German BioEnergy Association (BBE)

German BioEnergy Association (BBE) Bioenergy in Germany: Markets and perspectives June 22 nd, 2010, Des Moines, USA Thomas Siegmund German BioEnergy Association (BBE)

German BioEnergy Association (BBE) The German BioEnergy Association BBE is the umbrella association of the German bioenergy market and was founded in 1998 to bundle the different sectors and initiatives of the bioenergy market to speak with one voice. Members: 25 specialised associations 140 companies 8 universities and R&D institutions

Bioenergy in Germany: Markets and perspectives Structure German RES targets and the status quo Market development and political driving forces of the bio-electricity sector - Biogas - Biomass Market development and political driving forces of the bio-heat sector Market development and political driving forces of the biofuel sector Conclusion

German RES targets and the status quo National targets of the EU RES Directive United Kingdom Sweden Finland The Slovak Republic Slovenia Romania Portugal Poland Austria The Netherlands Malta Hungary Luxembourg Lithuania Latvia Cyprus Italy France Spain Greece Ireland Estonia Germany Denmark The Czech Republic Bulgaria Belgium 18 % 0 5 10 15 20 25 30 35 40 45 50 RES final energy 2005 RES final energy 2020

Bioenergy in Germany: Markets and perspectives German RES targets and the status quo Targets of German Government 30 % RES Electricity in 2020 10 % RES in Transport in 2020 14 % RES Heat in 2020 } 18 % Final energy demand 8 % bio-electricity 9-10 % predominantly biofuels 10 % heating and cooling with biomass } 11 % Final energy demand

German RES targets and the status quo RES share on final energy demand 2009 [%] 0,2 0,8 0,5 1,6 89,4 10,6 7,5 non-res RES Bioenergy Wind Solar Hydro other RES Source: BMU

German RES targets and the status quo RES market share on final energy 2009 RES Heat 9,6 % RES Transport Fuels 5,4 % RES Electricity 16,1 % 140 120 100 7,7 % [TWh] 80 60 other RES Bioenergy 40 20 5,4 % 5,2 % 0 91 % Bioenergy 100 % Bioenergy 32 % Bioenergy Source: BEE

German RES targets and the status quo Development of total turnover, bioenergy (investment + operation) 12,000.00 10,000.00 8,000.00 8,7 % 6,000.00 4,000.00 2,000.00 0.00 5,4 % 5,2 % 2004 2005 2006 2007 2008 2009 Source: BMU

Market development bio-electricity Bio-electricity generation in Germany, 1990 2009 [TWh] 35,00 30,00 EEG 2000 EEG 2004 EEG 2009 28,70 30,10 25,00 23,80 [TWh] 20,00 15,00 14,10 18,00 10,00 5,00 0,00 1,42 1,45 1990 1991 1992 1993 1,54 1,57 1,87 2,02 1994 1995 1996 1997 2,20 2,48 2,80 3,02 1998 1999 2000 2001 2002 4,13 5,07 6,42 6,90 9,36 2003 2004 2005 2006 2007 2008 2009 Source: BEE

Market development bio-electricity support schemes Strong political framework conditions as market driver - Higher E-production costs - Higher entrepreneural risk - Payment period long enough to incite investments? Planning security EEG - Access to market necessary - Avoidance of blockades Level of Remuneration Guaranteed grid access Sufficient? - Cost based? - Market based? Differentiated by - Technology? - Capacity? - Feedstock?... Purchase obligation - Guaranteed market - Prioritized RES-E transmission? - Fair cost allocation to grid operators?

Market development bio-electricity support schemes The Renewable Energy Source Act (EEG) Planning security: EEG obligates electricity grid operators to purchase RES electricity, to integrate RES with priority into the e-grid and to pay a minimum remuneration rates for it for a 20-year period The remuneration fees for newly installed power plants are lowered by 1% each year to foster technology development and cost degression Technology differentiated support for all RES enables early development of future RES technologies (learning curves, economies of scale etc.) EEG remuneration is allocated to all consumers (~4 EUR/month), hence polluter pays principle fulfilled while acceptance grows due to low costs EEG is evaluated and amended regularly to react to market developments

Bioenergy in Germany: Markets and perspectives Market development bio-electricity support schemes The Renewable Energy Source Act (EEG) Overview EEG 2000: 13 articles ( ) regulating all RES electricity Capacity <= 500 kw <= 5MW <= 20 MW Fee for bioenergy 10,23 Cent 9,21 Cent 8,7 Cent

Market development bio-electricity support schemes The Renewable Energy Source Act (EEG) Overview EEG 2009: 66 articles ( ) regulating all RES electricity Remuneration system biogas <=150 kw <=500 kw <= 5 MW <= 20 MW Basic compensation 11.67 Cent 9.18 Cent 8.25 Cent 7,83 Cent Clean air bonus Old plants 1.0 Cent 1.0 Cent New plants 1.0 Cent 1.0 Cent Energy crop bonus 7 Cent 7 Cent 4 Cent 2,5 Cent (Wood) Rural conservation bonus 2 Cent 2 Cent - Manure-bonus 4 Cent 1 Cent - - Technology bonus (without Gasinjection) 2 Cent 2 Cent 2 Cent 2 Cent Bonus for Gasinjection New plants 1/2 Cent - Old plants 2 Cent - CHP-bonus 3 Cent 3 Cent 3 Cent 3 Cent

Market development bio-electricity - BIOGAS Development of installed biogas plants and capacity in Germany 5.000 1.800 Number of plants 4.500 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0 139 159 186 1992 1993 274 1994 1995 1996 1997 Biogas plants Capacity 370 450 617 1998 1999 2000 850 50 1.050 65 1.300 182 1.600 256 1.750 2001 2002 2003 2004 333 2.500 390 2.680 650 3.500 2005 2006 2007 2008 1.100 3.711 4.500 4.100 1.435 1.271 2009 1.600 1.400 1.200 1.000 800 600 400 200 0 Installed capacity [MW] Source: German Biogas Association

Market development bio-electricity - BIOGAS Biogas electricity, feedstock and CO 2 -mitigation 11,3 X 10 Mio. t CO 2 12 10 8 6 8,9 10,1 biowastes 14% [TWh] 6 4 2 X agricultural & industrial residues 6% = X X energy crops 26% manure 54% 0 2006 2007 2008 2009 Source:

Market development bio-electricity - BIOGAS Expected biogas trends in Germany Higher remuneration and manure bonus within EEG incites great increase of small biogas plants on local sites using liquid manure as feedstock Much wider use of heat through various concepts: - direct local heat use (buildings, green houses, cattle sheds etc.) - heat injection into public DH system - micro gas distribution to satellite CHP (less expensive, lower loss of energy, 30% funding of investment costs) - Heat storage - Organic-Rankine-Cycle (ORC) Source: German Biogas Association

Market development bio-electricity - BIOGAS Excellent perspectives for biogas: bio-electricity No targets for single technologies defined yet, but expected within nreap 2010 Biogas will play a key role in heat, electricity and mobility markets Estimated biogas potential with today s technology: 23-24 bn m³ German Biogas Association expects for 2020: ~ 31,2 TWh electricity generation with biogas ~ 4.400 MW installed capacity ~ 9.000 biogas plants ~ 6-8 bn EUR cumulated investment costs Source: German Biogas Association

Market development bio-electricity - BIOGAS Excellent perspectives for biogas: biomethane injection Government aims to inject 10 bn m³ biogas (= 6 bn m³ biomethane) into the natural gas grid until 2020 (but voluntary, not binding) So far 35 biogas injection plants in operation (18 are being build at the moment, 17 are in planning process) To inject 6 bn m³ biomethane in 2020, approx. 1.200 to 1.800 new biogas plants ranging from 4-6 MW th will be needed = 120 new plants annually Estimated investments: 10 12 bn EUR, necessary farm land: 1,2 m ha Voluntary agreement: to double efficiency of total biogas value added chain (compared with 2000) to double the biogas yields per hectare, resp. to halve the necessary farm land to reach political aims Beneath CHP future market potential as transport fuel and in the heating sector

Market development bio-electricity - BIOMASS Development biomass CHP and structure 2008 250 1400 biomass plants Capacity 1200 200 1000 number of plants 150 100 800 600 installed capacity [MW] 400 50 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 18% 1% 39 plants 102 plants Source: > 5 MWel 0,5-5 MWel 0,5 MWel 68 plants 80%

Market development bio-electricity - BIOMASS Material flows in relation to plant size (2008) 0,5 MWel 0,5-5 MWel > 5 MWel 60 60 60 50 50 % of plants <0,5 MWel 50 40 30 20 % of plants 0,5-5 MWel 40 30 20 % of plants >5 MWel 40 30 20 10 10 10 0 Waste Wood Forest Wood / landscape management Mix 0 Waste Wood Mix 0 Waste Wood Forest Wood / landscape management Mix Source:

Market development bio-heat Structure of RES heat supply 2009 [110,5 TWh in total] 52% solid biomass (household solid biomass (industry) solid biomass (DH) liquid biofuels gaseous biofuels 5% 4% 5% 13% biowaste solarthermal energy geothermal energy 9% 7% 5% Source: BMU

Market development bio-heat Biomass use for heat (1997 2009) 120.000 100.000 80.000 [GWh] 60.000 40.000 20.000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: BMU

Bioenergy in Germany: Markets and perspectives Market development bio-heat Wood pellet market 2009 at a glance heat market shares 40 % on final energy consumption, heat in households even 90 % installed wood pellet units in 2009: 125.000, trend to larger systems (> 50 kw) branch target: +30 % annual growth of sold units to 650.000 systems in 2015 70 wood pellet production sites, usually with 10.000 50.000 tons capacity 2,5 m tons pellet production capacity in 2009 (0,39 m tons in 2005!) 1,6 m tons pellet production in 2009 (+7 % to 2008), 1,1 m tons sold domestically 28% of produced pellets were exported (40% in 2008)

Market development bio-heat support schemes Relevant support schemes for bioheat in Germany Renewable Energy Heat Act (EEWärmeG) RES heat obligation for new buildings Market Incentive Program (MAP) Investment subsidies Renewable Energies Source Act (EEG) incentive for CHP for biopower plants Ordinance on natural gas grid access (GasNZV + GasNEV + ARegV ) Removal of barriers for biogas feeding Joint Task for improvement of agrarian structures and coast protection (GAK) support of grids for district heating or biogas in the frame of rural development

Market development bio-heat support schemes Renewable Energy Heat Act (EEWärmeG) As of 1 January 2009 owners of new buildings > 50 m² will be obliged to provide a minimum share of their heat demand with RES: - min. 15% with solar energy or - min. 30% with biogas district heating if provided by a CHP plant or - min. 50% with liquid biofuels when sustainability is certified or - min. 50% with biomass in high efficient systems or - min. 50% with heat pumps Requirements for bioenergy: > 50 % boiler efficiency for biomass, biogas only if used in CHP plant, liquid biofuels only in modern systems and certified sustainable produced fuels, operation of bioenergy systems has to be proved annually by bill of fuel supplier over a period of 15 years

Bioenergy in Germany: Markets and perspectives Market development bio-heat support schemes The Market Incentive Program (MAP) MAP supports bioheat with investment subsidies, long-term and lowinterest loans and/or partial release of depth. Total budget in 2009: 400 million In 2008 budget was 236 million initiating 150.000 investments worth of 1,6 billion in total; since MAP s start in 2000 subsidies amounting to 912 million have been granted initializing total investments of 7,7 billion

Bioenergy in Germany: Markets and perspectives Market development bio-heat support schemes The Market Incentive Program (MAP) by KfW RES heat systems > 100 kw th are supported by KfW since September 2008 with low interest loans and up to 30 % repayment grant of investment costs: - Biomass heating- and biomass CHP plants - district heating grids and heat storages - plants to uprade biogas to natural gas quality - biogas grids ( micro grid ) - other RES (geothermal systems (thermal and CHP), large solar collectors > 40 m² (hot water, heating backup, process heat, solar cooling)

Market development biofuels support schemes and legal frame Energy Tax Law and Biofuels Quota Act Since 2007: 2 way strategy: - Energy Tax Law with decreasing tax exemptions for B100 and PPO Pure Bioethanol (E70 E90) exempted from energy tax until 2015 - Biofuels Quota Act with rising obligation for diesel and petrol fuel to blend biofuels (fully taxed: (45 ct/l Biodiesel, 65 ct/l Bioethanol). Biofuel quota since 2009: 6,25% (cal.) by 2010 2015 with subquotas: - 4,4% (cal.) diesel (~ 2,1 m tons biodiesel) - 2,8% (cal.) petrol (~ 1,1 m tons bioethanol) - 3% (vol.) HVO from 2010 (~ 0,5 m tons HVO) Compliance with fuel standards DIN EN 14214, DIN EN 15376, DIN V 51605 and with Sustainable Biomass Ordinance.

Market development biofuels - BIODIESEL Biodiesel production costs (Jan Jun 2009) Integrated plants not integrated Feedstock costs: 69,4 ct/l 54,7 ct/l Proceeds by-products: -24,8 ct/l -1,9 ct/l Production costs: 21,4 ct/l 11,78 ct/l Logistic: 3,5 ct/l 2,6 ct/l Extraordinary expenditures: 8,0 ct/l 8,0 ct/l Energy Tax: 18,41 ct/l 18,41 ct/l Sum: 95,91 ct/l 93,59 ct/l Fossil diesel: 85,48 ct/l 85,48 ct/l Balance: - 10,43 ct/l - 8,11 ct/l Source: Deutscher Bundestag

Market development biofuels - BIODIESEL Development B100-taxation (ct/l) 50 40 42,20 45,03 45,03 30 30,40 20 24,50 18,29 10 14,90 9,00 9,03 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 tax increase as of 2007 tax increase as of 2010

Market development biofuels Development biofuel quota 9,00% 8,00% 7,00% 6,00% 6,25% 6,75% 6,25% 7% 6,25% 7,25% 6,25% 7,50% 6,25% 7,75% 6,25% 8% GHGmitigation quota 5,00% 5,25% 4,00% 3,00% 2,00% 1,00% 0,00% 2009 2010 2011 2012 2013 2014 2015 biofuel quota as of 2007 biofuel quota as of June 2009

Market development biofuels Market development biofuels market volume blends 4.500 2,8 % 3,4 % 5,25 % 6,25 % 4.000 [1.000 t] 3.500 3.000 2.500 2.000 1.500 1.000 500 460 1.423 625 1.613 1.094 2.002 1.094 577 2.189 Bioethanol HVO Biodiesel Difference 0 291 2007 2008 2009 2010 Source: UFOP

Market development biofuels - BIOETHANOL Bioethanol production in DE [kt] 1.000 900 904 9 800 202 700 600 500 460 591 E70 - E80 ETBE Ethanol blend 400 300 340 310 693 200 100 0 20 130 2004 2005 2006 2007 2008 2009 Sales 2009 Source: BDB e

Market development biofuels - BIODIESEL Market development biodiesel DE 3,5 3,26 3 2,5 2,87 0,93 1,42 2,81 2,53 [million tons] 2 1,5 1,64 2,28 1 1,94 1,84 0,5 1,17 0 0,25 2006 2007 2008 2009 B100 Biodiesel blend Source: VDB

Market development biofuels Market development biofuels 12,00% 10,00% 1% 8,00% 6,00% 6,30% 7,20% 5,90% 5,40%? 4,00% 3,80% 9% 2,00% 0,00% 0,40% 0,60% 0,90% 1,40% 1,80% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009... 2020 Biofuels other RES estimated Source: VDB

Market development biofuels Decarbonization Strategy From 2015 biofuels for transport are no longer supported by volume but by GHG-mitigation potential: 3 % GHG-reduction in 2015 rising to 7 % in 2020 Biofuels Quota 2009-2014 GHG-Quota > 2015 Net mitigation rate Resulting biofuels blended Year cal. % % % cal. % 2008 3,4 2009 5,25 5,25 2010-2014 6,25 6,25 2015 3 50 6 2017 4,5 60 7,5 2020 7 70 10 Assumption: Rising GHG-mitigation contribution of biofuels from 50 % in 2015 (required by EU Directive) to 70 % in 2020

Market development biofuels Sustainability Criteria for transport biofuels Biofuels need to guarantee sustainability criteria by certificate from 2011: - Minimum GHG-savings of 35% until 2017, of 50% by 2017 (60% for new production plants in 2018) compared to fossil fuels - no energy crops from areas with a high biodiversity value in January 2005 (natural forest, grassland ) - no energy crops from areas with high carbon stock (peat land ) - energy crops in EU only if Cross Compliance regulations are met 2 certification schemes and 11 audit companies accredited so far, but 3.000 units to be audited now to guarantee sustainable biomass for autumn s biofuel production => shortage of certified biomass / biofuels???

Conclusion Perspectives Development of German bioenergy market will grow steadily Estimation BBE: 15% on final energy consumption in 2020 With right political support, up to - 39bn Euro are expected to be invested, leading to - 100,000 new jobs to 200,000 bioenergy jobs in total until 2020 BBE Recommendations - Electricity: continuity and regular adaption of EEG to market needs - Heat: more reliable and budget neutral support scheme - Transportation: revitalization of pure biofuel market

Bioenergy in Germany: Markets and perspectives Conclusion Final remarks German market will remain an attractive market and offers excellent investment opportunities Long-lasting market experiences, detailed know-how and lessons-learned make German technology providers to valuable partners for co-operation on global markets

German BioEnergy Association (BBE) Thank you for your attention German BioEnergy Association (BBE) Thomas Siegmund Godesberger Allee 142-148 53175 Bonn Tel.: +49.(0)228.81002-23 Fax: +49.(0)228.81002-58 siegmund@bioenergie.de Skype: thomas.siegmund