Biofuels Market and Technology Overview

1. Biofuels Market and Technology Overview 1st Biofuels International Conference Guadalajara, Jalisco, Mexico May 7, 2008 Brad Chadwell

2. Generates $4 billion annually in global R&D Oversees 20,000 employees in 130 locations worldwide Global enterprise Applying science and technology to real-world problems Managing machinery of scientific discovery and innovation Creating commercial value by bringing new technologies to international marketplace Non-profit, charitable trust formed by Will of Gordon Battelle in 1925 Who We Are 12 International Locations BUSINESS SENSITIVE 2

3. The $890m energy R&D portfolio Battelle manages is first in the nation in breadth and depth in energy science and technology Long term Near term High-yield,robust biofuel crops Inexhaustible fusion power Closingthe nuclearfuel cycle Abundant, affordable energysupplies Oil shale extraction technology Sustainable nuclear reactors and fuels Nano materials for affordable solar Biotech and materials processes for efficient industry Efficient vehicles and engines Smart, efficient electricity grid Net-zeroenergyhouses More efficient energy use Capturing and sequestering CO2 Protectionof the environment Cleaner coal plants and engines

4. Biofuels in the News • Green Energy Sings the Blues: Credit Crunch Hits Clean Tech, TooWall Street JournalGlobal venture capital and private equity investments in clean energy were down significantly in the first quarter; U.S. ethanol investments tumbled from $1.7 billion in 1Q last year to just $311 million this year • Ethanol Profits May Still be Hindered by Overcapacity, Corn Prices, Despite Government-Mandated Use Associated PressEthanol profits remain near record lows and industry plans to increase capacity will likely continue to outpace mandated use. • Shocked, Shocked: Biofuels Are Bad, Saudis Say Wall Street JournalThe list of those opposed to biofuels continues to grow, including British Prime Minister Gordon Brown, who blamed biofuels for food shortages in a letter to fellow G-8 members • Studies Say Clearing Land for Biofuels Will Aid WarmingWashington PostClearing land to produce biofuels such as ethanol will do more to exacerbate global warming than using gasoline or other fossil fuels, two recent scientific studies have shown. The studies were written by a team of researchers from Princeton, Woods Hole and Iowa State as well as a team from Nature Conservancy and the University of Minnesota

5. U.S. Energy Secretary Defends Biofuels “The bottom line is this: concerns about the sustainability and environmental impact of biofuels are not misplaced, but they are absolutely not a reason to ignore the tremendous promise of biofuels. They are an argument for developing them in a way that makes sense for our environment, for our food supply, for our agricultural community and for our nation's economic health.” – U.S. Energy Secretary Samuel Bodman, April 18, 2008

6. Energy and Fuel Costs Continue to Rise

7. Energy Security Has Become a Watchword • EIA forecasts that by 2030 U.S. will be importing 2/3 of its oil and nearly 25% of its natural gasSource: EIA, Annual Energy Outlook 2007, December 2006

8. After peaking in mid-2006, ethanol margins have slowly eroded Food vs. Fuel debates EISA Renewable Fuel Standard (RFS) mandate “saturated” with corn ethanol As of January 2008, the US had total, on-line ethanol production capacity of 7.5B gallons with another 5.8B under construction This would put total capacity in the next few years ahead of RFS mandate “Conventional” Feedstocks Encountering Difficulties “US ethanol development is dead until 2009, says exec after 15-bank tour” – Reuters 3/26/2008

9. U.S. Showing National Commitment to Biofuels Goals • “Cost-competitive cellulosic ethanol” • Cost-competitive in the blend market by 2012 • “20 in 10” (from the 2007 State of the Union address) • Reduce U.S. gasoline* use by 20% by 2017 through… • 5% reduction from enhanced efficiency standards (CAFÉ) • 15% reduction from new Alternative Fuels Standard at 35 billion gallons/year (consistent with the current RFS) • EISA (Energy Independence & Security Act) • 36 billion gallons renewable fuel by 2022 • 21 billion gallons advanced biofuels • 30 x 30 (followed from the 2006 SOU) • Longer-term biofuels goal • Ramp up the production of biofuels to 60 billion gallons • Displace 30% of U.S. gasoline consumption* (based on 2004 use) by 2030 Source: J. Spaeth, DOE, “Overview of U.S. Energy Policies,” Feb 13, 2008

10. Similar Requirements Across the Globe Source: Renewable Fuels Association, January 2008

11. Mexico’s Law for the Promotion and Development of Biofuels (LPDB) Extends Beyond Corn • Biofuels defined as “fuels obtained from biomass derived from organic material in the following activities: agriculture, cattle activities, forestry activities, aquaculture, algaeculture, fisheries products, households, commercial, industrial, from microorganism, enzymes, and derivatives of the foregoing that are produced by technological sustainable processes that comply with the specifications and quality norms issued by the competent authorities.”

12. Biomass Potential Exceeds One Billion Dry Tons Per Year

13. Research Is Underway… Lignocellulosic Biomass Conversion Strategies Source: NW Biomass Business Case (PNNL)

14. …And Supported by US DOE Funding

15. Mature or Extensive Development Underway Hydrogen Water gas shift+ separation Near Term (scale up beginning in 3-5 years) FT Diesel Mid Term (scale up beginning in 5-10 years) Mixed Alcohols Longer Term (scale up beginning in 10+ years) Gasification Syngas Catalyticsynthesis Methanol Hydrocarbons CatalyticSynthesis Alcohols Organic Acids Bio synthesis Anaerobicdigestion Lignocellulosic biomass Biogas SNG(CH4) Purification Flash pyrolysis Biodiesel/ Syn Crude Monomers / Chemicals Bio-oil Hydrotreatingand refining CatalyticSynthesis Hydrothermalliquefaction Ethanol Fermentation Hydrolysis Sugar Alcohols Organic Acids Monomers / Chemicals Bioprocessing Catalytic Synthesis Direct Bioconversion Glycerin Polyols Catalytic Synthesis Sugar/starchcrops Milling andhydrolysis Biodiesel(alkyl esters) Monomers / Chemicals Esterification Catalytic Synthesis Oil plants Pressing orextraction Vegetable oil Bio oil (vegetable oil) Bio-lubes Catalytic Synthesis Opportunities to Advance Technology Abound

16. Diverse Feedstocks, Including Algae, Should Be Considered “The high cost of algae production remains an obstacle” – NREL 1998 Raceway ponds are producing high value nutraceuticals (spirulina) today Photobioreactors (PBRs) currently limited to inoculum production (due to high capital costs) Left: Commercial Photobioreactor in Germany Below: Raceway Ponds (Earthrise Farms, California, USA)

17. Commercialization “Valley of Death” Remains Source: Ethanol Statistics, March 2008 • Volume 1 • Issue 1

18. Battelle Energy Technology Client Alliances / Needs • Systems Engineering • Program Management • Technology Development • Product Development • IP Platform Development S&T Solutions / Products Battelle Energy Technology Provides a Market Facing Asset to Complement Lab S&T Assets Laboratory S&T Assets Commercial Energy Clients Expanding Opportunities for Societal and Commercial Impact from Energy Innovation

19. Battelle’s Bioenergy/BioproductBusiness Will Build on Lab Capabilities • End-to-end process modeling • Enzymes • Fermentation processes • Cellulosic Energy Center • Basic plant science • Fuels research • Basic plant science • Biomass transportation • Bio-energy feedstocks • Bioenergy Science Center • Advanced imaging • Fuels chemistry • Feedstock handling and processing expertise • End-to-end process modeling • Specialized enzymes • Pyrolysis and thermal-chemical processes • Catalysis • End-to-end process modeling • Computational modeling • Chemical process engineering • Chemical synthesis and application formulation • Additional value can be brought to the market through integration of Battelle/National Lab capabilities • A systems-engineering orientation will identify technology gaps/needs while providing value to others • Opportunities exist for technology maturation/scale up for both Battelle/Lab technologies and for technologies from other sources

20. Battelle Is Integrating Labs’ Bioenergy Capabilities for Field to Fuel Solutions Basic Biology Research Systems Biology Feedstock Assembly Conversion Processes Foundational understanding Better crops and organisms to process them Efficient harvesting and transportation Effective processes to produce fuels

21. Battelle has entered a relationship with PETRONAS to scope, design, and develop a renewable energy laboratory (REL) in Malaysia R&D agenda for the new lab Initially focused on biomass conversion to biofuels, biochemicals, and biopolymers Future R&D activities to address solar power, hydrogen generation and storage, fuel cells, ocean and other areas REL predominately will be an applied R&D laboratory, with outreach for “basic” research to Battelle and others The new laboratory will: Showcase state-of-the-art energy efficiency design and operations Be modeled after leading laboratories around the world Provide a suite of new products and technologies, initially aligned with existing PETRONAS business units PETRONAS Renewable Energy Laboratory (REL) New Malaysian Renewable Energy Laboratory

22. Biofuels Hold Tremendous Promise for Diversifying the Energy Base • The need continues to grow • The significant investments being made require strategic focus and sound scientific basis • Technical challenges remain, but can be overcome world Advanced biofuels offer tremendous promise for helping our nation to bring about a new, cleaner, more secure and affordable energy future.”– U.S. Energy Secretary Samuel Bodman, January 30, 2008