 130,000 tpa low density and linear low density polyethylene; and

165,000 tpa high density polyethylene. The company employs 1200.

http://www.chemlink.com.au/qenos.htm


http://www.ausvinyl.com.au/

http://www.qenos.com/

http://www.chemlink.com.au/qenos.htm


BIOSCIENCE

GLOSSARY

ABBREVIATIONS DESCRIPTION

1st generation biofuels 1st generation biofuels include mature technologies for the

production of bioethanol from sugar and starch crops, biodiesel and

renewable diesel from oil crops and animal fats, and biomethane

from the anaerobic digestion of wet biomass. 2nd generation biofuels 2nd generation biofuels are novel biofuels or biofuels based on

novel feedstocks. They generally use biochemical and

thermochemical routes that are at the demonstration stage, and

convert lignocellulosic biomass (i.e. fibrous biomass such as straw,

wood, and grass) to biofuels (e.g. ethanol, butanol, syndiesel). 3rd generation biofuels 3rd generation biofuels generally include advanced biofuels

production routes which are at the early stage of research and

development or are significantly further from commercialisation (e.g.

biofuels from algae, hydrogen from biomass). Agricultural residues Agricultural residues include arable crop residues (such as straw,

stem, stalk, leaves, husk, shell, peel, etc.), forest litter, grass and

animal manures, slurries and bedding (e.g. poultry litter). Aliphatic acids Non-aromatic acids, often with a simply linear structure, such as

acetic, formic and levulinic acids

Angina Chest pain or discomfort that occurs when an area of the heart is

deprived of oxygen. It is usually a symptom of underlying heart

disease, such as coronary artery disease. Available sugars Simple sugars which are made available for fermentation (by

microbes) or transformation (by enzymes or chemical reaction) to

new products

Aviatronics Aviation electronics and computer solutions, including those for

mission critical applications Bagasse The cane fibre or bagasse which remains once the cane juice is

pressed from the cane. Bagasse is lignocellulose: lignin content of

20-30%, cellulose (40-45%) and hemicelluloses (30-35%). Bio-based compounds See bio-compounds.

Bio-compounds Any chemical, plastic or other compound derived from a biological

feedstock (such as sugar, cellulose, proteins, fats or plant oils),

especially if produced by biological processes such as fermentation

or biotransformation. Bio-compounds may be chemically identical to

those manufactured from petrochemical feedstocks, or may be

unique to biological processes. Also known as bio-based compounds.



BIOSCIENCE

Biobutanol Alcohol with a 4 carbon structure and the molecular formula C4H9OH

produced from biomass. Biobutanol can easily be added to

conventional petrol and can be blended up to higher concentrations

than bioethanol for use in standard vehicle engines. Biobutanol can

also be used as a blended additive to diesel fuel to reduce soot

emissions. Biocatalysts See Enzyme

Biochar Biochar is charcoal created by pyrolysis of biomass.

Biodegradability The characteristic of a compound which allows it to be broken down

to simpler molecules, such as water and carbon dioxide, by microbial

action. Bioeconomy Bioeconomy or bio-based economy describes the use of renewable

resources to meet the demand for energy, fuel, chemicals and raw

materials in place of petroleum and coal. In the bioeconomy, the

basic building blocks for industry and the raw materials for energy

are derived from sustainable plant or crop-based sources. A key

enabler of the bioeconomy is biotechnology, with applications in

agriculture, health, chemical or energy industries. Bioenergy Renewable energy produced from the conversion of organic matter.

Organic matter may either be used directly as a fuel or processed

into liquids and gases. Bioethanol Alcohol with a 2 carbon structure and the molecular formula

C2H5OH, produced from biomass. Bioethanol can be blended with

conventional gasoline or diesel for use in petroleum-engine vehicles. Biofuel Fuel produced directly or indirectly from biomass. The term biofuel

applies to any solid, liquid, or gaseous fuel produced from organic

(once-living) matter. The word biofuel covers a wide range of

products, some of which are commercially available today, and some

of which are still in the research and development phase. Biomass Organic matter available on a renewable basis. Biomass includes

forest and mill residues, agricultural crops and wastes, wood and

wood wastes, animal wastes, livestock operation residues, aquatic

plants, fast-growing trees and plants, and municipal and industrial

wastes. Biomass energy See Bioenergy

Bioreactor A bioreactor is a vessel in which a biochemical process occurs. This

usually involves microorganisms or biochemically active substances

derived from such microorganisms.

Biorefinery The scope of a biorefinery has some analogy with a petrochemical

refinery in that flexible delivery of product may be generated from a

multiple product portfolio depending on market demand, contractual

obligations and plant capacity. Furthermore, a bio-based biorefinery

may be developed to process various biomass feedstock options to

generate a mix of fuels, high value products and/or electricity Biotransformation The process by which enzymes catalyse chemical changes in other

compounds Black liquor Lignocellulose raw material as a feedstock is impacted by the

significant costs and inefficiencies of processing and refining this

complex and recalcitrant material. Because of the remaining



BIOSCIENCE

impurities inherent in these cellulosic liquors, they are regarded by

industry as a “black” feedstock stream ideal for products recovered

by distillation, such as fuel ethanol and butanol. In contrast is the

easily purified liquor based on sugar: these clean feedstocks

minimise the very expensive downstream processing of fine

chemicals and plastic monomers which are essential for their

function. Bulk chemicals Bulk chemicals are produced by transformations on a massive scale

by a number of companies, producing relatively simple molecules

which are chemically indistinguishable, at the lowest possible cost.

These large-volume, low value chemicals are often used as

feedstocks by other manufacturers. Bulk chemicals are defined as

having a production volume of millions of tonnes pa. Also known as

the commodity chemical sector. Bulk density Mass of a portion of a solid fuel divided by the volume of the

container which is filled by that portion under specific conditions,

that is, the ratio of dry material to bulk volume. Butanol See Biobutanol

By-product A by-product, or co-product, is a substance, other than the principal

product, generated as a consequence of producing the main product.

For example, a by-product of biodiesel production is glycerine. Every

bioenergy conversion chain generates co-products. These may add

substantial economic value to the overall process. Examples include

animal feed, food additives, specialty chemicals, charcoal, and

fertilisers. Capital cost The total investment needed to complete a project and bring it to a

commercially operable status. The cost of construction of a new

plant. The expenditures for the purchase or acquisition of existing

facilities. Carbon neutral Over its life cycle, a product or process that does not add more

carbon dioxide to the atmosphere. For instance, a plant consumes

carbon dioxide while it grows, then when transformed into and used

as fuel such as ethanol it releases carbon dioxide back into the

atmosphere. Plant-derived fuels have the potential to be carbon

neutral. Catalyst A catalyst is a substance that increases the rate of a chemical

reaction, without being consumed or produced by the reaction.

Enzymes are catalysts for many biochemical reactions. CCS Commercial Cane Sugar

Cellulase A specific enzyme used to treat cellulose to release the component

hexose sugars from the cellulosic polymer

Cellulose Polysaccharide or polymer made up of a chain of glucose sugars,

which are hexose or 6-carbon sugars. Cellulosic ethanol Cellulosic ethanol is ethanol fuel produced from lignocellulosic

material such as wood. Cellulosic ethanol is chemically identical to

ethanol from other sources, such as corn or sugar, and is available

in a great diversity of biomass including waste from urban,

agricultural, and forestry sources.



BIOSCIENCE

Chirality Refers to the shape of a molecule such that is it not superimposable

on its mirror image, ie the “handedness” of an asymmetrical

molecule (left or right handedness). The correct chirality of

biologically active molecules such as pharmaceuticals is essential for

function. CO2 Carbon dioxide.

Cogeneration The simultaneous production of electricity and useful thermal

energy from a common fuel source. Surplus heat from an electric

generating plant can be used for industrial processes, or space and

water heating purposes (topping cycle).

Commercial Cane Sugar

(CCS) A measure of the commercially recoverable sugar content of

cane Commodity chemical See Bulk Chemical.

Co-product See By-product.

Dehydration Removal of a water molecule (H2O) from within a structure, eg the

dehydration of ethanol to ethylene

Density Ratio of mass to volume. It must always be stated whether the

density refers to the density of individual particles or to the bulk

density of the material and whether the mass of water in the

material is included. Diol A class of alcohols with 2 hydroxyl groups in each molecule, such as

ethylene glycol, used chiefly as an antifreeze and as a solvent.

Diuretic A substance or drug that tends to increase the discharge of urine.

Diuron A persistent herbicide used especially to control annual weeds in

sugar cane, to keep irrigation channels and drainage ditches free of

grasses and broadleaf weeds. Diuron is on the (Great Barrier) Reef

Protection Herbicide list by the Queensland Government. Dry basis Condition in which the solid biofuel is free from moisture.

Dry matter Material after removal of moisture under specific conditions.

Dry matter content Fraction of dry matter in the total material on mass basis.

E85 Mix of 85% ethanol and 15% petrol. E85 is a common bioethanol

blend used in flex-fuel vehicles. Other fuel blends exist such as E5

and E100. The number always refers to the percentage of ethanol

blended in the petrol. EC European Commission.

Enantioselectivity Refers to the highly selective mode of action of an enzyme in

selecting one stereoisomer to react with rather than with both. (see

chirality) Energy crops Crops grown specifically for their fuel value. These include food crops

such as corn and sugar-cane, and non-food crops such as poplar

trees and switchgrass. Enzyme Protein molecules from a biological source used to catalyse

reactions between other molecules but which are not themselves

changed in the course of the reaction. Enzymes act as catalysts for a

single reaction, converting a specific set of reactants into specific

products.



BIOSCIENCE

EtOH See Bioethanol.

EU European Union.

Feed-in tariff Subsidy mechanism by which the regional or national electricity

companies are obligated to buy the electricity generated from

renewable resources by decentralised producers at fixed prices (the

feed-in tariffs) set by the government, The higher price helps

overcome the cost disadvantages of renewable energy sources. Feedstock A feedstock is any resource, petrochemical or bio-based, destined for

conversion to chemicals, plastics, energy or fuel. A bio-based

feedstock is any biomass resource which can be converted to bio-

based products, such as chemicals or plastics, energy or biofuel. For

example, corn is a feedstock for ethanol production, soybean oil may

be a feedstock for biodiesel, and cellulosic biomass has the potential

to be a significant feedstock for biofuels. Fermentation The cultivation of a microbe on a feedstock, usually a sugar. During

the fermentation process, the microbe may produce an array of

products, some of which may be biologically active (e.g. antibiotics)

or of other industrial interest (e.g. amino acids, organic acids and

ethanol) Microbial fermentations produces specific forms of the

product reliably and does so under mild conditions. Fine Chemical See Specialty chemical.

Fischer Tropsch (FT) Process

Catalysed chemical reaction in which syngas from gasification is

converted into a liquid biofuel of various kinds. Fossil fuel Solid, liquid, or gaseous fuels formed in the ground after millions of

years by chemical and physical changes in plant and animal residues

under high temperature and pressure. Oil, natural gas, and coal are

fossil fuels. Gasification Any chemical or heat process used to convert a substance to a gas

(CO, H2, CH4, etc) by reaction with steam, oxygen, air, hydrogen,

carbon dioxide, or a mixture of these.

Gasifier A device for converting solid fuel into gaseous fuel.

Greenfield A greenfield facility is one which is constructed and commissioned on

a site on which no previous facility exists. This is in contrast with the

retrofitting of an existing facility for a new purpose. Greenhouse gas Gases that trap the heat of the sun in the Earth's atmosphere,

producing the greenhouse effect. The two major greenhouse gases

are water vapour and carbon dioxide. Other greenhouse gases

include methane, ozone, chlorofluorocarbons, and nitrous oxide. GHG Greenhouse gas

β-Glucosidase The cellulolytic enzymes used in the hydrolysis of the cellulose

components of sugarcane bagasse to generate accessible sugars.

Glycoprotein Biological molecules which are composed of a protein with specific

sugar molecules attached. The number, type and means of

attachment of the sugars to the protein confer biological activity to

the protein (for example antibodies and many hormones).



BIOSCIENCE

GM or GMO Genetically Modified or Genetically Modified Organism.

Grid An electric utility company's system for distributing power.

GW Gigawatt A measure of electrical power equal to one billion watts (1,000,000

kW). A large coal or nuclear power station typically has a capacity of

about 1 GW.

Hectare (Ha) Common metric unit of area, equal to 2.47 acres. 1 hectare equals

10,000 square meters. 100 hectares = 1 square kilometre.

Hedging A strategy that eliminates a risk by ensuring that any profit or loss

on the current sale or purchase will be offset by the loss or profit on

the future purchase or sale. The overarching purpose is to protect

one’s business, assets or business transactions from adverse

changes in market prices. The basic principle of hedging is to take an

equal but opposite position on the market. Derivatives, such as

futures and options, are also commonly employed to reduce the risk

of a transaction. Hedging is widely used in merchandise,

commodities, and foreign exchange and securities transactions for

security rather than speculative purposes. Hemicellulose A polysaccharide made up of pentose sugars, which are 5-carbon

pentose sugars, mainly xylose but also arabinose

Heterocyclic A heterocyclic compound contains more than one kind of atom

joined in a ring, as found in benzene

Hexose 6-carbon sugars such as glucose.

High value molecules Bio-based molecules generally produced in low volume processes,

and may require little if any further transformation to be marketed

directly. Examples include amino acids, nutraceuticals essences, and

flavours, vitamins, enzymes and polymer monomers such as lactic

acid or polylactic acid (PLA). Hydrocarbon Any chemical compound containing hydrogen, oxygen, and carbon.

Hydrocracking see Hydrotreating

Hydrogen Simplest molecule with a molecular formula of H2. Gaseous fuel

that can be produced from fossil fuels, biomass and electricity.

Hydrolysis Pre-treated cellulose can undergo hydrolysis to release the

component hexose sugars from the cellulosic polymer, usually by the

addition of acid and/or enzymes. Hydrotreating A catalytic chemical process used in petroleum refineries for

converting the high-boiling constituent hydrocarbons in petroleum

crude oils to more valuable lower-boiling products such as gasoline,

kerosene, jet fuel and diesel oil. The process takes place in a

hydrogen-rich atmosphere at elevated temperatures (260 – 425 °C)

and pressures (35 – 200 bar). In planta The production of compounds within the cell of a growing plant.

Some of those compounds might be subsequently extracted, based

on their commercial value IEA International Energy Agency.



BIOSCIENCE

Incinerator Any device used to burn solid or liquid residues or wastes as a

method of disposal. In some incinerators, provisions are made for

recovering the heat produced.

Invert sugars Sucrose is made up of the two simple sugars, glucose and fructose.

These simple sugars are known as invert sugars and are derived

from the breakdown of sucrose. All three sugars are readily

fermentable. Ionic liquids See Ionic solvent

Ionic solvent Ionic solvents are chemically analogous to molten salts and so have

different properties to other commonly-used solvents such as water

and organic solvents. Unlike conventional molten salts which have a

very high melting point which greatly limits their usefulness, ionic

solvents remain liquid at or below room temperature. Many ionic

solvents can be recycled and reused repeatedly. Jatropha Jatropha curcas is a non-edible evergreen shrub found in Asia, Africa

and the West Indies. Its seeds contain a high proportion of oil which

are proposed for used for making biodiesel.

Joule Metric unit of energy, equivalent to the work done by a force of one

Newton applied over a distance of one metre (= 1 kg.m2/s2). One

joule (J) = 0.239 calories (1 calorie = 4.187 J).

kW Kilowatt. A measure of electrical power equal to 1,000 watts. 1 kW = 3.413

Btu/hr = 1.341 horsepower. See also Watt.

kWh Kilowatt hour. A measure of energy equivalent to the expenditure of one kilowatt

for one hour. For example, 1 kWh will light a 100-watt light bulb for

10 hours. 1 kWh = 3.413 Btu. Kyoto Protocol UN-led international agreement aimed at reducing GHG emissions.

LCA See Lifecycle assessment.

Lifecycle Assessment (LCA)

Investigation and valuation of the environmental impacts of a given

product or service caused or necessitated by its existence. The term

'lifecycle' refers to the notion that a fair, holistic assessment requires

the assessment of raw material production, manufacture,

distribution, use and disposal including all intervening transportation

steps necessary or caused by the product's existence. Lignin A compound that accounts for roughly 25 percent of all plant

material that provides rigidity and, together with cellulose, forms the

woody cell walls of plants and the glue that binds these cells. Lignin

is an excellent fuel and can be burned to provide heat, steam, and

electricity. Miscanthus Miscanthus or elephant grass is a genus of about 15 species of

perennial grasses native to subtropical and tropical regions of Africa

and southern Asia. The rapid growth, low mineral content and high

biomass yield of Miscanthus makes it a favoured candidate as a

bioethanol feedstock in some countries. MJ Megajoule (1MJ = 106J). See also Joule.

Moisture content The quantity of water contained in a material (e.g. wood) on a

volumetric or mass basis.



BIOSCIENCE

Molasses The black syrup derived from sugar processing by repeated

crystallization. The major constituents of molasses are sucrose and

invert sugars (40-60%). Monomer A monomer is the simple molecule which is the basic unit from which

large and complex polymers are made. Examples: the polymer

polylactic acid is a chain of lactic acid monomers; the polymer starch

is made up of sugar (glucose) monomers. When complex polymers

are broken down or degraded, the simple monomer subunits are

released. NatureWorks A proprietary family of polymers derived from polylactic acid, by the

joint venture of Cargill and Teijin. The biopolymer is sold as a

replacement for many applications which are currently based on

polyester, polyolefins, and polystyrene. Niche chemical See Specialty chemical.

O2 Oxygen.

Off-take agreement An agreement to purchase all or a substantial part of the product

produced by a project, which typically provides the revenue stream

for a project financing.

Oligosaccharide Biological molecule made up of a chain of simple sugars

Organic compounds Chemical compounds based on carbon chains or rings and also

containing hydrogen, with or without oxygen, nitrogen, and other

elements. Pentose Sugars with a five carbon ring. Pentose sugars occur in hemicellulose

PHA see Polyhydroxyalkanoates

Phenolic Compound with an aromatic ring such as benzene

Photobioreactor A reactor vessel which provides a closed, contained and managed

environment for the mass cultivation of algae and other

photosynthetic organisms. These vessels are generally a transparent

tubular system arranged to provide high light intensity, gas transfer

and mixing required for high biomass production. Photosynthesis Process by which chlorophyll-containing cells in green plants and

algae convert incident light to chemical energy, capturing carbon

dioxide in the form of carbohydrates.

Pilot scale The size of a system between the small laboratory model size

(bench scale) and a full-size system.

PLA see Polylactic acid

Plasticisers A substance added to plastics or other materials to make them more

pliable, to impart viscosity, flexibility, softness, or to rubbers and

resins to impart flexibility, workability, or stretchability. Platform compounds Those molecules which are used industrially as precursors for a

family of both bulk and fine chemicals. An example is succinic acid,

which is used as a starting material to generate an array of more

complex products used in plastics and fibers, resins, solvents, and

paints.



BIOSCIENCE

Polycarbonate Polymers containing carbonate groups (-O-(C=O)-O-). Polycarbonate

are a class of thermoplastics characterized by high-impact strength,

light weight, and flexibility, excellent electrical properties and a high

impact strength; used as shatter-resistant substitutes for glass. Polyester Polymers composed of repeated units of an ester. Conventionally,

polyesters are petroleum-based fibres with characteristics of

strength, resistance to abrasion and low absorbency. Polyether Polymers in which the repeating unit contains two carbon atoms

linked by an oxygen atom. Polyhydroxyalkanoates (PHA) A class of bio-based molecules, which can only be produced

by fermentation, and which are used to make bioplastics

Polylactic acid Polylactic acid (PLA) is a biodegradable, thermoplastic, aliphatic

polyester derived from renewable resources, such as corn starch.

PLA is a polymer composed of lactic acid monomers – lactic acid is

produced from a bacterium by fermentation. Polymer A polymer is a large and complex arrangement of many subunits or

monomers all linked together. Examples: the polymer polylactic acid

is a chain of lactic acid monomers; the polymer starch is made up of

sugar (glucose) monomers. When complex polymers are broken

down or degraded, the simple monomer subunits are released. Polyurethane Versatile polymers used as flexible and rigid foams, fibres,

elastomers (elastic polymers), surface coatings, and adhesives,

resins and glues. Polyurethanes are produced by reacting a

diisocyanate with a diol. First developed in late 1930s, polyurethanes

are now some of the most versatile plastic polymers. Pre-treatment The purpose of pre-treatment of lignocellulose is to solubilise the

lignin and hemicellulose and loosen the cellulose fibres. Pre-

treatment prepares the cellulose for treatment to release sugars

from this polysaccharide (hydrolysis) Process heat Heat used in an industrial process rather than for space heating or

other housekeeping purposes. Pyrolysis The thermal decomposition of biomass at high temperatures

(greater than 400°F, or 200°C) in the absence of air. The end

product of pyrolysis is a mixture of solids (char), liquids (oxygenated

oils), and gases (methane, carbon monoxide and carbon dioxide)

with proportions determined by operating temperature, pressure,

oxygen content, and other conditions. QSL Queensland Sugar Ltd

Ratoon Cane grown from the below ground portion of the plant from the

previous harvest REC Renewable energy certificates: an electronic, tradable commodity

equal to 1 Megawatt hour of renewable energy generation. A REC is

similar to a share certificate as it represents a unit of value and may

be traded for financial return. www.rec-

registry.gov.au/aboutRec.shtml Refining The conversion of crude sugarcane into sugars or other simpler

compounds for fermentation or transformation


http://www.rec-registry.gov.au/aboutRec.shtml

http://www.rec-registry.gov.au/aboutRec.shtml


BIOSCIENCE

Regioselectivity Refers to the highly selective mode of action of an enzyme in

selecting a specific a bond to make or break within a complex

structure, rather than acting at random. Residues By-product of agricultural cultivation (e.g. bagasse), farming

activities (e.g. manure) or forestry industry (tree thinnings).

Setts 300mm long cane stems used to initiate new sugarcane plants

Short rotation crop Woody biomass grown as a raw material and/or for its fuel value in

short rotation forestry. Steam turbine A device for converting energy of high-pressure steam (produced in

a boiler) into mechanical power which can then be used to generate

electricity. Specialty chemical Produced in smaller volumes than bulk chemicals, speciality or fine

chemicals are of correspondingly higher value per tonne. Production

methods are not as dependent on the differential between cost of

production and market price. Specialty chemicals are not available

from many suppliers, and are produced to meet customer's

application needs rather than what the manufacturer can make.

Specialty chemicals often are protected by patents. As the market

grows and patents expire, specialty chemicals begin to move more

into the realm of commodities. Subset is niche chemicals.

Manufacturers in the specialty chemical sector are more likely to

develop niches in which they excel in meeting specific customer

requirements.

Switchgrass A perennial energy crop. Switchgrass is native to the US and known

for its hardiness and rapid growth. It is often cited as a potentially

abundant 2nd generation feedstock for ethanol. Synthetic biology Biological research that uses molecular genetics to design and build

new biological entities such as enzymes, genetic circuits, and cells,

or the redesign of existing biological systems. Synthetic biology

builds upon advances in molecular, cell, and systems biology and

seeks to transform biology in the same way that synthesis

transformed chemistry and that integrated circuit design

transformed computing. Systems biology see Synthetic biology

Thermochemical Traditional chemical syntheses which are based on a series of

individual steps, each responsible for the transformation of a starting

material or intermediate to the next intermediate required in the

chain of synthetic steps required for product manufacture. These

conventional processes are energy-intensive, often with extreme

temperatures, pressures and pH conditions; inefficient, with

separation of the desired compound from a reaction mix required at

each step. Thermoplastic A plastic that softens when heated and hardens again when cooled,

such as polystyrene or polyethylene.



BIOSCIENCE

Torrefaction Mild pre-treatment of biomass at a temperature between 200-

300°C. During torrefaction of the biomass, its properties are

changed to obtain a better fuel quality for combustion and

gasification applications. VC Venture Capital Woody biomass Biomass from trees, bushes and shrubs.

World sugar indicator price

World sugar indicator price is determined by Intercontinental

Exchange, no11. The Sugar No. 11 contract (traded on the New York

Stock exchange) is the world benchmark contract for raw sugar

trading. The contract prices the physical delivery of raw cane sugar,

free-on-board the receiver's vessel to a port within the country of

origin of the sugar. Xylanase The enzyme used in the hydrolysis of the hemicellulose components

of sugarcane bagasse to generate accessible sugars.

Yeast Yeast is any of various single-cell fungi capable of fermenting

carbohydrates. Bioethanol is produced by fermenting sugars with

yeast.



BIOSCIENCE

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