1

Future of Renewable Energy

&Role of State Government

Will HughesWisconsin Department of Agriculture,

Trade & Consumer Protection

Overview

• BioEnergy Scope and Future– BioFuels

– BioPower

– BioProducts

• Rationale for Government Intervention – Federal Role

– State Role

2

BioEconomy Scope

Renewable Product Matrix

DOE Biomass Program Multi-Year Technical Plan, 2003

Glycerol

Ar

5-Hydroxymethyl-

furfural

SG

Ferulic acid

Gallic acid

C6

C5

Higher alcohols

C2

Oxo synthesis products

3-Hydroxy-

propionate

Lactic

Propionic acid

Malonic acid

Serine

Succinic acid

Fumaric acid

Malic acid

3-Hydroxy-

butyrolactone

Acetoin

3-Hydroxy-

butyrolactone

3-Hydroxy-

butyrolactone

Acetoin

Itaconic acid

Furfural

Levulinic acid

Glutamic acid

Xylonic acid

Xylitol/Arabitol

H2

Methanol

Mixed alcoholsBiobasedSyn Gas

Direct

Polymers & gums

TextilesCarpets, Fibers, fabrics, fabric coatings, foam cushions, upholstery, drapes, lycra, spandex

Safe Food SupplyFood packaging, preservatives, fertilizers, pesticides, beverage bottles, appliances, beverage can coatings, vitamins

TransportationFuels, oxygenates, anti-freeze, wiper fluids molded plastics, car seats, belts hoses, bumpers, corrosion inhibitors

HousingPaints, resins, siding, insulation, cements, coatings, varnishes, flame retardents, adhesives, carpeting

RecreationFootgear, protective equipment, camera and film, bicycle parts & tires, wet suits, tapes-CD’s-DVD’s, golf equipment, camping gear, boats

Health and HygienePlastic eyeglasses, cosmetics, detergents, pharmaceuticals, suntan lotion, medical-dental products, disinfectants, aspirin

Iso-synthesis

products

Fischer-Tropsch

Liquids

C3

C4 Aspartic acid

Citric/Aconitic acid

Lysine

Gluconic acid

Sorbitol

Glucaric acid

Ammonia synthesis, hydrogenation products

Linear and branched 1º alcohols, and mixed higher alcohols

Methyl esters, Formaldehyde, Acetic acid, Dimethylether,

Dimethylcarbonate, Methyl amines, MTBE, olefins, gasoline

Olefin hydroformylation products: aldehydes, alcohols, acids

Iso-C4 molecules, isobutene and its derivatives

αααα-olefins, gasoline, waxes, diesel

Fermentation products, Propylene glycol, malonic, 1,3-PDO, diacids, propyl alcohol, dialdehyde, epoxides

Acrylates, L-Propylene glycol, Dioxanes, Polyesters, Lactide

Acrylates, Acrylamides, Esters, 1,3-Propanediol, Malonic acid

and others

THF, 1,4-Butanediol, γγγγ -butyrolactone, pyrrolidones, esters, diamines, 4,4-Bionelle, hydroxybutyric acid

Unsaturated succinate derivatives (see above)

Hydroxybutyrates, epoxy- γγγγ-butyrolactone, butenoic acid

Methyl succinate derivatives (see above), unsaturated esters

Many furan derivatives

δδδδ-aminolevulinate, 2-Methyl THF, 1,4-diols, esters, succinate

EG, PG, glycerol, lactate, hydroxy furans, sugar acids

Amino diols, glutaric acid,substituted pyrrolidones

1,5-pentanediol, itaconic derivatives, pyrrolidones, esters

Numerous furan derivatives, succinate, esters, levul inic acid

Caprolactam, diamino alcohols, 1,5-diaminopentane

Dilactones, monolactones, other products

Gluconolactones, esters

Glycols (EG, PG), glycerol, lactate, isosorbide

Phenolics, food additives

polyhydroxyalkonoates

poyaminoacids

polysaccharides

Hydroxy succinate derivatives (above), hydroxybutyrolactone

Amino succinate derivatives (see above)

Butanediols, butenols

Diols, ketone derivatives, indeterminant

Lactones, esters

Antifreeze and deicers

Fuel oxygenates

Green solvents

Phthalate polyesters

Plasticizers

Polyacrylates

Polyacrylamides

Phenol-formaldehyde resins

PEIT polymer

Polyhydroxypolyesters

Polyhydroxypolyamides

Chelating agents

Amines

Solvents

Nylons (polyamides)

Polyurethanes

Bisphenol A replacement

Polycarbonates

Reagents-building unit

EnvironmentWater chemicals, flocculants, chelators, cleaners and detergents

Reagent, propionol, acrylate

Pharma. Intermediates

Polyvinyl acetate

Polyvinyl alcohol

Specialty chemical

intermediate

Polyethers

Polypyrrolidones

Resins, crosslinkers

pH control agents

Emulsifiers

CommunicationMolded plastics, computer casings, optical fiber coatings, liquid crystal displays, pens, pencils, inks, dyes, paper products

2-amino-1,3-PDO, 2-aminomalonic, (amino-3HP)

ThreonineThreonine

IndustrialCorrosion inhibitors, dust control, boiler water treatment, gas purification, emission abatement, specialty lubricants, hoses, seals

Intermediate Platforms

Building Blocks

SecondaryChemicals

Products/UsesIntermediatesBiomassFeedstocks

SugarsGlucoseFructoseXylose

ArabinoseLactoseSucroseStarch

Starch

Cellulose

Lignin

Oil

Protein

Hemicellulose

3

Fibers

MonomersBioFuels

Green Solvents (ethyl lactate)

Lignin

Polyurethanes

Organic Acids

PolyolsPolymers

Polyesters

Specialty Chemicals

Agriculture

Amino Acids

PharmaceuticalPrecursors

HighPerformance

Materials

Nylon

Ethanol

Feed Additives

Biorefining

Source: Argonne National Laboratory

Beyond BioEnergy and BioFuels

BioProducts

• Chemicals

• Materials

4

BioMaterials

BioMaterials include

novel applications and traditional items.

• PLA: Corn-based polymer can be used in fabric or in heavy duty plastic.

• Milk Paint: Traditional form of paint used in the 1800s that utilizes dairy milk as its base.

Substantial Influence of Industrial Biotechnology in Selected Markets

400 560

300

250

50Fine

Polymers

Bulk

Specialties

2000 2010

1,000

1,400

Market SizeUSD billion

CAGR

+5.5%

+3.5%

+2.0%

+3.0%

Biotech Inroads today

Examples

Biopharmaceuticals

3GT, polylactic acid

Ethanol, adipic acid,

acrylamide

Detergents, lubricants,

Fragrances, food chemicals

60%

10-15%

10-15%

0-50%

2010 Share

$160 - 280 billion

Source: McKinsey and Company, 2003

90

370

380

5

When will the BioIndustry Happen?

Achieving the vision will require an entirely new toolbox – a set of technologies that is unique from that of the petroleum-based chemical industry.

10%

20%

~ 2010

Time

Slow uptake

Fast uptake

2000Today

Source: McKinsey and Company, 2003

Renewable Energy Report Card

4.0%Iowa

2.0%Minnesota

4.5%Wisconsin

6%National

Renewable Energy Use (percent of total)

Source: US Energy Information Agency

6

US Energy Consumption by Energy Source

0.1430.1150.1050.0700.057Wind

0.0630.0640.0640.0650.066Solar

2.8452.7402.6482.6402.907Biomass

0.3400.3390.3280.3110.317Geothermal

2.7252.8252.6892.2422.811Hydroelectric

6.1176.0825.8355.3286.158Renewables

40.13039.04738.40138.33338.404Petroleum

23.00023.06923.62822.86123.916Natural Gas

86.18684.88984.07083.17684.965Fossil Fuels

100.2898.71497.95296.46498.961Total

20042003200220012000Energy Source

(Quadrillion BTU)

Clean Energy Projected Growth2005 – 2015

Source: Clean Energy Trends 2006

Biofuels

Wind Power

Solar Power

Fuel Cells

$0 $20 $40 $60 $80 $100 $120 $140 $160

TOTAL

2005

2015

$US Billions

$52.5

$48.5

$51.1

$15.1

$15.7

$11.8

$11.2

$1.2

$167.2$39.9

7

Biofuels

• Ethanol

• Biodiesel

• Future

Technology

– Cellulosic

– Forestry

Geography of Ethanol Production

Corn Production Density

Bushels/Square Mile

40,000 to 61,800

20,000 to 40,000

10,000 to 20,000

5,000 to 10,000

1,000 to 5,000

0 to 1,000

Ethanol Facility Operating Status

Construction

Operating

Proposed

Ethanol Facility Capacity

Million Gallons per Year (mmgy)

100 to 340

50 to 100

25 to 50

10 to 25

0 to 10

8

U.S. Ethanol Volume Trajectory

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,0001

99

9/0

0

20

00

/01

20

01

/02

20

02

/03

20

03

/04

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

Sep.-Aug. Crop Year

Mil

lio

n G

all

on

s

Renewable Fuels Standard (Crop Yr. Equivalent)

Ethanol Prodn., Slow Growth After 2007/08 (No Cellulosic)

Ethanol Prodn., High Growth After 2007/08 (No Cellulosic)

ForecastHistory

US market growth(DOE estimate)

Billion gallons

0

5

10

15

2000 05 10 15 2020

(Legislation to support fuel ethanol also in Canada, Europe, Brazil, others)

Cost reductionUS cent/gallon

Ethanol among the first and biggest markets to profit from low-cost biomass feedstock

Biomass-based ethanol

Corn Now Mid Long

90

130

70

40

Cost

Corn Based

Biomass based

Total

Ethanol Price Range

Source: US Department of Energy; GOBI International; NREL; MBI; McKinsey

9

BIOHOL TRAJECTORY

Dove Creek

Roaring Springs

Moundville

Mobile

Batesville

Tucson

Bakers field

Martinez

Port Huenem e

VintonUkiah

Coachella

Denver

Monte Vis ta

BerthoudClayton

Lakeland

Brunswick

Rom e

Sergeant BluffClinton

Milford

Saybrook

Chicago

Mt. Vernon

Morris town

Claypool

Unknown

Butler

Bos ton

Belgrade

Glads tone

Greenfield

Redwood Falls

Ironton

Mexico

Eve

Bethel

Nettleton

Meridian

AshvilleMount Olive

Velva

Beatrice

Newark

Taos

Minden

FultonAlbany

Tulsa

Durant

Guym on

Salem

MiddletownPittsburgh

Lewisburg

Giddings

Dallas

Seabrook

Cors icana

Poteet

Laredo

Kilm arnock

Seattle

Bellingham

DeFores t

Unknown

© 2006 Informa Economics, Inc.

Biodiesel Fac ility Capacity(Million Gallons per Year)

50 to 80 (3)

25 to 50 (17)

10 to 25 (23)

1 to 10 (72)

0 to 1 (16)

Biodiesel Facility Status

Active (62)

Construction (14)

Proposed (55)

Soybean Acreage Dens ity(Acres per Sq. Mile)

250 to 365 (44)

200 to 250 (168)

150 to 200 (170)

100 to 150 (168)

25 to 100 (424)

0 to 25 (735)

Biodiesel Facilities in U.S.

10

US Biodiesel Capacity Outlook

0

100

200

300

400

500

600

700

800

900

1000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millio

n G

allo

ns P

er

Year

Capacity Source: Informa Economics

IF THE TAX INCENTIVE IS NOT

EXTENDED BEYOND 2008, THEN

CAPACITY EXPANSION WILL BE FLAT

OR DECLINE.

11

US Senate and House signed concurrent resolutions to support all 25x25 policy.

– 25% fuel and 25% power by 2025

• Wisconsin 25 x 25

– 1.0> billion gallons of renewable fuel

– Top 10 bioproduct producing state

New National Goals

12

Government Intervention

Governor Blagojevich unveils ambitious energy Governor Blagojevich unveils ambitious energy Governor Blagojevich unveils ambitious energy Governor Blagojevich unveils ambitious energy

independence plan to reduce Illinoisindependence plan to reduce Illinoisindependence plan to reduce Illinoisindependence plan to reduce Illinois’’’’ reliance on foreign oilreliance on foreign oilreliance on foreign oilreliance on foreign oil

Illinois provides $25 million in grants for biofuels plants

GOVERNOR PAWLENTY ANNOUNCES TESTING OF E85

CONVERSION KITS

Governor Pataki Unveils Innovative National Policy To DramaticalGovernor Pataki Unveils Innovative National Policy To DramaticalGovernor Pataki Unveils Innovative National Policy To DramaticalGovernor Pataki Unveils Innovative National Policy To Dramatically ly ly ly

Reduce Our Dependence On Foreign OilReduce Our Dependence On Foreign OilReduce Our Dependence On Foreign OilReduce Our Dependence On Foreign Oil

USDA-DOE MAKE AVAILABLE $4 MILLION FOR BIOMASS GENOMICS

RESEARCH

First E85 station opens in Florida

Governor Doyle Announces Four UW Campuses to Be Energy Independent By 2012

Governor Doyle Proposes $450 Million Public, Private Investment Strategy to Develop Renewable Energy

Rationale for Intervention

• Macro Policy– Energy Independence

– Economic Development

– Environmental Benefits

• Micro Policy– Shared Risk

• Research and Development

• Commercialization

• Market/Consumption

13

Federal Intervention

• US Energy Consumption

• US Energy Policy

2005 Energy Policy Act

• Mandate 7.5 billion gallons of biofuels by 2012

– Celluosic 1 billion gallons by 2015

• Ethanol Excise Tax Credit

– Ethanol blend $.51/gal

– Small producer production credit

– Bidiesel tax credit -$1/gal thru 2008

• CCC BioEnergy Program

14

US Energy Policy

Focus on renewable energy and energy efficiency for vehicles and homes.

Vehicles

• Flex Fuel Vehicle Tax Incentive

• Clean Diesel Regulations

• Extend Ethanol and Biodiesel Tax Benefits

• Advanced Batteries--Lithium

• Cellulosic Ethanol

• Hydrogen Fuel Cell Vehicles

State Renewable Energy Incentives with Biomass Provisions

http://www.dsireusa.org/

1) Financial Incentives– State Grant Programs 53 – Production Incentives for Renewable Power Generation

27– Loan Programs 60– Property Tax Incentives 37 – Personal Income Tax Incentives 25 – Corporate Tax Incentives 27 – Sales Tax Incentives 20– Industrial Recruitment Incentives 10– Rebate Programs 104

15

State Renewable Energy Incentives with Biomass

Provisions (cont’d)

2) Rules & Regulations– Construction and Design Policies 14– Generation Disclosure Rules 23– Green Power Purchasing/Aggregation Policies 19– Net Metering Rules 36– Public Benefit Funds 17– Renewable Portfolio Standards/Set Asides/Goals

24– Mandatory Utility Green Power Option 5

Fuel Incentives-Fed/State(use and conservation)

3 4 4Iowa

1 1 1Minnesota

1 1 2Wisconsin

20 13 7Federal

Grants Tax Incentive Other

Source: US Energy Information Agency

16

17

Ag/Forestry Value Chain

Seed Development

CropProduction

CropProcessing

CropUtilization

FoodFuels

Pharmaceuticals

Automotive

Aerospace

Electronics

FoodFeedChemicals

Materials

Pest controlQualityPost-harvestStress mgmt

Input traitsOutput traitsProcess traitsPlants as factories

BIOTECHNOLOGY

18

State Intervention

• Midwest Best Energy Practice

• Wisconsin’s Energy Picture

Midwest States’ Best Practices

• Implement statewide biofuels use requirement

– Since 1997, Minnesota has required all gasoline sold in the state to be E10.

• Encourage the purchase of flex fuel vehicles

– Governor Blagojevich proposed a $500 in state sales tax credit on flex fuel vehicles

• Adjust tax rates to encourage additional biofuel consumption

– Kansas signed a bill to reduce motor vehicle fuel tax on E85 by 7 cents.

19

• Create R&D fund to encourage emerging technology

– Kentucky’s public universities support energy research through their Energy Research and Development Program

– WI BIO grants 12 projects; $1m,

• Use state’s purchasing power to create demand for biofuels

– Executive Order 141- cut State’s petro gas by 20% by 2010 and 50% by 2015

Midwest States’ Best Practices

“Our plan for the emerging bio-based economy will rely on our natural and agricultural resources, historic strengths in manufacturing, research and quality workforce. These world class assets are what sets Wisconsin apart from competitors. And we want local and producer ownership to be a priority as this part of our economy develops.”

Rod Nilsestuen, Secretary, Wisconsin Department of Agriculture, Trade & Consumer Protection

The Future