In the previous article, we presented a debate about points that can justify our central premise: in the future, the industrial use of biomass will be very different from the current industry. The World Economic Forum has just published “The future of industrial biorefineries”, a report that reinforces the idea of a new industry under construction.
Note that this is the first work of the Collaborative Innovation Initiative group, established in 2009 to identify important trends in the global economy and contribute to the cooperative development of innovations.
In this article we will discuss the ongoing process of innovation that is based on construction of the biofuels industry of the future.
Except for the production considered as first-generation (ethanol from sugarcane and corn, biodiesel from vegetable oils), there are some hundreds of innovative projects developing worldwide. They are the source of the industry of the future. Studying these projects can help us understand this process of innovation. We are building a database with about 50 projects selected from the most interesting and popular projects. Still in a very early version, the database is partially reproduced in the article “Biofuel technological innovation and the innovation in the Brazilian ethanol industry” that we introduced in 33rd IAEE Congress, last June.
What can be seen by analyzing the ongoing innovative projects? The first point to be noted is the number and diversity of the proposed alternatives. There are innovations related to commodities, conversion processes and products, in addition to innovations in business models. Finally, it is interesting to observe the profile and strategy of companies and investors (knowledge background, associations, technology-based companies, new entrants and large companies).
At the current stage of development of technologies, it is not possible to anticipate the innovations that will be effectively adopted in the fuels and bioproducts market. It is a process aimed at generating varieties, within the dynamics of innovation, to be selected over time and to contribute to the construction of biomass-based industry of the future. The ongoing projects seeks better products, better processes and better commodities (lower and stable prices, and easy availability) for the production of biofuels that can overcome the current limitations of industry and bioproducts to be presented as alternatives to fossil-based products.
Some points should be highlighted. The first one relates to the number and diversity of the alternatives proposed, which suggests that the technology is the fluid phase. No processes and products that will occupy the largest market share have been defined. This point suggests that the ventures are made even with a high degree of uncertainty.
Regarding commodities, efforts are focused on improving the productivity of feedstocks of various types by using knowledge of biotechnology and genetic engineering. Researches are developed in well-known raw materials, such as sugarcane, and raw materials not yet used widely by industry, such as cellulosic materials, algae and new plants. New business models using waste as raw material have been tested as well.
The analysis of process innovations shows firstly a range of techniques under development, using various knowledge bases (fermentation, enzymatic processes, catalysis, genetic engineering, gasification, chemical synthesis). A variety of processes still reports the presence of companies with diverse backgrounds and they were traditionally out of the energy and chemistry markets. This is the case of biotechnology companies, some of them with a history of important developments in other industries, such as pharmaceuticals.
The liquid fuel industry usually focuses on process innovations. According to this, much of the efforts are focused on developing new processes to produce fuels already known and used, such as ethanol. But the current state of the industry sees opportunities to introduce new products from renewable sources, which are close to the ideal condition of fuel – so-called drop in biofuels – and other bioproducts that may compete with fossil-based chemicals.
It should be also emphasized the growing importance of the biorefinery concept. This concept suggests that the exploitation of renewable raw materials need to integrate a multiproduct view, by exploring several chains and processes, like the oil refineries. In the case of biorefinery, energy products and chemicals are side by side.
Finally, we will extend a little more discussion about the profile of companies and their strategies. Profiles of the companies involved, as well as their strategies adopted, are varied. Companies that contribute their base knowledge technological: biotechnology companies with previous experience in other industries such as pharmaceuticals or established to act directly on bioenergy with start ups with other knowledge bases (chemical engineering, chemistry). Among the companies that contribute their accumulated technological expertise, there are some chemistry/biotechnology (Du Pont) and enzymes (Novozymes) companies. Recent movements of companies like Monsanto and BASF strengthens the diversity of actors currently involved in the exploitation of renewable raw materials. Some of these companies also contribute engineering process knowledge that are essential for industrial scale production. This knowledge is often out of technology-based companies from universities and research centers.
Some companies may be characterized by their historic involvement with fossil fuels: oil companies and automobile industry. These companies, in addition to financing research projects, can be relevant holders of strategic complementary assets for the introduction and adoption of innovations in the market for liquid fuels. In the case of oil companies, biofuels also represent an opportunity for diversification in relation to fossil fuels.
There are also companies linked to agro-business. Now there are traditional companies such as Cargill and ADM, with a history of involvement in the agro-food industry. These companies can also be seen as holders of complementary assets; in this case, they are connected to agricultural production and supply logistics chain.
Two special cases deserve a separate comment: Shell and BP. It is notable the Shell’s strong presence in five different projects that are structured over the past years. There are five different platforms, all operated as association or involvement by technology-based companies. Projects include the production of new feedstocks (algae), process innovations (bioethanol from cellulosic materials, liquid fuels such as diesel and fuel by thermochemical route and fuels from sugars by chemical route) and product innovations (biogasoline). Shell’s approach emphasizes clearly the focus on technological innovation based on competition in biofuels, focusing the advanced biofuels and directs itself for exploring several different technological platforms. In the company’s strategy, one or more platforms could reveal the winners of technological competition, being selected in the selection process and developed as commercial scale businesses. The remaining would not be considered. However, the technological process planning in industry has been dynamic. Recently, Shell changed partially its position: company left the association with Choren (production of biofuels by thermochemical route, BTL) and, at the same time, positioned itself as a major producer of ethanol from sugarcane in association with Cosan, the industry leader in Brazil.
The case of BP shows a different strategic approach. The company, which invested about US$ 1.5 billion since 2006 in biofuels and bioproducts, showed more clearly its strategy with last operations made in 2009. BP aims to play an active role in expanding the market for biofuels from the first-generation fuels and moving, as the maturing of projects, for the production of advanced biofuels and bioproducts. The company currently operates in seven different projects ranging from the production of first-generation ethanol to advanced biotechnology research: production of ethanol in Brazil (Tropical, a BP, Santelisa and Maeda joint venture), production of ethanol from wheat in the UK (Vivergo, a BP, DuPont and British Sugar joint venture), development of technology and production of butanol (Butamax, a BP and DuPont joint venture), production of ethanol from lignocellulosic materials (Vercipia, a BP and Verenium joint venture), production of diesel from sugars (project developed by Martek from algae supported by BP), biotechnology of seeds for high-yielding energy crops (Mendel supported by BP) and finally the application of US$ 500 million in 10 years, for the structuring EBI, Energy Biosciences Institute, in partnership with University of California Berkeley, Lawrence Berkeley National Laboratory and University of Illinois.
With different approaches, the Shell and BP’s strategies mean the building process of the industry based on renewable raw materials of the future.
This brief discussion about the nature of the ongoing innovation process, which is the basis of the biofuels industry of the future, leads us to a essential issue of our consideration. Have strategies and policies in Brazil taken into account the opportunities and threats that this process brings us? Or do we believe undoubtedly that our competitive ethanol from sugar cane – which gives us an enviable competitive position in the current industry – is enough to ensure a prominent position in the industry of the future as well? We will be back to this later.