The energy and power sector is experiencing a radical shift from non-renewable sources to renewable sources. The increasing carbon footprint and its negative impact on the ecological balance are considered to be one of the major factors driving this change. Implementation of laws such as the European Green Deal is expected to lead to a net-zero carbon emission standard by the year 2050. The Green Deal aspires to achieve economic growth that is not tied to resource use.
As of July 2021, a “Fit for 55” package was issued as part of the European Green Deal. The regulation envisages a 55% reduction in carbon emissions by the year 2030.
What are Biofuels?
Biofuel is a type of renewable energy that is essentially derived from elements of nature such as microorganisms, plants or animal materials. Ethanol, biodiesel, green diesel and biogas are some of the major biofuel types. The efficiency of biofuels is similar to that of conventional sources of power. Upon ignition, both of these can be used to harness energy.
The types of biofuels generated vary from region to region depending on the feedstock used. The availability of natural substances varies with the geographical landscape. The development of biofuel algae was considered a promising market until 2005. The companies Algenol, Sapphire Energy and Solazyme raised millions of dollars in private sector investment for biofuel algae technology-based research. Companies began chemically engineering the algal components to produce the biofuel algae. Algae to fuel conversion is mainly based on the high lipid concentration of the feedstock.
Currently, biofuel algae is considered as a dwindling market. This is mainly because the cost competitiveness of this technology was deemed unacceptable. Upon making mathematical simulations, it was observed that ponds three times the size of Belgium would be needed to produce 10% of the EU’s transport fuel requirement. In addition, fertilizers that account for 50% of the EU’s crop needs would be needed to produce the above amount of biofuel algae.
Therefore, between 2005-2012, many companies that were exploiting biofuel algae technology are currently out of business. Research within the biofuel algae field is currently inactive as it is one of the less viable biofuel types.
For example, in regions such as Brazil, sugarcane is used as a feedstock for biofuels. Sugar is considered one of the major agricultural commodities within the region. Thus the biomass produced from the extraction process to produce sugar serves as an economical feed for the production of biofuels. In the United States, corn is used as a feedstock for the production of ethanol.
Chemical market forecasting studies different market segments and provides a trade-off between technology development and commercialization. Chemical market forecasting acts as a bridge between business and education.
Transition from crude oil to different biofuel types
Plateau fuel demand led to the closure of many refineries located in the US and Europe. Due to tightening of environmental regulations and foreign competition in 2020, some owners opted for a more viable option. The global pandemic led to a sharp economic downturn that severely affected the global economy in the year 2020.
The International Energy Agency said that by the year 2030, about 14% of existing refinery capacity is expected to experience low utilization or risk of closure. The IEA also noted that an aggressive transition from fossil fuels to electric vehicles is to be experienced by the year 2040.
To reduce losses, companies are moving from crude oil based energy derivatives to biofuels. The companies BP, TOTAL, and Eni are expected to increase their biofuel capacity by 2-5 times by 2030. Other European refiners such as Repsol and Saras are also planning to increase their biofuel capacity. The global refining footprint is expected to shrink by about 40% by the year 2040. The transition from crude to biofuel is expected to reduce the cost of complete shutdowns and cleanup. Strategic move is anticipated to generate long-term value products.
The Finnish refinery, Neste, has also invested heavily in expanding its biofuel capacity in Europe and Singapore. Since the strategic move, the company has experienced a 55% gain in shares.
global biofuel race
On an overall scale, the demand for biofuels in Europe is expected to range from 3 million tonnes per year to 8 million tonnes per year. America continues to be a strong contender in the race for biofuels. New fuel quality regulations implemented in states such as California are expected to boost growth in the sector. The demand for biofuels is expected to reach 2 billion gallons per year from 21.4 million gallons per year by the year 2025.
Currently, there are 8 ongoing projects that are expected to add to the biofuel economy within the US. Completion of these projects is to increase biofuel production capacity within the US by 1.1 billion gallons per year. Refiners such as Philips 66 and HolyFrontier Corp have mentioned their expansion plans. The current supply and demand gap for the US biofuels market will potentially prompt the country to import this product.
With increasing demand for biofuels, feedstock prices are expected to rise between 2021-2030. The increasing demand for biofuels is set to reduce the profit margins associated with the production of the same.