UPM BIOREFINERY. World Biorefinery Conference 2012, Jönköping, Sweden UPM Biofuels / Kosti Mokkila

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Laura Lyons
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1 UPM BIOREFINERY World Biorefinery Conference 2012, Jönköping, Sweden UPM Biofuels / Kosti Mokkila

FOREST OF NEW OPPORTUNITIES World is changing Resource scarcity Power shift in global economy Climate change Digitalisation Biofore growth and competitiveness Materials and energy efficiency

2 FOREST OF NEW OPPORTUNITIES World is changing Resource scarcity Power shift in global economy Climate change Digitalisation Biofore growth and competitiveness Materials and energy efficiency Renewable and recyclable products Innovation and new businesses 2 The Biofore Company - UPM leads the integration of bio and forest industries into a new, sustainable and innovation-driven future

3 RENEWABLE FUELS MARKET Four megatrends drive demand for biofuels Energy security Climate change Biofuels are an effective way to increase energy security, reduce dependency on oil imports Together with improving fuel efficiency, biofuels are the most important low-cost way of reducing CO2 emissions in the transport sector Rural development Higher energy prices Biofuels can create new sources of income for rural areas. Increased competition for arable land has raised awareness of sustainability issues Increasing cost for the marginal barrel of oil (ultra deep water drilling, oil sand etc.) supports demand for substitutes including biofuels 3

RENEWABLE FUELS MARKET Public policy responds to megatrends also outside Europe Current regulation favourable EU (Renewable energy directive): Biofuels account for 10% of energy content by 2020 US

4 RENEWABLE FUELS MARKET Public policy responds to megatrends also outside Europe Current regulation favourable EU (Renewable energy directive): Biofuels account for 10% of energy content by 2020 US (Renewable fuel standard): Biofuels are expected to account for about 20% of annual fuel consumption by 2022 Other countries: More than 50 countries have adopted blending targets or mandates Major regulation changes unlikely Biofuels are needed to fight megatrends Stable regulatory environment and rewarding of investors needed to drive investments Long-term, regulation support not needed to drive market creation as competitiveness of biofuels improves with more mature technology and increasing fossil fuel price 4

RENEWABLE FUELS MARKET Demand for biofuels expected to grow Global biofuel demand is expected to grow by 9% annually over next 10 years European market is driven by biodiesel robust growth expected

5 RENEWABLE FUELS MARKET Demand for biofuels expected to grow Global biofuel demand is expected to grow by 9% annually over next 10 years European market is driven by biodiesel robust growth expected Global biofuel demand (Mtons) % CAGR, (consensus range) Total (cons.) Biodiesel (cons.) Total (IEA) 7-11% 7-16% 7% Biodiesel demand, EU-27 (Mtons) % Share of traffic fuels % 8% 10% Ethanol (cons.) 8-9% Ethanol demand, EU-27 (Mtons) % Consensus range National action plans (NREAPs)

6 RENEWABLE FUELS MARKET Demand for biofuels is growing fast Global demand will exceed supply in the next few years DEMAND OF BIODIESEL IN EU (Mtonnes) 50 Demand in EU grows by approx. 7% yearly 40 +7% EU s target by 2020 is to cut greenhouse gas emissions by 20% to have 10% of renewable fuels in road transport (Finland 20%) UPM s markets are in the EU Consensus area National action plans (NREAPs) Source: Hart Global Biofuels Outlook

RENEWABLE FUELS MARKET EU s Renewable Energy Directive favours advanced biofuels EU s Renewable Energy Directive (RED) favours advanced biofuels Advanced biofuels which are produced from

7 RENEWABLE FUELS MARKET EU s Renewable Energy Directive favours advanced biofuels EU s Renewable Energy Directive (RED) favours advanced biofuels Advanced biofuels which are produced from lignocellulose, waste and residue based raw materials are double counted when calculating renewable target In practice, 5% of advanced biofuels would be regarded as 10% when calculating the renewable target Source: Directive of the European Parliament and of the Council on the Promotion of the Use of Energy from Renewable Sources (RED) 7

8 Wood raw material is the basis of many different businesses Fibres to pulp, paper and composites Bark and branches to BTL (next generation biodiesel) and energy Lignin and fibrils to new products Extractives to Biodiesel Logs for sawn goods and plywood 8

9 UPM BIOFUELS UPM s biofuel strategy Significantly less greenhouse gas emissions Advanced biofuels Wood based, non-food raw materials Products are drop-in advanced biofuels ready components for car fuel tanks 9

UPM BIOFUELS Biofuels concepts FEEDSTOCK PROCESS PRODUCT PROPERTIES SUGAR & STARCH BLE OILS RESIDUES & WASTE VEGETA- LIGNO- CELLULOSE Sugar cane Palm Tall oil (Energy) wood Corn Soy Waste fat

10 UPM BIOFUELS Biofuels concepts FEEDSTOCK PROCESS PRODUCT PROPERTIES SUGAR & STARCH BLE OILS RESIDUES & WASTE VEGETA- LIGNO- CELLULOSE Sugar cane Palm Tall oil (Energy) wood Corn Soy Waste fat Pyrolysis oil Wheat Rape Waste Straw Fermentation Esterification Hydrogenation Gasification + FT-synthesis Hydrolysis + fermentation Bioethanol No1 in production volumes in the world Biodiesel No1 in production volumes in Europe Advanced biodiesel Few comm. plants Bioethanol No comm. production Limited fuel properties Maximum blending 6 % in energy content Low sustainability Simple processes High quality fuels that complement motors (ethanol quality similar to 1G) High sustainability Advanced processes 1G CONVENTIONAL 2G ADVANCED UPM FOCUS 10

11 UPM BIOFUELS UPM s biofuel vision and concepts FIRST STEPS OF BUSINESS HYDROTREATMENT Liquid raw materials First investment Tall oil Lappeenranta biorefinery EXPANDING BUSINESS THERMAL CONVERSION Energy wood Gasification (BTL) / Pyrolysis BTL investment Strasbourg or Rauma GROWTH OF BUSINESS FUTURE DEVELOPMENT New technologies, processes and innovative raw materials.. UPM s own R&D activities in Lappeenranta and co-operation with strategic partners. 11 BTL = Biomass-to-liquid R&D = Research and Development

12 UPM BIOFUELS UPM's biofuels significantly reduce GHG emissions compared to fossil fuels % Fossil diesel* Rapeseed biodiesel* Palm oil biodiesel (with/without methane capture)* UPM's biofuels EU 2011 EU 2017 EU 2018 (new plants) *Source: Directive of the European Parliament and of the Council on the Promotion of the Use of Energy from Renewable Sources 12

13 UPM BIOFUELS UPM Lappeenranta biorefinery Commercial scale industrial investment Total investment of appr. 150 MEUR Production tonnes/a of advanced biodiesel Production starts in 2014 Employes approx. 200 persons directly and indirectly Profitable investment Know-how and volumes in raw material procurement and logistics Mill integrated synergies in energy and infrastructure High quality product UPM s innovative technology (technology partner Haldor Topsøe) 13

UPM BIOFUELS Crude Tall Oil (CTO) Tall oil is a residue of pulping process Contains the extractive components of wood (gum, kåda) Distillation derivatives Tall Oil Fatty Acid TOFA Tall Oil Rosin Acid

14 UPM BIOFUELS Crude Tall Oil (CTO) Tall oil is a residue of pulping process Contains the extractive components of wood (gum, kåda) Distillation derivatives Tall Oil Fatty Acid TOFA Tall Oil Rosin Acid TOR Tall Oil Pitch TOP Manufactured by acidulating raw sulphate soap separated from black liquor Yield kg CTO/ t pulp Global production now > t CTO/a Additional soap potential exists Utilization of low grade CTO 14

15 UPM BIOFUELS Hydrotreatment process 15

16 UPM BIOFUELS Chemical reactions in hydrogenation Removal of oxygen, sulphur and nitrogen COOH CH 3 Double bond saturation CH=CH CH 2 CH 2 Aromatics to cyclic hydrocarbons (HC s) Cyclic HC s to linear HC s Isomerization (linear HC s to branched HC s) Cracking (lights / gas formation) Reactions taking place in random order and at random yields 16

UPM BIOFUELS Technology concept developed in UPM Research Centre UPM has developed hydrotreatment process in Lappeenranta biorefinery development centre R&D focus - Technology development:

17 UPM BIOFUELS Technology concept developed in UPM Research Centre UPM has developed hydrotreatment process in Lappeenranta biorefinery development centre R&D focus - Technology development: hydrotreatment, feed pretreatment process, reaction kinetics - Proof of concepts in lab, pilot and bench scale - Raw material mapping and feasibility evaluation - End-product development Hydrotreatment piloting is done in co-operation with technology partner Haldor Topsoe 17

UPM BIOFUELS Attractive growth investment based on UPM s competitive advantages Competitive raw material Crude tall oil, a residue from pulp production Steady supply partially from own sources

18 UPM BIOFUELS Attractive growth investment based on UPM s competitive advantages Competitive raw material Crude tall oil, a residue from pulp production Steady supply partially from own sources Outside food value chain No indirect land-use change Efficient production process Technology based on UPM innovations Efficient use of raw material Integrate synergies Industrial infrastructure High quality product 2 nd generation biodiesel fully compatible with current diesel motors 80% reduction in greenhouse gas emissions High energy content No blend wall issues 18 UPM

SUMMARY Ingredients for new business creation Favourable Megatrends Know-how, innovation and right partners Support from top management with

19 SUMMARY Ingredients for new business creation Favourable Megatrends Know-how, innovation and right partners Support from top management with clear state of will Sustainable chain of production Good products and growing markets Profitable business model Courage to think differently 19

Future UPM will be a big player in advanced biofuels market, revenue targeting > 1 billion /a Getting really big volumes of advanced biofuels to market necessitates effective new

20 Future UPM will be a big player in advanced biofuels market, revenue targeting > 1 billion /a Getting really big volumes of advanced biofuels to market necessitates effective new technologies in converting lignocellulose to advanced biofuels UPM is actively developing new production technologies with the forefront technology vendors and research companies 20

Renewable diesel from tall oil

Uudet energialähteet ja joustava voimantuotanto Renewable diesel from tall oil Ville Vauhkonen UPM Biofuels R&D UPM today UPM Plywood Plywood and veneer products UPM Biorefining Pulp Plantations Biofuels