REPLACING FOSSIL TRANSPORTATION FUELS WITH RENEWABLE ALTERNATIVES Svebio Advanced Biofuels Conference

Jaakko Jokinen, Pöyry Management Consulting Oy

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CONTENTS

Biofuels in the Nordics

Advanced biofuels as a key for decarbonisation

Biofuels in bioeconomy – CASE Finnish Energy and Climate strategy up to

2030

30/05/2017 SVEBIO 2017

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CONTENTS

Biofuels in the Nordics

Advanced biofuels as a key for decarbonisation

Biofuels in bioeconomy – CASE Finnish Energy and Climate strategy up to

2030

30.5.2017 SVEBIO 2017

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BIOFUELS PRODUCTION IN THE NORDICS

Food and feed based biofuels

production is marginal in the Nordic

countries which help in the transition to

sustainable fuels

Long traditions in biomass based

businesses has led to development and

building of number of advanced biofuel

plants

Current biofuels production in the

Nordics:

– Renewable diesel (HVO) ~500 000 tons/a

– Advanced ethanol ~50 000 ton/a

– Conventional ethanol ~200 000 ton/a

– Conventional biodiesel ~500 000 ton/a

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The Nordic companies are forerunners in European advanced biofuels development

ST1 Kajaani

UPM

Lappeenranta

Neste

Porvoo

St1 Pietarsaari

Kaidi Finland

Kemi

SunPine Piteå

Aditya Birla

Domsjö

SCA Obbola

Smart Fuel

Hönefoss

MEC (Dong)

Måbjerg Preem

Gothenburg

St1

Gothenburg

Renfuel

Bäckhammar

Silva

Greenfuels

Tofte

Lantmännen

Agroetanol

Norrköping

Suomen Bioetanoli

Kouvola

Perstorp

Fredrikstad,

Stenungsund

Borregaard

Sarpsborg

Advanced biofuels plants

Advanced biofuels projects

Conventional biofuels plants

Emmelev

Odense

St1

Small waste based

ethanol plants

(5 plants)

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BIOFUEL POLICIES IN THE NORDICS

30.5.2017 SVEBIO 2017

Different approaches towards biofuels have been pursued in the Nordics

Biofuels mandate for

biofuels and advanced

biofuels

Tax exemptions for biofuels

and electric vehicles

Specific sustainability

criteria for HVO

Biofuels target 20% by

2020

Biofuels mandate following

the target

Double counting of

advanced biofuels

Tax differentiation for

biofuels

Biofuels mandate for

biofuels and advanced

biofuels

Tax regulation mechanism

for biofuels

Premium tariff for biogas for

transport

No separate biofuels target

Tax exemptions for biofuels

“Pump-law” for alternative

fuels at fuelling stations

Biofuels mandate in place

Double counting of advanced biofuels

No domestic production

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SVEBIO 2017

BIOFUELS IN THE NORDICS

Biofuels consumption in the Nordics has grown

despite of mixed regulations

Biodiesels

Biogasoline

Gas/diesel oil (without bio components)

Gasoline (without bio components)

Biofuels share

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CONTENTS

Biofuels in the Nordics

Advanced biofuels as a key for decarbonisation

Biofuels in bioeconomy – CASE Finnish Energy and Climate strategy up to

2030

30.5.2017 SVEBIO 2017

COPYRIGHT©PÖYRY

EU-28 transport sector energy demand by fuel

ADVANCED BIOFUELS ARE SEEN AS ONE PILLAR FOR

LOW-EMISSION MOBILITY

The European strategy for low-emission mobility will

focus on road transport as it is responsible for over 70

% of the transport sector GHG

Advanced biofuels create an opportunity for innovation

and new jobs, as well as reduced dependency on

imported oil

One key criteria for growth of advanced biofuels is the

effective framework for selected support schemes

such as blending mandates or CO2 reduction

obligations

At the same time Commission is focusing on gradual

phase out of 1G biofuels and wants to accelerate the

electrification of the transport sector

In the medium-term, advanced biofuels will be

particularly important for aviation as well as for heavy

road traffic

It is not Biofuels or electrification – both are

essential to achieve 30-40% decarbonisation of

the transportation sector

Source: European Commission, EU Reference scenario 2016

30.5.2017 SVEBIO 2017

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CHANGING ENERGY AND CLIMATE POLICY IN THE EU

SVEBIO 2017

The regulatory context is changing post-2020; this is opening up new opportunities

for the development of advanced biofuels

ILUC amendment: • 7% of 1G biofuels

• 0.5% of 2G biofuels

(indicative sub-target)

2009 2020 2030

Targets by 2020: • 20% GHG emissions reduction

• 20% of RES in energy

• 10% of RES in transport

2020 package

2030 package

2014

Targets by 2030: • 40% GHG emissions reduction

− 43% in ETS

− 30% in non-ETS

2015

Current regulation Future regulation

1 2

3

RED II: • 3.8% of 1G biofuels

• 6.8% of 2G biofuels

4

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EU 2030 PROPOSAL FOR BIOFUELS

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Commission’s proposal sets new targets by biofuel categories that highlights the

importance of wood and agricultural residues based biofuels commercialisation

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STATUS OF WOOD BASED ADVANCED BIOFUELS

Wood based biofuels have been developed to industrial

demonstration but the flagship projects have not

materialised

Business risk caused by political uncertainty, high

capital costs and technology risks have delayed market

entry of wood-based biofuels

New emission reduction targets and need for

decarbonisation of transport could bring new interest

towards sustainable wood based biofuels

Challenges in sourcing of vast amounts of agricultural

residues has created more interest towards woody

biomass as feedstock

Focus in feedstock is shifting towards forest industry

residues and by-products (e.g. black liquor from pulping)

30.5.2017 SVEBIO 2017

Sustainability concerns require strong shift towards non-food feedstocks

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CONTENTS

Biofuels in the Nordics

Advanced biofuels as a key for decarbonisation

Biofuels in bioeconomy – CASE Finnish Energy and Climate strategy up to

2030

30.5.2017 SVEBIO 2017

COPYRIGHT©PÖYRY

NATIONAL ENERGY AND CLIMATE STRATEGY TOWARDS 2030

The aim is to reach Government and EU 2030 targets

Implementation from 2017 onwards

Emphasis on reducing CO2 emissions and promoting renewable energy

– Investment subsidies to biorefineries etc.

– Limited production aid for renewable electricity in 2018-2020 (tendering, technology

neutrality)

– Transport fuels: at least 30 % renewables by 2030 (especially through biofuel

blending obligations)

– Phasing out the use of coal in energy production by 2030 (with some conditions

regarding things such as security of supply)

– Halving the use of imported oil for energy

– Promoting biogas

How do these targets align with overall “Bioeconomy” growth targets?

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Approved by the Government on 24 November 2016 as a Report to the Parliament

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BIOFUELS IN FINNISH BIOECONOMY

Wood consumption in Finland is estimated to grow by 2030 driven by the new pulp

mills that create by-products for advanced biofuels and other bio-products

History source: Luke

30.5.2017 SVEBIO 2017

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WOOD DEMAND OF ADVANCED BIOFUELS - SCENARIOS

30.5.2017 SVEBIO 2017

Wood based biofuels production will support forest industry growth in low scenario

but the higher production volumes will limit the growth of pulp production

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SUSTAINABLE BIOFUELS NEED RELIABLE MARKET MECHANISMS

TO REACH THE SET TARGETS

30.5.2017 SVEBIO 2017

Decarbonisation of transport sector drives sustainable biofuels demand

The need to limit global warming is the main growth driver for biofuels

Paris Agreement is creating pressure to decarbonise also the transport sector where biofuels

may play a key role

Food vs. fuel debate has shifted the mandated demand towards advanced biofuels

Regulated market mechanisms have not catalysed growth of supply

Production costs of advanced biofuels are higher than for conventional biofuels or fossil fuels and they

need solid market mechanisms that guarantee premium pricing

US RFS policy and Californian Low Carbon Fuel have created first functional pricing mechanisms for

cellulosic fuels

Investors need more than one market in order to secure take-off and competitive pricing

Lignocellulosic biofuels are needed post 2020 to decarbonise transport

Lignocellulosic biofuels are required if biofuel mandates are raised to decarbonise transport

Growing biofuels demand cannot be filled solely by increasing the utilisation of imported advanced

feedstocks for existing HVO refineries

Categorisation of advanced biofuels based on feedstocks require reliable mechanisms and rules in order

to achieve bankability for wood based biofuel projects