ÖRNSKÖLDSVIK – In the year 2000, the discovery rate of new oil reserves was approximately 10 billion barrels per year. Consumption of oil in 2006 amounted to over 30 billion barrels per year. According to the European Commission, the transportation sector relies for 98% on oil derived fuels. A staggering 70% of that oil is imported, a number that is expected to grow to 90% in 2020. On the 9th of July, the IEA published a new forecast in which it warns for a worldwide oil and gas shortage within 5 years as demand is increasing above expectations and supply is lagging behind. On top of that, a UN panel of 2,500 scientists from more than 130 nations said it was "very likely" (or more than 90% probable) that human activities led by burning fossil fuels explained most of the warming in the past 50 years. As a result of climate change, the panel projects a rise in sea levels of between 18 and 59 centimetres (7 and 23 inches) in the 21st century, threatening low-lying islands, coasts of countries such as Bangladesh and cities from Shanghai to Buenos Aires. As transportation has become the foundation for our increasingly global economy, oil proves to be an economically and environmentally unsustainable fuel.
Ethanol Statistics sat down with Per Carstedt, CEO of Sweden’s largest first and second generation ethanol producer SEKAB, to discuss his vision on the developing ethanol industry. He shared his vision for the sustainability of transportation in the future, drawing upon his experience in the Swedish market. He explained the subjectivity of cost-competitive technologies as well as the most important form of government support: a genuine sense of urgency.
Following Swedish example
Sweden was one of only two European countries to comply with the 2005 biofuel target of 2% in 2005. Since than, Sweden has created more than a 1,000 biofuel filling stations, sold over 60,000 flex-fuel vehicles and it is the only country in the EU that has 5% ethanol in all it’s gasoline. We asked Mr. Carstedt which part of the Swedish legislation has contributed most to this success and whether the EU should perhaps copy some parts of this. “It is not so much the legislation itself, but the decisiveness to really do something. In relative terms, Sweden has put in more resources, but in national terms this is still peanuts. The real difference is that since a few years, Sweden has taken climate change very seriously and challenged itself to reduce it’s dependency on oil. To do this, the automotive industry is developing vehicles that can run on renewable fuels, but they also develop more energy efficient vehicles. So the focus is not so much on biofuels, but on the concept of sustainable transportation. The consequence of this attitude has been a range of supportive legislation. Biofuels in Sweden are free of duty until 2013. When a company purchases an environmental car (hydrogen vehicles, flex-fuel vehicles and biogas vehicles), they receive lower corporate tax rates. If someone buys an environmental car for private use, he or she receives roughly 1,100 euros and some cities offer free parking. On top of that, Stockholm will only buy biofuel powered busses for public transportation and the government has decided that 85% of all federally purchased vehicles should be environmental cars. And that is really what all European governments should do. Send clear messages and set the right example”.
SEKAB’s strategy
Europe is slowly beginning to understand the importance of a diversified fuels matrix and a reduction in GHG emission levels. What will SEKAB’s strategy be for the coming years? “Our strategy consists mainly of two point. The first is our strong focus on the development of second generation ethanol, the research & development and industrialization of it. The second point is to provide sufficient quantities to the market, to really implement the ethanol into the fuels matrix. Therefore, we are developing markets both foreign and domestic. At the moment, we are investing in Poland and Hungary. In Poland we have broken ground a few weeks ago, in Hungary we will follow soon. Both countries are part of the European Union and are committed to comply to the 10% market share in 2020. On top of that, Hungary will probably have some degree of export capacity due to the large surplus of maize. A good strategy for al, I think, is to utilize the comparative advantage of these countries to the best extent, since industrialized countries in western-Europe lack the capacity for large scale domestic production.
The subjectivity of cost-competitive technology
Some people suggest that we should wait with the large scale use of biofuels until second generation technology becomes cost-competitive, a development SEKAB is working on as well. Mr. Carstedt however questions whether we should give any value to the term ‘cost-competitive’ at all. “Cost competitive has so many unknowns. Competitive to what? To oil at $50/barrel or $200/barrel? It is a very relative thing. What price do you put on carbon dioxide? €20/ton or €10/ton? I don’t know an I don’t think anyone knows. So cost competitive is really a very relative issue. It will be cost competitive, but it depends largely on the costs of our competitors. And as oil reserves are depleting, it will only be a matter of time. Than the question is, how does it compare to other renewable energies, which depends on where we are in 10 years. Will we still have the capacity to expand the production from grains? If you don’t, what else do you have except cellulose? And at that point, you are only competing with yourself. In that stage, cost-competitive depends on the price of biomass, making feedstock development key. Subsequently, the question than turns to volumes. Are the residuals sufficient, or do we have to look to other fractions? This is a very step wise development.
We see a development towards cellulose and a development towards larger scale. We are developing regardless of the cost competitiveness to oil or other fossil resources. And that should be the way of thinking. Oil will run out, and we don’t have many other options. We at SEKAB have a pilot plant right now and we plan to have a development plant that is 40 to 50 times larger up and running in 2010. That will take 2 to 3 years to operate and to build a new one, than you’ll have cost-competitive technology probably around 2013-2014. But having technology is one thing, applying it large scale is another. For that you need a balance in demand and specifically in supply of biomass, since you cannot produce in a sustainable manner if you use more than the annual growth of biomass.
© Ethanol Statistics 2008