The ambitious targets of the Paris Agreement cannot be met without significant decarbonisation of the transport sector. In Europe, the revised version of the Renewable Energy Directive (REDII) will enter into force by the end of 2019 and will govern European biofuel policies during the next decade. The directive will gradually phase out unsustainable palm oil –derived biodiesel, while simultaneously creating European wide demand for “low ILUC risk” biofuels. Minimum target for low ILUC risk biofuels will be 3.6% by 2030. In the attempt to accelerate the market introduction of low ILUC risk biofuels, VTT has developed a “Low-CapEx” concept for biomass-to-liquids (BTL) that can be realised at an intermediate scale of 100-150 MW biomass input (corresponding to 30-50 ktoe annual production of transportation fuels) with an estimated investment cost for a first-of-a-kind plant of around 200 - 300 M€. The proposed concept is suitable for non-edible lignocellulosic feedstocks and features an atmospheric steam-blown dual fluidised-bed gasifier combined with a simplified hot-gas clean-up train and a small-scale Fischer-Tropsch (FT) synthesis. The pilot-scale development work was started in a national research project BTL2030 during 2016-2018, and is currently being continued in a H2020 project COMSYN. Based on Aspen Plus simulations, the overall efficiency (to both FT fuels and saleable heat) of the process is 79 – 87 % (LHV). Based on a prospective economic analysis, 1100 – 1300 €/tonne production cost is expected for a first-of-a-kind commercial plant, depending on the price of feedstock. However, significant cost reduction potential exists for subsequent plants through learning-by-doing. We present main results from our R&D work to date, together with a roadmap on how low ILUC risk biofuels could be deployed during next decade in Europe to meet the targets set in REDII.

1. Low-CapEx approach to
synthetic transport fuels
from biomass –
From laboratory to markets
Ilkka Hannula and
Esa Kurkela
14/04/2020 VTT – beyond the obvious

2. 14/04/2020 VTT – beyond the obvious
Consumer demand for sustainable
transport is on the rise

3. 14/04/2020 VTT – beyond the obvious
A ”portfolio” of decarbonization solutions
are under intense development
Cost of Li-ion battery packs in BEV in Nykvist and Nilsson (2015)

4. 14/04/2020 VTT – beyond the obvious
Projects awarded funding between 2012 – 2014 by NER300
Project name Member state Project Sponsor Fuel output Funding
kton/a ktoe/a MW M€ €/MWh
Ajos BTL Finland Forest BtL Oy 150 150 229 88 17
GoBiGas, phase 2 Sweden Göterborg Energi 50 57 87 59 20
UPM Stracel BTL France UPM Kymmene 105 105 160 170 37
Bio2G Sweden E.ON 115 131 200 204 37
Woodspirit The Netherlands MCN 225 102 156 199 -
Synthetic biofuels have faced
repeated set-backs in scale-up

5. 14/04/2020 VTT – beyond the obvious
 Sustainable fuels found competitive over long
distances even as electric vehicles become
cheaper
 Electrofuels remain expensive in the near term
and are difficult to scale up in the longer term.
 Synthetic biofuels identified as being more
competitive than electrofuels at the present time.
 At this state, we need a wide portfolio where we
focus on learning-by-doing and economies of
scale.
Link to the paper: http://bit.ly/2mcUZsO
”Apples-to-apples” comparison of road
transport decarbonisation options

6. 14/04/2020 VTT – beyond the obvious
 Costs strongly affected by scale
Scale economics of synthetic biofuels

7. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
NER 300
 Costs strongly affected by scale
”Initial cost effectiveness
approach to BTL”

8. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
NER 300
GoBiGas
 Costs strongly affected by scale
152 M€

9. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
NER 300
GoBiGas
 Costs strongly affected by scale
 However, scale benefits largely achieved
by 100 MWsynfuel scale
152 M€

10. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
 Costs strongly affected by scale
 However, scale benefits largely achieved
by 100 MWsynfuel scale
152 M€

11. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
 Costs strongly affected by scale
 However, scale benefits largely achieved
by 100 MWsynfuel scale
 GoBiGas ~7.6 €/Wfuel
 Same plant
• 50 MW  5.5 €/Wfuel
• 75 MW  4.8 €/Wfuel
• 100 MW  4.4 €/Wfuel
152 M€

12. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
 Costs strongly affected by scale
 However, scale benefits largely achieved
by 100 MWsynfuel scale
 GoBiGas ~7.6 €/Wfuel
 Same plant
• 50 MW  5.5 €/Wfuel
• 75 MW  4.8 €/Wfuel
• 100 MW  4.4 €/Wfuel
152 M€
2/3
1/3

13. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
 Costs strongly affected by scale
 However, scale benefits largely achieved
by 100 MWsynfuel scale
 GoBiGas ~7.6 €/Wfuel
 Same plant
• 50 MW  5.5 €/Wfuel
• 75 MW  4.8 €/Wfuel
• 100 MW  4.4 €/Wfuel
152 M€

14. 14/04/2020 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
Commercially
viable BTL?
 Costs strongly affected by scale
 However, scale benefits largely achieved
by 100 MWsynfuel scale
 GoBiGas ~7.6 €/Wfuel
 Same plant
• 50 MW  5.5 €/Wfuel
• 75 MW  4.8 €/Wfuel
• 100 MW  4.4 €/Wfuel
152 M€

15. ”NER300 approach” to BTL
14/04/2020 VTT – beyond the obvious
Hydrocarbon
liquids
OXYGEN
GASIFIER
BELT
DRYER
ASU
AUXILIARY
BOILER
Air N2
O2
H2S
Steam Steam
Filter ash
Purge
Steam
Unconverted gas
Bypass
HOT-GAS
FILTER
ATR POX
REFORMER
SOUR SHIFT
SCRUBBER
COOLER
CENTRIFUG.
COMPR.
WET CO2
REMOVAL
RECYCLE
F-T
SYNTHESIS
CO2
Flue gas
Forest
residues
POWER
GENERATION
EQUIPMENT
WSA
H2SO4
WET SULPHUR
REMOVAL
RECOVERY
&
UPGRADE

16. ”NER300 approach” to BTL
14/04/2020 VTT – beyond the obvious
Hydrocarbon
liquids
OXYGEN
GASIFIER
BELT
DRYER
ASU
AUXILIARY
BOILER
Air N2
O2
H2S
Steam Steam
Filter ash
Purge
Steam
Unconverted gas
Bypass
HOT-GAS
FILTER
ATR POX
REFORMER
SOUR SHIFT
SCRUBBER
COOLER
CENTRIFUG.
COMPR.
WET CO2
REMOVAL
RECYCLE
F-T
SYNTHESIS
RECOVERY
&
UPGRADE
CO2
Flue gas
Forest
residues
POWER
GENERATION
EQUIPMENT
WSA
H2SO4
WET SULPHUR
REMOVAL
Give up oxygen
plant: -10%
Eliminate separate
WGS step: -2%
Rethink on-site steam
generation: -5%
Simplify acid gas
removal: -10%
Once-through FT
optimised for plant
overall efficiency
Identified potential
for CapEx savings:
Oxygen plant 10%
Sour shift (WGS) 2%
Steam generation 5%
Rectisol / WSA 10%
 ~25% reduction

17. 14/04/2020 VTT – beyond the obvious
Steam
Forest
residues
Raw
FT product
Char
DFB
GASIFIER
DRYER(S)
DFB
OXIDISER
Filter ash
Offgas
Air
HOT-GAS
FILTER
ATR POX
REFORMER
SCRUBBER
COOLER
SORBENT
SULPHUR
REMOVAL
ONCE THRU
F-T
SYNTHESIS
PRODUCT
RECOVERY
Flue gas STEAM/DH
GENERATION
EQUIPMENT
CENTRIFUGAL
COMPRESSOR
Air
”Low-CapEx” approach to BTL
*Tuomi et al. (2019) and Kurkela et al. (2019)

18. 14/04/2020 VTT – beyond the obvious
Steam
Forest
residues
Raw
FT product
Char
DFB
GASIFIER
DRYER(S)
DFB
OXIDISER
Filter ash
Offgas
Air
HOT-GAS
FILTER
ATR POX
REFORMER
SCRUBBER
COOLER
SORBENT
SULPHUR
REMOVAL
ONCE THRU
F-T
SYNTHESIS
PRODUCT
RECOVERY
Flue gas STEAM/DH
GENERATION
EQUIPMENT
CENTRIFUGAL
COMPRESSOR
Air
”Low-CapEx” approach to BTL
Performance*
- Efficiency to FTL: 49-55%
- Efficiency to DH: 31-40%
- Electricity deficit: 10-12%
TCI for FOAK at 150 MWth scale:
- Central est: 299 M€
- Low est: 255 M€
- High est: 352 M€
*Tuomi et al. (2019) and Kurkela et al. (2019)

19. Production cost estimate for a First-of-a-kind
BTL plant at 150 MWbiom (~1000 bbl/d) scale
14/04/2020 VTT – beyond the obvious
 Total capital investment
(TCI) estimate for FOAK
plant is 299 M€
(255-352 M€) at 150 MWth
scale.
 The levelised cost of fuels
is calculated for three
different biomass prices
Financial parameters:
- WACC: 8%
- Economic life: 20 y
”Best guess”?

20. What will be the value of advanced biofuels?
14/04/2020 VTT – beyond the obvious
Pöyry (Sipilä et al. 2018) study
concluded, that
• The market for advanced biofuels
will likely be supply limited and
• Prices will be largely governed by
the level of fines and tax
exemptions

21. What will be the value of advanced biofuels?
14/04/2020 VTT – beyond the obvious
 Finnish law on promoting biofuels (March 2019)
• Blending obligation will gradually increase to 30% by 2029
• For adv. biofuels obligation will gradually increase to 10% by 2028
• Fine will be 0.03 €/MJ = 1284 €/tonne (~190 $/bbl).
 In Sweden the fine is
• for petrol 490 €/tCO2 = 1580 €/tonne (~200 $/bbl)
• for diesel 390 €/tCO2 = 1281 €/tonne (~180 $/bbl)

22. Average selling price of Neste renewable diesel
and the market price development in Sweden
14/04/2020 VTT – beyond the obvious
As reported by Neste
Value in Sweden

23. Production cost estimate for a First-of-a-kind
BTL plant at 150 MWbiom (~1000 bbl/d) scale
14/04/2020 VTT – beyond the obvious
 Total capital investment
(TCI) estimate for FOAK
plant is 299 M€ (255-
352 M€) at 150 MWth
scale.
 The levelised cost of
fuels is calculated for
three different biomass
prices
Fine for advanced biodiesel
in Finland and Sweden

24. Needed investment support for a FOAK
plant to reach 1280 €/tonne LCOF
14/04/2020 VTT – beyond the obvious
The needed FOAK
investment support is
calculated for
 Three different
investment estimates,
and
 Three different biomass
prices
NER300 awards:
- GoBiGas 2 59 M€
- Ajos BTL 88 M€
- UPM Stracel BTL 170 M€
- Bio2G 204 M€

25. 25
COST EXPECTATIONS FOR NEW TECHNOLOGY – WHERE ARE THERMOCHEMICAL BIOFUELS ON THIS MOUNTAIN ?
($/output)

26. 26
Nth plant
N-1th plant
N-2th plant
1st-of-its-kind($/output)
The ”Mountain of Fog”
COST EXPECTATIONS FOR NEW TECHNOLOGY – WHERE ARE THERMOCHEMICAL BIOFUELS ON THIS MOUNTAIN ?

27. VTT 2018
 Three learning rates (LRs)
• 11 % (electricity from biomass)1
• 20 % (Brazilian ethanol)2
• 26 % (organic chemicals)3
Production cost outlook for 10 000 bpd
deployment
1Rubin et al. (2015)
2van den Wall Bake, J. et al. (2008)
3Merrow, E. (1989)

28. VTT 2018
 Three learning rates (LRs)
• 11 % (electricity from biomass)1
• 20 % (Brazilian ethanol)2
• 26 % (organic chemicals)3
 10 000 bpd equals roughly
0.5 Mt per year, or 8% of the
RED II demand for advanced
biofuels
 However, we do not have a
good understanding on the
early phases of learning
Production cost outlook for 10 000 bpd
deployment
1Rubin et al. (2015)
2van den Wall Bake, J. et al. (2008)
3Merrow, E. (1989)
Pöyry’s long-term estimate
for the value of HVO

29. VTT 2018
Grubler (2010) on the costs of the French
nuclear scale-up:
“The ambitious French PWR expansion
program is legitimately considered the most
successful scaling-up of a complex, large-
scale technology in the recent history of
industrialized countries.”
How to nurture learning by doing?

30. VTT 2018
Grubler (2010) on the costs of the French
nuclear scale-up:
“Reasons for this success lay in a unique
institutional setting allowing
• centralized decision-making,
• regulatory stability,
• dedicated efforts for standardized reactor
designs, and
• a powerful nationalized utility, ÉDF, whose
substantial in-house engineering resources
enabled it to act as principal and agent of
reactor construction simultaneously”
How to nurture learning by doing?

31. VTT 2018
 Joint venture between Helsinki
Energia, L&T and VTT
 Gasification of waste feedstocks
from Helsinki area followed by
upgrading to high-grade products
like fuels and plastics.
 By-product heat will
be recovered and utilised in the
Helsinki district heating network.
 The 5 MW demo phase received
7.9 M€ investment support from
the government in Dec 2019.
Next step: The Helsinki City Refinery

32. VTT 2018
 Thermochemical biofuels are currently risky and costly
• However, technologies can and usually will get cheaper with increasing experience
 Choosing the ”optimum” scale for a FOAK plant complicated.
• Even medium-scale deployment pathways can quickly lead to reasonable
production costs in the medium-term if high learning rates can be realised.
• Better understanding on the economics of scale, and early-stage learning needed.
 Most policies in the past have promoted a “rapid scale-up” approach.
• Problematic due to lack of investment appetite for large-scale high-risk bets.
• Policy implication: Learning, not initial cost effectiveness (€/bbl of NER300), should
be an important goal of early-stage technology promotion.
Summarising…

33. VTT 2018
 Grubler, A. The costs of the French nuclear scale-up: A case of negative learning by
doing, Energy Policy, 38(9), 2010, pp. 5174-5188. DOI: 10.1016/j.enpol.2010.05.003.
 Hannula and Reiner, Near-Term Potential of Biofuels, Electrofuels, and Battery
Electric Vehicles in Decarbonizing Road Transport, Joule (2019),
https://doi.org/10.1016/j.joule.2019.08.013
 Kurkela, E., Kurkela, M., Tuomi, S., Frilund, C., & Hiltunen, I. (2019). Efficient use of
biomass residues for combined production of transport fuels and heat. VTT Technical
Research Centre of Finland. VTT Technology, No. 347 DOI: 10.32040/2242-
122X.2019.T347
 Merrow, E. An analysis of cost improvement in chemical process technologies. R-
3357-DOE. RAND Corporation, Santa Monica, USA. 1989.
 Nykvist, B., and Nilsson, M. (2015). Rapidly falling costs of battery packs for electric
vehicles. Nat. Clim. Change 5, pp. 329–332.
Bibliography

34. VTT 2018
 Rubin, E., Azevedo, I., Jaramillo, P. and Yeh, S. A review of learning rates for
electricity supply technologies, Energy Policy, Volume 86, 2015, Pages 198 – 218.
 Sipilä, E., Kiuru, H., Jokinen, J., Saarela, J., Tamminen, S., Laukkanen, M. and
Palonen, P. (2018). Biopolttoaineiden kustannustehokkaat toteutuspolut vuoteen
2030. http://urn.fi/URN:ISBN:978-952-287-614-0
 Tuomi, S., Kurkela, E., Hannula, I. and Berg, C.G. The impact of biomass drying on
the efficiency of a gasification plant co-producing Fischer-Tropsch fuels and heat – A
conceptual investigation, Biomass and Bioenergy, 127, 2019.
https://doi.org/10.1016/j.biombioe.2019.105272
 van den Wall Bake, J., Junginger, M., Faaij, A., Poot, T. and Walter, A. Explaining the
experience curve: Cost reductions of Brazilian ethanol from sugarcane, Biomass and
Bioenergy, Volume 33, Issue 4, 2009, Pages 644-658, ISSN 0961-9534
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