By James Cogan, Bioeconomy Industry Analyst

Ethanol Europe Renewables Ltd (EERL) is an interesting before & after case study in bioeconomy finance.   It didn’t exist eight years ago and only opened its doors for business five years ago.  By taking a look at the company’s evolution one can witness the interplay of some of the financial, entrepreneurial, legislative and market forces that shape the sector.


EERL was created to supply renewable ethanol for displacing petrol on the road.  The 2009 Renewable Energy Directive had just been enacted, setting a 10% target for renewable energy in EU transport by 2020.  Dozens of new biofuels factories were going to be needed.  EERL alone was planning to build several.   Ethanol, which is made by fermenting the sugars in grain and beet crops, offers very high greenhouse gas savings, is economical to make, generates high quality protein feed as a co-product and provides rural regions with new markets for crops as well as new jobs in and around the biorefineries.


Critically, ethanol, even if deployed to the maximum extent possible in the current vehicle fleet on Europe’s roads, was never going to pose any challenges to the supply chain. Europe’s farmers have masses of underused farm capacity, the whole process from seed-to-wheel is tried and tested and in a period of long term depressed crop prices and excess world grain stocks farmers need all the demand they can get.  There are no adverse side effects.  Legislation is essential however, because even if fossil prices rise again there’s no way the incumbent oil industry is going to give up market share or control of the value chain without being forced to.


EERL’s first plant, Pannonia Ethanol in Hungary, was built in a record 20 months, cost about 150 million euro and was financed by a combination of equity from its Irish founders, equity from the owners of a USA biorefinery engineering company and loans from two USA development banks.   It produces enough climate friendly ethanol to fuel five million cars and enough protein rich GMO-free feed supplement for 300 thousand head of cattle.    It provides additional income streams to many hundreds of farm families and over two thousand off-farm jobs in the area.   So far so good.

Then the superstition set in.   A hike in the price of oil caused food commodity prices to go up for a short period and some commentators voiced fears about using conventional crops for bioenergy.   In the minds of some these fears became facts.  The Brussels executive caught the bug and reversed policy direction for all conventional biofuels, regardless of science and in denial of the evidence demonstrating that ethanol achieves all the things the legislation wanted of it.  EERL cancelled its investment programme with the result that Pannonia holds the distinction of being the last privately funded, commercial scale and viable biorefinery built in the Union.    There are signs that peak superstition has been reached but there are still influential anti-bioeconomy voices in Brussels which maintain that using any bio-based resource for anything other than food is a sin.


So where is EERL going from here?   The Pannonia operation, in line the with entire industry, has massively improved its efficiencies, increasing yields, reducing input energy and producing ethanol and protein rich animal feed that meet ever more demanding quality requirements in the market.   Pannonia has led the field, creating the PannoniaGold branded range of protein feed products and in doing so creating a market for innovative high value biorefinery feeds.   There is a win-win effect for everybody:  higher efficiencies mean greater greenhouse gas savings under the legislation and more secure returns for the organisations that put up the finance.

When EERL was first launched the USA provided most of the finance.   With several years of solid results behind it European loan and equity providers have stepped in to replace them while at the same time making available new funds for continuous improvement and for innovation.


On this firm financial basis EERL is realising its vision of biorefinery technology incubator.


A grain of cereal yields four essential biobased building blocks:  starch, protein, fiber and oil.  Each of these can be further separated into sub-components and each of these sub-components can be processed into novel high value products.   Every year EERL evaluates hundreds of patents, start-ups and new technology claims around the world and from these it has so far picked about a dozen for collaboration and development.   The projects include biotech and chemical processes, involve fermentation by-product CO2 in addition to the four main building blocks and address high value food, feed, health, chemicals, materials and energy markets.   The project partners are from India, the USA and Europe and come in every shape and size, from individual researcher to corporate behemoth.   EERL’s Pannonia biorefinery at Dunaföldvár on the Danube in Hungary operates an open access policy and welcomes many researchers, entrepreneurs and policy makers to the site each month.

Access to finance for these incubator projects is not a primary challenge for EERL because like most established business developers it can return to its original financing network.  But it has looked at European Investment Bank and European Commission instruments.


The EIB promotes a package of loan and equity instruments under the brand InnovFin which are intended to make tens of billions available to technology and business innovators each year.   However it is difficult to determine how much InnovFin finance actually makes it to innovation and how much to traditional lending secured by real estate, personal guarantees, invoices or inventory.  One gets the feeling that what the EIB disburses from Luxemburg as InnovFin money ends up morphed by local banks (where innovation is a synonym of risk) into low risk lending backed by near-cash assets.  And in a risk-averse culture such as the EIB it seems unlikely that this is especially worrisome for the bank.


The Commission’s grant funding programmes are more interesting.  To date EERL has not used a single euro of H2020/BBI finance but it has participated in applications.  The sums involved, of between 80 and 150 million euro per year of BBI grant finance, appear large at first glance.  But they shrink in real terms when one considers that in relation to EERL activities and interests only a small fraction is applicable.  There are also opportunity and cash costs in applying for the grants plus considerable operational constraints imposed on how grants can be deployed.  So yes, the BBI programmes are attractive and EERL monitors them with interest, but for the European bioeconomy to scale from niche to norm it will require one or two orders of magnitude of investment greater than the BBI amounts.   To an extent this is happening.  The point being that bioeconomy policy makers, advocates and entrepreneurs should be devising ever more ambitious, long term and stable measures for generating many billions more each year.


The 2009 renewable energy legislation, had it been improved rather than thrown out, might have been just that kind of measure.  Europe would have dozens more biorefineries like EERL, all of them vying to expand and diversify.