October 8, 2013, Gatineau, QC - Canadian Renewable Fuels Association (CRFA) president Scott Thurlow did not disappoint at CanBio's AGM held today and tomorrow just over the river from Ottawa.
By Scott Jamieson
The straight-speaking advocate for renewable energy was one of four members on the opening executive panel, and came armed with a shopping list of requirements to push the biofuel sector forward. Topping the list is a national bioeconomy strategy.
"The Unites States has one, although not without its challenges," Thurlow told the 110+ delegates at the CanBio conference. "Europe has had one for years. Canada does not, and it's a priority for our members moving forward."
Thurlow would also like to see the monetization of carbon in Canada, so that industries helping to dramatically reduce the economy's carbon footprint, such as the bioenergy sector, get the credit they deserve, and that it receives in other jurisdictions. He also noted that as the automotive industry strives to make the significant fuel consumption reductions required of it by legislation in the US and elsewhere, it will require gasoline with increasingly higher octane levels. "The best way to achieve those higher levels is through ethanol blending. We'll need to develop the fueling infrastructure to allow for that higher ethanol level."
Yet perhaps the most important step to increasing renewable fuel manufacturing in Canada, especially second generation biofuels like cellulosic ethanol, is additional strategic investments to manage the massive capital required for commercialization.
"I don't like to talk subsidies when you see the return on investment that the biofuel industry has already shown in Canada; I prefer to talk strategic investments. And when you look at the strategic investments Canada has already made in the oil and gas sector, it makes those in the biofuels sector look like rounding errors."
Thurlow added that some challenges are outside our control in Canada. A major impediment to developing cellulosic ethanol in Canada is the flow of relatively cheap corn ethanol from the US. He noted that 40 per cent of the ethanol consumed in Canada is currently corn ethanol from the US. "It's cheap, and as far as the market is concerned up here it is indistinguishable from cellulosic ethanol."
Still, despite that and the ongoing need to reduce pre-treatment costs, Thurlow remains confident in the industry's future, both through increased demand for this high-octane blending tool as well as the potential for value-added products in the biorefinery model.
Joining Thurlow on the executive panel was Ken Shields, CanBio chair and Conifex CEO. Conifex runs two large sawmills in northern BC producing upwards of 350 million bdft/yr in lumber. The company recently secured financing for its $100 million combined heat and power (CHP) project being constructed at a shuttered Abitibit-Bowater pulp mill in Mackenzie, BC. Shields explained how the investment fit into the company's growth plans, and some of the lessons they learned along the way.
"One of the big benefits of projects like these, and one that perhaps doesn't get mentioned enough, is the creation of greater and more stable employment opportunities in remote communities like Mackenzie. In our case we're looking at reducing our lumber costs by $40 per thousand boardfeet by adding this asset, which moves us up to the next quartile in lumber productivity. That means that the next time US housing slows down, we're in a much more solid position to keep running."
Yet despite that, he notes that the tenure system in provinces like BC are still in their infancy when it comes to bioenergy and the bioeconomy. Not only are bioenergy producers like Conifex' separate division 100 per cent dependent on the main resource commodity they stem from, but there is still a relaxed attitude toward under-utilized fibre in most of Canada.
"I'd guess that 100,000 tonnes per year of fibre are not being captured for each sawmilling operation like ours in the BC Interior. Growth in the bioeconomy will require a change in our approach to tenure in Canada."
Finally, Shields explained that given low energy prices in most of Canada by global standards, the bioenergy industry in Canada will remain dependent on export markets for a significant part of its future growth. Support to date from organizations like DFAIT has been crucial, he said, and will be required on an ongoing basis to identify and capture emerging export markets.
Following the executive panel was a bioeconomy financing panel that addressed the hurdles to funding large commercial projects, especially those relying on new technologies. Jeff Passmore of Passmore Group Inc. reviewed the funding available, although he acknowledged that the majority of conventional sources will not be attracted to second generation biofuel or biochemical commercial projects. Of the $80 to $100 billion investment required to meet US targets for advanced biofuels in the coming years, Passmore does not expect much to be funded by either banks or venture capitalists.
"First of kind projects costing in excess of $100 million are not in the wheelhouse of traditional banks. At the same time, venture capitalists come in much earlier, with smaller investments and higher risks." As a result, finding the right finance partner for these projects can be challenging, and typically requires some form of expertise in the field.
Passmore suggests co-developing with partners that can help with finance and share the risk; to look at brownfield sites from old industries rather than developing greenfield infrastructure from scratch; and extracting multiple streams from the resource, with the highest value product taken first.
"If we look at the oil refinery model developed over the years, you'll see a small fraction of the volume produced driving a large part of the revenue. They make their money off the petrochemicals, not the gasoline."
Finally, Passmore noted that Canada is blessed with some significant government support that projects should look to, or get help in accessing. The SDTC fund is a great example for biorefineries he said, as is Export Development Canada if you plan to export 50 per cent of your production.
CanBio also used the occasion to launch its new logo, as well as explain its new focus on networking and cross-association collaboration.