Despite billions of dollars in financing, countless government incentives, and a graveyard of failed start-ups, global biofuel capacity represents only 3% of petroleum fuels, while bio-based materials have only captured 1% of the market from plastics. The future for bio-based alternatives is not all bleak, however. A new report from Lux Research forecasts that global biofuel capacity will grow 7.8% annually to 53 billion gallons in 2015, while materials are on track to grow at 17.7% per year to reach 8.1 million tons in 2015. The report identifies which companies will be winners and losers, and plots the most promising paths to growth.

“It is now obvious that incumbent technologies like ethanol and biodiesel will drive new capacity less and less. Instead, the industry will capitalize on the technical advantages of emerging platforms, such as bio-based jet fuel, algal oil, and renewable diesel, in order to expand”

Titled “Bio-based Fuels and Materials Through 2015: Growing Capacity Past a Drop in the Bucket,” the report forecasts the most likely industry growth, but also models four different alternative scenarios. Each explores the impact of a potential disruptor: advanced technologies, new government regulations, deeper corporate involvement, and falling oil prices.

“It is now obvious that incumbent technologies like ethanol and biodiesel will drive new capacity less and less. Instead, the industry will capitalize on the technical advantages of emerging platforms, such as bio-based jet fuel, algal oil, and renewable diesel, in order to expand,” said Andrew Soare, an analyst at Lux Research, and the lead author of the report.

To drive the report’s models, Lux Research tallied up over 1,000 bio-based fuels and materials producers from around the world – ranging from billion gallon behemoths to backyard brewers – and spanning over 50 countries on six continents. It found that:

• Although limited, growth in ethanol will rely on supportive government regulation. Increasing the U.S. ethanol blend limit to 15% would free up new demand for the fuel in the states, while increased Brazilian control over sugar speculators would prevent that country’s volatile sugar prices from encouraging its ethanol producers to switch to sugar production. Combined, these measures could boost ethanol capacity to 43 billion gallons by 2015, up from 34 billion gallons in the base case.
• Technology advances drive new capacity in bio-based fuels and materials. New technical processes based on algae oil and butanol could drive growth in biofuels to 78 billion gallons of total capacity by 2015. On the materials side, advances in technology could help expand capacity to 10.5 billion tons, largely driven by growth in succinic acid and ammonia producers.
• Bio-based fuels and materials need corporate backing. Increased corporate investment in either industry could fuel massive growth, particularly on the materials side where it could bring total capacity up to 12.4 million tons in 2015. Biofuel capacity also benefits from increased corporate participation, which could expand capacity to 65 billion gallons in 2015.

“Biofuel capacity is sensitive to the price of oil,” said Soare. “But even in the unlikely case of oil prices below $50 per barrel, capacity will grow because there is momentum and corporations will keep their hands in until oil prices rise.”

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