Global biofuels market faces challenges

A new report by Accenture says several challenges are hampering the development of a global biofuels industry.

"The key implication is that not all biofuels are created equal," Melissa Stark, senior executive, Accenture energy industry group told the Cleantech Group.

"Policies that ensure the sustainable production of biofuels and the positive impact on greenhouse gas emissions will be key to consumer and business-to-business support," Stark said.

The recent report outlined factors influencing the growing biofuels market, such as the need for a distribution network for biofuels, infrastructure investment and forward looking government policies.

There are distribution challenges related to integrating biofuels into the established fuels value chain, with tough decisions to be made around storing, blending and accommodating different grades of biofuels, Accenture said.

The growth of the biofuels market is dependent on making a compelling case to motorists and businesses of the environmental benefits, Accenture said in its report, "Biofuels’ Time of Transition: Achieving high performance in a world of increasing fuel diversity."

Accenture said the food-versus-fuel debate might slow demand, but demand will exist as long as governments manage the sustainability issues (see World Bank says food prices hit by biofuels).

“Longer-term trade policies that encourage production in areas most suitable to grow biofuels will be required,” Stark said.

In order to have a game-changing breakthrough biofuel technology, it would have to be something that could be produced to scale from non-food sources, require limited land use, and use the existing distribution infrastructure, Stark said (see Aurora Biofuels lands $20M in Series B).

"First and second-generation biofuels will be used in tandem for a number of years," Stark said.

Over the next few years second-generation technologies, such as cellulosic ethanol and those that use the waste from first-generation technologies will come to market, she added. 

The report said the biofuels market will need to become as global and efficient as possible over the next 10 years, before competing technologies such as plug-in hybrid vehicles or non-agriculture alternatives like algae or biotechnology become mainstream.

The advent of biofuels marks a far-more diverse transport fuels marketplace, characterized by new products, new players and a different competitive landscape.

"We think the investor caution is similar to what we saw in 2005 and
2006," she said. "And the realization that the economics or technology required to significantly scale second generation is further away than thought three years ago," she said.

Investors will also need more certainty when it comes to government commitment to biofuels and how it fits into the overall fuel infrastructure, the report said.

“The growing number of privately funded independents and agribusinesses — and even international and national oil companies — now developing and investing in biofuels reveals significant momentum behind biofuels," Stark said.

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