Bright future awaits biofuels despite current challenges

C&I Issue 16, 2009

The promise of biofuels will take longer to materialise than many expected just a year or so ago. The excitement provoked, centred mainly around the promise of energy security and freedom from imported oil, particularly in the US, has been tempered by the multitude of challenges that have arisen, ranging from the food vs fuel debate, the global economic slump, the lack of cheap feedstock, the impact of oil price volatility and, finally, overcapacity. However, despite these problems, combined bioethanol and biodiesel sales are still expected to grow from $76bn in 2010 to $247bn by 2020, reaching $280bn by 2022, according to a recent study by US consultancy Pike Research.

‘In the near term, the biofuels market looks like a train wreck,’ says Pike managing director Clint Wheelock. ‘The economics of bioethanol and biodiesel are not yet competitive with petro fuels, and governments have pulled back some of their support. However, in the 10-15 year timeframe, the outlook remains very positive… and economies of scale will dramatically improve the economics of biofuels vs petroleum.’

Pike is forecasting compound annual growth rates of 9% and 15% for bioethanol and biodiesel, respectively, over the period 2009 to 2022, with bio-jet fuel growing in prominence (see Box).

Biotechnology and genetically modified organisms are also becoming increasingly important as a means to reduce feedstock costs. ‘The effect of microbiological technology advances in a myriad of feedstock growth and biorefinery processes cannot be overstated,’ the study states. ‘Yield growth rates of traditional starch- and grain-based biofuel feedstocks, combined with reduced fertiliser requirements, will likely make first-generation feedstocks more abundant and attractive within five years, leading to feedstock gluts and lower prices.’

Second-generation cellulosic and thirdgeneration bioethanol are forecast to see commercial-scale demonstrations by 2011 and 2012, respectively, but Pike believes efficiency improvements will continue well beyond those dates.

The study suggests there will be three waves of next generation biodiesel products, beginning with fuels based on waste greases, which are expected to come onto the market in 2010. The next wave will feature fuels based on jatropha oil, which Pike believes will have a significant impact on the market in 2014. The final wave will be algal biodiesel, which is forecast to reach commercial availability in 2012, but will not have a major impact until 2016.

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