Germany's Choren Industries will launch the country's first commercial producer of second generation biofuels in the autumn and will select the site for a second, larger plant in the coming weeks, the firm said on Wednesday.
Choren will produce synthetic diesel from low-cost waste materials using the so-called biomass-to-liquid (BTL) process. Wood and wood chips will be the main raw material initially used but later more straw could be processed. Established first generation biodiesel and bioethylene producers largely use vegetable oils such as rapeseed, soyoil and palm oil or corn.
As such raw materials are costly and are generally required as food, some observers believe the second generation technology presents a better long-term prospect. "We will not compete for raw materials with the food industry," said Choren business development manager Matthias Rudloff. "This will not only have lower costs, we will also have greater flexibility to move to other supplies if one raw material is unavailable for any reason."
The first plant will start the first commercial-scale production of 15,000 tonnes of BTL green diesel annually at Freiberg in east Germany using around 65,000 tonnes of wood and wood chips as raw material annually, he said.
This plant would provide experience of the advanced technology at commercial volumes. It is currently under construction with investment totalling around 50 million euros.
Production would be largely aimed at the blending market. "This is where we see the main sales potential," he said. Germany introduced compulsory blending of biofuels with fossil fuels at oil refineries in January this year.
The European Union is discussing substantial increases in levels of biofuels permitted in fossil fuel blending to achieve carbon dioxide reduction targets to stop global warming.
Oil giant Royal Dutch Shell is a minority shareholder in Choren and its huge European oil refining operations are viewed as a major potential customer. Choren is in the final stages of selecting the German site for a much larger BTL fuel plant costing around 500 million euros, Rudloff said.
This will produce about 200,000 tonnes of BTL diesel annually. "Construction could start in 2008 and production could start in late 2010," he said. About one million tonnes of BTL raw materials will be consumed annually.
The company does not rule out imports of biomass material in the medium term as increasing demand for biofuel production could make what is now largely low-grade waste into important raw materials.
Two sites were being considered, one at Brunsbuettel near Hamburg in north Germany and another at Lubmin in east Germany. A decision is likely in the next few weeks. This would be the first of five 200,000 tonne production units that the company plans to raise its total output to around one million tonnes of BTL diesel by around 2015.
"We will move from wood to greater use of straw but the group of five larger units would anyway open major opportunities to optimise raw material supplies," he said.