The Promise of Renewable Chemicals

Transcription

1 Renewable chemicals are a small but growing part of the global chemical industry. Savvy countries understand both the imperative of sustainability and the opportunity to create new industries and new jobs in renewables. India is a market ripe for domestic production of renewable chemicals and is uniquely positioned to become a global leader in renewable chemicals. The Promise of Renewable Chemicals Timothy G. Staub Timothy G. Staub Global Vice President Business Development, Green Biologics Ltd. (UK)

2 The chemical industry is a $4.5 trillion global industry with annual growth of 4.4 percent over the past 25 years. To put this into perspective, global GDP (gross domestic product) growth over the same time period averaged less than 3 percent annually. The chemical industry is, to be clear, a growth industry. It is an industry built on innovation and intellectual capital. It is an industry filled with brilliant scientists and engineers dedicated to improving lives and livelihoods through applied science. Sustainability Matters Recognising the positive contributions of the global chemical industry is important, but with this recognition comes responsibility to leave the world a better place than we found it for our children, our grandchildren, and future generations to come. On December 12, 2015 a historic accord was reached in Paris, France signed by 195 countries to reduce greenhouse gas emissions and reduce or slow significantly global warming. Fortunately, our industry thrives on challenge, and the greatest challenge we face as a global society is sustainability and the health, safety and environmental security of the world. We are all members of a community called earth. Aside from sustainability and environmental concerns, there is an irrefutable fact: oil is a scarce resource and its long term supply is finite. As a scarce resource, oil Global consumers are embracing sustainability and responsible packaging. Major global corporations are embracing sustainability as a critical business metric. All indications are that the bio-economy will be a major contributor to economic development within those countries that focus on developing bio-industries. is prone to volatility, as seen in Fig 1. From 1948 through 1972 oil remained in the $20 to $25 per barrel range in North America. With the 1972 oil embargo, the world changed and volatility became the norm. It is a certainty that volatility will remain in global oil markets, with recent oil prices breaking through the $35 per barrel pricing barrier. Behind this volatility and scarcity is another reality: Sustainability matters. Sustainability matters because global warming has an impact on every human. And many of these humans are consumers. As consumers, we get to vote every day with our purchases, with the brands we choose to buy, September 2008 MICROTRENDS.NET May 1980 September 2015 January 1945 WTI Crude Oil Price Fig 1. Chart showing volatility in oil prices

3 Table to Comparison in trends influencing renewables industry and with the companies we choose to support with our purchases. Savvy companies realise this and are acting upon it, utilising sustainability as a business opportunity, and not just an imperative. Companies like Unilever, AkzoNobel and Roche (all 2015 winners of the 2015 Dow Jones Sustainability Award) are leveraging their commitment to sustainability with customers, shareholders, suppliers, and employees while driving core values and business practices to ensure continued value. Renewable chemicals are a small Fig 2. Pictorial representation of a circular economy The Make in India campaign promoted by the Indian government is a start, but concerted effort by Indian investors, producers and customers (from industrial end users and formulators to consumers) is needed to meet the growth potential of the industry. but growing part of the global chemicals industry. It is, by definition, the production of chemicals from rapidly replaceable sources of carbon. From 2010 onward, the industry was in full growth mode. Private investors and governments pumped more than $250 billion into renewables in Much of the focus was on renewable energy, and the deals were big. More than 600 deals in 2010 and another 570 in 2011 were closed in the U.S. alone. In India, investments in renewables rose 67 percent to more than $12 billion in Savvy countries understand both the imperative of sustainability and the opportunity to create new industries and new jobs in renewables. In 2013, more than 4 million jobs in the U.S. were directly related to production of renewable products, and more than $369 billion of value was contributed by renewable industries to the U.S. economy. Since 2013, the USDA Bio-Preferred programme has registered more than 20,000 products with an estimated additional 20,000 products in the pipeline. The Circular Economy It s a big deal. For every job in the U.S. bio-economy, another 1.64 jobs are created to support the industry. These are jobs in transportation, maintenance, education, construction, wholesale and retail. The impact on local economies is pronounced. The jobs being created in the bio-economy are well paid and require an educated, committed and dedicated workforce. Those jobs and salaries have a significant impact on the local economy. They purchase homes, autos, appliances, clothing, food, healthcare, and energy. And they are educated consumers who are keen to support sustainability in their purchases. We call this the circular economy. The circular economy underscores the linkage between technology, new product development, distribution, consumption, recycling and waste management, and reuse, repair or recovery in a closed loop system. A few years ago, the term cradle to grave was used to describe the responsibility of manufacturers to own material flow from production to disposal. The circular economy takes this concept to an ultimate objective of cradle to cradle. This concept opens up a range of interconnections between feedstock and finished product, where every element of waste is examined. From energy usage in production and transportation, to the impact of feedstocks on land usage, every element of the ecosystem is assessed to

4 Fig 3. Interactions of the Bioeconomy system maximise the impact on sustainability, whilst at the same time driving the opportunity for profit. The circular economy aligns global trends (water, nutrition, health, environmental) with external drivers (scarcity of natural resources, climate change, land use, supply/demand) to drive opportunities in renewable products. This isn t a matter of altruism. It is entirely a matter of efficiency and responsible capitalism. What does this mean to the global chemicals industry? The global chemicals industry is on course to reach 1,800 million metric tons by According to Markets to Markets, a chemical industry consultant, the renewable chemicals industry will reach $84 billion by According to a recent study by the USDA, renewable chemicals will grow by 1,000 percent to more than 17 percent of the global chemical industry volume by The industry is poised for growth. Jobs in the bio-economy are generally good jobs with good pay, and the benefit to the local economy is significant. Global consumers are embracing sustainability and responsible packaging. Major global corporations are embracing sustainability as a critical business metric. All indications are that the bio-economy will be a major contributor to economic development within those countries that focus on developing bio-industries. So... who are those countries? The answer to this question is threefold: 1) access to feedstocks is important; 2) access to educated and increasingly affluent consumers is important; and 3) access to technology is important. In the bio-economy, there s a saying that sugar is the new oil. Much of the renewable chemicals industry is based on fermentation and industrial biotechnology. It s a marriage of process technology and microbiology to drive productivity and scalability. The key to successful commercialization is scale, and scale requires feedstock. That feedstock is sugar. Opportunities for India India is uniquely positioned to become a global leader in renewable chemicals, driven by a growing middle class of educated consumers and ready access to both feedstocks and technology. India has significant excess ethanol capacity that could be converted to production of renewable chemicals, and a rapidly growing domestic market for n-butanol and acetone. India is the second largest sugar economy on earth, behind Brazil. In the growing season, more than 5,307,000 hectares of sugar cane was planted in India, down modestly from the planting of 5,341,000 hectares. Yields however were at an all-time high of million tonnes of sugar cane and 12.5 million tonnes of molasses. This equates to more than 69 tonnes of cane per hectare. In 2015, upwards of 550 sugar factories operated in India. India is a major player in the global chemicals industry, but with much room for growth. In 2014, India was roughly 3 percent of the global chemicals industry, with an estimated $125 billion market value. Recent studies suggest that the Indian chemicals market will grow to over $190 billion by However, while output has

5 Renewables Fig 4. Global distribution of Feedstocks grown by an average of around 4 percent per year in India from 2009 to 2013, imports of chemicals have grown by over 20 percent in the same time period. The Make in India campaign promoted by the Indian government is a start, but concerted effort by Indian investors, producers and customers (from industrial end users and formulators to consumers) is needed to meet the growth potential of the industry. Fig 5. Number of Sugar Mills in the State (in brackets) India s consumers are the envy of global marketers worldwide. India boasts the 7th largest economy in the world. With a population of 1.2 billion people and a growing middle class of educated consumers, the Indian retail market is over $600 billion and growing. Consumer confidence in India has risen for 7 consecutive quarters and spending is expected to more than double by 2025, making India the world s 5th largest consumer market, up from 12th today. According to a recent study from McKinsey, household incomes in India could triple by Total consumer spending, according to another study by the Boston Consulting Group, could reach $3.6 billion by 2020, including significant increases in spending on food, housing, consumer durables, transportation and com-

6 munication. India is a market ripe for domestic production of renewable chemicals. It has abundant feedstock and competitive production costs, well developed (and improving) infrastructure, an educated and rapidly growing consumer market, and a keen awareness of sustainability by government, producers, retailers and consumers. India is uniquely positioned to benefit from a domestic programme of renewable chemicals. Lastly, India s economy is driven by technology. India is now indisputably the world s fastest growing economy. With growing freedom of the Internet (unlike China) and a strong rule of law, technology can be both developed and protected in India a fact that has not gone unnoticed by global technology companies. Yes, there is a clear opportunity for India to become an Internet powerhouse, but more importantly, India has an opportunity to become a powerhouse for a broad range of technologies including renewable technologies. Unique Position for India India has existing infrastructure and ample feedstock to produce renewable chemicals domestically. In 2015, ethanol production in India is expected to reach 2.1 billion litres with more than 330 distilleries in operation with more than 4 billion litres of capacity. As noted above, there are 550 sugar mills operating in India. These are all potential hosts for high value renewable chemicals either through conversion of existing under-utilised ethanol mills or by bolting on, or collocating a renewable chemicals plant adjacent to an operating sugar mill. And while India s current ethanol capacity is all first generation feedstock (e.g. molasses or cane), India is uniquely positioned for second generation cellulosic feedstocks, with more than 500 million tons per year of biomass available. Solvents and derivatives represent an opportunity for renewable n-butanol and acetone in India. N-butanol is used extensively in industrial and wood coatings, and is used as an intermediate to produce butyl acrylate, butyl methacrylate, butyl glycol ethers, butyl acetate, and butylated amino resins, all critical raw materials in Indian paints, coatings, adhesives and inks markets. Both n- butanol and acetone are used in cosmetics, fragrances and personal care ingredients as well as food ingredients. Butanol is also used to produce butyl amines for rubber chemicals, as well as plasticizers, lubricants and specialty esters. Today, the only domestic producer of n-butanol in India is Andhra Petrochemicals Ltd., with imports supplying much of the domestic demand. Conclusion The $4.5 trillion global chemical industry is driven by innovation and growth. One of the biggest challenges we face as an industry is the reduction of GHG emissions. Major global companies such as AkzoNobel and Unilever see the value of sustainability as a core business metric. They understand that sustainability is good business. Consumers prefer sustainable alternatives and the economic impact of investment in sustainable industries is significant. India is uniquely positioned to become a global leader in renewable chemicals, driven by a growing middle class of educated consumers and ready access to both feedstocks and technology. India has significant excess ethanol capacity that could be converted to production of renewable chemicals, and a rapidly growing domestic market for n-butanol and acetone.