Infocast in Milan: Nova-Institut Analyses Feedstocks and Feedstock Competition

Michael Carus of the Nova Institut gave a presentation at the recent Infocast event in Milan regarding recent developments at the Institut around feedstocks, policy and markets for Green Chemistry and Biopolymers.

The Institut has a number of areas of activity; Resource management, Industrial use of these resources and building the political/regulatory foundations for a sustainable bio-based economy. Resource management covers feedstocks; their production, cost and competitiveness with fossil fuel feedstocks. Industrial use of resources refers to a range of applications for industrial biotechnology; bioenergy/biofuels, bioplastics and bio-based chemicals. Their efforts are around the whole process, taking the feedstocks, converting them to products and taking them to market.

Prices of feedstocks are something that the Nova institute monitors and prices are rising across the board. The price of oil is at its highest point in February 2011 in 25 months, since the price spike in 2008. The price of wheat has also increased, largely due to droughts in 2010. Corn prices have risen sharply in 2011 due to poor harvests and some say demand for corn ethanol is also a factor. Increasing demand for corn in general is also a factor; more of it is being used for food markets and in non-industrial applications, such as bio-based chemicals. Sugar prices are also high due to a drought in Brazil; before the drought prices were amongst the most stable of all the feedstocks they looked at. Markets for renewable feedstocks from agriculture have been growing steadily for the past few years. While consistently larger and generally growing, markets for non renewable feedstocks fluctuate much more. The point was made that the prices of renewable feedstocks are driven by supply, but prices of oil are driven by demand, a product of the pressures on renewable feedstock production. Rising GDP of developing countries is also expected to affect the prices of these feedstocks, most likely resulting in a rise in 2011/2012.

Since renewable feedstocks prices are more dependent on supply, increasing this supply is one of the most fundamental ways of making these feedstocks more competitive with oil. Increasing yields is one way of doing this. It is not only a technological challenge, but also a challenge to regulatory frameworks in developing countries; often the methods for increasing yields common in developed countries are unavailable. Investment and reform is the answer here. This is a clear area for improvement that the Nova Institut has identified. Another method for increasing renewable feedstock supply is to increase the available land for growing crops; they estimate between 0.6 and 1.6 billion hectares could be used for agriculture with minimal impact on protected and urban areas. They also see GM technology as a potential technological contributor, but one that is less significant than these two other options according to Nova.

They looked at the food vs fuel issue in some detail and concluded that the issue has been oversimplified: they say the real issue is how to get the best yields out of agricultural land. Interestingly, centuries of selective breeding actually mean that food crops result in better yields than some of the crops currently used as non-food alternatives. Again, as prices of these feedstocks rely more upon supply rather than demand, increased demand for them from biobased fuels and chemicals won’t have as much of an effect (though scarcity might become an issue). Nova claims what is needed is not a shift from food crops to non-food crops, it is better use of agricultural land. But, the land available to produce renewable feedstocks will become limiting unless productivity is greatly increased and more land efficient options are used (such as solar or wind power). They also recommend food and feed crops are given higher priority over crops to be used for other applications.

Nova also made some interesting projections for the biobased chemicals market in 2025. They predict market penetration of biobased fine and specialty chemicals will roughly double (to make up approximately 50% of the market) from present levels. Biopolymers will also double (to around 15% of the market). Biobased commodity chemicals will increase its market share from 1-2% to 6-10% in that time, according to Nova. It can be said with reasonable confidence that fine and specialty chemical production will be one of the most solid growth areas for industrial biotech, as a number of other studies have reached the same conclusion. For example, the IBLF in the UK concluded that these sectors were relatively sure for growth in a number of scenario predictions for the 2025 time frame. Nova also found that use of biobased feedstock to produce biobased chemicals rather than fuels was a more efficient way to use land.