Europe's Bio Opportunity: Closing the Demo Gap

Executive summary (1/2)
The climate challenge The EU has set an ambitious target to reduce GHG emissions and oil dependency The key to achieve this goal is to establish a biobased economy that focuses on replacing oil in all applications including plastics, chemicals and other materials Europe is well positioned to spearhead the development of a new bioeconomy1 with world leading companies in the biochemical industry and strong agricultural industry However, the EU risks falling behind the US, Brazil and China as the development of the bioindustry is facing a major barrier due to the lack of demonstration facilities to mature technologies and commercialization It is urgent for Europe to capture the economic and environmental benefits arising from its research investments There is a gap in demonstration scale second generation biorefineries focusing on the production of high value products like chemicals, materials and fibres The industry is willing to invest but lacks public funding support to realize projects The bioindustry has come together to promote this goal (e.g. via EuropaBio)3 The ambition is to see at least two lignocellulosic demonstration scale integrated biorefineries within the following value chains: Biological enzymatic conversion of agricultural residue, hard wood and energy crops into C5 and C6 sugars and ultimately chemicals, materials and energy. The investment would be approx. 25-50 million2 per biorefinery Thermochemical conversion of wood and black liquor into chemicals, materials, fibres and energy. The investment would be approx. 150-200 million2 per biorefinery
Europe has great potential but risks falling behind Gap for demonstration biorefineries focusing on non-energy
1. Defined as an economy that does not base itself on oil but on renewable biomass. This includes bioenergy, biomaterials, chemicals, etc. 2. Rough estimate for new demo biorefinery the size of 10 tons of dry biomass per day for biochemical and 100 tons per day for thermochemical 3. However, the group present is mostly focusing on biochemical conversion as there are few representatives of the forest based sector. This group is therefore keener to support a biochemical conversion facility.
Executive summary (2/2)

Join the EIBI To avoid falling behind the global competition, Europe needs to start demonstration activities as soon as possible In the short-term the best option is to join the European Industrial Bioenergy Initiative (EIBI) to establish integrated demonstration scale biorefineries producing both bioenergy and biochemicals/materials. This will imply establishing several smaller consortia with bioenergy producers and other key stakeholders around targeted value chains In the medium to long term (funding windows opening 2013) the most attractive option is to foster the launch of a tailored European Biorefinery Initiative (EBI) similar to EIBI but focused on non-fuel biorefineries in the biobased economy The bioindustry along with Research Technology Organizations (RTOs) and member states in dialogue with EC could establish a European Biorefinery Initiative (wider than EIBI, focused in the biobased economy) under the European Strategy for Bioeconomy. The outcome of this process remains uncertain Alternatively establishing a PPP or encouraging a joint FP8 call for demonstration scale biorefineries could be viable options Both PPP and FP8 are in the process of being defined and the outcomes remain uncertain Previous PPPs (called JTI) have been deemed bureaucratic and are not likely to continue. The EC asks for input to redesign the PPP facility Using FP8 for biorefinery investment would require an expansion of funding eligibility from research to Capex The industry needs to collaborate to establish the framework for these funding opportunities These funding options leave room for multiple sub-consortia to establish different demonstration facilities tailored to their demonstration needs without compromising IP These consortia will define detailed technical design and locations for demonstration facilities according to their members priorities Industrys immediate next steps are to align on the strategy to pursue
Start dialogue for FP8, PPP or a tailored European Biorefinery Initiative (EBI)
Joint effort for multiple demo projects
Agenda
1. Vision 2. Design and cost 3. Funding options 4. Location analysis 5. Governance models 6. Implications and implementation plan Annex A: Back ups
2nd generation biofuels are needed to address a range of global challenges
The world is facing many severe challenges Threat of climate change and environmental degradation
that 2nd generation biofuels can help to address Address climate change through emission reductions (GHG potential of -60% to -100%) No competition with food security (e.g. 1st generation crops) Stimulation of economic growth in agricultural and biochemical industries (green growth), with economic potential estimates of $300-400 billion1
High volatility of energy, commodity and food prices

Economic dependency on foreign oil / lack of energy security Global economic slowdown / recession
Decrease of oil dependency from high risk countries
1. McKinsey growth scenario for WEF, ADL Green Boom scenario Source: World Economic Forum, McKinsey
Europe is well positioned to exploit the bio-opportunity, but risks falling behind other countries
Europe is well positioned to spearhead development of a 2nd generation bioeconomy. Sophisticated agricultural sector with large availability of feedstock Strong network of biochemical clusters Strong commitment to GHG reduction Dominant market position in key technologies and inputs (e.g. Enzymes, biotechnology) Strong commitment to stimulation of EU R&D agenda in general and the knowledge-based bioeconomy in specific but risks falling behind Brazil, China and the US Brazil, China and the US invest heavily in biorefineries from an economic and global security perspective A substantial part of their funding is directed at closing the gap between research and commercial application Strong progress on first generation biofuels High ambitions and targets for the replacement of fossil transportation fuels Government support (e.g. through public technology grants) and tax credits Large-scale investments in biorefineries, often with participation of EU based companies implying a substantial risk for Europe losing the knowledge it has invested in building through research However, they are mostly focused on biofuels and less on other products leaving an attractive niche for Europe
Note: By 2020, the EU expects 20 percent of its power to come from renewables, part of which will have to be delivered by power derived from biomass. Additionally, 10 percent of all transportation fuels should come from renewable sources, which will require a substantial increase in penetration of bio fuels 5
Brazil, China and the US are making significant public investments in bringing biorefineries to commercial scale
US High targets for the replacement of fossil transportation fuels Wide range of support schemes including grants, tax credits, loan guarantees, etc Focus: bioethanol Public support last 5 years: ~ 1.2 billion EU High targets for the replacement of fossil transportation fuels Focus: biodiesel/ biochemicals Public support last 5 years1: ~ 200 million
BRAZIL World leading first generation biofuel production Some commercial 2G bagasse refineries in operation Aggressive government growth targets for bioethanol by 2025
CHINA Large-scale investment in biorefineries Plan to substitute 20% of crude oil imports by 2020 Target of 1.7bgy ethanol by 2010
1. Estimated funds provided by FP6 and FP7 to biorefinery-related projects Source: US Department of Energy, EU, World Economic Forum, Bio-economy.net
For example the US has multiple support mechanisms for the biorefinery industry focusing on demonstration and commercial application
US approach to biorefineries Mainly for solving national security issue of foreign oil dependency Focused on biofuels and bioethanol in particular Started under Bush administration and continued under current Support programs boosted with the Economic Recovery Act or 2010 granting USD 564 million to biorefinery projects Program (start year) Renewable Fuel Standard Description Goal to produce 36 billion gallons of biofuels by 2022 Act to favour biobased products over alternatives in public procurement Cataloguing and labelling products based on biorefinery ingredients Lucrative support for farmers to transition to energy crops USD 2-300 million per year support to 2nd generation biorefineries (mainly demo) Loan guarantee to finance commercial scale biorefineries Government institution US gov Dep. Agriculture
Low High
Estimated Impact* Potential
Demand
Bio-preferred procurement (2002) Bio-preferred labelling (2002) Biomass Crop Assistance Program (2008) Biomass Program
Dep. Agriculture
Dep. Agriculture
Dep. Energy
Supply
Clean Energy Loan guarantee (2007)
Dep. Energy
Biofuels Loan guarantee

Corn Ethanol tax Credit
Loan guarantee to finance 2nd generation biorefuel plants

Applies to all biofuels 0.45 $/gallon
Dep. Agriculture
IRS
Cellulosic Ethanol tax Credit
1.01 $/gallon production tax credit terminates 2012
IRS
* Impact to date some programs have only been starting slowly and are therefore not showing too much impact yet Source: interview with BIO; Dalberg analysis
Overcoming the gap from research to funding (called the valley of death) requires co-investments from public and private stakeholders
Governments
Financing, technology, ideas
Markets
Number of projects
Research and Development
Demonstration
Deployment
Diffusion
Graphics: Mercer
2nd generation biorefineries align with EU priorities, but demonstration-scale biorefineries are needed to overcome the valley of death
Strong alignment with EU core priorities. The EU has defined three ambitions for 2020, which are linked to the biobased economy and 2nd generation biorefineries: 1. Smart growth: developing an economy based on knowledge and innovation but interventions need to be targeted, and aligned with other initiatives There is much research related to 2nd generation biorefineries in Europe (see next slide) However, there is a valley of death between early stage research and commercialization that requires intervention, especially outside the biofuel space (sustainable chemicals, biomaterials and fibres) This project is a feasibility study to investigate the opportunities to promote demonstration scale integrated lignocellulosic biorefineries in Europe This report lays out the vision, technical value chains and capital investments required as well as the funding options, implications on governance and implementation paths
2.
Sustainable growth: promoting a more efficient, greener and more competitive economy
Inclusive growth: fostering a highemployment economy delivering social and territorial cohesion
3.
Funding mechanisms
Current landscape of biorefinery initiatives in Europe

European Union
BioCore EuroBioRef
Fuel Chemicals Mixed outputs NOT EXHAUSTIVE

BioSynergy
NER300
FP6 - FP7
EuroBioRef BioCoup SupraBio Leibniz Inst fuer Agrartechnik Icelandic biorefinery BioBase Europe CPI
EIBI
SupraBio Research projects Belgium (>20) Finland (>50) France (>20) Germany (>10) Sweden (>10)
Europe
Icelandic biomass Biorefinery Ireland BioMCN Nuon Europe BioHub Rotterdam Brensbach Abengoa Roquette/DSM Innventia
Sud Chemie
National funding (e.g. FNR - Germany, Nordic Energy Research, BOF - Belgium, BBSRC -UK, etc.)
BE Basic Inbicon
Company
Procethol 2G
DTU/BioGas Sekab
Sud Chemie
Inbicon Biogasol NSE Biofuels BioAmber Solvay Bio T-Fuel FMS Chemrec ARD Biodemo GoBioGas BPS
TMO
Research
Pilot
Demonstration
Europe is still far from a biobased economy despite the number of initiatives and funding mechanisms: Most facilities focus on biofuels Most funding is for research activities, rather than demonstration facilities
10 Source: Star Colibri, Dalberg research
Establishing a strong biobased economy in Europe would have significant impact on the environment and oil dependency
Less petroleum used in the production of plastic from natural feedstock (corn) Less emissions in the production of propanediol from natural resources
Industrial biotechnology will bring environmental advantages to a number of industries (e.g. plastic production, textile, pulp and paper production industries, biofuels, etc.) Despite the early-stage technology, biotechnology already shows environmental benefits when compared to business as usual processes based on oilderived chemicals
Source: EuropaBio
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and create employment and jobs

Potential socio-economic impact of 2nd generation ethanol on EU in 2020
Building a strong biobased economy in Europe will create both revenues and jobs directly and indirectly Next to direct jobs, a biobased economy will also increase farmer income and improve economic activity in developing rural regions
Note: The numbers of biorefineries are determined by the ability of each region or member state within the EU27 to supply bioproducts. Jobs in the chart represent the total man-years of employment between 2010 and 2020, not the number of jobs in 2020 alone. Included jobs are in management, operation and construction of the biorefineries. Revenues are per year Source: Bloomberg
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Agenda
13
Technical design and capital investment summary

There is significant technological and commercial uncertainty (and diverging opinions) on the most promising technologies and feedstock to create the 2nd generation biobased economy
Project participants have different aims with regards to "what to prove" in a demonstration biorefinery Different foci along the value-chains (e.g. input, conversion technologies, output) Diverging preferences between testing specific proprietary technologies vs. testing the overall paradigm Different approaches to proprietary information and intellectual property The focus on different stages of the value chain encourages collaboration. However, to accommodate the other differences, at least two facilities are needed: Biological enzymatic conversion of agricultural residue, hard wood and energy crops into C5 and C6 sugars and ultimately chemicals, materials and energy. The investment would be approx. 25-50 million1 per biorefinery Thermochemical conversion of wood and black liquor into chemicals, materials, fibres and energy. The investment would be approx. 150-200 million1 per biorefinery However, given the group involved there is divergence on the specific technical design, which should probably be resolved in smaller consortia A joint, consensus-focused design would probably be a slow process and might lead to an ineffective and expensive compromise Our recommendation would be to work through competing sub-consortia (potentially including other stakeholders) Choice of technical design should be driven by the desired output production in the sub-consortia and the feed stock available in the chosen region
1. For a new biological enzymatic biorefinery the size of 10 tons of dry biomass per day the capital investment required will be in the range of 25-50 million. For a new thermochemical facility at 100 tons per day the capital investment is likely to be 150-200 million. If feasible to build on existing facilities investments required will drop substantially
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Observations on capital requirements

The economies of scale, learning and scope of biorefineries. Strong economies of scale: A facility twice the size will only be ca. 1,6 times the cost (scaling factor of about x0,7) Strong economies of learning: The first ever facilities built will be considerably more expensive than later facilities. Similarly, building on existing facilities will allow building on accumulated knowledge and skills Low economies of scope: There are hardly any investment synergies to co-locating a full biochemical and thermochemical biorefinery Synergies of co-location: Expanding / adjusting existing facilities can significantly lower the investment required Ideal demonstration scale depends on product: Size required for demonstration depends on what needs to be demonstrated for further scale up which will vary greatly with product and technology
15
point towards at least two pilot scale refineries To test both the biochemical and thermochemical value chains, it will be necessary to establish at least two specialized facilities As the demonstration scale facilities will be firstof-a-kind, and relatively small, they will be more expensive per unit produced than later facilities Building on existing facilities will lower capital investment required significantly
Value chains agreed and capital investments needed

Feed stock Sugar based biochemical integrated biorefinery Must have Agricultural residues, e.g. Wheat straw, bagasse etc. Hard wood / processed residue from paper industry Municipal waste Algae Energy crop Biological enzymatic conversion Steam explosion Waste treatment Thermochemical route in parallel Biological acidic Combustion Gasification Fermentation On-site enzyme production Fine chemicals Bulk chemicals Heat & power Materials Biofuels 10 tons of dry biomass per day 25-50 million Conversion technology Output Size Capex estimate (new biorefinery)
Nice to have
Additional feed stock + 3-12 million
Thermochemical integrated biorefinery Must have
Forest resources Black liquor
Biological enzymatic conversion Pyrolysis Gasification

Integrated biochemical conversion
Fibres Chemicals Materials Biofuels
100 tons of dry biomass per day
150-200 million
Nice to have
Multiple wood types
NB: The biochemical conversion does not include facilities for on-site enzyme production Source: Capex survey, technological survey, team analysis
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BACK UP
Investment breakdown per value chain

Sugar based biochemical integrated biorefinery, 10 tons of dry biomass per day
1. Feedstock handling Storage Crushing Pre-treatment 2. Hydrolysis Hydrolysis Intermediary product 3. Upgrading Distillation
Total cost 25-50 million
End products Ethanol Biodiesel Chemicals Fibre materials Heat Power
Fermentable sugars (C5,C6) Fermentation/ Lignin combustion/ estherfication/
Waste water treatment Conversion of stillage + +
7-12 million
5-25 million
10-15 million
Total cost 150-200 million
Thermochemical integrated biorefinery on wood, 100 tons of dry biomass per day
Storage Crushing Thermal treatment Syngas Fibre Ashes & impurities Synthesis Destillation
Conversion of stillage + +
Ethanol Biodiesel Chemicals Fibre materials ...
~ 30 million
70-100 million
40-70 million
Source: Capital Investment survey among experts, interview with Andritz, analysis of existing biorefineries
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Alternative: Build on existing facilities
Examples Co-locate with complementary industrial facilities Pulp & paper production Heat & power Agricultural processing, e.g. mills, first generation biorefineries, etc.
Synergies achieved Savings on capital infrastructure such as: Silos for feedstock storage Boilers Power plants Waste water treatment facility Access to feedstock supply Reduction in Capex (almost no investment needed except modifications to existing plant) Reduction in time to start testing operations Leverage skilled staff and experience build
Reduction of Capex needed Savings of 20-80% of new capex cost depending on level of synergies
Build on existing demonstration scale biorefineries
CPI BE Basic Bio Base Europe BioDemo
Savings of 50-90% estimated depending on match of current facilities
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Agenda
19
Funding options executive summary

The large size, significant risks, system-wide benefits, and positive externalities linked to biorefinery investments point towards a pooling of private and public investments EU has funded biorefinery related research in various ways FP7 invested 182 million in biorefinery-related projects, incl. 53 million to SupraBio, BioRef, EuroBioRef and StarColibri FP6 allocated 14.6 million to Biosynergy and Biocoup European structural funds support biorefinery-related projects as well Member states have been the main public funding source, supporting ~80% of EU biorefinery related projects However, most biorefinery-related funding has been dedicated to biofuel projects and research activities, rather than nonfuel products and demonstration scale testing
The European Industrial Bioenergy Initiative (EIBI) is the best option in the short-term. A tailored bioindustry initiative (EBI) would be better in the long-term. FP8 or PPP funding in the long-term are potential long-term options as well
The EIBI is already underway and is likely to open up funding before 2014. Although primary focus is on bioenergy, there is funding space for the biochemicals and materials
A tailored bioindustry initiative (EBI), the FP8 and PPP require changes to current programs and the outcome is uncertain A tailored bioindustry initiative build on the model of the EIBI would be a new initiative and as such the success is depending on broad support Previous PPPs (called JTI) have been deemed bureaucratic and are not likely to continue. The EC asks for input to redesign the PPP facility Using FP8 for biorefinery investment would require an expansion of funding eligibility from research to Capex investment
20
Key assumptions behind recommendations

Assumptions Design criteria Demonstration of technologies is the crucial last step before commercial application. The large size, significant risks, system-wide benefits, and positive externalities point towards a pooling of private and public investments to overcome the valley of death The global competition for successful technologies based on lignocellulosic feedstock is fierce and time is a factor It will be valuable to engage in short-term opportunities for demonstration The stakeholders involved in this project want to see integrated lignocellulosic biorefineries at demonstration scale in Europe and they will cooperate to promote it However, companies are also representing competing technologies. Funding options should accommodate multiple consortia of stakeholders Not all stakeholders involved are interested in owning and running a demonstration facility longer term
Scarcity of resources
Funding options should:

Fit the technical requirements Accommodate multiple consortia and multiple facilities to test competing technologies Leverage funding from both the EC and member states
Urgency
Collaboration and competition
Allow industry co-funding across the value chain to pool resources and expertise
Focus on short-term options as well as long-term
Long-term ownership
Source: Interviews with steering group members, steering group meetings, Dalberg analysis
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Criteria to evaluate options
Sub criteria
Evaluation Does the funding option enable demonstration at the right scale and of the desired technologies and products? Does the funding option make it possible to accommodate the different conversion technologies highlighted in this group? When will the grant realistically be awarded and what is the length of the process?
Fit
Technological match
Accommodation of multiple technology requirements Timeline
Timing
Feasibility
Additional funding needed
How much additional funding needs to be raised, and from which sources? Does the funding option require additional public or private partners and how much involvement is required from the partners?
Additional partners (private and public) needed
22
Overview of public funding sources

Funders EU funds Examples NER300 grants FP7 JTI Structural funds, incl. Interreg Main funding for biorefinery related projects1 13%
Focus of this analysis
The majority of current funding comes from member states Loans from the EIB have not yet been available (high risk profile), even after RSFF
Grants
EU mandated, member state granted Member state funds
1%
Art. 185 initiatives National research entities such as FNR (Germany), Nordic Energy Research, BOF (Belgium), BBSRC (UK), etc. Loans and loan guarantees
86%
European Investment Bank Public loans Risk Sharing Finance Facility (under EIB)
None to date
This split of funding sources stresses the need to include member states in the strategic considerations for funding options
Funding for high risk research, development and innovation Risk shared with EC through capital cushion of 2 billion
TBC
1. Main funding source for current biorefinery research projects. Percent counted as number of projects not percent of total funding. Source: Star-Colibri D2.3 - Preliminary report on the global mapping of research projects and industrial biorefinery initiative s
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Implications of national versus EU funding

Ideal consortia Implications Typical funding options Capex: National member states funds Co-funding from regions/ municipalities Structural funds (e.g. Interreg) as top up Opex: In kind from local universities and companies Potential to apply EU research funds For example: NER300 grants FP7 JTI Limited track record of support to Capex for demonstration activities (EU mostly funds research) The EU is likely to have less funds available in 2014 than 2013
24
Member states funding
Majority of consortia members Location needs to be within located in one country or a few country or at border bordering countries Project focus need to be aligned Involvement from multiple local with: stakeholders (e.g. farmers, local Local resources (feedstock universities, local governments, available and prominent local national private sector, etc.) industry) Local political priorities (e.g. Example: Bio Base Europe Energy targets, research agenda, policies for regional and industrial development etc.) Members of consortia from several EU countries Often including research partners from countries involved Example: SupraBio project (launched under EC call for sustainable biorefineries) Location less determined, but regional development priorities could play a role Project focus need to match existing priorities and mechanisms The EU does not support research or demonstration of 1st generation biorefinery
EU funding
Source: Dalberg analysis
Funding options
Timing of grant Program/facility CPI, BE-Basic, BioBase Europe, ARD, etc. European Industrial Bioenergy Initiative (EIBI) Tailored European Biorefinery Initiative (EBI) Options to use
Primary recommended options Best alternative options Estimated match
High Low
Short term (2011-13)
Work with/build on existing facility with potential support from FP7 call Establish consortia to answer EIBI call for demo facility Engage EC to include this initiative under the European Strategy for Bioeconomy Invoke a member state to support a biorefinery project Engage in FP8 dialogue to help define early FP8 call for demo biorefineries Help design new PPP instruments Form coalition to apply in 2014
Establish demonstration scale lignocellulosic biorefineries producing chemicals and materials
Medium term (2013-15)
Structural funds
FP8 call for biorefineries focused on non-fuels Long term (2015-) PPP for demo biorefineries focused on non-fuels NER300 Article 185
Establish consortia for next NER300 call Invoke national research support to form partnership Invoke national research institutions to establish joint call
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ERA Net Plus
Description of short-term funding options

Program Build on an existing facility Description Existing European facilities could host demonstration activities In most cases this would require expansion of facilities to match scale and technical requirements Ongoing SET-plan initiative to promote demonstration scale biorefineries to convert lignocellulosic material to bioenergy Has defined seven value chains with a demonstration scale and flagship initiative for each Could build on existing facilities Funds available Not applicable How to obtain support
Primary recommended options Best alternative options
Establish private consortia, define project and negotiate with existing facilities Apply to relevant FP7 call (if any)1. Alliance with existing facility enables to apply to small calls
Join EIBI (European Industrial Bioenergy Initiative )
Funding mandate but no funds allocated yet Member states allocation based on interest generated by EOIs Public funding for up to 50% of capex Expected size of grants2: 10-20 million for demo plants
Establish dialogue with EIBI to integrate this groups ambitions and co-funding options Partner with biofuels companies and member states for integrated biorefinery project Ensure member states support to proposed project and consortia as soon as possible Apply to EIBI Expressions of Interest and Calls
1. There might be an FP7 call to allow for targeted adjustments but not for building of new facilities 2. Typical size of grants allocated per project Source: Dalberg analysis, EU
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BACK UP
European Industrial Bioenergy Initiative (EIBI)

Value chains included in EIBI program About EIBI Funding Funding platform rallying and focusing support, but with no funding pool dedicated at this time Project funding will be 50-50 publicprivate Most EIBIs public funds will come from member states Member states will decide the amount of funding granted, based on project descriptions (EOIs) and national interests Most national funding will be linked to specific projects
Technical focus: 70% of the output of the biorefineries must be bioenergy This includes co-generation of heat and power The remaining 30% can be biochemicals, biomaterials and other Though EIBI is mostly focused in biofuels, the bioindustry could work to broaden its scope through private funding and member states and ECs Note: Preliminary estimates of costs per single project per value chain. Including private and public resources. It should be noted that because demonstration and flagship plants are by definition "first ever support
built" the costs cannot be accurately estimated, until a basic design engineering study or a detailed engineering study have been performed Source: EIBI 27
Description of medium-term funding options

Program Establish a tailored European Biorefinery Initiative (EBI) Description Initiative to promote demonstration scale biorefineries Establishment of funding platform similar to EIBI Aligned with EU biobased economy (not only focused in biofuels) Could build on existing facilities Funds available Initiative not defined yet Ideally, similar to EIBI Funds allocated by member states based on interest generated by EOIs 50-50 split between private and public funding How to obtain support
Partner with member states, ETPs, industry and other stakeholders to rally for a tailored European Biorefinery Initiative (EBI) Inclusion of a tailored EBI under the European Strategy for Bioeconomy Ensure member states support to proposed project and consortia as soon as possible Apply to EBI Expressions of Interest and Calls
Apply to structural funds
EU funds granted by member states or ~ 350 billion total regions Average size of grants: Aimed at resolving structural economic 200.000 (Interregio IV) and social problems Interreg funds most likely funding option
Partner with public institutions to develop a biorefinery project aligned with structural funds goals (convergence, competitiveness and employment, territorial cooperation) and matching an interregional cooperation Obtain member states support for the project
28 Source: Dalberg analysis, EU
Description of long-term funding options (1/2)

Program FP8 Description EUs main mechanism to finance research and innovation Limited support to demonstration to date but strong push to increase this in FP8 Funds available Funds not allocated yet How to obtain support
Form a private consortia and develop a common position in the biorefinery field Communicate common position to member states and EC through ETPs, Star-Colibri and individual reach out to member states
Establish a Public Private Partnership (PPP)
PPP between EC and private partners During FP7, the EC established PPPs through JTIs and other mechanisms New PPP structures are expected for 2014
Funds not allocated until the establishment of a PPP Funds pooled from FP8 and member state contributions
Help design new PPP program Establish a private sector consortia willing to commit funds (historically, at least 50% in the case of JTIs and other PPPs) Convince EC and ETP to establish biorefinery PPP
Description of long-term funding options (2/2)

Program Description Funds available How to obtain support Develop demonstration scale biorefinery focused on bioenergy Apply to second NER300 call likely to be launched in 2013 or 2014 Program based on Emission Trading Up to 1,5 billion available Scheme funds in second round1 Supports commercial demonstration Funding up to 50% of the projects of innovative renewable energy value of the project production and CCS Size of grants not yet known Public sector entity used by EU to implement national research programmes jointly with member states Funding: from member states (at least 50%) and EC Funds not allocated until the launch of a Dedicated Implementation Structure (DIS) under Art. 185
Join NER300
Article 185
Form alliance with member states willing to invest human and financial resources on a common research program and to apply for Art 185 to EC
Era Net Plus
Public sector instrument only, no direct private sector involvement EC mechanism to coordinate national research programmes Funding: from member states (at least 67%) and EC
Funds not allocated until the launch of an Era Net Plus
Form alliance with at least 5 member states willing to launch a transnational research call and to negotiate with EC for financial support under the EraNet Plus supporting scheme
1. First round with a funding mandate of up to 3 billion was closed for applications early 2011 Source: Dalberg analysis, EU
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Core implications, pros and cons of the recommended options

EIBI PPP FP8 Scope uncertain and politically defined Likely to require international EU consortia Likely, restricted access EBI (European Biorefinery Initiative) Requires support from both member states, industry, ETPs, and the EC Scope and outcome uncertain
Main Production focus: bioenergy Requires all stakeholders to implications Requires international consortia pool funding and design in Urgency to create project committee consortia, decide biorefinery Likely to require international vision and location EU consortia
Industry-driven initiative and Advantages Only funding window opened EIBIs biorefinery vision partially best option to pool funding aligned to bioindustrys needs Could be shaped to match (size, technologies) scope tightly (e.g. Urgency can foster dialogue Biochemicals and biomaterials and speed up decision making production) Joining the initiative is likely a Can result in good longer term better option than competing relation between industry and for the same funding public institutions with positive spin-offs
Challenges 70% bioenergy output Need to partner with bioenergy stakeholders Value chains predefined Some level of national/regional confinement to obtain member state support
Allows for 2-3 competing consortia No immediate geographical dependency Could be shaped to match scope tightly (e.g. Biochemicals and biomaterials production)
Tailored initiative would match scope tightly Attractive timing: European Strategy for Bioeconomy to be decided over the next few months
Uncertain bet as PPP facility Uncertain if the FP8 will currently in flux prioritize development and Uncertain size of funding make funding available for Long term option unlikely to Capex see public funding before 2015 May turn out very research Alignment on technical design, focused location and governance might Long term option unlikely to be challenging in joint see public funding before consortia of diverging interests 2015 in the most optimistic and competitors scenario Getting several DGs to align priorities and pool funding involves greater political risk
Will compete with EIBI for EC and member state funding Political will: member states support difficult to obtain (especially given the existence of EIBI already) Alignment on industry needs will require consensus from very different stakeholders
31
Evaluation of short-term funding options

Program Build on an existing facility Fit Fit: Allows for testing different conversion technologies and products Maximizes value for money of investments to test different technologies and feedstock Timing Short-term Feasibility Feasibility:
Primary recommended options Best alternative options Overall Medium
High Low
Negotiations can start Additional funding: funds needed to join as soon as a private existing facility consortium defines Additional partners: entity governing the demonstration project existing facility
Join EIBI (European Industrial Bioenergy Initiative )
Fit: EIBI can accommodate different conversion technologies and products Bioenergy needs to be 70% of output measured on energy content (including heat and power)
Short-term Fund raising 20112012
Feasibility: Additional funding: at least 50% from private sector Additional partners: at least 3 member states and 2 companies from different EU countries
Medium/High
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Evaluation of medium-term funding options

Program Establish a tailored European Biorefinery Initiative (EBI) Fit Fit: A tailored EBI would have a perfect fit with the bioindustry needs EBI could accommodate demonstration scale projects for several technologies, feedstock and outputs Timing Medium-term European Strategy for Bioeconomy currently under discussion (closure expected by end of the year) Funds could be allocated by end of 2013 TBD Feasibility Feasibility Not defined yet
Primary recommended options Best alternative options Overall
High Low
Medium/High
Additional funding: partially funded by private sector Additional partners: member states, ETPs, industries, research institutions, etc.
Apply to structural funds
Fit:
Feasibility:
Medium
Allows for testing different conversion technologies and products Timing varies according to national priorities. Once national decision is taken, funds are allocated under certified expenditures
Some funding could still be available within Interreg IV
Additional funding: generally co-financing with own member state resources Additional partners: member state cofinancing the project and granting the structural funds
33
Evaluation of long-term funding options (I)

Program FP8 Fit Fit: FP8 priorities not defined Biotech is high on the agenda There is a drive towards more demonstration Fit: A PPP could accommodate demonstration scale projects for several technologies, feedstock and outputs Timing Long-term FP8 starts in 2014 Feasibility Feasibility:
Primary recommended options Best alternative options Overall
High Low
Medium/High
It will depend on FP8 definition
Establish a Public Private Partnership (PPP)
Long-term Funds not available before 2014/2015
Feasibility Additional funding: partially funded by private sector Additional partners: likely EC and member states
Medium/High
Note: timing estimated according to past examples, expert insights or Dalberg research Source: Dalberg analysis
34
Evaluation of long-term funding options (II)

Program Join NER300 Fit Fit: NER300 cannot accommodate multiple outputs in the short-term (100% focused on the production of bioenergy) Fit: Focused on research programmes (no support of demonstration) Timing Long-term Funds expected by 2015/2016 Feasibility Feasibility:
Primary recommended options Best alternative options Overall Low
High Low
Additional funding at least 50% from private sector Additional partners: none
Article 185
Long-term Funds expected 2014/2015
Feasibility: Additional funding: at least 50% from member states Additional partners: member states and EC Feasibility: Additional funding: at least 67% from member states Additional partners: member states and EC
Medium/Low
Era Net Plus
Fit: Focused on research (no support of demonstration) Funds allocated in the long-term (expected later than 2014)
Long-term Funds expected 2014/2015
Medium/Low
Note: timing estimated according to past examples, expert insights or Dalberg research Source: Dalberg analysis
35
Additional funding options

Funds Common Agricultural Policy (CAP) Potential support CAP will not support capex for biorefineries directly in any foreseeable future During next funding cycle (2014-2020), CAP could support the biorefinery value chain upstream through: Funds to support building the infrastructure for collection and storage of agriculture residues Subsidies to farmers to increase biomass production (though subsidy to change crops to energy crops was recently terminated) CAP could have a high impact on feedstock economics and availability. However, its outlook is still uncertain Research funds Funds fostering research will be available both under FP7 and FP8 Some of these funds might cover research activities conducted in the demonstration biorefinery
These funds could influence the biorefinery economics and feasibility but cannot contribute to cover the capital investments required
36 Source: Dalberg research, interviews
Agenda
37
Steps to define location of demonstration biorefinery
Decision 1:
Decision 2 (if decided to build a new facility) Funding mechanism Feedstock, technical route, output What needs to be tested
Decision 3:
Decision 4: Specific biorefinery location
Build on existing facility and/or Build a new facility
Selection of attractive clusters (co-location synergies)
Selection best 3-5 clusters, final candidates to host the biorefinery
Decision Criteria:
Availability of time and financial resources Project match with existing facilities
Open funding windows Member states support Consortias private interests, state of the art of the technology, key areas to test
Economic synergies Operability, access to talent pool and expertise Feasibility to join the cluster (regulation, capacity, etc.)
Existence of local feedstock market close to cluster Degree of industrialization of agriculture/forest processing Crops/forest residues yields Access to transportation network Selection of key clusters offering the best colocation synergies, feedstock availability and transportation costs
38
Decision outcome:
Decision to build a new plant and/or to join an existing facility
Selection of country or high-level region
Selection of most attractive clusters within the selected regions
Summary of principles for ideal location for a biorefinery (1/2)

The ideal agriculture-based biorefinery will be: Integrated into a relevant industrial cluster Next to an agricultural area with existing residues collection infrastructure Close to clients and biotech knowledge (e.g. industries active in the biobased area, research centers, universities) The ideal forest-based biorefinery will be: Integrated next to a paper pulp mill or a facility producing forest-based feedstock Located in an area of dense forestry Close to clients and biotech knowledge (e.g. industries active in the biobased area, research centers, universities) The application of these criteria shows a number of potential good hosting regions for the biorefinery
The specific location will be a function of the funding strategy applied High-level region defined by type of funding, output and feedstock focus and member states involvement Specific location defined by co-location synergies, feedstock availability and transportation costs to end users These criteria are unnecessary if the consortia decides to build on existing facilities to leverage knowledge and minimize funding needs
Source: Interviews, Dalberg analysis
39
Summary of principles for ideal location for a biorefinery (2/2)

The location of the biorefinery should seek to optimize the plants economics and operations, in order to provide the best simulation for larger-scale plants The importance of the location variables depends on the scale of the plant and the time horizon considered Early stage facilities are very sensitive to Capex due to difficulties in finding external funding and to unproved revenue models. Commercial scale plants, however, are much more sensitive to operating costs External financial support and co-location synergies have a high impact on funding needed and are key for demonstration scale facilities Feedstock costs are especially important for commercial scale facilities In the medium to long-term, different EU regions might improve their cluster landscape, funding schemes, feedstock availability or transportation network. This would increase the number of potential good hosting regions for the biorefinery In the short-term, some EU countries (e.g. France, Germany, Belgium, the Netherlands, Denmark, UK, Sweden and Finland) are more attractive locations for a biorefinery (agriculture-based in the heart of Europe and UK, wood-based in Scandinavia) In the long-term and as full commercial scale biorefineries emerge - other regions could become attractive locations for a biorefinery provided improvement in key location variables (e.g. Eastern Europe)
40
Feedstock cost, transportation costs, synergies from co-location and funding High importance and regulation are key factors for the location decision Low importance
% of final product value 60 25-40 40
Key variables for location decision
10-35 5-10
20 0
Feedstock cost1
10-30
5-10 Other fixed costs3
5-10 Transportation and logistics Proximity to end users Accessibility to transport infrastructure
Enzymes, acids, and Other operating costs2 other raw materials
Capital costs
Main cost drivers
Feedstock availability in the biorefinery surroundings
Cost of enzymes and acids
Function of geography
Cost of Total Capex energy/utilities/water Plant capacity/ and other operating technological costs scope Cost of labour/ construction materials
Plant capacity/ technological scope Real estate leases, maintenance, etc.
Function of co-location
Function of funding options and local regulation 1. Feedstock: lignocellulosic material. 2. Other operating costs: electricity, water, waste disposal, etc. 3. Other fixed costs: real estate leases, maintenance, etc. Note: these graphs are an approximation for illustrative purpose only. The exact breakdown will depend on the final value of the product Source: National Renewable Energy Laboratory, Expert interviews, Dalberg analysis
41
The importance of these key factors varies for demonstration plants

Key variables for demo plant
Relative importance
1 Synergies from colocation
2 Funding and regulation
Higher importance for a demonstration plant due to significant Capex savings Additionally, positive impact on the plants operability through shared staff, access to talent pool and expertise, etc.
3 Feedstock cost
Lower importance for a demonstration plant given the limited feedstock required As a result, a demonstration facility will have bigger flexibility to feedstock availability than a commercial plant (where this is the paramount variable)
4 Transportation cost
Lower importance for a demonstration scale plant, given the limited output sold in the market
42
Main location variables

Focus for this section
Co-location generates synergies for the biorefinery by reducing Capex up to 90% and Opex up to 15%
Synergies from co-location arise along the value chain: Upstream, through proximity to agriculture processing facilities and paper pulp mills Midstream, through integration into existing industrial complexes Downstream, through proximity to end users
Funding and regulation and regulatory environment impact Capex and Opex through: Different EU priority regions Availability of local co-funding Local tax credits and waste water regimes
Feedstock costs are 25-40% of the COGS The key driver for feedstock cost is its availability in the biorefinery surroundings The availability of agriculture residues depends on crop production, yield and degree of development of the infrastructure to collect residues In the case of forest residues, feedstock availability is a function of wood and wood residues production Transportation costs to end users are 5-10% of the COGS Transportation costs are mostly driven by: Access to good transport infrastructure Distance from the biorefinery to customers (e.g. chemical, biotech, pharma and plastic industries)
Cost of feedstock
4 Cost of transportation to end users
43
1. Co-location with existing facilities generates synergies along the value chain
Synergy description Feedstock collection Upstream Feedstock reception and pretreatments Surrounding cereal cooperatives supply more stable quantities of agriculture residues Proximity to cereal/sugar beet processing facilities provides cheaper feedstock because of low transportation costs Integration of forest-based biorefineries with paper pulp mills ensures feedstock availability and minimizes capex and operational costs
Biomass degradation
Availability of experienced staff and access to good talent pool in the region Proximity to heat/power factories Allows the biorefinery to generate heat/energy through combustion of waste products Obtains heat/energy from other plants in the industrial complex (those with a positive energy balance ) Proximity to certain factories (e.g. Sugar beet refineries) can provide input for the biorefinery such as water, CO2 or sucrose Integration into an industrial complex can provide waste water and other effluent treatment facilities Synergies from tailored in-the-field R&D
Ensured plants operability
Biomass treatment
Reduced energy costs (Opex) Savings in boilers, CHP plants, etc. (Capex)
Midstream
Biomass treatment
Reduced operational costs Savings in Capex
Output refining
Savings in waste water treatment facilities (Capex)

More effective research and reduced labor costs (Opex) Minimized transportation costs of biorefinery output
Logistics: Downstream Transportation and distribution to customers
Proximity to end users (e.g. biofuel buyers) and other companies using biorefinery output as a production factor (e.g. chemical, pharma, plastic industries, etc.)
44
1. Several countries offer good co-location possibilities for agriculture-based biorefineries

European innovation clusters1 (number of employees) Rating of existing clusters2 (biotech, chemical, pharma and plastics) Star rating by European Cluster Observatory 1,5 1,3
1,0
1,0
1,0
1,0
1,0
0,9
0,9
0,9
0,9
0,5
0,0 Ger Den Ire Ita Bel Pol Hun Fra Aus
The exact co-location decision will need to consider synergies arising from each cluster, however Northern Europe seems to present a stronger starting point with well established clusters of the relevant industries
1. Data for 2009. Size measured in number of employees, according to European Cluster Observatory (ECO) methodology 2. According to the Star Ratings of the European Cluster Observatory. Data for 2009. Calculated as the average of biotech, plastic, pharma and chemical clusters ratings Source: Eurostat, Biorefinery, European Cluster Observatory (ECO)
45
1. The paper pulp industry in Scandinavia has the biggest co-location potential for forest-based biorefineries
High paper pulp production areas
Co-location synergies for forest-based biorefineries
Paper pulp production in Europe, 2007
Integration with paper pulp mills provides feedstock supply (black liquor) to biorefineries
Integration (through additional modules to a paper pulp mill facility) reduces Capex substantially
Examples estimate the cost of adding biorefinery facilities to an existing pulp and paper plant to be only 25% of the capex required to build a new plant of same capacity
Source: Biorefinery Euroview-Biopol, Dalberg analysis
46
1. There are examples of co-location in the agriculture and forest-based biorefining

Cluster Bazancourt-Pomacle Biorefinery (France)
Upstream synergies
Midstream synergies
Downstream synergies
Range estimates savings
Feedstock supply (wheat and glucose) from wheat silos and wheat biorefinery
Energy and steam provided by cogeneration facilities Water supplied by sugar beet biorefinery
Minimum transportation costs to end users (BioDemo - biotechnology industrial plant in the cluster)
Unknown
Processum (Sweden) Black liquor supply from integration to paper pulp mill Energy, steam provided by cluster facilities Minimum transportation costs to end users (companies producing ethanol and ethanol derivatives present in the cluster) Unknown
Dong Inbicon Biomass Refinery (Denmark)
Wheat straw collection infrastructure available from co-location with heat and power generation
Shared generation with heat and power facility
TBD
Unknown
Source: ARD and Processum documentation, Dalberg analysis,
47

Cost of feedstock
48
2. The country decision is key for the economics of the biorefinery
External financial support is key for the economic sustainability of the biorefinery Most EU biorefinery related projects are funded by member states through national funds EU biorefinery landscape is very diverse given the different national supporting schemes Scandinavia, Benelux, France and Germany are leading this industry in terms of number of biorefinery related projects Despite greater availability of EU structural funds, Eastern Europe is still lagging behind Nations with strong biorefinery activity offer advantages beyond financial support (upstream, midstream and downstream synergies)
Biorefinery related projects per country

#
92
72 59 49 40 34
11 5
Fin
Fra
Ger
Net
Swe
UK
Pol
Hun
49 Source: Star Colibri, Dalberg research

Cost of feedstock
50
3. Feedstock availability
Given the high transportation costs, the availability of feedstock in biorefinery surroundings is key However, a demonstration scale facility is much more flexible with regards to feedstock availability than a commercial one (given the different feedstock needs) Feedstock availability depends on the existence of feedstock markets in the region Feedstock markets tend to be relatively local as it is rarely viable to transport feedstock like agricultural residue more than 100 km The price for agricultural residues is lower in unorganized markets but the infrastructure cost is likely to be higher Currently, only some countries have an organized market for these residues (e.g. Denmark straw market, result of utilities obligation to produce a share of their energy from straw)
However, the market for agricultural residues is likely to become more commoditized and transparent in the near term, given the increasing demand from biorefinery-related projects
As many European member states do not currently have an organized market, the best proxies to measure feedstock availability are the regional crop production and yields
51
3. Several regions have high cereal and sugar beet production

Wheat production by regions Corn production by regions Cereal production yields
10 9 8 7 6 5 4 3 2 1 0
T/ha
9,6 8,3 7,2 7,1 7,0 6,7 6,1 6,0 5,7
Bel Net Ire UK Fra Ger Aus Den Lux
Regions with high production and high yields offer a better feedstock availability and minimize supply costs Feedstock costs will be relevant for the biorefinery in order to provide the best simulation possible of these costs at a commercial scale
Note: Data for 2007 distributed according to NUTS 2 classification (territorial units for statistics at the EU level). Cereal as defined by Eurostat (wheat, corn, barley and other cereals). Average yields per year from 2005 2010 Source: Expert interviews, Eurostat, Dalberg analysis
52
3. The wood industry is concentrated in Northern Europe

Wood residues1 production (mostly industrial, yearly average 05-09) m m3 per year 15,0 15
Wood2 production (yearly average 05-09) m m3 per year
80 70
75,4 61,6
60
10
53,4
8,3
5,6
50 40
50,4 33,8 19,1 16,8 15,4 14,0
4,9 3,3 3,0
30
2,8
1,8 1,6
20 10 0
Swe Ger Fra Fin Pol
0
Swe Fin Fra Aus Spa Lat Ger Est UK
Aus Cze Spa Rom
The wood industry is highly concentrated in Sweden, Finland, Germany and France The production of wood residues could potentially be doubled but there is no current financially viable infrastructure for the collection of fellings, roots, branches etc. from the forestry sites
1.Wood residues: miscellaneous wood residues, those which have not been reduced to small pieces. They consist principally of industrial residues 2.Wood: Wood in the rough, in its natural state as felled, or otherwise harvested, with or without bark, round, split, roughly squared or other forms (e.g. roots, stumps, burls, etc.). All wood obtained from removals Source: FAOStat, UNECE, METLA, Dalberg analysis
53

Cost of feedstock
54
4. Transportation costs are minimized through good infrastructure and proximity to customers
Accessibility1 to transportation infrastructure
High potential
Concentration of potential end users (Revenues of chemical, rubber and plastic industry2) Billion 178 180
160 140 120 100 80 60 40 20 0 92 79 56 50 40 33 15 15 126
Ger
Fra
UK
Ita
Net
Spa
Bel
Ire
Pol Swe
The cost of transportation to customers depends on distance and cost/quality of transport infrastructure Benelux, northern France, Germany and southern England have the best access to transport infrastructure Potential customers in the chemical, rubber and plastic industries are mostly concentrated in Germany, France and the UK
1. Accessibility (as defined by ESPON): combines level of economic activity in a certain region with the effort, time, distance and cost needed to reach that area 2. Data for 2007. Includes revenues generated by the manufacturing of chemicals, rubber and plastics industries Source: ESPON Project 1.2.1, European Monitoring Center on Change, Eurostat, Dalberg analysis
55
Highest values
EU-27 country overview location variables

Co-location synergies Proxy variable Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Rating of existing clusters 3 0.9 1.0 0.5 0.0 0.4 1.0 0.0 0.2 0.9 1.3 0.4 0.9 1.0 1.0 0.3 0.0 0.0 0.0 0.5 0.9 0.1 0.8 0.7 0.8 0.8 0.5 0.5
Medium value Lowest values Key variables for demo plant

Cost of feedstock Transportation costs to end users Chemical industry revenues (Bn ) 10.1 39.5 1.3 0.2 6.5 9.5 0.4 7.5 126.0 177.6 3.5 6.4 33.3 79.2 0.2 1.5 0.2 0.0 56.0 15.3 5.4 3.4 2.1 2.9 50.4 15.3 92.0
Funding options Biorefinery landscape4 Medium High Low Low Low High Low High High High Medium Medium Low Medium Low Low Low Low High Medium Medium Low Low Low High High High
Cereal production yields (t/ha)1 6.1 9.6 4.1 1.2 4.8 6.0 2.7 3.4 7.0 6.7 3.7 4.9 7.2 4.9 2.8 2.9 5.7 0.0 8.3 3.2 2.8 2.9 4.2 5.5 3.0 4.8 7.1
Wood production (Million m3)2 19.1 4.8 5.6 0.0 16.8 2.7 5.0 50.4 53.4 61.6 1.5 5.6 2.5 8.3 11.4 5.8 0.3 0.0 1.1 33.8 10.4 14.0 8.7 2.9 15.4 75.4 8.6
1. Average national production 2005-2010 2. Wood: Wood in the rough, in its natural state as felled, or otherwise harvested, with or without bark, round, split, roughly squared or other forms (e.g. roots, stumps, burls, etc.). All wood obtained from removals 3. According to Star Ratings of European Cluster Observatory (2009). Average ratings for EU biotech, plastic, pharma and chemicals industry. Shows clusters specialized critical mass to develop positive spill-overs and linkages (based on three main criteria: cluster size, specialization and focus) 4. Based on number of biorefinery related projects, according to Star Colibri database. Includes private, public and EU funded projects
56
Potential locations for a demonstration scale plant in the short-term

The most efficient EU areas in industrial farming Region Synergies from co-location France, Germany, Belgium, the Netherlands, Denmark, UK Score: High potential synergies across value chain (agriculture processing facilities, bioclusters, customers) Good access to biorefinery expertise and talent pool Score: Limited EU support High national support Dense biorefinery landscape Score: Feedstock cost Biorefining in EUs top priority area Bulgaria, Hungary, Poland, Romania, Slovakia, Czech Republic Score: Some synergies with agriculture facilities Limited synergies bioclusters Limited access to biorefinery expertise
Favourable conditions Unfavourable conditions
Wood biorefining in Scandinavian forests Sweden, Finland, Norway Score: High potential synergies across value chain (pulp mills, bioclusters, customers) Good access to biorefinery expertise and talent pool
Funding and regulation
Score: High EU support Limited national support Few ongoing projects Score: Extensive agricultural area Low cereal yields Score: Medium distance to customers Good access to transport network Low fit region for biorefinery Likely EU support and lower Capex and Opex Limited synergy and national support
Score: Limited EU support High national/regional support Dense biorefinery landscape Score High feedstock availability (black liquor) from integration with pulp mills Score: Proximity to customers Good access to transport network High fit region for forest residues demonstration biorefinery High synergy possibilities and likely national support
Intensive industrial farming High cereal production and yields

Score: Proximity to customers Excellent access to transport network High fit region for agriculture residues demonstration biorefinery High synergy possibilities and likely national support
Transportation cost
Overall potential
In the long-term, other regions could become attractive (e.g. Eastern Europe), as particularly feed stock availability develops. This will be of higher importance for a full scale commercial biorefinery.
57
Agenda
58
Examples of governance models for European pilot biorefineries

CPI Facilities Integrated modular biorefinery pilot and demonstration plants (1000 and 10.000 litre capacity) Private company, owned by the two executive directors Open access. IP property of entities renting the facility Management team Advisory board Bio Base Europe Integrated modular biorefinery pilot plant (10 tons biomass/day) PPP between Ghent Bio-Energy Valley and Bio Park Terneuzen BE Basic Integrated modular biorefinery pilot plant PPP between universities, research institutes and 24 companies
Ownership
Access
Open access. IP property of entities Open access renting the facility Preferential access to partners Management team Advisory board Ghent Bio Energy Valley, Bio Park Terneuzen, Dutch and Belgian Governments TBC TBC
Governance bodies/model
Key stakeholders British Government Industry players Mainly customers of facility Advisory role contributing expertise and customer flow ~100% public (British Government)
Delft University, Research institutions, DSM, Purac, other Private funding In kind contribution (skills, staff, etc.)
Role/ contribution of private partners Capex funding source Opex funding model
Source:
100% public (Interregio IV, Dutch 30% public (Dutch national and national and regional governments, regional funds) Flanders government) 70% private
Mostly fees from research and Fees from research and innovation ... innovation projects renting the facility projects renting the facility Public grants
59
Agenda
60
Summary implications and implementation

The recommendation is to focus on joining the EIBI initiative for the near future, work towards a tailored bioindustry initiative in the medium-term and potentially consider FP8/PPP funding in the long-term EIBI projects are likely to start construction in late 2013, while it is more likely to be 2016 for FP8 and PPP Expansion of an existing facility could further shorten the EIBI timeline A tailored bioindustry European Biorefinery Initiative (EBI) might be established within two years Initiative support from the EC and recognition under the European Strategy for Bioeconomy is key This will require collaboration between different industry players, ETPs, RTOs, member states and other stakeholders, as well as fast alignment and decision making processes
The setup and timelines for FP8 and PPP are uncertain.
The project structure and responsibilities will be different between the FP8/EIBI and the PPP setup The PPP will require joint project governance and technical design decisions among all stakeholders The EIBI and FP8 will require joint industry coalition to promote the prioritization of non-fuel biorefineries but will enable several project consortia to test competing technologies All funding mechanisms require at least 50% private sector co-funding, which would require a private sector coinvestment of up to 125 million depending on scope and ambition
61
Summary of implications of different funding options key differences

EIBI Who initiates the program Partners needed Funding split Public funding source PPP FP8 The Commission
Tailored initiative (EBI)

Industry, ETP, RTOs, other stakeholders Member states willing to cofund Likely to be 50-50 publicprivate Mainly member states Potential for some limited EU funding
EIBI group EC, member states, Industry research and industry stakeholders Biofuel producers Max 50% public Min 50% private consortia Likely to require public research institutions Max 50% public Min 50% private consortia
Likely to need to represent multiple member states TBD EU
Member states, supporting EU projects with the biggest national interest EU may contribute top up funding through ERA Net Plus Overall EIBI Detailed private consortia PPP consortium
Who defines technology
Overall EU Detailed private consortia
Overall the initiative coalition of ETPs, member states and industry Detailed private consortia TBD Choice to build on existing facilities Member state support TBD
Key location driver
Choice to build on existing facilities Member state support Private
Optimal conditions to minimize TBD cost (see location analysis) Potentially EU priority regions Potentially EU priority regions Public-private governance Private governance, but likely to require some public access Private consortia, unlikely to be open facilities
Governance of demo biorefinery Access to demo facilities
To be decided by consortia PPP consortia Could accommodate open facility Could accommodate open if consortia agrees facility if consortia agrees
TBD
62
Next steps decision tree

Short-term action or not EIBI or not Joint or collaborative Build on existing or create new New Existing New Existing New Existing New Joint ownership Subconsortia Joint ownership Subconsortia Define long term modality Joint ownership New Existing Identify additional Define in private and public consortia: partners needed if Detailed design any Location Budget Governance mechanism Who to partner with Define detailed project
Subconsortia Yes Join EIBI Joint ownership
Short term action No Attempt national alternative Subconsortia
Next step
Not mutually exclusive Medium term action
Tailored EBI
FP8
Existing
PPP
New
Existing
63
Approval of the strategy key decisions and implications

Key decision Short term action Key parameter Is it urgent to start demonstration activities to compete globally? Are you ready financially and technically to invest in a demonstration facility? Implication Short term action requires high decision pace
Use of the EIBI Is your desired project feasible within window or set up own the technical parameters? initiative: EBI Do you believe it will be easier to collaborate than compete for funding?
Preparation of decision will require an urgent dialogue with EIBI to prepare groundwork Positive EIBI decision commits the industry to aggressive time-scale, requiring implicit agreement by companies on competitive coalition approach The decision to go for an own program (EBI) also requires immediate action and strong collaboration with ETPs and other stakeholders
Competitive or collaborative approach
Is it attractive to pool investments with A collaborative approach will require this group? Coalitions between companies to drive design and Do you believe that you can align on a provide application assistance feasible and satisfactory technical EuropaBio as trusted broker and liaison with EU design and scope by collaboration? A competitive approach will require ETPs and industry to coordinate technical design process and drive proposal submission Companies to work in committee towards consensus designs
64
Approval of the strategy key decisions and implications

Key decision Build on existing or new Key parameter Are there facilities that could suitably be adjusted to match your demo project? How much are you willing/able to invest to get a new facility? Do you want to own the facility longer term? Do you need more private partners to contribute; Funding Knowledge Resources Fill the facility etc. Implication Building on current facilities allows for more modest or gradual investments, building on existing expertise and getting started faster It does not allow for direct ownership and most likely not for the 100% optimal design
Who to partner with
Strategic partnerships can ensure sound economics, steady supply of biomass and expertise but too many stakeholders may challenge the decision power of the consortia
Long-term funding modality
Long-term funding modality
FP8 aligns with a competitive approach, whereas PPP follows a collaborative approach, with significant implications for roles & responsibilities
65
Roles & responsibilities trade organization (e.g. EuropaBio) and RTOs

Role Overall Responsibility Liaising with other biorefinery initiatives Coordination of funding windows Description Tracking of development opportunities of other bioeconomy based initiatives
Support and coordination of outreach to EU institutions and member states
Competitive universe (EIBI, FP8)
Support in creation of coalitions Application assistance Trusted broker between / within coalitions
Support to prepare submissions (standard requirements, non-technical components) Support to prepare submissions (standard requirements, non-technical components) Exchange of non-sensitive information between coalitions / companies
Collaborative universe (PPP)
Facilitation of design
Facilitation of meetings and consensus building across companies on technical design, financial design and location
Submission of proposal
Develop and submit the joint proposal

66
Roles & responsibilities industry

Role Overall Responsibility Advocacy and fund-raising Preparation of corporate business case Description Articulation of the business case and fund-raising with national stakeholders
Development and advocacy of the business case for corporate co-investment
Competitive universe (EIBI, FP8)
Creation of coalitions
Partnering with companies that are closely aligned on technical design / location / operating model Preparation and submission of the proposals (together with partners and support from bioindustry coordinator)
Proposal development and submission
Engage in joint design process
Participation of company experts in collaborative design process (technical, financial, location)

Engagement in consensus-building activities, and build willingness to accept compromises
67
Roles & responsibilities European Technology Platforms (ETPs)

Role Overall Responsibility Define research and technological objectives for a biobased economy Advocacy to stakeholders and EC Description Structure dialogue among industry players and RTOs, reach consensus on common vision and define roadmap (strategic research agendas) , e.g. StarColibri, IEA Bioenergy Task 42 Dialogue with EC about research policies and priorities
Coordination of funding windows Support ECs calls launch process

Competitive universe (EIBI, FP8, new EBI) Support in creation of coalition Proposal development and submission Networking fora to connect companies with aligned or complementary interests Preparation and submission of the proposals (together with partners and support from bioindustry coordinator)
Coordination and communication of industry needs
Compilation of industrys needs and arguments Structure these needs around a Strategic Research Agenda Support EC in defining future funding mechanisms (EIBI, FP8, etc.) Support EC in the actual fund allocations (calls)
68
Timeline Strategy approval

2011 Activity Discussion of strategy with key stakeholders Mar Apr May
Refinement / changes to strategy document Approval of strategy Definition of roles & responsibilities of key stakeholders Mapping of financial implications / budgets Finalization of timelines Approval of implementation plan Location TBD Communication of strategy
Implementation
69
Agenda
70
Technical survey - size and technology

The conversion route you are primarily interested in testing (Number of responses)
7
BACK UP BASED ON 9 RESPONSES Essential to test both thermochemical and biological in same plant (Number of responses) 6 2 No Not essential, But if possible
3
2 0
4 Yes No
Sugar-based Mixed facility (biological route) including thermochemical route
I am indifferent
Essential technologies to test (Number of responses)
Size tons of dry biomass per day (Number of responses)

5
Biological Enzymatic Steam explosion Gasification Biological Acidic Combustion Anaerobic fermentation Pyrolysis Chemical conversion (catalytic) Waste water treatment
9 4 4 2 2 2 2 1 1
2 0
2 0
>10
10
50
100
>100
Comment: Depends on what needs to be tested. Gasification will require high volume while other technologies can be tested at smaller scale
71
Source: Technical survey among expert group participants
Technical survey - biomass

Primary biomass in demonstration plant (Number of responses)
4 4 3
BACK UP BASED ON 9 RESPONSES Essential to test several feedstock in same plant (Number of responses)
8
Agricultural Forest residue resources
Energy crops
Whole crop
Yes
No
Additional feedstock to test (Number of responses) Forest resources Energy crops Agricultural residue First generation sugar crops Municipal waste Algae Food/oils
1 1 3 3 4 5 6
72 Source: Technical survey among expert group participants
European Industrial Bioenergy Initiative (EIBI)

About EIBI Public-private initiative to promote and fund the establishment of up to 14 lignocellulosic demonstration and flagship plants EIBI will support projects focused on bioenergy (at least 70% of output) 1 Established on the basis of the SET plan and the EU biofuels technology platform EIBI focus areas Thermochemical pathways 1. Synthetic liquid fuels and/or hydrocarbons (e.g. gasoline, naphtha, kerosene or diesel fuel) and blending components through gasification 2. Biomethane and other biosynthetic gaseous fuels through gasification 3. High efficiency heat & power generation through thermochemical conversion 4. Intermediate bioenergy carriers through techniques such as pyrolysis and torrefaction Biochemical pathways 5. Ethanol and higher alcohols from lignocellulosic feedstock through chemical and biological processes 6. Hydrocarbons (e.g. diesel and jet fuel) through biological and/or chemical synthesis from biomass containing carbohydrates 7. Bioenergy carriers produced by micro-organisms (algae, bacteria) from CO2 and sunlight Governance model EIBI team under the SET plan committee governing the EIBI initiative The EIBI team has representatives of the European Commission, 16 member states and industry representatives. Membership is based on interest, not contribution Projects awarded based on open calls. Criteria set but evaluation process not yet defined
Funding model EIBI estimates total Capex for the 14 projects to be ~ 2.6 billion There are no funds allocated to these projects at present Project funding will be 50-50 public-private Most EIBIs public funds will come from member states Member states will decide the amount of funding granted, based on project descriptions (EOIs) and national interests Most national funding will be linked to specific projects EC might provide minor funds to incentivize cooperation across member states (under ERA Net Plus, still to be confirmed by EC) Private funding will cover (at least) 50% of the Capex of the project
1. Measured as energy content (including heat and power) over total plants output Source: EIBI, Interviews
73
Seventh Framework Programme (FP7)

About FP7 Seventh Framework Programme for Research and Technological Development EUs main instrument for funding Research in Europe 50 billion budget for research-related projects over 7 years (2007-2013) FP7 will be replaced by FP8 in 2014-2020. FP8s budget has not been allocated yet FP7 focus areas The FP7 covers 4 specific programs 1. Cooperation (32.3 billion budget): supports international cooperation projects across the European Union and beyond 2. Capacities (4.2 billion budget): supports regional research driven clusters 3. Ideas (7.5 billion budget): supports activities implemented by the European Research Council 4. People (4.7 billion budget): supports research careers of individuals The strongest links between FP7 and the integrated 2G biorefinery are Cooperation (through projects in agriculture, biotechnology, energy and environment areas) and Capacities (through research infrastructure areas) Fund allocation process FP7 priorities are defined at the beginning of the program by the EC in consultation with member states These priorities are adjusted periodically and guide the fund allocation Funds are allocated to research projects, mostly through open calls for proposals
FP7 calls Calls are not public in advance. The EC defines and launches new calls several times per year Funds allocated to each call depend on type of projects funded and available budgets When defining new calls, the EC consults member states, industrial associations and other interest groups FP7 calls can support up to 30% of demonstration projects and up to 50% of research projects Funds for each call vary depending on the nature of the project Calls generally have intense competition. Strong research consortia with a balanced EU geographical presence have a competitive advantage
EU Framework Programmes (FP)
Milestone Call definition
Timing Several times per year during FP7 Call definition generally takes place 6-9 months prior to the launch of the call Several times per year during FP7 1-2 years before the program starts
Entities involved Negotiation: European Commission, member states Approval: European Commission
FP7 calls schedule Call launch
European Commission
Programme definition (structure, priorities and fund allocation decision)

FP8 Programme approval
Negotiation: European Commission, European Council, member states, private sector, interest groups and other stakeholders
European Council
1st January 2014
Joint Technology Initiatives (JTI)

About JTI Joint Technology Initiatives are public private partnerships between the EC, member states and the private sector based on article 171 of the Treaty JTIs foster large scale multinational innovation. They can support research, technological development and demonstration programs over a period of 10 years JTIs arise from European Technology Platforms (ETPs) recommendations ETPs are industry-led stakeholder fora defining research priorities JTIs do not have a budget allocated a priori Existing JTIs Five JTIs have arisen as a result of ETPs initiative 1. The Innovative Medicines Initiative (IMI): 2 billion budget 2. The Embedded Computing Systems Initiative (ARTEMIS): 2.7 billion budget 3. The Clean Sky Initiative: 1.6 billion budget 4. The Nanoelectronics Initiative (ENIAC): 3 billion budget 5. The Fuel Cells and Hydrogen Initiative (FCH): 1 billion budget Fund allocation process Each JTI is funded by industry (at least 50%) and by member states and the European Commission. The EIB and structural funds can contribute to the funding as well JTIs priorities are defined by each of JTIs parties Funds are then allocated to projects mostly through open calls for proposals Funds allocated to each call vary according to the projects JTIs have been heavily criticized because of their lack of flexibility and excess bureaucracy
NER300 - fund description

About NER300 Fund that supports commercial demonstration projects of innovative renewable energy or CCS EC, EIB and member states jointly manage NER300 NER300 funds arise from the sale of 300 million allowances (right to emit one tone of CO2). Funds available depend on CO2 market prices Fund allocation NER300 allocates its funds through two open calls First call just closed: 200 million allowances (expected 2 billion) Second call: to be launched in 2013, 100 million allowances (expected 1.5 billion) First call fund allocation process Project submission to member states by February 2011 Member states review and submission of eligible projects to EIB (~June 2011) EIB evaluation, ranking and listing of recommended projects (~March 2012) European Commission award decision (~Second half 2012) Rules of the fund allocation The funds will cover up to 50% of the projects relevant costs (extra Capex and Opex needed to demonstrate the technology) Individual project financing is limited to 15% of total NER300 funding (45 million allowances) Funds are disbursed annually as a function of the carbon stored or the renewable energy generated. In some cases, upfront payments are allowed as well NER300 project requirements Projects need to be financially robust and provide detailed information on costs and revenues Projects have a sharing-knowledge obligation. The EC has not fully defined this obligation for renewable energy projects
77 Source: NER300
NER300 focus areas The NER300 is structured around Carbon Capture and Storage (CCS) and Innovative renewable energy technology The Renewable Energy Technology category includes: 1. Bioenergy: lignocellulose, household waste or algae to electricity or biofuels 2. Concentrated solar power 3. Photovoltaics 4. Geothermal 5. Wind 6. Ocean 7. Hydropower 8. Smartgrids
NER300 - support to bioenergy

Renewable energy technology Lignocellulose to intermediate solid, liquid or slurry bioenergy carriers via pyrolysis with capacity 40 kt/y of the final product
Lignocellulose to intermediate solid, liquid or slurry bioenergy carriers via torrefaction with capacity 40 kt/y of the final product
Lignocellulose to Synthetic Natural Gas or synthesis gas and/or to power via gasification with capacity 40 million normal cubic metres per year (MNm 3 /y) of the final product or 100 GWh/y of electricity Lignocellulose to biofuels or bioliquids and/or to power including via directly heated gasification with capacity 15 million litres per year (Ml/y) of the final product or 100 GWh/y of electricity. Production of Synthetic Natural Gas is excluded under this subcategory Lignocellulosic raw material, such as black liquor and/or products from pyrolysis or torrefaction, via entrained flow gasification to any biofuels with capacity 40 Ml/y of the final product Lignocellulose to electricity with 48 % efficiency based on lower heating value (50% moisture) with capacity 40 MWe or higher Lignocellulose to ethanol and higher alcohols via chemical and biological processes with capacity 40 Ml/y of the final product Lignocellulose and/or household waste to biogas, biofuels or bioliquids via chemical and biological processes with capacity 6 MNm 3 /y of Methane or 10 Ml/y of the final product Algae and/or micro-organisms to biofuels or bioliquids via biological and/or chemical processes with capacity 40 Ml/y of the final product
78 Source: NER300
Bio Base Europe

About Bio Base Europe Research, innovation and training Center in the DutchFlemish border region Open access to private sector and research institutions Rights to developed technology remain property of clients using the facility Revenue stream based on pay-per-project model Bio Base Europe facilities Integrated multipurpose biorefinery Pilot Plant Modular setup of pilot process equipment Feedstock: regular crops, agricultural waste and non food crops Technologies: Biorefining, plant fractionation, biological conversion, chemical conversion, thermochemical conversion Output: biofuels, biochemicals, bioplastics, biomaterials and other bioproducts Capacity: Up to 10 tons of dry biomass per day Pilot scale, average reactor ~10 m
79 Source: Bio Base Europe
Governance model Private public partnership Management team: strategy and day-to-day operations Advisory board: PPP members and other stakeholders (e.g. university of Ghent)
Funding model Capex ~ 21 million to date, almost 100% publicly funded Structural funds (Interreg IV): ~ 6 million Belgium (Flanders) and the Netherlands (government and provinces): ~ 15 million Opex: Covered through fees from research and innovation projects
Center for Process Innovation (CPI)

About CPI Research and Innovation Center Privately run on pay per project model Open for all without restrictions on nationality Governance model Private company in shelled model: Not-for-profit private foundation Trading subsidiary for profit Holding company subsidiary to nurse spin-off companies Company owned by the two executive directors, no customers co-ownership Advisory Board of industry and academic capacities
CPI facilities
Development lab 1000 L pilot facility 10.000 L demonstration facility Plug & play reconfigurable set up based on: Fermentation Chemical processing Extraction Pyrolysis and gasification facility (in progress)
Funding model
Capex: ~ 70 million to date Almost 100% publicly funded (mainly British government through different pots)
Opex: Mainly covered through project activity Currently no core funding, but some public grants to help market failures Aim for Opex mix of 1/3 public, 1/3 private and 1/3 public-private consortia Projects range from 1000 to several hundred thousand Pounds
80
Source: CPI Annual report 2009, Interviews
BE-Basic
About BE Basic Research and innovation center Facility not operational yet Open access to private sector and research players Preferential access to BE-Basic partners (universities, research institutions and the private sector) Governance model Private public partnership between universities, research institutes and 24 companies PPP owns the facility and manages the strategy and day-to-day operations PPP coordinator: Delft University of Technology
BE Basic facilities
Integrated second generation biorefinery, modular setup, pilot scale Feedstock: agricultural waste and non food crops Technologies: biological conversion Output: biofuels, bioplastics and other bioproducts
Funding model
Publicly and privately funded: Dutch public funds (Government and provinces), EU, universities, private sector Capex Research program (flagships): 120 million Pilot facility: 100 million Subsidies from regional funds and local bodies: 30 million
81 Source: BE-Basic
Bio Demo - IAR

About Bio Demo Biotechnology demonstration plant within the innovation platform Bioraffinerie Recherches & Innovations (BRI) Open facility for the scaling up of biotechnological processes aimed at chemical intermediates production Governance model PPP between ARD and the cluster of competitiveness IAR for biorefineries, biotechnologies and green chemistry
Bio Demo facilities
Funding model
Demonstration facility Technology description: Feedstock: agricultural crops and lignocellulosic material Technologies: biological conversion, extraction and purification Output: organic acids, diols, etc. Capacity: 2,500 tones per year
Publicly and privately funded: 21 million European Regional Development Funds: 2.5 million Dpartement de la Marne: 1.25 million Rgion Champagne-Ardenne: 1.25 million Private (ARD and banks): 16 million
82 Source: ARD

Europe's Bio Opportunity: Closing the Demo Gap

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Executive summary (1/2)

Executive summary (2/2)

Joint effort for multiple demo projects

2nd generation biofuels are needed to address a range of global challenges

High volatility of energy, commodity and food prices

Decrease of oil dependency from high risk countries

Estimated Impact* Potential

Clean Energy Loan guarantee (2007)

Biofuels Loan guarantee

Loan guarantee to finance 2nd generation biorefuel plants

Cellulosic Ethanol tax Credit

1.01 $/gallon production tax credit terminates 2012

Research and Development

Current landscape of biorefinery initiatives in Europe

Fuel Chemicals Mixed outputs NOT EXHAUSTIVE

10 Source: Star Colibri, Dalberg research

and create employment and jobs

Technical design and capital investment summary

Observations on capital requirements

Value chains agreed and capital investments needed

Additional feed stock + 3-12 million

Thermochemical integrated biorefinery Must have

Forest resources Black liquor

Biological enzymatic conversion Pyrolysis Gasification

Fibres Chemicals Materials Biofuels

100 tons of dry biomass per day

Multiple wood types

Investment breakdown per value chain

End products Ethanol Biodiesel Chemicals Fibre materials Heat Power

Fermentable sugars (C5,C6) Fermentation/ Lignin combustion/ estherfication/

Waste water treatment Conversion of stillage + +

Ethanol Biodiesel Chemicals Fibre materials ...

Alternative: Build on existing facilities

Build on existing demonstration scale biorefineries

CPI BE Basic Bio Base Europe BioDemo

Savings of 50-90% estimated depending on match of current facilities

Funding options executive summary

Key assumptions behind recommendations

Funding options should:

Collaboration and competition

Criteria to evaluate options

Accommodation of multiple technology requirements Timeline

Additional funding needed

Additional partners (private and public) needed

Overview of public funding sources

Focus of this analysis

EU mandated, member state granted Member state funds

Implications of national versus EU funding

Member states funding

Source: Dalberg analysis

Primary recommended options Best alternative options Estimated match

Short term (2011-13)

Establish demonstration scale lignocellulosic biorefineries producing chemicals and materials

Medium term (2013-15)

ERA Net Plus

Description of short-term funding options

Primary recommended options Best alternative options

Join EIBI (European Industrial Bioenergy Initiative )

European Industrial Bioenergy Initiative (EIBI)

Description of medium-term funding options

Primary recommended options Best alternative options

Apply to structural funds

28 Source: Dalberg analysis, EU