Betting on Science

Disruptive Technologies in Transport Fuels

Study Overview
1. Study Overview

2 Copyright © 2009 Accenture. All Rights Reserved.

Never before has there been so
much uncertainty about the future
supply and demand of
hydrocarbons.

What drives great companies?

There are a number of reasons for this uncertainty, but technology assumptions are a key driver. New
technologies that either have higher yields per unit of energy input, or allow new sources of energy to
be cost-competitive have the potential to completely change future supply and demand levels. In
addition, future options to reduce greenhouse gases (GHGs) will vary from those being widely
considered today. Transport fuels account for approximately 50 percent of global primary oil
consumption and up to 30 percent of global carbon dioxide (CO2) emissions.1

Accenture’s study looks at technologies in transport fuels that have the potential to “disrupt” the
current views of supply, demand and GHG emissions in the next 10 years.

Copyright © 2009 Accenture. All Rights Reserved. 3

Accenture’s research examines the technologies through three lenses:
• Specific technologies: What are some of the most interesting technologies that could
fundamentally change the supply and demand equation of transportation fuels and/or affect the
GHG footprint?
• Representative companies: Who are the innovative companies that claim to be close to
commercialization of these technologies (that is, will achieve commercialization in less than five
years, or by 2014), and what are their thoughts and aspirations?
• Particular markets: Where are regulation and private investment going, and what are the
implications of this direction for different markets around the world?

For a technology to be considered “disruptive”, it needed to meet the following criteria:

• Scaleable: Greater than 20 percent potential impact on hydrocarbon fuel demand by 2030.
• GHG impact: Savings greater than 30 percent relative to the hydrocarbon it is replacing.
• Cost: Competitive at an oil price of $45 to $90 per barrel, at commercial date.
• Time to market: Commercialization date in less than five years.

In addition, we divided the technologies into three groups:

• Evolutionary: Technologies that stretch today’s assets and resources. Although there are still
challenges in commercializing these technologies, we believe these are “no-regret” technologies,
as they represent actions that can be made today to make a significant impact on CO2, energy
security and the optimization of local resources.
• Revolutionary: Technologies that support the creation of fungible fuels, enabling the use of the
existing distribution infrastructure. These technologies would remove the distribution
infrastructure constraints on the speed and scale of penetration of biomass-based fuel.
• The game changer: Electrification and the technologies that are needed for the scale-up of
PHEVs and to enable the opportunities that PHEVs could bring in optimizing generation and
transportation resources. This section will provide insight into how and how quickly electrification
can happen.

The purpose of this study was to demystify these technologies––by providing data on when and
what the trajectory might be for commercial viability––and by highlighting the key challenges in
economically bringing these technologies to market.

“Betting on Science” aims to present a balanced perspective of these technologies and to

showcase a glimpse of a future where hydrocarbons are not the only viable transport fuel for mass
populations. Fostering a deeper understanding of emerging technologies can help regulators
enact policies, and help companies achieve high performance by developing strategies that
address GHG issues sooner rather than later.

4 Copyright © 2009 Accenture. All Rights Reserved.

What drives great companies?

Accenture is committed to uncovering the key ingredients to help each of our clients develop into a
high-performance business. Accenture’s first biofuels study, “Irrational exuberance”? An
assessment of how the burgeoning biofuels market can enable high performance—a supply
perspective (2007), explored the renewed emphasis of biofuels on the global stage. The following
year, we released “Biofuels’ time of transition: Achieving high performance in a world of increasing
fuel diversity.” This study further examines the future of fuel diversity, but explores options much
broader than biofuels such as vehicle electrification and the evolution of the internal combustion
engine. Through our ongoing High Performance Business research, Accenture is committed to
helping our clients in all industries achieve high performance. To review findings from our other
research and experiences with more than 500 high performers, visit www.accenture.com.

Copyright © 2009 Accenture. All Rights Reserved. 5

Key findings
As part of this research, Accenture reviewed more than 100 companies, interviewed over 30 and
included case studies on over 20 across the 12 technologies that have been covered. The case
studies are not Accenture’s endorsements of the companies. However, the case studies are
important because nothing is more insightful than understanding the views of the players driving the
change. We have also analyzed 10 markets, as we believe domestic resources and agendas will
continue to drive the solutions.

Tables 3, 4 and 5 later in this section summarize our assessment across the technologies. In almost
all cases, at least 2 of 4 criteria (used to determine whether a technology was “disruptive”) were met
for the technologies featured in this report. Most of the technologies met all four criteria. It is therefore
reasonable to believe that these technologies will have an impact on supply, demand and GHG
emissions in the relatively near future if successfully commercialized.

This Accenture report highlights the following 10 key findings:

1. There is low-hanging fruit where the debate should no longer be about “if” or
“how,” but about “when” and “how fast.” Proactive government regulation has the
potential to support and accelerate the sustainable development of these technologies. For
example:

• Increasing yields without significantly increasing land use. Hybrid genetics and
biotechnology have driven a five-fold increase in average United States (US) corn yields since
1940.2 Because there is a significant difference in crop yields around the world (see Figure 1),
there is still potential to implement similar yield increases in other parts of the world, relatively
quickly. For example, better agronomy practices in Malawi increased corn yields from 1.2
million metric tons in 2005, to 2.7 million metric tons in 2006, and then 3.4 million metric tons
in 2007.3 These technologies and practices can (and are) being applied to other crops.
• Rewarding improvements in water and energy use. The reduction of energy and water
use, when made a priority, has significant potential to change the GHG footprint. For example,
POET has achieved an 80 percent reduction in water use versus ethanol production since
1987.4
• Supporting the use of waste to create energy or fuel. Waste is an underutilized feedstock
that will be increasingly used for energy or upgraded to increase product yields.5 The support
for the “waste-to-energy” and “waste-to-fuel” markets creates more demand for service
providers to collect and transport the waste.
• Continuing roll-out of higher-efficiency standards. The higher-efficiency standards that
governments require provide an incentive for companies to continue to improve the miles per
gallon (mpg) of their combustion engines. Companies profiled in this report are claiming up to
50 percent improvements, albeit with disparity across markets (for example, in 2009, Europe
at 49 mpg and Japan at 46.9 mpg, are almost double the US at 27.5 mpg); this could deliver a
significant shift in the forecasted growth in demand globally.

6 Copyright © 2009 Accenture. All Rights Reserved.

 6
Figure 1. Corn yield trends
Corn yield trends
(Bushel per acre)
1990 2000 2005
World average 59 70 75
USA 113 137 149
Argentina 60 93 109
China 74 78 80
Brazil 33 47 54
India 23 29 31
Sub-Saharan Africa 22 24 25

Copyright © 2009 Accenture. All Rights Reserved. 7

2. Genetic engineering is transforming biofuel production (feedstock, deconstruction and
conversion), often eliminating, combining or simplifying steps. For example:

• Genetically engineered feedstocks that increase the yield density and reduce the intensity of
pre-treatment and required enzyme. There is even research being done to build the enzyme
into the feedstock.
• A “diesel” solution through synthetic biology that allows sugar cane to be converted into a
clean diesel.
• Microbes that have been able to overcome the toxicity challenges of converting starches and
sugars to butanol.
• Genetically modified algae that have higher yields and can be cultivated and harvested at
lower cost.

Figure 2. Wider applications of genetic engineering

8 Copyright © 2009 Accenture. All Rights Reserved.

3. Algae could exponentially increase available feedstock. In a 2007 Accenture biofuels
report, we estimated that first-generation feedstocks for ethanol and biodiesel (for example,
sugar cane, corn, cassava, sweet sorghum, sugar beet, soy, rapeseed and palm) could provide
for 10 to 15 percent of global fuel transportation demand. Accenture’s view today is that these
first generation feedstocks could stretch further, particularly with the inclusion of waste and the
continued evolution of the feedstocks as noted above; however, scale is still limited by available
biomass. The synthetic biology (sugar cane to diesel) and butanol pathways are also limited by
the same feedstock constraints. However, the addition of algae used as feedstock, with its
incredibly high yields, changes the game on potential biofuel feedstock availability
(see Table 1).

7
Table 1. Comparison of algae and soybean resource requirements

Soybean Algae*
Gallons oil/year 3 billion 3 billion
Gallons oil/acre 48 1,200
Total acres 62.5 million 2.5 million
2
*Based on algae grown in open ponds with daily productivity of 10 grams/m with
15 percent triacyglycerol (TAG).

However, of all the technologies Accenture has reviewed in this study, we believe that algae will
be the most difficult and will take the longest to achieve commercial scale. Furthermore, based
on our review of more than 20 players, it will take significant long-term commitment to reduce
our current cost estimates––ranging from approximately $2 to $8 per liter ($8 to $30 per gallon)
and to scale-up the production of strains and processes that are company-specific,
environment-specific (i.e., location and conditions), and have multiple interdependent steps.
However, this report contains case studies of three algae companies, all of whom claim that
they will reach the first commercial plant stage in less than five years. If they are successful,
then the scale-up of algae may be seen more quickly. In addition, recent commitments by
ExxonMobil to invest $600 million in algae research in cooperation with Synthetic Genomics;
Chevron’s investment in Solazyme; Valero’s investment in Solix; Shell’s investment in Cellana;
and the recently announced Joint Development Agreement between BP and Martek, suggest
that the major oil companies are in algae for the long term. Although Accenture believes it will
take 10 years for algae to reach commercial stage, the companies featured in this report could
prove us wrong.

4. Technologies and assets will be combined and evolve. The lines between
technologies and how they will be commercialized are gray. Accenture’s view is that the final
scale will be achieved by a combination of first- AND second-generation technologies—rather
than by any one technology in isolation. There is increasing creative application of multiple
technologies to the process of using biomass to produce different products, while continuing to
reduce costs. For example:

• Custom application of novel technologies for multiple, differing processes – Amyris,

LS9, Gevo, Solazyme and Glycos Biotechnologies are all using synthetic biology techniques
in their fermentation processes. However, as they produce different products or use different
feedstocks, we have classified them differently in this report.
• Integrating new technologies into existing plants – Examples include retrofitting existing
ethanol plants into butanol plants (Gevo), or sugar cane ethanol to diesel (Amyris), or corn
ethanol to also process cobs (POET), or refineries to process bio-crude (Licella, Ensyn).

Copyright © 2009 Accenture. All Rights Reserved. 9

 • A blurring of the traditional chemical processes – Companies are combining biochemical
and thermochemical processes, particularly in the processing of waste (for example,
LanzaTech and Coskata’s “hybrid” processes).
• Deriving benefits from integrating existing processes with other technologies – The
importance of pretreatment for cellulosic ethanol production (for example, when using
grasses as a feedstock) is an element of the value chain that is now also applicable to some
bio-crude technologies (for example, catalytic hydrothermal upgrading a.k.a. Cat-HTU).

5. Batteries are the “feedstock” of electrification and constrain its potential. The case
for the electrification of vehicles is well understood. This is evidenced by the regulatory and
private support for plug-in hybrid electric vehicles (PHEVs). However, in the same way that
feedstock characteristics and supply constrain the potential of biofuels, battery characteristics
and supply constrain electrification, highlighting a number of challenges that need to be
overcome.

Today, only lithium-ion batteries can provide the necessary energy density and power density
required for PHEVs. However, lithium is expensive, combustible, and scarce (there are currently
only 11 major producing countries, dominated by South America, with a number of sources
being remote and difficult to access). Production is also concentrated in three countries: China,
Japan and South Korea. Given these constraints, many of the countries supporting
electrification of vehicles are increasingly recognizing that developing battery capabilities is as
important as supporting the purchase of PHEVs or building charging infrastructure. For
example, the US has earmarked $2.4 billion for battery development8, and both A123 and GM
are building lithium-ion battery manufacturing plants in Michigan.9 Although this addresses some
of the production risks, the United States will still need to import almost all of the lithium
required.

6. Electrification heralds two key players in transport fuels—utilities and battery

manufacturers. The transport fuels industry has been dominated by international oil
companies (IOCs) for decades. Although there are some successful independents in different
parts of the oil value chain, it has been difficult for new entrants to compete with the capital
strength and asset/distribution control of the IOCs and national oil companies (NOCs). Utilities
are a different story. Unlike agribusinesses entering big oil, where the distribution was controlled
by the IOCs, utilities will not rely on IOCs for distribution. Utilities have the capital strength and a
distribution infrastructure that could make cars running on electricity a reality. Many lithium-ion
battery manufacturers are also large global players (for example, Panasonic). Provided
governments and automotive companies continue to be supportive, utilities and battery
manufacturers are well-positioned to make electric vehicles a reality. .

10 Copyright © 2009 Accenture. All Rights Reserved.

Table 2. Both utilities and battery manufacturers are well-positioned to play a successful role in the future
10
of transportation .
Business segments Financials Pilot

Utility Pacific Gas and Supplier of electricity, 2008: Piloted plug-in Prius in
Electric Company natural gas, hydroelectric $40.9 billion 2006. Testing four EVs
power (total assets); (Ford Escape PHEV,
Scion e-box BEV,
$14.6 billion
Mitsubishi i-Miev and a
(operating
second Toyota Prius
revenues)
PHEV) in their own fleet.

Battery Panasonic Digital audio-visual 2008: Ni-MH batteries already

manufacturer communication networks; $69 billion mass-produced for hybrid
home appliances; (total assets); electric vehicles (HEVs) at
components and devices; several manufacturing
$83.5 billion
Panasonic Electric Works; facilities, since 2000.
(sales)
other (welding, trading, EV Plans to expand lithium-
energy) ion manufacturing bases
(Osaka and Wakayama,
Japan).

International Chevron Exploration and 2008:

oil company production (oil, natural $161 billion
gas); manufacturing, (total assets);
marketing and
$265 billion
transportation; other
(sales)
(chemicals, mining, power,
technology)

7. At least in the next five years, possibly even 10, PHEV scale-up is not dependent
on comprehensive “smart” grids. Although many of the pilots testing PHEVs are related
to smart grid initiatives, it should be clear that the initial scale-up of PHEVs does not require a
comprehensive smart grid. For example, in the National Renewable Energy Laboratory’s study
to assess the impact of PHEV penetration rates on Xcel Energy’s Colorado territory, it was
concluded that up to 500,000 PHEVs could be supported without the need for additional
network capacity.11 It is true that off-peak charging is absolutely critical if the cost benefits of
running vehicles off grid power are to be maximized without large-scale investment. This could
initially be performed with a meter or timer to “turn on” the charging during off-peak hours (for
example, between 1 a.m. to 5 a.m.), without the need for a full smart grid. In the medium term,
there will need to be some intelligence built into the system, as the utility will need to monitor
and bill for the charging. In addition, there are companies looking at software to charge vehicles
under centralized control (for example, allowing the consumer to subscribe to a plan, with a third
party acting as an aggregator).12 This would simplify matters for the utilities in terms of
managing the load to the grid, as the utility could collaborate with a third party to optimize
charging. However, the scale-up of PHEVs will need to be monitored due to the eventual stress,
wear and additional capacity requirements it will place upon the grid. In the long run (10 to 20
years), when there is significant penetration of PHEVs, a smart grid would be beneficial in
optimizing the additional load and taking advantage of opportunities such as vehicle-to-grid
(V2G).

Copyright © 2009 Accenture. All Rights Reserved. 11

 8. There will be increased activity in the airline and marine industries on options to
reduce GHG. Airline and marine have not received as much attention from government and
private investors as road transport, but with viable solutions available to reduce GHG, these
sectors will likely be the focus of much regulatory and private investment attention in the next
few years. We expect these technologies to take longer than five years to scale for a number of
reasons:
• Marine and aviation are difficult to regulate at a market level, as they are global industries
with strong, cross-border industry bodies such as the International Maritime Organization and
the International Air Transport Association (IATA).
• Time is required for the industry and regulators to have the same dialogue that the road
transport players and regulators have been having for the past five or so years, with the aim
of looking for cooperation and compromise.
• Aviation biofuels and marine scrubbers are not commercially competitive to traditional fuels––
that is, jet fuel for aviation and low sulfur fuel oil (LSFO) for marine. Aviation biofuels and
marine scrubbers will be additive to what is being done today, and will come with additional
costs, hence regulatory support will be needed to assist the roll-out of these technologies.
• For aviation, there is a question of whether there will be enough biofuel feedstock to meet
both the road and air biofuel demand.
• For marine, a further constraint is when improvements can be made to existing fleets and
how often ships are replaced.

9. Markets will optimize around their own domestic agenda, local resources and
local economic development opportunities. Today, transportation fuels are dominated
by globally traded and efficiently produced hydrocarbons. It is hard to imagine that a fragmented
market would provide an improvement. However, what the global hydrocarbon market does not
do is make optimal use of local resources, force diversity (and therefore increased security) of
supply, and allow governments to put a price on the level of GHG abatement it believes it can
afford and achieve. In our review of markets, we see Brazil looking at technologies that
maximize the value from sugar cane; South Korea and Japan very focused on electrification;
and the United States and China exploring all options. The suite of technologies will likely be the
same, but the weighting will differ dramatically by market, as illustrated in Figure 3.
13
Figure 3. Government and private support (between 2004 and 2008) across the 10 markets.
Evolution Fungible Fuels Electrification
Next Next PHEV/EV+
Waste-To- Marine Synthetic Bio- Airline Vehicle
Generation Generation Butanol Algae Electrification Batteries Charging
Fuel Scrubbers Biology Crude Drop-Ins To Grid
ICE Agriculture Of Engines

US PI PI PI PI PI PI PI PI PI PI PI PI PI
Canada PI PI PI PI PI PI PI PI PI
UK PI PI PI PI PI PI PI* PI PI PI
Germany PI PI PI PI PI PI PI PI PI PI
France PI PI PI PI* PI* PI PI PI
Netherlands PI PI PI PI PI* PI PI PI PI
China PI PI PI PI PI PI PI PI PI
Japan PI PI PI PI PI PI PI PI
South Korea PI PI PI PI PI PI
Brazil PI PI PI PI PI PI PI

Key
Neither regulation/targets nor gov’t incentives/investment PI - Is there a company or plant developed with this technology.
One of either regulation/targets or gov’t incentives/investment PI*-Investment by an IOC (for example, Shell, BP, Total) not in IOCs headquarters country
Both regulation/targets and gov’t incentives/investment Note: investor can be from another market but the company and investment is in this country

12 Copyright © 2009 Accenture. All Rights Reserved.

10. The trajectory of supply, demand and GHG footprint of transport fuels is being
reshaped now. In five years, we will be looking at a different landscape of fuel supply, fuel
demand and options to reduce GHG than is currently forecast today given the pipeline of disruptive
technologies. It is important that these technologies be considered when forecasting supply and
demand. As with any technology, improvement in the cost per mile can be anticipated as
technologies mature and the industry gains experience. However, Accenture believes that with the
right policies, practical fact-based information on the opportunities and constraints and, most
importantly, continued commitment by government to research and development (R&D)––the use of
alternatives can be scaled up even sooner. Although there are uncertainties around some
technologies (for example, algae, airline drop-ins and electrification), the private activity and
government support of these technologies indicate that they too will impact supply and demand.

Throughout our report, we have assessed each of the technologies based on the four criteria of
scaleability, GHG emissions, cost and scale. In isolation, the technologies we selected look promising,
with most meeting all four criteria. However, it is important to note that all of the technologies are “in
play” now, and that there is a race to commercialization. The success of one technology will impact the
potential market of the others. We do believe in more diversity in technologies.

Figure 4 is Accenture’s view of how the market may evolve over the next 15+ years. It is based on our
analysis of each technology, the current cost, the S-curve, the challenges and the improvement drivers.
The chart is limited to the technologies covered in this report, and although we will have missed
technologies that will be successful, we do believe that these are the most promising. We have
presented our best estimate of costs, but have stayed away from predicting market share as this chart
would look very different were it cut individually for each of the 10 countries in the report.

Copyright © 2009 Accenture. All Rights Reserved. 13

Figure 4: How will some of the key technologies continue to evolve?

14 Copyright © 2009 Accenture. All Rights Reserved.

Copyright © 2009 Accenture. All Rights Reserved. 15
Tables 3, 4 and 5 summarize Accenture’s assessment of the technologies in this report against the four
disruptive criteria: scaleable, GHG impact, cost and time to market. In almost all cases, 2 out of 4 of the
criteria were met, and in most cases all were met.

Table 3. Summary of disruptive technology criteria assessment: Evolutionary

Scaleable GHG impact Cost Time to market

Evolutionary
Next-generation    
internal With existing infrastructure and With VW and Toyota internal In most cases, improvements For the first wave of
combustion manufacturers already on combustion engines already in internal combustion engines improvements (i.e., the OEM
engine board, rolling out internal coming close to 50 mpg, will have a lower cost to and start-ups in this report), it
combustion engine improvements to these engines implement than building is likely that some will be
improvements will be one of could deliver 100 mpg by 2030. electric vehicles (EVs)/ hybrid commercialized in the next five
the easier technologies to electric vehicles (HEVs)/ plug- years.
implement. in hybrid electric vehicles
(PHEVs).

Next-generation    
agriculture Energy cane, miscanthus, Energy crops/root biomass are Latest estimates for most There are already
sweet sorghum have the carbon negative overall, with energy crops suggest costs demonstration plants using
highest estimated ethanol yield available data suggesting below $0.50 per liter. With corn cobs and wheat straw and
potential (more than 9,000 savings of 31 to 89 percent continued improvements, this plantings of various grasses
liters per hectare) and can be compared to replaced makes them cost competitive and sorghum. Commercial
grown in a wider range of hydrocarbon fuel. with oil at (or possibly even sales of dedicated energy
geographies/ land types (for below) $65 per barrel. crops have already begun, with
example, marginal). Pretreatment and enzymes are a well-established market for
probably closer to $0.79 to genetically enhanced/modified
$1.06 per liter ($3 to 4 per conventional row crops.
gallon) today, but Accenture
believes this should continue to
improve, with targets closer to
$0.53 to $0.79 per liter ($2 to
$3 per gallon) by
commercialization.

Waste-to-fuel ?   

High theoretical feedstock Some incineration processes Feedstock costs represent a Hybrid technology is the
availability and modular are fairly GHG intensive. More considerable proportion of furthest away, but several
conversion technologies, but advanced techniques offer biofuel production costs; with prominent players are aiming
collection and transportation better emissions reduction under zero or even negative to be commercial within three
logistics that are not reliant performance, and it is likely feedstock costs (for example, years.
upon hydrocarbons may prove that a reduction in GHG will be due to tipping fees), the
the crunch point. a requirement. economics of waste-to-fuel
processes appear favorable.

Marine   ? 
scrubbers Need to identify/engineer a Will avoid significant increase Dependent on differential Commercialization expected by
winning technology solution in net CO2 emissions by between HSFO and LSFO and 2011—for at least one
and standardize production offering alternative to on where the vehicles operate. company.
process to achieve scale, but it upgrading HSFO to meet It is expected that for some
is expected that this technology IMO’s sulfur emissions limits vehicles it will make sense
will prevent at least 20 percent for marine transportation. while for others it will not.
of the current HSFO market
from switching to LSFO.

16 Copyright © 2009 Accenture. All Rights Reserved.

Table 4. Summary of disruptive technology criteria assessment: Revolutionary
Scaleable GHG impact Cost Time to market

Revolutionary
Synthetic    
biology: Sugar
cane-to-diesel Theoretically constrained only Will be similar to sugar cane Estimated costs for first Building of commercial plants
by sugar cane availability. (88 percent reduction) commercial plant are expected due to start in 2011, with
However, a key challenge is at $45 to $75 per barrel. commissioning in 2013.
scaling up the process, at a
competitive cost. Currently less
than 3.8 million liters per year,
mLpy (1 million gallons per
year, mgpy) produced in pilot
facilities, although commercial-
scale production has been
demonstrated in other
industries.

Butanol    

A fungible fuel with a wide Aim is for 80 percent reduction Target approximately $50 to Commercialization expected by
range of applications that can based on use of combined heat $60 per barrel of oil. 2014.
be produced from a wide range and power.
of possible feedstocks. New
processes have been proven at
pilot scale, with demo plants on
the way.

Bio-crude    

As with all biomass conversion GHG balance depends on the With the anticipated scaling Companies projecting
processes, feedstock is the process used, but the best efficiency and technology, bio- commercial operation within
most likely bottleneck. have a GHG impact crude from both pyrolysis and five years.
significantly above 30 percent. catalytic hydrothermal
upgrading are expected to be
competitive within this range.

Algae   ? ?

Algae is plentiful and high Technology to sequester CO2 Target approximately $60 per Commercialization not
yielding, but there is the from power plants being barrel of oil. This is currently expected for another 10 years,
challenge of which strain or developed by several aggressive given the National although some companies
strains—that is, need to companies. Renewable Energy Laboratory have made commitments for
identify/engineer a high oil- estimate of $2.24 to $8.45 per earlier dates.
yielding and highly productive liter ($9 to $32 per gallon),
strain and standardize which is consistent with our
production process to achieve research findings.
scale.

Airline drop-ins   ? ?

Although it is still to be Will likely be part of the Producing a biofuel that can Technology has been proven; it
determined whether there will requirement. replace jet will be one of the is reliant on regulation as
be enough feedstock for an more expensive processes production costs may be above
airline biofuel to account for 20 because of the tight $45 to $90 per barrel of oil.
percent of jet fuel, the specification.
combination of design
improvements and biofuel
could reduce fuel consumption
by 20 percent.

Copyright © 2009 Accenture. All Rights Reserved. 17

Table 5. Summary of disruptive technology criteria assessment: The Game Changer
Scaleable GHG impact Cost Time to market

The Game Changer: Electrification

PHEV/ EV/ ?  ? 
electrification
engines The Electric Power Research PHEVs can achieve substantial PHEVs can run at an The first PHEV was launched
Institute estimates that under a savings in GHG emissions over equivalent price of $0.25 per in China in 2008 with all major
medium-penetration scenario, internal combustion engines. liter ($0.75 per gallon), but the OEMs releasing models in the
PHEVs could reach more than While their savings are no battery premium over an next two to three years.
40 percent of new market greater than those of HEVs in internal combustion engine is
vehicle sales. But, on the more an integrated gasification still $4,500 to $6,000 and a
conservative end, some combined cycle scenario, they HEV is $2,000 to $2,500,
studies estimate a figure of are able to play the fuels off of revealing a key cost
only 4 percent of new vehicle each other to ensure the dependency.
sales by 2020. greatest economic and
emissions savings.

Charging ?   

Market growth will be A number of pilots are currently Utilities and/or businesses Charging points are currently
dependent on the up-take of demonstrating the ability to use would own the charging points commercially available and are
plug-in hybrid electric vehicles. intermittent renewable energy (estimated at approximately being rolled out as part of pilots
sources, such as wind or solar, $5,000 per unit) and would across the globe.
to charge vehicles at the offer subscriptions to
charging points. consumers, competitive at $40
per barrel of oil, dependent on
consumer preferences.

Vehicle-to-grid ?  ? ?
(V2G)
V2G will gain momentum in While savings will vary by At full scale, target estimates AC Propulsion already has
vehicle fleets, but is unlikely to market, V2G has the potential are that V2G will be developed a vehicle with
reach 20 percent impact in the to reach up to 99 percent competitive at between $40 to bidirectional power flow, and
consumer market by 2030. savings over the hydrocarbon it $60 per barrel of oil for plug-in the communications systems
is replacing if renewable hybrid electric vehicles and, in required to support V2G are
energy is optimized. theory, at $0 per barrel of oil for currently in demonstration
electric vehicles (as the phase. AutoPort is in limited
consumer would be able to sell production of electric vehicles
power back to the grid). with V2G built-in, indicating
Furthermore, potential revenue V2G could be commercially
streams from providing available within the next five
ancillary services to the grid years.
could offset these costs,
rendering the technology even
more cost competitive.
However, there are
considerable assumptions in
these assumptions.

18 Copyright © 2009 Accenture. All Rights Reserved.

Summary of Key Findings:

Disruptive Technologies

Copyright © 2009 Accenture. All Rights Reserved. 19

Evolutionary
Next-generation internal combustion engine

Next-generation internal combustion engine. Significant gains are achievable, which are often
overlooked. In-house developments by original equipment manufacturers (OEMs), coupled with
best-in-class start-up technologies, will mean that the automotive industry as a whole can make
significant advances in the efficiency of the internal combustion engine. Getting more miles per
gallon out of conventional vehicles achieves the same end-goals of lowering carbon emissions
and increasing energy security as the movement toward the electrification of transport. While
there are significant requirements for infrastructure and incentives to bring about the widespread
electrification of vehicles, improvements to the internal combustion engine could be quickly
deployed and assuage many of the voices currently clamoring for change.

Next-generation agriculture
Stretching further with innovation and technology. New agriculture is in its infancy. There is
significant potential for improvement, particularly given the historic advances made with genetic
modification (GM) of crops to obtain desired characteristics, increase yield and reduce harvesting
and processing costs. This is coupled with the innovation seen in first-generation players to drive
down costs, energy and water use, and GHG emissions. The biggest challenge is in the
deconstruction stage, with high costs for pretreatment and enzymes. These costs have to go
down, but improvements will come from optimizing the whole system, from feedstock to
production.

Waste-to-fuel

An important feedstock source. The production of transport fuel from waste is a nascent
technology, largely in the lab and pilot stages of commercialization at present. Subsequently,
while there are small local government pilot projects in place, there is little legislative support or
financial incentive to develop the technology at the current time. However, if the technology can
be brought to scale, then waste feedstock processing could solve two problems at once—a
source of low-cost, low-carbon renewable fuel, and a solution to the ever more critical issue to
landfill reduction. With such obvious benefits, it would seem likely that this technology is suitable
for a much larger role in the world’s future transport fuel mix.

Marine scrubbers
Alternative to upgrading refineries and increasing refinery CO2 . This technology could avoid
both the need for significant capital investment to upgrade refineries to produce more low sulfur
fuel oil (LSFO) and greater dependence on costlier, low sulfur crudes. It also has the potential to
significantly and economically reduce emissions from seagoing vessels beyond that which can
be achieved by simple fuel switching. Marine scrubbing is technically feasible—several
companies have successfully tested the technology on demonstration projects. However, the
final technology winner has not yet been identified, with investment dollars currently spread
across seawater and fresh water solutions.

20 Copyright © 2009 Accenture. All Rights Reserved.

Revolutionary
Synthetic biology: sugar cane-to-diesel
Close to commercial viability. The world has long awaited a biofuel diesel solution. Synthetic
biology applied to the sugar-to-diesel pathway changes this situation. If the economics could
come close to the sugar cane-to-ethanol economics, then there would be significant potential in
diesel markets given the cost and availability of sugar cane (compared to the traditional biodiesel
feedstocks such as palm, soy and rapeseed). The use of synthetic biology to convert sugars to
diesel has advanced significantly in the past one to two years, and it is close to commercial
viability. Two companies, Amyris and LS9, are planning to break ground on commercial plants in
2011, with production starting by 2013.

Butanol
Application of synthetic biology could resolve issues. Fuel from butanol is a highly desirable
product with energy content similar to gasoline—higher octane and less affinity to water—
meaning it can be transported through existing pipelines, use existing infrastructure and be
blended with gasoline at ratios much higher than ethanol. However, there are issues hampering
the production of butanol and the economics are unproven. Researchers are looking to adapt
traditional butanol production (via the ABE or acetone-butanol-ethanol process) by consolidation
of process steps and potential genetic modification of bacteria. Genetic engineering and
advances in synthetic biology could also lead to breakthroughs from companies such as Gevo
and Butamax, who have proven the technology at pilot scale and are both planning commercial
plants in the next few years.

Copyright © 2009 Accenture. All Rights Reserved. 21

 Bio-crude
High potential to leverage infrastructure but few technologies. Bio-crude is an industry with
enormous potential, but with many challenges to overcome. The benefits of a bio-crude that
could take advantage of existing refining and distribution infrastructure with little extra investment
are clear, and could lead to a breakthrough in the adoption of renewable fuels worldwide. Given
this potential, what is most surprising is how few companies and technologies there are,
compared with many of the other technologies covered in this report. There are uncertainties
over the technology, but with the right level of investor funding, bio-crude could be a disruptive
technology for transport fuel.

Algae

Incredible yields but many variables, little industry consensus and high cost.
Technologically, the algae industry is very fragmented—possibly the most fragmented of all of
the industries covered in this report. There are many players, and the oil industry (including
Shell, ExxonMobil, BP, Valero and Chevron) is looking at a range of methods to eliminate steps
in the process to reduce complexity and cost. As companies try to find the lowest cost option,
several different operating models are emerging. In this report, Accenture has provided case
studies of companies with plans for commercial production within five years. However, there are
considerable technical constraints. In ExxonMobil’s announcement of its investment in Synthetic
Genomics, the company stated that “significant work and years of research and development still
must be completed,” with the key challenge being “the ability to produce it [algae] in large
volumes which will require significant advances in both science and engineering”.14 It is
therefore likely that it may take more than current estimates of five years in order to reach
commercial scale.

Airline drop-ins and design/operational innovation

Drop-ins are now feasible, but feedstock availability remains an issue. The aviation industry
will face increased pressure to increase efficiency (because of the cost of fuel and competitive
nature of the market) and reduce carbon emissions. The outlook for airline biofuels is positive as
it is one of the few ways to reduce emissions and many of the technology challenges have been
overcome. However, the scale is questionable given the feedstock supply constraints and the
competing demand for biofuels in road transport. This demand for feedstock will continue to
support developments in high-yielding feedstocks such as algae and also provide support to
other alternatives to diesel for cars and trucks, i.e., save the feedstock for jet fuel (where there
are limited alternatives to biofuels) versus using it for road. Improvements in design and
operational efficiency will continue to be important.

22 Copyright © 2009 Accenture. All Rights Reserved.

The Game Changer – Electrification
PHEVs
High potential, but battery cost and availability remain challenges. Plug-in electric
vehicles have received increasing amounts of attention from government and industry,
indicating they will be part of the future vehicle landscape, with PHEVs likely to be the most
disruptive model within the next five years. PHEVs benefit from lower-running costs than
both internal combustion engines and HEVs, as well as extended driving range over EVs,
but the capital cost of the battery and availability limitations still need to be overcome for the
economics to work favorably without regulatory incentives. Moreover, while PHEVs have the
potential to be emission-free, the reduction in GHG emissions is highly dependent on the
generation mix and will therefore vary by country. The ability of the grid to withstand PHEV
penetration rates will further vary by country. However, using smart, off-peak charging, the
grid will be able to manage initial PHEV penetration and enable load leveling for utilities.

Charging
Controlled charging infrastructure development benefiting from government support.
Controlled charging enables utilities to manage energy demand more effectively and
consumers to benefit from lower off-peak tariffs. This will be key in delivering the aspirations
of widespread electrification of vehicles. Municipalities across the globe have announced
ambitious roll-outs of charging point infrastructure. The growth of the controlled charging
market will be heavily dependent on the uptake of plug-in electric vehicles and how
incentives for the growth of PHEVs and EVs are driven/managed by policymakers and
businesses.

Vehicle-to-grid (V2G)
A long-term opportunity, dependent on significant PHEV/EV scale. V2G is technically
feasible with demonstration projects currently underway. These projects vary in focus, with
some assessing the communications between the vehicle and the grid, some looking at how
to maximize vehicle storage to increase the quantity of renewables being used, and some
looking at a more integrated smart grid offering. All projects, albeit in the early stages, have
proven that V2G has the potential to significantly disrupt the supply and demand
relationships—with end-electricity consumers potentially becoming an essential grid storage
resource—and change both the electric power and transport fuels landscapes. However, to
reach this potential, V2G is dependent upon the commercialization of electric-drive vehicles,
cooperation between the various industry players, and the education of consumers. Initial
electrification initiatives will determine the latter’s potential success.

Copyright © 2009 Accenture. All Rights Reserved. 23

Summary of Key Findings:

Markets

24 Copyright © 2009 Accenture. All Rights Reserved.

 Brazil Brazil’s transportation consumption is fairly balanced between
diesel and non-diesel (ethanol and gasoline) demand and
consumes approximately 19 billion liters of gasoline, 37 billion
liters of diesel, 19 billion liters of ethanol and 800 million liters of
biodiesel per year. Brazil is the second largest producer of
ethanol and is the largest exporter of ethanol. It is focused on
maximizing the value of its sugar cane. Government regulation
supports the development of next-generation agriculture and
use of sugar cane waste. The sugar cane-to-diesel pathway is
also seeing private activity as companies such as Amyris and
LS9 look to locate production in Brazil.

Canada The Canadian transportation sector is predominantly a gasoline

market and consumes approximately 42 billion liters of gasoline,
16 billion liters of diesel, 0.6 billion liters of ethanol and 93
million liters of biodiesel per year. Government support is
focused on next generation internal combustion engine (ICE),
next-generation agriculture, waste-to-fuel, marine scrubbers and
PHEV/EV. Canada’s large land mass, forestry industry and
refining infrastructure make it a logical fit for next-generation
agriculture, waste-to-fuel and bio-crude, and we have seen
private activity with companies such as Iogen (cellulosic
ethanol), Enerkem (municipal solid waste), and Ensyn (bio-
crude). The government is also emphasizing PHEV/EV with a
federal roadmap expected in 2010 that will extend its current
rebates and incentive system, which are highly regional due to
the utilities infrastructure.

China China’s transportation sector is predominantly a diesel market

and consumes approximately 38 billion liters of gasoline, 92
billion liters of diesel, 1.6 billion liters of ethanol and 0.6 billion
liters of biodiesel per year. China is aggressively moving into
both biofuels and electrification. It expects biofuels to meet 15
percent of transportation needs, and has been able to effectively
roll out ethanol. It plans to have the highest number of
PHEVs/EVs in the world and is the second-leading producer of
lithium-ion batteries. Government support is focused on next-
generation agriculture, PHEVs/EVs and batteries. China is also
investing in developing butanol and algae. We are seeing
significant private activity in China, both from local players as
well as international players. For example, Novozymes,
COFCO, and Sinopec are working together to develop ethanol
from crop waste.15

Copyright © 2009 Accenture. All Rights Reserved. 25

China – continued PetroSun China already produces algae for other uses; Jiangsu
Lianhai Biological Technology Co Ltd has invested $80 million to
produce butanol in Haimen city, and BYD launched the first
PHEV in 2008.

France The French transportation sector is predominantly a diesel

market and consumes approximately 13 billion liters of gasoline,
39 billion liters of diesel, 0.4 billion liters of ethanol and 1.3
billion liters of biodiesel per year. France has one of the highest
average mpg, increasing to 65 mpg by 2020, is a large producer
of both ethanol and biodiesel and fairly balanced in its
consumption and production of both, and was also a first mover
in electrification with the French government announcing a
target of 100,000 EV/PHEV by 2012. Government support
focuses on next-generation ICE, next-generation agriculture,
and PHEV/EV. Private activity in these areas is significant. For
example, Renault-Nissan expressed its intention to become the
world’s largest electric car manufacturer; French battery
manufacturer Saft, in a joint venture with Johnson Controls, is
building a lithium-ion battery plant, and next-generation
agriculture investments and R&D are being made by Total,
Tereos and Unigrains.

Germany The German transportation sector is predominantly fairly

balanced between gasoline and diesel demand and consumes
approximately 29 billion liters of gasoline, 33 billion liters of
diesel, 0.6 billion liters of ethanol and 3.8 billion liters of
biodiesel per year. With strong automotive and agricultural
sectors, Germany has one of the highest average mpg,
increasing to 65 mpg by 2020, and is the largest producer and
consumer of biodiesel. Government support focuses on next-
generation ICE, next-generation agriculture, waste-to-fuel,
marine scrubbers and PHEV/EV. For example, there is no tax
on second-generation biofuel and E85 ethanol until 2015; the
government is setting ambitious targets of 1-5 million EV/PHEV
by 2020-2030, and 50 percent of waste materials have to be
reused or recycled by 2020. Key private activity includes:
Petrotech AG has invested in a biodiesel plant based on
municipal/industry waste; BMW’s megacity vehicle; and, the
$2.7 billion (9.1 percent) stake in Daimler AG by the United Arab
Emirates's Aabar Investments, which includes a planned
partnership for the development of electric vehicles and
innovative compound materials.16

26 Copyright © 2009 Accenture. All Rights Reserved.

 Japan The Japanese transportation sector is fairly balanced between
gasoline and diesel demand and consumes approximately 59
billion liters of gasoline, 58 billion liters of diesel, 0.5 billion liters
of ethanol, and 0.2 billion liters of biodiesel per year. Japan has
the highest mpg in the world and has had a long focus on
electrification and is the world’s leading producer of lithium-ion
batteries. Japanese manufacturers have shifted to hybridization
and electrification, with all having EVs, HEVs and/or PHEVs,
rather than focusing on improvements in ICE. Japan is also
leading in municipal solid waste (MSW) combustion plants and
has the only commercial plasma arc MSW plants in the world.

Netherlands The Dutch transportation sector is predominantly a diesel

market and consumes approximately 6 billion liters of gasoline,
9 billion liters of diesel, 0.2 billion liters of ethanol and 0.3 billion
liters of biodiesel per year. The Netherlands is not a significant
producer of biofuels, but it does have a large refining industry
and Rotterdam is the port where most imported ethanol and
biodiesel enters Europe. Government support and private
investments have focused on waste-to-fuel, electrification and
bio-crude. For example, like much of Europe, there is an acute
shortage of landfill availability, leading to some of the first
significant investments into commercial waste-to-fuel facilities,
such as a $142 million waste-to-biodiesel plant planned.17 The
Amsterdam “smart city” will look at integration of PHEVs into the
smart grid, and two bio-crude players, KiOR and HVC, are
present in the Netherlands.

South Korea The South Korean transportation sector is predominantly a

diesel market and consumes approximately 10 billion liters of
gasoline, 17 billion liters of diesel, and 0.1 billion liters of
biodiesel per year. South Korea has a strong automotive sector
and is the third-largest producer of lithium-ion batteries.
Government support has focused on next-generation ICE, with a
recently announced fuel standard target of 40 mpg by 2015,
requiring a 54 percent improvement in vehicle efficiency, and
electrification, with a duty incentive for green cars. Key private
investment includes: GM Daewoo is planning to manufacture
PHEVs from 2010; and LG Chem will provide the batteries for
the GM Volt. SK Energy, the largest refining company, is also
investing significantly in researching biofuels.

Copyright © 2009 Accenture. All Rights Reserved. 27

United Kingdom The United Kingdom transportation sector is fairly evenly
balanced between gasoline and diesel demand and consumes
approximately 24 billion liters of gasoline, 26 billion liters of
diesel, 0.15 billion liters of ethanol, and 0.35 billion liters of
biodiesel per year. The UK is not a significant producer of
biodiesel, although the Vivergo and Ensus plants will come on-
stream between 2009 and 2010, increasing ethanol capacity to
approximately 837 mLpa (420 mLpa Vivergo and 400 mLpa
Ensus). The focus of government support has been on biofuels,
through the Renewable Transport Fuel Obligation (RTFO), and
electrification (which has increased in the last year, with the UK
Committee on Climate Change predicting that up to 40 percent
of new cars in 2020 could be EV/PHEV). There has also been
an increase in waste-to-fuel activity due to the lack of landfill
capacity, marine scrubbers with companies such as Krystallon
based in the UK, and butanol with plans for the Vivergo ethanol
plant to add on butanol production capacity.

United States The United States transportation sector is predominantly a

gasoline market and consumes approximately 539 billion liters
of gasoline, 169 billion liters of diesel, 26 billion liters of ethanol
and 1.4 billion liters of biodiesel per year. The US is the only
country active in all of the technologies covered in this report. Of
the 25 case studies, 18 are based in the US. On the biofuels
side, the Renewable Fuels Standard program has set the target
for 36 billion liters of ethanol, stimulating investment in new
agriculture and waste-to-fuel. Its energy, security and climate
change agenda is driving the investment in fungible fuels, with
the establishment of three Department of Energy centers and a
large National Renewable Energy Laboratory program focused
on further development of next-generation biofuels. The
American Recovery and Reinvestment Act of 2009 created a
$787 billion in economic stimulus spending and tax incentives.
For example, already $2.4 billion has been pledged to improve
US battery manufacturing capability, and there is a target of 1
million PHEVs on the road by 2015.

28 Copyright © 2009 Accenture. All Rights Reserved.

Key Challenges

Copyright © 2009 Accenture. All Rights Reserved. 29

The cost and time to commercialization and
scale-up of the technologies are heavily
impacted by the current situation and
specific challenges.

These include:

• Improvements are limited to new vehicles. For many of the technologies (most next-
generation internal combustion engine improvements, ethanol beyond the 10 percent blending
limit, electrification) the key constraint is turnover of the vehicle fleet. For example, in 2007 the
median age of a passenger vehicle in the United States was 9.2 years, meaning turnover will be
almost a decade.18
• Ethanol blending wall. The US is close to the 10 percent limit of ethanol that can be blended
into current gasoline vehicles, and the allowable share of corn ethanol specified in the
Renewable Fuels Standard (RFS) program. There is a movement by the American Coalition for
Ethanol (ACE) to increase the blending wall to 15 percent19––although only flex-fuel vehicles
(FFVs) are currently allowed to use blends containing more than 10 percent ethanol, there is
evidence to suggest that blends of up to 15 percent will not damage gasoline engines20––and to
increase the allowable corn ethanol share of the RFS. This would buy the industry time to
commercialize and roll out cellulosic ethanol. If the blending wall does not change, then the pace
of the industry will be constrained by the roll-out of FFVs and the ethanol refueling infrastructure.
US Secretary of Agriculture, Tom Vilsack, and Senate Agriculture Committee Chairman, Tom
Harkin, have both expressed their support for the US Environmental Protection Agency (EPA) to
authorize a higher blend;21 a decision by the EPA is expected by the end of 2009.

30 Copyright © 2009 Accenture. All Rights Reserved.

• Acceptance of genetic engineering. Genetic engineering is a key lever in using biomass to
produce fuel. Although this technology has been applied in the drug industry for over 20 years,22
many countries, particularly in Europe, have legislation that restricts the use of genetic
modification (GM). For example, in the EU, legislation such as the “Directive on the Deliberate
Release into the Environment of Genetically Modified Organisms” (2001) and the “Regulation on
Genetically Modified Food and Feed” (2003) demand approval before GM plants can be used
commercially. This is only granted under certain conditions (proven safety, freedom of choice,
labeling and traceability). However, while cloning of human genetic material remains an ever-
contentious issue, with strict legislation either banning the process outright, or limiting what can
be done for research only, acceptance of GM for fuel production is slowly growing.
• Feedstock logistics. In the new agriculture section, we noted that harvesting and preprocessing
could make up to 50 percent of the feedstock costs. For new feedstocks, the infrastructure and
processes required to effectively harvest and transport these materials to the refining plants will
be a key focus area.
• Cooperation across players in the electrification value chain. Electrification requires
significant cooperation across players who have not worked together before. The business
models and value chain collaboration required across local governments, utilities, OEMs, battery
and charging companies to really scale electrification of vehicles remain a significant challenge.
There are pilots in almost all of the markets profiled. In each case, we find variations, for
example on capital investment, revenue sharing, method for optimizing charging time, battery
and charging time assumptions, technology that supports charging and billing, the extent to
which smart grid is used, and the extent to which V2G (the services the PHEV/EV can provide to
the grid) is explored. Figure 5 illustrates the electrification value chain and the number of different
players who need to be aligned to bring this technology to market.

Figure 5. Players in the electrification value chain;

Examples of new market entrants in the electrification value chain

Copyright © 2009 Accenture. All Rights Reserved. 31

• Leveraging of current asset base and distribution networks. It is important for biofuels,
marine scrubbers and electrification to leverage as much as possible of the asset infrastructure
that exists.

‒ Biofuels: New build plants are expensive, so new producers need the ability to leverage the
existing ethanol and hydrocarbon infrastructure and to optimize the provision of fuel to
customers. This will, in some cases, require the coming together of hydrocarbon and biofuel
value chains, but will be important in driving down scale-up costs.
‒ Marine scrubbers: Ensuring the solution is optimized for the current fleet will be critical given
the time it takes for the fleet to turnover.
‒ Electrification: Understanding the state of the network, how much off-peak capacity is
available and how to manage wear on the infrastructure will be key to evaluating short-term
capital investment needs.
• Agreement on standards, measurement and monitoring. It is important for all the
technologies to agree and roll-out standards quickly—whether they are fuel specifications,
emissions, charging, etc.—because a lack of standards will create inefficiencies and increase the
commercialization/scale-up costs. In addition, these standards need to be enforced and, in some
cases (for example, marine scrubbers), strictly monitored.

32 Copyright © 2009 Accenture. All Rights Reserved.

Implications for High Performance

So what does this impending shift in future transport fuels mean for government or companies today?
We believe the transport fuel market of the future will include players from different industries (including
governments, utilities, energy, chemicals, pharmaceutical and consumer electronics to name a few)
who will bring different capabilities and assets that will shape the market.

Copyright © 2009 Accenture. All Rights Reserved. 33

For each entity, the capabilities required
for high performance will differ depending
on their current objectives, capabilities
and, in the case of companies, go-to-
market strategies.

However, Accenture does see a few common key capabilities for achieving high performance:

• Scientists and engineers in leadership positions. Most companies entering this market will
have product and process patents around their technologies and processes. Strong R&D
capability is a necessity as we are looking for breakthrough solutions. Integration of the
technology with other technologies will also be an obvious capability. However, equally key to
successful commercialization are leadership and communication and the ability to provide fact-
based explanations to regulators and the public and to address often technical questions frankly
and honestly. For governments, this means that more scientists will be chosen for key energy
department roles.
• Partnering and business model flexibility. Commercialization of these technologies will take
cooperation across many industries. In reviewing more than 100 companies, we have found
plans for many different business models, from traditional plant joint ventures to fully integrated
ventures, with capabilities across the value chain, including different models for different
markets. In all cases, partnering is key to complementing in-house capability, whether to access
the feedstock, the battery, the customer market, the infrastructure or capability. Also, the
business models will evolve as commercialization starts to shape how the market will operate.

34 Copyright © 2009 Accenture. All Rights Reserved.

• Close to government and policy makers. Regulation will evolve as more information becomes
available on new technologies and policy makers will make trade-off decisions
across the technologies. For example, the RFS program does not specifically mention the
contribution from synthetic biology (sugar cane to diesel) or algae, but if these technologies are
successfully commercialized and have the currently estimated GHG impact, it is expected that
the fuel categories as defined within the RFS program would be modified to include them.
• Clear baseline assumptions and active tracking of the market. Technologies are being
developed now, and announcements come daily. Companies and governments need to be clear
on their assumptions on the key improvement drivers that drive down the cost to
commercialization and subsequent cost/mile. Understanding how new information impacts their
technology, go-to-market strategy or regulatory positions is critical. For example, at Accenture,
we use improvement drivers and S-curves to illustrate our view of cost at maturity and market
evolution. When ExxonMobil announced the investment in Synthetic Genomics, it did make us
look again at our current assumptions on GM algae. Other examples are the announcements to
build lithium-ion manufacturing capability in the US. Again, this made us look at what we
believed were the constraints to the scale-up of electrification.
• Execution – project management excellence, supply chain optimization. With the race to
commercialize, the advantage of operational excellence in delivering projects on budget and on
time and developing efficient and optimized supply chains should not be underestimated.
Cost/mile of these technologies will continue to compete with gasoline and diesel, so maximizing
the operating margins, particularly given the initial capital investment required, will be key to
long-term profitability. In the companies we interviewed, there was emphasis on how the scale-
up was going to happen and how they were doing this at the lowest possible cost, leveraging
existing assets.
• Contracting and risk management. There is risk in both biofuels and electrification. On the
biofuels side, although the mandate guarantees a level of demand, there have historically been
very weak correlations with feedstock. For next-generation agriculture, this will be even more
challenging as there is no market to set the price of the new feedstocks. In the electric markets, it
is the demand that is most uncertain. In all cases contracting will be important to managing risk.
• Long-term and flexible capital. Time (how long things will take) is one of the biggest
uncertainties of this market. Probably the best example is the Internet where the take-up curve,
although it eventually got there, did not follow the growth path estimated by many in 1998. Even
for the technologies that will be commercial in five years, scale-up could be slow or fast. For
those technologies that will take more than five years, companies need to recognize that they
may be in pilot or demonstration stages for many years.
• Market-specific strategy. Investments in new types of transport fuels will be driven by the local
agenda. We strongly believe in increasing diversity of markets. Our research model is one of
blended teams to leverage the most of what has been done around the world with the critical
local filter, as nothing can replace local insight and local knowledge, particularly as
understanding of the drivers of the domestic agenda and the local context is absolutely critical.

Copyright © 2009 Accenture. All Rights Reserved. 35

Accenture invites you to explore much more in the balance of the detailed report––including
sections on technologies, the companies bringing these technologies to market, and the individual
markets. We include a sidebar on hydrogen and a guest commentary by Daniel Kammen (Co-
Director, Berkeley Institute of the Environment, and Founding Director, Renewable and Appropriate
Energy Laboratory, RAEL) and Derek Lemoine (Energy and Resources Group, University of
California, Berkeley), on the transition to electric vehicles. We contrast a utility company’s
perspective on electrification, with an integrated oil company’s perspective on both biofuels and
electrification. In summary, Accenture hope that this report will provide a detailed framework with
which you can fuel your own discussions on business strategies and government legislation, as we
all globally seek to conquer the challenges of greenhouse gas emissions and the potential for future
hydrocarbon shortages.

36 Copyright © 2009 Accenture. All Rights Reserved.

End Notes
1
Keynote Speech by Nobuo Tanaka, Executive Director, International Energy Agency, Ministerial Conference on
Global Environment and Energy in Transport, January 2009,
www.iea.org/textbase/speech/2009/Tanaka/Tanaka_speech_MLIT.pdf; "International Energy Outlook 2009,"
Energy Information Administration, 2009, http://www.eia.doe.gov/oiaf/ieo/index.html.
2
Accenture interview; “Growing Energy” presentation:
http://www1.eere.energy.gov/biomass/pdfs/Biomass_2009_3-17_Plenary_Hamilton.pdf.
3
Accenture’s study, “Biofuels Time of Transition: Achieving high performance in a world of increasing fuel
diversity”, 2008.
4
See Poet Case Study in the Detailed Report.
5
See LanzaTech case study regarding use of steel mill gas to create ethanol and the GlycosBio case study
regarding a process for upgrading use of steel mill gas to create ethanol and co-products – in the Detailed Report.
6
Accenture interview; “Growing Energy” presentation:
http://www1.eere.energy.gov/biomass/pdfs/Biomass_2009_3-17_Plenary_Hamilton.pdf.
7
Darzins, Al. "Sustainable Algal Biofuels at Scale: A Prospectus." Paper presented at the annual Southwestern
Biofuels Policy Summit, May 27-28, 2009, in Albuquerque, New Mexico, USA.
8
Overview of the American Recovery and Reinvestment Act of 2009, U.S. Department of Energy,
www1.eere.energy.gov/recovery.
9
"A123Systems Awarded $249M Grant from U.S. Department of Energy to Build Advanced Battery Production
Facilities in the United States," A123 Systems press release, August 5, 2009,
http://ir.a123systems.com/releasedetail.cfm?ReleaseID=403090.

"GM Begins Work at Michigan Facility Where Batteries for the Chevrolet Volt Will Be Manufactured," General
Motors press release, August 13, 2009, www.gm.com/experience/technology/news/2009/brown_081309.jsp.
10
Sources: Panasonic (http://panasonic.co.jp); Chevron (www.chevron.com); PG&E (www.pge.com/).
11
K. Parks, P. Denholm and T. Markel, "Costs and Emissions Associated with Plug-in Hybrid Electric Vehicle
Charging in the Xcel Energy Colorado Service Territory," National Renewable Energy Laboratory, May 2007,
www.nrel.gov/docs/fy07osti/41410.pdf.
12
Accenture interviews – research from the University of California, Berkeley, Derek M. Lemoine and Daniel M.
Kammen).
13
Accenture analysis; New Energy Finance.
14
“ExxonMobil to Launch Biofuels Program,” ExxonMobil press release, July 14, 2009,
http://www.businesswire.com/portal/site/exxonmobil/index.jsp?ndmViewId=news_view&ndmConfigId=1001106&n
ewsId=20090714005554&newsLang=en.
15
“Novozymes and Sinopec sign new second-generation framework agreement in China,” Novozymes press
release, February 2, 2009,
http://www.novozymes.com/en/MainStructure/PressAndPublications/PressRelease/2009/sinopec-
novozymes.htm.

Copyright © 2009 Accenture. All Rights Reserved. 37

16
"Abu Dhabi’s Aabar Investments to become a major Daimler shareholder," Daimler press release, March 22,
2009, www.daimler.com/Projects/c2c/channel/documents/1687887_daimler_ir_2009_releases90323_e.pdf.

17
"BDI BioDiesel Plant for Residual and Waste Materials in the Netherlands," BDI - BioDiesel International AG
press release, June 2, 2009, www.biodiesel-
intl.com/PressRoom/details.aspx?ID=166&LNG=EN&Menu=News&Inhalt=Normal.
18
“Table 1-25: Median Age of Automobiles and Trucks in Operation in the United States,” Research and
Innovative Technology Administration, Bureau of Transportation Statistics,
http://www.bts.gov/publications/national_transportation_statistics/html/table_01_25.html.
19
Letter to the US Environmental Protection Agency, from the American Coalition of Ethanol, July 17, 2009,
http://www.ethanol.org/pdf/contentmgmt/ACE_Comments_to_EPA_on_E15_waiver_717.pdf.
20
“Optimal Ethanol Blend-Level Investigation”, Energy & Environmental Research Center (EERC), November
2007, http://www.ethanol.org/pdf/contentmgmt/ACE_Optimal_Ethanol_Blend_Level_Study_final_12507.pdf.
21
“All Star Lineup Wows NFU Convention,” National Farmers Union press release, March 9, 2009,
http://nfu.org/news/2009/03/09/all-star-lineup-wows-nfu-convention.html.
22
Accenture interview.

38 Copyright © 2009 Accenture. All Rights Reserved.

About Accenture
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Its home page is www.accenture.com.

Study Authors: Study Sponsors:

Melissa Stark (Lead, Clean Energy) Shawn Collinson
Kathleen Bellah (Houston) Arthur Hanna
Herbert Cepera (São Paulo) Hee Jip Kim
Charles Howorth (London) Tommy Mann
Charles Jans (London)
Kyung-In Jung (Seoul)
Kunal Kulkarni (London)
Caroline Middlecote (London)
Aliya Nanji (London)
Caroline Narich (London)
Sinead Ni Mhuircheartaigh (London)
Ian O’Gara (London)
Mauro Rubin (São Paulo)
Katherine Sherratt (Houston)
Maya Sturm (London)
Peter Thompson (Calgary)
Bartosz Wojszczyk (Raleigh)
Claire Yang (Beijing) For questions about this report
Sam Yardley (London) or to order additional copies, please contact
Justin Yunjia Piao (Beijing) kathleen.l.bellah@accenture.com.

Copyright © 2009 Accenture

All rights reserved.

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High Performance Delivered
are trademarks of Accenture.

Accenture makes no representation or warranty, express or implied, as to accuracy or completeness of the

information contained herein. Unless otherwise noted, the views and opinions expressed in this report are those
of Accenture only and do not necessarily reflect those of any of the companies participating or cited in the report.
Accenture is not providing professional, accounting or legal advice of any kind in this report. Neither Accenture
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