SEKAB impeded by political shortsightedness
At a time when the fossil content of many products is coming under scrutiny, SEKAB (Svensk Etanolkemi AB) is laying the foundation for change.
SEKAB is at the cutting edge in Europe when it comes to producing fossil-free, green chemicals that do not emit fossil carbon dioxide into the atmosphere. In parallel with this work, the company has also developed a technology for producing bioethanol – the second generation of ethanol – from forest residue.
The forest residue is broken down to sugar in SEKAB’s pilot facility and then fermented into bioethanol. The challenge now is to sell the technology to a large-scale project.
The technology developed in the company’s demonstration facility in Örnsköldsvik, Sweden – and which SEKAB is currently in the process of commercializing – involves breaking down cellulose in a process known as fractionation. This process includes four stages: pretreatment, hydrolysis, fermentation and distillation.
When the raw material from Domsjö comes to SEKAB’s facility, it is pretreated with acid and steam to release the sugar from the hemicellulose. Enzymes are used to break down the cellulose and yeast and water are added, thereby allowing the cellulose to be broken down into sugar. Yeast is then used to ferment the sugar from both the hemicellulose and the cellulose into ethanol. Finally, the mixture is concentrated through distillation.
The complicated breakdown and fermentation process is the final stage in a procedure that ultimately yields 5% ethanol. The remaining lignin can be dried into biofuel or refined into fine chemicals. The demo facility in Örnsköldsvik is one of the most advanced in the world and SEKAB’s patented processes have been refined over many years. The facility now has an annual capacity of approximately 200 cubic meters of cellulose-based ethanol.
“We have developed a great technology, but how do we turn it into good business? The challenge is to go from a single fermenting tub to a large-scale project that someone is willing to invest half a billion kronor in,” says Anders Fredriksson, CEO of SEKAB.
One solution for the commercial concept could be to find an energy user in the chemical or pulp industry – a major energy guzzler – to build the first generation of ethanol plants. Such a plant can be found in Poland, where SEKAB is part owner of the Polish company Bioagra, which produces 140,000 cubic meters of ethanol from grain for the German and Polish market.
SEKAB performed a detailed assessment of the opportunities available in a study in which the Polish mill was the focal point of a business case.
– We took our output at Örnsköldsvik and investigated whether the same figure would apply if we scaled up the project in Bioagra. At the same time, we conducted a study to determine the price of biomass on the Continent, including both the cost of biomass and the spot-market price of ethanol, without subsidies.
Following fractionation and ethanol refinement at SEKAB’s facility in Örnsköldsvik based on the above process, the studies showed that the facility in Poland would be able to produce 60,000 tons of ethanol as early as its second year of operation, bringing the plant’s capacity utilization to approximately 95% and generating EBIT of EUR 23 million – and this would be a low estimate. Based on this study, SEKAB applied for EU funding and has since received a grant of EUR 31 million.
– While these are decent figures and a strong foundation, getting the project off the ground will still be a challenge – even if it shouldn’t be if considered in market economic terms,” Fredriksson relates.
– This is because the political risks are greater than in conventional projects, particularly when biofuel is being produced since the biofuel market is currently entirely dependent on political decisions in Europe. Long-term political decisions are not being made.”
A number of ethanol plants already exist in the US where, for environmental reasons and, perhaps most importantly, due to the country’s extensive energy needs, the state provides bank guarantees for projects of this type.
– The technology is in place. The largest obstacle will be to secure financing for a full-scale production facility. The investors are out there, but the political signals are causing them to hesitate.
SEKAB now considers annual production of between 30,000 and 60,000 as the minimum production limit to make building a facility worthwhile, but a rate of 100,000 to 150,000 cubic meters will probably be necessary for future commercial operations.
Building the first production facility will be a challenge. So will the second. But when the time comes to build the third and fourth facilities, there should be plenty of investors interested in providing financing.
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At its Biorefinery Demo Plant in Örnsköldsvik, Sweden, SEKAB has conducted successful research and developed commercial technology for producing the second generation of cellulose ethanol from a number of raw materials, including wood chips, straw and bagasse. SEKAB’s technology is among the five foremost in the world and the company is currently involved in a number of pilot studies at a global level.
The demo facility where SEKAB conducts its operations has an annual capacity of approximately 150 to 200 cubic meters of cellulose-based ethanol. SEKAB previously planned to build a new facility capable of producing between 5,000 and 10,000 cubic meters annually, but this turned out to be too little to cover the operating costs of the facility. Special conditions in terms of integration will be required if these facilities are to become profitable.