Global biofuels market: Opportunities, emerging technologies and production

Big oil companies are responding to the global credit crunch and ubiquitous emerging low-carbon policies being set by investing in biofuels. Non-food sources, particularly, are getting a boost.

In the U.S., Congress has called for 36 billion gallons of biofuels by 2022. The EPA claims that doing so will translate to nearly 300 million fewer barrels of imported oil.

Since EISA caps the amount of ethanol from corn starch at 15 billion gallons by 2015, the remaining 21 billion gallons will come from “second generation” feedstocks and technologies plus an estimated one billion gallons of biomass biodiesel.

The Department of Energy expects U.S. production of biofuels to increase to 2.3 million barrels a day in 2030, up from less than half a million barrels a day in 2007.

This has current and new biofuel players looking at nonfood sources rather than corn, soybean, wheat and sugar. Materials such as switchgrass, algae, straw, wood residue, cellulose (inedible plant parts) and garbage are the investment choices of oil companies.

“Among the oil companies, BP PLC and Royal Dutch Shell PLC have been the most active investors in the sector. But it’s even beginning to attract more conservative companies like Exxon Mobil Corp., [“which] announced in July it was investing $600 million in an algae-to-fuel start-up, Synthetic Genomics Inc.,”The Wall Street Journal recently reported.

Global efforts to develop technologies that improve the biomass refining and conversion processes associated with many different types of biofuels and bioenergy create significant opportunities in technology manufacturing that correlate to the growing consumption of bio-based energy among nations.

To keep pace with changing energy demands, countries and companies invested in the long-term success of biomass will assess their capabilities to convert available resources into liquid biofuels and electricity. This includes the retrofitting of established petroleum plants and paper mills with biomass conversion technology, inherent fuel transportation capabilities and the building of new biorefineries.

The biofuels industry is ablaze with research and development activity to determine the most sustainable and cost-efficient technologies for biomass conversion.

A significant expenditure of funds for R&D supporting development of biofuels was made within the last two years.

Through 2014, SBI projects the U.S. to lead the world in global production of biobased energy activity, growing at a five-year CAGR rate of 13 percent. Ethanol production provides a substantial contribution to the American economy. The industry spends in excess of $13 billion on raw materials, the largest share of which is for corn and other grains, noted John Caupert, Director of the National Corn-to-Ethanol Research Center in

In addition to providing a reliable domestic market for American farmers, the ethanol industry also provides the opportunity for farmers to enjoy some of the value added to their commodity by further processing. Farmer-owned ethanol plants account for half of U.S. fuel ethanol plants and almost 40 percent of industry capacity.

The global market value for liquid biofuel and bioenergy manufacturing is estimated by SBI Energy at $102.5 billion ($U.S.) in 2009, reaching nearly $170.4 billion by 2014. The U.S. is the leading producer and consumer of biobased renewable energy, including automotive fuel and electricity.

The dollar value of U.S.-produced bio-energy manufacturing initiatives is currently $48.7 billion and will grow to reach $103.3 billion in 2014, representing a five-year CAGR rate of 16.2 percent. The U.S. share of the biofuel and bioenergy manufacturing industry is nearly 48 percent of the world’s total and will grow to nearly 61 percent by 2014.

Brazil will maintain share of second place with a market value of $46.3 billion by 2014, a 4.2 percent CAGR growth from $37.7 billion.

The fastest growing countries for bio-based energy manufacturing include China and India, which will grow their market values through 2014, although their overall market share will flatten.

SBi Energy values the biofuels market based on the manufacturing of the raw materials that compose primary and secondary biomass feedstock sources, and technology components that enable the conversion of biomass to bioenergy.

Primary feedstock biomass includes corn, wheat and barley, and secondary feedstock includes soybeans and other oilseeds. Industrial technology manufacturing includes components to retrofit established paper mills or petroleum refineries or construction of new biorefineries.

These components include furnaces, boilers and metal cans. The U.S. market value for biomass manufacturing has nearly doubled since 2006 to reach $48.7 billion, which is comprised of $24.9 billion from organic feedstock manufacturing and $23.8 billion from industrial technology manufacturing.

The U.S. has grown less dependent on exports of organic feedstocks for biomass manufacturing and this trend is likely to continue through 2014. The refining of biomass to liquid biofuels and electricity requires several components throughout the conversion process, including boilers, furnaces, metal tanks and cans. Many bioenergy manufacturers are retrofitting petroleum refineries and paper mills to accommodate the conversion process.

Others are weighing the cost of building newer biorefinery plants that can convert organic feedstocks and adopt next-generation cellulosic refining processes. U.S. shipment value of biomass conversion technology components is expected to reach $18.6 billion in 2009, representing a five-year CAGR of 7.1 percent. The greatest CAGR growth (10 percent) comes from power boilers and heat exchangers, which is expected to reach $4.2 billion in 2009.

Total U.S. market value for biomass conversion technologies will exceed $23.8 billion in 2009, representing a five-year CAGR rate of nearly 6 percent. U.S. exports have grown at a faster rate than imports to reach an estimated $25.2 billion in 2009.

Innovative developments in cellulosic-based biofuels, although more environmentally sound, carry an overall higher price and greater manufacturing risk.

Capital costs for a next-generation cellulosic ethanol plant with a capacity of 50 million gallons per year are estimated by one leading producer to be more than $400 million, as compared with $67 million for a corn-based plant of similar size, and investment risk is high for a large-scale cellulosic ethanol production facility.

However, other studies have provided lower cost estimates. The National Renewable Energy Laboratory tells SBI that the estimated total capital costs for a cellulosic ethanol plant with a capacity of 69.3 million gallons per year is $200 million.

Its recent study showed that the costs (including capital and operating costs) remained too high for a company to begin construction of a first-of-its-kind plant without significant short-term advantages, such as low costs for feedstocks, waste treatment, or energy. Significant reductions in the capital cost and operating costs of a cellulosic ethanol plant will be needed for cellulosic ethanol to be economically competitive with petroleum-based fuels.

Research efforts that lead to successful innovation of next-generation biofuels will lead to further growth in construction projects of refineries that incorporate advanced biomass conversion technologies. SBI Energy expects seven different biorefinery concepts will dot the biofuel processing landscape during the next decade.

Plants specifically designed for industrial processing to biofuels can be developed concurrently with new biorefinery treatment and conversion processes. Resulting technologies will lead to the fusion of agriculture, industrial biotechnology, and energy value chains to enable an efficient and economically viable industry for conversion of plant biomass to liquid fuels. Several advanced biofuels are being developed that have the potential to complement or even replace ethanol as the dominant biofuel.

While still in early stage development, these fuels are being created to improve fuel properties and circumvent production bottlenecks. Examples include technologies used to produce alternative alcohols to be blended with gasoline. British Petroleum and DuPont have been working together on butanol while Amyris Biotechnologies is working with synthetic biology to produce alternative fuels.

Other companies are experimenting on non-alcohols that can be introduced into the supply chain in different ways than ethanol. For example, ADM and ConocoPhillips are working together on the development of biocrude from cellulosic feedstock sources that can be introduced at the oil refinery level.

Another example is start-up LS9, which is producing “renewable petroleum” that can be distributed through traditional pipelines. Biofuels for consumer vehicles will undoubtedly become more prevalent at the fuel pump as governments pass stricter regulations on fuel composition.

The U.S. Environmental Protection Agency (EPA), for example, is proposing revisions to the National Renewable Fuel Standard program (RFS program) that establish new specific volume standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that must be used in transportation fuel each year.

The revised statutory requirements also include new definitions for renewable fuels and the feedstocks used to produce them, including new greenhouse gas emission (GHG) thresholds for renewable fuels.

The EPA proposes to establish a revised annual renewable fuel standard (RFS2). The volume standard under RFS2 was increased beginning in 2008 from 5.4 billion gallons (Bgal) to 9.0 Bgal. Thereafter, the required volume continues to increase under RFS2, eventually reaching 36 Bgal by 2022.

Although the U.S. is the largest producer of biofuels, it is keeping a close eye on the biofuel policymaking activities of other nations to ensure it can protect its export market, and keep tariffs on biofuel imports low. Government standards and mandates on future biofuel production vary by nation, which poses challenges on the trade of biofueled vehicles (FFVs) and their components.

For instance, the second largest biofuel consuming nation, Brazil, currently produces both hydrous and anhydrous ethanol. Hydrous ethanol has 96 percent ethanol and 4 percent water in its composition, whereas anhydrous ethanol is made up of 99.5 percent ethanol and 0.5 percent water.

In 2006, total ethanol consumption made up 17.2 percent (9.9 percent hydrous and 7.3 percent anhydrous) of the vehicle fuel pool with the rest being: 27.2 percent Gasoline A (pure gasoline before blending with ethanol), 3.2 percent vehicular natural gas (VNG), 3.3 percent B2 (diesel blended with 2 percent biodiesel), and 48.9 percent Diesel.

Given the unsettled global economy, particularly in the U.S., SBI Energy forecasts the five-year market value of the bioenergy manufacturing industry with assertive caution.

The U.S. will undoubtedly maintain its global leadership position as its economy recovers through 2014 and its government continues to provide low-interest loans and grants to the private sector to further R&D efforts in renewable energy, especially biomass. Brazil, too, will continue expansion in biomass during the next five years although SBI expects that it will lose market share to the U.S.

 

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Global biofuels market: Opportunities, emerging technologies and production

Big oil companies are responding to the global credit crunch and ubiquitous emerging low-carbon policies being set by investing in biofuels. Non-food sources, particularly, are getting a boost.

In the U.S., Congress has called for 36 billion gallons of biofuels by 2022. The EPA claims that doing so will translate to nearly 300 million fewer barrels of imported oil.

Since EISA caps the amount of ethanol from corn starch at 15 billion gallons by 2015, the remaining 21 billion gallons will come from “second generation” feedstocks and technologies plus an estimated one billion gallons of biomass biodiesel.

The Department of Energy expects U.S. production of biofuels to increase to 2.3 million barrels a day in 2030, up from less than half a million barrels a day in 2007.

This has current and new biofuel players looking at nonfood sources rather than corn, soybean, wheat and sugar. Materials such as switchgrass, algae, straw, wood residue, cellulose (inedible plant parts) and garbage are the investment choices of oil companies.

“Among the oil companies, BP PLC and Royal Dutch Shell PLC have been the most active investors in the sector. But it’s even beginning to attract more conservative companies like Exxon Mobil Corp., [“which] announced in July it was investing $600 million in an algae-to-fuel start-up, Synthetic Genomics Inc.,”The Wall Street Journal recently reported.

Global efforts to develop technologies that improve the biomass refining and conversion processes associated with many different types of biofuels and bioenergy create significant opportunities in technology manufacturing that correlate to the growing consumption of bio-based energy among nations.

To keep pace with changing energy demands, countries and companies invested in the long-term success of biomass will assess their capabilities to convert available resources into liquid biofuels and electricity. This includes the retrofitting of established petroleum plants and paper mills with biomass conversion technology, inherent fuel transportation capabilities and the building of new biorefineries.

The biofuels industry is ablaze with research and development activity to determine the most sustainable and cost-efficient technologies for biomass conversion.

A significant expenditure of funds for R&D supporting development of biofuels was made within the last two years.

Through 2014, SBI projects the U.S. to lead the world in global production of biobased energy activity, growing at a five-year CAGR rate of 13 percent. Ethanol production provides a substantial contribution to the American economy. The industry spends in excess of $13 billion on raw materials, the largest share of which is for corn and other grains, noted John Caupert, Director of the National Corn-to-Ethanol Research Center in

In addition to providing a reliable domestic market for American farmers, the ethanol industry also provides the opportunity for farmers to enjoy some of the value added to their commodity by further processing. Farmer-owned ethanol plants account for half of U.S. fuel ethanol plants and almost 40 percent of industry capacity.

The global market value for liquid biofuel and bioenergy manufacturing is estimated by SBI Energy at $102.5 billion ($U.S.) in 2009, reaching nearly $170.4 billion by 2014. The U.S. is the leading producer and consumer of biobased renewable energy, including automotive fuel and electricity.

The dollar value of U.S.-produced bio-energy manufacturing initiatives is currently $48.7 billion and will grow to reach $103.3 billion in 2014, representing a five-year CAGR rate of 16.2 percent. The U.S. share of the biofuel and bioenergy manufacturing industry is nearly 48 percent of the world’s total and will grow to nearly 61 percent by 2014.

Brazil will maintain share of second place with a market value of $46.3 billion by 2014, a 4.2 percent CAGR growth from $37.7 billion.

The fastest growing countries for bio-based energy manufacturing include China and India, which will grow their market values through 2014, although their overall market share will flatten.

SBi Energy values the biofuels market based on the manufacturing of the raw materials that compose primary and secondary biomass feedstock sources, and technology components that enable the conversion of biomass to bioenergy.

Primary feedstock biomass includes corn, wheat and barley, and secondary feedstock includes soybeans and other oilseeds. Industrial technology manufacturing includes components to retrofit established paper mills or petroleum refineries or construction of new biorefineries.

These components include furnaces, boilers and metal cans. The U.S. market value for biomass manufacturing has nearly doubled since 2006 to reach $48.7 billion, which is comprised of $24.9 billion from organic feedstock manufacturing and $23.8 billion from industrial technology manufacturing.

The U.S. has grown less dependent on exports of organic feedstocks for biomass manufacturing and this trend is likely to continue through 2014. The refining of biomass to liquid biofuels and electricity requires several components throughout the conversion process, including boilers, furnaces, metal tanks and cans. Many bioenergy manufacturers are retrofitting petroleum refineries and paper mills to accommodate the conversion process.

Others are weighing the cost of building newer biorefinery plants that can convert organic feedstocks and adopt next-generation cellulosic refining processes. U.S. shipment value of biomass conversion technology components is expected to reach $18.6 billion in 2009, representing a five-year CAGR of 7.1 percent. The greatest CAGR growth (10 percent) comes from power boilers and heat exchangers, which is expected to reach $4.2 billion in 2009.

Total U.S. market value for biomass conversion technologies will exceed $23.8 billion in 2009, representing a five-year CAGR rate of nearly 6 percent. U.S. exports have grown at a faster rate than imports to reach an estimated $25.2 billion in 2009.

Innovative developments in cellulosic-based biofuels, although more environmentally sound, carry an overall higher price and greater manufacturing risk.

Capital costs for a next-generation cellulosic ethanol plant with a capacity of 50 million gallons per year are estimated by one leading producer to be more than $400 million, as compared with $67 million for a corn-based plant of similar size, and investment risk is high for a large-scale cellulosic ethanol production facility.

However, other studies have provided lower cost estimates. The National Renewable Energy Laboratory tells SBI that the estimated total capital costs for a cellulosic ethanol plant with a capacity of 69.3 million gallons per year is $200 million.

Its recent study showed that the costs (including capital and operating costs) remained too high for a company to begin construction of a first-of-its-kind plant without significant short-term advantages, such as low costs for feedstocks, waste treatment, or energy. Significant reductions in the capital cost and operating costs of a cellulosic ethanol plant will be needed for cellulosic ethanol to be economically competitive with petroleum-based fuels.

Research efforts that lead to successful innovation of next-generation biofuels will lead to further growth in construction projects of refineries that incorporate advanced biomass conversion technologies. SBI Energy expects seven different biorefinery concepts will dot the biofuel processing landscape during the next decade.

Plants specifically designed for industrial processing to biofuels can be developed concurrently with new biorefinery treatment and conversion processes. Resulting technologies will lead to the fusion of agriculture, industrial biotechnology, and energy value chains to enable an efficient and economically viable industry for conversion of plant biomass to liquid fuels. Several advanced biofuels are being developed that have the potential to complement or even replace ethanol as the dominant biofuel.

While still in early stage development, these fuels are being created to improve fuel properties and circumvent production bottlenecks. Examples include technologies used to produce alternative alcohols to be blended with gasoline. British Petroleum and DuPont have been working together on butanol while Amyris Biotechnologies is working with synthetic biology to produce alternative fuels.

Other companies are experimenting on non-alcohols that can be introduced into the supply chain in different ways than ethanol. For example, ADM and ConocoPhillips are working together on the development of biocrude from cellulosic feedstock sources that can be introduced at the oil refinery level.

Another example is start-up LS9, which is producing “renewable petroleum” that can be distributed through traditional pipelines. Biofuels for consumer vehicles will undoubtedly become more prevalent at the fuel pump as governments pass stricter regulations on fuel composition.

The U.S. Environmental Protection Agency (EPA), for example, is proposing revisions to the National Renewable Fuel Standard program (RFS program) that establish new specific volume standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that must be used in transportation fuel each year.

The revised statutory requirements also include new definitions for renewable fuels and the feedstocks used to produce them, including new greenhouse gas emission (GHG) thresholds for renewable fuels.

The EPA proposes to establish a revised annual renewable fuel standard (RFS2). The volume standard under RFS2 was increased beginning in 2008 from 5.4 billion gallons (Bgal) to 9.0 Bgal. Thereafter, the required volume continues to increase under RFS2, eventually reaching 36 Bgal by 2022.

Although the U.S. is the largest producer of biofuels, it is keeping a close eye on the biofuel policymaking activities of other nations to ensure it can protect its export market, and keep tariffs on biofuel imports low. Government standards and mandates on future biofuel production vary by nation, which poses challenges on the trade of biofueled vehicles (FFVs) and their components.

For instance, the second largest biofuel consuming nation, Brazil, currently produces both hydrous and anhydrous ethanol. Hydrous ethanol has 96 percent ethanol and 4 percent water in its composition, whereas anhydrous ethanol is made up of 99.5 percent ethanol and 0.5 percent water.

In 2006, total ethanol consumption made up 17.2 percent (9.9 percent hydrous and 7.3 percent anhydrous) of the vehicle fuel pool with the rest being: 27.2 percent Gasoline A (pure gasoline before blending with ethanol), 3.2 percent vehicular natural gas (VNG), 3.3 percent B2 (diesel blended with 2 percent biodiesel), and 48.9 percent Diesel.

Given the unsettled global economy, particularly in the U.S., SBI Energy forecasts the five-year market value of the bioenergy manufacturing industry with assertive caution.

The U.S. will undoubtedly maintain its global leadership position as its economy recovers through 2014 and its government continues to provide low-interest loans and grants to the private sector to further R&D efforts in renewable energy, especially biomass. Brazil, too, will continue expansion in biomass during the next five years although SBI expects that it will lose market share to the U.S.