Resource study:Recovered vegetable oil and Animal fats in Ireland

Project summary

Simon DickGlasnevin 30 March 2004

- 2 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

With 20 minutes to cover a lot of ground, this session is necessarily brief and to the point

• 2 minute background

– Clearpower

– RVO and Tallow resource study

• Taking 5 minutes for each of the two resources analysed, we will cover:

– What we said we were going to do

– What we did

– What we found

– So what does this mean in the context of biofuel potential?

• Following this, we will open up to the floor for 8 minutes of questions and discussion

- 3 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

Clearpower is a leading integrated wood energy and biomass research company

Energy Crops• Clearpower Energy Crop Scheme first and largest in Ireland

• Proven high yields of woodchip from short rotation willow

• Effectively using the plantations in an EPA/Council licenced licenced manner for effective treatment of liquid wastes and sludges

Renewable fuels• Wood chip and sawdust trading

• Wood pellet production

Sustainable Energy Services• Design, build, operate and finance wood heating and CHP

installations

• Client focused project development and research services

• Pioneers in Biomass and renewable energy research in Ireland with 12 years experience, deep analysis and multinational project management experience

- 4 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

For the RVO/Tallow project we ran an intensive 10 week programme, with two parallel workstreams

Understand current and future supply

Understand current and future supply

Assess current markets for residue

Assess current markets for residue

Evaluate current/forecast surplus

Evaluate current/forecast surplus

Assess biofuels potential

Assess biofuels potential

STRAND 1: Recovered vegatable oils (RVO)

TIMING

TASKS

4 weeks

• Interviews with key players

• Define influencing factors

• Create GIS database

• Validate data with advisors and software

• Interview notes• First draft

database

OUTPUT

2 weeks

• Determine current uses and prices

• Assess factors setting price floor and ceiling

• Estimate volume by usage

• Identify and quantify trends impacting usage volumes

• Detailed volume by use

• Forecast forward price curve

STRAND 2: Animal Fats

1 week

• Calculate current and future surplus

• Location and spread of surplus

• Current disposal methods and costs

• Model various scenarios

• Assessments of current/future scenarios by location

2 weeks

• Identify other limiting factors

• Calculate bio-fuels potential and associated economics

• Estimate required gov. support

• Potential biofuel production and recommended method/scale/location

1 week

• Identify volumes collected

• Understand collection methods

• Identtify destinations and overlaps with other wastes

• Breakdown of volumes by player

Identify collection method

Identify collection method

WHAT WE SAID WE WERE GOING TO DO

- 5 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

Our RVO workplan tackled the Island of Ireland, under five main headings• Supply?

– Bottom up:

• Interviewed major snack food companies (4), restaurant chains (8) and catering companies (3) to understand supply factors

– Top down:

• Analysed CSO stats for overall vegetable oil imports, and volume going in to the catering industry

• Analysed overall restaurant numbers and geographical distribution

• Collection?

– Designed detailed focus interview, and completed 10 interviews with key collectors/aggregators

– Built up detailed understanding of players, volumes, economics and regulatory pressures

• Markets?

– Interviewed end users in the feed (5) and emerging biodiesel industries (4)

• Surplus?

– Built up a detailed excel model to evaluate current and future surplus up to 2020

While outside of scope, we also included recommendations on the potential for RVO to be used as a fuel. While outside of scope, we also included recommendations on the potential for RVO to be used as a fuel.

WHAT WE DID - RVO

- 6 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

The RVO resource is growing gradually

• Waste supply rising gradually in line with population and economic growth, centred on urban areas

• Approx 50% collected, could realistically rise to 68% as more pressure comes on producers from Local Authorities. Very price sensitive.

• Collection made up of a network of players, with four major aggregators/cleaners

• >90% RVO still going to animal feed in Ireland and UK, but following ban in Nov 2004 the resource will all be exported for fuel production unless local markets can be found

(RVO: All figures in tonnes) 2003 2010 2020 Waste vegetable oil supply 29,200 32,300 37,500 RVO 14,500 17,900 24,000 Potential surplus 14,700 14,400 13,500 Realistically collectable surplus 5,300 4,000 1,400 RVO available for biofuel 5,300 21,900 25,400

WHAT WE FOUND - RVO

- 7 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

For the tallow research, the workplan focused on 4 major areas, and was confined to RoI production

• Supply?

– Completed detailed focus interview with owners and management teams in each of the eight rendering plants

– Met industry representatives from IBEC and Rendering Association

– Completed interviews with sample meat processing plants

• Markets?

– Analysed current markets for different categories of tallow

– Interviewed 10 end users in the feed industry

– Understood trends and likely market impacts of price/regulatory changes

• Regulations?

– Built clear understanding of regulatory pressures and potential regulatory changes for different categories of tallow

• Surplus?

– Assessed current/future potential surplus for different categories, and under different potential regulatory conditions

WHAT WE DID - TALLOW

- 8 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

The tallow production is falling gradually, in a highly regulated market

• Tallow production at the eight rendering plants will fall slowly in line with predicted fall in national herd

• Large volumes already profitably used as a fuel within the plants, changeover since 1999 triggered by regulatory pressures

• Currently no surplus tallow produced, and fuel use will not compete with existing markets for high-grade non risk tallow. However, 22,000 tonnes of low-grade, non-risk tallow could be diverted for biofuel use

• Changing regulatory environment makes forward planning difficult

WHAT WE FOUND - TALLOW

(Tallow: All figures in tonnes) 2003 2010 2020 Total tallow produced 78,200 71,700 63,400 Risk material 34,400 31,800 28,100 Non risk material 43,800 39,900 35,300 Volume used as boiler fuel within the rendering industry

42,000 38,000 34,000

Lower grade non risk material with biofuel potential

21,900 20,000 17,600

- 9 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

In terms of biofuel use for the surplus RVO and tallow resource, there are three options

• Heating

– Opportuntiy to replace 35cents per litre delivered light heating oil

– Economics of necessary cleaning plant are volume dependent

– Refit on boilers relatively straightforward, as proven in tallow/rendering industry.

– Public perception on tallow buring needs to be handled carefully

• Transport

– Biodiesel is attractive given EU Liquid Biofuels Directive and emerging biodiesel standards. Economics however are volume dependent

– Vegetable oil alone for transport is perceived as a cottage industry, engine manufacturers slow to provide warranties

– Blends with fossil diesel likely option to hit EU targets, or secure tied fleets with 100% biodiesel.

– Requires a 30 cent reduction in duty per litre in Ireland, or RVO/Tallow resource will be exported

• Power production

– Fast rpm engines burn out. Large, slow rpm engines now being proven in Germany

– Tallow and RVO targetted for power production in UK where ROCS and PPA make it potentially feasible

SO WHAT DOES THIS MEAN?

- 10 -CONFIDENTIAL 2003. Clearpower Ltd, 36 Fitzwilliam Square, Dublin 2, Ireland

Summary

• The 14,500 tonne RVO collected in the island of Ireland has good immediate potential for use as a renewable fuel

– Price point competitive compared to fossil fuels or fresh vegetable oil

– Volume is predictable and likely to increase slightly

– Volume controlled by small number of major collectors

– Much of this volume will go to energy market in UK if nothing happens here

– Regulatory change in Nov 2004

• 22,000 tonnes of non-risk, low-grade ROI tallow could be diverted from its current use, although the rendering industry as a whole has a less predictable future

– Volume and markets are predictable and controlled by small number of players

– However investors may not be comfortable financing significant tallow only RE projects, given flux in regulatory environment

Thankyou for your time.