Author Archives: jblackest

RTOs and the Industry

Scenario Pathway 7: Green Enablers

20151214 Green Enablers

In this pathway, the dominant logic is that of Environmental Sustainability, meaning that RTOs’ mission is to support industry’s efforts to transition to more environmentally friendly technologies, products and systems.

The green paradigm of the RTOs is based on Life Cycle Analysis. While politics and values drive the environmental movement at higher levels, RTOs seek to provide a sound scientific basis upon which industry can make technology development and investment choices.

RTOs do have a political role, as they are expected to act as Leaders with respect to environmental technology, rather than responding to industry demand. Only in some cases is this expectation accompanied by additional public funding to provide flexibility for the RTOs, but in all cases, RTOs are backed by political credibility and work closer with governments on environmental technology issues.

The most important policies for RTOs are Green Innovation Agendas. Though ‘market pull’ instruments are generally technology-neutral, ‘technology push’ agendas are developed in many countries looking to develop robust R&D portfolios. RTOs are perceived as particularly knowledgeable in the bioeconomy and have an important role in shaping the Bioeconomy Innovation Agendas.

In line with the goal of large-scale fossil substitution, the RTOs employ the technological paradigm of Footprint Reduction. To the RTOs this paradigm means that novel environmentally-friendly technology systems must compete with technologies to reduce the impact of existing large-scale technology systems. Technology potential is explicitly evaluated with respect to political goals for CO2 reduction and resource efficiency.

Markets in innovation services see Advantages for Public Entities and both RTOs and universities are attractive to industry based in part on their linkages to government environmental policies and implementing agencies. The ability to sustain work over longer time frames is another key advantage for these entities.

Value chains in the industry create a Flow of Research Opportunities for RTOs, as innovation agendas filter through to different actors in the value chain, and new actors successively identify opportunities for footprint reduction.

Scenario Pathway 8: Bio Workshop

20151214 Bio Workshop

In this pathway, the dominant logic is that of Competitive Innovation, and RTOs seek to support industry clients in their efforts to secure competitive advantage in the emerging bioeconomy.

For RTOs the green paradigm has shifted towards Green Consumption, as the driving force for adoption of bio-based processes and products is early adoption by green consumers and public procurement.

The political expectation is that RTOs can function as effective, competitive Consultants to industry, and to a lesser extent to governments. RTOs are expected to be responsive to the marketplace and help advance the innovations that appear most promising to their clients and deliver growth to Member State economies.

In terms of policies, this pathway sees Commercial Agendas dominating the innovation space. Policy is focused on opening markets, both domestic and abroad, and RTO activities are pushed down the innovation chain while primary and pre-commercial research is undertaken at universities.

As RTOs and industries search for the bioeconomy’s higher margin opportunities, the emerging technological paradigm is focused on High-Performance products. Properties and functionality are considered more defensible advantages than cost, and chemicals and specialty materials from bio-based feedstocks are prioritized when they can be sold as functionally and environmentally superior.

Markets in bio-based research and innovation services create advantages for SMEs and startups. Focused firms with protected, specialized expertise are the feeder system for industrial plays in the bioeconomy, with the broader scope of knowledge at the RTOs proving less important.

Value chain formation creates Little Space for RTOs – the institutes are not needed as a facilitator and the commercial drivers of value chains do not per se generate incremental innovation needs as new players get involved. RTOs struggle to expand their client base.

Scenario Pathway 9: Efficiency Engines

20151214 Efficiency Engines

In this pathway, the dominant logic is that of Resource Utilization, and RTOs work with industries to maximize the valorization of raw materials and waste and the efficiency of existing capital assets.

At the level of concrete action, the dominant green paradigm is Reduce, Re-use, Recycle, and in the bio-economy RTOs find themselves working ‘outwards from the middle.’ Starting with the focus on the valorization of industrial side-streams, the RTOs over time increase research into both the recyclability of bio-based products and the reduction of resource requirements through new circular business models.

The political expectation for RTOs is that they serve as the Workhorses of the bioeconomy, tackling challenges related to process design, energy and water efficiency, and systems integration that prove difficult for individual companies, since they require long research, development and demonstration cycles and successive incremental improvements.

To achieve this, innovation policies create a Partnership Context for work on the bioeconomy, with RTOs and industry jointly influencing national bioeconomy agendas. RTOs are virtually embedded in the bioeconomy work that large industry undertakes.

The dominant technological paradigm for RTOs is Process and Systems Optimization. With political focus on extracting value from assets, RTOs can afford to take address incremental improvements in energy and resource efficiency and process intensity.

The markets for innovation services in this pathway are less competitive, and create Advantages for Insiders including, in this case, RTOs. The exception is in software development, where industry works with small private firms more regularly than RTOs.

In this pathway, value chain formation is centred around large, incumbent companies, and as such RTOs face a Stable Context for their ongoing work in the bioeconomy.


Market analysis: Products from Lignin

(Written by Jesse Fahnestock (SP) based on analysis by Ileana Hernandez Mireles (TNO) and Henna Sundqvist-Andberg (VTT))

The AERTOs Bio-Based Economy project has begun working to evaluate business cases for select process–>product routes for ligno-cellulosic biorefineries. A first, rough assessment of the economics of these cases has been performed, with more detailed techno-economic analysis of the processes now under development. From a product perspective, all of these cases assume a production of C5 and C6 sugars (volumes dependent on process) and a valorization of the lignin fraction. The project’s market studies and innovation systems analysis team has already looked at some issues related to sugar markets (here and here); the following post provides a brief summary of some of the potential markets for lignin-based products.

Several of the routes involve the production of guaiacol, which is the primary feedstock in industrial vanillin production. Vanillin is a valuabe product in flavourings, fragrances, in agrochemicals and as a pharmaceutical feedstock, commanding up to $12 000/tonne. The potential to produce vanillin from lignin has been understood for decades, but the mismatch between the small market volumes and the scale of lignin side-streams has been a disincentive. The problem remains today – 20% of the total market volume (16 000 tonnes/year) is based on Lignin, but this is all from one company (Borregard).

20151219 Vanillin

The routes generating guaiacol can also produce phenolics. As a chemical feedstock these command a lower price of approximately $1500/tonne but the global market of around 8 million tonnes is large and expected to outgrow the economy as a whole. Derivatives such as resins are seeing similar market growth. Another higher-value alternative may also be the production of Bisguaiacol-F, a potential replacement (somewhat controversial) plastics precursor BPA.

20151219 Phenolics

While the integrated techno-economic analysis for these routes has not been complete, a preliminary back-of-the-envelope calculation suggests that vanillin revenues are required for a robust business case. As it is unclear that the vanillin market could grow sufficiently to absorb new lignin-based production, the alternative route, focusing on the production of polyelectrolytes that could potentially compete with fossil-based polyacrylamide as a flocculant. The largest market for such flocculants is wastewater treatment; prices of flocculants are typically around $3000/tonne at production volumes of 2 MT/year. Lignin-based polyelectrolytes have not yet entered this sector and their performance needs to be verified, but the preliminary case appears attractive.

The following image summarizes the prices and volumes of these products.

20151219 Lignin Products

(Prices per tonne for phenolic resins were based on an unweighted average of three cited price ranges and the physical volume based on this average and the cited 2012 market volume of USD 9,19 billion.)

The following table summarizes some of the market issues related to these products.

20151219 Lignin Products Market Issues



Europe and the Bioeconomy

(A continuation from the AERTOs BBE Forward-Looking Analysis. For background, see Bioeconomy: The Scenario Pathways)

Scenario Pathway 4: Green Agenda

20151214 Green Agenda

In this pathway, the dominant logic is that of Environmental Sustainability, meaning that Europe views the bioeconomy as part of the transition to a more environmentally sustainable economy, due to its potential to contribute to reduced fossil fuel consumption, greenhouse gas emissions, and waste.

The working green paradigm is one of Think Globally, Act Locally, which means that the European bioeconomy is expected to help solve global environmental problems, both by reducing Europe’s own global environmental footprint and through the maintenance of high standards for what constitutes sustainable bio-based business.

The  politics of the European bioeconomy are focused on Keeping Promises, i.e., delivering on Europe’s high-level environmental targets. Tensions between environmental and economic objectives are not resolved, but commitments made to targets are seen as politically credible and the bioeconomy is positioned as a tool for meeting ambitious CO2 reduction, renewable energy, and waste reduction targets by 2050.

Policies aim to Incentivize a Fossil phase-out. With much of the energy sector on track to phase out fossil fuel use by 2050, the emphasis for the bioeconomy after 2030 is on replacing fossil feedstocks in process industries and manufactured goods. Product standards (for both CO2 and renewable content) and carbon taxes are the primary policy tools.

The dominant technological paradigm for the European bioeconomy is Substitution at Scale. Technologies that allow for bio-based solutions to enter the economy through large-scale infrastructure akin to that of the ’fossil economy’ are dominant. For fuels and chemicals this means that strategies that involve blending through existing infrastructure are prioritized initially until new infrastructure is economically justified by very high marginal CO2 prices after 2035.

Markets treat this large-scale substitution strategy as Bankable and respond with large-scale finance. The perceived robustness of policy frameworks and infrastructure used by the bioeconomy by 2030 makes the sector attractive to both industrial balance sheet investors and project financiers.

Value chain formation occurs initially through Clusters to overcome uncertainty about economic and environmental value creation. Over time, the increasing bankability of bio-based alternatives leads to larger investors and industrials scaling up in both vertically integrated and disaggregated approaches.

Scenario Pathway 5: Bio Boutique

20151214 Bio Boutique

In this pathway, the dominant logic is that of Competitive Innovation, and Europe sees the bioeconomy as an arena to develop competitive advantages vis a vis other countries and regions, based on advanced technological capabilities.

The working green paradigm is once again Clean Tech, with the European bioeconomy positioned as a cutting-edge industrial movement creating products  with both green benefits and advanced functionality. Green consumerism is an established and large market segment that includes bio-based alternatives and Europe sees itself as a pioneer of bio-based processes and products.

The politics of the European bioeconomy are most interested in Export Promotion. Political favour is given to concepts that may have advantages in global markets. The bioeconomy is expected to be fast-moving and dynamic and political support follows technological trends.

In terms of Policies, this strategy encourages European countries to create Domestic Lead Markets, usually through public procurement and tax advantages. These programmes require resolution with trade and competitiveness rules, leading to uncertainty that undermines their breadth and scope. However sufficient exceptions are carved out to support a number of pioneering companies.

Capturing investor interest in the European bioeconomy and competing on global markets requires a technological paradigm based on Patentable IPR. Companies patent process technologies and product designs aggressively, and benefit from increased harmonization in patenting in the EU, itself driven in part by the ’Clean Tech Race’ at the global level.

Markets in the European bioeconomy develop in ways that favour First Movers. Bio-based innovations attract more venture capital than in other scenarios and investors see major advantages to reaching early adopters, participating in procurement programmes, and creating strong brands for bio-based alternatives. Early movers in process technologies look to export patented solutions based on enzymes, catalysts, and genetic modification as well as a number of advanced materials applications and turnkey industrial systems.

Value chain formation occurs at Arm’s Length, with the companies with the greatest technical and IPR base wielding the greatest negotiating power and capturing the highest margins.

Scenario Pathway 6: Bio Leverage

20151214 Bio Leverage

In this pathway, the dominant logic is that of Resource Utilization, and the countries of Europe take different approaches to the bioeconomy, each looking to leverage their own natural resource and industrial bases.

The working green paradigm is the Circular Economy, and the bioeconomy in Europe is at first considered by many as an ’inherent’ part of this paradigm, since biogenic resources are part of nature’s closed loops. Over time however more pressure is put on the bioeconomy to increase its own ’circularity’, through industrial symbiosis and improved durability and recyclability of its products.

In Europe the politics of the bioeconomy are based on Strategic Assets, and those countries most active in the bioeconomy pursue something akin to industrial policy in the sector. Political priorities include promoting the sustainable exploitation of natural resources (sometimes against green opposition) and protecting jobs in strategic industries (sometimes against disruptive forces).

Domestic Policies in the European bioeconomy thus incentivize the Supply-Side of the bioeconomy. While more direct strategies at the national level risk conflict with competition rules, Member States are able to make use of European environmental strategies to promote both particular feedstocks (forest and agro-waste, especially) and subsidize the integration of key industries into the bioeconomy through support for demonstration, scale-up, and efficiency improvements.

As at the global level, the dominant technological paradigm of the European bioeconomy is that of Closed-Loop Systems. The primary variant of this paradigm is industrial symbiosis, and the bioeconomy becomes the pre-eminent practitioner of this model of integration between industries. Recycling of end-of-life products, especially those based on wood fibres, is a smaller but steadily growing element of the circular bioeconomy.

The political and technological dynamics limit the availability of capital, and as such the focus of financial markets and industrial competition is Return on Assets. Innovation and the growth of new markets become less important than efficiency and market share.

In this pathway, value chain formation produces Integrated Champions of the bioeconomy, with feedstock, processing, and brand ownership often controlled by large, integrated incumbents. In Nordic and Southern European countries the agro, forest and pulp and paper sectors forward-integrate into chemicals, while the Central European chemical companies backward-integrate into raw materials.

The World and Sustainability

(A continuation from the AERTOs BBE Forward-Looking Analysis. For background, see Bioeconomy: The Scenario Pathways)

Scenario Pathway 1: Our Common Future

20151214 Our Common Future

In this pathway, the dominant logic is that of Environmental Sustainability, meaning that sustainable handling of natural resources, protection of ecosystems, and reduction of undesirable human impact on the biosphere are the main priorities of global approaches to sustainable development.

The working green paradigm is one of Earth Systems Solutions, which means that environmental problems and the attendant solutions are put in a global systemic context. Environmental activists describe threats to the health of the planet and seek large-scale, long-term solutions based on global collective action.

In the absence of true global governance, the global politics of sustainability must therefore seek Incremental Collaboration, negotiating through existing vehicles such as the UNFCCC, WTO and other trade agreements. Complete top-down solutions remain elusive and these negotiations are more successful at generating international convergence and a cooperation between national approaches to sustainability.

Policies thus aim to create Shared Incentives, both between nations and across sectors of the economy. The emphasis is on economic instruments, especially those that put prices on environmental externalities.

In response to the search for large-scale, global solutions, the most important technological paradigm is one of Affordability and Transferrability. Technologies that can reduce environmental impact and replace fossil fuels in the greatest volumes, at the least cost, and in the most contexts globally are in demand and are the focus of research, development and innovation efforts.

Markets for these technologies deliver Price Convergence, driving the value of greenhouse gas reductions, saved water and other ’sustainability goods’ together by working at scale across borders and across sectors.

Value chain formation creates Global Efficiencies, with large companies stitching together value-add and deploying according to advantageous conditions across from multiple countries and sectors to minimize the costs and reach of sustainability-products and services.

Scenario Pathway 2: The Clean Tech Race

20151214 Clean Tech Race

In this pathway, the dominant logic is that of Competitive Innovation, as countries and global companies approach sustainable development as a challenge which will produce winners and losers, with innovative capacity the determining factor.

The working green paradigm is one of Clean Tech and Leapfrog, as novel technological and social innovations are seen as the key to addressing environmental problems while creating win-win situations for business and the economy. Action on the environment is viewed as modernizing and countries see themselves in a ’race’ to develop green solutions.

In this competitive environment, the global politics of sustainability are focused less on common benefits and more on securing Exemptions and Advantages for countries and their preferred strategies. Links and synergies between the strategies are pursued only when they are seen to generate economic or political benefits.

The resulting policies create a Tangled Web, both of trade and regulations. Market-making tools such as subsidies and preferred purchase programmes are common, and some tariffs are used defensively.

The emphasis on competitive advantage means that the technological paradigm of sustainable development is Targeted and Proprietary. Companies and research institutions seek to develop highly differentiated innovations, and to protect both the intellectual property and market positioning.

Markets for these technologies, products and services deliver Green Premia, either via the aforementioned policy instruments, first-mover advantages, or marketing and branding.

Value chain formation attempts to create and preserve High-Margin Niches. Brand and technology owners use bargaining power to capture as much of the aforementioned premium as possible. Supply chains tend to be hard to replicate and overall dissemination of a given solution tends to be less broad.

Scenario Pathway 3: Green Resource Nationalism

20151214 Green Resource Nationalism

In this pathway, the dominant logic is that of Resource Utilization, and global approaches to sustainability are built around maximizing efficiency and asset utilization, both in terms of natural resources and capital assets.

The working green paradigm is the Circular Economy, and the minimization, re-use, and valorization of waste are seen as the keys to reducing environmental footprint. Radical resource efficiency building on existing industries and technologies is seen as both green and strategic.

In this competitive environment, the global politics of sustainability see countries trying to achieve ’Sustainable Nation Status,’ with ambitious domestic strategies competing with one another for political and industrial prestige. International relations on sustainability are less collaborative and more akin to a ’Top-Runner’ arrangement.

Domestic Policies focus on Supply-side Security, with rules, trade, and subsidies promoting sustainable domestic feedstocks. Industrial policy, including targeted R&D initiatives, seeks to maximize the value of existing industrial assets and facilitate industrial symbiosis rather than looking to create new markets.

The technological paradigm most associated with this logic is that of Closed-Loop Systems. Zero-waste approaches come to dominate in process and manufacturing sectors and the system perspectives expand over time to incorporate consumers, both through advanced end-of-life recycling and upcycling and through new business models focused on function and service rather than product ownership.

For both industry and consumers, these markets are valued for their cost-certainty. Waste valorization reduces exposure to volatile feedstock and raw material prices, and an increase in leasing and subscription-based consumption gives consumers mores table expenditure over time.

Under these conditions Value chain formation produces Islands of Efficiency. Integrated companies, clusters, and even sectors of the economy pioneer specialized, deeply efficient approaches to production and consumption, but these solutions see limited dissemination globally and fail to systematically address economic and environmental externalities beyond their system boundaries.

Bioeconomy: The Scenario Pathways

The Forward-Looking Analysis portion of the AERTOs Bio-Based Economy project seeks to develop contextual, exploratory analysis that helps the participating research institutes better evaluate their bioeconomy strategies. The general approach has been to build up a framework for thinking about the future and to consult with stakeholders to identify potential issues of particular importance  and discuss how they might play out. The analysis takes a 15-20 year perspective, near enough to be relevant to the research and development being done today, but far enough away to allow for a new bioeconomy regime or regimes to have emerged.

The first output of the analysis was the scenario framework, and associated ’pathway narratives’ below. In 2016, the project will also summarize possible ranges for key quantitative variables at the bioeconomy level, and dig deeper into four themes identified by project stakeholders.

20151214 Bioeconomy Pathways

The accompanying short texts are intended to explore the implications of the scenario framework. This framework looks at three different ’Dominant Logics’ over three levels, with their intersections creating nine ’scenario pathways.’ The narratives to follow explore these pathways across six ’framework conditions.’ These are speculative and are kept at a general level – the intention is not to produce in-depth, evidence-based scenarios for each pairing, but rather to give a sense of how this scenario framework could inform conditions for more specific scenarios.

The Scenario Pathways:

The Lignin business – what is the way forward?

Henna Sundqvist-Andberg, VTT

Discussions on business potential of lignin have come and gone over several decades. Is this an everlasting cycle or is there something revolutionary in the air?

Lignosulphonates have established they position in the markets for decades ago in several applications, including construction, food and feed ingredients, and bitumen. So far other types of lignin haven’t been able to compete in production volumes with lignosulphonates. Kraft lignin from pulp production has been the second largest commercial lignin type but production volumes and markets have been modest. Lignin business hasn’t been lucrative enough for companies, even though there could be several viable applications for lignin (Fig. 1). However, weak signals from the industry have become stronger. Anticipation and expectations are once again in the air.

20150822 Lignin business blog price vs. volume

In 2014 Stora Enso announced a biorefinery investment in Sunila Pulp Mill Finland which focuses on extracting lignin, “the green gold of the Nordic forests”, from pine and spruce kraft pulping process by utilizing LignoBoost recovery technology. According to Stora Enso the initial markets are anticipated in the construction and automotive industries, as a renewable and sustainable alternative to the phenols used in plywood and wood-panelling glues and the polyols used in foams. Similar kind of progress is taking place in Canada. West Fraser Mills is investing in LignoForce System™ lignin recovery plant together with its partners (AB Plywood, Ecosynthetix, FPInnovations, Hinton Pulp, and Quesnel Plywood). The company is planning to use lignin as an adhesive (phenol formaldehyde resin) for its plywood and engineered wood products.

What makes the situation different this time? The bioeconomy boom is going strong with public funding available for R&D, piloting and investments. Innovation processes are advancing into piloting stage (e.g. carbon fibre (Innventia and Oak Ridge National Laboratories) and bioaromatics (Biorizon, Biochemtex)). Separation technologies for kraft lignin are commercially available (LignoForce, LignoBoost, SLRP). Environmental sustainability has become more and more important for both consumers and companies.

Even though the recent progress has been positive the picture is still not that rosy. The first step has been the production of green substitutes, like phenol formaldehyde resins. Additional commercially viable applications are needed, and the industry needs to evaluate whether lignin-based chemicals are for niche applications or if they could fully substitute petroleum-based products, and build the appropriate value network and even markets. Lignin-based chemical producers need to provide right product properties, ensure the consistent quality, guarantee the supply security, and balance with oil price development. It does become clear why it has taken a long time to reach this point, doesn’t it?

Could this still be a tipping point for lignin business? It might be that for kraft lignin, but for other types of lignin (organosolv, hydrolysis etc.) it is likely to take several more years until these truly take off. Cellulosic ethanol production and solvent pulping are further away but are steadily developing, with several pilots (CIMV, Renmatix Plantrose, Lignol Innovations’ Alcell process for solvent pulping) and start-ups are running (e.g. Abengoa, POET/DSM, GranBio for cellulosic ethanol production).

So what is the way forward for the lignin business? Two steps forward and one step back? The recent oil price development certainly might curb enthusiasm but there is no denying that there are opportunities today, if the circumstances are right: the raw material is cost competitive and available, quality of the lignin is right, performance is reliable and sustainability is taken into account, Fig. 2.

What could be the next step forward? It has been said that the best way to predict the future is to create it – so let’s continue developing new business from lignin in collaboration with the industry.

20150822 Lignin business success factors

Figure 2. Critical success factors for lignin business

20150822 Lignin business future markets

Fig. 3. An overview of prospective lignin markets.

About the Insight Refinery

This is a blog used by the AERTOs Bio-Based Economy project to develop and exchange ideas and insights related to the bioeconomy. All readers can comment, and if visitors would like to create their own posts they can contact the site administrator

We are open to all bioeconomy-relevant ideas for articles. At the moment the following articles are available:

On the Price of Sugars by Bart Goes, Tecnalia

Market Analysis: Products from Lignin

Bioeconomy: The Scenario Pathways:

by Jesse Fahnestock, SP

The Lignin Business: What is the Way Forward? by Henna Sundqvist, VTT

Sustainability certification for biobased chemicals & materials by Jorrit Gosens, SP

Market protection for sugar, ethanol and biobased chemicals & materials by Jorrit Gosens, SP

Investment climate for biobased business in Europe by Roald Suurs, TNO, and Elsbeth Roelofs

A description and applications of products obtained from brown and green algae, by Bart Goes, Tecnalia

Visions of sugar beets: Parsing Deloitte’s analysis of the sugar beet boom and its relevance for the European bioeconomy by Jesse Fahnestock, SP

(Some background on the creation of the blog is also available here.)