Parratt & Associates Scoping Biorefineries: Temperate Biomass Value Chains

Chapter 7. Challenges and Opportunities for Temperate Biomass Value Chains

7.1 Valuing the Temperate Biomass Value Chain

The WEF study on identified a value chain for US$295 B/y from the transformation of biorefineries to bioproducts from biorefineries. Information in Chapters 3-5 of this report provide a basis to estimate the scale and potential dollar benefits from establishing a temperate biomass value chain through to pre-customer supply. In Chapter 3 we estimated the extent of the temperate biomass that would be available immediately and by 2020. There is an estimated 20.8M tonne/y growing and up to 36.8M tonne/y if dedicated bioenergy plantations were established on 5% of the current cleared crop and grazing land by 2020. The latter also includes 6M tonne/y projected to be available from hardwood plantations.

Figure 7-1: Estimates of revenue from a temperate biomass value chain in 2010 and 2020 in Billions.

Note: These are gross values and do not include capital costs for establishment, taxes or incentives. Data are in Appendix 3.

This simple analysis does assume certain conditions and decisions prevail with respect to policy, economics and investment in the establishment of the value chain. Firstly, growers of crops and forests perceive the average returns set out in Table 3-6 (Chapter 3). Secondly, the transport returns are sufficient to warrant investment by logistic owners. These volumes of biomass would require significant investment in trucks, rail and possibly intermodal hubs. Thirdly, the returns from adding value at a biorefinery assume that biorefineries of sufficient scale and efficiency can be established. Importantly, consideration would have to be given by any operation to the potential for commoditisation of products that may be produced.

As discussed in Chapter 4 Greenfield development to establish a biorefinery capable of processing 1 M tonne of dry biomass per year could cost in excess of A$1billion. The retrofitting an existing pulp mill could cost between A$500M and A$750M in 2010 dollar terms. Using the NREL estimates of costs the annual operating costs to produce 1MT of ethanol would be A$658.4M or $0.66/l.

To utilise all of the temperate biomass available within Australia would require 10-15 biorefineries of 1 MT /y and, as such is significant scale. Though this would appear an insurmountable task, this should be considered an end-point is some years away and is seen as the logical transition from smaller scale facilities to larger to achieve efficiencies of economics and scale. On the path to these larger aggregations smaller niche producers could deliver a range of fine and speciality chemicals. As stated in Chapter 4 a number of commercial scale plants focussed on speciality products from first generation conversion technologies are apparently viable (Dupont 45kT/y 1,3 propanediol output).

From an employment perspective the development of these bio-refineries, again using the Gunn’s mill²³² as an example could create an additional 2000 jobs per 1 M dry tonne/y biorefinery or up to 40,000 jobs by 2020 if all biomass was available for onshore manufacturing. Estimates were for up to an additional 1400 jobs in Tasmania during construction. These figures do not account for possible flow on effects into the chemicals and plastics sector and are considerably higher than those forecast by the Clean Energy Council education appraisals. Critics in their submissions to the Gunn’s Impact Statement have queried estimated job numbers. However, if the A$20B target were achieved then at 1 job per $500,000 turnover 40,000 jobs would be involved in the bio-based product value chains. Current EU data suggests sales of 1.5M Euro per worker in the chemicals and plastics industry. This would reduce the number of potential direct jobs to approximately 10,000²³³. There would be job replacement and redeployment from current biomass collection, transport and downstream processing. However, the majority of these would be green jobs based on renewable resources. These numbers are at odds also with the Clean Energy Council predictions on jobs from bioenergy consideration needs to be given to the both the scale and benefits from producing bio-based products particularly chemicals. The chemicals and plastic industry currently employs over 83,000 workers. The Clean Energy Council figures are for bioenergy only, a comparatively simple process and no indication was made of the flow on post-production jobs.

In Chapter 5 the products, their current and forecast value and capability for being produced from a temperate biomass value chain were examined. The estimates in Table 7-1 for the revenue per tonne of cellulose or lignin are conservative. The Gunn’s Bell Bay pulp mill is based on receiving $600 per tonne for air dry pulp (which consists of sugars of cellulose and hemi-cellulose). Industry leaders have suggested that a target price for sugars delivered to a biorefinery using fermentation would be A$248 per tonne. This is just below two thirds of the current spot price for sugar. From this base, products such as 1, 3 propanediol (used in a range of consumer products including; carpets, food packaging) sell for in excess of A$2,800 per tonne²³⁴. The estimated return from furfural (used for coatings, polyesters) at the northern Queensland plant is estimated to be A$2,500 per tonne using bagasse as a base.

An alternative approach is to examine the development of the industry of current import replacement. The data presented in Chapter 5 would suggest that bio-based products could replace a large proportion of the current imports for platform chemicals, representing several billion dollars. Whether these can be produced at competitive prices to the current scale of manufacture off-shore is open to debate.

These revenues and opportunities for employment creation along the value chain through new ‘green’ industrial development are enticing. There are existing industries that will be better able to capture the opportunities than others; however the nature of the new product development and the reshaping of the supply chains will provide new growth potential. New alliances between technology providers, biomass providers (grain producers, foresters), chemical companies and consumers will emerge. These changes will involve the community and legislators through a variety of mechanisms.

Consultations and workshops held over the past 12 months examining the potential for the development of the bioeconomy and industrial biotechnology incorporating biomass transformation have identified a range of issues and opportunities for industry development. The detailed output from two workshops and a summary of the key discussion points from consultations with industry and non-government organisations are provided in Appendix 4. There is significant industry and academic interest and support for the development of biomass transformation to bio-based products. The challenge is solidifying this into a cohesive and focussed effort across the value chain.