Biofuel technology sector developments
It seems beyond question at this point in the market’s development that biofuels will be a significant factor in the evolution of the transportation and petrochemical sectors, but the space remains in flux, with the winners and losers yet to be declared.
Materials such as sustainable aviation fuels (SAF) present some of the most achievable pathways to reducing the carbon dioxide (CO2) footprint of sectors that are difficult to decarbonise, like aviation, while materials such as bionaphtha have potential for the petrochemicals sector as well as transportation.
Limited time remains for governments to shift course on energy, production and economic growth to meet the net-zero targets policymakers have set for the coming decades.
Utilisation of biofuel
A factor that could stand to drive wider deployment of biofuels could be its relative maturity compared to other emissions-reduction technologies, particularly for heavy industry, with around half of the innovations that are likely to contribute to those goals currently not yet in existence or in the development phase, according to the International Energy Agency (IEA).
Many biofuels production technologies are much more established, and some feedstocks such as waste cooking oil already have international trade networks, with material from China, Argentina and Brazil flowing into Europe.
The choice of technology, as much as the choice of biofuel, is likely to be a significant determinant of success. Some forms, such as SAF and biodiesel, can be synthesised using a wide variety of technologies, from isomerisation to pyrolysis, while others such as biogasoline, have a much more limited range of technological options at present.
The sector remains policy-driven, although consumer interest in alternative-fuel transportation is growing and that balance may shift over the next decade.
In the short-term, the momentum of the space is also dependent on government targets, meaning that some momentum has been lost during the pandemic.
Biofuel demand and growth
Biofuels demand dropped 8% in 2020 year on year to 150bn litres, according to the IEA, with Brazilian and the US ethanol production experiencing the most significant contraction. However, this was slightly less than the overall drop in gasoline and diesel consumption at almost 9%.
The coronavirus pandemic has sharpened government attention on more immediate issues than transport sector reform, with Indonesia and Malaysia pushing back biodiesel blending mandates temporarily and Thailand postponing its ethanol-blending mandate indefinitely.
Output is expected to return to 2019 levels at least this year, the agency added, but the rebound will be uneven, with biodiesel and hydrogenated vegetable oil (HVO) fuels coming back strongly but US and Brazil ethanol sectors remaining subdued.
A factor in this is that ethanol and biodiesel are constrained by total demand (which remains subdued) due to blending limits, while HVO is a substitute for fossil diesel.
HVO could be a significant driver in biofuels becoming more mainstream, according to Michael Connolly, senior analyst on the ICIS global refining team.
“I think the big change in the market is HVO, because all these other fuels to date are limited by the blending percentage that can go into the finished product, whereas HVO can be 100% of the product. And so that opens up room for biofuels to expand”, said Connolly. “That, in combination with all the regulations/incentives, we're seeing encouraging biofuels is really what's driving a big change in the market. Then you will get co- products on the side like the bionaphthas and LPGs which the petchems firms are going to lap up.”
