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Shared Piloting Facilities – Episode 1: Bio Base Europe Pilot Plant (BBEPP)

Introduction

As explained in the previous blog post, I will look closely to the role of ‘shared piloting facilities’ in the biobased innovation system. Table 1 provides a selection of such facilities that currently exist within Europe. This article will focus entirely on the Bio Base Europe Plant in Ghent.

All information on this facility was derived from a very detailed assessment report resulting from the multi-ket-pilot-lines project: 

http://www.mkpl.eu/results/demonstrators/

Table 1: Selection of shared piloting facilities

Bio Base Europe Pilot Plant Ghent, Belgium / Terneuzen, NL
CPI UK
Bio-economy pilot line Aalto, Finland (VTT)
Chempolis Ltd Oulu, Finland
ARD Agro-Industrie Recherches et Développements Reims, France
CBP Center for Chemical-Biotechnological Processes Leuna, Germany (hosted by Fhf)
Bio Process Pilot Facility Delft, the Netherlands
Biorefinery of the future / SEKAB Örnsköldsvik, Sweden (hosted by SP)

 

Specific questions to be answered

  • What role do these shared piloting facilities play in the Eureopan biobased innovation system?
  • What are the best practices and lessons learnt with respect to these facilities?
  • How do these (combined) facilities connect to the (future) role of AERTOS RTOs?

Topics to be covered

  • History
  • Purpose
    • Services provided
    • How does it fit within the ecosystem
  • Technology, Equipment
    • Overview
    • Unique selling point
  • Organisation, Staff, Business, Finance
    • Ownership
    • Business Case / Funding (public / private)
    • Client base / Market perspective
  • Lessons learnt
    • Best practices
    • Do’s and dont’s

 

History

Bio Base Europe Pilot Plant is a not-for-profit organization located in Ghent, Belgium. It officially started up as part of a 2009 INTERREG IV European project, together with the Bio Base Europe Training Centre located in Terneuzen, The Netherlands.

The plant is located in the port of Ghent in a former fire station. It has been converted into a biochemical transformation facility with an analytical lab and 3 different process halls of over 1700 m2, equipped with state-of-the-art equipment. Most of the equipment and utilities were installed between 2009 and 2011. The plant became fully operational in 2012.

history

Purpose

The facility is “open” to customers without restriction (within the limits of their business model and operating procedures). As such Bio Base Europe Pilot Plant is a multi-user “pilot plant”, or scale up facility. A mix of industrial and academic customers can access the facility in order to close the gap between scientific feasibility and industrial application of new biotechnological processes.

The focus lies on biochemical conversion of abundantly available 1st generation substrates to high added value molecules and converting second generation substrates such as agricultural waste products and non-food crops into renewable products like biofuels, bioplastics, biosolvents.

BBEPP positions itself as a one-stop-shop meaning that it covers the entire process chain in a single plant, from the biomass up to the final bio product. All equipment needed is available in one place, from upstream to downstream and from lab-scale to pre-industrial scale. To allow for flexibility, each piece of equipment is modular, put on a skid and many are placed on wheels to allow for re-positioning according to the configuration desired by the customer.

The services provided are mainly focused on two deliverables: delivery of the physical end product and the transfer of know-how concerning the process. The know-how is detailed in a full set of documentation which includes elaborate reports, protocols, mass balances and equipment specifications that constitute a complete technology transfer. The protocols, the list of tasks and deliverables, the timing, price and reporting are discussed when setting up the partnership.

Technology, Equipment

Bio Base Europe Pilot Plant is a facility that operates using diversified process equipment from kilogram scale to ton scale as a service for the development of the bio based economy. The pilot plant allows its customers to assess specific strengths and weaknesses of new biotechnological processes before making costly, large-scale investments. The development services provided are positioned between late stage research and pre-market industrial development (TRL 4 to 7).

Bio-based processing is typically a series of individual process steps that are executed in different equipment or vessels. In a full scale production bio-refinery, the production vessels are positioned one after the other in the sequence of the process steps. In the development phase at the pilot plant, the sequence of processes can vary according to specific needs of the various starting materials and the end-products. Thanks to the high degree of modularity and the completeness of the equipment set, BBEPP can market themselves as a one-stop shop.

BBEPP is equipped with modular, multi-purpose, industrial equipment to cover a broad range of bio-based processing for industrial applications. At the start of BBEPP, a specific budgetary envelope was reserved for the purchase of the required equipment and installation. Table 3 provides a list of equipment specifications.

Table 3: List of equipment

equipment 1

equipment 2

Organization and staff

The key supporting agencies / partners at the start of BBEPP include:

  • Ghent Bio Economy Valley, the local bio base cluster
  • The port of Ghent, where BBEPP is located
  • The city of Ghent, the Province of East Flanders
  • Enterprise Flanders and IWT (agency for innovation by science and technology), regional funding agencies that support BBEPP
  • The University of Ghent, where BBEPP does a large part of its scientific resourcing.

These entities supported BBEPP from the start and are still guiding its business plan as board of directors. These partners are public agencies, making therefore BBEPP independent from any industrial company. BBEPP makes sure that it is not serving one big unique customer in order to keep its independence. At the time of writing (2013) the facility had a staff of 35-40 persons. The team was split between administration, finance staff (6 persons), Business development & communication (2 persons), research & development (20 persons) Operations, Maintenance and Engineering (9 persons). At the beginning, a larger share of the staff was made up of engineers and operators dedicated to the installation of the equipment.

Business and finance

BBEPP was a publicly funded organization at the outset, but with “one-shot” capital subsidies. In total, the BBE project received around 13 M€ of public funding from European Union (via INTERREG), East-Flanders, and Ghent. (With a total budget of 21M€, 13M€ went to Bio Base Europe Pilot Plant and 8 M€ to Bio Base Europe Training Centre.) The year 2013 was BBEPP’s first year of operational break even with a budget of 4.6M€. On the side of the expenses, almost 2.8 M€ were due to equipment and infrastructure depreciation, utilities and maintenance and more than 1.7 M€ for staff expenses.

With respect to income, BBEPP keeps a balance of (50%/50%) between public and private contracts. In 2013 the BBEPP received almost 1.9 M€ in private contracts. Of this amount, approximately two thirds came from large enterprises, which represent 1/3 of BBEPP customers. Only one third of contract revenue was from SMEs, which represents 2/3 of BBEPP customers. About 75% of BBEPP clients are situated from a radius of 200km.

The most important value-added for customers is accessing faster manufacturing learning curves and quicker time to market. The industrial outcome is equally split between the setting up of a new production line and the optimization/ adaptation of an existing on (medium and large enterprises). For start-ups and SMEs, scale-up often enables the company to test stabilized products with potential customers, triggering possible contracts and engagement, which is an essential step before convincing an investor to pour money into a new production line. The typical contract for a large enterprise is around 100k-200k€, whereas for an SME it goes from 5k€, with an average around 25 k€. Sharing fixed costs is part of BBEPP’s value proposition. In comparison, the cost of building up one’s own pilot would typically cost between 500 k€ and 5 M€.

After five years of operation, BBEPP was able to cover its annual operating costs with contract revenue. However, depreciation cost are not covered by contracts, so upgrades or investments in new capital equipment and facilities are not possible without assistance from external bodies, either public or private. BBEPP will certainly need a regular public funding of CAPEX to be sustainable in the future as non-profit regulations do not allow BBEPP to build up capital from revenues year over year to be able to invest in new equipment.

Lessons learnt

The following section lists some key lessons learnt that were developed as part of the on-going activities:

There is added value in building up and sharing non-proprietary know-how

The most significant distinguishing characteristic of BBEPP with respect to the competition is its high level of expertise in industrial biotech. BBEPP develops and tests processes as a typical contract manufacturer would do, and in addition shares and transfers non-proprietary know-how as a major part of the added-value delivered to industrial customers and academic partners alike.

Maintaining know-how

BBEPP is developing process know-how in the bio-based industry, thanks to its staff expertise and is keeping it “state-of-the-art” thanks to public R&D projects and experience with customers’ scale-up runs. This know-how is transferred to customers. This is differentiating the shared facility proposition from contract manufacturing (i.e. by competitors).

Serving multiple ecosystem functions

Today the facility is running on the basis of a combination of publically financed R&D projects and industrial contracts, covering a broad range of customers and markets. This mix of projects is critical for serving a variety of ecosystem functions. For example:

  • Public projects give BBEPP the necessary visibility to attract potential private customers. Most private customers of BBEPP do not want to communicate on their experiences.
  • With respect to private customers, large enterprises are essential for financial sustainability. These customers can finance 100kEUR plus projects necessary to stay in business.
  • The facility serves a majority of SMEs. An interesting lesson is the so called “coupon scheme”, which provides start-ups with a 10-30k€ voucher, sponsored by a government, for a scale-up experiment at BBEPP. These dedicated subsidies enabled BBEPP to offer its services to start-ups.

Independence, IP and confidentiality as key boundary conditions

From the beginning of the project, BBEPP chose to be independent of any industrial shareholders. Thus, BBEPP can work equally with any company. For certain companies, it ensures that their know-how will not be taken and used by a competitor. For the public funding agencies of BBEPP, it ensures that their investment will be used equally by SMEs, and big companies with no preferences towards a specific consortium of enterprises. BBEPP generally grants industrial property rights developed along projects to its customers. The customer requirements for confidentiality continually increase as the activity moves closer to market. Therefore service agreements with customers include confidentiality clauses and BBEPP generally does not take any IP. Of course this is more limited in the case of public-funded projects where transparency and openness are required.

Staff

The hiring process for a new structure like BBEPP is difficult: it is crucial to find the right people, and a good mix between young inexperienced but enthusiastic people and experienced process engineers. Contacts with universities and other academic partners were used to find new candidates, as well as networking and word of mouth.

Equipment acquisition

Based on experience and estimations, a list of equipment to acquire was made, this equipment was assessed to cover the needs of future customers, this is an estimated guess. For certain unit operations, second hand equipment was selected instead of new equipment in order to keep the overall project within budget and still to be able to offer a “one-stop shop” concept. Modular equipment enable its staff to offer quickly customized testing to its customers. The next step for BBEPP to take would imply bigger equipment aiming for custom manufacturing. This would be the last scale-up step for big volume industries, with the ambition to cover developments beyond TRL7 to TRL8 (enabling final scale product demonstration), and would enable custom manufacturing services, which could represent a base revenue stream for BBEPP.

Without multiple funding sources, BBEPP would not have been possible.

The initial investment in capital needed to create a pilot plant of meaningful size is significant. A pilot facility needs a large set of equipment and skilled people to run the pilot processes. A facility like the BBEPP has substantial fixed costs, so critical mass and size is key to being both viable and effective. At the time of inception of BBEPP, no single government funding agency had the programmes or measures in place to support such an initiative. BBEPP was made possible by combining various sources of public funding. Even today, despite the facility covering its operational costs, capital and equipment depreciation are not covered by contracts, so upgrades or investments in new capital equipment and facilities will not be possible without finding additional capital injections.

Agro-food sector requirements

The agro-food sector demands special quality requirements, particularly in terms of norms and standards. Though BBEPP is already addressing the scale-up of sub-products for the agro food industry, scaling-up final product for this sector requires standardized quality processes. BBEPP is currently working on getting approved for this sector in order to address a broader range of customers.

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Biorefinery Pilot & Demo landscape

At the core of the currently existing biobased innovation system, we find a pluriformous landscape of pilot & demonstration facilities. This landscape stretches out across Europe and the rest of the world. For biobased innovators, there is a strong call for even more of such ‘steel’, lest we lose the race to capture the upcoming market for sustainable biobased products and applications.

Some of these facilities are like lighthouses pointing to biobased industrial achievement: signposts to a distant future where biorefineries will have replaced steam crackers. Some of these facilities are more akin to ship wrecks, pointing out hazardous waters of technological failure and financial ruin.

We started out this explorative study as an attempt to provide an overview of this landscape and to derive lessons learnt from past experiences.

lighthouse

Scoping and research questions

So-far this exploration is based on merging a combination of existing sources:

In order to bring down the set of projects to a researchable selection, a specific focus was chosen. A first inventory of projects yielded the following categories of special interest from the perspective of the AERTOS consortium:

  • Focus on shared innovation facilities
  • Focus on LC-biorefinery multi-product systems
    • Excluding oligo-chemistry and thermochemical based routes
    • Excluding dedicated ethanol/energy plants

For practical reasons, an additional delineation is to:

  • Focus on initially on plants within Europe.
  • With high TRL level (demo-scale)

The result of this scoping step are presented in Table 1 and Table 2.

Table 1: Selection of state of the art EU demonstration plants

Lenzing Lenzing, Austria Wood refinery
Zellstoff Stendal Arneburg, Germany Wood refinery
Sunila mill (Stora Enso) Kotka, Finland Wood refinery
Borregaard AS Sarpsborg, Norway Wood refinery
SEKAB / Domsjö plant Övik, Sweden Wood (primarily) refinery
Abengoa Bioenergy Multiple pilots / demo’s Agri-LC-refinery
Beta Renewables Rivalta Scrivia /  Crescentino Agri-LC-refinery

Table 2: Selection of EU shared piloting facilities

Bio Base Europe Pilot Plant Ghent, Belgium / Terneuzen, NL
CPI UK
Bio-economy pilot line Aalto, Finland (VTT)
Chempolis Ltd Oulu, Finland
ARD Agro-Industrie Recherches et Développements Reims, France
CBP Center for Chemical-Biotechnological Processes Leuna, Germany (hosted by Fhf)
Bio Process Pilot Facility Delft, the Netherlands
Biorefinery of the future / SEKAB Örnsköldsvik, Sweden (hosted by SP)

Guide to the reader

The upcoming blogs will attempt to look closer to these two lists of pilot facilities and demonstration plants.

Blog series 1: shared piloting facilities

Specific questions to be answered

  • What role do these shared piloting facilities play in the Eureopan biobased innovation system?
  • What are the best practices and lessons learnt with respect to these facilities?
  • How do these (combined) facilities connect to the (future) role of AERTOS RTOs?

Blog series 2: State of the art biorefinery technologies:

 Specific questions to be answered

  • What are the relevant competing technologies currently ‘out there’ in the market?
  • How are they performing in terms of:
    • Markets served
    • Underlying business case (subsidies / launching customers)
    • What are the best practices and lessons learnt with respect to these facilities?

 

Investment climate for biobased business in Europe

Roald Suurs, Elsbeth Roelofs

For a full-text report, please send an email to roald.suurs@tno.nl

Introduction

As part of its general innovation policy, the Dutch government wants to make sure that it provides positive conditions for innovative companies with biobased ambitions. For this reason, TNO was asked to investigate the factors that determine the investment climate for biobased chemical companies in Europe (and more particularly in the Netherlands). The following questions were central:

  1. Which criteria determine the outcome of planning biobased investment decisions?
  2. What is the relative country performance within and outside Europe?
  3. What are the specific barriers for investing in the Netherlands and Europe?

The results of the study indicate that, depending on the development stage of innovation activities,  decision criteria will be dramatically different. Europe, and the Netherlands, are doing relatively well when it comes to supporting R&D but key improvements are necessary when the ambition is to move from R&D to demonstration and commercial production.

Approach

The results presented here are based on a quickscan, consisting of a short literature study and 20 interviews with industry leaders and venture capitalists. Interviews were directed at identifying key decision criteria for building either R&D facilities or pilots, demonstration plants or commercial scale production lines (see figure). The focus of the study was on companies developing and/or producing biobased chemicals.

  • Excluding companies that exclusively produce bioenergy and biofuels.
  • Excluding companies that exclusively produce feed and food.

Despite the narrow focus, a large variety of companies was involved, ranging from large waste processors and a sugar company to small pyrolysis or IB oriented technology start-ups.

 fig1

Figure 1: Three categories of investment and typical budgets involved.

Which criteria determine the outcome of planning biobased investments?

The figure below provides an overview of criteria that were considered most important in deciding on go no-go / location of investments in R&D, demo’s and commercial installations.

fig2

Figure 2: For each type of investment the figure shows the average weight of each criterion considered for deciding on a go/no-go and/or choosing a location. Weights are calculated on the basis of a collection of ‘top 5’ rankings. A weight of 5 stands for an average rank score of 1; a weight of 1 stands for an average rank score of 5; a weight of 0 means absence from any individual top 5).

Based on the interviews the following explanations can be given for the relative importance of different criteria for the three categories of investment.

R&D capacity / pilot plants (network oriented)

  • Generally speaking, investments are drawn to regions where professionals with the relevant knowledge are situated. The knowledge infrastructure (organisations, facilities, education level) is key in attracting and supporting these professionals.
  • Biobased clusters are important for their network effects, pilot facilities and especially for their ‘marketing power’.
  • Public financing, subsidies, are a lifeline for biobased pre-competitive R&D.

Demonstration plants / semi-commercial (risk oriented)

  • Access to sufficient quantities of biomass feedstock at predictable and affordable costs is a requirement.
  • Energy costs are a cost determining factor in the (bio) chemical industry.
  • Moreover, investors seek to minimise the high costs and risks associated with this stage. Policy regulations directed at mitigating investment risks is therefore crucial.
  • For the same reason, investors will usually look for a fit with existing site infrastructure (e.g. steam supply, heat outlet, logistics, safety services).

Commercial production / Upscaling (market oriented)

  • Feedstock, infrastructure and energy costs remain very important criteria.
  • The business case perspective is leading. Access to biobased markets is therefore an important additional criterion at this stage. Whether this affects a location decision depends on the type of product and company (how locally organized is the market for that company).
  • Labour market conditions (e.g. costs and quality of operators) are key.

What is the relative country performance within and outside Europe?

Based on the key decision criteria for the three investment categories, it becomes clear that Europe’s strengths lie in the development of knowledge and networks. Critical weaknesses are the feedstock situation, energy costs, relative tax level and (other) financial incentives.

fig

Some more detail on the most differentiating criteria for biobased companies making investment decisions are provided below:

Feedstock costs

  • Wood prices (chips, pellets) in the EU are about three times higher than in the USA.
  • Cost levels in the EU are modest where wood residues can be collected and transported over short distance. Still the prices are volatile.
  • Global prices of sugar are currently highly volatile. Potential for upscaling sugar production is, by most respondents, believed to lie especially in Brazil and SE Asia.

Policy support

  • A key strength of EU is the policy support for R&D.
  • The EU has trouble supporting companies in bridging the ‘valley of death’.
  • Tax levels are relatively high
  • Lack of demand-side policies / public procurement initiatives
  • Permits can be important for choosing specific regions within a country, but only after all other business requirements have been met.

fig3

Figure 3: Scaling up from pilot to demonstration remains a critical challenge. The key is a combination of measures to support risk mitigation (push) and market outlook (pull).

Knowledge infrastructure

  • The USA and the EU are globally considered leading in biobased R&D.
  • Growing competition is to be expected from China and Brazil.
  • Important differences do exist between EU countries for specific areas of expertise (for example biotechnology is relatively big in the UK).
  • The figure below provides a crude estimation of strengths in terms of R&D spending in general (not specific for biobased). fig4Figure 4: Global R&D spending 2011. Size of circle reflects the relative amount of annual R&D spending by the country noted. Source: 2012 Global R&D Funding Forecast.

Energy costs

  • Energy prices are lowest in China and the USA. For the EU, energy prices are relatively high.
  • Within the EU price differences are less significant.
  • Cheap energy on the basis of coal (China) and shale gas (USA) comes with high ecological costs. Many biobased businesses consider this a liability from a CSR / branding perspective.

fig energy1

figenergy2

 What are the specific barriers for investing in the Netherlands and Europe?

High feedstock costs / availability

  • Subsidies for bioenergy seem to create artificially high prices for biomass
  • Lack of incentives for farmers to innovate e.g. sugar quota
  • Regional biomass supply is insecure
  • Waste legislation is not adapted to circular economy concept

Lack of ‘valley of death’ capital

  • Lack of risk capital
  • Lack of government procurement programmes
  • Conditions of government financing are often unfit for commercial parties:
  • Obligation to form consortia
  • Obligation to disclose knowledge

Limited market value biobased products

  • Lack of market incentives for biobased products
  • Limited consumer awareness of (advantages of) biobased products
  • No level playing field for fossil and biobased applications

Burden of regulation

  • REACH requirements press on biobased businesses (especially SMEs)
  • Permit procedures (province, municipalities) take too much time

Fragmentation and lack of critical mass

  • Biobased initiatives are spread too thin
  • Lack of cooperation between regions
  • Lack of international cooperation across Europe

Concluding remarks

In the face of international competition, what role is there for a European biobased chemical industry?

Which possibilities are there for strengthening the position of European feedstock producers?

Which possibilities are there for different EU countries / regions in specialising in forestry, agriculture or waste as key biobased resource

How can the Dutch and EU governments mitigate the risks of biobased investments, most importantly for the support of demonstrations plants?

Which possibilities are there for developing biobased markets within Europe and the Netherlands? How to stimulate consumer uptake of biobased products?