2/23/2011. Our Multi-Client Services. Global Biofuels Center. Presentation Overview

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1 2/23/211 Presentation Overview Biofuels Policy & Market Issues in the U.S. Intertek Trends in Energy Kuntal Vora, Manager, Alternative Fuels Service February 1, 211 Capabilities and Product Offerings Global Outlook Policy & Overview U.S. Policy Mandates U.S. Market Ethanol Overview Overview Next Generation Biofuels Summary 2 Organization & Services Our Multi-Client Services Global Biofuels Center Global Biofuels Outlook Study North American Ethanol Database International Fuel Quality Center Alternative Fuels Service World Refining & Fuels Service 3 4 Global Biofuels Center How do we do it? High-level multi-client service providing analysis and support to its membership, covering the following biofuels developments in three key areas for more than 68 countries around the world: POLICY: Government policy, legislation & regulatory developments, quality specifications, taxation, incentives, tariffs and related fiscal policies MARKET: Production, consumption, imports, exports, production capacity, feedstocks TECHNOLOGY: Production technologies (e.g. next gen) Biofuel types covered: ethanol, cellulosic ethanol, ETBE, biobutanol, biodiesel, renewable diesel (i.e. non-ester biodiesel) Provides a neutral forum to discuss current issues and network through events such as conference calls, webinars, meetings Analysts are a resource, facilitator, networker for the members NOT an advocacy group a rarity in the biofuels world! Production capacity database 77 countries represented, 3,+ facilities Capacities for ethanol, cellulosic ethanol, renewable diesel, biodiesel, biobutanol, ETBE Features operating, under construction, planned and inactive capacity View the capacities in your preferred unit Get summaries, compare capacities, make charts and download your searches in XLS files Information by country Reports divided into four primary sections Biofuels Market & Policy; Production Capacity; Fiscal Policies; Quality Specifications Coverage for 68 countries: North America, Latin America, Asia, Europe, Russia/CIS Information by topic Climate Change; Energy Security; Environment; Feedstocks; Food v. Fuel; Health Effects; Market & Economic Policy; Next Generation Biofuels; Production & Consumption; Public Policy; Sustainability; Vehicles/Vehicle Emissions Flash and Special Reports Delivered via to the members, posted on the site Flash Reports: Quick intelligence, information and analysis on breaking biofuels developments Special Reports: Project-oriented research and analysis reports on the biofuels topics we cover Extensive archive of all biofuels reports available since 24 Member Q&A 5 6 1

2 2/23/211 Global Biofuels Center Membership Diverse and Global Stakeholders Global Biofuels Outlook, Annual Supply and Demand Outlook Study reviews 3+ countries in five regions: North America, Latin America, EU-27, Russia/CIS and Asia-Pacific Supply and demand analysis for ethanol and biodiesel in these countries, along with policy and market outlook, next gen included where applicable Gasoline and diesel demand numbers supplied by the World Refining & Fuels Service study Demand estimated from mandates expected to be in place during the three study time periods (21, 215, 22) Supply estimated based on production capacity, plant utilization, historical production and imports (where applicable), feedstock availability GBC has used production capacity from its Production Capacity Database to estimate potential supply, using existing capacity and future capacity from projects currently under construction and those we expect will be built. Where possible overall utilization rates have also been applied to make an estimate of possible supply for the region. We also look at historical production where applicable. 7 8 North American Ethanol Database International Fuel Quality Center North American Ethanol Database: Determining Demand, Value And Logistics For Ethanol in North American Motor Fuel Markets, Indepth information and analysis on: Logistics: points of entry for CBI and Brazilian imported ethanol, petroleum storage facilities, terminals, market distribution logistics, rail transportation, trans-load facilities, barge companies, pipelines Major end-users by region, demand volumes by refiner, RIN obligation estimates, ethanol values to refiners Supply and demand analysis in the U.S. to 22 Production by plant, historical ethanol production, ethanol stocks, historical imports, historical ethanol sales State ethanol sales forecasts Gasoline and ethanol demand by state RFS2 RVO requirements and RIN obligations by refiner Established in 1998 by 13 founding companies A specialized member service Empowers members with analysis and information of about 15 countries on fuel quality and specifications vehicle emission standards refining implications environmental legislation and regulations Ensures members complete coverage and interpretation of global transportation and fuel specifications developments Improves communications among refining, automobile and regulatory bodies for a better understanding of fuel quality Does not advocate any position - only organizations being non-bias and representing all parties Brings discussions in international organizations such as ISO, CEN, ASTM, OPEC, JCAP to you 9 1 IFQC The Members Client-Specific Consulting Areas of Expertise International Fuel/Biofuel Market Research Supply/Demand Data Price Forecasts Project Feasibility Studies Fuel/Biofuel Specifications In-Use Fuel/Biofuel Qualities International Base Oil / Lube Market Research Supply/Demand Data Price Forecasts Project Feasibility Studies Specifications Air Quality Planning Mobile Source Control Impacts Exhaust Emissions Modeling Pollutant Inventory Forecasts Urban Air Shed Modeling Health Effects Refining Technology Evaluations Capability/Capacity Evaluations Emerging Technology Previews Licensing Alternative Comparisons Refining Economics Linear Programming Applications (based on PIMS) Process/Operations Optimization Capital Project Planning Product Blending Models Other Specialized Services Expense Reduction Due Diligence Expert Witness Training Government Relations and Policy Development

3 2/23/211 Biofuel Mandates in 21 Half the Programs in Developing Countries North America: RFS2, LCFS Europe: RED implementation & GHG-savings GLOBAL OUTLOOK Africa: many projects but no programs Policy & Drivers Latin America: more countries pushing for mid and higher level ethanol blends Ethanol Middle East: Ethanol & Jatropha R&D projects; Algae Asia: Blend levels vary highly Source: HEC/Global Biofuels Center, June 21 Ethanol & No known biofuels program Current Global Ethanol Blending Limits Blend Limits Generally 1 vol% or Less Current Global Blending Limits Blend Limits Generally Less than 5 vol% Policy Timeline: North America Is an RFS3 Coming to the U.S.? Missouri: E1 Washington: E2, B2* Manitoba: E8.5 Saskatchewan: E7.5 Massachusetts: B2 Pennsylvania: B2* Florida: E1 Canada: E5, B2 British Columbia: B5 Note: Red suspended/not in effect *Mandates in Louisiana, Montana (E1), Pennsylvania and Washington depend on meeting local production triggers U.S. POLICY U.S. RFS2 Enacted Minnesota: B2 Ontario: E5 Ontario: E1 Quebec: E5 Minnesota: E2 Massachusetts: B5 U.S.RFS 2: 36 BGY : Hawaii: E1 Iowa: State RFS (unenforced) 25: U.S. RFS 1 Enacted Minnesota: B5 25: Louisiana: B2, E2* Montana:E1* 22: California: CaRFG3 Oregon: E1, B2 Standards effective New Mexico: B5 Minnesota: B1 Minnesota: B2 California: 1% GHG Reduction Target 1997: Minnesota: E1 17 Source: Hart s Global Biofuels Center, September

4 Million Gallons Billions of Gallons Million Gallons Gasoline Demand (billion gallons) RFS2 Requirements (billion gallons) 2/23/211 RFS2 Targets under the U.S. Energy Legislation 29 Corn Ethanol Production to Exceed Targets EPACT production billion gallons corn ethanol production 11.2 billion gallons U.S. MARKET Biomass-Based Diesel Advanced Biofuels (Sugar) Cellulosic Biofuels Renewable Fuel (Corn Ethanol) Previous RFS - PL Total New RFS Requirement Source:, citing the Energy Independence & Security Act, March 28 Ethanol Overview 19 2 Production v. Capacity, Capacity to Continue Creep, Utilization to Remain above 9% Production v. Consumption, Consumption Lead by Intermediate Blends to Outpace Production 2, 2 1, Production Consumption Domestic Production Production Capacity Source:, October 21 Source:, October Bumping Up Against the Blend Wall Hart Low Case Shows Near Maximum E1 Penetration Today Another View of the Blend Wall Declining Gasoline Demand Accelerating Blend Wall 9% % Penetration % Penetration 1-5% Penetration Below 1% Penetration Source: Hart s North American Ethanol Database, June 21. Alaska 1% Hawaii 95% Source: Hart s North American Ethanol Database, June 21. RFS Mandated Conventional Ethanol Use Gasoline Demand Excluding Blend Components

5 Billion Gallons Billion Gallons Million Gallons 2/23/211 Current LCFS Impact on U.S. Ethanol 76+ MGY Domestic Ethanol Potentially Out of California by 215 Potential Sugarcane Ethanol Import Needs Could Be Close to 2 BGY by Will CARB end up updating ILUC values following the expert workgroup work, and could it have a favorable impact on corn ethanol? The blend wall? If so, that may impact our assessment of Brazilian ethanol we project a significant increase in imports beginning in 212. On the other hand, updating the ILUC factors may have an even more positive impact for Brazilian ethanol. Note: Green=volumes permitted for purposes of LCFS compliance; red=volumes no longer permitted for purposes of LCFS compliance. Source: California Energy Commission, May Imports RFS2-AB Req. Net Difference Source:, October Fundamentals, 26-Q221 Is There Enough to Meet RFS2 Targets?? 3,5 3, Jan-July 21 2,5 2, 1,5 U.S. MARKET Overview 1, 5 - Production Consumption Operating Capacity Total Imports Total Exports Fragmented industry, few vertically integrated players, had been many garage-style operations. Too much capacity built out after RFS1 and no home for the market global trend as well. 3 BGY total capacity 5% not operating at all, the other 5% operating at about 6-1% utilization. Very little biodiesel in the market right now. We project total production of about 35 million gallons for 21. Tax credit renewed for 211, effective retro-actively for 21. Source: Hart s Global Biofuels Center, November 21 citing production, consumption data from EIA and import/export data from US ITC Diesel v. Demand, Diesel Demand Increases, But Not NEXT GENERATION BIOFUELS Diesel Demand Demand By 215, economic growth propels growth of diesel demand back to 28 levels. Through 22, on-road diesel demand to increase 2.48% per year. demand stays flat through 22 barring any major policy move or realignment about 1 billion gallon demand and less than 2% penetration into the on-road pool. Must acknowledge growing demand for biodiesel as a heating oil application not included in this analysis. Source:, October

6 Million Gallons 2/23/211 Expected Regional Distribution of Capacity Surprise: There s a lot of cellulosic projects in Asia, more than the U.S. Next Gen Capacity in North America Lots of Cellulosic Ethanol Projects Biobutanol Cellulosic Ethanol FT hydrocarbons Methanol DME HVO Pilot/Demo Commercial Pilot/Demo Commercial Pilot/Demo Commercial North America Asia Pacific Europe Source: Hart s Global Biofuels Outlook 21-22, September 21 Product Total number of facilities Source: Hart s Global Biofuels Center June 21; Canada data in brackets Total annual production capacity (million gallons) Pilot/demo Commercial Total Pilot/demo Commercial Total Biobutanol Cellulosic Ethanol FT Liquids / Hydrocarbons 37 (5) 8 (3) (6) (39) Methanol Hydrogenated vegetable oil / animal fat DME Synthetic Gasoline Total Summary There s Never a Dull Moment for Analysts Looking at the U.S. Market! SUMMARY It s likely the RFS2 program could be revised in the new session of Congress. Corn ethanol production and consumption will continue to increase in the U.S. and intermediate blends are a sure bet by 215. We project about 2% penetration of E15 in the U.S. market by 215. Demand for Brazilian ethanol could grow to more than 2 billion gallons by 22, driven primarily by LCFS and RFS2 advanced biofuel requirements. California-specific ethanol demand due to the LCFS will grow to 1.8 billion gallons by 215 and we expect much of this demand could be satisfied with Brazilian ethanol. At least 5% of the state s ethanol demand could be satisfied with Brazilian ethanol. What pressure could this put on the ethanol import tariff? Small commercial availability of next gen increases value of sugarcane ethanol. The future viability of FAME biodiesel is questionable, but renewable diesel has never looked better! We expect volumes from Neste and Dynamic Fuels in the market next year (California). Next-generation biofuels simply will not be widely and commercially available through 22 and this has significant implications for the RFS2 and LCFS programs Kuntal Vora Manager, Alternative Fuels Service kvora@hartenergy.com +1(713)