A VISIT TO SWEDEN'S BIOREFINERY COAST

UNCLAS SECTION 01 OF 02 STOCKHOLM 000201

DOE FOR EERE DAVID RODGERS

SIPDIS

E.O. 12958:N/A
TAGS: ENRG SENV KGHG PGOV EAID SW
SUBJECT: A VISIT TO SWEDEN'S BIOREFINERY COAST


1. Summary: During a March 10-11 trip to three cities on the north
east coast, embassy staff visited the heart of a traditional export
industry - paper and pulp - in the process of redefining itself.
These large paper and pulp mills are developing biofuels from
previous waste by-products: ethanol from wood chips and methanol
from "black liquor" (a waste wood by-product). They are seeking
government support to commercialize their new biofuels. Some
companies we visited were already on the embassy's "A-list" of
alternative energy companies, others were not. Lulea University of
Technology provided an in depth report on their renewable energy
related research and also pointed out the numerous connections with
the region's paper and pulp businesses. End Summary.


2. On March 10-11, CDA, Commercial Advisor and Economic Section
Intern visited Sweden's Biorefinery Coast. The northeastern Baltic
coast is home to significant forest resources, paper/pulp mills,
universities and technology parks. There is also a strong
interaction between government, universities and the private
industries. CDA visited the northern cities of Ornskoldsvik, Lulea
and Pitea with the objective to discuss the recent progress in the
region's research on, and production of, biofuels.

SEKAB - ETHANOL FROM WOOD WASTE
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3. Sekab is a cutting edge company producing ethanol from
feedstocks not used as foods, including wood and sugar cane waste.
The process is fast reaching a commercial breakthrough and
attracting a substantial commercial interest.


4. Sekab is on the Embassy's list of potential Swedish cleantech
companies (A-list),compiled as part of the One Big Thing, the U.S.
Embassy Stockholm's alternative energy cooperation initiative.
Sekab has gone through severe financial turmoil lately due to
fluctuations in oil prices and currencies, but is determined to keep
focus on the development and production of cellulosic ethanol
technology. The company is now looking for an injection of capital
or reorganization. Along with the U.S. and Brazil, Sweden is a
leading country in the field of biofuel research. During the
meeting, CEO Per Carstedt mentioned four growth drivers that will
encourage an increased interest in bio-ethanol: farm revenues,
energy security, environment and economics. Swedish Prime Minister
Fredrik Reinfeldt has set a national target for Sweden to eliminate
the use of fossil fuels by 2030. Sekab aims to contribute to
Sweden's goal and to reduce the use in the rest of the world by
marketing and delivering its cellulose technology worldwide.


5. In its current research and small-scale production, Sekab is
focusing on softwood, primarily pine, which can yield high output of
biofuel but also offers the biggest challenge in the production
process. Great work is also being done to produce energy and green
chemicals from the paper mills' by-products, such as lignin. By
2011 Sekab aims at having a complete Cellulose Industrial
Development Unit. The company has started an initiative called the
Verified Sustainable Ethanol Initiative, which aims at securing the
supply of verified sustainable ethanol for E85 gasoline to the
market until EU regulations are in place to do so. The underlying
message of the initiative is "Traceability from Field to Wheel."


6. Sekab sees a great potential in expanding into the African
tropical zone, mainly Mozambique and Tanzania, for producing
bioethanol. The region offers good conditions for growing sugarcane
with bioethanol as one of its products. A bio energy cluster in the
region would be globally competitive and provide long term access to
Europe. Through carbon capture and storage, CCS, an optimized
production system could even be a CO2 sink.


7. Sune Wannstrom, Head of Research, discussed with us the Sekab
pilot plant. The plant is a complete cellulose-to-ethanol system,
presently holding a capacity of 2 tons of dried wood chips/24 hrs.
The plant is developed by Sekab technology but is co-owned with
holding companies of Ume University and Lule University of
Technology. It has more than 17,000 hours of operation and at the
time of the visit the plant had had ten days of uninterrupted
operation.

HAGGLUNDS - A HYBRID MILITARY VEHICLE
--------------


8. Hagglunds, part of the British weapons manufacturer BAE Systems
Group, primarily produces infantry fighting vehicles, armored
all-terrain vehicles and turret systems. The focus of our visit,
the Electric Hybrid Drive Technology, provides fuel economy, is less
harmful to the environment and allows a silent approach on military
target. The system has advanced energy storage, electric traction
drive, power generation, regenerative braking, and integrated power
management technology. By expanding the technology to also fit the
non-military sector, the company believes it to be a strong
competitor to the existing technologies. Interesting non-military
projects are being done in cooperation with Arlanda Airport, Volvo

STOCKHOLM 00000201 002 OF 002


Construction Equipment and Ume University.

LULEA UNIVERSITY OF TECHNOLOGY
--------------


9. Lulea University of Technology (LTU) has a focus on leading edge
and applied research in multiple disciplines. The faculty of
engineering covers 53 research subjects and has close ties to
industry, including energy related research such as wind energy,
energy savings/process integration within the process industry,
district cooling using snow, and pulp mill based biorefinery
research. The two main research partners are Energy Technology
Center (ETC) in Pite and Metallurgical Institute (MEFOS) in Lulea.



10. Dr. Joakim Lundgren described the global bioenergy challenges
to include biomass combustion. The university has a research focus
on small to medium heating appliances and combined heat and power
plants. Within the area of biomass gasification the university's
research is mainly focused on transforming pulp and paper mills to
biorefineries by adding black liquor gasification technology. This
enables the plants to produce electrical power, fuels and valuable
chemicals at competitive prices in addition to pulp and paper.
Developing, evaluating and improving gasification technologies for
refining of available regional biomass feedstock for local product
consumers is also on the agenda.


11. Prof. Staffan Lundstrom introduced the university's hydropower
research, which focuses on research turbines and pressure
measurements in hydropower applications. The new climate situation
has led to an increased importance of dam safety and aquaculture
protection and new regulation paradigms are in place due to the
increased amount of renewable energy. Internal erosion in
embankment dams is a threat to the dams. The region also offers
high potential for land-based wind power and LTU hopes to open a
research center for wind power in cold climates.


12. Prof. Kris Berglund covered the topic of producing ethanol
through biomass fermentation. He claimed little attention is being
paid to value-added derivatives that can leverage the capital
investments for ethanol plants, namely green chemicals production.
A chemical business that is parallel to fuel ethanol would offer
diversification as well as stable margins. Fermentation is however
a relatively expensive and capital equipment intensive process.
Thus we need to make sure that the end product can support the costs
of the technology. Berglund has founded a company, "Working Bugs,"
which produces micro-thin membranes used in producing green
chemicals and biofuels.

CHEMREC - METHANOL FROM PAPER TO PULP MILLS
--------------


13. Chemrec, also on the Embassy's A-list of Swedish alternative
energy companies, is helping pulp and paper mills transform into
biorefineries through black liquor gasification technology. Since
paper mills already produce black liquor in large quantities as a
pulp by-product, the technology does not compete for food or
agricultural land. In Pitea, where the visit took place, the
Chemrec gasification plant is located next to Smurfit Kappa
Kraftliner paper mill. The gasification plant produces second
generation vehicle fuel (methanol and DME) from forest biomass and
has been in operation since 2006. The mill also has another
biorefinery development project starting in 2010, aimed at producing
biodiesel from tall oil.


14. Chemrec has since 1996 had a booster gasifier for black liquor
recovery at the Weyerhaeuser New Bern plant in North Carolina, U.S.
Their new gasifier technology will also be producing methanol at the
New Page plant in Escanaba, MI. Chemrec is looking into funding
opportunities from DoE and USDA and has extensive cooperation with
U.S. companies.

SILVERMAN