Pike Research forecasts that the global market for biofuels will more than double over the coming decade, increasing from $82.7 billion in 2011 to $185.3 billion by 2021. At least 38 national governments have enacted blending mandates or targets to accelerate the expansion of biofuels production and consumption in the transportation sector.
However, despite strong growth in the industry over the next decade, Pike expects production volumes to fall short of an estimated 71.8 BGPY of biofuels demand. A doubling of current biofuels production (an estimated 29.4 BGPY in 2011) would represent just 7% of the estimated global transportation fuels market in 2021.
Pike Research estimates that the global gasoline market will reach an estimated 375 billion gallons per year (BGPY) in 2021, while demand for diesel in ground transportation markets will reach at least 427 BGPY. Meanwhile, aviation and marine fuel demand could add 200 BGPY or more to global transportation fuel demand by 2021.
...despite huge demand for biofuels from transportation end-markets, access to inexpensive feedstocks and financing hurdles remain challenging obstacles for biofuels production trying to keep pace with emerging mandates. Although many feedstocks, technologies, and conversion pathways are currently sharing the same tent, the current decade is shaping up to be one of shakeouts, as early bets on cellulosic technologies reach commercial production and significant investments from oil majors and multinationals continue to pour into the industry.
As interests diverge among stakeholders (e.g., conventional versus advanced, ethanol infrastructure versus drop-in compatibility, fuels versus chemicals, etc.), we expect the trend towards flexibility and partnerships with multinationals to continue among emerging biofuels producers. Although the shift towards high-value, low-volume markets as a source of revenue will help advanced fuel ventures finance scale-up efforts, it is unclear whether this trend will accelerate biofuels production by bringing more capacity online or divert production away from biofuels as companies back into lower value, high-volume fuel markets over the next decade. Ultimately, widespread commercialization will depend on whether these ventures can reach price parity with petroleum-based fuels.
Although growth is expected to climb steadily through 2016, more robust growth is expected between 2017 and 2021, as a combination of higher oil prices, emerging mandate obligations, availability of new feedstocks, and the scaling up of advanced technologies drive increased investment in the industry.
Pike expects ethanol production to maintain its dominance and reach 49.5 BGPY by 2021, as compared to biodiesel’s 16.2 BGPY. The Americas are projected to account for 71% of global biofuels production.
Key trends identified in the report include:
Oil prices are expected to climb over the next decade, driving increased interest in biofuels.
Wash-out from “Food versus Fuel” and “Indirect Land Use Change” will linger, shifting investor and policy focus from conventional to advanced biofuel pathways.
Advanced biofuels seek near-term revenue, continuing the trend towards feedstock and end-product flexibility.
Commercial airlines and the US military continue to emerge as key drivers of industry growth, signaling growing demand and attracting new investment into the industry.
Yields incrementally improve for first-generation feedstocks, undergirding continued growth in the global biofuels industry.
Genetic modification and feedstock optimization will improve outlook for non-food feedstock pathways, enabling new geographic expansion and accelerated commercialization.
Number of off-take agreements with oil and chemical will increase, confirming the trend towards strategic partnerships.
Policy and regulatory uncertainty likely to persist, tempering more optimistic growth in the industry.
Governments are expected to retreat from stimulus investment highs, shifting financing onus onto private capital sources.
Cellulosic biofuels progress likely to disappoint through 2015/2016, leading to the further scaling-back of production mandates and increased demand for sugarcane.
Long-term outlook for cellulosic biofuels is expected to hold firm, preventing wide-scale retrenchment among investors.
Waste-to-fuels shows promise as near-term success story, shoring up confidence in advanced biofuels over the long-term.
Mandates continue to integrate sustainability measures, setting benchmarks for market access and dictating terms for accessing financing.
Production is expected to significantly outpace demand in some markets (e.g., Brazil) and fall short in others (e.g., China), increasing opportunities for global trade in ethanol and biodiesel.