Advancing the Bioeconomy: Michigan’s Recent Progress...bioeconomy, including its automotive...

AdvancingtheBioeconomy:

OverviewofMichigan’sRecentProgressSeptember2010

PreparedBy:

3820Packard,#250AnnArbor,Michigan48108

734.975.0333ShepherdAdvisors.com

MichiganStateUniversityProductCenterforAgricultureandNaturalResources82AgriculturalHall EastLansing,MI48825

MichiganStateUniversity’sProductCenterforAgricultureandNaturalResourcesisofferingaseriesentitled“StatusofMichigan’sBioeconomy:Progress&EvolvingPotential.”Thepurposeoftheseriesistobetterinformdecision‐makersandbioeconomystakeholdersaboutarangeofissuesandopportunitiesrelatedtothestillemergingbioeconomy,especiallyinMichigan.

Thepapersintheseriesinclude:

AdvancingtheBioeconomy:OverviewofMichigan’sProgress Michigan’sPositionintheU.S.BiofuelandBioenergyMarket PotentialFutureScenariosofMichigan’sBioeconomy

TheProductCenterenvisionstheseriesasanongoingopportunitytotrackMichigan’sbioeconomyprogress,identifyopportunitiesforadvancingthebioeconomy,andencouragecollaborationamongthemanyregionalbioeconomystakeholders.

StatusofMichigan’sBioeconomy:ProgressandEvolvingPotential “AdvancingtheBioeconomy:OverviewofMichigan’sProgress”

CONTENTS ListofTablesandFigures....................................................................................................................................................3

ExecutiveSummary................................................................................................................................................................4

Introduction...............................................................................................................................................................................4

Michigan’sBioeconomyMarket.........................................................................................................................................5

PolicySupportforMichigan’sBioeconomy................................................................................................................11

BioeconomyResearchandDevelopmentatMichiganStateUniversity.........................................................13

EconomicImplicationsandBioeconomyPotentialINMichigan.......................................................................14

Conclusions..............................................................................................................................................................................20

AppendixA–Workinglistofmichiganbioeconomy‐relatedcompanies......................................................22

LIST OF TABLES AND FIGURES Table1CurrentandUnderwayEthanolFacilitiesinMichigan...................................................................................8

Table2.StatePoliciesandIncentivesPrograms...........................................................................................................12

Table3.PotentialBiogasYieldfromMichigan’sCattleandSwineFarms...........................................................20

Figure1State‐by‐statewaterrequirementsforirrigatedcornin2003..............................................................18

Figure2IrrigatedLandintheUnitedStates....................................................................................................................19

EXECUTIVE SUMMARY Asastatethatimportsalmostallofitsenergyinputsandfuel,Michiganhasprioritizedgrowingitsbioeconomytosupportitsownenergyneedsandtobeglobalsupplier.Whilesubstantialslowdownsinthestate,national,andglobaleconomieshavelimitedthegrowthofthebioeconomyinmanypartsoftheUnitedStates,includingMichigan,progressinadvancingthebioeconomyisbeingmade,entrepreneurialismishappening,andthesupplyandproductionchainisactive.

Thethreemajorsectorsofthebioeconomy–biofuels,bioenergy,andbiomaterials–haveallseenpromisingadvancementsinMichigansinceMichiganStateUniversity(MSU)firstpublishedanevaluationofbioeconomyopportunitiesinthestate.Thestatehasfiveoperatingethanolplantsanditsfirstcommercial‐scalecellulosicethanolplantisunderway,oneofonlyseveninthecountry.Inadditiontoseveralagricultureandindustrialanaerobicdigesterfacilitiesand10current(severalmoreareplanned)wood‐firedelectricalgeneratingfacilities,thelastfewyearsalsohavebroughtanewpublic‐privatepartnershiptodevelopandoperateabiogasfacilitytoprovideheatforFlintandmethanetofuelthecity'sbusfleet.Finally,Michigan‐basedcompaniessuchasDowChemical,FordMotor,andKTMindustriesareallinvestinginandgrowingtheirbiomaterials/biochemicalbusinessesinthestate.

Michiganhasmanyassetsthatoffernationalandglobalbioeconomyleadershipopportunities:adiversefeedstockbase,includingtraditionalbiofuelcropssuchascornandsoybeans,timber,wastewood,andanimalmanure;significantR&DexpertiseandcommitmenttobioeconomyscienceswithinMichigan’suniversities;accesstolarge,high‐qualitywaterresources;andcontinuedeffortsbypolicy‐makerstocreatetheregulatoryandincentivesystemstofurtherbuildthebioeconomymarket.However,likeotherstates,Michigan’sbioeconomyisstilllimitedbycost:producingmostbiobasedfuels,energy,andmaterialsstillcostssignificantlymorethanthefossilfuelcounterparts.Consumershavenotyetbeenwillingtoadoptbiobasedproducts.Asprocessesbecomemoreefficientandpublicunderstandingabouttheavailabilityandqualityofbioproductsexpands,Michigancouldbewellpoisedtoplayastrongroleinthisgrowingsector.

INTRODUCTION “AdvancingtheBioeconomy:OverviewofMichigan’sProgress”isthefirstintheseriesofwhitepaperreportspreparedbytheMSUProductCenterforAgricultureandNaturalResourcesonthe“StatusofMichigan’sBioeconomy:Progress&EvolvingPotential.”Itbuildsonpreviousworkdonein2006byMSUandtheCentrecConsultingGroup1toevaluatetheemergingbioeconomyinMichiganandidentifyhowMSUcouldsupporttheadvancementoftheindustry.ThisreportdiscussesMichigan’sprogressincapitalizingontheopportunitiesandaddressingtheissuesidentifiedinthe2006reportaswellasthosethathavearisenintheensuingyears.ThiswhitepaperisnotmeanttobeacomprehensiveorexhaustiveevaluationofMichigan’sbioeconomy,norajudgmentonMichigan’sprogressinadvancingitsbioeconomy.Itspurposeisto:

1CentrecConsultingGroup.“PreparingfortheFutureofMichigan’sBioeconomy:RecommendationsfortheOfficeofBiobasedTechnologies,”and“LinkingKnowledgeandResourcestoSupportMichigan’sBioeconomy.”2006.

Provideamarketoverviewofthevariousbioeconomysectors.

Highlightrelevantpolicyandstateleadershipeffortsoverthelastfiveyears.

ProvideasampleofsomeofthekeybioeconomyR&DeffortsatMichiganStateUniversitysince2006.

Describesomeoftheeconomicimplicationsandcontinuingopportunitiesforathrivingbioeconomy.

Michiganhasprioritizedgrowingitsbioeconomysectorsandbecomingaleaderintheglobalbioeconomymarket.Sothekeyobjectiveofthe“AdvancingtheBioeconomy:OverviewofMichigan’sProgress”whitepaperistoprovidedecision‐makersandstakeholderswithareasonablythoroughsnapshotofMichigan’sbioeconomyin2010.Forthepurposesofthisreportseries,theProductCenterdefinesthebioeconomyasanycommercialorindustrialeffortbasedongrowingrenewablebio‐materialsandconvertingthemintoproductsthatreplacepetrochemical‐orfossilfuel‐basedproducts.Totheextentpossible,thisreportdrawsfrompubliclyavailabledatafromavarietyofgovernmentagencies,tradeassociations,andpublishedreportsandusesthemostrecentquantitativedataandinformationavailable.

MICHIGAN’S BIOECONOMY MARKET Michiganhasputahighpriorityonbuildingandadvancingitsrenewableenergymarketintermsofbothproductionandconsumption,andthebioeconomyhasbeenasignificantpartofthateffort.ThisfocusisbasedontherecognitionthatMichiganhasseveralcompetitiveadvantagesintheevolvingbioeconomy,includingitsautomotivemanufacturinghistory,accesstovastwaterresourcesforbioeconomyproductdevelopmentandtransportation,andsignificantforestryresources.

Michiganisalsoanetimporterofenergy,includingtransportationfuelsandelectricity/heatinginputssuchascoalandnaturalgas.Michiganproducesapproximately30,000MWofelectricityandconsumesmorethan300millionBTUspercapita(ranking35thintheUnitedStates).Thestateimports97percentofitspetroleum,80percentofitsnaturalgas,and100percentofcoalandnuclearfuelfromotherstatesandnations.Theseimportsaccountforabout70centsofeverydollarspentonenergybyMichigan'scitizensandbusinesses.Michiganspentatotalof$37billiononallformsofenergyin2007;ofthatamount$26billionwasforenergyresourcesimportedfromotherstatesandnations2.AdvancingthebioeconomyinMichigannotonlyincreasesthestate’sshareoftheglobalbioeconomymarket,itaddressestheneedforcost‐competitive,Michigan‐basedenergyfeedstockssothepercentageofgrossstateproductspentonimportedenergycanbereduced.Thestate’seffortshaveincludedpolicysupports;investmentsinbioeconomy‐relatedresearchanddevelopment;investmentinprivatesectoreffortstoconstructbiofuel,bioenergy,andbiomaterialsfacilities;partnershipswithmajorbioeconomycompanies;supportofentrepreneurialandpilot‐scaleefforts;andsupportfortechnologycommercialization.

2MichiganPublicServiceCommission.MichiganEnergyOverview.September2008.

LikemostsectorsoftheU.S.andglobaleconomies,thebioeconomymarkethasbeenhardhitinthelastseveralyearsbythesubstantialeconomicdownturn,tighteningcreditmarkets,andloweroilprices.However,inmanypartsoftheU.S.,includingMichigan,progressinadvancingthebioeconomyisbeingmade,entrepreneurialismishappening,andsupplyandproductionchainsareactive.

Thestatehasmorethan100companiesoperatingdirectlyinthebioeconomy(seeAppendixA),withdozensmore(engineering,research,andconsultingfirms)supportingthebioeconomy.Thesecompaniesrangeinsizefromentrepreneurialstartupstobillion‐dollarcorporationssuchasDowChemicalandDowCorning.Mostofthecompaniesareinvolvedinbiofuelsinsomeway,buttherearemanybioenergycompanies,includinganaerobicdigesters,woodorwoodproductssuppliers,andbiomasscombustionfacilities,aswellasbioplasticandbiobasedproductcompanies.

Mostmarketanalysesbreakthebioeconomydownintothreesectors:

biofuels:replacementforgasolineanddieselfuel;generallyusedastransportationenergy

bioenergy:replacementforcoal,naturalgas,and(possibly)nuclearenergy;generallyusedtocreateelectricity

biomaterials:replacementforpetroleumandsyntheticinputsinproductsThebiofuelsandbioenergymarketshavedominatedmuchoftheinvestmentin,publicdialogueabout,andconsumerawarenessofthebioeconomy.Still,asthefuelssectorinparticularhasstruggledinthelastfewyears,thereisgrowingawarenessandinvestmentinthebiomaterialssector.

MichiganBiofuelsSector

Biofuelstendtobethemostrecognizedsectorofthebioeconomybythegeneralpublic,particularlyasgaspriceshavefluctuated.Forthispaper,biofuelsaredefinedas:

grainethanol:madefromcornandsugarcane,itisblendedwithpetroleumandmostcommonlysoldasanoxygenateblendedwithgasoline(10%ethanolbycontent)

cellulosicethanol:madefromagriculturalcellulosefeedstockssuchascornstover,wheatstraw,switchgrass,andwoodybiomass

biodiesel:madefromvegetableoilssuchassoyorpalm,wastegreases/oils/fats,orfromalgae;commerciallyitalsocanbeblendedwithpetroleumdieselincombinationsof5to100percent

TheU.S.biofuelsmarketsectorhasseengrowthoverthelastdecade,despitethedropoffinbiofuelproductionfacilityinvestmentinthelastthreeyearsbecauseoflowoilpricesandthesubstantialeconomicdownturn.U.S.biofuelproductioncapacitywasupto13.9billiongallons/year(BGY)ofethanolin2009(up688percentfrom20013)and2.6BGYofbiodieselbytheendof2009(upmore

3U.S.EnergyInformationAssociation(EIA).Short‐TermEnergyOutlook.December9,2008.http://www.eia.doe.gov/emeu/aer/txt/ptb1003.html

than4000percentfrom2001)4.However,actualproductionislower―muchlowerinthecaseofbiodiesel.

GrowingthebiofuelmarkethasbeenapriorityforMichiganandsignificantresourceshavebeenfocusedonattractingthebiofuelindustrytolocateorexpandwithinthestate.In2006,thestatecreatedtheMichiganBiofuelsCommission.Itschargewastomakerecommendationstoallowthestatetobecomealeaderinalternativefuelproductionanduse.Thegovernorsetaninitialtargetofhaving1,000ethanolorbiodieselpumpsacrossthestateby2008.ThestatealsopassedaRenewablePortfolioStandardin2008,whichincludeselectricitygeneratedfrombiomassresources.Michigancurrentlyhasabout30operationalbiofuel‐relatedcompanies.

Between2005and2010,Michigan,likemostofthecountry,experiencedmixedmarketsuccessinthebiofuelsindustry.Through2008,thehighpriceofcrudeoilwasstimulatingmoredemandforbiofuelsandthestatesawthecontinuedoperation,expansionand/orconstructionofbothethanolandbiodieselproductionfacilitiesduringthattime.Asoilpricesdroppedandtheeconomyandcreditmarketswentintocrisisin2008and2009,biofuelproductionfacilitygrowthinMichigansubstantiallyslowedandtheinvestmentenvironmentforbioeconomyandotherventuresbecameincreasinglytight.OneofthelargestethanolproducersinMichiganandthenation,VeraSun,filedforChapter11bankruptcyandcloseditsWoodburyfacility.Biodieselproducerswereequallyhardhitfrom2007to2009asthepriceofsoybeans,theprimaryfeedstockforbiodiesel,soaredto$7to$15/bushelcomparedtopricesof$4.50to$8.70/bushelduringthepreviousdecade.Thisincreaseinsoybeanpricesdrasticallyreducedprofitmarginsandmarketstability.5ManyofMichigan’sbiodieselplantsarecurrentlyoutofproductionoronlyoperatingatpartialcapacity.

4U.S.EIA.Short‐TermEnergyOutlookSupplement:BiodieselSupplyandConsumption.April,2009.www.eia.doe.gov/emeu/steo/pub/special/2009_sp_01.pdf5IndexMundi.http://www.indexmundi.com/commodities/?commodity=soybeans&months=180

FrontierRenewableEnergy

FrontierRenewableEnergyisapartnershipbetweentheMascomaCorporationandJ.M.Longyeartodevelopacommercial‐scalecellulosicethanolplantinKinrossintheEasternUpperPeninsula.Whencompletedin2013,thefacilitywillproduceupto40milliongallonsoflow‐cost,low‐carboncellulosicethanol.Itwillemploymorethan150peopleduringconstructionand50full‐timeemployeeswhenoperational.TheFrontierprojectwasoneoftheinitialCentersofEnergyExcellenceawardsmadebythestate.AdditionalpartnersincludetheU.S.DepartmentofEnergy,MichiganStateUniversity,andMichiganTechnologicalUniversity.Fundingfortheprojectincludes:

$23millionfromthestate

$26millionfromtheU.S.DepartmentofEnergy

$300millionfromFrontier

However,progresscontinuedinotherareasofthebiofuelssector.EthanolproducerssuchasPOET,whichoperatesa53‐million‐gallon‐per‐yearethanolplantinCaro,havebeensuccessfulbymakingtechnologicalimprovementsinproductionprocessesandincreasingsalesofbyproductssuchasdistillersgrain.Currentlythestatehasfiveoperatingethanol‐plants,allusingcornastheprimaryfeedstock(seeTable1fordetails).Inmid‐2008,thestatesignedanagreementwithMascomaCorporation,inpartnershipwithMichiganTechnologicalUniversityandMichiganStateUniversity,toprovidemorethan$23millioninCentersofEnergyExcellencefundingforthedevelopmentofthestate’sfirstproduction‐scalecellulosicethanolplantinKinross(FrontierRenewableResourcesProject).Theplantisexpectedtobeoperationalby2013.

AvailabilityofbiofuelsandconsumerdemandalsocontinuedtoshowincreasesinMichiganinthelastdecade.Totalethanolconsumedincludesethanolusedasanoxygenate(ablendofupto10percentethanolwithgasoline)andE85(85percentethanolbyvolume).Thevastmajorityofethanoliscurrentlyusedasanoxygenate.Michiganranksseventhinthenationintotalethanolconsumed:morethan300milliongallonsofethanolconsumedin2007.Inaddition,Michiganhasmorethan90E85stations,withagoalofincreasingthatnumberto1,000.

Michigan’sBioenergySector

Theterm“bioenergy”generallyreferstotheuseofbiomassforenergysystemsthatproduceheatand/orelectricity(versustransportationfuels).Thebioenergysectorincludes:

biogasrecovery:anaerobicdigestionofavarietyofwaste(animalmanure,municipal,andindustrialwastewater)tocreatebiogasthatpowerselectricity‐producingturbinesorcombinedheatandpower(CHP)units

landfillgasrecovery:decompositionofsolidwasteinlandfillscreatesgasthatisusedtofuelboilers,turbines,orCHPunits

TABLE1CURRENTANDUNDERDEVELOPMENT ETHANOLFACILITIESINMICHIGAN

FacilityName LocationCapacity(mgy)

Feedstock OperationalStatus

TheAndersonsAlbionEthanol Albion 55 corn operating

MarysvilleEthanol Marysville 50 corn operating

GlobalEthanol/MidwestGrain Riga 57 corn operating

POETEthanol Caro 53 corn operating

CarbonGreenBioenergy Woodbury 50 corn operating

Mascoma‐FrontierRenewable Kinross 40 cellulose,wood underdevelopment

AmericanProcessInc.Biorefinery Alpena unknown celluloseunderdevelopment‐

pilotscale

biomassgasification:useofwoodorotherorganicwastetocreatesynthesisgas(syngas)thatcanbecombustedinturbinesorusedtocreatemethanolandhydrogen

biomasscombustion:directcombustionofbiomass(woodchips,pellets,blackliquor–aliquidbyproductofpulpandpapermanufacturing)intraditionalboilers

ThebioenergymarkethascontinuedtomakeheadwayinMichiganacrossallthreetypesofbioenergygeneratingfacilities.Therearecurrentlymorethan35bioenergy‐relatedfirmsoperatinginthestate(seeAppendixA).In2008,thestatesignedanagreementwithandprovided$4millioninCentersofEnergyExcellencefundingtoSwedishBiogasInternationaltodevelopabiogasplantinFlint,usingthecity’swastewaterasafeedstocksource(seeinsetforprojectdetails).Thebiogaswillbeusedtogenerateelectricityandcreatebiomethanetofuelthecity’sbusfleet.

Michiganisoneofthetop10U.S.statesintermsofmegawatthoursproducedfrombiomasssuchasbiogenicmunicipalsolidwaste,landfillgas,sludgewaste,agriculturalbyproducts,andotherbiomassgases(includingdigestergasesandmethane)6.Thestate’ssixfarm‐basedanaerobicdigestersgeneratemorethan18,600megawatthourequivalentsofenergyannually7.

AccordingtotheU.S.DepartmentofEnergy,Michiganranksninthinthecountryforpowerproductionfromwoodorwoodderivedproducts.Thestategeneratesmorethan1.7millionmegawatthoursfromcombustionofwoodybiomassat10facilities8.ThiscapacityisexpectedtosignificantlyincreaseinthecomingyearsasMichigan’sutilitiespursueadditionalrenewablegenerationopportunitiestomeetRenewableEnergyStandardsmandatedthroughPublicAct295,passedin2009.

Michiganhasmorethan19millionacresofforests,65percentofwhichareownedprivately.Giventhegrowinginterestinwoodandwoodwasteasfeedstocksforbothbioenergygenerationandcellulosicbiofuelproduction,thestatehaspartneredwithseveralMichiganuniversitiesandotherbioeconomypartnerstoevaluatetheextentofexistingaswellaspotentiallyavailablewoodresourcesin

6EIA,“StateDataforReservesandSupply,”2008.

7U.S.EPA.AgStarProgramAccomplishments.April,2010.http://www.epa.gov/agstar/accomplish.html.

8EIA,“StateDataforReservesandSupply,”2008.

SwedishBiogasInternational

SwedishBiogasInternationalisconstructingan$8‐$10millionbiogasfacilityinFlintinpartnershipwithKetteringUniversityandthecity.Theprojectwill:

usethecity’swastewatersludgetoproducebiogasfueltoheatcitybuildingsandpossiblycreatebiomethaneforthecity’svehiclefleet

receive$4millioninMichiganCentersofEnergyExcellencefunding

employ25to45people

beoperationalinfall2010

saveFlintanestimated$3.5millionwithinsevenyears

thestate.In2009,theMichiganClimateActionCouncillookedatavailablebiomassresourcesinthestateundera“businessasusual”scenarioandfoundthatthepotentiallyavailableresourcesinclude9:

morethan20milliondrytonsofunharvestedbiomassgrowthontimberlandacres morethan6milliondrytonsofenergycrops approximately870,000drytonsofunusedloggingresiduefromcurrenttimberlandharvests approximately1.5milliondrytonsofmillandotherresidueandurbanwoodwaste justunder4milliondrytonsofagricultureresidue 1.7milliondrytonsofmunicipalsolidwastefiber

TheseresourceswillincreasinglybelookedatforuseinthebioenergysectorinMichigan.

MichiganBiomaterialsSector

Thebiomaterialssectorislargelymadeupofbiochemicals,biobasedplastics,polymers(e.g.,polylacticacid),solvents(e.g.,ethyllactate),biodegradableproducts,biobasedpackagingmaterials,andotherplatformchemicalssuchassuccinicacidandbutanol.

Theglobalpolymermarketisestimatedat$250billionandispredictedtoexceed$450billionby2025.Biobasedpolymersareexpectedtoincreaseinmarketsharefromthecurrent0.1percentto10to20percentby2025.Thechemicalindustryisprojectedtogrowtomorethan$2trillionayear,withbiobasedchemicalsrepresentingmorethan$500billionby202510.

Thestatehasmorethan30biomaterialsfirms(seeAppendixA),includinglargemultinationalcompaniessuchasDowChemicalaswellassmallerandstartupcompaniessuchasDrathsCorporation.Thesecompaniesmakeavarietyofproductsincludingbiobasedplastics,biochemicals,biodegradableproducts,biobasedhealthandbeautyitems,biosolventsandcleaningproducts,biobasedpackagingmaterials,biobasedautomotivematerials,beneficialbacteria,andgreenbuildingsupplies.ThesectorhasseenincreasedactivitybothinMichiganandnationwideasbiofuelproducersinparticularlookforwaystodevelopintegratedbiorefineriestocreatebiobasedmaterialsasbyproductsofbiofueldevelopment.Someexistingbiofuelproducersarealsobeginningtoshiftcurrentfeedstocks(soybeansforexample)tobiochemicalproductionbecauseitoffersmoreopportunityforeconomicviability.WhiletheMichiganmarketaswholehasnotseensubstantialgrowthincommercialoperationsoverthepastfiveyears,therehavebeenseveralkeyadvancementsduringthistime.

Tohelpsupportthebiomaterialsmarket,thestategrantedoneofsixPhaseICentersofEnergyExcellenceawardstoWorkingBugsLLCtoestablishabiorefinerythatwillproducehigh‐valuespecialtyandfinebiochemicalsandbiofuelsfromnaturalfeedstocks.Technologydevelopedatthis

9MichiganClimateActionCouncil.ClimateActionPlan.March,2009.Definedas:“theamountavailableiftheresourceweremanagedaccordingtoitscurrentdemonstratedproductivecapacity,andifsocial,ecological,administrative,andtechnicalconstraintsweremanagedtominimizetheirimpactonutilization.”P.J‐3.10U.S.DepartmentofAgriculture(USDA).USBiobasedProducts.2008.

centercanbeappliedtoexistingbiomaterialprocessingfacilitiesacrossthestate,includingcornethanolplants,beetsugarrefineries,andpulpmills,toproducenew,highervaluebioproducts.

SeveralotherMichiganbiomaterialscompanieshaveseennotablegrowthandexpansioninrecentyears,including:

DowChemical:industry‐leadingmanufacturerofspecialtychemicals,advancedmaterials,agrosciencesandplasticsproducts.

KTMIndustries:developerandmanufacturerofGreenCellbiodegradableengineeredfoamforcushioningandinsulationapplications.ThecompanyislocatedinLansingandhasmorethan$2.5millioninannualsales.

FordMotorCompany:leadingU.S.automanufacturerworkingtodevelopadvanced,low‐temperaturecombustiondieselenginesthatusebiofuelblendsoptimizedforengineperformance.FordhasbeenpartneringwithMSUresearchersona$4.7millionU.S.DepartmentofEnergygranttointegratethedevelopmentofadvancedengineswiththedevelopmentofnextgenerationbiofuels.Additionally,Fordcurrentlyusesbiobasedmaterialsinsomevehicles,includingawheatstraw‐reinforcedplasticandsoy‐basedpolyurethaneseatcushions,seatbacksandheadrests.

DrathsCorporation:nextgenerationchemicalcompanythatcombinesmicrobiologicalandchemicalprocessestoproducechemicalintermediatessuchasnylonprecursorsfrombiobasedmaterials.Drathsrecentlyreceivedmorethan$5millioninMichiganstatetaxcreditstoconstructheadquarters,research,andmultiplepilotfacilitiesinDelhiTownship.

Bio‐Kleen:manufacturerofhighperformance,biodegradablecleaningproductsforthemarine,RV,snowmobile,motorcycle,automotive,household,andcommercialindustries.

POLICY SUPPORT FOR MICHIGAN’S BIOECONOMY Twopiecesoffederallegislation,the2005EnergyPolicyActandthe2007EnergyIndependenceandSecurityAct,createdrenewablefuelstandardsfortheUnitedStatesthatmandatedproductionanduseof36billiongallonsofbiofuelsbytheyear2022.Thestandardrequiresthatthismustbemadeupof21billiongallonsofadvancedbiofuels(renewablefuelsotherthanethanolderivedfromcornstarch)andspecifiedthatatleast16billiongallonsbefromcellulosicbiofuelandatleast1billiongallonsmustbedieselmadefrombiomass.Theremaining15billiongallonsmaybeeitheradvancedbiofuelsorconventionalbiofuelssuchascornethanol.Therenewablefuelstandardshavebeendrivinggrowthinthebiofuelssectoracrossthecountry,includingMichigan.

KTMIndustries

KTMIndustrieswasfoundedin1997byfourMichiganStateUniversityresearcherswhowantedtomakeproductsfrombiomaterials.Itstartedoutasasmallhomeofficeandnowisamultimilliondollarcompanythatoccupiesa42,000‐square‐footbuildinginLansing.Thecompanymanufacturesandsellsbiobased:

greencellfoamusedforcushioningandshockabsorption

compostable/recyclablethermalcooler

MagicNoodlesbiodegradeablebuildingblocksforkids

Inadditiontothefederalrenewablefuelstandards,Michiganhasimplementednumerousotherpolicies,incentiveprograms,andregulatoryrequirementstoadvanceitsgrowingbioeconomy.Theseeffortshavebeenparticularlyfocusedonattractingnewbioeconomy‐relatedbusinessestothestate,creatingpublic‐privatepartnerships,andhelpingexistingMichigancompaniesdiversifyintoandexpandbioenergyandotherrenewableenergymanufacturingandproductionfacilities.Table2highlightssomeofthestate’skeypolicysupporteffortsforthebioeconomy.

TABLE2.STATEPOLICIESANDINCENTIVESPROGRAMS

IncentivePrograms ProgramDescriptionCentersofEnergyExcellence

TheCentersofEnergyExcellence(COEE)programwascreatedtopromotethedevelopment,accelerationandsustainabilityofenergyexcellencesectorsinthisstate.In2008,theMichiganStrategicFundBoardawarded$43milliontosixCentersofEnergyExcellenceinthefirstphaseoftheprogram(fourofwhicharebioeconomyprojects).The2009PhaseIIoftheprogramauthorizedanadditional$30million.Theinitiativeprovidesgrantstofor‐profitcompaniesthatarecommercializinginnovativeenergytechnologieswithsupportfromauniversity.

RenewableEnergyRenaissanceZones

Allowscompaniesoperatingwithinthezonetooperatefreeofvirtuallyallstateandlocaltaxesfor15years.FacilitieswithinarenaissancezonedonotpaytheMichiganBusinessTax,stateeducationtax,personalandrealpropertytaxes,orlocalincometaxes(whereapplicable).Theprogramallowsfor15RERZs,witharequirementthatatleastfivebefocusedontheproductionofcellulosicbiofuels

NonrefundableBusinessActivityTaxCredit

Businessesengagedinalternativeenergyresearch,development,andmanufacturingmayclaimanonrefundablecreditfromtheMichiganbusinesstax.Qualifiedbusinessactivityisdefinedbroadlytoincluderesearch,development,ormanufacturingofanalternativeenergymarinepropulsionsystem,analternativeenergysystem,analternativeenergyvehicle,alternativeenergytechnology,orrenewablefuel.

BiomassGasificationandMethaneDigesterPropertyTaxDigester

Provides100percentexemptionfromrealandpersonalpropertytaxesforcertainmethanedigesters,biomassgasificationequipment,andequipmentusedtoharvestcropresiduesordedicatedcropspercentusedforenergyproduction.

BiomassEnergyGrantProgram

Providesfundingforstatebioenergyandbiofuelsprojectsonaregularbasis.Fundingcategoriestypicallyincludebiofuelsandbioenergyeducation,biofuelsinfrastructure,andbiomasstechnologydevelopmentanddemonstrations.

RefundablePayrollTaxCredit

BusinessescertifiedbytheNextEnergyAuthoritythatlocateintheNextEnergyZonetoresearch,develop,ormanufacture"alternativeenergytechnologies,"asdefinedbytheMichiganNextEnergyAuthorityAct,mayclaimacreditequaltotheirqualifiedpayrollamountmultipliedbytheirincometaxrateforthatyear.

Policies/Mandates PolicyDescriptionRenewableEnergyStandard PublicAct295,requiringthestate'sinvestor‐ownedutilities,alternativeretail

suppliers,electriccooperativesandmunicipalelectricutilitiestogenerate10percentoftheirretailelectricitysalesfromrenewableenergyresourcesby2015.Underthestandard,eligiblerenewablesincludebiomass,solarandsolarthermal,wind,geothermal,municipalsolidwaste(MSW)*,landfillgas,existingtraditionalhydroelectric(i.e.,waterpassedthroughadam),tidal,wave,andwatercurrent(e.g.,runofriverhydroelectric)resources.Biomassisbroadlydefinedasorganicmatterthatisnotderivedfromfossilfuelsandwhichreplenishesoverahumantimeframe

RenewableFuelsCommission

In2006thestatecreatedtheRFC,madeupofstakeholdersfromacrossMichigan'sbioeconomysectors,tomakerecommendationsabouthowthestatecouldencourageandacceleratethetheproductionanddeploymentofbiodieselandethanol.TheRFCissueditsreportin2007,whichincludedmorethan40recommendations.Severalofthekeyrecommendationshavebeenimplementedalready,includingthedesignationofRenewableEnergyRenaissanceZonesforcellulosicethanolmaterials.

TheMichiganEconomicDevelopmentCorporationalsoofferstechnicalandmarketassistancetobioeconomycompaniesandhasincludedbioenergyasoneofitsfourkeygrowthareasforthestate.

BIOECONOMY RESEARCH AND DEVELOPMENT AT MICHIGAN STATE UNIVERSITY Michigan’spublicuniversities,likemostacrosstheUnitedStates,areincreasinglyfacingreducedstateandfederalfundingforresearchacrossdisciplines.Michigan’sinvestmentinitshighereducationinstitutions(two‐andfour‐year)droppedbyabout6percentfrom2005to200911.FederalR&Dfundingduringthedecadewasalsovolatile,butsawsomepositiveopportunities.ResearchfundingbytheNationalScienceFoundation’s(NSF)DirectoratesforBiologicalSciences,MathandPhysicalSciencesandEngineering,increasedoverallbymorethan50percentfrom2000to200912.U.S.DepartmentofEnergy(DOE)fundingfortheEnergyEfficiencyandRenewableEnergy(EERE)Program(whichincludesbioeconomy‐relatedresearch)wasupanddownduringthisperiod,rangingfromahighof$851milliontoalowof$456million13.ThestateofMichiganhasbeenabeneficiaryoffundingfrombothagencies.InFY2007,Michiganinstitutionsreceivedmorethan$125millioninNSFfundingandmorethan$31millioninDOER&Dfunding.14Whilethisistotalagencyfunding,notspecifictothebioeconomy,itdoesgiveapictureoftheoverallfederalR&Dfundingforscienceandtechnology.InFY2008,MichiganreceivedaDOEawardofmorethan$50millioninpartnershipwiththeUniversityofWisconsin‐MadisontoformtheGreatLakesBioenergyResearchCenter,oneofthreeDOEbioenergyresearchcenters.

MostofMichigan’smajorresearchinstitutionsaredoingatleastsomebioeconomyresearchandseveralhavebecomenationalleadersintermsofexpertise,fundingreceived,patentsand/orcommercialventurespin‐offs.Whilethefullscopeofalltheuniversityresearchcannotbecapturedinthisbriefingpaper,somenotableexamplesofresearchandinitiativesatMSUthathavehelpedadvancethebioeconomyinMichiganandgloballyarehighlightedbelow.Laterpapersinthisserieswillprovidemorein‐depthcasestudiesonbioeconomyresearchatMSUandotherMichiganuniversities.

GreatLakesBioenergyResearchCenter:afive‐year,$250millionpartnershipwiththeUniversityofWisconsin‐Madisontoresearchanddeveloptechnologiesandprocessestoproducebiofuels,bioenergy,andhighvaluebiobasedproducts.

11StateHigherEducationExecutiveOfficers.2009.StateHigherEducationFinanceFY2009.“GrapevineTable2.”(twoandfour‐yearinstitutionsincluded)http://www.sheeo.org/finance/shef/SHEF_FY_2009.pdf

12AmericanAssociationfortheAdvancementofSciences.AAASAnalysisofR&DintheFY2009Budget.March,2008(revised)http://www.aaas.org/spp/rd/prev09p.htm.

13AAAS.AAASReportXXXIV:ResearchandDevelopmentFY2010http://www.aaas.org/spp/rd/rdreport2010/tblii11.pdf

14NationalScienceFoundation,DivisionofScienceResourcesStatistics.2010.FederalFundsforResearchandDevelopment:FiscalYears2007–2009.DetailedStatisticalTablesNSF10‐305.Arlington,VA.Availableathttp://www.nsf.gov/statistics/nsf10305/.

MSUBioEconomyNetwork:universitywideorganizationdesignedtomarshalMSUresearchandresourcestohelpfosterconnectionswithpublicandprivatesectorinitiativesaimedatexpandingMichigan'sbioeconomicsector,aswellasidentify,encourageandsupportresearchprogramsthatpositionMSUasaworldleaderindevelopingthebioeconomy.

BiomassConversionLab:focusedondevelopingpretreatment,enzymaticandfermentationtechnologiestobreakdowncelluloseandhemicellulosemoreeconomicallyandefficiently.

MSU‐DOEPlantResearchLab:researchfocusesonmanipulatingplantsatthemolecularleveltocreatemoreefficientandeconomicalbiofuelsandbiochemicals.

WorkingBugsLLC:inpartnershipwithLuleåUniversityofTechnologyinSweden,WorkingBugsisidentifyingpotentiallyusefulmicrobesthatcouldbeusedinfermentationprocessestomakeproductsfromrenewableresources,aswellasintermediatechemicalsthatarethenusedtomakeotherbiobasedproducts.

Biostarch:usingbiomassfromsoybeansandcorn,researchersarecreatingbioplasticbagsandbiofoamsheetstoprotectcargoduringshippingandforuseasinsulation.

MSUBioeconomyInstitute:openedinspring2009attheformerPfizerfacilityinHolland,the138,000‐square‐footfacilitycomplementsandextendscampusresearchsupportingthebioeconomy,includingresearchonbiofuels,biobasedchemicalsandbiomaterials.

MBI:awholly‐ownedsubsidiaryoftheMSUFoundation,MBI'smissionistodevelopandcommercializesustainablebiobasedtechnologies.MBIpartnerswithbioeconomyinventorsandstartupstode‐risk,develop,andscaleupdiscoveriesintocommerciallyviabletechnologypackages.

ECONOMIC IMPLICATIONS AND BIOECONOMY POTENTIAL IN MICHIGAN ThebioeconomyofferssubstantialopportunitiesforMichigantoimprovethestate’seconomybyreducingrelianceonimportedenergy,creatinglocalandregionaljobs,helpingcreatemarketsforadvancedautomobiles,andexpandingtheglobalexportofagriculture‐andforestry‐basedproducts.Thesupplyandbuychainsforthebioeconomyincludesignificantopportunitiesforenergyconsumers,componentsuppliers,energyservicesuppliers,manufacturersanddistributors,serviceproviders,developers,fuelretailers,fueldistributors,blenders,biofuelrefiners,andfeedstocksuppliers.

Inadditiontothebioeconomyprogresshighlightedabove,Michiganhasnumerousplannedeffortsorprogramsandprojectsthatareunderway,butnotfully‐realized.ThereareseveralfactorsthatcouldshapeMichigan’sabilitytocontinuebuildingitsbioeconomyandbecomeamarketleader,including:

Continuedpolicysupport,suchasrenewableenergystandards,taxcredits,andgrantprograms

MichigancontinuestoimplementandpossiblyaugmentPublicAct295thatcreatedthestate'srenewableenergystandards.Thestatealsoisworkingwithinvestor‐,municipal‐,andcooperative‐ownedutilitiestodevelopprogramstomeettheirrenewableenergytargets.

MichiganisinthesecondphaseofCentersofEnergyExcellencefunding,aprogramthathassignificantlyattractedglobalbioeconomycompaniestothestatetodevelopandcommercializebiobasedfuels,energy,andproducts.

Thestatealsoisconsideringseveralotherpiecesoflegislationspecificallyaimedatadvancingthebioeconomyincluding:15

o HouseBill4137thatwouldoffer20‐yearbiofuelcontractsatfeedintariffratesof$0.105to$0.145/kWh(comparedtonewcoalpriceestimatesof$0.133/kWh)

o HouseBill4107toprovidetaxcreditsforthepurchaseofbiomassstoves

o HouseBill4170toprovidetaxcreditsforbiomassgatheringandhandling

o HouseBill4241toprovidetaxcreditsforamountsexpendedonbiomassfuel

AsofJuly1,2010therehasbeennoactiononthesebills.

However,untilthedevelopmentandproductionofbiofuels,bioenergy,andbiomaterialsaremoreefficient,therewillcontinuetobeasignificantcostdifferentialbetweenbioproductstheirfossil‐fuelcounterparts.Michigan’spolicy‐makersmusthavethepoliticalwilltosupportthenecessarysystemsthatwillspeedadoptionandhelpincreaseconsumeracceptanceoftheseproducts.

InvestmentinresearchandproductdevelopmentatMichigan’suniversitiesandfacilitationofthecommercializationprocess

Michigan’spublicuniversities,likemostacrosstheUnitedStates,arefacinglong‐termreductionsinresearchfundingacrossdisciplines.ForMichigantoadvanceitsgrowingbioeconomy,thestatemustcontinuetopartnerwithitsresearchinstitutestoprovidefundingandfacilitateindustrycollaboration.TheMichiganCentersofEnergyExcellenceprogramhasbeenavaluabletoolforcreatingopportunitiesforthestate’suniversitiestocollaboratewithindustryonthedevelopmentandcommercializationofcleanenergytechnologies.PhaseIIofthateffort(targetedat$30million)willcontinuethatinvestment.

Asindicatedinthe“BioeconomyResearchandDevelopmentatMichiganStateUniversity”sectionabove,Michigan’sfundingforitshighereducationinstitutionshasdeclinedinrecentyears.Infiscalyear2008,Michigan’spercapitainvestmentinhighereducationwas$258,approximately88percentoftheU.S.average.Thisfundingrepresentedjustlessthan7percentofthestate’staxandlotteryrevenuesandincludedallhighereducationfunding,notjustresearch.16

Statesupportforresearchfundingathighereducationinstitutionslikelywillcontinuetodeclineinthecomingyears,asthestatestrugglestoboostitssaggingeconomy.Michiganhasbeenparticularlyhardhitbytheglobaleconomiccrisisandcontinuedeffortstobalancecompetingbudgetprioritiesmeans

15MichiganPublicServiceCommission.GrowingGreenEnergyinMichigan.PresentationbyTomStanton,February,2010.

16StateHigherEducationExecutiveOfficers.StateHigherEducationFinanceFY2009.

highereducationfundinghassuffered.Stateinvestment,however,isacriticalcomponentfordevelopingthetechnologies,processes,andfeedstocksforthenextgenerationofthebioeconomy.Theinnovationtomakebiofuels,bioenergy,andbiomaterialsmoreefficientandcostcomparabletotheirfossil‐fuelcounterpartscomesfrombasicandapplieduniversityresearch;ifMichiganhopestobeabioeconomyleader,asitsprioritiessuggest,supportforthisresearchatthestate'suniversitiesmusttakeprecedence.

Investmentinbiomassavailabilityandbiomasstransportationinfrastructure

Michiganhasmorethan19millionacresofforestlandandforestlandhasincreasedmorethan6percentsince1980.Thestate’sforestresourcescurrentlyarebeingunderutilizedandthisisasignificantareaofbioeconomygrowthpotential.In2009,theMichiganClimateActionCouncilreleasedareportmakingseveralrecommendationsforadvancingenergyandbiofuelsproductioninthestateincluding:

Expandeduseofbiomassfeedstocksforelectricity,heat,orsteamproduction:produce10percentoftotalin‐stateelectricgenerationfromsustainablebiomassfeedstockby2025.

In‐stateliquidbiofuelsproduction:achieve10percentuseofrenewablefuelsby2012and25percentby2025.

Methanecaptureandutilizationfrommanureandotherbiologicalwaste:reducegreenhousegasemissionsfromhanding,treating,andstoringlivestockmanureandorganicwasteby15percentby2015and25percentby2025throughimprovedmanuremanagementpracticesandmethaneuse.

Expandeduseofbiobasedmaterials:use100,000metrictonsofbiobasedproductsannuallyby2025andreclaim150,000metrictonsofsolidwoodresiduesfrommanufacturingprocesses,deconstructionsites,andurban/suburbantreesannuallyby2025.

Thecouncilevaluatedthepotentialavailabilityofbiomassfeedstockstomeettheaboverecommendations(basedlargelyona“businessasusual”scenario)andestimatedthat8.4milliondrytons/yearareavailableforcellulosicbiofuelproductionand14.1milliondrytons/yearareavailableforuseinelectricityorheat/steamproduction.Theoverallbiomassdemandofthecouncil'srecommendationsisestimatedtobeabout78percentoftheavailablesustainablesupplyforthestate17.Thecouncil'srecommendationsarebeingconsideredbythestateandmanyhavebeenadoptedinMichigan’srecentenergylegislation,PublicAct295.ImplementingtheClimateActionCouncil'srecommendedgoalsnotonlyachievesclimatereductiongoals,itfacilitatesthedevelopmentofathrivingbioeconomybypromotinginvestmentinbiomassfeedstockproductionandinfrastructuretoimproveitsaccessibility.Therearenumerouschallengestoaddressingsomeoftheserecommendationsandincreasingtheavailabilityofbiomass,including:

17MichiganClimateActionCouncil.ClimateActionPlan.March,2009.AppendixJ‐3.

politicalleadershipandstatebudgetsupportisneededtocreaterequirementsandincentivesforproducingenergyfromrenewablesourcessuchasbiomass

developingwaystoaccessthesubstantialamountofforestresourcesonwidelydistributedprivatelands

ensuringthatincreaseduseofbiomassresourcesisdonesustainably

privatesectorinvestmentintechnologyandinfrastructureisneeded

identifyingandevaluatingavailablelandsforenergycropplantations

prioritizingandinvestinginbiomass/biofueltransportationinfrastructure(rail,road/highwayupgrades,truckingefficiencies)

CapitalizingonMichigan’saccesstosubstantialwaterresourcesforbothbiofuelandbiomaterialsproductionprocessesandtransportofbiomaterialsviaGreatLakesshipping

Allagriculturalcrops,includingbiomassfeedstocks,arewateredbyeitherrainfalland/orirrigation(whichuseseithergroundorsurfacewater).Waterandirrigationneedsvarysignificantlybetweencropsandregions.Ingeneral,commonbiomasscropssuchascorn,soybeans,andwheatneedmorewaterthancellulosicbiomasscropssuchasswitchgrass,butthereisalackofhistoricaldataandknowledgeaboutthewaterimplicationsofgrowingmorecellulosiccrops.Figure1showsthestate‐by‐statewaterrequirementsin2003ofirrigatedcorn(gallonsofirrigationwaterperbushel)18asaproxyvariableofsomeoftheregionaldifferencesinwaterneedsforbiofuel/bioenergycrops.Therewillobviouslybegeographiclimitationsonthetypesofbiomassfeedstocksthatcanbegrown.Ifbiofuels,bioenergy,andbiomaterialsfeedstockmarketsexpandbeyondcurrentirrigatedcropland,therecouldbesignificantpressureonwaterresourcesinsomeareasofthecountry,especiallydrywesternareas.

18NationalAcademyofSciences.WaterImplicationsofBiofuelsProductionintheUnitedStates.2008.(NAScitedsource:N.Gollehon,USDAERS,writtencommun.,July12,2007.Basedondatafrom2003FarmandRanchIrrigationSurvey(USDA,2003).

FIGURE1STATE‐BY‐STATEWATERREQUIREMENTSFORIRRIGATEDCORNIN2003

Inadditiontothewaterrequiredtogrowbiofuel,bioenergy,andbiomaterialscrops,processingthesegoodsrequireswater.Theprocessofcreatingethanol,forexample,issimilartobrewingprocessesanduseswaterforconversionandforheatingandcoolingtheproducts.Currentestimatesofconsumptivewateruseatcornethanolfacilitiesareabout4gallonsofwaterpergallonofethanolproduced.Soanethanolplantthatproduces100milliongallonsperyearwouldwithdrawslightlymorethan400milliongallonsofwaterperyearfromeithergroundwaterorsurfacewatersources.Whiletherearenotalotofcommercialcellulosicethanolplants,theirwateruseisestimatedtoabout9gallonsofwaterpergallonofethanolproduced,thoughthisisprojectedtodecreasetoabout2to6gallonsofwaterpergallonofethanolproducedasefficienciesimprove.Theseethanolproductionwaterrequirementscomparetoabout1.5gallonsofwaterusedpergallonofpetroleumrefined.19

ComparedtomostoftheWest,HighPlains,andSouth,Michiganhasarelativelylargeamountofaccessiblewater.Thestate'sclimateprovidessignificantprecipitation,whichreducestheoverallneedforirrigatingcrops,asFigure2demonstrates.Asaresult,growingbiomasscropsinMichiganwillnot

19NAS,2008.

putasmuchpressureongroundwatersuppliescomparedtootherstates.Whileprotectionofwaterresourcesfromoveruseorcontaminationisaveryhighpriorityforthestate,Michiganisblessedwithsubstantialgroundwaterresources,36,000milesofstreams,11,000inlandlakesandponds,andisalmostcompletelysurroundedbytheGreatLakes.TheseresourcesprovidevastsuppliesofcleanandaffordablewaterforMichigan’sresidential,commercial,andindustrialsectors.

FIGURE2IRRIGATEDLANDINTHEUNITEDSTATES20

Inaddition,Michigan’spositionatthecenteroftheGreatLakesofferssignificantopportunitiestoshipbiomassfeedstocks,biofuels,andotherbiobasedproductstootherregionsofthecountryandworldviatheAtlanticOcean.Combinedwiththestate'sotherproductshippinginfrastructure,thisaccessdiversifiesMichigan’sabilitytohaveastrongsupplychainandbeanexporterofbiobasedproducts.

20NAS,2008.

IncreasingtheuseofMichigan’sagriculturalandmunicipalwastestocreatebioenergy

Inadditiontothosefacilitiesalreadyoperating,theMichiganDepartmentofAgriculturehasbeenworkingwithseveralotherfarmsandindustrialagricultureproducerstodevelopandreceivepermitsforanaerobicdigestionfacilities.

TheProductCenterandShepherdAdvisorsalsoevaluatedMichigan’soverallpotentialforenergygenerationfromanaerobicdigestion.Michiganhasmorethan175largeconfinedanimalfeedingoperations(CAFOs),21andmorethan200foodprocessingcompanies.22Thispresentsasignificantopportunitytoconvertanimalmanureandfoodprocessingwastetoenergyusinganaerobicdigestion.Animalwasteinthestate,forexample,offerstheopportunityforasmuchas493,037kWh/dayor2.2millionMJ/dayasTable3demonstrates.

AnimalType

NumberofAnimalsinEntireState

ManureProduction(lbsmanure/animal*day)

TonsofManure

(perday)inMichigan

BiogasYield

(m^3/ton)

BiogasYield

(m^3perday)

ElectricalYield

(kWh/day)HeatYield(MJ/day)

DairyCattle 150,928 115 8,678 25 216,959 368,830 1,670,584

BeefCattle 34,341 92 1,580 25 39,492 67,137 304,090

Swine 186,505 10 933 36 33,571 57,071 258,496

Total 371,774 ‐ 11,191 86 290,022 493,037 2,233,170 CONCLUSIONS Asastatethatimportsalmostallofitsenergyinputsandfuel,Michiganhasputapriorityongrowingitsbioeconomytosupportitsownenergyneedsandtobeglobalsupplier.Whilesubstantialslowdownsinthestate,national,andglobaleconomieshavelimitedthegrowthofthebioeconomy,inmanypartsoftheUnitedStates,includingMichigan,progressinadvancingthebioeconomyisbeingmade,entrepreneurialismishappening,andthesupplyandproductionchainisactive.

Incultivatingitsbioeconomy,Michiganhasavoidedsomeofthepitfallsthathaveplaguedotherstatesbynotoverinvestingintraditionalcorn‐basedethanolandbiodieselplants.Asaresult,whileourbioeconomyhasstruggledduringtheeconomicdownturnofthelastfewyears,thestateisnothurtinginthissectorasmuchasotherregions.

Theongoingandpotentialbioeconomyeffortsdescribedinthispaper,combinedwiththestate’sgeographicadvantagesintermsofdiversefeedstocks,underutilizedforestryresources,andvastwater

21MichiganDepartmentofAgriculture.TheEPAdefinesalargeCAFOasanoperationwith1,000ormorecattleorcow/calfpairs,or700maturedairycattle,or2,500swineweighingmorethan55pounds.TheanalysisusesCAFOsbecausetheyarelargeroperations,generallymakingbioenergyproductionmorecosteffective.

22U.S.Census,2007.FoodProcessorswithover20employees.

TABLE3.POTENTIALBIOGASYIELDFROMMICHIGAN’SCATTLEANDSWINEFARMS

resources,offersignificantopportunitiesforMichigantoexpanditsbioeconomyandadvanceitspositionintheglobalbioeconomymarketgoingforward.Indoingso,thestatecan:

continuetodiversifyitseconomyandcreatemorelocaljobsandwealthacrossthebroadspectrumofthebioeconomysupplychain,positioningMichigancompaniestobemorecompetitiveinaworldthatincreasinglyvaluessustainability

gaingreaterfuelsecurity

contributetoglobalreductionsinclimatechangeemissions

Achievingtheseobjectiveswillrequirecommitmentonthepartofdecision‐makersandindustrytomakekeyinvestmentsandaddresssomeoftheremainingbutsignificantbarriersincluding:

sustainablyincreasingtheuseofstateforestryresourcestoboostavailabilityofbiomassfeedstocks

improvingtheinfrastructuretoaccess,harvest,andtransportbiomassresources

continuingexistingpublic‐private‐universitypartnershipsandincreasinginvestmentinbioeconomyresearchtodevelopthetechnologies,processes,andfeedstocksforthenextgenerationbioeconomy

providingcontinuedpolicysupportforgrowingthestate'srenewableenergysectorbyimplementingexistingandcreatingnewlegislationthatrequiresrenewableenergytargets,providesinvestmentandresearchincentives,andfacilitatesthesitinganddevelopmentofbioeconomyfacilities

educatingconsumersaboutthevalueandqualityofbiobasedenergyandproducts

AsMichiganaddressestheseremaininghurdles,itcouldbewellpoisedtoplayastrongroleinthegrowing,globalbioeconomysector.

APPENDIX A – WORKING LIST OF MICHIGAN BIOECONOMY‐RELATED COMPANIES Thefollowingisalistofmostthebioeconomy‐relatedcompaniesoperatinginthestate,drawnfrompubliclyavailableinformation,suchasnewsarticlesandpressreleases.Withtwoexceptions,thesefirmsareheadquarteredinMichigan.TheProductCenterandShepherdAdvisorsrecognizethatitisnotacomprehensivelistandthatthebioeconomyisconstantlyevolving.TheProductCenterwelcomesinformationonanyotherfirmsoperatinginthebioeconomybutnotrepresentedhere.

Thesecompaniesareinvariousstagesofcommercialoperations.Inadditiontothese,therearedozensofotheremergingandstart‐upcompaniesthatarecontributingtothegrowthofthisindustry.

Company CityTypeofBioeconomy

Company

CarlMeyerFarms23 AnaerobicDigester

DenDulkDairyFarm24 Ravenna AnaerobicDigester

GeerlingsHillsideFarm25 Overisel AnaerobicDigester

GreenMeadowFarms,Inc.26 Elsie AnaerobicDigester

MeadowbrookFarms27 Hamilton AnaerobicDigester

ScenicViewDairy28 Freeport AnaerobicDigester

ScenicViewDairy29 Fennville AnaerobicDigester

SietsemaFarms30 Allendale AnaerobicDigester

ConsumersEnergyGreenGeneration Jackson Bioenergy

DTEEnergyGreenCurrents Detroit Bioenergy

FiberBy‐Products WhitePigeon Bioenergy

Granger Lansing BioenergyHeatTransferInternational Caledonia Bioenergy

HESCOSustainableEnergy Warren BioenergyHogquest,LLC Hamilton Bioenergy

KirtlandProducts,LLC BoyneCity Bioenergy

LandfillEnergySystems Wixom Bioenergy

LansingBoardofWaterandLightGreenWise Lansing Bioenergy

MaederBrothersQualityWoodPellets,Inc. Weidman Bioenergy

MichiganBiomass Ithaca Bioenergy

MichiganWoodPelletFuel,LLC Holland,Grayling Bioenergy

Mid‐MichiganLiquidators Ithaca Bioenergy

Morbark Winn Bioenergy

MSRSales Brighton Bioenergy

23,24,25,26,27,28,29,30Thesefarmsarealloperatinganaerobicdigestionbio‐energyequipmentforself‐containedheatingandpoweruse,butarenotoperatinginthewiderbioeconomymarket.Asnetmeteringbecomesmoreprevalent,thesefarmsmaybecomeenergyproviderstothegrid.

Company

PelletSales.com Manchester Bioenergy

Phase3Development&Investments,LLC Fennville Bioenergy

ReGenBioFuels WhitmoreLake Bioenergy

RenewaFuel Kalamazoo Bioenergy

RenovareEnergyInc. FarmingtonHills Bioenergy

UpperPeninsulaPowerCompanyNatureWise GreenBay,Wisconsin Bioenergy

VulcanWoodProducts,Inc. Kingsford Bioenergy

WeEnergies‐EnergyforTomorrow Milwaukee,Wisconsin Bioenergy

AdvancedBiodieselPartners AnnArbor Biofuels

AgSolutions,Inc. Gladstone Biofuels

AlbionEthanol‐TheAndersons Albion Biofuels

AlternativeFuelTechnology RedfordTownship Biofuels

AmericanProcess,Inc. Alpena Biofuels

BiodieselIndustries Detroit Biofuels

BlueGreenEnergy,LLC AnnArbor BiofuelsCenterforAlternativeFuels‐MacombCommunityCollege Warren Biofuels

CornEnergyProducts Newaygo Biofuels

CroreyBiomassGasifierSystemsLLC BeverlyHills Biofuels

eFarms Holland Biofuels

EnderLLC,Inc. Detroit Biofuels

GraylingGeneratingStation Grayling Biofuels

GreatLakesEthanol‐GlobalEthanol Riga Biofuels

LibertyRenewableFuelsLLC Owosso Biofuels

MarysvilleEthanol,LLC Marysville Biofuels

MichiganBiodiesel Bangor Biofuels

MichiganEthanol‐PoetBiorefining Caro Biofuels

MidlandEnergyLLC Midland Biofuels

MilanBiodiesel,LLC Milan Biofuels

NextDiesel Adrian Biofuels

NextGenEnergyLLC Livonia Biofuels

NextGenEnergyEthanolPlants McBain,Watervliet Biofuels

NorthwestMichiganBiofuelsLLC SouthBoardman Biofuels

RKAPetroleumCompanies Romulus Biofuels

TheAndersons‐EthanolDivision Albion Biofuels

USBioWoodbury‐Verasun Woodbury Biofuels

A.R.B.Distributing,LLC GrandRapids Biomaterial

Company

AdvancedAdvertisingProducts Jackson Biomaterial

AlinesSoyCandles&Products Burton Biomaterial

BGreenToday.com AnnArbor Biomaterial

Bio‐Kleen Kalamazoo Biomaterial

BioPlasticPolymers&Composites,LLC Okemos Biomaterial

BiosolutionsLLC GrandHaven Biomaterial

BlissSoybeanCandlesandGifts GrandHaven Biomaterial

CandlesMadefromSoy Westland Biomaterial

ChangingPoses BloomfieldHills Biomaterial

DiversifiedNaturalProducts,Inc. Scottsville Biomaterial

DowChemical Midland Biomaterial

DrathsCorporation EastLansing Biomaterial

EcoRoofsLLC BerrienSprings Biomaterial

Eco‐LogicLawnandLandscape GrossPointePark Biomaterial

GlobalGreenRoofs GrandRapids Biomaterial

HydroSafeOil DeWitt Biomaterial

KelseyPromo,LLC Livonia Biomaterial

KTMIndustries Lansing Biomaterial

L&LPackaging Livonia Biomaterial

LiveRoof SpringLake Biomaterial

MichiganGreenSafeProducts Detroit Biomaterial

MysticFlames,LLC Redford Biomaterial

OmniTechInternational,Ltd. Midland Biomaterial

OrganicPonds SterlingHeights Biomaterial

PermalocCorporation Holland Biomaterial

PineRidgeSoyCandles Norway Biomaterial

RoyalRoofingCompany,Inc. Orion Biomaterial

SchenaRoofing NewBaltimore Biomaterial

SelestialSoap TraverseCity Biomaterial

SouthernScentsations FlatRock Biomaterial

StrongProductsLLC BattleCreek Biomaterial

SuperiorGroundCoverInc. Hudsonville Biomaterial

TheGreenerCleanerCarpetandUpholstery Detroit Biomaterial

TrueArtesian Alanson Biomaterial

WorkingBugs,LLC EastLansing BiomaterialXeroflora East Lansing Biomaterial

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