About Lux Research. The Next Frontier of Alternative Fuels in an Era of Low. Victor Oh Practice Lead, Bio based Materials & Chemicals

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1 The Next Frontier of Alternative Fuels in an Era of Low Priced 3D Crude Printing Update 2016 Edition Victor Oh Practice Lead, Bio based Materials & Chemicals Prepared for: World Ethanol & Biofuels November 9, 2016 Image Sources: Neste, Wikipedia, Blume Distillation About Lux Research 2

2 Lux Research Coverage Areas Advanced Materials Agro Innovation Alternative Fuels Autonomous Systems 2.0 Bio based Materials & Chemicals Coatings Digital Health and Wellness Distributed Generation Electronic User Interfaces Energy Storage Food and Nutrition Future Computing Platforms Industrial Big Data and Analytics Industrial Internet of Things Intelligent Buildings Sensors Solar Sustainable Building Materials Water Wearable Electronics More at Exploration and Production 2 Agenda Global biofuels outlook: highlighting capacity trends and emerging markets Roadmap to success with low carbon biofuels in an era of low priced crude 4

3 First generation biofuels dominate global capacity today 40,000 35,000 30,000 Corn ethanol (U.S.) Sugarcane ethanol (Brazil) 25% 20% Capacity (MGY) 25,000 20,000 15,000 Rapeseed biodiesel (Europe) Soybean biodiesel (U.S.) Palm biodiesel (ASEAN) 15% 10% 10,000 5,000 0 Challenges: Food vs. Fuel Volatile feedstock pricing First Gen Ethanol First Gen Biodiesel Incompatibility with cars Novel Fuels Novel Feedstocks 2015 Capacity (MGY) CAGR 5% 0% 5 Next generation biofuels are driving capacity expansion through ,000 35,000 30,000 Novel feedstocks: Agriculture residues, energy crops, waste oils, MSW, CO2 25% 20% Capacity (MGY) 25,000 20,000 15,000 Novel fuels: Renewable diesel, biojet fuel, butanol, biocrude 15% 10% 10,000 5,000 5% 0 First Gen Ethanol First Gen Biodiesel Novel Fuels Novel Feedstocks 2015 Capacity (MGY) CAGR 0% 6

4 The U.S. leads the way for capacity expansion of low carbon fuels through 2018 France Cellulosic ethanol: 0.1 MGY Renewable Diesel: 197 MGY Capacity (MGY) 850 Canada Cellulosic ethanol: 40.0 MGY Renewable Diesel: 68.9 MGY U.S. Cellulosic ethanol: 114 MGY Biodiesel: 113 MGY Renewable Diesel: 279 MGY Biojet: 240 MGY Brazil Cellulosic ethanol: 47 MGY Biocrude: 20 MGY China Cellulosic ethanol: MGY Biojet: 0.1 MGY 0 Capacity Expansion for Next generation Biofuels from 2015 to Agenda 2018 Global biofuels outlook: highlighting capacity trends and emerging markets Roadmap to success with low carbon biofuels in an era of low priced crude 8

5 Three strategies enabling low carbon alternative fuel companies to grow Low cost feedstocks Capital light projects Market flexibility 9 Neste dominates the renewable diesel space with four competitors following closely behind Neste Diamond Green Diesel Eni (Green Refinery) Renewable Energy UPM Group 2007, 2009, 2010, 2011 May 2014 June 2014 October 2014 December MGY capacity (3 facilities) CPO, animal fats, tall oil 130 MGY capacity 95 MGY capacity 75 MGY capacity 32 MGY capacity Animal fats, used cooking oil Palm oil, animal fats, used cooking oil Animal fats Tall oil Image Sources: Neste, Diamond Green Diesel, Renewable Energy Group, UPM 10

6 Tapping into low cost feedstocks reduced Neste s production costs by nearly 15% in % 62% Data Source: Neste 11 Three strategies enabling low carbon alternative fuel companies to grow Low cost feedstocks Capital light projects Market flexibility 12

7 First full year of cellulosic ethanol production leaves many unanswered questions Company Location Capacity Capital Cost Feedstock Abengoa Bioenergy U.S. 25 MGY $500 million Corn stover Beta Renewables Italy 20 MGY $208 million Wheat straw GranBio Brazil 22 MGY $265 million Sugarcane straw POET DSM U.S. 25 MGY $275 million Corn stover Raizen Brazil 10.6 MGY $100 million Sugarcane bagasse DuPont U.S. 30 MGY $225 million Corn stover Image Sources: Abengoa, Beta Renewables, GranBio, POET DSM, Iogen, DuPont 13 Bolt on technology offers a capital light approach to cellulosic ethanol production 2.1 million gallons QCCP Capital Cost Capacity Production Cost Feedstock Cellerate Process $8.5 million 2 MGY $1.25/gal to $1.50/gal Corn kernel fiber Image Source: Quad County Corn Processors; Data Source: U.S. EPA 14

8 Three strategies enabling low carbon alternative fuel companies to grow Low cost feedstocks Capital light projects Market flexibility 15 Pyrolysis oil: the new feedstock for alternative fuels? Pyrolysis Oil Refinery Crude Heating Oil Image Sources: Flat Icon 16

9 Pyrolysis oil co refining will hit commercial scale production by 2020 Pyrolysis Oil Pyrolysis Oil Refinery Refinery Drop In Fuels Crude Heating Oil Crude Oil Image sources: Flat Icon, Ensyn, NREL, Tesoro, Honeywell UOP, Chevron, Shell, Petrobras, BTG BTL, Agilyx 17 Ensyn trailblazing the shift from heating oils to renewable fuels for its biocrude Ensyn Nameplate Capacity Feedstock Renfrew, Ontario 3 million gallons per year Woody biomass, agriculturalresidues Product Renewable fuel oil (RFO) Operational December 2006 (upgraded 2014) 18 Image sources: Ensyn, NREL, Tesoro, Honeywell UOP, Chevron, Green Car Congress

10 Conclusion First generation biofuels dominate today, but future growth is nearly stalled Low carbon, drop in biofuels drive the next frontier in alternative fuels Strong technology isn t enough strategy execution will be key differentiator for winners and losers 19 Thank you Victor Oh Lead, Bio based Materials & Chemicals victor.oh@luxresearchinc.com Lux Research Inc. 100 Franklin Street, 8 th Floor Boston, MA USA Phone: