European Non-Food Agriculture E N F A

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European Non-Food AgricultureE N F A
Kick-off-MeetingMai 9th 11th 2005Hamburg,
University
Work Package 25 Bioethanol and Biodiesel
University of Hohenheim, Germany,Jürgen Zeddies
and Oliver Henniges
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Proposed activities in the application

• Cost and potential of bio ethanol and biodiesel
• Regional dimension
• EU-15, NUTS 2
• Different raw materials
• Wheat, sugar beets, maize, potatoes

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Methodology

• Farm accountancy data network (FADN) of EU-15
  (1997- 2002)
• Data available
• About 60 000 farms
• Calculation of gross margins (ARACOST)
• Accomplished by standard data for sugar beet
• To be completed for wheat, maize, others

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Cost of raw material

• Type of model already available
• Comparative static approach
• Results variable cost, opportunity cost,
  marginal cost for different raw materials
• Time dimension
• Base 1997 2002
• Reference 2008
• Prognoses up to 2020

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Cost of conversion

• Biodiesel RME and by products for Germany
• Bioethanol distinguished by different raw
  materials, and technical processes (DDGS,
  biogas)
• For Germany
• For main competitors worldwide

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Assessment of production potential

• Raw material (oilcrops, cereals, beets)
• Regional dimension (Germany, EU-15, and EU-28)
• Assessment of supply elasticities

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Markets for biofuel

• National markets (Germany)
• EU domestic market
• World market

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Open questions for the study

• Which kind of raw material should be considered?
  Potatoes? Sunflower ? Soy beans?
• Can other lines for biofuel be ignored (sun
  fuel)?
• Regional dimension EU-15 or EU-28?
• Definition of time horizon (base, reference,
  prognoses?
• Should greenhouse gas emissions in conversion
  processes considered as well?

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Links to other projects

• German Ministry of Environment . Cost and
  potential of biomass
• German Ministry of Environment .Macro economic
  study of biomass for energy
• Oliver Henniges Bioethanol Worldwide analyses
  of competitiveness
• DFG-Project Zeddies Mitigation strategies for
  green house gas emissions in agricultural

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First results

• Data flow
• Potential for biomass from agriculture
• Germany
• EU-15 and EU-28
• Biodiesel (RME)
• Bioethanol
• Production cost international
• World trade / world production
• World market price
• Models for bio fuel markets

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Supply elasticity in der EU 15



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Supply potential for energy crops in Germany
(base 1000 t)



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Supply potential for energy crops in EU-15 (base
1000 t)



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Biomass for energy ?Political decisions in EU

• Share of renewable energy of primary energy
  consumption in 2010 up to 12
• Similar goals in member states
• Various initiatives in member states to reach
  these goals
• Germany Renewable Energy Law (higher price for
  supplier)
• Exemption from mineral oil tax

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Resources

• Wood
• Agricultural by products (straw)
• Liquid energy from crops (bio diesel/RME,
  ethanol
• Biogas

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Heating facilities for wood pellets
10.05.2005 / Hamburg2/ENFA-Workshop
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Markets for bio energy- Electric Energy -

• Biomass from
• Wood, primarily old wood from buildings
• Agricultural by products (straw)
• Liquid bio energy
• Biogas

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Electricity plants for biomass
10.05.2005 / Hamburg2/ENFA-Workshop
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Electricity plants from biogas
10.05.2005 / Hamburg2/ENFA-Workshop
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Markets for bio fuel

• Bio diesel from oil crops
• Ethanol
• Synthetic fuel (biomass to liquid)
• Biogas

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Bio diesel plants capacity
10.05.2005 / Hamburg2/ENFA-Workshop
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• Bio fuel in Germany
• 2004 only rape seed oil (RME) as poor fuel
• About 1.2 mio t from about 750.000 ha
• Little natural rapeseed oil in tractors
• 2004 three factories are producing ethanol from
  cereals

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Why Bio ethanol?

• Kyoto Protocol ? CO2 reduction
• Energy (in-) dependence
• Concrete EU target regarding biofuels
• 5,75 Energy- in 2010
• Further Challenges
• Jobs in rural areas
• Market relief for agricultural commodities
• Alternative incomes for farmers
• Maintenance of sugar beet cultivation

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Why 100 Tax Reduction in D?

• EU Commission agreed with tax exemption, since
• Production Costs 69 Cent/l
• 107 Cents/l
• Gasoline price at that time
• No further calculations cited
• Officially no overcompensation of production
  costs difference

only 65 volume based energy density
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Tax Relief in the EU
Source FO Licht, Ethanol Production Costs A
Worldwide Survey
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Bio ethanol Requirements

• EU Directive 2003/30 EG
• Share of renewable energy in fuels in
• 2006 2,00 (0,75 points/year)
• 2011 5,75 ( ? 8,8 Vol.- )
• For Germany that means
• Gasoline consumption 2003 25,7 Mio t
• 2,00 Energy 10,5 Mio hl
• 5,75 Energy 30,3 Mio hl

10.05.2005 / Hamburg2/ENFA-Workshop
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Required Land
Assumption 5,75 energy- ethanol blend

• Potential ethanol demand EU-25 (acc. to
  COLBERT) 132 mln hl
• Cereals 85 112 mln hl
• Sugar beet 15 20 mln hl
• Raw material requirement
• Cereals 31,8 mln t
• Sugar beet 19,9 mln t
• Required land 6,4 mln ha
• Cereals 6,1 mln ha
• Sugar beet 0,3 mln ha
• Total agricultural area EU-25 167 mln ha
• Set aside area EU-25 7,0 mln ha
• Data according to COLBERT, D EU Need for Biofuel
  Import? FO Licht World Ethanol Conference 2004,
  London, 9. Nov. 04

10.05.2005 / Hamburg2/ENFA-Workshop
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World Production by Country
EU need in 2010 130 mln hl
10.05.2005 / Hamburg2/ENFA-Workshop
Source Dr. Christoph Berg, FO Licht, World
Ethanol Conference 2003
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International Trade
10.05.2005 / Hamburg2/ENFA-Workshop
Now 1.5 mln hl Planned Mercosur Contingent 12
mln hl
CBI 2.66 mln hl
4.16 mln hl
4.77 mln hl
For comparison World Production 400 mln hl
Source FO Licht, Germany
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Bio ethanol in Germany
today...
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Production Costs Germany

• Assumptions
• Multiple feedstock plant
• a) 0,5 mln hl/year
• b) 2,0 mln hl/year
• Raw material
• Beet campaign (90 days) beet juice
• Rest of year wheat
• ? 64 ethanol from wheat, 36 from beet
• Wheat Price 100 /t
• ? Beet Price ?

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Production Costs Germany(pWheat 100 /tincl.
transport)
10.05.2005 / Hamburg2/ENFA-Workshop
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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Beet Price?
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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Production Costs in D(pWheat 100 /tincl.
transport)
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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Bio ethanol
in
Brazil
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Brazil
10.05.2005 / Hamburg2/ENFA-Workshop
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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Production Costs Bio ethanol BR
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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Production costs Brazil (2003)
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
14 /hl !
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Bagasse Burning
10.05.2005 / Hamburg2/ENFA-Workshop
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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State Support in BR

• Mandatory blending
• 20-25 Vol- depending on market situation
• Tax reduction (2003)
• Gasoline 30 US-Cents/l
• Ethanol 17 US-Cents/l
• Small car tax reduction

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Bio ethanol in Brazil

• Low feedstock costs
• Largest producer worldwide
• Large potential for expansion
• Large-scale facilities for export exist
• Rising demand by Total Flex Cars
• Serious competitor for EU production

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International Comparison of Production Costs
10.05.2005 / Hamburg2/ENFA-Workshop
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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Competitiveness against Gasoline in Germany
10.05.2005 / Hamburg2/ENFA-Workshop
Please contact Prof. Zeddies (zeddies_at_uni-hohenhei
m) or Oliver Henniges (henniges_at_uni-hohenheim) for
further information regarding this slide
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What about the competition of biomass for
nutrition and energy?

• 1. Relevant variables
• The demand for nutrition
• Population growth
• Per capita consumption
• The world market prices for agricultural
  commodities
• The supply elasticity for biomass
• 2. Expectations for the next 20 years
• population growth
• World 1.1
• EU 28 0.3

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Price developments

• 1. Oil price
• Increase of ca. 50 in 25 years
• Absolute 18 to 28 US
• 2. Cereals
• Increase of 10- 20 in 15 years
• 3. Oilseeds
• Decrease of 13 to 27 in 10 years
• 4. Sugar
• constant

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Production and agricultural surpluses in EU

• Food demand 0,3 /year
• Production 1.5 to 2 /year
• Set aside land 5 to 7
• Potential relief of land from surplus production
  5
• Total balance of land for biomass in EU 25
• in 10 years about 22
• In 20 years about 35