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Power Generation

Energy Utilization

Transportation

Agriculture

Forestry

Waste Management

Biocombustibles

Biofuels

Bio-oil

RenewableFuel

Energy Exploration and Production

Biodiesel

Bioethanol

Biogas

Biosyngas

Sustainable Development Business Case Report

Renewable Fuel — BiofuelsSD Business Case™ Version 2 • December 2006

BC_RFB_V8.5.5_EG_061207

Biocombustibles

Biofuels

Bio-oil

RenewableFuel

Energy Exploration and Production

Biodiesel

Bioethanol

Biogas

Biosyngas

Sustainable Development Business Case Report*

Renewable Fuel — BiofuelsSD Business Case™ Version 2 • December 2006

* Copyright © 2006 by Canada Foundation for Sustainable Development Technology (“SDTC™”). All Copyright Reserved. Published in Canada by SDTC™. No part of the SD Business CaseTM may be produced, reproduced, modified, distributed, sold, published, broadcast, retransmitted, communicated to the public by telecommunication or circulated in any form without the prior written consent of SDTC, except to the extent that such use is fair dealing for the purpose of research or private study (unpublished, or an insubstantial copy). To request consent please contact SDTC. All insubstantial copies for research or private study must include this copyright notice.

The SD Business Case™ is provided “as is” without warranty or representation of any kind. Use of the information provided in the SD Business Case is at your own risk. SDTC does not make any representation or warranty as to the quality, accuracy, reliability, completeness, or timeliness of the information provided in the SD Business Case.

Sustainable Development Technology Canada™, SDTC™, SD Business Case™ and SDTC STAR™ are trade marks of Canada Foundation for Sustainable Development Technology.

Table of Contents1 Overview : SD Business Case™ Plan and the SDTC STAR™ Process ......................... 1

1.1 The SD Business Case™ Plan ............................................................................................................................................................ 1

1.1.1 Primary Audience ........................................................................................................................................................................ 1

1.1.2 The SDTC STAR™ Tool ................................................................................................................................................................. 2

1.1.3 Sectors to be assessed by the SD Business Case™ ...................................................................................................... 2

Figure 1 : SD Business Case Investment Roadmap ............................................................................................................................................ 3

1.1.4 Investment Categories to be Analysed ............................................................................................................................ 4

1.1.5 Conclusions Framework ........................................................................................................................................................... 4

1.2 The SDTC STAR™ Process : Data Collection And Analysis ...................................................................................... 5

Figure 2 : The SDTC STAR Process ........................................................................................................................................................................... 5

1.2.1 Assessment Descriptions ......................................................................................................................................................... 6

Figure 3 : SDTC Funding Support ............................................................................................................................................................................ 7

1.2.2 Output Structure .......................................................................................................................................................................... 8

Figure 4 : Sample Technology Plot ........................................................................................................................................................................ 10

1.3 Conclusions And Investment Priorities ............................................................................................................................... 12

2 Executive Summary : Biofuels ................................................................................................................................ 13

2.1 Biofuels ........................................................................................................................................................................................................... 13

2.2 Biofuel Resources ................................................................................................................................................................................... 13

2.3 A Vision for the Future ....................................................................................................................................................................... 13

2.4 The Biofuels Market ............................................................................................................................................................................. 13

2.5 Biofuel Technologies ........................................................................................................................................................................... 14

2.6 Achieving the Vision ............................................................................................................................................................................ 15

2.6.1 Technical Needs ........................................................................................................................................................................... 15

2.6.2 Non-Technical Needs ................................................................................................................................................................ 15

2.7 Statements Of Interest Review .................................................................................................................................................. 16

2.8 Investment Priorities .......................................................................................................................................................................... 16

2.8.1 Near Term ....................................................................................................................................................................................... 16

2.8.2 Longer Term .................................................................................................................................................................................. 17

2.8.3 National Strategy Impacts .................................................................................................................................................... 17

3 Industry Vision/Background ....................................................................................................................................... 18

Figure 5 : Biofuels SD Business Case Investment Report Study Scope ............................................................................................................ 18

3.1 General Description ............................................................................................................................................................................. 18

3.2 Types of Biofuels ..................................................................................................................................................................................... 18

3.2.1 Solid Biofuels ................................................................................................................................................................................ 18

3.2.2 Liquid Biofuels ............................................................................................................................................................................. 18

3.2.3 Gaseous Biofuels ........................................................................................................................................................................ 19

3.3 Biofuel Resources ................................................................................................................................................................................... 19

3.3.1 Canada’s Energy Mix ................................................................................................................................................................. 19

Figure 6 : Canada’s Industrial Energy Flow (2002) ............................................................................................................................................... 20

3.3.2 Canada’s Biomass Resources................................................................................................................................................ 21

Table 1 : Canada’s Biomass Feedstock Supply ...................................................................................................................................................... 22

3.3.3 Feedstock Availability and Regional Distribution ................................................................................................... 22

Figure 7 : Canadian Forest Map ............................................................................................................................................................................ 23

Figure 8 : Canadian Sawmill Locations Map ........................................................................................................................................................ 24

Figure 9 : Canadian Farming Map ......................................................................................................................................................................... 25

Figure 10 : Canadian Large Livestock Operations Map ........................................................................................................................................ 26

Figure 11 : Canadian Population Density (2001) Map ........................................................................................................................................ 27

3.4 Emissions from Biofuel Production ........................................................................................................................................ 28

Figure 12 : Emissions from Food Production and Biomass Waste ..................................................................................................................... 28

3.5 Emissions from the Production of Fossil Fuels ............................................................................................................. 28

3.5.1 Coal Mining Emissions ............................................................................................................................................................. 28

3.5.2 Oil Production Emissions ....................................................................................................................................................... 28

3.5.3 Natural Gas Production Emissions ................................................................................................................................... 28

3.5.4 Diesel Fuel Production Emissions ..................................................................................................................................... 28

3.6 Key Drivers and Influencers .......................................................................................................................................................... 29

3.6.1 Political & Regulatory Drivers ............................................................................................................................................. 29

3.6.2 Political Attention ..................................................................................................................................................................... 29

3.6.3 Regulation ..................................................................................................................................................................................... 29

3.6.4 Tax Treatment .............................................................................................................................................................................. 30

3.7 Technical Drivers ..................................................................................................................................................................................... 30

3.7.1 Energy Content ............................................................................................................................................................................ 30

3.7.2 Moisture Content ....................................................................................................................................................................... 30

3.7.3 Infrastructure Requirements .............................................................................................................................................. 30

3.7.4 Airborne Emissions.................................................................................................................................................................... 30

Figure 13 : Emissions from Dedicated Energy Crops for Biofuel Production ....................................................................................................... 31

3.7.5 Product Performance............................................................................................................................................................... 31

3.8 Production and Distribution Infrastructure ................................................................................................................... 31

3.8.1 Economic and Financial Drivers ......................................................................................................................................... 31

Figure 14 : Future Feedstock Composition ............................................................................................................................................................ 32

3.9 Market Infrastructure & Market Demand Drivers ..................................................................................................... 34

3.9.1 Fuel Prices....................................................................................................................................................................................... 34

Figure 15: Crude Oil Price Trends .......................................................................................................................................................................... 34

3.9.2 Market Proximity ....................................................................................................................................................................... 35

3.9.3 Replicability and Portability ............................................................................................................................................... 35

3.9.4 Sources of Risk ............................................................................................................................................................................. 35

Figure 16 : Canadian Oil Production and Export Map.......................................................................................................................................... 36

3.9.5 Transportation Infrastructure ............................................................................................................................................ 36

Figure 17 : Canadian Natural Gas Supply and Distribution ................................................................................................................................ 37

3.9.6 Market Development Trends ............................................................................................................................................... 38

3.10 Societal Issues & Trends .................................................................................................................................................................... 38

3.10.1 Acceptance of Sustainability ............................................................................................................................................... 38

3.10.2 Local Economic Impacts ......................................................................................................................................................... 38

3.10.3 Public Concerns ........................................................................................................................................................................... 38

Figure 18 : Biofuel Value Chain ............................................................................................................................................................................. 39

3.11 Solid Biofuels ............................................................................................................................................................................................. 40

3.11.1 Biocombustibles ......................................................................................................................................................................... 40

Figure 19 : Canada’s Surplus Wood Residues (1990-1998) ................................................................................................................................. 41

Figure 20 : Harvesting Skidder .............................................................................................................................................................................. 42

3.12 Liquid Biofuels .......................................................................................................................................................................................... 43

3.12.1 Bio-oil ............................................................................................................................................................................................... 43

Figure 21 : Bio-Oil Conversion Process.................................................................................................................................................................. 43

3.12.2 Biodiesel .......................................................................................................................................................................................... 44

Table 2 : Biodiesel Feedstock Availability (tonnes) ............................................................................................................................................... 45

Figure 22 : New Process of Biodiesel Production ................................................................................................................................................. 46

3.12.3 Bioethanol ..................................................................................................................................................................................... 47

Figure 23 : Canadian Fuel Ethanol Projections ..................................................................................................................................................... 47

Figure 24 : Corn Ethanol Net Energy Balance ....................................................................................................................................................... 48

Figure 25 : Processing Grain to Ethanol ................................................................................................................................................................ 50

3.12.4 Mixed Alcohols from Gasification ..................................................................................................................................... 51

3.13 Gaseous Biofuels..................................................................................................................................................................................... 52

3.13.1 Biogas – Anaerobic Digestion ............................................................................................................................................ 52

Figure 26 : Anaerobic Digestion of Hog Manure .................................................................................................................................................. 53

3.13.2 Biogas – Landfill Gas ............................................................................................................................................................... 53

Table 3 : Landfill Gas in Canada ............................................................................................................................................................................ 54

Figure 27 : Landfill Gas Collection and Beneficial Use ......................................................................................................................................... 55

3.13.3 Biosyngas........................................................................................................................................................................................ 55

Figure 28 : Syngas and Methanol Feedstock to Product Threads ........................................................................................................................ 56

Table 4 : Types of Biomass and the Sources ......................................................................................................................................................... 57

Figure 29 : Simplified Gasification Process ........................................................................................................................................................... 58

Table 5 : Gasifier Technologies............................................................................................................................................................................... 59

3.14 Vision Statement .................................................................................................................................................................................... 60

3.14.1 Vision Summary .......................................................................................................................................................................... 61

Table 6 : Biofuels Vision for 2015 .......................................................................................................................................................................... 61

3.14.2 Vision Assessment ..................................................................................................................................................................... 62

Table 7 : Resource Availability Balance ................................................................................................................................................................. 63

4 Risk and Needs Assessment and Analysis ............................................................................................... 64

4.1 Needs Summary ...................................................................................................................................................................................... 64

4.1.1 Technical Needs ........................................................................................................................................................................... 64

Table 8 : Common Biofuel Technology Needs ....................................................................................................................................................... 64

4.1.2 Non-Technical Needs ................................................................................................................................................................ 64

4.1.3 Solutions to Non-Technical Needs .................................................................................................................................... 65

Table 9 : Non-Technology Needs and Solutions ................................................................................................................................................... 66

4.2 Market Assessment .............................................................................................................................................................................. 66

4.2.1 Biofuel Economics ...................................................................................................................................................................... 66

Figure 30 : Biofuel Production Facility Construction Costs ................................................................................................................................... 67

Figure 31 : Canadian Average Refinery Margin (1994 to 2005) ......................................................................................................................... 68

Figure 32 : Crude Oil Price Trends .......................................................................................................................................................................... 68

Figure 33 : Bioethanol Production Cost ................................................................................................................................................................ 69

Table 10 : Estimated Production Cost Comparisons of Various Fuels .................................................................................................................. 70

Figure 34 : Fuel Production Cost Comparisons ..................................................................................................................................................... 70

4.2.2 Biofuel Market Potential ....................................................................................................................................................... 71

Figure 35 : Bio-oil Production Cost vs. Plant Capacity and Feedstock Cost ......................................................................................................... 72

Table 11 : Biodiesel Capital Costs .......................................................................................................................................................................... 74

4.2.3 Market Plot Description ......................................................................................................................................................... 76

Table 12 : Market Plot Fuel Comparisons.............................................................................................................................................................. 76

4.2.4 Market Plot Summary ............................................................................................................................................................. 76

4.2.5 Combined Market Plot Data ................................................................................................................................................ 77

Table 13 : Biofuels Market Plot Data Summary .................................................................................................................................................... 77

Figure 36 : Biofuels Combined 2006 ..................................................................................................................................................................... 78

Figure 37 : Biofuels Combined 2015 ..................................................................................................................................................................... 80

4.3 Technology Assessment ................................................................................................................................................................... 81

4.3.1 Solid – Biocombustibles ........................................................................................................................................................ 81

Table 14 : Solid Biocombustibles Technology Summary ...................................................................................................................................... 81

Figure 38 : Solid Biocombustibles Technology Plot .............................................................................................................................................. 82

4.3.2 Liquid — Bio-oil ........................................................................................................................................................................ 83

Table 15 : Bio-oil Technology Summary ............................................................................................................................................................... 83

Figure 39 : Bio-oil Technology Plot ....................................................................................................................................................................... 84

4.3.3 Liquid — Biodiesel ................................................................................................................................................................. 85

Table 16 : Biodiesel Technology Summary ........................................................................................................................................................... 85

Figure 40 : Biodiesel Technology Plot ................................................................................................................................................................... 86

4.3.4 Liquid — Bioethanol .............................................................................................................................................................. 87

Table 17 : Bioethanol Technology Summary ........................................................................................................................................................ 87

Figure 41 : Bioethanol Technology Plot ................................................................................................................................................................ 88

4.3.5 Gaseous — Biogas .................................................................................................................................................................... 89

Table 18 : Biogas Technology Summary ............................................................................................................................................................... 89

Figure 42 : Biogas Technology Plot ....................................................................................................................................................................... 90

4.3.6 Gaseous — Biosyngas ............................................................................................................................................................ 91

Table 19 : Biosyngas Technology Summary ......................................................................................................................................................... 91

Figure 43 : Biosyngas Technology Plot.................................................................................................................................................................. 92

4.4 Combined Technology Summary ............................................................................................................................................. 93

Table 20 : Combined Biofuel Technology Summary ............................................................................................................................................. 93

4.5 Statements Of Interest Responses.......................................................................................................................................... 94

Table 21 : Biofuel SOI Summary ........................................................................................................................................................................... 94

5 Investment Priorities ............................................................................................................................................................ 95

5.1 Solid Biofuels ............................................................................................................................................................................................. 95

5.1.1 Biocombustibles ........................................................................................................................................................................ 95

5.2 Liquid Biofuels .......................................................................................................................................................................................... 95

5.2.1 Bio-oil .............................................................................................................................................................................................. 95

5.2.2 Biodiesel ......................................................................................................................................................................................... 95

5.2.3 Bioethanol .................................................................................................................................................................................... 95

5.3 Gaseous Biofuels..................................................................................................................................................................................... 96

5.3.1 Biogas .............................................................................................................................................................................................. 96

5.3.2 Biosyngas ...................................................................................................................................................................................... 96

5.4 Sustainability Assessment ............................................................................................................................................................ 96

5.4.1 Common Environmental Issues ......................................................................................................................................... 96

5.4.2 Specific Environmental Sustainability .......................................................................................................................... 98

Table 22 : Biofuel Environmental Sustainability Impacts ..................................................................................................................................... 98

5.4.3 Common Economic Issues ..................................................................................................................................................... 98

5.4.4 Specific Economic Sustainability....................................................................................................................................... 99

Table 23 : Biofuel Economic Sustainability Impacts ............................................................................................................................................. 99

5.4.5 Common Societal Issues ......................................................................................................................................................... 99

5.4.6 Specific Societal Sustainability ........................................................................................................................................ 100

Table 24 : Biofuel Societal Sustainability Impacts .............................................................................................................................................. 100

5.5 Risk Assessment .................................................................................................................................................................................... 101

Table 25 : Risk Summary ..................................................................................................................................................................................... 101

6 Summary ............................................................................................................................................................................................... 102

6.1 Near-Term Technology Investments ................................................................................................................................... 102

6.1.1 The Near Term Market ........................................................................................................................................................... 102

6.1.2 Near Term Investment Priorities ..................................................................................................................................... 102

Table 26 : Near Term Investment Priorities ......................................................................................................................................................... 102

6.1.3 Near Term Sustainability Impacts .................................................................................................................................. 103

6.1.4 Near Term Risks ......................................................................................................................................................................... 103

6.2 Long Term Technology Investments .................................................................................................................................... 103

6.2.1 The Long Term Market .......................................................................................................................................................... 103

6.2.2 Long Term Investment Priorities .................................................................................................................................... 104

Table 27 : Long Term Investment Priorities......................................................................................................................................................... 104

6.2.3 Long Term Sustainability Impacts.................................................................................................................................. 104

6.3 National Strategy Impacts ........................................................................................................................................................... 105

6.3.1 Strategic Advancement ........................................................................................................................................................ 105

6.3.2 Intellectual Property ............................................................................................................................................................. 105

7 Acknowledgements .............................................................................................................................................................. 106

7.1 SDTC Thanks the Following Contributors ........................................................................................................................ 106

8 Endnotes ................................................................................................................................................................................................ 107

Copyright © 2006 by SDTC™ Sustainable Development Business Case �

1 Overview : SD Business Case™ Plan and the SDTC STAR™ Process Sustainable Development Technology Canada is a foundation created by the Government of Canada that operates a $550 million fund to support the development and demonstration of clean technologies — solutions that address issues of climate change, clean air, clean water, and clean soil to deliver environmental, economic and health benefits to Canadians.

SDTC is pleased to present this Biofuels Investment Report, which is one in a series on the current state of sustainable development and future investment priorities in Canada. This report is the result of collaboration from a wide range of stakeholders. It is based on reports, studies, and research findings by various industry associations and government initiatives. We hope you find the information useful, and look forward to working with you as we further sustainability in Canada.

1.1 The SD Business Case™ Plan

SDTC invests in areas where Canada has a strong capability, and where SDTC can provide the most value. To that end, SDTC has developed a comprehensive evaluation and decision-support process that investigates various technologies, their markets, the needs they address, and the barriers they must overcome to achieve market success.

The SD Business Case is founded on the concept of creating a common vision of market potential, as described by those in the industry. It incorporates their ideas, expectations and knowledge into a single statement of purpose, so that the outcomes are relevant, pragmatic, and realizable. There are many different approaches that could be used to analyze individual technologies or economic sub-sectors. Each stakeholder group has unique challenges and expectations, which are expressed and analyzed to suit their own needs. With this in mind, the SD Business Case has been developed to provide a common benchmark for all participants, as well as a consistent and reliable means of comparing technologies in a number of diverse and expanding areas. The SD Business Case serves as a guide to SDTC for future investment priorities as well as a means of collecting non-technology input that may be useful in policy development.

Work on the SD Business Case could not have been done without the participation and guidance of opinion leaders and experts throughout the country. Our philosophy at SDTC is to work with and through others, and we thank all these individuals for their assistance to SDTC and contributions to the success of the SD Business Case.

1.1.1 Primary Audience

The primary audiences for the SD Business Case include :

Industry Stakeholders – to help them identify key sectoral challenges and priority areas for potential future investment, and to assist in partnering with SDTC.

Canadian Researchers – to assist in providing direction and focus for successful future endeavours including indicators of the key challenges to be addressed in priority technology areas as they enter or exit the development and demonstration stages of the commercialization process.

Relevant Government Departments – to provide a comprehensive decision making framework to assist with technology investment priorities to its key stakeholders and funders. The SD Business Case may also be used to help identify and manage technological issues that are beyond SDTC’s immediate mandate, as well as non-technical market barriers that can be addressed by other players, policies, funding sources, and financial instruments.

Other Stakeholders – to provide a clear and consistent information base on relevant technology sectors, and an open dialogue on non-technology issues facing companies in a number of Canadian economic sectors.

SDTC – to highlight areas of priority attention for future investment focus and investigation.

� Renewable Fuels — Biofuels Copyright © 2006 by SDTC™

1.1.2 The SDTC STAR™ Tool

The Sustainable Technology Assessment Roadmap (STAR) tool is an iterative analytical process that combines data, reports, stakeholder input, and industry intelligence in a common information platform. It uses a series of criteria selection screens to assess and sort relevant information from a variety of sources. The output is a series of Investment Reports that highlight key technology investment opportunities for each sector under study.

1.1.3 Sectors to be assessed by the SD Business Case™

The overall SD Business Case project focuses on seven of Canada’s primary economic sectors.1 An illustrated version of the full project and master roadmap, Figure 1, is provided on p.3 to highlight the selected areas of study.

Energy Exploration & Production – including Clean Conventional (oil and gas) and Renewable Fuels (bio-fuels, hydrogen production and purification). Note that Renewable Electricity and Renewable Fuels are linked as they share a number of technological platforms.

Power Generation – including Clean Conventional and Renewable Electricity Generation (wind, solar PV, bioelectricity and stationary fuel cells).

Energy Utilization – improving the effectiveness of the application of current end-use technologies in industrial, commercial and residential sectors (i.e. improving energy efficiency).

Transportation – including Systems Efficiency and Fuel Switching. Also note that Fuel Switching and Renewable Fuels are linked as they share a number of technological platforms.

Agriculture – addressing solid waste or Biomass conversion to Fuels and eliminating air and water contaminants produced by manure.

Forestry and Wood Products – addressing development of wood waste recycling technologies to harness energy resource potential, reduce emissions and improve productivity and profits.

Waste Management – addressing the various forms of waste management from municipal (residential and commercial) and primary and secondary industrial sources.

Note : Some of these sectors may be covered through work in other sectors. For example, many Agriculture and Forestry technologies are common to Renewable Fuels in the Energy Exploration and Production Sector.


Figure 1 : SD Business Case Investment Roadmap

Economic Sector Technology Sub-sector

Segments Products & Processes

EnergyExploration &

Production

Power Generation

EnergyUtilization

CleanConventional

Fuel

RenewableFuel

Biofuels

Solid

Liquid

Biodiesel

Bioethanol

Biogas

Biosyngas

Gaseous

Biocombustibles

Bio-oil

Transportation

Agriculture

Forestry

WasteManagement

Hydrogen

SD Business CaseTM is a trade mark of Canada Foundation for Sustainable Development Technology.


1.1.4 Investment Categories to be Analysed

The SD Business Case provides conclusions in three primary categories of investment opportunities :

• Short Term Investment Priorities – These are investments that could be made within the next 3-5 years that could have a direct and positive impact in the next 6-8 years.

• Long-Term Investment Priorities – These are early stage investments that could be made within the next 3-5 years but where the environmental impacts are realized over the longer term (greater than 8 years).

• National Strategy Impacts – Although it is not in SDTC’s mandate to advance policy initiatives, over the course of developing the SD Business Case™ a number of policy-related enablers and barriers to the development and implementation of sustainable technologies have been identified. A summary of these issues and their potential impact on Canada’s ability to meet its environmental goals is included in the analysis.

1.1.5 Conclusions Framework

The SD Business Case provides a consistent and fully referenced set of recommendations and investment indicators that can be used by stakeholders to support possible investment opportunities and priorities. It does not produce a single number, answer or result as the range of technologies and the interpretation of their future potential is too large and complex to simplify to a single solution. The output should only be viewed, and can only be understood, within the context of the information collected during the business case development process. Contributors to the business case have made every effort to be as objective, comprehensive and analytical as possible. Although based on rigorous analysis of the best available information, the SD Business Case serves only as a guide to future investment priorities ; it is not to be used as a definitive tool to accept or reject individual projects or technologies. Final decisions on whether SDTC will invest will be made by taking into account all relevant conditions and requirements.


1.2 The SDTC STAR™ Process : Data Collection And Analysis

Figure 2 : The SDTC STAR Process

Industry Vision

SDTC SOI’sStakeholder Input Market Data Reports & Studies

Industry Entrepreneurs

Government Depts. & Agencies

Financial Community

NGO’s

Needs Assessment

Non-TechnicalTechnical

Information Input

Market Sustainability Technology

Detailed Analysis

MarketSustainability

Technology

Investment Report

Academia

1. Input : The STAR process starts of with a “vision-based, needs-driven” approach: it begins with an industry vision of where the sector is anticipated to be at some defined point in the future, and then identifies the most critical requirements that must be satisfied in order to achieve the stated vision.

2. Assessment : By taking into account the technological, economic, political, and societal forces that act upon a sector, the STAR process can create a reasonably accurate picture of the market. It can then assess the relative strengths, weaknesses and emerging opportunities of each market sector. Finally, it calculates the gap between the current state of the sector and the vision, and identifies the specific things that need to be done in order to fill the gap and achieve the vision.

3. Analysis : The lists of needs are applied to each technology area, where they are rated against a set of economic (i.e. cost relative to conventional sources at time of market entry) and environmental criteria specific to SDTC's mandate.

4. Report : Since some of the issues surrounding the successful commercialization of emerging technologies are non-technical in nature (i.e. policy-related issues), the STAR process captures and prioritizes them to create a complete investment picture for integration into the final Investment Report.

The above process is repeated for each area of study, until a complete picture of the market emerges to the satisfaction of SDTC and the key market stakeholders.

SDTC STAR™ is a trade mark of Canada Foundation for Sustainable Development Technology.

The STAR process uses a “vision-based, needs-driven” approach : it begins with an industry vision of where the sector is anticipated to be at some defined point in the future, and then identifies the most critical requirements that must be satisfied in order to achieve the stated vision. By taking into account the technological, economic, political, and societal forces that act upon a sector, the STAR process can create a reasonably accurate picture of the market. It can then assess the relative strengths, weaknesses and emerging opportunities of each market sector. Finally, it calculates the gap between the current state of the sector and the vision, and identifies the specific things that need to be done in order to fill the gap and achieve the vision.


The lists of needs are applied to each technology area, where they are rated against a set of economic (i.e. cost relative to conventional sources at time of market entry) and environmental criteria specific to SDTC’s mandate. Since some of the issues surrounding the successful commercialization of emerging technologies are non-technical in nature (i.e. policy-related issues), the STAR process captures and prioritizes them to create a complete investment picture for integration into the final Investment Report.

The above process is repeated for each area of study, until a complete picture of the market emerges to the satisfaction of SDTC and the key market stakeholders.

1.2.1 Assessment Descriptions

Once the market vision has been accepted, the economic sectors and their associated technologies are assessed through the following four screens :

1.2.1.1 Market

This focuses on the ability of the market to carry the emerging technologies that are currently at the development and demonstration stages. It identifies what needs to be done in order to maximize the application and acceptance of the technology, with a focus on financial and economic performance.

The main components of the assessment are ;

General Market Description – an overview of the sector under consideration, with a comparison to conventional or competing sectors.

Market Potential – an indication of the immediate growth potential for the sector under consideration. The data is drawn from industry literature and stakeholder feedback, and shows the theoretical and realizable potential as well as equipment installed costs (where available). Using linear extrapolation, it then estimates the anticipated potential over the next three to five years. Due to the rapidly evolving nature of emerging markets, it is necessary to conduct this assessment a number of times as conditions change. The primary purpose is to understand the gap between today’s situation and the vision for each sub-sector. This helps to determine the required rate of innovative developments and the amount and timing of capital placements.

There are three Market Assessment criteria used in the STAR process ;

• Stage of Investment – An assigned value (on a scale of 1~10) that takes into account market barriers, the amount of time expected for the technology to achieve full commercialization, market infrastructure issues and impediments, and current state of codes, standards and regulations.

• Economic Efficiency – An assigned value (on a scale of 1~10) that takes into account technology spin-off potential, product replicability and scale-up potential, market size and dynamics, competitiveness, pricing and financing, and export potential.

• Emissions Reduction Potential – A calculated value of the difference in GHG emissions between conventional technologies and the alternative technologies within the sub-sectors under consideration. It is shown in megatonnes of carbon dioxide equivalent (MtCO2e) and is the amount of CO2e expected to be reduced or displaced within the next three to five years as a consequence of commercializing the subject technologies. Note that GHG is a proxy used as a general indicator of emissions reductions as, for most technologies, there is a positive correlation between GHG and other air emissions. Exceptions (such as the inverse relationship with NOx associated with combustion-based technologies) are noted where applicable.

The Market Assessment is conducted from the perspective of SDTC’s mandate, which is to support the development and demonstration of emerging sustainable technologies in Canada at critical stages in the development cycle. Specifically, SDTC is focused on those technologies that are between prototype development and market-ready product stages. The size and span of the blocks in Figure 3 are indicative of the relative timing and amount of funding from various sources.


Figure 3 : SDTC Funding Support

R & D

FundementalResearch

ProductPrototype

Development

SDTC

SDTC BRIDGES THE FUNDING GAP

Demonstration Market-readyProducts

MarketEntry

COMMERCIALIZATION

Angel Investors

Venture Capital

Governments

Industry

Banks

SDTC’s Mandate :The Market Assessment is conducted from the perspective of SDTC’s mandate, which is to support the development and demonstration of emerging sustainable technologies in Canada at critical stages in the development cycle. Specifically, SDTC is focused on those technologies that are between prototype development and market-ready product stages. The size and span of the above blocks are indicative of the relative timing and amount of funding from various sources.

1.2.1.2 Technology

This concentrates on the technologies that need to be brought to market in order to achieve the stated vision. There are 15 fundamental ranking criteria, which are weighted and rolled up into two principal impact criteria :

a. Economic Impact : The developmental and financial issues related to a specific technology that can/will influence sector growth, technological inter-dependencies, infrastructure improvement, and the cost of environmental improvement ; and,

b. Environmental Impact : The magnitude of the emissions reduction potential, reductions of regional environmental pollutants, the life cycle emission returns, and the time at which these emissions reductions are most likely to occur.

1.2.1.3 Sustainability

This section describes the impact that these technologies are likely to have on individuals, communities and regions. Each technology group is evaluated in terms of its potential impact in three key areas :

a. Economic – current investment capital, company and job creation, productivity impacts ; b. Environmental – impacts on wildlife, air (GHG and regional pollution emissions), water and land and ; and,

c. Societal – health and safety, training and education, and aesthetics and property value impacts.


1.2.1.4 Risk

This outlines the potential risks associated with the development and implementation of the technology, and are divided into three criteria :

• Development Risk – will the technology work as intended?• Financial Risk – is there enough private capital to fully commercialize the technology and will it be financially viable once commercialized? • Market Risk – is there sufficient market demand and infrastructure to support the technology?

1.2.2 Output Structure

There are five categories in the output : Vision and Needs, Market Assessment, Technology Assessment, Sustainability Assessment, and Risk Assessment. The STAR process combines the results from these Assessments to develop the investment report conclusions.

1.2.2.1 Vision and Needs

Vision Statements are derived from the industry, typically through industry association-published statements. The statement is reviewed by key industry stakeholders, who check for accuracy and realistic potential. The purpose is to provide focus for further discussions and analysis within the STAR process. In the case of the upstream oil and gas industry, vision is production or output driven and measured in barrels/day or Nm3/day or MCF/day. In turn, this production driven vision translates into environmental impacts such as GHG emissions, water and land usage under a “business as usual scenario”.

Typically, there are gaps between the actual current production capability and the envisioned target. The magnitude of any such gaps is the primary driver behind the analysis that follows. For example, if the gap is very small, and the target easily achievable within the near term, then proportionally fewer resources are applied to examine ways to bridge that gap. If, however, the gap is very large (as is often the case), then a considerable amount of time and resources are applied to help determine the best course of action to minimize the gap. In these cases, therefore, the industry must consider and apply more aggressive and/or effective means of achieving that target. Emerging sustainable technologies are a part of the solution, and could assist in achieving the targets set by the vision. It is also notable from this example that, without efficiency or technology improvements, significant capital investment would be required to achieve the target.

1.2.2.2 Market Assessment

The Market Assessment output data is presented in a “Circle Chart,” with Stage of Investment on the X-axis, Economic Efficiency on the Y-axis, and Emissions Reduction Potential on the Z-axis.

Circle Location – In general, plots that show in the upper right-hand corner are considered attractive because they have high Economic Efficiency and are at the optimum Stage of Investment from SDTC’s perspective. Conversely, anything in the lower left-hand corner is considered less attractive from an investment perspective.

Circle Size – The size of each circle represents the magnitude of the emissions difference between the base case and the alternative case. Note that Greenhouse Gases (expressed in CO2e) have been used as a proxy for all air-related emissions. In instances where there is a negative correlation amongst CO2e and other forms of emissions (for example NOx acts inversely to CO2e in many combustion processes), these will be noted in the model or in the actual technology as it is evaluated. The next point to note is the base case used for comparison. The alternative can produce more – or less – emissions than the conventional technology, depending on where in the value chain that the analysis is conducted. For example, the production of a new fuel can create more emissions than the production of the conventional fuel it is to replace, but the utilization of that new fuel may create fewer emissions than the utilization of the conventional fuel. As such, lifecycle analyses are conducted to help draw appropriate investment conclusions. When examining a new technology or process, the lifecycle analysis helps determine whether or not it is a beneficial area of investment. The individual process steps help determine where further improvements can best be made.

Circle Colour – In general, each circle represents a different sub-sector and is identified by a unique colour in order to distinguish them on the plot. The colour red is used exclusively to indicate negative reductions (i.e. anything in red represents a net increase in emissions relative to


the baseline that it is being compared to). This can occur when the emissions created by the production using the new technology, process, or feedstock exceed the emissions created from the production using the baseline process or feedstock, resulting in a negative emission reduction. However, this condition may be reversed during the utilization phase—resulting in overall beneficial lifecycle emissions reductions.

Production vs. Utilization – In some cases, the STAR process includes two circle graphs or bar charts for each type of technology being examined. The inner circle (or first bar chart) represents production or upstream emissions, and is determined by calculating the difference between the GHG emissions created through the production using the baseline technology or process and the production using the new technology. The outer circle (or right-hand bar chart) represents utilization or downstream emissions, and is determined by calculating the difference between the GHG emissions caused by the utilization of the baseline technology and the utilization of the new technology. Although utilization is not the focus of this report, it is included here in order to place the entire fuel life cycle into proper context.

Because of the variation in emission creation from one stage of the value chain to another, it is important to understand the exact location of the topic under consideration in the value chain.

It is important to note that no investment can be placed without examining the full lifecycle cost and environmental impact, including how the inputs may change over time, and how the production efficiency and technologies will change over time.

By plotting the outcomes in this way it is possible to get an overall snapshot of the position and potential of each sub-sector relative to one another.

It should be noted that many of the emerging technologies have the capacity to also reduce regional pollutants (Clean Air) and other environmental impacts (Clean Water and Land) : this information is captured within the tool, but is not illustrated separately on the market plot. Separate plots can be generated for these environmental aspects.

1.2.2.3 Technology Assessment

This assessment focuses on the technology plot position of each technology area. The position of each plot is the result of the numerical ranking of the individual technological assessments. Each technology is mapped on a scatter graph, with Economic Impact on the X-axis and Environmental Impact on the Y-axis.

The closer a technology plots to the upper right hand corner, the greater it’s potential, relative to the other plotted technologies. When the available processed data supports, technologies that are considered breakthrough or have a potentially disruptive impact1 are shown, in red, on the supporting scatter graph table. Since this is an iterative process, the plot values change over time as new information becomes available, new technologies are developed, and renewable energy markets continue to develop.

�0 Renewable Fuels — Biofuels Copyright © 2006 by SDTC™

Figure 4 : Sample Technology Plot

Economic Impacts

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1.2.2.4 Sustainability Assessment

Sustainability is the cornerstone of all the assessments made in the SD Business Case . The Sustainability Assessment extracts and highlights the economic, environmental, and societal impacts of the emerging technologies.

Economic Impact

This is a broad set of impacts and is subdivided into :

• Investment Capital : Defined as the amount of capital currently required for an investment in each technology, typically on a $CAD/installed capacity basis. This benchmark capital investment level is projected forward to estimate future investment level requirements.

SDTC acknowledges that future investments will be a function of economies of scale, the time value of money, and shifting investment priority areas. Nevertheless, this approach provides sufficient accuracy to establish relative values to conduct cost comparisons. It also provides an estimate of the overall magnitude of the capital investments on a national basis.

• Company and Job Creation Impacts : There are two broad areas of potential employment within each sub-sector : direct employment from equipment production, installation and operation, and indirect employment from upstream industries that may supply service and support each sub-sector. SDTC recognizes that job creation may not be the best indicator of economic performance, however, it is a convenient proxy for company creation and growth. For the purposes of simplicity, the SDTC Roadmap process focuses only on direct company/job creation.

• Productivity Impacts : This is a general assessment of how successful market development of the sub-sector could affect Canadian productivity as a whole. This can be a significant consideration as the design and development of some sub-sectors in Canada could be labour-intensive compared to others that rely on lower-cost imports.

Copyright © 2006 by SDTC™ Sustainable Development Business Case ��

Environmental Impact

There are a number of additional environmental considerations that must be taken into account beyond the immediate and visible climate change and clean air impacts of the technologies employed. Although some quantitative data is available, there are instances, e.g. notably Bioelectricity, where SDTC has been unable to locate or establish a definitive position on environmental footprint. In the Bioelectricity example, there is ongoing debate on the most appropriate use of biomass waste, such as, forest floor impacts, energy versus food crops, etc. This will continue to be a challenge for the Roadmap process moving forward, but new information is constantly emerging from both internal and external sources. The future iterations of the process will continue to track new findings surrounding the following areas :

Air Impacts : The potential beneficial air impacts are evaluated under GHG Emissions Reduction Potential and Clean Air Emissions Reduction Potential.

• GHG Emissions Reduction Potential : The amount of greenhouse gases (measured as CO2e) that the technologies are expected to displace or reduce.

- Clean Air Emissions Reduction Potential : The amount of air pollutants that the technologies are expected to displace or reduce.

Water Impacts : Requirements for base material provisioning, component fabrication, and production processes often mean that a significant amount of water is stored, consumed or degraded (thermal and chemical contamination). This section examines the technology impacts on water quality and quantity.

Land Impacts : Some technologies occupy significant amounts of land while others could use sizeable land resources. This section examines land use issues, and provides a brief comparison of each.

Wildlife Impacts : Sustainable technologies, while for the most part benign, could have some negative impacts on local wildlife. Such impacts are noted and compared where applicable.

Societal Impact

From a sustainability perspective, technologies must not only be environmentally benign but must also address the educational, job growth, and property value needs that can arise as a result of their use. Impact on individuals and communities are also assessed in the following areas :

Health & Safety Impacts : The health and safety of local residences could possibly be affected by emerging technologies. While these impacts are not expected to be large, they are nonetheless identified where applicable.

Training & Education Impacts : While there may be common training and education requirements across the sub-sectors analyzed, the design, installation and operational complexity of each specific system would be assessed individually.

Aesthetics & Property Value Impacts : There are concerns (both perceived and real) that accompany the potential installation of some technologies. Where applicable, these issues are identified.

1.2.2.5 Risk Assessment

Each of the selected product or process technology area must manage various associated levels and types of risks throughout the course of becoming fully commercialized. There are two main types of risk considered : the non-technology related risks which are dependent upon political, financial and regulatory issues that may directly or indirectly influence the technology, and the technology-related risks that include developmental, financial, and market risks, as described below :

Developmental Risks : The probability that the technology will work as designed and as intended. Developmental risk is highest in the earliest stages of technology development.

�� Renewable Fuels — Biofuels Copyright © 2006 by SDTC™

b. Financial Risks : The probability that the technology will perform to the point where it is financially viable, and that there will be sufficient private funding available to see it through to commercialization.

c. Market Risks : The probability that there is sufficient demand for the technology and that market infrastructure can support the introduction and ongoing use of the technology.

1.3 Conclusions And Investment Priorities

The STAR process concludes by combining the results from the Vision and Needs, Market, Technology and Sustainability Assessments, and divides them into short and long term priorities and strategic impacts.

Short-Term Investment Priorities

These are investments that could be made within the next three to five years that could have a direct and positive impact on the environment.

Long-Term Investment Priorities

These are early stage investments that could be made within the next three to five years but that would aid Canada in meeting its longer-term, emissions-reductions objectives. SDTC recognizes that the investments must be made now in order to produce results in the future.

National Strategy Impacts

A summary is created outlining the potential impact that the investments may have on Canada’s national strategy to meet its climate change and sustainable development commitments.

The successful emergence of sustainable technologies in Canada will be largely dependant upon the resolution of a range of non-technical issues. These issues, when combined with the technology issues and opportunities, could have a profound impact on the direction of Canada’s national strategy.

Important Notes to the Reader :

While these conclusions indicate areas to place emphasis, SDTC recognizes that it is not possible to anticipate all new technologies and their impacts, and new technologies in areas or sectors not on the list are not excluded from consideration.

The output of the Roadmap process is not a single digit, answer or result. It is a series of indicators that support a set of possible investment opportunities, which can only be viewed within the context of the information provided. The final investment decision must still be made by accounting for all possible and relevant conditions and requirements, as viewed by the final decision-maker. The contributors to the Roadmap process have made every effort to be as objective, comprehensive and analytical as possible.

The numeric ratings used in the assessment process are relative ; they are not absolute. For example, the Time to Market rating is based on a scale of one to ten ; it does not indicate the actual number of years to get to market. This approach is necessary to overcome the wide range of qualifiers associated with each projection made by industry and government. The one to ten scale provides a common benchmark approach.

Unless otherwise stated, the term “market” refers to the set of technology areas under examination as a direct result of a scoping exercise to determine an appropriate breadth of coverage. It does not refer to an entire market.

Emerging Technologies that have not been included within any current sector assessment may be considered in future upgrades and published releases. SDTC will receive and evaluate opportunities in all areas falling within the SDTC mandate. However, where there is insufficient material or interest identified, no assessment priority will be assigned to the STAR tool.


2 Executive Summary : BiofuelsThere is enough biomass feedstock currently available in Canada to realistically satisfy about 6% of the country’s total energy needs, (not counting current forest product industry uses as stated by BIOCAP 2006). The challenge is to optimize the processing and conversion of this renewable resource into a usable and reliable source of fuel. Because of Canada’s increasing need for energy, and a desire to reduce emissions, the Canadian biofuels industry could go through a radical transformation in the next few years.

2.1 Biofuels

Biofuels are any renewable fuel that can be derived from living and recently living, biological material (biomass). They can be in the form of a solid, liquid or gas and can either be used directly as a primary fuel for electricity and heat generation, or as a feedstock to produce intermediate refined secondary fuels and chemicals. Biomass can be converted into biofuels by thermal, chemical, biological and/or physical processes.

Primary feedstocks include a variety of non-homogeneous materials such as agricultural crops and crop residues, manures, animal deadstock, forestry residues, forestry products industry residues, food processing industry residues, energy crops, and the organic portion of waste. This distinguishes biofuels from other fossil fuel industries that typically use homogeneous of raw materials. The dominant feedstocks today are residues and wastes from processing industries, especially forest and farming residues. In the future, it is expected that a greater range of biomass (such as purpose-grown crops) could be

used.

Biomass by its very nature is a renewable resource. Provided that it is managed properly, it represents a truly sustainable form of energy, food and manufactured products. From an emissions perspective, biomass itself is considered GHG-neutral : the utilization of biomass as a fuel does not contribute to GHG formation and adds very few criteria air contaminants (CAC’s). The production of biofuels does, however, contribute to GHG and CAC formation through the conversion processes used, as well as the use of fossil-fuelled trucks and machinery used to handle the feedstock. Technologies which can assist in the reduction of these emissions are the focus of this report.

2.2 Biofuel Resources

Canada has close to a billion hectares of land, of which about 42% is forested, and about 7% is agricultural. This represents a gross renewable resource of over 600 exajoules (EJ) of captive potential energy, which is 30% greater than the total global energy consumption in 2005 (463 EJ). Canada currently harvests the equivalent of about 5 EJ/yr, with most of that going into wood products and food production. About 1.4 EJ is currently available for bio-based fuel products, but only 0.047 EJ is actually utilized. The Canadian biofuels industry estimates that by increasing the use of waste biomass and developing purpose-grown crops, Canada could produce between 2.2 and 4.9 EJ/yr from bio sources within the next 10-15 years.

2.3 A Vision for the Future

To take advantage of Canada’s renewable bioresources and meet the challenge of growing energy demand, SDTC in consultation with the Canadian biofuels industries have developed a common vision :

Vision : To produce 650 PJ/yr (0.65 EJ) of bio-based fuel by the year 2015, by capitalizing on Canada’s natural advantage, and leveraging existing technological strengths and capabilities.

This represents a 14-fold increase in biofuel production over existing levels, and builds on the federal government mandate to increase biofuels in transportation fuels by 5% (3.3 BL/yr or 0.11 EJ/yr) by the year 2010.

2.4 The Biofuels Market

A commercial biofuels market is just beginning to emerge in Canada. It is being influenced by a number of forces ; some that are more general, and others that are new and unique to biofuels.


The main drivers are :

• Political & Regulatory : Political attention and focus tends to vary as new governments come into power, and as priorities change. This can increase investor uncertainty especially in the emerging markets. In addition, many of the existing regulations, codes and standards have not been updated to accurately reflect the unique characteristics and operating requirements of the biofuels industry.

• Technical : The major challenges to the use of biomass as a fuel source are lower energy content (relative to fossil fuel), lower bulk density (more costly to transport and pre-process), and high moisture content (energy is required to dry the feedstock). In addition, there is insufficient production and distribution infrastructure, and there are some outstanding product performance issues. Traditional biomass conversion technologies have been higher cost than for comparable fossil fuels.

• Economic and Financial : Feedstock supply is the highest cost factor for biofuels. Biofuels can be created from food and forestry wastes, but the size of most potential projects is too small to achieve the necessary economies of scale to be competitive. Unlike the petrochemical industry, the co-products of the bio conversion processes are not accounted for in the overall value chain. There are no government subsidies to support the growing industry.The gradual upward trend of oil and gas prices is beginning to make biofuels more financially attractive.

• Market Infrastructure & Market Demand : Most biomass resources are located far away from the market, making this bulky feedstock difficult and costly to transport. The industry is still so new that conversion technologies have not yet matured to the state where they can be

manufactured on a large scale and with reliable replicability.

• Societal Issues & Trends : Canadians are beginning to embrace the concept of a sustainable future, but there are lingering negative perceptions over high temperature conversion (incineration) processes. Balanced against that, however, are the prospects of job creation in an emerging sector, regional control over fuel production, and reduced environmental impacts.

2.5 Biofuel Technologies

Biofuels can be grouped into three general forms ; solid, liquid or gas. Within each group, there can be number of fuel types, and in some cases, interaction or inter-processing between the fuel types.

Solid Biofuels : Solid biomass is burned in a large number of boiler furnaces and heaters in the forest products industries. The market for biomass fuel pellets is developing. Solid biocombustibles are the most common and widely understood form of biofuels.

Liquid Biofuels : There are a number of types of liquid biofuels, but three (bio-oil, biodiesel, and bioethanol) are examined in this report.

• Bio-oil : This fuel is typically created through the thermo-chemical pyrolysis process, and can be burned directly to generate heat, burned in a steam boiler or turbine to generate electricity, or used as a feedstock for an array of chemical products and natural resins. It has a higher energy density than the original biomass, and can be easily handled, and/or stored for limited periods.

• Biodiesel : Oil from seeds or animal fats can be transformed through a chemical reaction with methanol to create methyl ester (biodiesel). It can be used directly in internal combustion engines at full concentration, or blended with petroleum diesel to reduce atmospheric emissions.

• Bioethanol : This is the most widely used liquid biofuel. It is made by converting starch crops into sugars, which are then fermented into bioethanol and distilled into fuel. It is mainly used to enhance vehicle performance, and as a fuel oxygenate to improve combustion and reduce tailpipe emissions.

Gaseous Biofuels : There are two types of gaseous biofuels discussed in this report ; biogas and biosyngas. Both are very different and are created through very different processes, but both are used in gaseous form.

• Biogas : Biogas is created by the anaerobic digestion (AD) or fermentation of organic matter under low oxygen conditions. The gas is either burned for process heat, to produce steam and generate electricity, or used directly in some internal combustion engines and turbines to generate electricity.


• Biosyngas : Biosyngas is an intermediate fuel that is created through the thermo-chemical gasification process where high temperature reactions convert carbonaceous materials , such as coal, petroleum, petroleum coke or biomass, into carbon monoxide and hydrogen (this syngas is either used as a fuel or as a feedstock for other chemical processes).

The current technology platforms, while well developed in some areas, are still insufficient to meet increasing demands.

2.6 Achieving the Vision

To achieve the vision, there are a number of technical and non-technical obstacles that must be overcome. They must be adequately addressed in order for the vision to move forward.

2.6.1 Technical Needs

The industry has identified eight common technological needs, and a number of application-specific needs. The common ones are :

• Alternative Feedstock : Exploration, testing and development of alternative sources of reliable, low-cost, and sustainable biofuel feedstock, including heterogeneous sources ;

• Harvesting and Pre-Processing : Development of technologies and techniques for efficient harvesting and pre-processing of feedstock, e.g. on-site separation, cominution, drying and maceration ;

• Plant Scale : Development of scaled biofuel plants, larger plants to achieve economies of scale, and smaller, distributed, plants to minimize feedstock transport costs and/or to serve remote communities ;

• Co-Product Technologies : Development of markets and technologies that support the cost-effective and reliable production of co-products ;

• Moisture Control : Development of low-cost moisture removal technologies for biomass feedstock ;

• End Use Technologies : Improvements in downstream technologies that consume the biofuel products, to optimize operating capacity and minimize the undesirable characteristics of biofuels, i.e. high acidity and chemical contaminants ;

• Feedstock Densification : Further development and refinement of cost-effective feedstock densification technologies suited to Canadian sources of biomass ; and,

• New Crop Species : Development of new crop species to optimize energy density and minimize handling and production costs.

2.6.2 Non-Technical Needs

The most pressing non-technological need is an adequate accounting for the value of the co-products created through the various biofuel production processes. Until that happens, the price point for biofuels will likely remain higher than for fossil fuels. Existing outmoded regulations, inadequate testing facilities and a lack of standardization have made it increasingly difficult for project developers to secure adequate financing. One of the issues unique to the biofuels industry is the way in which the bioresources are used. There is continued debate over whether they should be used for food purposes or fuel purposes. Finally, the industry acknowledges that the language used to convey complex biological processes to investors, government policy-makers and the general public, can be confusing and sometimes conflicting, which make it difficult for non-technical influencers to understand and adequately act

upon what is being proposed by the industry.

The industry, however, feels that these issues are manageable and can be overcome by gaining a better understanding of climate change and air quality policy implications, the adoption of more supportive government procurement practices, and an improved market strategy on the part of the biofuels industry.


2.7 Statements Of Interest Review

Part of the STAR process includes an analysis of the Statements of Interest (SOI’s) received by SDTC for funding approval. Only projects that meet the

technology development and financial integrity criteria are considered, so the information provided in the SOI’s is considered timely and relevant. Taken

together, these applications provide a unique and accurate snapshot of the state of late-stage sustainable technology developments in Canada.

Approximately 30% of all the SOI’s received by SDTC are in the biofuels sector. Applications in the biogas and biosyngas areas together represent 68%

of the applications reviewed. Most of the applications focus on waste-to-energy gasifiers, steam reforming, and fluidized bed applications, using mostly

downdraft designs in both small to large scale applications. Most applicants focused on the production of syngas to replace natural gas applications, with

a recent emphasis on portable or mobile applications. Most funding requests focus on municipal solid waste (MSW), paper sludge, wood waste, and hog

fuel. Plasma gasification requests consider a broader range of feedstock, such as agricultural waste, animal manure, and MSW.

The SOI analysis indicates that there is a strong correlation between recent technological developments and SDTC sustainability objectives. It also suggests

that there are a number of important technologies in Canada that are ready, or near ready, to enter the market.

2.8 Investment Priorities

The STAR process identified 28 technologies as having substantial potential to economically reduce GHG and CAC emissions in Canada. They are divided

into near and longer-term priorities; the top five in each category are listed below.

2.8.1 Near Term

The pre-2015 market will likely be dominated by the biogas and solid biocombustibles technologies since the markets for solid bio combustibles are already in place.

Bio-oil : Demonstrations of Systems Operating on Broader Array of Feedstocks – Currently only clean white wood is used as feedstock, which drives up the price of bio-oil. Other, less expensive, feedstocks have been tested, but have not been adequately proven on a commercial scale. Various other biomass feedstocks must be tested and optimized for use in order to decrease bio-oil costs.

Biogas & Biosyngas : Increased Extraction Efficiency – The extraction and conversion efficiency of gas recovered from landfill operations needs to be increased to improve the financial viability of small and medium-sized landfill gas (LFG) projects. LFG-to-energy systems tend to be installed at large sites where capture and conversion efficiencies are higher. The rate of LFG capture also needs to be increased (to the 75-85% range) in order to improve financial viability for smaller landfills. Improved gas capture technologies (such as improved collection systems) are currently in the R&D and prototype stages.

Biogas & Biosyngas : Improved Gas Cleaning & Recovery –Technologies that remove contaminants (such as Siloxane) cost-effectively are required. Existing removal systems are designed for large installations and are too costly for smaller installations. Other problems include moisture (which compromises combustion efficiency), and chemical impurities in the gas (which could lead to localized environmental impacts once the gas is combusted). Technologies that increase the efficiency and decrease costs of gas cleaning could improve financial performance.

Biogas & Biosyngas : Feedstock Expansion – Private investors are likely to view biogas as a high risk venture until feedstock costs are reduced, and long-term supply can be guaranteed. Technologies that could help reduce costs and increase quantity and quality of feedstocks include special-purpose crop engineering and more efficient collection techniques. The technological barriers for mechanical improvements are relatively small, but anything involving bioengineering is expected to be complex and expensive at this stage.

Bioethanol : Increased Bioethanol Processing Efficiency – The technologies that improve the processing efficiency of starch-based bioethanol are nearing commercialization. Environmentally, such technologies are expected to improve the net efficiency of starch-derived bioethanol (i.e. gravity fermentation can improve yields by 18%), and have related environmental benefits.

The overriding risks in the near term are primarily non-technical in nature. The largest are expected to be in securing capital for large-scale projects and developing a constructive dialogue with the appropriate agencies responsible for project approvals.


2.8.2 Longer Term

After 2015, a much greater expansion of biodiesel and bio-oil projects is expected, primarily driven by market demand for the biofuel products.

It will largely focus on achieving competitive economies of scale and efficiency, and potentially the development of Canadian-based manufacturing of the systems involved throughout the biofuel value chain.

Biodiesel : Feedstock Expansion – Only selected waste streams are currently used to produce biodiesel, but testing is underway to use tall oil, algae, flax, mustard seed, canola seed, soybeans, animal fats & greases, used cooking oils & greases, and other potential feedstocks. Expanding the biodiesel feedstock could have a profound impact on the transportation sector, as increasing amounts of petro-diesel could be displaced.

Biogas : Heterogeneous Feedstock Supply – Private investors will continue to view biogas operations as high risk opportunities unless feedstock costs are reduced and long-term supply can be guaranteed. Technologies that support these aims are in the R&D or prototype stage. The technological barriers for mechanical improvements are relatively small, but anything involving a new feedstock mix is expected to be complex and expensive at this stage. Some mechanical-based technologies could be market ready within a few years.

Solid Biocombustibles : Alternative Feedstock Supply – Pulp and paper operations currently use substantial amounts of their own residues and sawmill residue as low-grade energy sources for boilers. A wider range of high energy feedstock is being examined which could reduce the overall costs of feedstock. This may require additional research (beyond SDTC’s investment focus) in bioengineering or genetic modification to raise the energy density of the feedstock.

Biodiesel : Improved Cold Flow Performance – There are lingering market perceptions that biodiesel does not currently perform as well as petro-diesel in cold environment applications. Research is currently underway to improve its liquid flow characteristics.

Bioethanol : Improved Enzymes for Hydrolysis, Saccharification and Fermentation – Improved enzymes for starch saccharification are possible, but there are challenges regarding the genetic engineering of appropriate organisms. A lot of effort will continue to be needed to resolve this issue. The expertise to do this could come from other sectors where genetic engineering is already advanced.

The true economic impact from these biofuel products is expected to rise sharply during this period, as improved economies of scale and increased production capability are realized. The upstream production emissions are expected to drop significantly as the new technologies come on line. The post-2015 period should provide the highest possible societal benefits from the technology investments being made today. Some technologies that are currently going through the R&D phase will be approaching market pre-commercialization during the post-2015 period. Any unresolved technical issues that caused high levels of developmental risk in the early stages, should - at this point - be largely resolved. However, market risk and financial risk are expected to rise during this latter stage, and will only drop off again once the technology has successfully entered the market.

2.8.3 National Strategy Impacts

To remain cost-competitive globally, Canada must capitalize on its abundant bioresource base and continue to lead developments in new bio technology areas. To achieve this, it must focus on :

Canadian Technology Investments : Investments in Canadian technologies that meet Canada’s unique environmental, social, and financial requirements could support national wealth creation and accelerate the adoption of environmentally beneficial technologies.

Local Manufacturing : Retaining manufacturers and refinery specialists in Canada and continuing to support Canadian design and manufacturing capability will maintain a strong Canadian knowledge base, and help drive down fuel production costs.

Training & Education : A coordinated effort to build awareness among the general public, government regulators and policy makers, and the financial community about the performance benefits of biofuels will help support and accelerate deployment of technologies in this economic sector. As well, colleges and universities need to increase their content offering in sustainable technologies in order to maximize the knowledge potential in Canada.

The potential for a viable biofuel industry in Canada is considerable, but it can only be realized if private investors, government agencies and project developers make a concerted and coordinated effort to overcome the technical obstacles and put in place the necessary assurances to minimize risk.


3 Industry Vision/BackgroundThe focus of this report is on the production of Renewable Biofuels. This section of the report concentrates on the biofuels industry as a whole and describes : the different types of biofuels ; examines Canada’s bioresource base and the role of biofuels in Canada’s overall energy mix ; and, identifies the key drivers and influencers that will shape the biofuels industry in Canada.

Figure 5 : Biofuels SD Business Case Investment Report Study Scope

Distribution &Utilization(Combustion)

HarvestingandPre-Processing

ConversionandRefining

FeedstockSupply

Scope of Biofuels SD Business CaseSD Business CaseTM is a trade mark of Canada Foundation for Sustainable Development Technology.

3.1 General Description

Biofuels are any renewable fuel that can be derived from living and recently living biological material (bio-based products)2. They can either be used directly as a primary fuel, or as a feedstock for conversion to refined fuels or other products. They can be in the form of a solid, or converted into liquid or gaseous forms for the production of electric power, heat, chemicals, or fuels. They can be created by thermal, chemical, biological and/or physical processes3. Primary sources of biofuel feedstock include : agricultural crops and crop residues ; residues from food processing industries ; livestock and deadstock ; trees, logging & forestry products ; industry residues ; the organic portion of municipal solid waste ; sewage sludge ; and, industrial, commercial and institutional waste.

3.2 Types of Biofuels

Biofuels can be grouped into three general forms ; solid, liquid or gas. Within each group, there can be number of fuel types, and in some cases, interaction or inter-processing between the fuel types.

3.2.1 Solid Biofuels

For the purposes of this report, the solid biofuels are limited to solid biocombustibles. These are solid forms of biomass which are used directly or pretreated, by drying and/or pelletizing, for use in direct combustion applications to produce heat and/or electricity. Solid biocombustibles are the most common and widely understood form of biofuels. Presently, combustion is the largest volume of conversion of biomass to energy.

3.2.2 Liquid Biofuels

There are a number of types of liquid biofuels, but three, bio-oil, biodiesel and bioethanol, are examined in this report.

Bio-oil : This fuel is created through the thermo-chemical pyrolysis process, and can be combusted directly to generate heat, burned in a steam boiler to generate electricity, or used as a feedstock for an array of chemical products and natural resins. It has a higher energy density than the original biomass, and can be easily handled and stored (although shelf-life is limited due to settling).


Biodiesel : This fuel is typically created through a chemical reaction of oils or greases with methanol, to create methyl ester (also known as biodiesel). It can be used directly in internal combustion engines at full concentration, or blended with petroleum diesel. It reduces atmospheric emissions in conventional applications. Biodiesel is currently used throughout Europe and in parts of the United States, but is not widely used in Canada.

Bioethanol : Ethanol can be made either from hydrocarbons (petroleum) or carbohydrates (biomass). For the purposes of this report, only those made from biomass sources are considered. It is important to note, however, that the vast majority of ethanol used today is produced from hydrocarbons, and is used as a chemical feedstock in a variety of large-scale industrial applications. It is produced when ethylene (created through high temperature “cracking” of large hydrocarbons) is catalyzed with hydrogen to form ethanol. Bioethanol is the most widely used liquid biofuel. It is made by converting starch crops into sugars, which are then fermented into bioethanol and distilled to fuel grade. It is mainly used as a fuel oxygenate to improve combustion and reduce tailpipe emissions.

3.2.3 Gaseous Biofuels

There are two types of gaseous biofuels discussed in this report ; biogas and biosyngas. Both are very different and are created through very different processes, but both are used in gaseous form.

Biogas: Biogas is created by the anaerobic digestion (AD) or fermentation of organic matter such as manure, sewage sludge, municipal solid waste, biodegradable waste or any other biodegradable feedstock, under anaerobic (no oxygen) conditions. The gas is either burned to produce steam and generate electricity, or used directly in some internal combustion engines or turbines to generate electricity. Depending on how it is produced, biogas can also be called swamp gas, marsh gas, landfill gas, or digester gas. For the purposes of this report, two sources of biogas are considered ; landfill gas from municipal solid waste (MSW), and digester gas from anaerobic digesters (AD).

Biosyngas: Biosyngas is an intermediate fuel that is created through the thermo-chemical gasification process where high temperature reactions convert carbonaceous materials, e.g. coal, petroleum, petroleum coke or biomass, into carbon monoxide (CO) and hydrogen (H2). The resulting gas is called producer gas or syngas4, and is referred to as biosyngas if derived from biomass sources. In addition to syngas, the gasification process also can produce hydrocarbon liquids and char.

3.3 Biofuel Resources

3.3.1 Canada’s Energy Mix

Canada produces about 26 Exajoules (EJ)5 6 of energy per year, imports about 3 EJ, and exports about 17 EJ, leaving about 12 EJ/yr for domestic consumption 7. That translates to about 366 GJ/person/year 8 (or about 8 tonnes of oil equivalent), making Canada one of the most energy-intensive economies in the world. In the most recent OECD global report, Canada ranks 28th out of 30 in total energy consumption on a per capita basis 9


Figure 6 : Canada’s Industrial Energy Flow (2002)

Version 1c – April 2006 Sustainable Energy S&T Strategy National Panel of Experts

Sources:1) NRCan Energy Handbook2) Statistics Canada Source3) Calculated Value4) Natural Resources Canada

Uranium81482,3

Coal14512,3

Biomass458.91

5693

6992

8241

74774

524.51

Crude Oil19594

2.81

8.01

8.81 33.21

41.31

28.81

53.21

72.41

105.61

451.42

58.23

Petroleum321.51

Natural Gas742.71

Coal166.81

16.41

119.51

106.81

5.91

237.41

915.22,3

Crude Oil57192,3

287.13

125.61

MiningandExtraction12843

Chemicals200.51

143.11

Agriculture206.81

211.61

202.51

153.71

117.81

37.51

10.51

12.01

10.21

0.91

Pulp &Paper847.51

Iron & Steel239.51

Smelting &Refining255.01

Electricity857.3

34.71

Electricity711.81

68.01

Pipelines2122

10.12

32262

44102

310.71

116.31

Petroleum393.32

432.82

21133

Non-Fuel8942

973.43

Imports31003

24933

19.91

Natural Gas81482,3

ProducedEnergy236203

Biomass38.61

5942

Coal

Natural Gas153.72

ForElectricPower

Generation24153

10663

DomesticUse

37263

Exports167373

9252

RefinedPetroleum

44523

PetroleumRefining365.21

382.41

OtherManufacturing

691.21

Mining & Extraction (Petajoules) and Petroleum Refining Including Energy Intensity of Production in Mining & Extraction and Petroleum Refining


It is worth noting that of the total available energy, approximately 6 EJ (or 50% of the total) is lost through electrical line losses or thermal/mechanical inefficiencies, leaving about 5 EJ for useful purposes.

Approximately 84% (9 EJ) of the energy consumed in Canada is from fossil fuel sources. The production and utilization of fossil fuel is responsible for an annual creation of about 740 Mt of greenhouses gases (CO2e) 10, 2,900 kt of sulphur dioxide (SO2), 2,200 kt of oxides of nitrogen (NOx), and 2,900 kt of volatile organic compounds (VOC’s)11. The latter three air pollutants are referred to as criteria air contaminants (CAC’s) and are the primary drivers behind smog, acid rain and respiratory problems in humans.

By contrast, only about 6% (0.7 EJ) of the energy consumed in Canada is from bio sources (and most of that is used in the pulp and paper industry and wood products industries in biomass burners). Since biomass is considered GHG-neutral, the utilization of the fuel does not contribute to GHG formation. Biomass adds very little to CAC formation. The production of biofuels does, however, contribute to GHG and CAC formation through the use of fossil fuel trucks and processing equipment. Upstream production is the focus of this report.

3.3.2 Canada’s Biomass Resources

Canada has an abundance of renewable bioresources. Canada makes up 7% of world’s land mass, has 10% of world’s forests, and about 68 million ha of agricultural land (but only 0.5% of the world’s population). Of the 998 million ha of land, about 42% is forested, of which about 245 million ha (25%) is considered productive forest. A further 67.5 million ha (6.8%) is agricultural land, of which about 36.4 million ha (3.6%) is cropland. The annual biomass harvest from Canada’s forestry and agricultural sectors is about 143 Mt of carbon, with an equivalent energy content of about 27% of the annual energy Canada currently derives from fossil fuels12. The bio industry estimates that biomass could account for as much as 2.2 EJ/yr, or 17% of Canada’s total energy supply within the next 15-20 years13. The annual energy content of the biomass harvest in Canada amounts to 5.1 EJ, which is 62% of the energy derived from fossil fuel combustion. A 25% increase in forestry and agricultural production in Canada could provide about 1.25 EJ/yr in biomass energy, an amount equal to about 15% of the energy that Canada now derives from fossil fuels.

There are large biomass residue carbon streams associated with existing agriculture and forestry or with municipalities. Of the more than 66 Mt of carbon a year in the residual or waste biomass carbon stream, about 60 Mt may be considered “available” feedstock for a bio-based economy. This represents about 42% of the entire forestry and agricultural harvest. The energy content of this biomass resource, conservatively estimated to be in the range of 1.5–2.2 EJ/yr, is equivalent to 18–27% of the energy that Canada derived from fossil fuels in 2000.

Biofuels can be derived from a variety of non-homogeneous feedstocks (i.e. MSW, ICI and C&D wastes), in contrast to most conventional industries that require homogeneous sources of raw material. The dominant feedstocks today are residues and wastes from processing industries ; these are considered the best launching point for supply to the biofuels industry. The largest long-term potential source of feedstock is in forest and farming residues. However, there are some inherent limitations to its full use. Agricultural residues, for example, are seasonal in nature, and pose storage problems. In addition, a portion of the biomass must always be left behind in order to maintain adequate nutrient levels in subsequent growing cycles. Even with these restrictions, there is still sufficient agricultural and forestry feedstock potential to serve the Canadian biofuels industry. In the future, it is expected that a

greater range of forms of biomass (such as purpose-grown crops) could be included as feedstock.


Table 1 : Canada’s Biomass Feedstock SupplyFeedstock Theoretical Potential

(PJ/yr)Realizable Potential

(PJ/yr)“Most Likely”

(PJ/yr)

Forestry Harvest residues (7-25% of total harvest) 530 140 110

Unused mill waste 70 350 30

Unharvested clean white wood (based on Annual Allowable Cut) 420 280 200

Natural disturbance residues (fires and infestations) 70 70 50

Silviculture (30-80% increase) 1,400 530 370

Forestry Sub-Total 3,120 1,050 750

Agriculture Crop residues 170 70 50

Bioenergy crops (canola, soy and corn oils) 1,090 70 490

Animal waste (fats and yellow grease) 350 140 98

Agriculture Sub-Total 1,440 840 590

Human Urban waste (MSW, ICI waste, and food processing residue) 210 110 70

Human Waste Sub-Total 210 110 70

Total 4,760 1,990 1,410

Source: A Canadian Biomass Inventory : Feedstocks for a Bio-Based Economy. BIOCAP Canada , June 2003

According to data derived from the Biomass Inventory14, Canada currently has a “most likely” bio feedstock availability of about 1,410 PJ/yr15, as presented in Table 1.

It should be noted that recent advances in genomics and biotechnology have the potential to dramatically expand the opportunities for biomass feedstock supply. For example, biotechnology can be used to alter feedstock amounts by increasing plant growth rates, or decreasing the amount of energy required to extract oil from certain crops.

3.3.3 Feedstock Availability and Regional Distribution

There are three main sources of organic feedstock : forestry, agricultural/aquatic/animal, and wastes from human activity. In each case the feedstock can be used in primary form (e.g. trees) or waste form (e.g. bark, hog fuel), depending on the application and stage in the bioprocess.

The following maps illustrate the general locations of various biomass feedstock resources in Canada.


Figure 7 : Canadian Forest Map

< 1%

Percentage of Productive Forest

1% - 10%

10% - 25%

25% - 50%

50% - 75%

75% - 98%

Source : Natural Resources Canada

The dark green areas in Figure 7 show the primary forest regions in Canada, and are a reasonable proxy of forest density. The densest regions are in the west and the central/east16.


Figure 8 : Canadian Sawmill Locations Map

Type of Sawmills

Forested AreasConiferous Forest

Broadleaf Forest

Mixed Forest

Transitional Forest

Mixed

Hardwood

Softwood


Figure 8 shows the location of sawmills in Canada which are key generators of wood residue. Currently, many sawmills use residual sawdust as low-density boiler fuel.


Figure 9 : Canadian Farming Map


In Figure 9, the dark green depicts the highest density of large agricultural operations in Canada. The most productive regions are in the western Prairie Provinces as well as southwestern Ontario and along the St. Lawrence River valley.


Figure 10 : Canadian Large Livestock Operations Map

Animal Units per km²of Farmland on VeryLarge Livestock Operations

15.0 - 30.0 30.1 - 45.0 45.1 - 75.0 75.1 - 115.0 115.1 - 235.0>235.1


In Figure 10, the dark areas indicate the highest animal density (animal units/km2) of very large livestock operations in Canada. The highest animal densities occur in southwestern Ontario and along the Saint Lawrence River valley17.


Figure 11 : Canadian Population Density (2001) Map

<0.1

0.1 - 0.9

1.0 - 4.9

5.0 - 19.9

20.0 - 49.9

50.0 - 150.0

>150.0

Population Density byCensus Division(persons / square kilometre)


In Figure 11, the dark orange and red areas indicate the highest population densities in Canada. By superimposing the above resource maps over the main markets, it is possible to get a snapshot of where the resources originate and how close they are to their respective markets. The greatest population centres are in reasonable proximity to the primary sources of bio feedstock18. This demonstrates where the greatest resources and markets are, and provides a rationale for developing certain markets.


3.4 Emissions from Biofuel Production

Biofuel Emissions : In general, biomass is considered GHG-neutral over its lifetime. That is, it neither adds to, nor takes away from, Canada’s total GHG balance (i.e. plants and trees consume carbon dioxide as they grow, and release carbon dioxide when they are used or die). However, the man-made processes involved in altering, using or enhancing the biomass, can be an important source of GHG emissions.

Figure 12 : Emissions from Food Production and Biomass Waste

EnergyUsed toProduceFertilizer

EnergyRequired toFertilizeFields

N2OReleasefrom Fields

CO2 & CH4

ReleasedDuringDecay

Handling &Refining ofWaste to MakeBiofuel

Emissionsfrom Food Production

Emissionsfrom BiofuelProduction

3.5 Emissions from the Production of Fossil Fuels

Fossil Fuel Emissions : To compare the GHG emission levels between bio-based sources and fossil-based sources, it is necessary to examine the sources of emissions during fossil fuel production. While the STAR process covers these emissions in detail, the main ones are summarized below.

3.5.1 Coal Mining Emissions

Canada has over eight billion tonnes of coal reserves, and produces about 70 Mtcoal/yr from 20 active coal mines. Approximately 40% of the coal produced is metallurgical coal, which is mostly exported. The remaining 60% is thermal coal which is consumed domestically and augmented by about 24 Mtcoal of coal imports. In its natural state, coal contains varying amounts of methane, which is either trapped under pressure in porous voids within the coal formation or adsorbed into the coal itself. The amount of methane in the deposit varies depending on the grade, depth, and the surrounding geology of the coal seam. During the coal mining, post-mining, and coal handling activities, the natural geologic formations are disturbed and pressurized methane is released to the atmosphere. Fugitive emissions from underground mines can be as much as ten times that of surface mines on a per tonne basis.

3.5.2 Oil Production Emissions

The primary sources of emissions occur at the refinery (flaring and processing), but substantial amounts of GHGs are also released during production (fugitive emissions), pre-processing(cleaning and separating), and transportation (line pumping pressurizing stations).

3.5.3 Natural Gas Production Emissions

Emissions are released at the wellhead, during conditioning, drying, cleaning and refining, and transportation and transmission of the gas to the markets, for example : pipeline leakage ; compressor stations ; pressure reduction stations ; and local distribution piping.

3.5.4 Diesel Fuel Production Emissions

In addition to the fugitive emissions released during production and transport, a significant amount is also released during the refining process.


3.6 Key Drivers and Influencers

There are five main areas of influence that have a direct and tangible bearing on the success of the emerging biofuels market in Canada : Political and Regulatory ; Technical, Economic and Financial ; Market Infrastructure and Demand ; and, Societal Issues and Trends.

3.6.1 Political & Regulatory Drivers

From a strategic perspective, the adoption of biofuels allows Canada to fully capitalize on its “energy advantage.” Because of the strong natural resource base, both fossil fuels and biomass, there is an opportunity to manage domestic demand, improve environmental performance, and continue to leverage Canada’s position as a net energy exporter. However, there are a number of political and regulatory issues that must be addressed. There is a lack of regulation for some technologies. Some of the regulations are out of date. Policies such as taxes, incentives and assistance, environmental costing, and standards, greatly influence biofuels.

3.6.2 Political Attention

One of the single-largest drivers behind the development of the biofuels industry is the amount of attention and leadership provided by governments.

Federal : National policies and directives are established at the federal level, and are felt throughout the industry, within all regions of the country. These policies may be purely domestic in nature, e.g. domestic emissions trading, may be the product of international initiatives, or be the result of agreements between Canada and the United States, e.g. the Clean Air Act. Because of the complex and integrated nature of these political commitments, the impacts on the industry can be felt for many years and have a profound effect on technological innovation and private investment. For the past few years, the Canadian government has been focused on climate change and the implementation of the Kyoto Protocol. The attention, however, is shifting towards a uniquely “Made in Canada” approach to air quality.

Provincial : Provincial and Territorial governments have jurisdiction over such things as natural resources, electricity production and water quality. Since these are often influenced by broader national imperatives, these governments must ally their policies and directives within a national context, while at the same time meeting the unique needs of their respective jurisdictions. This can cause confusion, misinterpretation and misapplication of some policy instruments. For example, most of the Provincial and Territorial governments have been supportive of renewable electricity and lower vehicle emissions (which could influence the biodiesel, bioethanol and biogas industries) but have been less assertive on climate change issues (which could influence the bio-oil and biosyngas industries).

Municipal : Municipal governments have jurisdiction over urban waste, and are therefore a key stakeholder in the development of technologies and innovative approaches that will meet the growing and increasingly complex needs of removal and disposal. The direction provided by municipal governments will likely be the single-largest influencer of any technology that uses urban waste as a primary feedstock, e.g. biogas.

Some of the ongoing challenges in dealing with multiple levels of government are the varying degrees of consistency in policy interpretation and application, (the sometimes) lack of cooperation between levels of government, within governments, departments and agencies, and the (sometimes) short-term policy decisions that respond to immediate political priorities rather than longer-term sustainability needs. These issues must be clearly acknowledged within the industry, and effectively managed in order to achieve industry objectives.

3.6.3 Regulation

Fuel is regulated through standard specifications for combustion. Codes, standards, and regulations are currently based on fossil fuels, hence, some aspects of current standards—which are specific to fossil fuels—tend to increase the cost of biofuel use and production. There are a number of inequities and uncertainties over standardization and regulations. For example, environmental permitting can be an issue because agencies responsible for it can be uncertain about how to evaluate the new biotechnologies (i.e. product definitions, health assessments, environmental impacts, and waste classifications). There are many instances where project proponents have faced difficulty in obtaining permits in a timely, appropriate and cost-effective manner. This can delay progress, decrease investor confidence, and ultimately reduce market competitiveness of the biofuel technologies.


3.6.4 Tax Treatment

The development of some biofuels has received federal government funding in recent years (i.e. the Bioethanol Expansion Program). However, it has mostly been focused on research and development support, and increased public awareness. Financial and policy instruments are still required to ensure full market acceptance. These include accelerated capital cost allowance, environmental tax credits, removal of the provincial excise tax on biofuels, and reductions in non-tariff barriers.

3.7 Technical Drivers

3.7.1 Energy Content

The energy content of biomass varies widely, however, it averages about 36 gigajoules (GJ) per tonne of carbon19, which is less than that of fossil fuels. For example, landfill gas has about 40-50% of the energy density of an equivalent amount of natural gas. Because of the lower energy content, more units of biomass feedstock are required to produce a given amount of energy output. The size of the equipment used, the types of processes employed and the cost-effectiveness of the energy conversion are all driven by the characteristics of the feedstock. This inherent limitation has an impact on the growth of the biofuels sector. Canada has an abundance of biomass resources distributed throughout the country.

3.7.2 Moisture Content

Biomass typically contains large amounts of water, which can influence the overall efficiency and effectiveness of the processing technology. The level of desired moisture varies by technology type, but its control and management remains a technical prerequisite and is often a focus of technological developments. In some cases, the energy required to dry the bulk feedstock (sometimes down to 10% moisture content) is so large that the conversion processes are not viable. The production of these emissions is highly dependent upon the type of drying technology being used, and the initial moisture content of the feedstock. For example, forest biomass (wet wood and bark, hogged fuel) is typically more than 50% water ; pulp and paper sludges, sewage sludge, and digester sludge is more than 80% water. There are other feedstocks that vary quite widely in moisture content, such as municipal and industrial/commercial solid waste.

3.7.3 Infrastructure Requirements

Biofuel feedstock is generally very bulky due to low density and voids between irregular-shaped pieces of biomass, and thus is often difficult and expensive to handle. The low energy density of the feedstock means that significant input material and energy is required to produce a given amount of fuel. In addition, feedstock can come from a large number of relatively small operations resulting in a decentralized supply chain with expensive handling and transportation costs. These factors result in the need for capital-intensive infrastructure in materials handling and preparation. Large bio-refinery plants will likely be required as the demand for biofuels increases.

3.7.4 Airborne Emissions

There are several issues that influence the emissions generated during the production of biofuels. Depending on the feedstock and processes involved, energy can be used during the planting, growing, harvesting, transportation and processing of biomass.


Figure 13 : Emissions from Dedicated Energy Crops for Biofuel Production

Emissionsfrom BiofuelProduction

EnergyRequired to FertilizeFields

N2OReleasefromFields

CO2 & CH4

ReleasedDuringDecay

Handling &Refining ofWaste to MakeBiofuel

Emissions from Biofuel Production

3.7.5 Product Performance

Although bio-oil, biogas and biodiesel perform very well in most industrial applications, they possess different chemical and physical characteristics than petroleum-based fuels. For example, biodiesel is a chemically unique product that performs to the specifications of a fuel for a diesel cycle compression engine. Some of the characteristics of biodiesel (e.g. product stability and shelf-life, acidity, and cold-flow properties) are different from that of petroleum diesel. They may not necessarily affect the long-term performance of biodiesel in a blended mix for intended applications20.

3.8 Production and Distribution Infrastructure

The technologies used in the production and distribution of petroleum products are more advanced than those for biofuels. This makes the integration of biofuels into the overall fuel mix far more difficult and costly, as production and distribution infrastructure must still be developed. The cost will vary depending where blending takes place for biodiesel and alcohols.

3.8.1 Economic and Financial Drivers

The financial attractiveness of each of the emerging technologies varies considerably depending on feedstock supply costs, economies of scale (project size), the state of market maturity, and whether or not the industry receives any form of government subsidies. While most of these factors influence all new technological developments, there are additional considerations for the biofuels industry. These include the accounting for co-product value, the increasing economic value of waste, the emergence of bio-refineries, and the direction and strength of capital momentum. Viewed as a whole, these factors are a strong indication of the strength of the emerging industry, and provide some indications as to its future success.

3.8.1.1 Feedstock Supply

Feedstock currently accounts for about 55-75% of total biomass processing costs, and is the single-largest expense associated with biofuel production. There are possible sources of feedstock that, if exploited , could substantially reduce those costs.

Food/Feed Production Waste – The amount of available waste stock is directly proportional to human population and food production. As populations increase, the amount of potential waste from animal fats, vegetable oils and other organic residuals also increases. This is in contrast to the production of dedicated energy-based crops, which are limited by availability of suitable land to grow them21. In financial terms, the use of waste feedstock is preferable to dedicated stock because the costs of energy to grow the crops and dispose of the waste material are already embedded in the cost of the primary product. Food and feed currently command a much higher price than fuel crops, so there is little incentive to increase production of energy crops.

Forest Production Waste – As with food/feed crops, some of the costs associated with generating residues are already included in the cost of the primary product. For example, sawmill residues are a by-product of a wood products industry process, and although the residue is not the intended


product, the costs associated with producing it are already included in the cost of processing the wood into lumber, which is the primary product. In some locations, sawmill residue is accumulated in concentrated forms, i.e. stockpiled, which can be an issue (potential liability) as well as an opportunity, to take advantage of the economies of scale associated with a large central supply and lower transportation costs.

As the demand for biofuels grows in Canada, more feedstock may have to come from higher value feedstock, such as energy crops. The following Figure 14 illustrates this dynamic, and shows how the feedstock type and energy input per unit of GHG emissions (GJ/tCO2e) could change over time for biodiesel. This suggests that it would be economically advantageous to use as much waste as possible in the most efficient way. Once the demand for biodiesel fuel exceeds the economically available residual stock, more energy-intensive and expensive specialized crops would have to be grown to meet that demand. For this reason, the focus in the near-term should be on acquiring the widest range of economically available residues to produce biodiesel. A similar argument also applies to other biofuels.

Figure 14 : Future Feedstock Composition

Ener

gy In

put /

Emiss

ions

(GJ/

tCO 2

e)

2006

Time

2015

Animal Fats

Oils

SpecializedFuel Crops

Total Feedstock Supply Current Canadian biodieselfeedstock supply is from low value residual material

3.8.1.2 Project Size

The private investment community tends to focus on large systems that can achieve economies of scale necessary to produce price-competitive products, and on those companies backed by experienced management teams. Investors typically require a 2-4 year simple payback period, and a 15-year guarantee on feedstock costs and product sales. Some observers feel that the biofuels industry in on the cusp of having sufficient critical mass to attract large private investments. Until this happens, the lack of large-scale investment will remain a major financial deterrent to the emergence of the Canadian biofuels market using traditional technologies. Some of the emerging technologies will operate economically at small scale and thus save on transportation costs.

3.8.1.3 Co-Product Value

The value of chemical co-products is a critical enabler in the growth of the biofuels industry, and can be a primary financial motivator in the development of certain technologies. The value of the petroleum refinery process, for example, would be considerably lower today if crude oil were only used to


produce gasoline. Instead, crude oil is used to create a variety of refined petroleum products including lubricants and fuels, as well as a feedstock for the plastics, chemicals cosmetics and pharmaceutical industries. The combined market value of the co-products is greater than the value of the crude oil itself. In the case of biofuels, the pyrolysis process, for example, produces bioliquid with over 200 chemicals that could have a considerable combined value (some pharmaceuticals produced through pyrolysis are valued at over $3,000/kg). Consequently, the successful inclusion of co-product value could be a turning point in investment decisions22.

3.8.1.4 Economic Value of Waste

Industrial and municipal wastes are generally treated as cost centers, because companies and municipalities have to pay to dispose of the waste and/or treat it in order to meet operational requirements and environmental regulations. Biofuel technologies treat wastes as feedstocks, making them a potential source of sustained revenue. This is a shift in value economics, and is the cornerstone of the biomass industry (e.g. municipal waste can be used to generate electricity in order to meet a growing demand for power). There are limitations, however, to the amount of waste that can be recovered. Landfill gas operations, for example, can only capture 40-50% of the gases that are released. Such operations are generally limited to large centralized systems because of the economies of scale required to be cost-effective.

3.8.1.5 Capital Momentum

Large capital investments in Canada are typically influenced by the nature and size of similar investments in the United States. This helps to provide the necessary momentum in the Canadian market to sustain investments within a particular economic sector. There are some concerns within the emerging Canadian biofuels industry that the investment practices will be structured on US-based biomass feedstock and related processing plants.

3.8.1.6 Market Maturity

Large institutional lenders are not yet inclined to support the biofuels industry because it is still not market-proven. This limits the availability of capital, and in those cases where capital is available, the projects are often heavily discounted to minimize financial risk. This tends to drive up the cost of money and reduce the financial attractiveness. This situation is expected to improve, however, as more successful projects come on line.

3.8.1.7 Bio-Refineries

The same strategic thinking that applies to co-product value also applies to biorefineries. Biorefineries attempt to refine all of the feedstocks into a variety of valuable products. Bio-based industrial clusters optimize the balance between products and feedstocks ; the product of one can be the feedstock of another. Biorefineries and clusters are beginning to emerge in Canada, which is an important signal for investors. These clusters go beyond single feedstocks to include manure, sewage, abattoir offal, deadstock, and the organic portion of municipal solid waste. Components can come from different industry cluster participants with a variety of co-product outputs. This integrated approach reduces overall costs and maximizes output.

3.8.1.8 Industry Subsidies

Biofuels : Bio-based feedstock is not subsidized in Canada, unlike the United States where there are subsidies for energy crops (such as soybeans – for biodiesel, and corn – for bioethanol)23.

Fossil Fuels : The Canadian fossil fuel industry has been the recipient of government subsidies for decades, which has allowed it to mature to the current state of cost-effectiveness24. The biofuels industry is still in the very early stages of development and would be greatly helped by government support to attract the financial and physical infrastructure necessary to make it a realistic contributor to Canada’s total energy supply25.


3.9 Market Infrastructure & Market Demand Drivers

3.9.1 Fuel Prices

The end-of-pipe fuel costs will remain the dominant force in determining which type of fuel, or blend of fuel types, will be successful in the market. Until recently, biofuels have been orders of magnitude higher than fossil fuels. However, this may be changing as biofuel production costs continue to decline and crude oil prices increase.

The price of West Texas Intermediate (WTI) was around $60 USD per barrel ($67.63/bbl CDN) in the fall of 2006. Analysts are forecasting that crude oil will remain well above the US$60 mark for the remainder of 200626, and some are now predicting that WTI will average $69/bbl USD throughout 2007 (this is about 8% higher than the Sept 19, 2006 close)27.

The recent rise in oil prices has begun to improve the financial attractiveness of biofuels. In one report, it is noted that, if oil prices are sustained at about $70/bbl USD ($78.18/bbl CDN) for a 16-18 month period, this would be the critical “tipping point” to favour biofuels.28,29 The point at which biofuels becomes equally or more attractive than petroleum oil will depend on a number of factors. For example, some industry observers indicate that the tipping point for AD approaches $50/bbl USD ($55.84/bbl CDN), depending on the proximity of the system to the electricity grid and the spot price for the electricity. Although price is expected to vary among the various types of biofuels, one thing appears likely : oil prices are rising and will remain high as supply of cheap recoverable oil diminishes.

Figure 15: Crude Oil Price Trends

Dolla

rs p

er B

arre

l (US

)

Time

$ 0

$ 10

$ 20

$ 30

$ 40

$ 50

$ 60

$ 70

$ 80

Jan-0 0 Jul-00 Jan-0 1 Jul-01 Jan-0 2 Jul-02 Jan-0 3 Jul-03 Jan-0 4 Jul-04 Jan-0 5 Jul-05 Jan-0 6

Source : http://www.forecasts.org/data/data/OILPRICE.htm

While the price for crude oil shows a relatively steady increase, natural gas prices tend to be more volatile. During the period from January 2005 to September 2006, natural gas prices went from $6/mm Btu USD, to $15, back down to $530. This volatility has a profound impact on heating and industrial processing costs.


3.9.2 Market Proximity

Biomass feedstocks are often quite dispersed, and local concentrations may be insufficient to supply larger plants. In general, the maximum economic distance for biomass to be transported depends on the type of biomass and transport system. This can vary from 30-150 km between supply source and the processing plant, which limits where plants can be located31. Plants typically require long-term supply contracts in order to be financially viable and obtain investments. Because of the inherent low energy density and highly distributed nature of the feedstock, the large supply potential can be offset by accessibility issues. However, the converse can also be true : smaller distributed plants operating in parallel could possibly be more cost-effective, where the economy of scale is realized through the number of production units, and not the size of plants.

3.9.3 Replicability and Portability

Technologies and processes that can be easily produced and shipped to global markets could become increasingly important. A substantial economic opportunity may exist for Canadian companies to develop, produce and export technologies and expertise for developing countries. Volume manufacturing experience from these export opportunities could also drive down the cost of the technology domestically.

3.9.4 Sources of Risk

All forms of fuel production have risks associated with reliability of supply, contract prices, product quality, competition, market demand and the influence of political forces. While the same applies to biofuels, there are some unique externalities, such as the intensification of agriculture, deforestation, overgrazing/fishing, decrease of water availability in some regions, increased urbanization, and an increase in natural disasters (fire and pests), that could pose additional risks for investors32. However, the converse is also true ; there may be unforeseen opportunities, such as an unexpected increase in deadstock due to disease, pest infestations (e.g. the pine beetle) or other environmental factors, which could add dramatically to the supply of feedstock. Emerging environmental performance requirements are placing additional pressure on producers and suppliers of traditional hydrocarbon fuels. These factors will undoubtedly continue to influence market prices and supply stability for all fuels, renewable or otherwise.

Oil-producing regions are subject to other vulnerabilities, such as the effects of changing geopolitics (e.g. leadership transition and economic reform), acts of terrorism, severe weather events (e.g. hurricane Katrina), and a diminishing supply of accessible low-cost oil. Canadian oil production is less susceptible to such influences, but there could be some long term economic risks associated with single-region supply. Approximately 86% of all the oil produced in Canada comes from the Western provinces – mostly Alberta. Supply disruptions in this region would have a negative impact on trade with the United States (Canada’s primary oil export market). Any major disruptions are considered highly unlikely at this time, but the potential does exist. By contrast,

biomass supplies are distributed throughout most regions of the country so could be considered less risky from this perspective.


Figure 16 : Canadian Oil Production and Export Map

3

Western CanadaDemand 593 Mb/d

Western CanadaProduction 2.2 MMb/d

PADD V100 Mb/d

PADD IV273 Mb/d

PADD II1.0 Mb/d

PADD III25 Mb/d

PADD I184 Mb/d

OntarioProduction 2.7 MMb/d

Domestic Demand 977 Mb/d

Total Canadian Production 2.5 MMb/d

Ontario Demand 297 Mb/d

Atlantic Demand 39 Mb/d

Quebec Demand 48 Mb/d

Imports 950 Mb/d

Offshore E. Canada Production 48 Mb/d

Source : National Energy Board MMb/d = Millions of barrels per day

3.9.5 Transportation Infrastructure

Figures 16 and 17 show the relationship between supply areas and areas of primary oil and gas consumption. Although 60-70% of Canada’s oil is exported to the United States, there are still about 4,000 km of pipeline needed to get the oil to domestic markets. This suggests that the sources of supply are far removed from the main points of consumption, primarily the central and eastern industrial markets. Similarly, the natural gas deposits are located in the western regions of Canada, so the gas must be piped to the eastern markets. This highlights the fact that Canada has a large and complex system for the production and distribution of fossil fuels in order to meet rising Canadian energy demands. Presently, governments are investing in upgrading and enhanced recovery which will extend the useful life of the sunk costs in the infrastructure.

Fossil fuels have an advantage when transported by pipelines as this infrastructure has been heavily subsidized by taxpayers.

Biofuel supplies, by contrast, are often closer to the markets that they serve because they are more distributed throughout the country, but the current lack of transportation and distribution infrastructure remains a major concern.


Figure 17 : Canadian Natural Gas Supply and Distribution

Westcoast

Alberta System (TCPL)

Alliance

TransGas

Foothills

TransCanada Pipelines (TCPL)

TransQuebec and Maritimes

Maritimes and Northeast Pipeline

Union

500 KM0

500 Miles0

Parallel scale at 45˚N 90˚W

Natural Gas Bearing Sedimentary Basins

Canadian Natural Gas PipelineSystems

Alaskan Beaufort

Canadian Beaufort

Western CanadianSedimentary Basin

Newfoundland Offshore

Arctic Islands

Scotian Shelf

Western CanadianSedimentary Basin

Basins not yet Producing

500 KM0

500 Miles0

Parallel scale at 45˚N 90˚WSource : Natural Resources Canada



3.9.6 Market Development Trends

Biofuel production is expected to develop primarily in the domestic market because of Canada’s extensive bioresources, and the fact that the feedstock is very bulky and costly to transport to other markets. Export opportunities are therefore likely to focus on technology licensing and the sale of turnkey conversion technologies in Eastern Europe and Asia, rather than the direct export of the biofuel itself33, even though it is feasible to export liquid fuels.

3.10 Societal Issues & Trends

3.10.1 Acceptance of Sustainability

There is a growing interest in environmental technologies, and sustainability in general, within the developed countries. This increased awareness is beginning to be reflected in economic actions and political policies throughout many jurisdictions.

3.10.2 Local Economic Impacts

Currently about $0.80 of every dollar spent on the production of biofuels is retained within the area in which it is produced34. This may be due to the levels of automation associated with the production of other energy sources, but market stakeholders feel that the development of energy crops could redirect large financial flows to the rural economy, while simultaneously reducing federal agricultural expenditures.

3.10.3 Public Concerns

Food or Fuel : Canada currently produces about 30% more food than it requires : some is lost to wastage, and the rest is exported35. Some thought is being given to converting this excess to usable biofuels. There is a continuing debate over the benefits of growing crops for food versus growing for fuel. While the potential for energy crops could be significant as a means of achieving a balanced energy future, it is considered by some to be at the expense of adequate or optimum food production. Since Canada produces more food than it consumes, the main debate is centered on providing food to developing countries and avoiding the need for Canadian farmer subsidies. Most of this argument neglects the use of residues and assumes that all biofuel production is from crops. Furthermore, the debate often neglects the negative impacts on economic prosperity to local producers in developing countries, created by subsidized imported food.

Large Scale Operations : There is opposition to large scale livestock farm operations because of localized odours and the potential for contaminating local watersheds. Proponents of AD technology argue that this represents a viable approach to resolving the contamination and odour problems.

Incineration : Public opposition continues over the combustion of solid biomass to generate electricity because of the impacts on air quality, despite the fact that the emissions can be controlled. This “legacy” perception is attributable to antiquated technology that has been largely phased out in the combustion of biomass (i.e. beehive burners). In some cases, for example, regulators have categorized the gasification of waste as incineration, which has posed barriers for facility sitting and permitting.

The biofuel industry segment in Canada, beyond the forest products industries, is just beginning to emerge on a commercial scale. There are future growth opportunities for private investors, and the potential for Canada to dramatically decrease GHG emissions while improving air quality. These opportunities,

however, are tempered by the need to resolve some outstanding technological and market entry issues, and can only move forward if there is open and constructive dialogue among governments and industry stakeholders.

The following discussion focuses on the six biofuel product and process areas chosen for the SD Business Case analysis. It identifies the key issues and opportunities facing each biofuel, and highlights the specific issues that must be resolved in each case.

Each one is assessed within the context of the biofuel value chain. The following diagram shows the main components of the value chain, the sequence of processing steps, and the key issues within each component that drive efficiency and effectiveness.


Figure 18 : Biofuel Value Chain

MarketDistribution

ProductUtilization(Combustion)

HarvestingandPre-Processing

ConversionandRefining

FeedstockSupply

Key Issues:

Plant Size(Scale Up)

Plant Size(Modularization)

ResourceConsumption

ConversionEfficiency

ProductionInfrastructure

CapitalCost

OperatingCosts

ProductionCosts

Key Issues:

DeliveryInfrastructure

DeliveryCosts

Key Issues:

ExistingInfrastructure

LoadCapacity

Moisture &Impurities

RecoveryEfficiency

TransportReliability

Pre-ProcessingCapability

HandlingCost

Key Issues:

Co-ProductValue

ProductPerformance

ProductCompetitiveness

MarketDemand

Key Issues:

FeedstockQuality

FeedstockQuantity

SourceDensity

Reliability ofSupply

ProductionInfrastructure

FeedstockCosts

Areas where technology can make an impact are highlighted (shading). Technological improvements made in any of these areas are likely to have a positive influence on the overall value chain.

The following discussion is divided into the three main forms of biofuels : solids, liquids and gases. Within each form there are one or more fuels. In each case, there is a general description of the fuel, how it is used, and how much it contributes to the overall Canadian fuel supply, a discussion of the types and availability of feedstock, a description of harvesting and pre-processing issues, and an explanation of the conversion processes and co-products produced. The descriptions follow the main elements of the value chain , Figure 18, to provide consistency and a means of cross-reference.


3.11 Solid Biofuels

There is only one form of solid bio-based fuel in this section, referred to as biocombustibles throughout this report.

3.11.1 Biocombustibles

Direct combustion involves the burning of solid biomass directly or after it has been pre-treated (separated, dried, sized, etc) suitably for the method of combustion. It is the oldest form of generating heat for cooking and space heating. Advanced combustion systems can maximize the production of heat, steam, and electricity. In 2002, solid biocombustion made up 6% of Canada’s total energy production36, mostly from pulp and paper mills and sawmills (some mills are net exporters of energy).

Sawmill residues, such as bark, sawdust, and hog fuel37, are collected and burned as fuel in pulp mills. Cogeneration of electricity and steam can increase the overall efficiency of the process. Adding biomass to coal-based boilers can reduce emissions because biomass contains very little sulfur or nitrogen. However, on average, the energy content of solid biomass is about 30% less than that of an equivalent amount of fossil fuel. For example, the energy content of solid biomass is about 35 GJ/tonne (carbon), compared to approximately 42 GJ/t for coal, 51 GJ/t for oil, and 66 GJ/t for natural gas. This means that more biomass feedstock must be consumed in order to produce an equivalent energy output.

The cost-effectiveness of fully utilizing the forestry byproduct depends upon the costs of on-site material preparation and transportation to electricity generation plants. Canada’s greatest forest resources are located in the north-central latitudes, but the primary energy markets are in the southern regions (densely populated areas and manufacturing plants). This suggests that preparation and transportation will be key considerations in evaluating the cost-effectiveness using solid biomass material. The relative cost of electrical transmission lines vs. road transportation is another consideration in the use of solid biomass.


There is an abundance of solid biomass feedstock supply in Canada (e.g. about 15% of the wood in sawmills is bark or sawdust). In fact, the current supply of forest products industries, forestry, and agricultural residue is significant. Challenges include the widely dispersed nature of the feedstock which may impact its economic collection using existing harvesting and transportation technologies.

There are two main sources of feedstock :

Forest-based Feedstocks : This broad category includes forestry residues, wood products industry residues, and pulp & paper industry residues. Feedstock examples include sawdust, sander dust, bark, shavings, fines, sludges, trim, ends, culls, tree thinnings, commercially undesirable standing wood, tops, branches, limbs, stumps, fire and insect damaged wood, construction and demoltion waste, urban forestry, and plantation trees or otherwise purpose-grown wood. The majority of forest-based biomass is low-density high-volume material produced by sawmills and used onsite, or transported to be used as fuel in biomass boilers. Sawdust is frequently sold to particle board and medium density fibreboard mills as feedstock (which affects the price of feedstock for fuel uses). Forestry thinnings and other forest residues can be gathered and densified by specialized harvesting equipment. However, they are more often collected and burned, or left to decompose in the forest. Sawmills produce other solid wood residues such as bark, lilypads, trim, broken lumber or culls, shorts, and shavings, which are reduced in size in hog mills or further refined and sorted/collected for specific product manufacture. Figure 19 shows the estimated quantities of surplus wood residues in Canada in 199838.


Figure 19 : Canada’s Surplus Wood Residues (1990-1998)

0

1

2

3

4

5

6

7

8

9

10M

illio

ns o

f bon

e dr

y ton

nes p

er ye

ar (M

bdt/

yr )

Canada BritishColumbia

Alberta Ontario Québec Prairies AltanticCanada

1990

1998

Source : REAP Canada presentation Opportunities for Growing Utilizing and Marketing Bio-Fuel Pellets

Agricultural Feedstock : This includes residues (i.e. corn stover, cereal grain straw, stalks, leaves, husks, chaff, shells, peels, and skins) or purpose-grown energy crops such as switch grass or Jerusalem artichoke. Some agricultural residues contain high amounts of silica and alkali metals (potassium and sodium) which combine to form slag39 in conventional combustion systems. As a result, agricultural residues are not widely used in combustion applications, but they are being considered for conversion to liquids (bioethanol) and gasses (biosyngas). Agricultural residue feedstock can be augmented by energy crops, such as switchgrass or short rotation crops, or by reforesting unused agricultural land40.

3.11.1.2 Harvesting and Pre-Processing

Biomass from agriculture or forestry residues is generally bulky, wet, and dispersed over a wide area. It must therefore be collected, transported and dried for use as a fuel. This adds to the capital cost of new installations, and to some extent diminishes the value of the energy produced because of the large amounts of energy required to collect and prepare the fuel. There are a number of materials handling issues associated with solid biocombustible feedstock including41 :

Particle Size : The size and shape of the biomass influences stock density which can, in turn, affect transportation costs. Sawdust and wood chips do not compact well, so special high volume trucks are needed to transport the chips, bark and sawdust. Wood harvesting equipment (i.e. skidders) can increase product density by creating bundles similar in density to the original wood. These harvesting technologies have been widely adopted in several European countries.42


Figure 20 : Harvesting Skidder

Source : www.deere.com John Deere Company

Moisture Control : In order to burn well, solid biocombustibles must be dried below a specific moisture content, so cost-effective drying techniques remain a critical issue.43 Biomass can be dried by using waste heat from boiler stacks, proper harvesting and storage of agricultural residue, or through the direct use of fossil fuels. A number of sophisticated drying systems substituting time for temperature have been developed. While sunshine and natural air drying requires no operations input energy, large storage facilities (often covered) are required for extended periods. This can be capital-intensive, and can sometimes result in stock degradation or even spontaneous combustion.

Pelletizing : Sawdust, wood chips and hog fuel are often pelletized to increase stock density (increasing the economic transportation distance), reduce moisture content, and improve materials handling. The density of the pellets is about three times that of the incoming wood waste. This raises the heating value of the pellets to about 20 GJ/tonne (vs. coal at 37 GJ/tonne). Switchgrass can also be pelletized (as can other materials), although grasses have the disadvantage of higher mineral content and therefore higher ash content. The minerals are more difficult to pelletize, and can foul boilers.

3.11.1.3 Conversion and Co-Products

The technologies used in the conversion of solid biocombustibles to heat are well established, so further improvements can require substantial research and development.


3.12 Liquid Biofuels

3.12.1 Bio-oil

Bio-oil is a black liquid condensate which is typically created through the pyrolysis process (see Figure 21)44. It has an energy density of ~17 MJ/kg which is less than one half that of petroleum (39 MJ/kg), but is four times higher than that of wood chips, and 15 times that of straw. Bio-oil is sulphur-free and very low in minerals and nitrogen, making it an attractive substitute for fossil fuels, or, with the addition of surfactants45, can be blended with petroleum fuels for use in internal combustion engines. Industry stakeholders indicate that a 150 bdt/day46 plant will produce approximately 9 ML of bio-oil per year47.

Bio-oil has been used as boiler fuel, pretreated and used in turbines and low- and medium-speed diesel engines to generate electricity48. Applications must take into account the low pH of the pyrolysis oil, rising viscosity of the oil as it ages, storage stability, and the need for very low solid particle content in the oil to avoid excess wear at burner tips and associated piping.

Pyrolysis plants are cheaper to build than biomass burning boilers. In addition, bio-oil can be stored for limited periods so it can be shipped in liquid form (higher energy density than biomass), thereby helping to reduce transportation costs.

Since bio-oil technology is still in the early stages of market entry, it does not yet contribute in any substantial way to Canada’s total energy supply. However, two 100 bdt/day plants have been built. It is anticipated that the growth in the bio-oil product area will most likely be in the form of many small production plants because they are relatively inexpensive to build, and can be located near feedstock supplies.

Figure 21 : Bio-Oil Conversion Process

CycloneCharCollection

Bio-oilPyrolysisReactor

Burner

Feedstock

QuenchSystem

Feedstock

Bio-oil

Char

Quench Liquid

Recycled Gases

Bio-oilStorage

Source : DynaMotive Energy Systems Corporation



Many types of raw material can be used in the pyrolysis process ; currently, clean white wood is the focus of two key demonstration projects in Canada. Trials show that other biomass, such as poultry litter, bark and agricultural residues, can also be used. Future sources could include the capture of waste material from forest fires and pest infestations.

3.12.1.2 Harvesting and Pre-Processing

The pyrolysis process requires a dry feed that has been finely ground to about 2 mm in diameter : the feed composition affects product quality. Interest has been growing in the development of portable pyrolysis units that can take advantage of stockpiled organic material at different locations. Canadian companies have developed several pyrolysis systems and lead the world in the industrial application of the technology.


Modern pyrolysis processes are called fast (or flash) pyrolysis, which is a thermo-chemical reaction that vaporizes small particles of biomass at a high temperature (>500oC) in an oxygen-controlled environment. The material is then quickly cooled (<2 sec.) to form bio-oil (~65%), char (15%) and gas (20%)49. The proportion of each product depends on the feedstock and the operating conditions of the processing unit.

Bio-oil contains more than 200 chemicals ; some of which have a high market value, others that may be undesirable or even toxic. During fractionation50, some of the chemicals in bio-oil can form compounds that could possibly have significant adverse environmental and health impacts. This is an area that requires further study in order to accurately determine the impacts of these compounds, and to identify ways in which to minimize or eliminate the undesirable characteristics. Laevoglucose is one of the chemicals with the highest positive value, and could be a potential building block for synthesis of polymers, pharmaceuticals, pesticides, and surfactants51. The lignin fraction of pyrolysis oil can be used as a substitute for phenol in phenol-formaldehyde resins. These waterproof resins are used in the manufacture of plywood, oriented strand board, and composite panel boards.

Other co-products of the pyrolysis process include char and biogas. The char can be sold as high energy fuel, or converted to activated carbon for purification of industrial liquid or gas streams. The non-condensible gas is burned to provide process heat for the pyrolysis process ; refer to Figure 21.

3.12.2 Biodiesel

Biodiesel is a combustible yellow liquid that is produced through a chemical reaction between vegetable oils or animal fats – found in many types of biomass – and methanol, to form methyl esters. It can either be used as a stand-alone fuel (B100)52, or blended with petroleum diesel in varying concentrations (e.g. B5) to reduce overall combustion emissions and increase engine lubricity. Biodiesel has a high flash point (~ 150 0C) making it less flammable than petroleum diesel, but is largely non-toxic and does not produce as much CAC’s as petroleum diesel.

Since the biodiesel is well advanced in the commercialization process, there are existing standards for performance, e.g. ASTM 6751-02 Biodiesel Specifications, that provide a guaranteed level of performance in the market. Some special issues with biodiesel include cloud point, pour point, aging, water pickup, biological growth, and the presence of residual catalyst, methanol or glycerin. All must be controlled within specification.

Other processes, e.g. the SuperCetane process where hydrogenation is used, are also possible routes to biodiesel. Biodiesel has been successfully applied in electricity generation applications.



Biodiesel can be made from close to 30 different types of vegetable oils, animal fats, and recycled greases, including canola, flax and mustard, which grows very well in dry conditions throughout the Prairie Provinces53. Most biodiesel is made from oils from purpose-grown crops such as soybean and canola. These oils have low fatty acid content which aids in processing. There are smaller amounts of waste vegetable oils, residues, fish oil, and grease available that can also be transformed into biodiesel; materials which are collected primarily in large urban centers. Higher value waste vegetable oils are often used in soap making, which reduces available feedstocks for biodiesel.

In Europe, most biodiesel is made from canola oil (rape seed) while in the US, soybeans are the main source of supply. Canola, which is grown in large quantities in Canada, is considered a better oil seed plant for making biodiesel than soy because of it’s higher oil content (44% vs.18%). That means that there is the potential for a higher energy yield, and more biodiesel production capability per hectare than in the US. Approximately 800 acres (324 ha) of canola can produce about 240,000 L of biodiesel.

Currently the small amount of biodiesel produced in Canada is mostly made from waste products (restaurant oils and greases and animal renderings) because they are the most cost-effective and have the lowest environmental impact. However, the supply of these wastes is relatively small. Approximately 127,000 tonnes of animal fat are produced annually in Canada (about 40% of yellow grease is water)54, which is enough to supply one 60 ML/yr biodiesel plant55. Such feedstocks are usually produced in urban centres where there is a large concentration of grease generators. The 2005 federal government target of 500 ML/yr of biodiesel by 2010 is expected to be supplied by rendered animal waste (66%) and vegetable oils (33%).

Table 2 : Biodiesel Feedstock Availability (tonnes)Feedstock Theoretical Maximum Minimum Probable by 2010 Probable by 2015

Animal Fats 251,635 125,371 62,685 100,297 150,446

Yellow Grease 127,114 64,112 32,056 51,290 76,935

Canola Oil 2,668,000 1,334,000 133,400 266,800 400,200

Soy Oil 453,600 149,688 14,969 45,360 68,040

Marine Oils 15,452 15,452 2,914 2,914 4,371

Total 3,515,801 1,688,623 246,024 466,661 699,992


In biodiesel production, fats and oils are chemically reacted with alcohol (such as methanol) in the presence of a catalyst (such as caustic soda or potassium hydroxide) to form fatty acid methyl esters. Acid treatment is sometimes used for pre-treating high fatty acid feedstocks such as recycled greases56. Approximately 10% of the biodiesel mass comes from methanol, which is derived from natural gas.

Figure 22 is a conceptual flowchart of biodiesel manufacturing using current techniques57.

The main co-product of biodiesel production is glycerin (about 10% of the incoming fatty acid is converted). Glycerine is used in the production of food and personal care products. The supply of glycerine is increasing due to new biodiesel capacity, so the industry is seeking new markets, such as boiler fuel, to avoid over-supply.


Figure 22 : New Process of Biodiesel Production

95%Esterification

Transesterification

EsterificationTransesterrification

Filtration

Separation

Filtration

Washing and Drying

Separation

Crude BiodieselCrude Glycerol >95%

USP Glycerol

Glycerol

Glycerol

Methanol

Flash evaporation of Methanol and moisture

Catalyst

Distilling RecyclingDistilling

BIODIESEL

- Vegetable Oil- Recycled Restaurant

Greases

- Tallow- Fatty Acids- Yellow Grease

Feedstock:

Source : Josip Kuftinec


3.12.3 Bioethanol

Fuel bioethanol is a clear colorless liquid which is made by converting starch crops into sugars, then fermenting them into bioethanol. It is the most widely used biofuel today. Bioethanol has many uses including blending with gasoline as an oxygenation agent which burns clearly and reduces emissions.

Bioethanol has a low density and a relatively high vapor pressure, so blends of bioethanol and gasoline have a higher vapour pressure than gasoline alone. The gasoline is reformulated to remove some of the more easily vaporized components such as butane. The addition of bioethanol adds oxygen to the gasoline thereby improving combustion and reducing tailpipe emissions (esp. benzene). Reformulated gasoline is produced with different characteristics at different times of the year to control emissions.

Fuel bioethanol is usually sold as a 10% blend (E10) with gasoline, which is suitable for all vehicles. A higher concentration (E85) can be used in “flex-fuel “vehicles, but this is not yet widely sold in North America. Fuel bioethanol is becoming price-competitive with gasoline, even without any form of subsidization. In the United States, more than 60 plants produced in excess of 3.4 B gallons (12.9 billion litres) of fuel bioethanol in 2004. This is expected to increase to 5.0 B gallons (18.9 BL) by 2015, or 3.4% of the annual gasoline consumption. The production of bioethanol in Canada was 0.3 BL in 2005, and is targeted to reach 3.1 BL/yr by 2010.

Figure 23 : Canadian Fuel Ethanol Projections

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2005 2006 2007 2010

Billi

ons o

f Litr

es

Time

This suggests that a number of forces will need to come to bear in order for Canada to achieve that target. Key among them are the need to secure a reliable supply of domestic feedstock, the establishment of agreements with gasoline distributors to blend bioethanol and gasoline, adequate tax relief and capital cost support, technologies that decrease capital and operating costs, mandated bioethanol requirements, and the establishment of a robust co-product market.


Bioethanol can be made from a variety of feedstocks such as, cereal grains, potatoes, corn, sugar cane, and sugar beets. The easiest feedstock type to ferment in the bioethanol process is simple sugars, e.g. sugar cane. The next feedstock class is starches, e.g. corn, potatoes, cereal grains. The third feedstock class is cellulose-based sources. In 2006, Canada used mostly corn, barley and wheat for domestically-produced bioethanol. Most bioethanol in the United States is made from corn, and in Brazil, the world’s second-largest producer, it is made from sugar cane. Industrial wastes such as pulping liquors and food processing wastes also contain sugar and starch and are fermentable to bioethanol. Specialty farm crops, including sweet potatoes,


sorghum, Jerusalem artichoke, and fodder beets are also potential bioethanol sources. However, the production per hectare varies, and the efficacy of using this material is highly dependent on the growing season. The quality of bioethanol does not change with the feedstock used to produce it, unlike some other biofuels.

Natural Resources Canada states that Canada could produce 11BL/yr of bioethanol through agricultural and forestry wastes58. This compares to current and near-term projected corn or wheat based bioethanol of 1.3 BL. Ultimately it is expected that 20 BL/yr could be obtained from grains. Overall, biomass from crops and residues could generate enough fuel to augment about 50% of today’s consumption of gasoline. However such projections need to be considered in light of sustainability for all sectors beyond transportation.

Lignocellulosic59 feedstocks are an area of increasing interest. Of the available streams for conversion to bioethanol, wheat straw or corn stover are the most promising. Wood residues, e.g. sawdust, are very high in cellulose, but also contain large amounts of lignin, making it more difficult to process60. Although several lignocellulosic bioethanol demonstration plants are underway, there are no commercial plants currently in operation. Lignocellulosics in wood or agricultural residues can replace starch or sugar as a source of bioethanol. Lignocellulosic bioethanol will have an even greater positive environmental effect.

One of the ongoing issues surrounding the use of bioethanol is the amount of energy input required to produce a unit of energy output. The following graphic shows the rise in the net energy production from corn bioethanol over time along with the studies that measured the energy balance.

Figure 24 : Corn Ethanol Net Energy Balance

Weinblatt et al.

60,000

40,000

20,000

0

-20,000

-40,000

-60,000

-80,000

-100,000

-120,0001978

Energy balance is defined as Btu content per gallon of ethanol, minus fossil energy used to produce that gallon

Studies show an upward trend in the corn ethanol energy balance

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Chambers et al.

Marland&Turhollow

Lorenz&Morris

Keeney&DeLuca

Pimentel Pimentel

Shapouri et al.

Shapouri et al.

Shapouri et al.

Wang et al.Wang

Kim&DaleKim&DaleGraboski

Delucchi

Agri. Canada

NR Canada

Pimentel

Pimentel&Patzek

Patzek

Ho

Net E

nerg

y Val

ue (B

tu/g

allo

n)

Source : Energy and Greenhouse Gas Emissions Impacts of Fuel Ethanol. Presentation by Michael Wang, Center for Transportation Research, Energy Systems Division, Argonne National Laboratory



Although converting sugar, corn, and cereal grains to bioethanol is a mature process, most other biomass conversion processes are still under development. Pre-treatment of lignocellulose with dilute acid or by enzymatic hydrolysis of cellulose appear to be the preferred processes for producing fuel bioethanol. The processes to transform feedstock into bioethanol include :

Sugar Fermentation : The three components needed for fermentation are sugar, water and yeast and can proceed in either batch or continuous form. The conversion of starch or cellulose can be combined in a process called Simultaneous Saccharification and Fermentation, (SSF) or as a separate process called Separate Hydrolysis and Fermentation, (SHF). SSF has the advantage of minimizing energy requirements and capital cost. SHF allows enzymes and yeast to each work at optimum temperatures, increasing the speed of reaction.

Fermentation of Starches (Saccharification) : Starches are present in concentrations of 50% in rye and barley and up to 65% in corn and wheat. Converting starches to sugars is a multi-staged process that begins with the mechanical grinding of the corn kernels. There are two basic processes :

Dry milling : This process involves grinding the material into a fine powder (milling), mixing it with water, and passing it through cookers where it is liquefied. Enzymes are then added to convert the starch into dextrose. The fermented mash (called “beer”) contains about 10% alcohol and non-fermentable solids. It is then distilled to produce an alcohol and residual mash (stillage). This alcohol passes through a dehydration system, producing pure bioethanol.

Wet milling : The grain is first steeped in acidified water at about 500C to separate the starch from the rest of the grain. The wet milling process is more complex than dry milling and plants are generally large and have higher capital and operating costs.

Both dry and wet milling processes produce starch and co-products such as bioethanol, and distiller’s dried grain (DDG). Wet milling also produces other co-products including corn oil, gluten, germ, and sweeteners.

Distillation and Dehydration : The alcoholic solution from fermentation must next be concentrated through stripping it with steam to remove the bioethanol ("high wines") leaving solids. The high wines solution is further distilled to a concentration of 96% v/v. Dehydration then takes place using molecular sieves (zeolite beads) that adsorb water from the solution. Molecular sieves improve the efficiency of bioethanol dehydration.

Lignocellulosics can be converted to sugars and alcohol through a variety of processes, including :

Solvents : Treating the biomass with solvents to remove the lignin and to make the cellulose more available (Organosolv) ;

Hydrolysis : Separating the lignin by hydrolysis into cellulose and hemicellulose (bioethanol solvent hydrolysis) ;

Acid catalyzed steam explosion with enzymatic hydrolysis : Grinding material to a small size and treating it at a high pressure and temperature for a brief period in a steam explosion reactor ;

Two-stage acid hydrolysis : the first stage is operated under milder conditions to hydrolyze hemicellulose, while the second stage is optimized to hydrolyze the more resistant cellulose fraction ;

Concentrated acid decrystallization : cellulose is decrystalized followed by dilute acid hydrolysis to sugars at near theoretical yields. Fermentation then converts sugars to bioethanol ;

Ammonia Fibre Explosion (AFEX ) : treats lignocellulosic biomass with high-pressure liquid ammonia and then explosively releases the pressure ; and,

Bacterial fermentation : a conversion process which applies to all sugars and differs from other technologies in that the hydrolysis system is a 2-stage dilute acid hydrolysis process followed by the use of bacteria to ferment both 5-carbon and 6-carbon sugars to bioethanol.


Figure 25 : Processing Grain to Ethanol

Corn-EthanolWet Milling Dry Milling

Source : National Biobased Products and Bioenergy Coordination Office U.S. Department of Energy


There are two main methods of bioethanol production from corn : wet milling and dry milling.

In dry milling, the corn kernel is pulverized into a coarse flour-like consistency before it is cooked in water. During the cooking process, enzymes are added to hydrolyze the starch into glucose. The resultant mash is then cooled and transferred to fermenters where yeast is added. When fermentation is complete, the mash is transferred to a distillation unit where the alcohol is separated from the solids and water. The resulting alcohol-free mash is dewatered in a centrifuge and then sent to the dryer as distillers grains. The liquid from the centrifuge is concentrated in evaporators, and the resulting syrup is mixed in with the dried distillers grains creating a high value feed product.

In wet milling, corn is steeped for 24 to 36 hours in water and sulfur dioxide to begin the separation of the starch and protein connections. It is then coarsely ground to break the germ loose from other kernel components. The starch is later separated out and converted into sweeteners or ethanol. The co-products of this process are gluten meal and gluten feed, both of which are used widely as animal feed to supply vitamins, minerals and energy.

The advantage of wet milling is that, besides ethanol, valuable co-products such as corn oil are also produced. The disadvantages are that the equipment is expensive and the process uses hazardous sulfur dioxide. The net energy balance of corn ethanol from wet milling is about 27,729 Btu/gal (7,729 MJ/m3), and about 33,196 Btu/gal (9,252 MJ/m3) for dry milling.

The economics of fuel bioethanol from corn depend strongly on the marketing of distillers dried grains or wet grains with and without solubles (the non-starch component of the feedstock). The byproducts from dry milling are sold as various grades of animal feed. Wet milling gives a broader range of products including corn oil, refer to Figure 25.

Co-products from processing lignocellulosics could include lignin, which amounts to about 25% of the feedstock in most cases. If properly isolated, lignin can serve as a binder in phenol formaldehyde resin and as a dispersant in concrete mixes. Sufficient margin must be available in selling lignin to develop a byproduct market rather than burn the lignin co-product as fuel for the process.

3.12.4 Mixed Alcohols from Gasification

Mixed alcohols can be made from syngas (see below) through the Fischer-Tropsch (F-T)61 process that produces carbon monoxide and hydrogen, which is then catalytically converted to a mixture of alcohols, including methanol and bioethanol. The alcohols can be used as stand-alone fuels or be blended with gasoline to improve combustion and reduce tail pipe emissions62. Mixed alcohols have relatively low vapour pressure, high energy content, good solubility in hydrocarbons, and improved water tolerance63.

Unlike fuel bioethanol, mixed alcohols are still relatively new, so have not been generally accepted for blending.

The potential contribution of F-T mixed alcohols is very high – possibly higher than from fuel bioethanol – since almost any carbonaceous material can be used as feedstock.


Feedstock can be any biomass, including urban waste.


Biomass and other wastes are gasified with pure oxygen (see syngas production through gasification, below). The resulting synthetic gas (syngas) is cleaned to remove tars and other impurities by catalytic reforming. The clean gas is then used to create mixed alcohols. The end products can be selected by modifying the catalyst and the ratio of hydrogen to carbon monoxide in the syngas. Altering catalyst and process conditions can change the product mix, making the recovery of some chemicals possible.


3.13 Gaseous Biofuels

There are two types of gaseous forms of biomass considered in this iteration of the STAR process : biogas and biosyngas. The two are distinctly different, other than they are in gaseous form. Biogas consists primarily of methane (CH4), and is produced through the bio-chemical process of anaerobic digestion. Biosyngas, on the other hand, consists mainly of hydrogen (H2) and carbon monoxide (CO), and is produced through the thermo-chemical process of gasification.

3.13.1 Biogas – Anaerobic Digestion

Anaerobic digestion (AD) occurs when bacteria break down wet carbon compounds to form an off-gas consisting of about 60% methane (CH4), 30% carbon dioxide (CO2), and 10% nitrogen (N). The methane portion of biogas (calorific value ~ 23 MJ/Nm3) can be combusted to produce heat and power.

Several on-farm AD systems were built in Canada years ago, but only a few of them currently operate. High capital costs, operational complexities, unrealized energy potential, cost over-runs, feedstock storage problems, lack of incentives, low energy prices, and low land-use compatibility issues all led to poor investment returns. By contrast, there are more than 2,000 farm-scale AD systems currently operating in Germany.

One of the key issues in the use of on-farm AD systems is the need for the producer to have firm supply contracts to sell power to the electrical grid. This is necessary to offset the high costs of building and operating such systems. In order to produce as much biogas as possible, manure can be supplemented with high energy content waste streams such as oils and greases, and separated municipal waste (which also minimizes waste disposal costs for the waste producer).

AD systems have been used in pulp mills to digest solid sludge.

Centralized Anaerobic Digestion (CAD) has become popular in several countries. In this process, manure is added to other forms of organic waste to increase gas production. Such systems derive some of their revenue from fees which replace conventional landfill tipping charges.


A wide variety of organic materials can be digested, including the organic portion of municipal waste, activated sludge from sewage treatment plants, purpose-grown crops, industrial organic waste streams, and food processing wastes. The quality of the biogas varies with the type of manure and the operating conditions of the AD plant64.

In 2001, more than 164 million tonnes of livestock manure was produced in Canada65. Environment Canada reports that 37 m3 of biogas can be produced per cubic metre of hog manure. This amount of biogas can produce 200 kWh of electricity per cubic metre of manure66. Based on the total manure available without regard to other wastes, approximately 44 TWh of energy could be generated in Canada annually. Food wastes and other organic sources could increase this substantially. In 2002, the AgStar program in the United States estimated that about 3,000 farms could install AD systems67. It is estimated that across Canada, livestock-sourced renewable energy could supply upwards of 1500 MW of power68.


In other countries, AD systems consist of large reactors, and are often located on farms or at centralized locations where feedstock is obtained from different sources. Optimizing the residence time, temperature, mixing, and composition are all critical for maximizing production69.

AD systems can operate at a variety of temperature ranges. Higher operating temperatures result in shorter residence times and smaller equipment. However, controlling the digestion temperature at high levels can be difficult when the feedstock gets very cold. In Canada, lower temperature systems are preferred because they are less complex and easier to control (however, methane conversion and the ability to remove pathogens are reduced).

Problems with combustion indicates a need to demonstrate and provide proof of performance in this area.


Anaerobic digestion could be experiencing a resurgence in North America because of an increase in hog production and more stringent environmental requirements. Some of the emerging applications maximize the use of the hog manure feedstock, creating co-product value. For example, one approach combines low-temperature anaerobic digestion with the concentration of solids, and the production of green energy. It produces liquid fertilizers for use on their own farms, biogas for space heating and/or electricity generation, and solid fertilizer for sale to the agricultural market. Such technologies meet the needs of agricultural operations of all sizes, while solving odour problems and destroying pathogenic microorganisms.

Figure 26 : Anaerobic Digestion of Hog Manure

Cultivated Land

Feeding

Flare

Raw Manureon the Farm

Treated ManureOutdoor Tank

BioreactorSludge purged from bottom of bioreactor and/or tanks

Dehydrated Liquid

Dehydration

Liquid

Sludge

Biosolids

INDUSTRIAL USE

ElectricityGenerator

Desulphurization Biogas transformed into useful energy

Boiler

Heating

Holding Tank

Source : Environment Canada

The co-product from AD is sludge, which can be used as a fertilizer, either sold as a combined liquid/solid stream or separately as liquids and solids. The nutrients present in the feed remain in the co-products, including trace amounts of hydrogen sulfide which can be corrosive to metals in engines. Hydrogen sulfide can be controlled by the choice of feedstock and by the addition of chemicals to the digester. Some supplemental wastes (such as MSW) may contain undesirable components such as PCB’s70. Although this doesn’t affect the biogas, it may make the co-product unacceptable for land application, refer to Figure 26.

3.13.2 Biogas – Landfill Gas

Landfill gas (LFG) is formed during the anaerobic decay of the organic portion of municipal solid waste. Since there is only a small amount of oxygen available within the landfill, the carbon compounds break down under bacterial action to form methane, carbon dioxide, nitrogen, water vapor, small amounts of hydrogen and Siloxane71, and leachate72. Trace components include odour-causing compounds, hydrocarbons and small amounts of various solvents7374.


Depending on the landfill chemistry and stage of maturity, LFG is typically made up of about 55% methane, which is slightly lower than the concentrations found in AD systems. The methane is often flared75, or can be combusted in a turbine or engine to generate electricity. During combustion, the methane is reduced to carbon dioxide which lowers the GHG emissions from the methane that would otherwise be discharged to the atmosphere76.


In 1991 there were more than 10,000 landfill sites in Canada. About 5% of municipal waste is composted and the balance is landfilled. Approximately 7% of the landfill gas is captured and flared and a further 17% is captured and used as an energy source77. Table 3 identifies landfills in Canada that capture landfill gas, the amount captured, and the percentage of methane in the gas.

Table 3 : Landfill Gas in CanadaLocation m3LFG/yr % CH4 Methane gas

CESM: The Saint-Michel Environmental Complex in Montreal 141,392,346 38

La Compagne 7,292,868 50

Ste Cecilede Milton 699,520 56

Lachenale 22,325,107 55

Keele Valley 212,832,689 47

Waterloo 21,580,937 50

East Quarry 17,860,086 55

Cambridge 14,883,405 52

Beer Rd. 16,371,745 45

Brock West 74,417,024 39

Clover Bar 24,825,519 51

Port Mann 2,827,847 57

Coquitlam 1,116,255 52

Cedar Rd. 89,300 50

Clearbrook 297,668 48

Vancouver 31,255,156 50

Total LFG Capture 590,067,472

A recent study for Environment Canada calculated that the potential for reducing methane GHG emissions by capturing and using landfill gas was about 7 Mt CO2

e/yr over the next 20 years . Suncor, in cooperation with Conestoga-Rovers, has announced a major program to capture landfill methane gas to generate electricity78. Envirochem Services has estimated that 28 M tonnes CO2

e are available from landfills including forestry company landfills. Currently, 17% is recovered for energy generation.


Landfill gas is often collected by drilling wells into landfills and applying a vacuum drawing the gas from underneath the surface.


Figure 27 : Landfill Gas Collection and Beneficial Use

Source : Environmental Science & Engineering J. Paul Henderson,Tracy Kyle,and Chris E. Underwood

200 vertical wells10 horizontal wells

Landfill

Can Agro Greenhouses

Natural Gas

Valve

Co-Generation Facility

Gas Pre-Treatment

Heat

Electricity

Blowers Blowers

BlowersFlares

PressurecontrolePLC

Bypassto flare

2.5 Km Pipeline

Condensateknockout

Condensateknockout

Aerial cooler Condenser

Landfill gas projects are generally small and have a finite life span, which tend to raise the capital cost and the project risk.

3.13.3 Biosyngas

Synthetic gas, also referred to as “syngas” or “producer gas”, is an intermediate fuel consisting of carbon monoxide (CO) and hydrogen (H2), and is created when biomass is heated in an oxygen-controlled environment, i.e. about 30% of the oxygen normally required for complete combustion. The resulting gas can be refined to create other chemical compounds, or burned directly to generate electricity. If the primary fuel is coal or natural gas, the resulting product is simply referred to as syngas. If the primary fuel is biomass, then it is referred to as biosyngas, which is the focus of this analysis. The process of creating synthetic gas is referred to as gasification.

The energy content of syngas is typically about 3-8 MJ/Nm3 (Megajoules per normal cubic meter), but can reach 10-20 MJ/ Nm3 if pure oxygen is used in the gasification process instead of air. If steam is added during the process, called “reforming”, the resultant gas will have higher concentrations of hydrogen.

Figure 28 details the potential products from the gasification of biomass.


Figure 28 : Syngas and Methanol Feedstock to Product Threads

Mixes Alcohols

Fischer-Tropsch

MTBE

Bioethanol

SyngasCO + H2

Methanol

NH3 H2

Acetic Acid

Waxes Diesel

Alkali-doped

ZnO/Cr2 O2

Cu/ZnO; Cu/ZnO/AI2 O2

CuO/CoO/AI2 O2

MoS2

ThO2 or ZrO2

(K2O, AI2O3, CaO

N2 over Fe/FeO

HcO(CO)4HcO(CO)3 P(Bu3 )

Rh(CO)(PPh3 )3

Oxosynthesis

Fe, C

o, Ru

isobu

tyle

ne

acid

ic io

n ex

chan

ge

Co, Rh, N

i

Direct Use

carbonylation

CH 3OH +

CO

AL2O

3

homologation

Co

Co, Rh

Ag

Isosynthesis

Olefins Gasoline

H2OWGSPurify

Formaldehyde

Feedstock

WoodCorn stoverSwitchgrassLandfill gasSolid wasteRape seedEtc.

Treatment 1

CombustionFermentationCompostingShreddingMixingSeparation/CleaningEtc.

Treatment 2

Steam reforming

CatalyticConversion

Etc.

Step 1 Product

HeatPowerEthanolBiodieselPyrolysis oilSyngasEtc.

Step 2 Product

Hydrogen

Methanol

Biobasechemical product

AldehydesAlcohols

M100M85DMFC

DME

i-C 4Cu/ZnO zeolites Oletins

GasolineMTOMTG

1-Step and 2-Step Feedstock-to-Product Threads

Selection of Options to Use Syngas and Methanol for Products

Source : Jon Van Gerpen, Professor of Biological and Agricultural Engineering, University of Idaho

From Figure 28, it is evident that syngas is an important intermediary step in the formation of other useful materials. Syngas can be used as a fuel to generate electricity or steam, for gaseous or liquid fuels, or as a chemical building block for a variety of downstream uses, such as ammonia for fertilizer. The focus of this report is on biosyngas as a source of fuel, and can be divided into two main groups :

Syngas for Heat Production and Electricity Generation79 : There are a number of gasification applications for heat and power, including direct-fired, i.e. burning the raw gas in boilers or kilns, co-fired, i.e. combining the raw gas with natural gas in direct combustion, and indirect-fired, i.e. combustion in gas turbines. The latter approach eliminates the tar problem associated with small-scale applications, but is limited by economy of scale and some operational problems such as the fouling and corrosion of the heat exchanger.

Syngas for Transportation Fuels : Methanol, hydrogen and F-T fluids can be created through the biosyngas process, and can either be used in fuel cells for electricity or transportation purposes, or processed into liquid fuel additives. One of the major technical challenges is cleaning the resultant gas. Gas cleaning needs to be more thorough in order to protect downstream catalytic gas processing equipment. Recent technological advances, such as liquid-phase methanol production, once-through F-T synthesis, and new gas separation technology, offer the potential for lower production costs and higher overall energy efficiencies.

Application of gasification in other markets is emerging due to market changes associated with improved gas turbines, deregulation of electric power generation, and stringent environmental mandates affecting other forms of power generation. A key application is the gasification of coal (beyond


the scope of this report). Low energy prices have had a mitigating impact on advancing gasification technologies for large-scale transportation fuel applications80,81.


Almost any feedstock containing carbon can be gasified : from fossil fuels, to plastic bottles to wood waste. Typical feedstocks used in gasification are coal, petroleum-based materials, and organic materials (i.e. wood, grass, animal manure, and municipal solid waste). Coal and petroleum-based materials currently provide about 95% of feedstocks for world gasification capacity.

One of the barriers to the development of biomass gasification is the availability of low cost, reliable, productive and sustainable feedstock supply. Biomass feedstock costs currently range from minus $35/bdt CDN for MSW82, to over $67/bdt CDN for fibre from homogenous forest plantations83. Table 4 summarizes some of the more common types of feedstock.

Table 4 : Types of Biomass and the SourcesSector Biomass Gouping Examples

Forestry Logging residues Tops, branches, culls, slash, stumps

Environmental forestry From plantations; prunnings, thinnings

Weed species, inferior trees, brush, scrub from stand improvement and clearings

Energy crops Fast growing species, harvested for energy such as hybrid poplars, willow

Urban forestry Prunings, thinnings, removals, landscaping by municipalities, utilities, developers

Farming, agriculture Crop residues Stalks, straw, chaff, shells, stover, husks, branches,

Energy crops Purpose grown crops; swithch grass, Jerusalem artichoke, Kochia,

Vegetalble oil seeds for biodiesel; canola, soybean, mustard, flax

Sugar and starches for alcohols; sugar beets, corn, cereal grans

Distressed seeds unsuitable for food processing; all of the starches and oil seed crops

Animal manures Manures and bedding; cattle, pigs, chickens, fish, marine animals, etc., for Anaerobic digestion, pyrolysis or gasification

Dead stock

Forest products industry wastes/residues

Pulp & paper Bark, screenings

Sludges

Wood Products industries Bark, sawdust, shavings, sander dust, culls, trim, ends, lily pads, shorts,

Food & beverage industries

Crop processing Stalks, straw, chaff, shells, stover, husks, branches, Etc., if delivered to the processor

Seeds, pits, cores, peels, shells, skins

Pulp, sludges, brine, wash water, chemicals, solvents, off gasses

Animal processing Offal, skins, bones, blood, fat, renderings, tallow, fur, feathers, shells, scales

Brine, wash water, solvents, off gasses,

Industrial, Commercial, Institutional (ICI) wastes

Includes all of the forest and food products industries identified above

Construction and Demolition wastes

Paper, plastics, furniture, food, manufacturing wastes, etc.

Municipal Municipal Solid Wastes Household wastes

Municipal organic wastes Putricibles, food, gardening,

Sewage Sewage, sewage sludge

Waste Activated Sludge

Special organisms Algae, bacteria, E. Coli, micro-organisms



Prepared feedstock, in either dry or slurried form, is fed into a sealed reactor chamber (gasifier), where it is subjected to high heat, pressure, and either an oxygen-rich or oxygen-starved environment84. Further processing, through the F-T85 process, can convert the gas into biodiesel, refer to Figure 2986.

Figure 29 : Simplified Gasification Process

Particulates

ParticulateRemoval

GasCleanup

ShiftReactor

Synthesis GasConversion

Fuels andChemicals

High Sulfur Fuel Oil,Refinery Tars,Petroleum Coke,Coal, Biomass

Sulfur Byproduct

Air Separator

Oxygen

Gasifier

Vitrified Solids

Air

Steam

Compressed Air

SteamHeat RcoverySteam Generator

ElectricPower

ElectricPower

Generator

Stack

Generator

Combustion Turbine

Steam TurbineSource : Gasification Technologies Council


There are four types of gasification processes : fixed bed, fluidized bed, entrained flow, and plasma. Each one is described in Table 5, along with comments on the applicability of biomass sources.

Table 5 : Gasifier TechnologiesType Technology Description Biomass Applicability

Fixed Bed

Counter-Current : “updraft design”

A fixed bed of carbonaceous fuel (e.g. coal or biomass) through which steam, oxygen and/or air flows in counter-current configuration. The resulting ash is either removed dry, or as a slag [56a]**. Thermal efficiency is high, but tar and methane production is significant, so the gas must be cleaned before use [56b]*. The contaminated product gas is not suitable for use as synthetic fuel, chemical production, or gas turbine applications, but can be used in heat-only applications.

The counter flow arrangement is more tolerant of biomass moisture (up to 40-50%), but because the gas has a lot of tar (5-10%), it is usually only useful for direct combustion.

Co-Current : “downdraft design”

The gasification agent gas flows in co-current configuration with the fuel (i.e. downwards). Heat is added to the upper part of the bed, and the produced gas leaves the gasifier at a high temperature. Most of the heat is transferred to the gasification agent added in the top of the bed, resulting in high energy efficiency. Tar levels are much lower than the counter-current type.

The downdraft gasifier is useful for small scale applications, and may have a practical upper limit of ~1 to 1.5 MWth.

Fluidized Bed

Bubbling

A well-known and reliable design, suitable for large-scale applications. Rapid heating of reactant gases and mixing of biomass solids and inert media (i.e. silica, mullite, or olivine sand) provides thermal ballast during startup and operation, which allows stable operation. Tar production is moderately high at ~1% to 2%, but less than a fixed bed updraft gasifier.

Most useful for fuels that form highly corrosive ash that would damage the walls of slagging gasifiers.

Circulating

This type of gasifier has no distinct interface between the dense phase of fluidized sand and the dilute particle phase. The higher velocity fluidization regime means that there is a particle density gradient from the bottom of the gasifier to the top. Entrained media and char fines are recycled back into the gasifier.

Entrained Flow

Dry pulverized solid, an atomized liquid fuel, or fuel slurry is gasified with oxygen in co-current flow. The fuel particles must be much smaller than for other types of gasifiers, which require more energy. The high temperatures and pressures also mean that a higher throughput can be achieved; however thermal efficiency is somewhat lower as the gas must be cooled before it can be cleaned. Tar and methane are not present in the product gas; however the oxygen requirement is higher than for the other types of gasifiers.

Not practical for biomass because operating temperature limiting properties of biomass ash and the impracticality of generating finely ground biomass feedstock, and will not work with more than 10-15% biomass in a coal blend.

Plasma Gasification

A non-incineration thermal process that uses extremely high temperatures (20,000 oC) in an oxygen-starved environment to completely decompose waste (MSW) and other biomass into simple molecules. The process creates a clean, combustible product gas and an inert, non leachable slag. Ash, inorganic material and metals are melted down to a complex liquid silicate that flows to the bottom of the reaction vessel. The gas from the reactor has a low-to-medium calorific value, and is therefore suitable for gas-fired power generation. The gas is contaminated with a number of undesirable compounds that can cause damage to machinery and the environment, so it is cleaned. The cleaned gas, similar in quality to natural gas, is then fed to a compressor and storage facility.

This is considered a very effective way to dispose of wastes, but the systems are not yet of commercial size : the capital and operating costs tend to be very high. Most development in Canada has focused on biomedical waste.

Legend : MWth = Thermal megawatt equivalent

* FRONTLINE BIOENERGY, LLC, http://www.frontlinebioenergy.com/id17.html

** Reference : Slagging gasifiers require a higher ratio of steam and oxygen to carbon in order to reach temperatures higher than the ash fusion temperature. The fuel must have high mechanical strength and must be non-caking so that it will form a permeable bed, although recent developments have reduced these restrictions to some extent.


As syngas is generated, co-products are also formed (tar, particulates, mineral ash, alkali and nitrogen compounds), which must be removed or reformed if the gas is to be used in the creation of other desirable chemical compounds. Feedstock with high moisture content tends to increase carbon dioxide production and decrease carbon monoxide content (as moisture content increases from 10% to 20%, the carbon dioxide content increases from 12% to 15%).

3.14 Vision Statement

As mentioned, the STAR process is a “vision-based, needs-driven” methodology that enables a rigorous, comprehensive and consistent analysis of emerging sustainable technologies in Canada. While the Vision Statement establishes the desired future state, the Needs Assessment identifies the specific things that need to be done in order to achieve the vision. The identified Needs drive the Technology, Market and Sustainability assessments, and ultimately the SD Business Case itself.

Unlike other forms of sustainable technologies, there is no generally accepted vision statement for the individual biofuel technologies being considered in Canada. However, the Canadian Renewable Fuels Association has produced a set of recommendations to guide further developments in this industry. In addition, BIOCAP Canada has estimated the realizable biomass-based fuel production potential—which may serve as an upper limit to the vision87.

The only area with a specified target is transportation fuels88. The Government of Canada has announced a national target of 5% (3.3 BL/yr) of biofuels in transportation by 201089. This would consist of 2.8 BL/yr of bioethanol90, and 500 ML/yr of biodiesel. This represents a 7-fold increase in bioethanol production (currently 413 ML/yr), and a 5-fold increase in biodiesel production (currently 95 ML/yr) within four years91. However, participants in the SDTC Biofuels Stakeholder Session indicated that it would be possible to produce 750 ML/yr of biodiesel by 201592.

The biofuels industry acknowledges that the existing targets lack sufficient detail to adequately build the industry in Canada. So the vision has been further developed and refined through the STAR process93. It is based on a target year of 2015, and the anticipated production capability of the technologies currently coming into the market. The following is founded upon Canada’s current and projected ability to produce a substantial amount of fully renewable fuel sources (about 650 PJ) within the next nine years. It is understood that the amount and type of feedstocks required to achieve that vision will vary considerably during that time. However, with its’ abundance of natural bioresources, Canada is in a good position to realize the vision ; refer to Table 6, Biofuels Vision for 2015. .

The targets established for the biofuels vision are derived from a number of sources and synthesized by SDTC94. These targets have been reviewed (and amended) by a select number industry experts as part of the SD Business Case critic review process. Hence, in absence of national targets outside the potential Renewable Fuel Standard proposal, SDTC is using these figures to establish the magnitude of the gap. In order to establish a common metric, the following assumptions and interpretations have been made :

• All primary data is shown in metric units, and each fuel type is also converted to Gigajoules (GJ) of energy.

• All costs are shown in Canadian dollars (exchange rates as of Sept 6, 2006, 1.105 [0.905])

• The plant construction costs only include the capital required to build the number of facilities needed to achieve the vision. They do not include upstream equipment, feedstock or distribution costs. The costs were drawn from interviews and literature searches, and then normalized for Canadian dollars and GJ’s of energy.

• The Bio-oil Vision is based on the assumption that 1,500 bdt/day can be processed, and that there will be sufficient additional feedstock available to meet that demand.

• The Solid Biocombustibles Vision is based on the emerging technologies that are entering the market. It excludes the impacts of the existing technologies.

• The Biosyngas Vision was derived from the industry’s vision for 2009, for which data is available, and then extrapolated linearly for 2015.


3.14.1 Vision Summary

Table 6 : Biofuels Vision for 2015

The biofuel industry vision is to produce about 650,000,000 Giga Joules (GJ) per year by the year 2015.

Biofuel Type Vision Amount

Plant Construction

Cost to Achieve Target

($M CDN)

Canadian Production

Capacity as of 2006

Capacity Gap Required Annual

Growth RateActual Annual Growth Rate

Growth Rate Gap

Bio-oil300 ML/yr 342 2 ML/yr 298 ML/yr 33 ML/yr 1 ML/yr 32 ML/yr

6,350,668 GJ/yr 54 41,985 GJ/yr 6,308,683 GJ/yr 700,965 GJ/yr 21,169 GJ/yr 679,796 GJ/yr

Biogas 1,200 Mm3/yr 838 590 Mm3/yr 610 Mm3/yr 68 Mm3/yr 50 Mm3/yr 18 Mm3/yr

22,135,645 GJ/yr 38 10,985,302 GJ/yr 11,150,343 GJ/yr 1,238,927 GJ/yr 930,851 GJ/yr 308,076 GJ/yr

Biodiesel750 ML/yr 300 95 ML/yr 655 ML/yr 73 ML/yr 1 ML/yr 72 ML/yr

28,866,014 GJ/yr 10.39 3,062,080 GJ/yr 25,803,934 GJ/yr 2,867,104 GJ/yr 32,232 GJ/yr 2,834,871 GJ/yr

Solid Biocombustibles

20 Mbdt/yr 430 1 Mbdt/yr 19 Mbdt/yr 2 Mbdt/yr 1 Mbdt/yr 1 Mbdt/yr

364,880,509 GJ/yr 1.18 23,717,233 GJ/yr 341,163,276 GJ/yr 37,907,031 GJ/yr 27,366,038 GJ/yr 10,540,992 GJ/yr

Biosyngas29,000 Mm3/yr 957 0 Mm3/yr 29,000 Mm3/yr 3,222 Mm3/yr 0 Mm3/yr 3,222 Mm3/yr

159,500,000 GJ/yr 6 0 GJ/yr 159,500,000 GJ/yr 79,156 GJ/yr 0 GJ/yr 79,156 GJ/yr

Bioethanol2,800 ML/yr 3,386 413 ML/yr 2,387 ML/yr 265 ML/yr 41 ML/yr 224 ML/yr

65,520,000 GJ/yr 52 9,664,200 GJ/yr 55,855,800 GJ/yr 6,206,200 GJ/yr 871,430 GJ/yr 5,334,770 GJ/yr

Total 647,252,836 GJ/yr $ 6,632 47,470,801 GJ/yr 599,782,036 GJ/yr 48,999,383 GJ/yr 29,221,721 GJ/yr 19,777,662 GJ/yr

Sources : 1. Innovation Roadmap on Bio-Based Feedstocks, Fuels and Industrial Products. p. vii BioProducts Canada. 2004

2. Layzell, D. (2004) “Bioenergy for Climate Change Solutions”. Presentation to Canbio -FPAC Workshop, September 12, 2004.

3. First Year: 2004/05 Strategic Plan for the Canadian Biomass Innovation Network Research and Development Program.

4. Canadian Renewable Fuels Strategy

• The Bioethanol Vision is based on the government’s 2010 target of 2,800 ML/yr the same target was used for2015 in order to temper the effect of current bioethanol growth projections, given that it will already require a 7-fold increase in production over current levels in order to meet the 2010 target. Both the linear growth and no-growth models have no material impact on the technology priority selection.

• The projections are based on linear growth rates as a means of standardizing the projections. However, growth is rarely linear in practice, and the emerging technologies are showing some signs of rapid and significant growth. This should be taken into account when considering the growth potential for each technology area.


3.14.2 Vision Assessment

From the above Vision Statement, Canada could produce close to 337,104,404 GJ/yr (about 340 PJ/yr) of energy through bio sources. The country currently produces about 1,300 PJ/yr of fuel from fossil sources. In order to produce 340 PJ/yr of biofuels, there would need to be a (conservative) capital investment of over $6B CDN in new production facilities over the next nine years (exchange rates as of Sept. 6, 2006, 1.105 [0.905]).

Although Canada has an abundance of natural bioresources, very little of it is currently being exploited to produce biofuels. As of 2006, Canada produced approximately 47 PJ/yr of energy from biofuels, or about 7% of the amount required by 2015. In order to achieve the stated vision, Canada would have to produce 50 PJ/yr every year between now and 2015, which is an annual increase of about 20 PJ/yr over current levels. If biofuel production growth remains at the current (linear) levels, there will be insufficient biofuels produced to meet the stated vision.

From Table 7, it is evident that Canada has sufficient raw feedstock supplies to meet the stated vision. However, the feedstock use must be distributed in order to adequately supply all the sub-sectors. For example, solid biocombustibles could easily consume all of the mill waste feedstock. In order to meet the expected demand for solid biocombustibles, it is necessary to distribute the supply across a number of sources. In the Table 7, appropriate distributions were applied in order to retain a net positive balance in available feedstock. It is also worth noting that biogas and biosyngas could consume more feedstock than is available. This supports the industry’s expression for the need for a wider range of feedstocks for these fuels.

Within the context of identified production gaps shown in the Vision Statement, the following analysis, and the primary emphasis of SDTC’s activity, is focused on identifying those technologies that can help fill the production gap, and accelerate their entry into the Canadian market.


Table 7 : Resource Availability Balance

Feedstock

Availability* Amount Accounted for in STAR™ Process by 2015 * Remainder *

Theoretical Reliazable Most Likely Solid

Biocom-bustibles

Bio-oil Biodiesel Bioethanol Biogas Biosyngas Theoretical Reliazable Most Likely

Fore

stry

Harvest Residues (725% of total harvest)

525 M 140 M 112 M 29.2 M 79.8 M 416 M 31 M 3 M

Mill Wastes (Unused portion)

Saw mill and pulp mill residues

70 M 35 M 24.5 M 21.9 M 48.1 M 13.1 M 2.6 M

Unharvested (Annual Allowable Cut)

Clean white wood

420 M 280 M 196 M 109 M 6.4 M 304.2 M 164.2 M 80.2 M

Natural Disturbance Residuals

Diseased and fire-killed trees

700 M 70 M 49 M 36.5 M 663.5 M 33.5 M 12.5 M

Silvicultural Practices (3080% increase)

1,400 M 525 M 367.5 M 167.8 M 1,232.2 M 357.2 M 199.7 M

Forestry Sub Total 3,115 M 1,050 M 749 M 364.9 6.4 M 0 0 0 79.8 M 2,664 M 599 M 298 M

Agric

ultu

re

Crop Residues 175 M 70 M 49 M 175 M 70 M 49 M

Biomass Crops (7 Mha @ 3-4 tC/ha/yr)

Canola, corn and soy oils

1,085 M 700 M 490 M 9.6 M 65.5 M 1,009.9 M 624.9 M 414.9 M

Animal Waste Animal fats and yellow grease

350 M 140 M 98 M 19.2 M 330.8 M 120.8 M 78.8 M

Agriculture Sub Total 1,435 M 840 M 588 M 0 0 28.9 M 65.5 M 0 0 1,340.6 M 745.6 M 493.6 M

Hum

an

Urban Waste

Food processing, municipal solid and ICI wastes

210 M 105 M 73.5 M 22.1 M 79.8 M 108.1 M 3.1 M -28 M

Urban Wastye Sub Total 210 M 105 M 73.5 M 0 0 0 0 22.1 79.8 108.1 3.1 -28

Total 4,760 M 1,995 M 1,410.5 M 364.9 M 6.4 M 28.9 M 65.5 M 22.1 M 159.5 M 4,112.8 M 1,347.8 M 763.3 M

* Values are in millions of GJ/yr


4 Risk and Needs Assessment and AnalysisThis section consists of five assessment areas (Vision, Needs, Market, Technology and Sustainability) that together provide a comprehensive view of the industry. The assessments are based on available market data and industry stakeholder input regarding the potential for each technology.

4.1 Needs Summary

Demand for biofuel goods and services drive the identification of technical and non-technical needs that biofuel producers must address to meet the demand. Technical needs include quality, performance, and cost. There are many non-technical factors which create, stimulate, or impact on needs for technologies, including political, regulatory, financial and societal issues.

4.1.1 Technical Needs

The following technological needs are common to all forms of biofuels in Canada. Individual technological needs vary for each fuel, and are listed with each fuel type in the appropriate section(s) of this document.

Table 8 : Common Biofuel Technology NeedsRank Technology Needs Description

1 Testing and development of a wider array of sources of reliable, low-cost, and sustainable biofuel feedstocks

2 Development of technologies and techniques for better harvesting, collection, transportation, and pre-processing of biofuel feedstock (e.g. on-site separation, drying and maceration)

3 Development of scaled biofuel plants : larger plants to achieve economies of scale, and smaller plants to minimize feedstock transport distances and/or to serve remote communities

4 Development of technologies that support the cost-effective and reliable production of co-products

5 Development of low-cost moisture control technologies for biomass feedstock

6 Improvements in downstream technologies (that consume the biofuel products) to optimize operating capacity and minimize the undesirable characteristics of biofuels (e.g. high acidity and chemical contaminants)

7 Improvements to feedstock densification technologies (e.g. pelletization) suited to Canadian sources of biomass

8 Development of new crop species to optimize energy density and minimize handling and production costs

4.1.2 Non-Technical Needs

The non-technical needs identified by key market stakeholders are a direct consequence of the following conditions.

4.1.2.1 Accounting for Co-Product Value

Co-products are often not included in the financial evaluation of Biofuels by many potential user decision makers, which tends to diminish their financial attractiveness. This is both a technical and non-technical issue, but one that is at the forefront of the biofuels argument. There is a need to establish financial co-product value for biomass sources, and a framework from their development.

4.1.2.2 Outmoded Regulations

Interviews with industry stakeholders suggest that there have not been any major policy or regulatory developments in the biofuels industry in Canada recently. For example, the regulations controlling diesel production and fuel performance were written for petroleum-based diesel which, in some cases, is inappropriate for bio-based diesel fuel. This is in contrast to California which has seen a number of innovative and effective policy improvements in the same sector. Stakeholders suggest that new “smart regulations” could go a long way to equalizing the investment climate between existing and sustainable methods of fuel production and use.


4.1.2.3 Lack of Standardization

It has also been stated very clearly that existing standards are not very supportive of sustainable technologies in general – and biofuels in particular – and may in some cases actually impede development. For example, the standards for fuel oxidants apply only to one type of fuel (bioethanol) and not to the broader range of possible bio-based fuels within this group. However, it is recognized that these issues are manageable and are expected to be improved over time.

4.1.2.4 Inadequate Financial Support

This is a broad area that encompasses financial incentives at key stages in the development process, incorporation of environmental externalities in accounting practices, access to and parity with US markets, and the implementation of market-based environmental improvement mechanisms. Stakeholders indicate that financial subsidies, in and of themselves, are not the only solution to the challenges facing biofuel project developers. It is felt that such a narrow approach could create artificial value within the market, and that the market could collapse if the direct incentives were subsequently removed.

4.1.2.5 Inadequate Testing Resources

As the biofuels market emerges, there is a growing need for a robust product testing capability. Currently there are very few such resources in Canada, and much of what is available is being attracted to the more developed and lucrative US and European markets. This appears to be an important but longer-term issue. In addition, adequate training and certification would likely have to begin now in order to create a robust and reliable product testing capability in the future.

4.1.2.6 Competing Use of Feedstock

Some feedstocks used to create biofuels can also be used to produce foods for animal and human consumption. This is expected to become an increasingly important issue as growing populations place increasing demands on food supplies. Some of the waste material from industry is already being used as feedstock for products other than fuel production, resulting in a competition for supply. The supply/demand balance at any given time could have a profound impact on the growth levels of the emerging biofuels industry.

4.1.3 Solutions to Non-Technical Needs

The following have been identified as the primary ways of addressing the non-technical needs.

4.1.3.1 Better Understanding of Climate Change and Air Quality Policy Implications

Although there is a common desire to mitigate the effects of climate change and poor air quality through improved technologies, stakeholders feel that more should be done to better understand the strategic implications of changing government policy, and that the industry should play a more active role in helping to guide some of those developments. Conversely, government departments and the financial community, it is felt, should have a more comprehensive understanding of these complex and inter-related issues in order that they make sound policy and business decisions.

4.1.3.2 Supportive Government Procurement Practices

The federal, provincial, and municipal governments are very large consumers of products and services and have a significant impact on the type and quality of products and services provided. By enacting a biofuel option in the procurement of fuel and bio-based co-products, governments could provide an impetus to kick-start the industry on a large scale. Stakeholders conclude that a more coordinated and focused effort on the part of the biofuel industry towards government procurement could help achieve this objective.


4.1.3.3 Improved Biofuel Market Strategy

An integrated and comprehensive market strategy for the biofuels industry would go a long way to resolving many of the needs stated above. In a similar vein, stakeholders indicate that a more collaborative approach among key industry developers would advance the biofuels agenda a lot faster and further than if each player in each product segment tried to do it alone.

Table 9 : Non-Technology Needs and SolutionsStated Need Proposed Solution

Accounting for Co-Product Value Integrating Emerging Social Issues

Better Understanding of Climate Change and Air Quality Policy Implications

Inadequate Financial Support Improved Risk Mitigation Techniques

Better Understanding of Climate Change and Air Quality Policy Implications

Outmoded Regulations Better Understanding of Climate Change and Air Quality Policy Implications

Lack of Standardization Supportive Government Procurement Practices

Confusing and Conflicting Language

Improved Biofuel Market Strategy

Greater Collaborative Approach

Inadequate Testing Resources Improved Biofuel Market Strategy

Competing Use of Feedstock Improved Biofuel Market Strategy

Greater Collaborative Approach

Integrating Emerging Social Issues

Of the proposed solutions in Table 9, the areas that link the most to the stated non-technical needs are an improved biofuel market strategy and a greater collaborative approach among the industry players. While this may seem self-evident, stakeholders are very candid about what is currently lacking and what, from a strategic perspective, needs to be done in order to expand the biofuels industry.

4.2 Market Assessment

With a stated vision and list of needs, it is possible to then examine the current market conditions and identify areas of future opportunity and growth.

4.2.1 Biofuel Economics

Identifying and understanding the type and magnitude of the costs associated with biofuel production is a key consideration when examining the technological areas that could support cleaner air and reduced GHG emissions. If the costs associated with a particular element of the production process are already unacceptably high, then there is little incentive for project developers to consider additional investments in air pollution mitigation technologies. On the other hand, improved technologies could drive down current costs while at the same time reduce air emission levels.

4.2.1.1 Plant Construction Costs

Unlike other sustainable development technologies, there is very little public information on the installed cost of biofuel technologies. Costs vary considerably among the different technology types, and fully commercialized applications are still in the very early stages of development. The following construction costs have been derived from all available sources at the time of writing, and have been adjusted to meet the $CDN/GJ metric. Further efforts are required to validate and improve these figures.


Figure 30 : Biofuel Production Facility Construction Costs

$ 0

$ 10

$ 20

$ 30

$ 40

$ 50

$ 60

Bio-oil Bioethanol Biogas(MSW)

Biodiesel Biosyngas(MSW)

Sol id BioCombustibles

Unit

Cost

($CD

N/GJ

) of I

nsta

lled

Capa

city

Fuel TypeSource: MBC Energy and Environment

Note that the form of biofuel is very important and that direct comparisons are not possible. For example, Bioethanol and Biodiesel are consumer-level products (to the extent they are blended into the final fuel used in vehicles), whereas the other fuels (syngas, bio-oil, etc.) may go through further processes and have different market applications with different value propositions.

4.2.1.2 Fuel Production Costs

The estimated annual production costs for each fuel are based on the following assumptions :

General :

• The production costs only cover from feedstock supply to refinery gate. They do not include downstream taxes or distribution costs, because both can vary significantly from one jurisdiction to another.

Fossil Fuels :

• Total Production Cost (TPC) is a function of the cost of feedstock (e.g. crude oil) plus refinery operating costs and refinery profit. The latter two are collectively referred to as the refining margins100. The refining margins in Canada are currently about $0.11/litre.

• Refinery profit is assumed to be 15%, which equates to about 2% in overall profits cited at the retail level, and is consistent with publicly-available information.

• The price of crude oil is assumed to be US$ 69bbl (Sept 1, 2006), which equates to CDN $0.48/L.


Figure 31 : Canadian Average Refinery Margin (1994 to 2005)

0

2

4

6

8

10

12

14

16

18

Jan-95 May-96 Sep-97 Feb-99 Jun-00 Nov-01 Mar-03 Aug-04

128 Month Average = 8.6 Cents Source : Canadian Renewable Fuels Association

Cent

s/L (

CDN)

Time

The Canadian refinery margin101 has been gradually increasing since 1994 and is assumed to remain at this level for the foreseeable future. For the purposes of this report, the margin was held at $0.11/L CDN.

Figure 32 : Crude Oil Price Trends

Dolla

rs p

er B

arre

l (US

)

Time

$ 0

$ 10

$ 20

$ 30

$ 40

$ 50

$ 60

$ 70

$ 80

Jan-0 0 Jul-00 Jan-0 1 Jul-01 Jan-0 2 Jul-02 Jan-0 3 Jul-03 Jan-0 4 Jul-04 Jan-0 5 Jul-05 Jan-0 6

Source : http://www.forecasts.org/data/data/OILPRICE.htm


External geopolitical and natural disaster events continue to drive the price of crude oil. For the purposes of this report, the price was held at $69. 19 bbl USD.

Figure 33 : Bioethanol Production Cost

$ 0.35

$ 0.40

$ 0.45

$ 0.50

0 2000 4000 6000 8000 10000 12000 14000

Cost

of b

ioet

hano

l pro

duct

ion

($CD

N/L)

Capacity of plant (bdt/day)

$ 0.30

$ 0.25

$ 0.20

Bioethanol production cost at Quesnel (without bioethanol transportation cost)

Bioethanol production cost at West Road/Nazko River (with bioethanol transportation cost)

Source : Presentation by: Amit Kumar, University of Alberta

Biofuels :

Bio-oil costs are based on a 100 bdt/day facility with a feedstock cost of 30 $USD/ton102, and are adjusted for quotes from BIOCAP Canada

Biodiesel production costs are based on yellow grease as the feedstock. It should be noted that in Canada, feedstock costs represent approximately 70% of the cost of biodiesel production103. Unlike the United States, biodiesel feedstocks in Canada are not subsidized by the government.

Bioethanol costs are based on an 8,000 bdt/day facility104. It is interesting to note that bioethanol production costs remain flat as the production capacity increases.

Biosyngas data was derived form page 14 of “Biosyngas Key Intermediate in Production of Renewable Fuels, Chemicals, and Electricity”105.The Annual Production Cost (APC) per GJ for each fuel is calculated based on the above assumptions and extrapolations. The APC is used as a common indicator for all fuel sources and shows the relative costs for each.


Table 10 : Estimated Production Cost Comparisons of Various Fuels Fuel Type Annual Production Cost

($ CDN) per UnitEnergy Content per Unit

Annual Production Cost ($CDN/) per GJ

Liquid Fuel Bio-oil (Wood) $0.31/L 0.0195 GJ/L 15.90

#2 Fuel Oil $0.68/L 0.0385 GJ/L 17.66

Biodiesel (Tallow) $0.41/L 0.0322 GJ/L 12.73

Petro Diesel $0.55/L 0.0385 GJ/L 14.29

Bioethanol $0.37/L 0.0234 GJ/L 15.81

Gasoline $0.59/L 0.0347 GJ/L 17.00

Gaseous Fuel Biogas (MSW) $0.11/m3 0.0186 GJ/m3 5.91

Natural Gas $0.23/m3 0.038 GJ/m3 6.05

Biosyngas (MSW) $0.14/m3 0.0055 GJ/m3 25.45

Solid Fuel Solid Biocombustibles (Wood) $21.50/bdt 18.244 GJ/bdt 1.18

Coal $5.00/tCoal 20.00 GJ/tCoal 0.25

Legend : L = litre, bdt = bone dry tonne, m3 = cubic meter, t = metric tonne

Source : MBC Energy and Environment

4.2.1.3 Fuel Production Costs Assessment

Figure 34 : Fuel Production Cost Comparisons

0

5

10

15

20

25

Bio-oil

#2 Fuel Oil

Biodiesel(Tallow)

Petrodiesel

Bioethanol

Gasoline

Biogas(MSW)

Natural Gas

Biosyngas(MSW)

Natural Gas

Solid Bio Combustibles

Coal

Prod

uctio

n Co

sts (

$CDN

/GJ)

Fuel Products

In almost every case the annual production cost on a per GJ basis is higher for fossil fuels than for biofuels. This is largely due to the current price of crude oil ($69.19/bbl USD). The exceptions are syngas and solid combustibles. The last column, Energy Cost per Unit of Production ($ CDN/GJ/unit), is an important indicator within the STAR process because it provides a common metric for all fuel types to be compared.

When displayed graphically, the differences between the fuel types are clearly visible.


Based on Figure 34, there are a number of valuable comparisons ;

Solid Fuels :

Fuel production cost of coal is considerably lower than solid biocombustibles (white wood) largely because of the higher costs associated with handling, transporting and processing the bio stock. If the emissions had to be equivalent, this would change.

Liquid Fuels :

Bio-oil is almost twice as high as crude oil because the energy density of the feedstock wood used in the pyrolysis process is about half that of crude oil (note that the unit production costs are about the same).

Biodiesel, by comparison, is significantly lower than petroleum-based diesel because of the comparative energy density of the two feedstock sources, but the relatively higher production costs of petroleum-based diesel.

Bioethanol is also lower than gasoline, largely because of the price of crude oil. It is also possible that subsidies of the US-based bioethanol plants could influence construction costs throughout North America.

Gaseous Fuels :

Biogas is almost twice as high as natural gas because of the low energy density of MSW-based feedstock and the similar production costs of the two gases.

It has been estimated that the cost of technologies and systems for biomass harvesting and conversion into bioproducts must be reduced by a factor of 2-10 times in order to become competitive with other fuel sources106. Technologies that optimize specific harvesting techniques that include collection, reduction, bundling and drying processes, and those that minimize disruption to the existing land will be of greatest value to the industry. By developing these technologies, it will then be possible to reduce the Energy Cost per Unit of Production for each of the biofuels. Finally, as with any emerging market sector, manufacturing and fabrication costs are expected to drop dramatically as the number and size of plants increases.

4.2.2 Biofuel Market Potential

From a global perspective, Canada does not currently produce very much biofuel. However, it has an abundance of natural bioresources, with sufficient potential to meet most of Canada’s internal needs and possibly allow it to be a global market player in the future. Canada is also a global leader in the development of highly efficient process technologies for production of bioethanol from cellulose, biodiesel from animal fat and vegetable oil, and bio-oil from wood residues.

The biomass market could grow to include the concept of biorefineries,covering bio-based derivatives for the production of pharmaceuticals, specialty chemicals, and commodities. Intermediate chemicals will likely emerge in locations close to biomass supply, through specialized plants where integration and economies of scale can be achieved.

4.2.2.1 Solid — Biocombustibles

The current state of solid biocombustibles technology is adequate to meet the energy needs of its main users ; the pulp and paper and wood products industries. Advanced combustion technologies could result in additional electricity generation capacity. It depends largely on the location of feedstock and proximity to markets. The solid combustion technology market is expected to remain fairly flat for the foreseeable future. There is little market need for direct improvements but there is some spin-off potential for the biomass industry as a whole through improved feedstock harvesting and pre-processing technologies.


Stage of Investment

Many of the solid biocombustion technologies have been in existence for decades, so there are not many new technological developments expected in the near term.

Economic Efficiency

Given that solid biocombustion systems have been available for a number of years, a substantial amount of cost reduction has already taken place. Large efficiency improvements that are made will likely require fundamental changes in manufacturing techniques, which could drive up equipment costs.

4.2.2.2 Liquid — Bio-oil

The industry in Canada is expected to produce about 2 ML/yr of bio-oil by 2006, mainly for industrial purposes. By 2008, a five-fold increase in production is expected, and by 2015 the industry expects to produce 300 ML/yr.

Bio-oil produced from the pyrolysis process is one of several co-products which have market value. Construction and operation of pyrolysis plants is a function of plant size and price of feedstock, as illustrated in Figure 35. Costs are expected to drop as larger facilities are commissioned.

Figure 35 : Bio-oil Production Cost vs. Plant Capacity and Feedstock Cost

$1.50

$1.20

$0.90

$0.60

$0.30

$0.00

Prod

uctio

n Co

st ($

/USG

equ

ival

ent)

Feedstock Cost

$30 / ton

$20 / ton

$10 / ton

$0 / ton

100 tpd 200 tpd 400 tpd

• All capital and operating costs including 20% ROI • Excludes char revenue offset (5 –8 cents/USG)

Plant Capacity (bdt/day)

$10.00

$8.00

$6.00

$4.00

$2.00

$0.00

Prod

uctio

n Co

st ($

/mm

Btu)

Bio-oil Production Cost vs. Plant Capacity and Feedstock CostBio-oil Production Cost - US Plant

Source : DynaMotive Energy Systems Corporation

It is evident that unit production costs are inversely proportional to plant size, and directly proportional to feedstock costs.


Stage of Investment

Fast Pyrolysis technology is being demonstrated and is near commercial launch. The lessons learned from these experiences should help accelerate the technology to full market readiness within the next three to five years. From a market perspective, the spin-off potential for bio-oil is expected to be very high, primarily because of the value of co-products and the ability to adapt this technology to other markets.

Economic Efficiency

Barriers to acceptance are considered minimal with the exception of the financing barrier for new technologies. The potential market demand is considered to be high. The replication, dissemination, and expected export market potential are anticipated to be significant, particularly when factoring in potential co-product values and successful commercialization of smaller scale facilities.

4.2.2.3 Liquid — Biodiesl

In 2004, biodiesel contributed about 0.2% of the total supply of motor distillate world-wide, and approximately 0.1% in Canada107. Canada has just started to produce biodiesel domestically, although many progressive municipalities and companies have been importing high cost biodiesel from the US since the mid-1990s. A national target has been set to achieve a usage rate of 5% by 2010108.

Canada produced approximately 26 BL of petrodiesel in 2005, and about 95 ML of biodiesel (0.5% of the total diesel production). By contrast, biodiesel production in Europe (EU-25) was about 966 million gallons (4,392 ML/yr) in 2005109. That translates to approximately 2.97 L of biodiesel per capita in Canada, compared to 9.51 L/capita in Europe110. In the United States, more jurisdictions are planning to use biodiesel as a transportation fuel. Minnesota, for example, is currently developing a renewable fuel mandate for a B2 blend in transportation applications : Idaho and Kentucky have also passed similar mandates. Many public and some private fleet operators are testing biodiesel as a means to “green” their transport operations.

Despite the market potential for biodiesel, there are still a number of issues that need to be resolved, including :

• Engine Performance and Life Expectancy : The full range of biodiesel blends (e.g. B5-B20) need to be tested and proven in the full range of engine types, taking into account Canadian driving conditions.

• Cold Weather Performance : There are persistent perceptions over cold weather clouding and pour-point problems with biodiesel blends. These issues can be managed but biodiesel must still be field-proven on a large scale in cold operating environments.

• Lubricity Attributes : There is a need to verify lubricity test results (i.e., reduced engine wear, improved fuel economy) and the effectiveness of various competing lubricity additives and additive blends, especially for the use in heavy trucks.

• High Cetane Performance : The comparative benefits of biodiesel and SuperCetane111 as cetane112 enhancers for all petroleum based diesels including synthetic crude and tar sands diesel fuels still needs to be field-proven under a variety of Canadian operating conditions.

• Effects of Competition : Many other products and technologies compete with biodiesel, so the fuel must meet or exceed the performance standards of available alternatives. The strongest challenges come from fuel additives and alternative fuels, e.g., compressed natural gas, liquefied natural gas, and propane, used in heavy trucks.

Industry observers feel these issues are manageable, and expect to have them resolved in the next few years ; several fleet operations throughout Canada have already recorded hundreds of thousands of kilometers using biodiese.


Stage of Investment

Biodiesel technologies are available across the innovation chain spectrum. While there are some commercially available biodiesel processes, a unique Canadian opportunity exists for those currently emerging from earlier stages, e.g. development and demonstration.

Economic Efficiency

Although the biodiesel market is beginning to advance, there is very little market data available in Canada on the precise construction costs associated with building biodiesel production facilities. However, there is sufficient information to approximate the unit capital cost per litre of production capacity. The following table summarizes available data to provide a simple average of capital costs per litre of production capacity.

Table 11 : Biodiesel Capital CostsPlant Production Capacity (ML*/yr) Capital Costs ($M CDN) Capital Cost/Litre

1.9 $1.33 $0.70

11.3 $4.75 $0.42

56.7 $13.50 $0.24

113.0 $21.00 $0.19

* ML = Million litres

Table 11 indicates that it costs approximately 20¢ /L to construct a biodiesel production facility. The industry target for biodiesel production in Canada is 750 ML/yr by the year 2015. This represents a capital investment of approximately $300 M CDN, in 2005 dollars113. To date, biodiesel has received a portion of the federal government’s commitment of $1B to encourage biofuel development ($11.9M of the $40M requested, spread over four years).

4.2.2.4 Liquid — Bioethanol

Bioethanol production is expected to grow rapidly in direct response to the federal government target of producing 2.8 BL/yr by 2010.

Stage of Investment

Starch-based bioethanol technologies are commercial. Cellulosic-based bioethanol is emerging in Canada, with a range of processes near-commercial and at the development and demonstration stage.

Economic Efficiency

While it is currently more expensive to produce ethanol than petroleum-based fuel, policies (such as a Renewable Fuels Standard) will enhance the economic attractiveness of ethanol production.

4.2.2.5 Gaseous — Biogas

There are two primary sources of biogas examined in this iteration of the STAR process ; biogas from manure and biogas from landfill sites (MSW). Both are based on the same biological process of anaerobic digestion (AD).


Biogas (AD) Potential

Opportunities in this area are in the promotion of technologies that augment the value of co-products from AD (such as fertilizer and reusable water), and aid in the reduction of odours, pathogens, and ground water contamination. The financial viability can be increased if costs are reduced through improved process controls and safety standards, e.g. simple, safe and inexpensive packaged systems.

AD systems could present a significant opportunity to treat mixed streams, such as mixtures of MSW, animal wastes, manure, wastewater, and sewage sludge. The use of slaughterhouse offal may also present a key development opportunity, as concerns over bovine spongiform encephalopathy (BSE) have led to a significant increase in the amount of animal carcass waste in Canada. However, this technology has yet to be verified to ensure that prions (viral proteins), are neutralized114. It is estimated that a minimum of 350 dairy cattle would be required to produce sufficient methane to successfully operate a cogeneration plant115. That equates to approximately 590 head of beef, 4,200 swine, or 57,000 poultry. Since most of the cattle in Canada are located in the western provinces and along the St. Lawrence River valley, it would appear that the opportunities for AD systems are greater in those regions; dairy is big in Ontario.

Biogas (MSW) Potential

Landfill gas naturally rises to the atmosphere; gas capture with flaring is done on many larger landfill sites. Flaring converts methane to CO2e. In a few cases the captured biogas is used to generate electricity. Purpose-built concentrated MSW anaerobic digesters can be used to increase the methane production rate, and produce a reliable supply of electricity.

Presently there is about 85 MW of electricity generated from the capture of biogas from large landfills in Canada. The majority of large operations currently have gas capture systems in place which leaves little opportunity for growth. However, there are a large number of smaller sites throughout Canada that could be developed using the AD technology. These could provide an estimated 85 MW of additional generating capacity, and ultimately result in reducing GHG emissions by 10 MtCO2e from current projections.

The methane portion of LFG must first be cleansed of impurities before it can be used in internal combustion engines or turbines for electricity generation. Technologies that address the cleaning of the gas will assist in the further development of smaller-scale LFG capture facilities.

There are some development possibilities in membrane technology, for application in liquefying the methane in LFG and using it as a liquefied natural gas in vehicles, and/or turning LFG into pipeline-quality natural gas.

Stage of Investment

There are several commercially available biogas options for landfills and farms. At the development and demonstration stage, technologies that are economic at smaller scales are emerging. Regulatory, technological, and financial efforts will be required to deploy these technologies to overcome market and economic barriers. Codes and regulations may have a significant impact in terms of driving the uptake of these technologies, e.g. Intensive Livestock Operation waste management criteria. Spin-offs are considered to be moderate, with the possible exception of dewatering technology which could have application throughout the entire biomass industry.

Economic Efficiency

Overall market size is expected to be moderate in terms of the combination of increased use of on-farm anaerobic digestion and capture and use of landfill gas. Potential market demand is expected to be moderate, however this may be an underestimate considering that waste and food production will only continue to grow in Canada. The potential replicability of technologies is excellent across Canada for both technologies, however, is likely to be limited primarily to the domestic market in the near term.


4.2.2.6 Gaseous— Biosyngas

There is no biosyngas production capability currently on stream in Canada, but industry participants indicate that Canada could produce about 29,000 Mm3/yr by the year 2015.

Stage of Investment

Biosyngas technologies are proposing to gasify sewage sludge at the pre-commercialization stage in Canada. There are a large number of players and industrial sectors that must be integrated. MSW management is a growing issue and is probably the most important market driver in this product/ process area.

Economic Efficiency

Feedstock handling technology improvements could impact forestry and agriculture industries. Gas cleaning could impact a number of other industrial processes through improved economics. Biosyngas will always be compared to, and in competition with, fossil fuel syngas. There is potential for modular and exportable technologies but they have not yet been commercially proven.

4.2.3 Market Plot Description

The foregoing information provides the input for the Market Plots, which are graphical representations of the outputs from the STAR process. The plots are generated by establishing values for the Economic Efficiency and Stage of Investment for each fuel being considered, and are plotted on the X-Y axes of the Market Plot . The Stage of Investment and Economic Efficiency values are based on SDTC selection criteria, and are on a 1~10 scale. The lifecycle GHG emission reductions are plotted for each fuel type by subtracting the total GHG emissions for each biofuel from the total GHG emissions for each of their respective fossil fuels. The fuels being compared in this report are :

Table 12 : Market Plot Fuel ComparisonsFuel Type Biofuel Selected Biofuel Feedstock Fossil Fuel Comparison

Solids Biocombustibles Wood Coal

Liquids Bio-oil Hogged Fuel #2 Fuel Oil

Biodiesel Animal Tallow Petrodiesel

Bioethanol Wheat and Corn Gasoline

Gases Biogas Manure Natural Gas

Biosyngas Municipal Solid Waste Natural Gas

There are many combinations of fuels or fuel feedstocks that could be compared, but for the purposes of this iteration of STAR, only the fuel types cited in Table 12 are examined.

4.2.4 Market Plot Summary

Although this report focuses primarily on the production of fuel, the net emissions from production, utilization, and sequestration are incorporated into the Market Plot in order to provide a complete life cycle profile for each fuel. Given that feedstock inputs, technology efficiencies and other variables can and will change over time, such values represent the best impact evaluations at this time. The focus of this report is on the economic improvement of the overall biofuels value chain, as well as identifying priority areas where the environmental performance can be improved during the production phase.


4.2.5 Combined Market Plot Data

Table 13 summarizes the market position and GHG emissions differences for each biofuel, relative to fossil fuels for the periods 2006 (existing) and 2015 (target).

Bio-oil Example

At current bio-oil production levels, Canada is creating 2,290 fewer tonnes of CO2e emissions compared to the equivalent amount of #2 fuel oil production (on an equivalent energy basis). If the production of bio-oil increases to the levels projected in the 2015 Vision Statement, then Canada will save 371,985 tCO2e compared to #2 fuel oil.

Table 13 : Biofuels Market Plot Data SummaryBiofuel Biomass Feedstock Fossil Fuel

EquivalentStage of Investment

Economic Efficiency

2006 GHG Emissions Difference (tCO2e/yr)

2015 GHG Emissions Difference(tCO2e/yr)

Change(tCO2e/yr)

Solid Biocombustibles Forest Slash Coal 3.33 3.61 1,003,643 3,070,415 534,588

Bio-oil Wood #2 Fuel Oil 5.83 7.50 2,290 371,985 369,695

Biodiesel Tallow Petro-Diesel 7.92 7.22 101,656 1,846,672 6,526127

Bioethanol Wheat Gasoline 7.08 5.00 746,484 3,441,417 2,694,933

Biogas Municipal Solid Waste Natural Gas 7.08 5.56 665,520 5,060,907 3,941,646

Biosyngas Municipal Solid Waste Natural Gas 7.08 6.39 19,233 1,289,827 1,270,594

Total Change 15,337,583

Table 13 indicates that Canada could reduce GHG emissions by approximately 15 MtCO2e/yr by 2015 if it adopts the biofuel production levels projected in this report. It should be noted that the GHG emission reductions are only for the fuels specified, from the single feedstocks indicated, at the production levels proposed by the industry in the Vision Statement (not currently by industry for other purposes) and at current emissions intensity levels. The total GHG emission reductions would be significantly higher if all reasonable forms of biomass feedstock were used.

4.2.5.1 List of Major Assumptions

The following lists the main assumptions used in the STAR process.

• General : The emission intensity from electricity generation is based on the 2002 Canadian weighted average of 0.219 tCO2e/MWh.

• Biocombustibles : The only feedstocks considered are mill residues and logging slash. The emissions from this feedstock are assumed to be zero. The emissions from cutting and stripping are assumed to be zero, because this would be done anyway, but values were assigned for further handling, ie. chipping, and forest floor material transport, which would not necessarily be done. The emissions from open pit coal production are based on an average Canadian transport distances to market and that electric drag lines consume 389 kWhe/tcoal during excavation. The analysis excludes the emissions caused by the production and transport of imported coal.

• Bio-oil : Only clean white roundwood feedstock was considered in this iteration of the STAR process, and is based on the flash pyrolysis process only. A conservative estimate of 3,500 bdt/yr of feedstock was used as the current rate of supply. This could change significantly as the new plants (currently under construction) come on line. The bio-oil production rate is based on 567 L bio-oil/bdt of feedstock. For simplicity, the analysis compares bio-oil to #2 fuel oil.


• Biodiesel : The only feedstock considered is animal tallow. It should be noted that some purpose-grown crops can also be used to produce biodiesel, however, the emissions equation would change considerably due the production and use of nitrogen-based fertilizers that are required to grow the crops. (Fertilizer production and use is already accounted for in the production of food crops, and the resultant residues). The petroleum diesel figures are based on annual sales and not annual production because there was insufficient reliable information to support the production figures.

• Bioethanol : The primary feedstocks for bioethanol production are assumed to be corn and wheat. In addition, it is assumed that : emissions for both gasoline and bioethanol remain similar to 2006 projections ; that bioethanol production efficiency does not change ; that bioethanol would be blended as E10 in both 2006 and 2015, as this would be the most likely scenario in the near future;, and, that bioethanol would experience a decrease in fuel economy of 1.5% as an E10 blend.

• Biogas : It is assumed that the sources of biogas are from MSW landfill gas collection only.

• Biosyngas : It is assumed that the sources of biosyngas are from MSW landfill gas collection only.

It is important to note that the circle sizes in Market Plot are relative. For example, bio-oil creates a 2,290 tCO2e savings in GHG emissions over #2 fuel oil, but solid biocombustibles create a 1,000,643 savings over coal. Consequently, bio-oil shows up a lot smaller than solid biocombustibles. The relative nature of the plots is important when considering future projections (see the 2015 Market Plot).

Figure 36 : Biofuels Combined 2006

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HIGH

HIGH

MEDIUM

MEDIUM

Notes:

Plots are for Lifecycle emissions (Production plus Utilization)

Biosyngas based on 2009 production expectations

Biocombustibles based on incremental technology impacts, over existing technology impacts, at approximatley 5%.

Bio-oil

Stage of SDTC Investment Cycle

Econ

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Effic

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Bioethanol (Wheat vs Gasoline)

Biogas (MSW vs Natural Gas)

Biodiesel (Tallow vs Petrodiesel)

Biocombustibles(Forest Slash vs Coal)

Biosyngas (MSW vs Natural Gas)

Bio-oil(Wood vs #2 Fuel Oil)

Figure 36 illustrates that solid biocombustibles currently dominate the GHG reductions, but the market attractiveness is the lowest of all the fuels examined (lower left-hand quadrant). This appears consistent with both the magnitude of the existing industry, and marginal market attractiveness from SDTC’s perspective.


By contrast, biodiesel plots very high on market attractiveness, but displays relatively small amounts of GHG reduction potential. This is likely due to the fact that biodiesel is poised for significant market growth (driven largely by federal government policy), and that many of the emerging technologies are nearing commercialization, but have not yet had an environmental impact. It also highlights the relatively low production levels of biodiesel (95 ML/yr) which in turn influences the size of the biodiesel plot circle.

Bio-oil plots quite high on market attractiveness, but many of the technological developments are still in the earlier stages (which causes it to plot lower in terms of Stage of Investment). Current production levels are very low so the GHG emission reduction potential is almost insignificant at this point.

Bioethanol derived from wheat shows only marginal Economic Efficiency but rates quite high in terms of Stage of Investment. What appears surprising is the relatively large GHG reduction potential, which is second only to solid biocombustibles. This could be attributed to the current levels of bioethanol production, relative to the other sources examined.

Biosyngas shows good market potential and is well situated for future growth. However, current production capacity is very limited.

Biogas from municipal solid waste sources shows surprisingly high GHG reduction potential, but is only slightly better than marginal in terms of Economic Efficiency. The high GHG reductions are largely due to the reduction in fugitive emissions from the transport of natural gas over large distances116. Since municipal solid waste operations are considered “point” sources, there are virtually no fugitive emissions from transportation (although there are some on-site fugitive emissions)

Once the projections from the industry Vision Statement are taken into account, quite a different picture emerges. Figure 37 represents the GHG reduction capacity for each biofuel by the target date of 2015. The market position factors (X and Y plots) have been held constant. This suggests that the market attractiveness does not change over time. In fact it will change significantly due to emerging policy changes, technological improvements (that we are currently not aware of) and –most importantly – the interaction or symbiosis of the technologies as they enter the market. For example, reducing feedstock costs and increasing range and availability for one fuel type will likely have spill-over effects for all biofuels. Because of the high levels of uncertainty over future market performance, the 2015 Market Plot has been held constant for Economic Efficiency and Stage of Investment, but allowed to vary for GHG reduction potential.


Figure 37 : Biofuels Combined 2015

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Econ

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Stage of SDTC Investment Cycle

Bioethanol:(Wheat vs Gasoline)

Biogas:LandfillGas Capture

Biodiesel:Tallow D100

Biocombustibles:Forest Slash

Biosyngas:MunicipalSolid Waste

Bio-oil:WoodPyrolysis

Figure 37 shows a dramatic change in GHG reduction capacity by 2015. There is strong shift towards biodiesel, which is consistent with recent federal government announcements. Bioethanol, which is also scheduled to increase in production, shows an absolute increase in GHG reductions over gasoline (see Table 13 : Biofuels Market Plot Data Summary), but a smaller increase relative to biodiesel. Solid biocombustibles appear to shrink, but it only creates fewer emissions relative to the other fuels being considered. Bio-oil and biosyngas increase significantly over the 2006 scenario, but are still relatively small compared to biodiesel, biogas, and bioethanol.

Taken collectively, there is a significant amount of GHG reductions projected for the 2015 period. However, the placement of investment capital will be influenced by the market attractiveness of each fuel at any point in time. As mentioned, this will vary significantly over time, so it will be necessary to update the Economic Efficiency and Stage of Investment data on a regular basis.


4.3 Technology Assessment

This section provides a detailed description of the technologies identified in the STAR process as having the highest economic and environmental rankings within their respective product/ process technology area.

4.3.1 Solid – Biocombustibles

Table 14 : Solid Biocombustibles Technology SummaryStated Need Technology Solution Area Economic

Impacts Ranking Environmental Impacts Ranking

Development of low-cost moisture control technologies to improve conversion efficiency. Moisture Control Improvements Low-Medium Low

Exploration and testing of alternative low-bulk, high-energy content feedstocks. Enhanced Feedstock Supply Low Medium

Development of technologies that increase on-site bulk density. Feedstock Densification Medium Low-Medium

The results point to a need to obtain higher quantity and quality of solid biomass feedstocks using drying and densification, refer to Table 14. In the longer term, bioengineering may also have a role to play in increasing energy density. There are no disruptive technologies in this product/process group.

Moisture Control Improvements

Moisture content is a limiting factor in combustion efficiency. Moisture control techniques are well developed but require further improvements to help reduce costs. The technical risks are expected to be moderate as are the technological dependencies. Improved drying techniques could be applied to other sectors of the economy. Drying techniques that are not based on fossil fuels can reduce GHGs.

Alternative Feedstock Supply

The use of a wider range of feedstock could reduce the overall costs of feedstock. Industrial generators of biomass residue, such as sawmills, currently use significant portions of their residue in boilers. Use of different harvesting, collection, and transportation systems can increase types and quantities of feedstock.

• Short-term technological approaches to feedstock supply could include improved gathering and use of existing sources of forestry residues. The technological requirements, barriers, risk and technological interdependencies are quite low, and could yield positive environmental results in the near term.

• Bioengineering or genetic modification to raise the energy density of the feedstock is very expensive and could take a long time to perfect.

Feedstock Densification

The on-site compression of forestry feedstock is old technology which could be improved now that fossil fuel prices make forest biomass use possible. A breakthrough in this area benefits many biomass conversion processes.


Figure 38 : Solid Biocombustibles Technology Plot

Economic Impacts

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Moisture ControlImprovements

FeedstockCompression

AlternativeFeedstock Supply

Figure 38 shows the top three technology areas for the biocombustibles product/process group. All three focus on feedstock supply or handling. Increasing the quality and quantity of feedstock will have an incremental impact on solid biofuels, but could possibly have a dramatic impact on the feedstocks for other biofuels. For example, compressing the feedstock into dense bundles (SBC : Feedstock Compression) helps to reduce transportation costs because fewer trucks are required to ship the same amount of stock.

All three technologies have relatively low environmental impact ratings, when applied to solid biocombustibles, and only one, Alternative Feedstock Supply, exhibits an attractive economic rating. This appears consistent with the fact that only emerging technologies within this established market have been considered, so the economic performance is expected to be fairly low.


4.3.2 Liquid — Bio-oil

Table 15 : Bio-oil Technology SummaryStated Need Technology Solution Area Economic


Development of technologies that support increased co-product value from pyrolysis plants Pyrolysis Co-Product Value Medium-High High -Medium

Accelerated use of a variety of feedstocks (e.g. MSW) at commercialized levels Demonstrations of Systems Operating on Broader Array of Feedstocks

Low Low

Development of technologies that reduce harvesting, transportation and pre-processing costs of bio feedstock

Improved Pre-Processing Low-Medium High

Development of scaled-down portable pyrolysis plants for remote domestic as well as export markets

Moveable Pyrolysis Plants Medium Medium-High

Advances in turbine blades, coatings, and related mechanical equipment to minimize wear and optimize turbine performance

Improved Turbine Performance High -Medium Medium

Improvements in Bio-oil chemistry that minimizes wear and maximizes stability and thermo-chemical properties of Bio-oil in power turbines

Improved Oil Performance High Low-Medium

The six technology solutions, ranked under the STAR process, having strong investment potentional are:

Pyrolysis Co-product Value

There are over 200 chemical products created through the pyrolysis process some of which could be used in other industrial applications. However, the full financial value is difficult to quantify when financing new pyrolysis plants. Demonstrating the technical and financial efficiency of these co-products could influence the viability of this approach. The type, quantity and quality of the co-products are all a function of the production process used, so attention should be given to optimizing these technologies.

Demonstrations of Systems Operating on Broader Array of Feedstocks

There are significant quantities of feedstock available in Canada for use in the creation of bio-oil, including municipal solid waste, forest product residue (forest slash, pulp waste, sawmill waste) and agricultural residue (crop residue, spoiled crops). Many of these have been successfully tested as bio-oil feedstock, but only clean white wood has been used in the demonstration plants. Large scale bio-oil processing technologies that accept a wide range of biomass feedstock could decrease feedstock costs, increase economies of scale (through larger plants using a broader range of feedstock), and support waste management efforts in other sectors, making this a highly leveraged investment area.

Improved Pre-processing

The costs of collection, transportation and pre-processing of bio feedstock are high. This is due to the bulkiness of the feedstock and the relatively low energy density. Feedstock must be compressed to reduce the transportation costs.

Moveable Pyrolysis Plants

Current technologies are based on permanent and centralized installations. There is a need to demonstrate even smaller, moveable and transportable pyrolysis units for use in remote communities and forestry and agriculture applications, where the feedstock transportation costs are high. Scaling down pyrolysis plants and developing the enabling technologies to support the manufacture of modular and compartmentalized components could have a significant impact on this segment of the industry. These units could help drive strong export markets for the new pyrolytic processes in industrialized countries, as well as in developing countries where biomass heat and energy are fundamental to culture and economy.


Improved Turbine Performance

Some modern power generation turbines can use bio-oil as a fuel source, but long-term performance must be demonstrated if bio-oil is to be widely used. Hardened engines and advances in turbine blade design and composition, enhanced blade protective coatings, and fuel pre-treatment and filtering systems will all improve turbine performance, and minimize component failure. Testing these components on a range of heterogeneous feedstocks is an important step.

Improved Oil Performance

Advances in controlling refining processes to produce valuable mixes of bio-oil chemical will improve products, applicability and utility in downstream uses.. Significant global markets exist for bio fuels optimized to run large reciprocating engines and turbines.

Figure 39 : Bio-oil Technology Plot

Economic Impacts

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Demonstrationsof Systems Operating on Broader Array of Feedstocks

ImprovedPre-Processing

Improved OilPerformance

MoveablePyrolysisPlants

PyrolysisCo-ProductValue

ImprovedPerformanceTurbine

The bio-oil plot highlights two possible disruptive technologies117 ; Feedstock Expansion and Pyrolysis Co-Product Value. Of the two, the feedstock expansion shows

the highest Environment and Economy rating. This suggests that any technology that significantly enables or drives a wider range of usable feedstocks will be well

positioned technologically, and will likely enter the market with greater ease. Pyrolysis co-product value, while critical to the future financial success of the pyrolysis

process, is only marginal in terms of Environment and Economy ratings. The Environment rating is predictably low because co-product value is largely an economic

issue, and would not have a significant impact on the environment. The low Economy rating is a result of the complex and still unproven financial performance of the

downstream technologies that are required to generate the co-product value. For example, it may be cost-effective to produce bio-oil for use in the paint industry, but if

the existing paint production technology cannot easily integrate bio-oil as a primary feedstock, then there is no creation of value.


4.3.3 Liquid — Biodiesel

Table 16 : Biodiesel Technology SummaryStated Need Technology Solution Area Economic


A means of overcoming the limitations of the cold flow characteristics of Biodiesel. Improved Cold Flow Performance Low Low-Medium

Accelerated development in the commercial use of an expanded range of feedstock. Feedstock Expansion Low-Medium Low

A means of increasing the amount of usable feedstock from existing oilseed species to express higher levels of oils.

Oilseed Species Development Medium-High Medium-High

Investigate addressing oxidative stability characteristics of Biodiesel. Improved Oxidative Stability Medium Medium

The four technology solutions, ranked under the STAR process, having strong investment potentional are:

Improved Cold Flow Performance

The cloud point and pour point of biodiesel is slightly higher than petroleum-based diesel depending on the feedstock and process. Technologies and methods to manage this issue in the cold Canadian climate require further development.

Feedstock Expansion

Using a broader range of available feedstock for biodiesel could have a profound impact on the transportation sector, as increased amounts of petrodiesel could be displaced. Currently, food processing oils, animals fats, and soybean and canola oilseeds are used to produce biodiesel. Testing is underway to use a broader range of feedstock including tall oil, algae, flax, and mustards.

Oilseed Species Development

Continued development and demonstration of new, high oil content oilseed species could improve the economic attractiveness of agricultural-based feedstock.

Improved Oxidative Stability

Biodiesel will oxidize if left in storage for significant periods of time. Stabilizers are being developed and need further improvement. The main technical barrier is developing the chemical composition of an appropriate stabilizer.


Figure 40 : Biodiesel Technology Plot

Economic Impacts

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Improved Cold Flow Performance

ImprovedOxidative Stability

Oilseed SpeciesDevelopment

FeedstockExpansion

There are four technology areas in the biodiesel product/process group, including one with disruptive potential, Improved Cold Flow Performance, and one with high overall Environment and Economy ratings, Feedstock Expansion.

There has been an ongoing debate within the industry over the cold flow performance of biodiesel. Many observers feel that the problems have been solved, or at least minimized. If all the outstanding real and perceived issues could be adequately addressed through enhanced fuel performance technologies, then those enabling technologies would be well situated both in terms of Environment and Economy ratings.

Feedstock expansion is another area where significant gains can be made (see discussion on Solid Biocombustibles).


4.3.4 Liquid — Bioethanol

Table 17 : Bioethanol Technology SummaryStated Need Technology Solution Area Economic


Separation of lignin wood constituents (lignin, hemi-cellulose, cellulose) without damage (e. g. solvent extraction)

Improved Lignocellulosics Pretreatment High-Medium Medium

Enzymatic productivity. Improving speed and efficacy of enzymes in processes. Improved Enzyme Productivity Medium-High Low-Medium

Improve the productivity of Bioethanol processing Improved Bioethanol Processing Efficiency Medium Medium-High

New co-product development which will serve to improve the economic efficiency of all forms of bioethanol production are required.

Co-product Development High High

Improved enzymes for the hydrolysis, saccharification & fermentation of starches Improved Enzymes for Hydrolysis, Saccharification & Fermentation

Low-Medium High-Medium

In the technology solution’s area for bioethanol, five are identified with having strong investment potential : two deal with Feedstock Supply, one with Handling and Pre-Processing, and two with Conversion and Refining. The two that show the strongest potential within this group are the development of xylose co-products, and improved pre-processing of lignocellulosic material.

The five technology solutions, ranked under the STAR process, having strong investment potentional are:

Improved Lignocellulosic Pretreatment

Lignocellulosic material (a combination of lignin and cellulose that strengthens woody plant cells) forms the biochemical foundation of many biomass feedstocks. In order to be made useful in the production of biofuel, the lignin must be removed. Pretreatment technologies are currently at the R&D stage, which increases technological risk.

Improved Enzyme Productivity

The means to optimize the speed and efficacy of enzymes for biofuel processing is still in the R&D stage. One of the main challenges to productivity improvements is the issue surrounding the development and use of genetically engineered organisms to produce better enzymes. A great deal of effort is still required to achieve a breakthrough in this area.

Improved Bioethanol Processing Efficiency

Maximizing the processing efficiency in the creation of starch-based ethanol has been moderately successful in the past (e.g. gravity fermentation). New technologies are emerging (e.g. wet corn processing mills), but further improvements are still required.

Co-Product Development

The economic value of creating co-products from biofuel production (e.g. fermentation of Xylose to make other products) is critical to the future success of this sub-sector. However, this area has not been fully developed, partially because of the challenges with identifying the organisms that can make such products in a cost-effective way.

Improved Enzymes for Hydrolysis, Saccharification and Fermentation

The challenges of increasing the range and availability of productive enzymes to aid in hydrolysis, starch saccharification (the process of breaking down complex starch into simple carbohydrates) and fermentation processes are similar to those in cellulosic development. The primary issue is the genetic engineering of appropriate organisms.


Figure 41 : Bioethanol Technology Plot

Economic Impacts

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ImprovedLignocellulosicsPretreatment

OptimizedEnzymeProductivity

Improved Ethanol ProcessingEfficiency

XyloseDevelopment

Improved enzymes for Hydrolysis, Saccharification& Fermentation


4.3.5 Gaseous — Biogas

Table 18 : Biogas Technology SummaryStated Need Technology Solution Area Economic


Development of technologies that support the cost-effective and reliable production of co-products.

Co-Product Tech Improvements Medium Low-Medium

An increase in cleaning and quantity of gas recovered from MSW operations. Improved Gas Cleaning & Recovery Low Medium-High

Technologies that enable the use of heterogeneous feedstocks, thereby providing long-term feedstock supply diversity.

Heterogeneous Feedstock Supply Low-Medium Low

Development of small, low-maintenance and inexpensive on-farm AD systems that can contribute to farmers revenues without causing unmanageable operational burdens.

Improved On-Farm AD Systems Medium-High High-Medium

Technologies that improve the economy of scale for small/medium decentralized AD and MSW systems.

Improved Efficiency at Small Scales High-Medium Medium

There are five technology areas in the biogas products/process group, focusing primarily on improved feedstock supply, greater conversion efficiencies, and downstream co-product value. The greatest challenges are in developing cost-effective technologies that will support larger economies of scale, and create greater market value for the end product through a wider range of market-driven applications.

Co-Product Technology Improvements

Biogas is mostly methane—the simplest use of which is combustion. Chemical conversion of methane enables many other products. The technologies that support and enable the full market realization of co-products derived from biogas operations are expected to be a major driving force in the successful adoption of this technology.

Improved Gas Cleaning and Recovery

The quality and quantity and productive use of gas recovered from landfill operations needs to be increased to improve the financial viability of small- and medium-sized landfill gas (LFG) projects. In 2002, there were 44 landfills in Canada that captured landfill gas. However, only 17 of these locations put the landfill gas to productive use by converting it to energy. LFG-to-energy systems tend to be installed at large sites where capture and conversion inefficiencies can be dealt with economically. For example, the removal of contaminants (such as Siloxane) is a critical issue that impact system performance. These removal systems are designed for large installations and hence are too costly for smaller installations. Other problems include moisture in the gas and chemical impurities in the gas (which could lead to localized environmental impacts once the gas is combusted). Technologies

that increase the efficiency and decrease costs of gas cleaning could improve financial performance.

Heterogeneous Feedstock Supply

Private investors are likely to view biogas as a high risk venture until feedstock supply diversity can be assured. Demonstrations of anaerobic digester clusters which operate on many types of feedstock are required. .

Improved On-farm AD Systems

Biogas from waste products such as manure is generally produced at centralized operations because of operations and maintenance requirements. This presents a challenge for smaller, owner-operated systems. On-farm AD systems in livestock operations were tried in the 1970’s, but failed because farmers found them too complex and, when energy prices dropped, too expensive to operate. Newer, turnkey systems suitable to the Canadian market are being developed and are currently at the demonstration stage.


Improved Efficiency at Small Scales

Small, decentralized LFG and AD operations lack the economy of scale in the low size range to make them cost-competitive. European technologies are available, but have had limited uptake in Canada. Use of the digestate as fertilizer, avoidance of tipping/spreading fees, and avoidance of groundwater contamination help make small-scale anaerobic digestion viable.

Figure 42 : Biogas Technology Plot

Economic Impacts

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ImprovedEconomyof Scale

ImprovedOn-FarmAD Systems

HeterogeneousFeedstockSupply

ImprovedGas Cleaning & Recovery

Co-ProductTechImprovements


4.3.6 Gaseous — Biosyngas

Table 19 : Biosyngas Technology SummaryStated Need Technology Solution Area Economic


Technologies that reduce the costs and increase the performance efficiency of removing contaminants from the product gas.

Improved Gas Cleaning Low Medium-High

Use of a wider range of heterogeneous sources of solid waste Use of Expanded Range of Feedstock Low-Medium Low

A means of reducing the moisture content in primary feedstock in an energy- and cost-efficient manner

Improved Moisture Control Medium Medium

Optimization of existing gasification conversion processes, to increase output and/or reduce plant capital costs

Gasification Process Improvements High-Medium High-Medium

Improvements in the energy balance for plasma gasifiers to reduce operating costs and minimize lifecycle emissions

Low Cost Plasma Options Medium-High Low-Medium

Market penetration for biosyngas in the near term will depend on improvements in the technologies, including the implementation of reliable and cost-effective methods for removing tars and other contaminants from the product gas. Table 19 summarizes needs and technical solutions that are described in this section and as shown in Figure 43.

The five technology solutions, ranked under the STAR process, having strong investment potentional are:

Improved Gas Cleaning

Syngas from gasification contains mostly CO and H2, along with several other gases. Heterogeneous wastes (such as MSW, ICI, and C&D wastes) can contaminate syngas with pollutants (including heavy metals and toxics) which need to be removed by chemical processes, scrubbing, or separation. For some uses or chemical conversion, the syngas must be very clean. More evidence of reliable, cost-effective technologies for gas cleanup is required.

Use of Expanded Range of Feedstock (see Biogas)

The potential for the use of the organic component of municipal solid waste is expected to grow substantially in Canada in the next few years, especially in medium-large urban centers, where waste disposal is becoming a critical issue. The existing heterogeneous feedstock needs to be economically sorted and separated for use in emerging anaerobic digestion and biosyngas conversion processes.

Improved Moisture Control

Controlling the moisture content of biomass feedstock remains a technical and financial challenge. Improved drying and pre-treating technologies are expected to have a significant impact on this sector.

Gasification Process Improvements

Conversion efficiency improvements and development of processes which enable higher value co-products are still required to achieve financial viability.

Low Cost Plasma Options

Plasma technology is expected to have significant potential for the future, with world-wide applications. Concerns over high capital costs and energy balance are affecting market acceptance. Advances on total plant energy balance are required.


Figure 43 : Biosyngas Technology Plot

Economic Impacts

LOW

HIGH

HIGH

MEDIUM

MEDIUM

Envi

ronm

enta

l Im

pact

s

GasificationProcessImprovements

Low Cost OptionsPlasma

ImprovedMoistureControl

ExpandedRange of Feedstock

ImprovedGasCleaning


4.4 Combined Technology Summary

The following table lists the high priority technologies in descending order of total score. The ranking contrasts the TECH Rank (determined by the STAR process) and the NEED Rank (as identified by the stakeholders and summarized in the Needs Assessment).

Table 20 : Combined Biofuel Technology SummaryPriority Fuel High Priority Technologies

High Bio-oil Demonstrations of Systems Operating on Broader Array of Feedstock

High Biogas Improved Gas Cleaning & Recovery

High Biocombustibles Alternative Feedstock Supply

High Biodiesel Feedstock Expansion

High Biosyngas Improved Gas Cleaning

High Biosyngas Use of Expanded Range of Feedstock

High Bioethanol Improved Enzymes for Hydrolysis, Saccharification & Fermentation

High Bioethanol Co-Product Development

High Bioethanol Improved Bioethanol Processing Efficiency

High Bioethanol Improved Enzyme Productivity

High Bioethanol Improved Lignocellulosics Pretreatment

High Biogas Co-Product Tech Improvements

High Bio-oil Moveable Pyrolysis Plants

High Bio-oil Pyrolysis Co-Product Value

High Bio-oil Improved Oil Performance

High Biodiesel Improved Oxidative Stability

High Biosyngas Improved Moisture Control

High Biosyngas Low Cost Plasma Options

High Biosyngas Gasification Process Improvements

High Biocombustibles Moisture Control Improvements

Medium Bio-oil Improved Turbine Performance

Medium Biodiesel Improved Cold Flow Performance

Medium Biogas Heterogeneous Feedstock Supply

Medium Biogas Improved Efficiency at Small Scales

Medium Bio-oil Improved Pre-Processing

Medium Biocombustibles Feedstock Compression

Medium Biodiesel Oilseed Species Development

Medium Biogas Improved On-Farm AD Systems

Several stakeholders indicated that feedstock costs currently represent about 50-75% of the cost of doing business, and that ways must be found to reduce these costs if they are to become competitive. The analysis shows that a key way to lower overall feedstock acquisition cost is to target the drying process used to pretreat solid bio feedstock prior to refining and conversion.


4.5 Statements Of Interest Responses

Statements of Interest (“SOI’s”) are received by SDTC as part of the funding agreement process. Proponents identify the nature of the technology that they are proposing and provide a business rationale for funding support. Only projects that meet the technology development and financial integrity criteria are considered, so the information provided in the SOI’s is considered timely and relevant. Taken together, these applications provide a unique and accurate snapshot of the state of late-stage sustainable technology developments in Canada. This information is used in the SD Business Case to provide a unique perspective on the industry and assess the degree of consistency between current technological developments and SDTC’s delivery mandate.

The SOI’s for the biofuels area received by SDTC between 2002 and 2005 were reviewed as part of the analysis. Applicant information regarding the type of technology proposed, GHG reduction potential, total project costs, request for SDTC funding, and year of submission were documented for assessment. When appropriate, SOI’s were categorized by biofuel investment priorities identified in the 2006 SD Business Case (“SD investment priorities”).

Approximately 30% of all the SOI’s received by SDTC are in the biofuels sector. Of that, 204 SOI applications were reviewed for assessment, of which 161 (79%), were classified within the above categories (solid biocombustibles, biogas, biosyngas, bio-oil, biodiesel, and bioethanol)118. The remaining 43 applications focused on other areas of interest in the biofuel area.

The general breakdown of SOI biofuel applications is shown in Table 21.

Table 21 : Biofuel SOI SummaryFuel Type Number of Applications Percentage

Biocombustibles 17 10.6

Biodiesel 12 7.4

Bio-oil 8 4.9

Bioethanol 23 14.4

Biogas 49 30.4

Biosyngas 52 32.3

Total 161 100.0

* NOTE : some applications in this count may have been submitted in multiple rounds


5 Investment PrioritiesThe following is a summary of the general findings resulting from the categorization of SOI’s by the biofuel investment priorities identified in the 2006 SD Business Case.

5.1 Solid Biofuels

5.1.1 Biocombustibles

The solid biomass area had SOI’s addressing all of the investment priorities identified ; however exact synergies between applications, investment priorities, and actual developments are not evident. For example, feedstock compression has been identified as a priority area and efforts are ongoing in pellet manufacturing (particularly in Western Canada), but applications focused primarily on process efficiencies within the production plants, instead of discrete technologies for producing compressed feedstocks. Of the investment priorities identified, moisture control improvement has been the most subscribed. Proponents have so far demonstrated a good understanding of, and a response to, this need. Although applicant volume has declined in recent years, the solid biofuels area can be considered to be developing appropriately.

5.2 Liquid Biofuels

5.2.1 Bio-oil

Bio-oil was the least subscribed of all areas identified despite having among the highest number of investment priorities identified, along with bioethanol However, with few exceptions (improved oil performance, co-product value), each bio-oil investment priority matched SOI’s. SOI’s have been submitted in various areas, from the production chain, to feedstock expansion, to technology operation, to end-use performance. The appearance of SOI’s throughout the majority of the innovation chain suggests that the bio-oil industry segment, although small, is developing quickly and is in alignment with the SDTC investment priorities. From a strategic perspective, this is important, and can be critical, as SDTC will be able to leverage the growth potential throughout the entire Renewable Fuel sub-sector.

5.2.2 Biodiesel

Biodiesel has not been well-subscribed, and although some SOI’s examined upstream technology priorities, e.g. oilseed species, and feedstock expansion, these needs were addressed primarily on a one-off, small-scale basis. No applications were provided that would satisfy these requirements more broadly. Further, no applications have addressed downstream considerations such as cold flow and oxidative stability, which are critical enabling parameters to the large-scale developments. Applicants so far have tended to focus on known methods of production. This suggests a need to examine the length of the biodiesel innovation chain in Canada to ensure gaps are being addressed by funds focusing on both early stage R&D and later stage D&D. This is particularly important given biodiesel may offer highly leveraged GHG and CAC benefits, and the fact that this fuel is already in use in many Canadian municipalities.

5.2.3 Bioethanol

The bioethanol area had SOI’s relating to all investment priorities identified (with the exception of R&D in xylose development). However, SOI’s were not specifically well-aligned with the intent of the investment priorities. For example, improved harvest techniques in the SOI’s focused more on removing bran from wheat than on actual on-farm harvesting techniques. In addition, SOI’s relating to pre-treatment were based primarily on chemical advancements (e.g. fractionation) and not mechanical separation techniques. This suggests a need for better integration between bioethanol technology developers and the economic sectors that will be involved in the infrastructure for feedstock (and fuel) delivery. SOI’s were most aligned to priorities identified for enzyme productivity and for processing efficiency. This latter area was well subscribed and had a suite of applications relating to process advancements in fractionation and cold bioethanol, as well as membrane development and optimization. These technologies hold promise in terms of

reducing the overall capital and operating costs of bioethanol production plants.


5.3 Gaseous Biofuels

5.3.1 Biogas

The biogas area had a significant number of SOI’s that aligned very well to respective investment priorities (90% of the applications in this area). Biogas proponents appear to have among the most progressive submissions of all investment priorities when it comes to technology descriptions and consortia development. All technology priorities have been well-subscribed and, in general, applications illustrate strong industry knowledge, especially in terms of capitalizing on the multiple benefits of biofuels. In particular, expertise appears to be building in the AD area, notably in livestock manure management. SOI proponents have stated that this is partially due to the need for alternative treatment for farm and livestock management wastes resulting from the environmental and social problems surrounding the Walkerton tragedy, Bovine spongiform encephalopathy (BSE) concerns, and other related issues. This validates stakeholder comments at earlier SDTC Stakeholder Sessions on biofuels/bioelectricity.

5.3.2 Biosyngas

Approximately 70% of SOI’s received in biosyngas address the investment priorities identified for this area. The majority of SOI’s focused on the gasification of a variety of MSW sources, e.g. biomedical waste, tire refuse, CR&D, etc. Remaining applications (non-investment priorities) have focused primarily on the gasification of forestry residues and black liquor. Although biosyngas has the greatest number SOI’s submitted of all areas reviewed, applications have generally only aligned intermittently with the identified investment priorities. SOI’s have been prolific in some technology areas, i.e. MSW, and process improvements, but other areas, e.g. improved moisture control, gas cleaning, and low cost plasma options, have little or no applications. Applicants claim they are finding the biosyngas area of considerable interest, but this suggests that focus is not being placed on important cross-cutting technology priorities, such as moisture control, and gas cleaning, where advancements would leverage the biosyngas product/ process area as a whole.

The SOI applications indicate that there is a relatively strong correlation between recent technological developments and SDTC sustainability objectives. It also suggest that there are a number of important technologies in Canada that are ready, or near ready, to enter the market. The following assessments take this information into account to help determine the sustainability fit in this technology area.

5.4 Sustainability Assessment

There are three main areas that make up the Sustainability Assessment : Economic Impacts, Environmental Impacts, and Societal Impacts. The long term success of the biofuels industry is ultimately dependent upon how well the sustainability issues are identified and managed.

Some issues apply to the Renewable Fuel Sub-sector as a whole, while others are unique to specific fuel types. The following assessment first considers the overall issues, and then provides environmental, economic and societal assessments for each type of fuel.

5.4.1 Common Environmental Issues

The intensification of agriculture comes at the cost of potential damage and/or irreversible changes to the environment. Deforestation, overgrazing, and the effects of pesticide use could all contribute to negative environmental and human health impacts if improperly managed. These conditions already exist to some degree, but could be made worse without an integrated and sustainable environmental development plan. There are a number of environmental concerns that are common to the biomass industry.

5.4.1.1 Land Impacts

On a global basis, usable agricultural land is becoming increasingly scarce. Canada has an abundance of land, but not all of it is fully productive, and former land management practices may have resulted in the inefficient use of what is available. On the other hand, growing switchgrass or similar crops on marginal land could bring further value to this land and to the economy through the use of such feedstock in biorefineries.


5.4.1.2 Water Impacts

• Water Availability : Usable water is becoming increasing scarce worldwide. This has prompted the more efficient use of agricultural water and the development of drought-resistant crops. While the use of irrigation and processing water will eventually affect the global biomass market, it is considered less of a concern in Canada, which has approximately 10% of the world’s available fresh water.

• Water Contamination : Water quality (and associated health impacts) is a large and growing concern in Canada, especially in rural areas. Of particular concern is the contamination of well water from animal operations near rural centers. Runoff from livestock operations can have a detrimental impact on local water quality and lead to considerable health problems.

• Pesticide & Fertilizer Use : The use of pesticides and fertilizers continues to be an issue regarding runoff and water contamination. It will likely become an increasingly important and politically sensitive area as the biomass industry continues to grow, particularly if the industry expands its use of energy crops.

• Erosion Due to Run-Off : Undesired or potentially harmful water run-off and soil erosion causes silting, and can result in oxygen deprivation in lake bottoms and stream beds. The practice of clearcutting, lack of replanting, and excessive tillage can all effect erosion.

5.4.1.3 Air Impacts

• GHG Reduction Potential : Without accounting for sequestration, the biomass production process is considered to be a small but positive net emitter of CO2. GHG’s are released during harvesting, transportation, and feed preparation operations (such as moisture reduction, size reduction, and removal of impurities). However, those emissions are not the result of combustion of biomass but from fuel consumption (mostly petroleum and natural gas) for the related processing machinery. The main factor that determines the magnitude of GHGs displaced by bio-based operations is the amount of emissions from the use of conventional materials handling and processing machinery. It should be noted that as biofuels become a larger part of traditional fuel supply, emission intensities from all economic sectors – including biofuels production – will likely decrease. Once the biofuels are utilized (combusted) they offer no further GHG’s to the atmosphere as they are considered GHG-neutral.

• CAC Reduction Potential : A similar argument applies to criteria air contaminates, where the effects are most evident during combustion and utilization. Biofuels release very few CAC’s to the atmosphere and can help reduce overall CAC emissions either through stand-alone combustion applications or as a fuel additive for existing fossil fuels.


5.4.2 Specific Environmental Sustainability

Table 22 : Biofuel Environmental Sustainability ImpactsFuel Land Impacts Water Impacts Air Impacts


There is a remote possibility that increasing the use of forest slash as feedstock for combustibles could become an economic driver and encourage the practice of creating slash. This could have a negative impact on the land. (although the wood is likely to have more value than the slash).

It is unlikely that increased biocombustible use would have a negative impact on water, as the water is supplied naturally as rain.

Emissions of ash and other particulate matter can be a concern (most operations have reduced their emissions).

Bio-oil The pyrolysis process uses wood waste that would otherwise be landfilled, burned, or decomposed. The sustainable management of procuring wood residue for feedstock needs to be addressed.

Only about 50% of the nitrogen in fertilizers is taken up in plant growth. The rest is washed or blown away, causing excessive algae growth in lakes and rivers.

Bio-oil is CO2-neutral and has the realizable potential to displace 0.1 MtCO2e annually.

Biodiesel Crops used in the production of Biodiesel could be used for other food-based purposes. The large land areas required to grow these crops could be significant

Properly managed MSW and AD operations can reduce the amount of effluent that enters local water systems

While the production of Biodiesel may not result in a net decrease in emissions, the increased use of the fuel in transportation could have a positive effect on air quality.

Bioethanol Crops used in the production of wheat and other crops could be used for other food-based purposes. The large land areas required to grow these crops could be significant

Very little negative impact expected because the water is supplied naturally as rain.

While the production of bioethanol may not result in a net decrease in emissions, the increased use of the fuel in transportation could have a positive effect on air quality.

Biogas Biogas from farms treats manure. The treatment of pathogens and production of solid nutrient and re-usable water are major issues. The simultaneous production of high quality fertilizer as a byproduct is of value; however contamination by toxic compounds such as heavy metals must be avoided. Large livestock operations tend to have higher concentrations of animals on a given land area, putting greater stress on the environment in general - any management option that mitigates this footprint is desirable.

Properly managed MSW and AD operations can reduce the amount of effluent that enters local water systems

The current GHG offset for biogas from farm and from landfill is 0.1 MtCO2e each, annually. The realizable potential for offsets by 2010 is 0.3 MtCO2e annually for farm and 0.2 MtCO2e annually from landfill.

Biosyngas The use of landfills as the primary feedstock for biosyngas operations will not change the area of land required, but will increase the usefulness of the land.

Extracting unwanted or hazardous chemicals from the landfill will help sustain local water quality.

Reduced emissions from landfill operations.

5.4.3 Common Economic Issues

One disadvantage of biomass is that it is often dispersed and that local concentrations may not be sufficient to allow for the construction of large-scale plants and the resulting economies of scale. The same applies to the long-term availability of a biomass supply, as large plants will require long-term contracts for biomass feedstocks, which may take years to negotiate and secure.


5.4.4 Specific Economic Sustainability

Table 23 : Biofuel Economic Sustainability ImpactsFuel Capital Cost Impacts Job Creation Impacts Productivity Impacts


Capital cost increases are only expected if major improvements are required in the combustion process.

This is currently the largest biomass product group in Canada, which employs approximately 22 people/$1 M invested [109].*

Overall productivity is not expected to change significantly through the broader use of this technology area.

Bio-oil Long term financing is required. Provides a positive contribution to employment and skills development, particularly in rural areas where wood waste exists (pulp and paper mills, etc.).

The current estimated economic contribution of Bio-oil is $7M, with realizable potential of $80M by 2010, and $5B globally by 2010. Potential export markets for the technology exist in developing countries where biomass based heat and power is required.

Biodiesel The current federal government targets will result in the need for large amounts of capital investment in this product group.

Provides a positive contribution to employment and skills development, particularly in rural areas where various forms of waste exists.

While the production of Biodiesel itself may not result in a great improvement in productivity, the use of it as a more environmentally desirable fuel will reduce health costs and increase overall productivity.

Bioethanol The current federal government targets will result in the need for large amounts of capital investment in this product group.

Provides a positive contribution to employment and skills development.


Biogas There is limited information on the economic impacts of biogas , however the economics of on-farm AD systems are marginal, and the payback period lengthy as they are dependent on electricity prices.

MSW capture is presently estimated to account for 500 jobs in Canada and could potentially provide a total of 800 jobs by 2010 with the development of technologies for smaller sites. Biogas from AD is estimated to account for 60 jobs in and has the potential to provide a total of 200 jobs by 2010.

The estimated economic contribution of biogas from landfill at present day is $128M. The total realizable potential of electricity generation from landfill biogas is $200M by 2010. The estimated economic contribution of biogas from landfill at present day is $80M. The total realizable potential of electricity generation from farm biogas is $320M by 2010.

Biosyngas Since the technology is still in the early stages of commercialization, a significant amount of capital investment will be required to get it started.

Provides a positive contribution to employment and skills development.


* Socioeconomic Benefits of Bioenergy. by Doug Bradley. CanBio-FPAC conference presentation. Page 8. September 14, 2004. Vancouver, Canada

5.4.5 Common Societal Issues

The existing levels of understanding of the bio production process and the lack of trained operating personnel make this a challenge and opportunity for the post secondary education system. In addition, local public opposition is expected to occur (as with any facility of significant size) and the challenge is expected to be to install facilities that are as environmentally benign as possible and to educate and inform local residents about the true operational characteristics of these new plants. This could be a challenge in light of the negative public perceptions that still remain over old bio-based technologies. Such issues can best be minimized through local community involvement and education.


5.4.6 Specific Societal Sustainability

Table 24 : Biofuel Societal Sustainability ImpactsFuel Health & Safety Impacts Training & Education Impacts Aesthetics & Property Value Impacts


The primary health and safety issues are expected to be similar to that of any large project.

The existing levels of understanding of the bio production process and the lack of trained operating personnel make this a challenge and opportunity for the post secondary education system.

As with any large infrastructure project, local public opposition is expected to occur. This can be minimized through local community involvement and education.

Bio-oil

Biodiesel

Bioethanol

Biogas Biogas has no known negative public impacts. Anaerobic digestion of manure, in addition to producing methane for heat/power, minimizes odour, destroys pathogens, and protects ground water quality. MSW capture reduces public exposure to VOC production from open landfills

Biosyngas The primary health and safety issues are expected to be similar to that of any large project.

Copyright © 2006 by SDTC™ Sustainable Development Business Case �0�

5.5 Risk AssessmentPossible risk factors that could hinder the development and commercialization of the reviewed biofuel technologies are as summarized in Table 25 :

Table 25 : Risk SummaryMarket Risk Financial Risk Developmental Risk

Overall Lack of federal government support for market-based initiatives, including production tax incentives, flow-through expenses, and federal government procurement standards limit market attractiveness.

The international markets for co-products are already at capacity or could be quickly saturated (i.e. glycerin from Biodiesel).

The low energy density for biomass limits it as a significant alternative to traditional fuel. Possible negative public perception of using biomass

feedstock (e.g. use of the technologies may be seen as a threat to natural ecosystems).

The complexity in trying to quantify the value chain for biofuel processes may preclude making a simple business case for development.


The public perceptions of any form of combustion or incineration could impede further growth in this market.

The financial risks are expected to be fairly low, as the market is already well established.

Developmental risks are low because the technologies are well established

Bio-oil The creation of toxins and other contaminants in the pyrolysis process could limit the acceptability of bio-oil.

Lack of feedstock purchase agreements and longer-term planning strategies tend to keep costs high.

The technology is not able to be deployed successfully on a larger scale. Intellectual property rights are currently held by only a few companies.

Biodiesel The market is fairly well conditioned to the potential use of Biodiesel, but performance issues remain.

Long term reliable supply of high quality feedstock will dictate the degree to which financial institutions will take on investment risks in this area.

The current level of fuel performance, if left unresolved, will dampen market interest in Biodiesel as a mainstream fuel source.

Bioethanol The rapid increase in production could cause a temporary distortion in the biofuels market, which could have unforeseen consequences.

The risk is likely to be fairly low because of the driving support of government directives

There may be technical challenges with ramping the production capability up so high in such a short period of time.

Biogas Regulations that would drive the uptake of AD for Intensive Livestock Operations (i.e. nutrient and water management guidelines) and/or the management of methane emissions from small landfills do not emerge.

Low tipping fees and low land values continue to prevent investigation of and investment in alternative landfill management techniques

Anaerobic systems may work well in Europe (where prices are higher and favourable policies exist), but this does not necessarily mean these technologies will perform financially in Canada.

Regulations surrounding the use of deadstock may impinge upon or prohibit use of this feedstock for fuel production purposes.

— —

Biosyngas The market risk is high because the technologies are not yet market-proven.

The risks are high because of the unproven nature of this technology application (i.e. biomass sources)

The primary risks are in the cleaning and treatment of the off-gas, as the gasification process itself is well established.

�0� Renewable Fuels — Biofuels Copyright © 2006 by SDTC™

6 SummaryBased on the analysis within the STAR process, there are four key conclusions :

• Natural Advantage : Canada has strength in biofuels. Our demand for use is low relative to the overall global demand, but our resource base is large and our technology capability is strong. The challenge is the large geographic spread of low energy-density biomass and growing energy need.

• Lifecycle Impacts : No investment can be placed without examining the full lifecycle impacts. This includes how the feedstock mix and how production facility efficiency will evolve over time (cost, environmental, and proximity to feedstock/market).

• Co-Product Value : There is a need to understand the various chemical co-products in terms of their market viability.

• Feedstock Expansion : The increasing price of fossil fuels will have spill-over effects to valuing biomass residues, thereby creating a value proposition for the forest products industries. To manage risk, technologies must be able to handle variable (diversified) feedstock.

6.1 Near-Term Technology Investments

6.1.1 The Near Term Market

The 2015 market will likely be dominated by the biogas and biocombustibles product/ process areas. That is because there are existing opportunities to maximize the extraction of gases from the landfill sites already in operation, and because the market and available technologies for solid biocombustibles are already in place.

6.1.2 Near Term Investment Priorities

These are the investments that must be placed now in order to achieve the stated vision, as they establish the necessary groundwork and infrastructure required to meet the long-term goals. The following technologies are expected to have the highest priority during the 2015 period. More complete descriptions are in the Technology Assessment section of this report.

Table 26 : Near Term Investment PrioritiesPriority Fuel High Priority Technologies

High Bio-oil Feedstock Expansion

High Biogas Improved Gas Cleaning & Recovery

High Solid Biocombustibles Alternative Feedstock Supply

High Biodiesel Feedstock Expansion

High Biosyngas Improved Gas Cleaning

High Biosyngas Use of Expanded Range of Feedstock

High Bioethanol Improved Bioethanol Processing Efficiency

High Bioethanol Improved Enzyme Productivity

High Biodiesel Improved Oxidative Stability

High Solid Biocombustibles Moisture Control Improvements

High Biosyngas Improved Moisture Control

High Bio-oil Improved Oil Performance

Medium Biogas Heterogeneous Feedstock Supply

Medium Bio-oil Improved Pre-Processing

Medium Solid Biocombustibles Feedstock Compression


6.1.3 Near Term Sustainability Impacts

6.1.3.1 Economic

Beyond the localized job creation and capital expenditure for system installations, this period is not expected to experience any major economic impacts from the selected sub-sectors.

6.1.3.2 Environmental

The upstream GHG emission levels will continue to be high (on a per GJ basis) for some of the product/ process areas. However, this could diminish rapidly as new market-ready technologies come on line.

6.1.3.3 Societal

The greatest impacts are likely to come from public opposition over the installation of large refining plants. However, this will likely be offset by additional local job creation and wealth. Ongoing training and public awareness has been identified as a key priority in the near term.

6.1.4 Near Term Risks

The overriding risks during this period are primarily non-technical in nature. The largest are expected to be in securing capital for large-scale projects and developing a constructive dialogue with the appropriate departments and agencies responsible for project approvals. From a developmental perspective, the largest risks in the Biofuel industry will be the degree to which upstream production emissions can be reduced through improved feedstock handling, feedstock drying, and refinery energy use and emission release techniques and practices.

6.2 Long Term Technology Investments

6.2.1 The Long Term Market

The 2015 period will likely see a much greater expansion of biodiesel and bio-oil projects, primarily driven by government acceptance and market demand for the biofuel products.


6.2.2 Long Term Investment Priorities

These are the technologies that will help achieve the long-term goals, assuming that the near-term investments have been made and the technologies are in place. Some of the technologies listed below also appear in the 2015 list, but the difference will be the size and scope of their application. Early developments are expected to focus on pilot installations, accelerated life testing, and system improvements. The 2015 period will largely focus on achieving globally-competitive economies of scale and efficiency, and potentially the development of Canadian-based manufacturing of the systems involved throughout the biofuel value chain.

Table 27 : Long Term Investment PrioritiesPriority Fuel High Priority Technologies

High Bioethanol Improved Enzymes for Hydrolysis, Saccharification and Fermentation

High Biogas Co-Product Tech Improvements

High Bio-oil Moveable Pyrolysis Plants

High Biosyngas Low Cost Plasma Options

High Bioethanol Improved Lignocelluloses Pre-treatment

High Biosyngas Gasification Process Improvements

High Bio-oil Pyrolysis Co-Product Value

Medium Bio-oil Improved Turbine Performance

Medium Biogas Improved Efficiency at Small Scales

Medium Biodiesel Oilseed Species Development

Medium Biogas Improved On-Farm AD Systems

Medium Biodiesel Improved Cold Flow Performance

6.2.3 Long Term Sustainability Impacts

6.2.3.1 Economic

The true economic impacts from these product/ process technologies are expected to rise sharply during this period, as improved economies of scale and increased production capability are realized.

6.2.3.2 Environmental

The upstream production emissions are expected to drop significantly as the new technologies come on line. In addition, the use of biofuels may well extend to the equipment used in supplying, harvesting and refining of the product. For example, biodiesel fuel could possibly replace conventional fuel in engines for the pre-processing and handling of bulk bio stock.

6.2.3.3 Societal

The 2015 period should provide the highest possible societal benefits from the technology investments being made today.

6.2.3.4 Long Term Risks

Some technologies that are currently going through the R&D phase will be approaching market pre-commercialization during the 2015 period and carry some developmental risk. The financial, regulatory and market risks, however, should be minimal during this period.


6.3 National Strategy Impacts

6.3.1 Strategic Advancement

To remain cost-competitive globally, Canada must capitalize on its abundant bioresource base and continue to lead developments in new bio technology areas. To do this, Canada should focus and deliver on, the following areas.

6.3.1.1 Canadian Technology Investments

With the exception of pyrolysis and some biodiesel technologies, most Canadian biofuel project developers tend to purchase equipment and the rights to technology from the more mature U.S. and European markets. These technologies may then require modification to suit local conditions, with the net effect being that wealth is transferred to other countries. Investments in Canadian technologies that meet Canada’s unique environmental, social and financial requirements, could support national wealth creation and accelerate the adoption of GHG-reducing technologies.

6.3.1.2 Local Manufacturing

Attracting manufacturers and refinery specialists to Canada and developing a Canadian design and manufacturing capability could increase employment, establish a Canadian knowledge base, and drive down fuel production costs. The focus should be on durable, low maintenance, easily-transportable harvesting and handling systems, and on improved fuel performance characteristics.

6.3.1.3 Training & Education

Public Awareness : Educating the general public, government regulators and policy makers, and the financial community about the performance benefits of biofuels will go a long way to ensure the rapid deployment of technologies within the Energy Exploration and Production sector, as well as support Canada in achieving emission reduction goals.

Post Secondary Education : Canada currently lacks a strong knowledge base in biofuel production and optimization. Colleges and universities need to increase their content offering in sustainable technologies in order to maximize the knowledge potential in Canada.

6.3.2 Intellectual Property

Canada has an opportunity to capitalize on the intellectual property generated from innovations in biofuel production. Examples of initiatives that should be supported nationally include :

Canadian manufacturing of improved biomass handling equipment and leading refinery and conversion process.

New material handling techniques and standards which lower the embodied cost and energy throughout the biofuel value chain.

Demonstrations of Canadian commercial successes that illustrate the potential of Canadian technology to global markets.

Solutions that address the needs of colder-climate regions, which have the potential of creating additional market opportunities through Canadian technology exports.

SDTC technology investments can lead to local manufacturing opportunities. As such, projects with this potential are introduced to appropriate downstream funding individuals and agencies to enhance the potential for Canadian benefits.


7 Acknowledgements

7.1 SDTC Thanks the Following Contributors

SDTC would like to thank the following individuals for providing technical information and/or participating in the various interviews and stakeholder workshops. This report was prepared for SDTC through a collaborative effort involving both SDTC staff and industry consultants. A special thank you to all the organizations that supported the underlying research and reports referenced throughout this document.

Barclay, Jody Natural Resources Canada

Boulard, David Ensyn Technologies

Bradley, Douglas Climate Change Solutions/CanBIO

Brandle, Jim Agriculture and Agri-Food Canada

Browne, Thomas Pulp and Paper Research Institute of Canada

Burnett, John Natural Resources Canada

Chornet, Esteban Enerkem/University of Sherbrooke

Cruickshank, W.H. (Bill) Natural Resources Canada

DeYoe, David Ministry of Natural Resources, (ON) Forests Division

Francoeur, Bruno Petro Canada

Gauthier, David Foragen Technologies Management

Hogan, Ed Natural Resources Canada

Jackson, Dennis Environment Canada

Jayaraman, Govindh Topia Energy Inc

Kehrig, Ron AG-West Bio Inc.

Khan, Saeed Industry Canada

Kingston, Andrew DynaMotive Energy Systems Corporation

Klein, Manfred Environment Canada

Lansbergen, Paul Forest Products Association of Canada

Layzell, David BioCAP Canada/Queen’s University

Lewis, Scott Biox Corporation

Loh, Lawrence Cement Association of Canada

Minns, David National Research Council

Paquette, Christine Biodiesel Association of Canada

Penner, Gergory Soy 20/20

Reaney, Martin Agriculture and Agri-Food Canada

Rollefson, James National Research Council

Sirois, JP BIOX Corporation

Stumborg, Mark Agriculture and Agri-Food Canada

Tampier, Martin Envirochem


8 Endnotes Figure 7, Figure 8, Figure 9, Figure 10, Figure 11, Figure 16 and Figure 17 have been reproduced with the permission of the Minister of Public Works and Government Services,

courtesy of Natural Resources Canada, November 2006

1 Disruptive Potential is the degree of positive impact that a particular technology would have on its sector and/or adjacent (and even unrelated) sectors if it were to be fully commercialized. Disruptive technologies entirely

change the way in which industries operate or goods and services are produced.

2 Biomass refers to the total living and non-living biological material within a given area or of a biological community or group. Biomass is typically measured by dry weight per given area (e.g. per square metre or square kilometer)

3 SDTC Consultations, September 1st, 2004 ; Note that the classic definition of Biofuels focuses on liquid fuels used in transportation applications. SDTC’s focus is much broader than the classic definition.

4 Syngas is distinctive from natural gas, a fossil-based non-renewable resource, and from biogas, which is derived from the biochemical anaerobic digestions from renewable sources. Both of these latter gasses have high proportions of methane (CH4).

5 Throughout this report, all energy values are expressed in gigajoules (GJ), or multiples of gigajoules, and are converted directly from the literature or other relevant sources without assuming further losses, variations or operational influences.

6 1 exajoule – 1018 joules

7 Canada’s Energy flow – Detailed, 2002, Version 2. Figure 6 (version 6.0 – April 2006) Natural Resources Canada, Energy Science and Technology Panel Secretariat. April, 2006.

8 1 gigajoule = 109 joules

9 The Maple Leaf in the OECD. Comparing Progress Toward Sustainability. 2005. the David Suzuki Foundation (Based on OECD annual report). http://www.davidsuzuki.org/files/WOL/OECD-English2-FINAL.pdf and OEDC Factbook 2006 – ISBN 92-64-03564-3 – © OECD 2006

10 Canadian Environmental Sustainability Indicators. January 2006. Statistics Canada http://www.statcan.ca/english/freepub/16-251-XIE/16-251-XIE20050000.htm

11 Canada vs. the OECD : An Environmental comparison http://environmentalindicators.com/htdocs/indicators/3vola.htm

12 http://www.climatechangecentral.com/resources/presentations/ccpresentations/David_Layzell.pdf#search=%22bio-oil%20l%2Ft%22

13 Bio-Based Feedstocks. Fuels and Industrial Products. Capturing Canada’s Natural Advantage. BioProducts Canada and Industry Canada. http://www.bio-productscanada.org/pdf/en_roadmap_book.pdf#search=availablebiofeedstockscanada

14 A Canadian Biomass Inventory : Feedstocks for a Bio-Based Economy. BIOCAP Canada , June 2003

15 The “most likely” scenario is calculated by discounting the “realizable” feedstocks by 20-30% to account for potentially unforeseen stock reductions, however caused.

16 National Round Table on the Economy and the Environment

17 The Atlas of Canada, Natural Resources Canada

18 The Atlas of Canada, Natural Resources Canada

19 A Canadian Biomass Inventory : Feedstocks for a Bio-Based Economy. Final Report. p 36. Prepared for Industry Canada by BioCap Canada. June, 2003.

20 Biodiesel is primarily used as a blend to help reduce the amount of particulate matter created through incomplete combustion of petroleum diesel. Biodiesel has a lower sulphur content, and higher lubricity than conventional petroleum-based diesel. While there are GHG benefits, the clean air benefits are the primary driver for adoption of this fuel type.

21 There is currently about 1.2 billion hectares of abandoned farmland in Ontario, which could possibly be used for growing hybrid poplars for biofuel production.

22 SDTC SD Business Case Stakeholder Session

23 The 1996 Freedom to Farm Act dismantled the costliest price- and income-support programs and freed US farmers to produce for global markets without restraints on how many crops they planted. Under the law, farmers would get fixed subsidy payments unrelated to market prices. Soybeans are included under the Act.

24 Canadian federal tax subsidies to the oil and gas sector amount to approximately $1.4 billion per year. http://www.pembina.org/media/media-release.php?id=1154



26 National Energy Board. http://www.neb-one.gc.ca/energy/energypricing/CurrentMarketConditions/CO2006_02_e.htm

27 UBS Securities Canada Inc. Press Release. September 19, 2006 http://ubs.com/

28 Crude Prices Will Almost Double Over Next Five Years. By Jeff Rubin and Peter Buchanan. CIBC World Markets. Occasional Report #53. April 13, 2005

29 Oil Markets Into 2006. by Peter Davies, Chief Economist, British Petroleum PLC for British Institute of Energy Economics. London. January 24, 2006 http://www.bp.com/liveassets/bp_internet/globallbp/STAGING/global_assets/downloads/R/RP_oil_markets_into_2006.ppt#258,7,BrentOilprices

30 Energy Market a “Theatre of the Absurd” The Globe and Mail, Wednesday, September 26, 2006. With data from Bloomberg Financial Service. http://www.theglobeandmail.com/business.


32 Foresighting Future Fuel Technology : Backgrounder on Biofuels. Privy Council Office of Canada. December. 2004

33 With the exception of wood pellets which are already exported in large quantities.

34 Bioenergy and Community Impacts. D. Bradley. Canadian Bioenergy Association Workshop, Vancouver BC. September, 2004.

35 30% more food than required

36 Filion of Canmet- http://www.pollutionprobe.org/whatwedo/GPW/montreal/presentations/filion.pdf

37 Hogging is the shredding of long strands of bark or waste wood in order to prepare it for combustion.

38 REAP Canada presentation Opportunities for Growing Utilizing and Marketing Bio-Fuel Pellets

39 Slag is the by-product of smelting ore to purify metals. It is generally a mixture of metal oxides ; however, it can contain metal sulphides and metal atoms in the elemental form. In combustion processes, it is the metal-base residue created in the high temperature environment.

40 Energy Probe estimates that roughly 50% of North America’s energy needs could be met by converting 15% of all farmland to switchgrass and burning pelletized fuel. http://www.energyprobe.org/energyprobe/index.cfm?DSP=content&ContentID=1893

41 http://www.deere.com/en_US/compinfo/media/pdf/envtsafety/env/bundler_declaration.pdf

42 This unique system is able to harvest slash, and standing or fallen trees using equipment that cuts and bundles the residue, compressing it into log-like bundles with high density. The densified wood bundles are transported in conventional log hauling equipment. It is claimed that densified wood bundles can be delivered for co-firing with peat and coal at a cost of $30 US/tonne including transportation costs.

43 Biomass varies widely in moisture content. Sawdust may have a moisture content as high as 60% if it is stored outside in the winter time. Moisture content varies with the season, storage time, weather and form of storage. Wet wood has a moisture content above 50%. Free (intercellular) water is easy to remove but bound (intracellular) water is more difficult. Efficient combustion requires the lowest possible moisture content to maximize the energy available.

44 Bio-oil can be created through other processes, such as direct liquefaction, but the most common process is fast (or flash) pyrolysis.

45 Bio-oil is immiscible with hydrocarbons.

46 bdt/day = bone dry tonnes per day, and refer to the amount of dry biomass that is fed into the reactor

47 SDTC SD Business CaseTM Stakeholder Session

48 http://www.dynamotive.com/biooil/applications.html

49 Bio-oil can be created through other processes, such as direct liquefaction, but the most common process is fast (or flash) pyrolysis.

50 Fractionation is a separation process in which a certain quantity of a mixture (solid, liquid, solute or suspension) is divided up in a large number of smaller quantities (fractions) in which the composition changes according to a gradient.

51 Surfactants are wetting agents that lower the surface tension of a liquid, allowing easier spreading, and lower the interfacial tension between two liquids.

52 The number following the letter “B” indicates the percentage of biodiesel in the mix. For example, B75 means the fuel mix is 75% biodiesel and 25% petro-diesel. In most current commercial applications B5 is used.


53 http://www.bdpedia.com/biodiesel/plant_oils/plant_oils.html

54 http://www.solidwastemag.com/Issues/ISarticle.asp?id=174551&story_id=143367144544&issue=04012006&PC=

55 http://tc.gc.ca/tdc/publications/pdf/14100/14106e.pdf

56 http://www.uidaho.edu/bioenergy/biodieselED/publication/01.pdf

57 www.inet.hr/~jkuftine/en/biodizel.htm

58 http://www.greenfuels.org/ethanol/pdf/OConnor-Report-Ethanol-2004.pdf

59 Cellulose is a long-chain polymeric polysaccharide carbohydrate, of beta-glucose. It forms the primary structural component of green plants. The primary cell wall of green plants is made of cellulose ; the secondary wall contains cellulose with variable amounts of lignin. Lignin and cellulose, considered together, are termed lignocellulose, which (as wood) is the most common biopolymer on Earth.

60 Hydrolysis of cellulose is far more difficult than hydrolysis of starch due to the stronger chemical linkages found between the glucose monomers in cellulose. In addition cellulose forms crystals that prevent the access of acid or enzymes.

61 The Fischer-Tropsch process is a catalyzed chemical reaction in which carbon monoxide and hydrogen are converted into liquid hydrocarbons of various forms. Typical catalysts used are based on iron and cobalt. The principal purpose of this process is to produce a synthetic petroleum substitute for use as synthetic lubrication oil or as synthetic fuel. http://en.wikipedia.org/wiki/Fischer_Tropsch

62 Höhlein et al. 1991, quoted in NREL-TP-510-34929.pdf

63 Preliminary screening…biomass derived syngas. NREL, December, 2003, Spath and Dayton.

64 http://www.ridgetownc.on.ca/Research/documents/fleming_Electricity_and_Heat_from_manure.pdf

65 http://www.environmentaldefence.ca/reports/ItsHittingTheFanFINAL.pdf

66 http://www.qc.ec.gc.ca/dpe/Anglais/dpe_main_en.asp?innov_fiche_200409a

67 http://www.epa.gov/agstar/

68 RenTec Renewable Technologies, 2005 http://res2.agr.ca/initiatives/manurenet/en/man_digesters.html#Commentary

69 http://www.omafra.gov.on.ca/english/engineer/facts/04-097.htm#2

70 Polychlorinated biphenyls, commonly known as chlorobiphenyls or PCBs, are industrial chemicals which were used in the manufacturing of electrical equipment, heat exchangers, hydraulic systems, and several other specialized applications up to the late 1970s. They were never manufactured in Canada but were widely used in this country. PCBs are very persistent both in the environment and in living tissue.

71 The word siloxane is derived from the words Silicon, Oxygen, and alkane. Sioxanes can be found in products such as cosmetics, deodorant, water repelling windshield coatings, and some soaps. They occur in landfill gas and are being evaluated as alternatives to perchloroethylene used in the dry-cleaning industry. Perchloroethylene is widely considered environmentally undesirable.

72 Leachate is the liquid produced when water percolates through any permeable material. It can contain either dissolved or suspended material, or usually both. This liquid is most commonly found in association with landfills where result of rain percolating through the waste and reacting with the products of decomposition, chemicals and other materials in the waste to produce the leachate. If the landfill has no leachate collection system, the leachate can enter groundwater, and this can pose environmental or health problems as a result. Typically, landfill leachate is anoxic, acidic, rich in organic acid groups, sulphate ions and with high concentrations of common metal ions especially iron. Leachate has a very distinctive smell which is not easily forgotten.

73 The terms landfill gas (LFG) and municipal solid waste (MSW) are often used interchangeably in this report. This is done to either highlight the source (MSW) or highlight the usable product (LFG), but both refer to organic portion of solid wastes found in municipal landfills.

74 http://msw.cecs.ucf.edu/Gas.ppt

75 Flaring is the process of burning off unusable waste gas released by pressure relief valves during unplanned over-pressuring of plant equipment.

76 Methane is 21 times more potent as a greenhouse gas than carbon dioxide.

77 Woodrising Consulting, 1999. http://www.cec.org/files/PDF/ECONOMY/Biomass-StageI_en.pdf

��0 Renewable Fuels — Biofuels Copyright © 2006 by SDTC™

78 Opportunities and Challenges of a Bio-based Economy http://www.carc-crac.ca/common/Opportunities%20and%20Challenges%20of%20a%20Bio%20based%20Economy.pdf

79 “Bio-Energy in Europe : Changing Technology Choices” Faaij, A.P.C. (2006) Article in Energy Policy (34) 322 – 342.

80 One million normal cubic meters of syngas is the equivalent of 37.3 million standard cubic feet, or 10.4 billion Btu’s.

81 Gasification Worldwide Use and Acceptance SFA Pacific (2000). Prepared for the US Department of Energy, Office of Fossil Energy, National Energy Technology Laboratory and the gasification technologies Council.

82 The feedstock has a negative cost because the existing costs of disposing of the waste are avoided.

83 SDTC SD Business CaseTM Stakeholder Sessions

84 Most commercial gasification technologies do not use oxygen, and all require an energy source to generate heat and begin processing.

85 The Fischer-Tropsch process is a catalyzed chemical reaction in which carbon monoxide and hydrogen are converted into liquid hydrocarbons of various forms. Typical catalysts used are based on iron and cobalt. The principal purpose of this process is to produce a synthetic petroleum substitute for use as synthetic lubrication oil or as synthetic fuel.

86 http://www.gasification.org/gasproc.htm

87 SDTC SD Business CaseTM Stakeholder Session

88 In 2005, Canada produced approximately 41 BL of gasoline and about 26 BL of petroleum-based diesel. (http://www.statcan.ca/english/freepub/57-601-XIE/2006001/t073_en.htm)

89 http://www.canada.com/reginaleaderpost/news/business_agriculture/story.html?id=59763456-3744-46e4-a4c7-2c766bcfbb33

90 By comparison, Brazil produced 16.5 Billion litres of fuel ethanol in 2005, and the United States produced 16.2 Billion litres. (http://www.worldwatch.org/node/4081)

91 http://oee.nrcan.gc.ca/Publications/statistics/see06/transportation.cfm?attr=0

92 SDTC SD Business Case VAL RBM 20050609 v1.2 MB Bookend 2.doc

93 SDTC Market Stakeholder Session. June 9, 2005

94 It should be noted that aerobic digestion (vs. anaerobic digestion) was not considered in this iteration of the STAR analysis because aerobic digestion is used to treat sewage sludge, and does not produce methane or any other form of useful fuel.

95 Bio-oil : DynaMotive Energy Systems Presentation toCONEG/NRBP USFS and Others, Concord, New Hampshire, August 16, 2002. http://www.nrbp.org/pdfs/biobriefing3.pdf#search=%22GJ%20per%20ton%20biooil%22

96 Biodiesel : Interview with S.Lewis of BIOX.

97 Ethanol : IEA Bioenergy Newsletter. Liquid Biofuels Task Force 39. Number 5 : February, 2003. http://www.task39.org/_assets/_newsletters/IEAT39-05EU.pdf#search=%22%20bioethanol%20plant%20capital%20cost%22

98 Biogas : Natural Resources Canada. CanREN report. http://www.canren.gc.ca/renew_ene/index.asp?CaID=47&PgID=1110

99 Biosyngas : There are currently no commercial-sized biosyngas production facilities in Canada. It was assumed that the gasification process will be part of a larger BTL plant, and that the biogasifier would be approximately 25% of the overall construction costs of the BTL plant.

100 Refining margins are the difference in value between the products produced by a refinery and the value of the crude oil used to produce them. Refining margins will thus vary from refinery to refinery and depend on the price and characteristics of the crude used.

101 http://www.greenfuels.org/fuelchange/index.htm

102 http://www.nrbp.org/pdfs/biobriefing3.pdf#search=%22GJ%20per%20ton%20biooil%22

103 SDTC SD Business Case Industry Stakeholder session #1, August 2004.

104 http://www.biocap.ca/rif/present/Kumar_A_presentation.pdf#search=%22bio%20oil%20tons%20per%20liter%20%22


105 ECN-RX-05-181. Presented by Boerrinter and van der Drift at the 14th European Biomass Conference and Exhibition, Paris, France, 17-21 October, 2005. http://www.ecn.nl/docs/library/report/2005/rx05181.pdf#search=%22biosyngas%20production%20cost%20%22


107 This is based on 95 ML of biodiesel production and approximately 26 and 42 BL for petro-diesel and gasoline, respectively, for 2005. Statistics Canada

108 http://www.bus.ualberta.ca/CABREE/pdf/2005%20Spring-FortMac/BUEC%20562/Portelli-Biodiesel-BUEC562.pdf

109 http://www.greencarcongress.com/2006/04/european_biodie.html

110 Canada : 95 million litres/32 million people = 2.97 L/person Europe : 4,392 million litres/462 million people = 9.51 L/person

111 The conversion of waste vegetable oils and greases, animal tallow and other high lipid waste products into a renewable, high cetane diesel fuel blending stock. By raising the cetane content in diesel fuel, engine pollutant emissions are reduced and fuel economy improves.

112 A measure of how quickly fuel starts to burn (auto-ignites) under diesel engine conditions. A fuel with a high cetane number starts to burn shortly after it is injected into the cylinder ; it has a short ignition delay period. Conversely, a fuel with a low cetane number resists auto-ignition and has a longer ignition delay period.

113 The capital cost to construct a biodiesel plant is generally much less than that for ethanol.

114 SDTC is currently funding technology development in this area that may offer a safe way to destroy the toxic material, and reduce emissions.

115 The net energy content from the methane produced by various animals (Btu/head/day) is : Dairy (18,000), beef (10,700), swine (1,500), and poultry (110). http://www.bae.ncsu.edu/programs/extension/publicat/wqwm/ebae071_80.htm

116 Fugitive emissions are emissions not caught by a capture system which are often due to equipment leaks, (e.g. pipeline transport), evaporative processes and windblown disturbances.

117 A disruptive technology is any technology that could likely have a profound and lasting impact on the sub-sector or related sub-sectors.

118 It should be noted that numbers provided herein should be recognized as general estimates. SOI information can vary depending on how questions are interpreted by the applicant and further how this information is categorized.

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