Market for biofuels depends on biomass supply

ATLANTA, Georgia, December 6, 2006 (Refocus Weekly)

The market for biofuels could falter unless there is significant progress in producing fuel from cellulosic biomass, like plant stalks and wood chips, according to a report from BioWorld Today.

“The world doesn’t often collectively agree on anything; however, there are not many dissenting voices advocating abandonment of the quest to seek biotechnology-driven alternatives to gasoline and diesel for running automobiles and other transportation vehicles,” says the latest ‘Biofuels Report: Market Realities, Perspectives & Challenges.’ “Biofuels are, in comparison to fossil fuels, more environmentally friendly in production and consumption stages and will eventually be much less expensive than their petroleum counterparts.”

Cellulosic ethanol production on a substantial enough scale to meet a significant amount of the U.S. or world demand is at least a decade way from reality, and such serious investment by the oil companies may be a sign that they are willing to show the patience to make the long-term type of risk investment that shows confidence in a developing technology with a potentially successful future such as biofuels.

The perception is that biofuels are a “logical, and necessary, understudy-in-waiting to replace gasoline, which is definitely going through an image crisis,” noting that the Model T Ford was designed in 1908 to run on alcohol. “The gasoline industry has delayed that projection for almost a century, but the time for biofuels may have finally come, amidst concerns over increasing gas prices, dependency on relationships with sometimes not-so-friendly oil-producing nations and the high costs of extracting and refining domestic crude oil,” the report explains.

“During the past four decades there has been a growing interest in the U.S. and other major nations in developing alternative energy fuel sources that are cleaner, more cost-efficient, and are capable of being widely accessible to a broad range of consumers,” it continues. “Ethanol has emerged as the key biofuel for production and has become more economical to produce and more cost effective to consume than gasoline.”

“Biofuel is certainly a progressive alternative to the dangerous, costly and depletive ransom mankind pays to power its vehicles with gasoline and diesel products, but there are still some important factors that are prohibiting the proliferation of the biofuels industry right now, as well as implicating its future,” it cautions. “There may not be a preponderance of voices speaking out against the manufacturing of biofuels, but there are still challenges to think about as the biofuels bandwagon gathers supporters and horsepower on the road in its quest to become the primary fuel source in the U.S., as well as the rest of the industrialized world.”

The increased demand for ethanol has prompted legislation to encourage the use of biofuels and U.S. president George Bush recently said he will provide new funding to eliminate bottlenecks that slow the spread of ethanol in the market. As a result, the number of U.S. gas stations which sell ethanol has increased from 77 in 1997 to 1,000 this year, “a dramatic increase” but still a low share of the 170,000 service stations in the country and “it shows there is a lot of ground to cover before the product is considered truly accessible to the general population.”

The report examines the trend for large oil companies to get involved in ethanol and cellulosic ethanol, which it calls the second generation of biofuels. Production of fuel ethanol in the U.S. is predicted to increase from 4.3 billion gallons this year to 9 billion in 2012, with market revenue rising from US$22.1 billion to $39.3 billion in 2012.

“Without a significant innovation in cellulosic ethanol, the biofuels market is likely to falter, or at least lack the pace necessary to satisfy a significant percentage of demand, inasmuch as corn cannot conceivably handle the displacement of gasoline in the U.S. anymore than crop-based ethanol can keep pace with global gasoline consumption without running out of steam,” the report notes. Based on current trends, BioWorld estimates the market for cellulosic biomass ethanol (“currently a research-stage market with negligible return to date”) to have a production value of 20 billion gallons a year in 2020.

“The biofuels market is unique, in that its progress is less likely to encounter the conventional opposition that traditionally confronts similar fuels markets over concerns such as emissions and other environmentally intrusive issues,” it states. “The challenges facing the biofuels market should not be underestimated though. If the biggest challenges continue to be serious, though not-quite market-killing issues, such as finding a way to produce more corn, converting dispensable biomass to commodity-grade fuel, and pre-process and post-refining transportation of respective feedstock and product, the biofuels market will likely experience progressively consistent growth and apt return on a scale that has the potential to rival the oil industry at its peak.”

“The oil companies will not abandon gasoline, unless it is driven out of market relevance by the cleaner, cheaper and safer bioproducts,” it concludes. “That is an eventually reasonable scenario for the latter 21st century but, assuredly, Big Oil will have developed a Plan B long before that.”

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