CHAPTER - 1
Introduction
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CHAPTER - 1
“The country that harnesses the power of clean, renewable energy will lead the
21st century”.
Barack Obama, President of the United States.
1.1 Introduction
President Obama has a comprehensive plan to chart a new energy future by
embracing alternative and renewable energy, ending the addiction to foreign oil,
addressing the global climate crisis and creating millions of new jobs that
cannot be shipped overseas. The recent rises in oil prices and the ecological
disaster due to the explosion of the oil rig `Deep-water Horizon` off the coast of
Louisiana turn on the question on the use of fossil fuels and the real chances to
adopt biofuels in the foreseeable future.
The microscopic organisms - bacteria, cyanobacteria, fungi and algae are
biological factors that are proving to be efficient sources of bio-fuels with low
environmental impact that might represent an alternative to oil. Dr. Craig Venter,
CEO of Synthetic Genomics, recently claimed the creation of the first synthetic
cell and argues that synthetic algae may represent the final solution to replace
fossil fuels (Gibson et al., 2010). In 2009, ExxonMobil devoted $600M to algal
biofuel project with Synthetic Genomics. Venter stated that "the real challenge
to create a viable next generation biofuel is the ability to produce it in large
volumes which will require significant advances in both science and engineering
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[…] the alliance between SGI and ExxonMobil will bring together the
complementary capabilities and expertise of both companies to develop
innovative solutions that could lead to the large scale production of biofuel from
algae" (Ritch, 2009).
The main biofuel currently on the market is ethanol, produced mostly in the
United States by fermenting corn sugars. This type of production is now the
subject of harsh criticism for the rising food prices that determines. Researchers
are now trying to experiment with new biomass to feed the microorganisms that
should ferment sugars, producing ethanol. The material is the cheapest
lignocellulosic biomass, including wood residues, recycled paper and waste
materials of crops dedicated to energy production.
Liquid biofuels represent a hot topic in light of the rising global awareness on
climate change. To achieve a rapid scale-up in biofuels production,
governments started to enact a coordinated and consistent set of policies. Since
the beginning, Obama`s administration is considering the development of
biofuels market as a primary objective to increase energy efficiency and the
availability of renewable energy as clearly stated in the Energy Independence
and Security Act (CRS, 2007).
The Environmental Protection Agency (EPA) issued final rules for the federal
Renewable Fuel Standard. The biofuels industry now must step up production
to meet the aggressive targets for producing cellulosic biofuels in the coming
years. EPA also revised its estimates on the impact of biofuels production on
greenhouse gas (GHG) emissions.
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There are four biofuels meeting GHG reduction thresholds in USA:
1. Corn-based ethanol created using new efficient biotechnology methods
2. Fuels derived from cellulosic materials
3. Diesel produced from algal oils
4. Biobutanol created from corn starch
In Europe, the Commission has proposed new, legally binding targets for
renewables in the overall EU´s energy mix (20% by 2020) and for biofuels in
transport in special. In this case, the target is 10 % by 2020. Regarding the UK
position, the introduction of a UK Road Transport Fuels Obligation (RTFO)
requires that 5% of the national transport fuel comes from a renewable source
by the end of the current year. In the first year of operation, 2.7 % of total
transport fuel was biofuel (Renewable Fuel Agency, 2010). Performances
related to fixed targets are shown below in Table 1.1. Biofuels delivered a 46%
carbon saving compared to the equivalent fossil fuels.
Table 1.1 Governments targets vs. performance
(Source: Renewable Fuel Agency, 2010)
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The urgent matters of climate change and global warming make these results
even more meaningful. There is a global challenge that must be faced and
cannot be ignored. The recent United Nations Summit in Copenhagen
(December 2009) and the adoption of the Kyoto protocol by 187 countries are
clear signs for the global business leaders.
The two most common biofuels in UK are bioethanol and biodiesel. The latter
represents the 82% of total biofuel supplied by the companies under the RFTO
obligations. This means that bioethanol production in UK is still at its infancy. At
the moment, Germany is a world leader in production of biodiesel by chemical
esterification of animals’ fat or vegetable oil (Walker and White, 2007). USA and
Brazil lead the market of bioethanol in different ways. The former focuses on
maize starch hydrolysis and fermentation whilst the latter exploits fermentation
of sucrose extracted from the cane sugar.
Table 1.2 Sources of fuel alcohol in Scotland
(Source: Walker and White, 2007)
Feedstock Current Status
Wheat Scotland is an importer
Barley Not an ideal feedstock for bioethanol
Sugar beet Not since 1960`s
Potatoes Production focused on high quality seed potato
Cheese whey Potable spirit only
Spent grains Greatest potential
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The idea to investigate the prospects for biofuel use in transport came from
the work of Walker and White (2007) which analyzed the potential sources of
bioethanol in Scotland. The results are shown in Table 1.2 with lignocellulose
biomass looking as the most promising feedstock. The scientists are also
conducting a research programme to investigate the potential of spent grains as
substrates for further yeast fermentation.
1.2 Aims and Objectives
Biofuels emerged as a centrepiece of the international public policy debate.
Taken into account the opportunities and challenges of this new market, the
researcher decided to evaluate the business perspectives in Scotland. In
particular, the researcher found very interesting the possibility of exploiting the
technological advantage and expertise of Scotland in industrial alcohol
production for achieving a global sustainable competitive advantage in the
renewable fuels sector.
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Scotland has a distinguished history in the development of renewable energy
technology. From small prototypes to giant commercial machines, Scotland is a
test-bed for the future of renewables. Currently, the top priorities are wind
energy schemes, marine power and off-shore plants but the production and
commercialization of biofuels is crucial to make Scotland a leader on climate
action.
The researcher aims to study the business perspectives for lignocellulose
biomass-derived liquid fuels to be used for transportation since the RFTO and
the EU targets force the market to adopt biofuels. The aim of this study is to
shed light on the issues behind the development of a sustainable domestic
biofuels industry in Scotland. The industrial process scalability is put on
question along with further commercial production. In particular, the researcher
identified the following issues:
1. Cost effective infrastructure to maximize economies of scale to
reduce unit costs;
2. Reduction of high production and capital costs;
3. Securing financial support during pre-commercial development;
4. Establishing feedstock supply arrangements and improving yields
to reduce feedstock costs;
5. Sound policies and regulations to sustain industrial development;
6. The “Blend Wall” constraint
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The identification of these issues led the researcher to propose the following
research hypotheses:
1. Is lignocellulose biomass-derived fuels production feasible in terms
of costs and economies of scale?
2. Could the Scottish technological and engineering expertise be
useful to achieve a global competitive advantage in bioethanol
production?
The researcher decided to collect quantitative data through semi-structured
interviews contacting scientists from the University of Abertay (Dundee,
Scotland) working on bioethanol derived from yeast fermentation, market
analysts and experts in brewing/distilling sector. Furthermore, it has been
decided to implement additional data from previous reports and studies to
enhance the reliability of qualitative data.
1.3 Dissertation Overview:
Chapter One – The author introduces the topic and context including a
set of new policies introduced in EU, USA and UK which may justify
further business initiatives in Scotland. The aim of the research work is
also included.
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Chapter Two: Literature review to set the background of the study is
conducted introducing the topic, the macro-economic context, current
projects undergoing worldwide and citing the most relevant news from
journal and press articles (e.g. The Economist, Financial Times).
Chapter Three: Research methodology and research methods that have
been used to carry out the research are presented and discussed in
details. Validity, reliability and limitations of the method utilised are
specified.
Chapter Four: Presentation of findings obtained from qualitative data
gathered conducting a set of interviews with semi-structured questions
along with the review of relevant foresighting reports. PEST and SWOT
analysis.
Chapter Five: Analysis and discussion of findings obtained in light of
relevant literature presented in chapter two.
Chapter Six: Conclusions and recommendations for the way forward.
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