Goals for Biofuel Production Could Collide with Market Realities

Supply out-of-sync with mandated demand through 2025, study says

News provided by

Sep 17, 2012, 06:30 ET

HOUSTON, Sept. 17, 2012 /PRNewswire/ -- Hart Energy's newly released study, Global Biofuels Outlook to 2025, finds a disconnect between mandates (Renewable Fuels Standard in the U.S. and Renewable Energy Directive in the European Union) and actual market demand. This has been known for some time but not acknowledged and addressed.

The study analyzes local and global drivers, public and fiscal policy developments, production capacity, feedstocks, and supply and demand projections through 2015, 2020, and 2025 in key countries. Focused predominantly on ethanol and biodiesel, the analysis also includes next-generation biofuels (cellulosic ethanol and renewable diesel), as well as ethyl tertiary butyl ether (ETBE). The study captures biofuels supply and demand in four key regions:

North America: the United States, Canada, and California (U.S. state)
EU-27: Finland, France, Germany, Italy, the Netherlands, Poland, Spain, Sweden, and the United Kingdom
Latin America: Argentina, Brazil, Colombia, and Peru
Asia Pacific: China, India, Indonesia, Japan, Malaysia, the Philippines, South Korea, and Thailand

Hart Energy projects total market demand for all biofuels in the four regions analyzed will reach 4.5x10¹² J (110 million toe) by 2025, equivalent to a share of biofuels in the gasoline and diesel pool of 5.4 percent by energy content. Total demand for ethanol is projected to reach nearly 133 billion liters (over 35 billion gallons) and for biodiesel to more than 51 billion liters (nearly 14 billion gallons). In energy terms, total biofuels market demand is projected to grow by 23 percent from 2015 to 2020, and by 16 percent from 2020 to 2025, or an overall 43 percent for the study period (2015 to 2025). The key question is whether supply, given current challenges to feedstocks and capital availability, will meet these requirements.

"The U.S. vehicle market simply cannot accept more ethanol," said Tammy Klein, assistant vice president of Hart Energy. "It's not a matter of lack of supply or lack of commercial development of cellulosic ethanol."

"The situation in Europe is similar to the United States," said Maelle Soares Pinto, director of Hart Energy's Global Biofuels Center. "The vehicle pool cannot use the amount of ethanol or biodiesel necessary to meet the Renewable Energy Directive. The European Union's sustainability criteria also constrain the type of biofuels that can be used to meet the mandates and the situation could get worse if the EC's proposal for ILUC factors is approved in its current form."

For more information, visit globalbiofuelscenter.com.

Hart Energy provides specialized data/information products and member-only services to targeted audiences worldwide and ranks among the leading providers of news, data, and analysis for the global energy industry. Its core publishing and consulting expertise has been extended to online products (databases, maps) and services (websites, market information) as well as industry conferences and exhibitions (DUG). Hart Energy clients derive from the energy industry, the financial and investment community, engineering and automotive industries, utilities, leading NGOs, and the world's major governments.