[MUSIC]. [SOUND]. My name is Michele Rubino and I am the Chief Operating Officer of Beta Renewables. Beta Renewables is a joint venture between an Italian chemical company MG, Novozymes, and private equity firm Texas Pacific Group. Beta Renewables is commercializing a second generation of bio-fuels and bio-based chemical technologies. And I am here to talk to you about Cellulosic Ethanol. As an intro, just to give some context, when I am talking about bio-fuels, I am referring to renewable liquid transportation fuels that displaced the use of petroleum in internal combustion engines for transportation. So that's the context of the use of this term bio fuel today. First generation bio fuels I understand people are pretty familiar with them. Main products are ethanol, made mainly from starches and sugars. and, biodiesel, which is derived from oil seeds. There's a, an overview of these, of these technologies and these processes. I'm not going to focus on this. Because, today, we're going to focus on second generation biofuels. The goal of second generation biofuels is to overcome some of the limitations of first generation biofuels, and we'll talk about those a bit later. Second generation biofuels convert non-food crops such as some of the ones in the picture here, such as herbaceous grassy crops, woody crops, agricultural residue. convert, they get converted into again bio fuels. Today I'll focus on what in the industry is known as cellulosic ethanol. So, ethanol derived from non food biomass. There are two main conversion processes, the people in the industry refer to to classify this technology. The first one are biochemical conversions in which the polymers in the biomass, the structure of biomass is depolymerized. To free the fermentable sugars that then are fermented through biochemical processes into ethanol, and potentially other products. And thermo-chemical processes, in which the feed stock is gassified. And, converted into sine gas which is then used as a feed stock, either for chemical or biochemical synthesis to fuels and chemicals. Why convert cellulose to fuel? So talking a bit about the rationale for using lignocellulosic feedstocks instead of first generation, food crops. They are globally abundant, very diverse, low cost resource. You go from, woody, biomass, such as, forestry residues, agricultural residues. Energy crops,uh, different canes, grasses, a whole variety of different crops. And potentially down the road also municipal solid waste could be a viable feed stock. There is limited competition with food supply very important, first generation biofuel. Have been getting a go a lot of attention and, and, and, and, and bad attention of sorts from the press. in, in that day the, for the claim that they raise food prices, that they interfere with the food suppa supply chain. Additionally [UNKNOWN] biofuels can have very low carbon intensity, so very good strategy to displace the emission of greenhouse gases, potentially up to being a carbon [UNKNOWN]. They have a large potential for displacing the use of petroleum. This is very important because when we're talking about fossil fuels Coal, natural gas, we have a variety of technologies to displace them. Wind, solar. When it comes to the use of petroleum that is used in liquid transportation fuels, there are not may viable options. And one of those is biofuels. And this can be the starting point of a new industry, the sustainable bio-refinery industry, in which biomass is sustainably converted to not only fuel, but also chemicals, fertilizers, feed, and other products. Just a quick overview before we get, into some description of the technology about the ethanol market. Demand for liquid transportation fuel is expected to increase over time. Ethanol is today a very important portion of the gasoline fuel pool. Global demand is today around 75 million tons. It's about a $65 billion industry. is, it is expected to increase anywhere from 125 million tons to 175 million tons depending on a number of considerations. So, ethanol is already a large portion of the fuel pool. Over half of the market is in the U.S., and another third of, of it is in Brazil. Second generation, cellulosic, ethanol is increasingly the favored option by both consumers and policy-makers. For some of the reasons we mentioned about. Just to give a, a, a quick perspective people talk a lot about electric vehicles. Plug in hybrid, hybrid, the point of this slide is to give, to show, to, to highlight That the liquid transportation fuel, liquid fuels, will be the predominant source of energy for transportation in the foreseeable future. So, even if we're looking from 2007 thru 2030, with all the, deployment of. Electrical drives in transportation. There is still the expectation that 93% of vehicles fleet in 2030 will be using liquid fuels. And therefore a sustainable solutions such as bio fuels and second generation bio fuels is important. Just to give a sense of where this demand will come from. We have, I think this is a 2010 figure, about 760 million passenger vehicles in the world. And this is going to in, grow 4x to 2.9 billion and we obviously see where all that growth is coming from. Not unexpectedly from, from from the China and India and that part of the world. All of this will result in increasing fuel demand, increasing need for sustainable bio fuels to displace and otherwise increase the use of petroleum, which as we know is not sustainable. Many countries have already taken the step to adopt a number of policies in support of the use of biofuels, such as ethanol. And, some countries, have also, introduced a strong preference for advanced biofuel. Second generation biofuel. So the, the, the kind of things like cellulosic ethanol, which we're talking about today. Will to, I have a slide on the U.S., but the Eur, European Union, has put in place policies, that go in that direction. Other countries are doing so. We know Brazil, is a large market for ethanol. And ethanol demand in Brazil is expected to increase. But China, Southeast Asia, India, all of these regions are putting in place this kind of policy. In the US, we probably have one of the strongest,be better consolidated policies in support of biofuels, known as the renewable fuel standard. It calls for an increasing amount of cellulosic ethanol to fill the renewable fuels standard and be blended in the gasoline pool. Up to 16 billion gallon in 2022,you'll notice that the blue portion that is corn ethanol is capped at 15 billion gallons. and, and so the policy maker clearly has an intention to shift the focus towards second generation bio-fuels. Now this policy has been recently come under threat. There's a lot of challenges to this policy, mainly from the incumbent, from the oil companies. From other industries I think that while this policy will, will, will resist, will stay in place even, even under threat, we are starting to see the emergence in the U.S. of a new policy framework that has the potential to be a very strong framework in support of low carbon fuels, and that is the California Low carbon fuel standard which is being implemented in the next few years in California and well, we believe other States other country will follow as California has a track record as being an environmental frontrunner in, in mater of policy. Let's talk a bit about what is biomass, what is lignocellulosic, biomass. Lignocellulosic biomass is made is a, a, is a, is a very complex polymer, very diverse, and it's made of three main components. Cellulose, which is long chain of glucose mole molecules. Hym hemicellulose, which is chemically diverse po polymeric form of sugars made of both five and six carbon. monosaccharides, and Lignin, which is, a, phenolic compound, an aromatic compound, that forms the structure of biolignin is the element that allows biomass, its rigidity and its, its resistance to microbial degradation. so, there's a lot of different type of cellulosic feedstocks, as we said, very diverse base of resource. We can go from woody species and, by the way, woody reside. Woody reside is definitely also an option. These tend to be fast growing species that can be grown on most available soils. They don't require the kind of high quality soil that is needed for food crops. In that sense, you know, this supply chain doesn't really interfere with the food supply chain. Not that these crops cannot be grown on very high value, land, but they just will not compete economically. They will inevitably find their way towards marginal land. Other feed stocks, there's all the variety of agricultural residues from current crop production such as corn stover, sugarcane bagasse, and there's the whole variety of different we call them energy crops, so crops grown for energy purposes. And and such as switchgrass such as the, the, you know, the the grassy crops but also more cane like like crops such as the energy cane. There's a lot of research in these areas, it's we're at the very early stage of you know, the, the, the agricultural biotechnology research in the field of energy crops. So obviously to talk about the, the, the, the production of cellulosic biofuels, one has to see both the opportunities which we discussed. Both in terms of societal opportunities and technological opportunities. Meaning this, this this feed stock has a lot of valuable elements that can be converted to valuable products. But, also, the challenges. The challenges can be, I think, pretty much summarized in, in this last bullet point. Nature has perfected this polymer to resist microb, microbial degradation over, over you know, evolutionary, you know, timeframes. So, to, to now take this biomass polymer and deconstruct it into its, its you know, elements that can then be converted to higher value products. That is a technological challenge A pretty substantial technological challenge. Talking about this challenge and, and, and the biochemical approach to cellulosic ethanol. This slide just quickly summarizes what are the different process steps. There's the pre-treatment in which the lignocellulosic material is made amenable to further processing. The structure, the matrix of the lignocellulosic biomass is softened, let's say. There's the next step, in which the the cellulose and the hemicellulose are hydrolyzed meaning there reacted with sugar to break down these long chains of polymers into simple fermentable sugars. Then there's a phase of cleanup of this broth, let's say to take out compounds that are not filterable the downstream processes. At that point the sugar solution is fermented with, with design and microbes, and converted into ethanol which is then distilled and recovered. The later part is very similar to a first generation technology. The, the first three steps are the real innovation in the bio chemical approach. One interesting technological technologically interesting aspect of this process is the role of cellulosic enzymes. This is really the development of the bi, biocatalyst is really what enabled this technology to you know, to be commercialized. The the, this over, you know, many years was considered the most cost prohibitive step. Just to give you a sense up to ten years ago, to five, probably eight years ago. The cost of only this debt was, approximately five dollars a gallon of fuel produced, which clearly makes it, out of the range of economic viability. But after a lot of money and ten, 15 plus years of intensive R&D, we see this cost being approximately 60 cents a gallon and with the potential to decrease to 40 cents a gallon over the next few years. This is a quick graphic diagram of what a, a an industrial process of cellulosic ethanol looks like. Those two central steps are the biocatalythical steps, the enzymatic hydrolises and the microbial fermentation. We see at this point, that the technology, and I'll get to that later, the technology is proven at commercial scale. And the next step for this technology is really the global deployment at large scale. My company has started up the first fully commercial, the world first fully commercial cellulosic ethanol facility in Italy. This plant produces 20 million gallons a year of cellulosic ethanol. It's a 150 million Euro, so $200 million investment. It's based on our biotechnology platform called the Proesa Technology. And at that plant we're now produce ethanol and power from the lignen co-product. This slide highlights our concept of the biorefinery based on a core enabling Proesa Technology. You can make other chemicals, both from the sugars and from the lignin. and, this is, kind of, the next step of, the development of our technology. Important to say that compared to gasoline and compared to first generation, biofuel, second generation biofuel Have a very important role to play in greenhouse gas emission reduction. You see from the numbers to the right how you know, with corn the reduction in greenhouse gas intensity compared to gasoline is about 30, 40%. But with corn stover, it, it's more like 80 to 90%. And with some of the energy crops, it can actually serve as a carbon sink, because of the carbon stored in the roots of these crop for for for a very long, long, long time. So to conclude, biofuels is one of the only scalable and sustainable option to replace petroleum use. Cellulosic ethanol as we said has solid e, environmental credential, we believe the technology to be now commercially proven. our, my company has a 20 million gallon a year facility operating. There are more coming online this year, DuPont, DSM-POET, Abengoa, GranBio are just some of them. After 20 plus years and hundreds of millions of dollars spent on RAD, the first versions of these technologies are cost competitive with petroleum refinery on an operating basis. Clearly, these technologies require a large deployment of capital, which still poses a very big challenge from the standpoint of financing and large scale uptake of the technology. Therefore, we feel that the need for policy support is still there for the next three to five years. There are substantial opportunities to further improve the technology. These will be the second, third, fourth iteration of the technology. And they will get funded by the cash flows generated by the first generation, by the first version of these technology. For example, higher value chemicals we discussed. The whole value of improving biomass crops,we didn't really touch on that much here but that is at a very early stage of, of the, the exploiting of using the potential of using biotechnology in developing biomass crops. Improved biocatalysts, enzyme, microorganisms. In our mind now that the technology viability in the next couple of years is going to be out of the way, the, the big focus becomes laying the foundation for large scale and sustainable deployment. And that's going to be all about developing replicable and cost effective biomass supply chains. This is, in my mind, the really hard stuff that's going to have to be done in the next few years. And last point, this industry is moving away from venture funded startups, to where large well capitalized companies. And this is a sign of a maturing industry that's gearing to to deployment. These players have committed large resources, and are, and are now [INAUDIBLE] to, to, to establish themselves as market leaders. The three of them we already mentioned. M and G and Novisand of the form beta renewables, but with DSM, and Dupont, and [INAUDIBLE]
