The next major shift in industrial production is here. UPM is promoting new bioeconomy projects both through its own investments and through international funding and collaboration.
UPM’s Biofore strategy provides a strong foundation for the company’s R&D and the development of new products, affirms Jyrki Ovaska, Executive Vice President, Technology at UPM.
Developing new technology and launching new products takes time and requires a certain amount of patience. The journey from laboratory to market often takes seven to ten years. “The most significant new innovations are born by breaking the boundaries of traditional industry. However, entering unknown territory is always a business risk. This risk can be distributed by collaborating with leading equipment suppliers and networking with research institutions and other businesses,” Ovaska says.
Ovaska predicts that bio-based products will not entirely replace fossil-based products. The two are likely to co-exist long into the future. It furthermore takes time for new products to become established in the value chain.
“We aim to develop what are known as ‘drop-in alternatives’. Our goal is to manufacture second-generation renewable biofuels and biochemicals that are similar in molecular structure to petrochemical products. This lowers the technical threshold for using the products and enables customers to adopt new products without any additional effort.
“This is one way of minimising the risk associated with new products. It also accelerates time to market and enables scaling of production,” Ovaska adds.
Ovaska points out that development and investment can also be supported through deregulation.
“Industries such as energy and biofuels are strongly regulated by the EU and its member states, whereas the regulations concerning biochemicals are not as strict. Launching new products is also hindered by processes related to the technical approval of products, which are often slow and complex.”
Bottom-line value in piloting
Research can be carried out in laboratory conditions up to a certain point, but new products and manufacturing processes must be tested in demo and pilot plants at an early stage.
“In large-scale process industries, piloting is indispensable. Only piloting can provide sufficiently reliable data as to whether new products are effective and whether costs can be brought to a level that will make business profitable in the long run. We have been unable to test all our new innovations in Europe, so we have piloted our manufacturing process elsewhere, for instance in the United States. Now this problem is being tackled by increasing funding for building new pilot plants capable of testing bio-based products.”
Launching the actual production of new innovations often requires major investments in equipment. UPM recently invested EUR 179 million in the Lappeenranta-based biorefinery in Finland that manufactures UPM BioVerno fuel.
Kudos to bioeconomy strategy
Ovaska points out that it is vital to distribute the burden and risk related to the funding of research and investments. The European Commission, for one, participates in funding research and innovation projects in collaboration with industry. Among the financial instruments used by the European Commission are the joint initiatives of the Bio-based Industries Consortium (BBI), which aim at developing the sustainable bioeconomy sector through new investments. UPM is one of the founding members of BBI, which has a budget of around EUR 3.7 billion.
As an example of recent collaboration under the new funding model, Ovaska mentions the ValChem project coordinated by UPM. The EU has contributed EUR 13.1 million to funding this EUR 18.5 million project. Other participants include Swedish chemicals company SEKAB, French start up METabolic EXplorer and Technische Universität Darmstadt.
The ValChem project taps into a vast body of expertise covering the forest industry, chemistry and biotechnology. It aims to produce wood-based chemicals that rival oil-based materials in terms of quality and production costs. “The project is a good example of how EU funding supports bioeconomy projects and distributes the risks associated with funding. As we are focusing on a specific product segment, our customers are also involved in the development work from an early stage,” Ovaska says.
“Naturally, we cannot rely on public funding, but it does contribute to accelerating our product development and decreasing risks.”
Open doors to partners
Ovaska praises the solid results that have been achieved through public funding and research collaboration with the Finnish Funding Agency for Innovation (Tekes) and the Technical Research Centre of Finland (VTT). With the help of public funding, Finland has become part of a close-knit international community in the business and research world.
“We boast a wealth of expertise in different areas, but we have been fairly ineffective at translating innovations into commercial products and achieving large-scale production. The same applies to the EU as a whole” Ovaska says.
“We would like to see the Finnish funding model become more international. We would also gladly open the door to foreign operators, as the largest markets are ultimately abroad. International collaboration would benefit both large and small companies alike.”