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 indicated to be one of the key factors that instill this change. The imposition of legislations like the European Green Deal is expected to generate a net-zero carbon emission standard by the year 2050. The Green Deal aspires to achieve economic growth which is not tied to resource use.
As of July 2021, the “Fit for 55” package was released as a part of the European Green Deal. The regulation postulates a 55% decrease in carbon emissions by the year 2030.
What are Biofuels?
Biofuels are a type of renewable energy which is essentially derived from elements in nature like microbial plants or animal materials. Ethanol, Biodiesel, Green diesel, and Biogas are some of the key Biofuels types. The functionality of biofuels is similar to that of conventional sources of power. On ignition, both of them can be used to harness energy.
The Biofuels types generated vary from region to region depending on the feedstock used. The availability of natural substances differs with the geographic landscape. The development of Biofuels Algae was considered a promising market as of 2005. The companies Algenol, Sapphire Energy, and Solazyme raised millions of dollars in private sector investment for Biofuels Algae technology-based research. The companies had embarked upon chemically engineering the algal constituents to produce biofuels algae. Fuel conversion from Algae is majorly based on the high lipid concentration of the feedstock.
Presently, biofuels algae are considered a declining market. This is predominantly because the cost competitiveness of this technology was accounted to be unachievable. On creating mathematical simulations, it was seen that ponds worth three times the size of Belgium would be required to produce 10% of the EU’s transport fuel requirement. Moreover, fertilizer that accounts for 50% of EU’s crop needs would be required to produce the above quantity of biofuels algae.
Therefore, between the years 2005-2012, several companies that had been touting the biofuels algae technology are currently out of business. The research within the biofuels algae sector is presently dormant since it is one of the lesser feasible biofuels types.
For instance, in regions like Brazil sugarcane is used as the feedstock for Biofuels. Sugar is considered one of the key agricultural commodities within this region. Thus the biomass produced from the extraction process followed to produce sugar serves as an economical feed to produce biofuels. In the United States, Corn is used as a feedstock for the production of ethanol.
Chemical Market Forecast studies the various market segments and provides a trade-off between technology development and commercialization. Chemical Market Forecast serves as a bridge between trade and academia.
The transition from Crude Oil to various Biofuels types
The plateauing fuel demand led to the closure of several refineries stationed in the US and Europe. The tightening of the environmental rules and overseas competition in 2020 led some owners to opt for a more viable alternative. The global pandemic led to a swift economic downturn which severely impacted the global economy in the year 2020.
The International Energy Agency stated that by the year 2030 roughly 14% of the existing refinery capacity is expected to experience the risk of lower utilization or closure. IEA also mentioned that an aggressive transformation is to be experienced away from fossil fuels to electric vehicles by the year 2040.
To decrease losses, companies are moving away from crude oil based energy derivatives to biofuels. The companies BP, TOTAL, and Eni are expected to grow their biofuel capacity by 2-5 folds by 2030. Other European refiners like Repsol and Saras also plan on increasing their biofuel capacity. The global refining footprint is expected to reduce by a value of roughly 40% by the year 2040. The transition from crude to biofuels is expected to mitigate the cost of full shutdown and clean-up. The strategic move is anticipated to generate long-term value products.
The Finnish Refinery, Neste has also invested heavily in expanding their biofuels capacity in Europe and Singapore. Ever since the strategic move, the company has experienced a gain in shares by 55%.
Global Biofuels Race
On a holistic scale, the demand for biofuels in Europe is expected to attain a value of 8 million tonnes per year from 3 million tonnes per year. Consecutively, the US is a strong contender in the biofuels race. The new fuel quality regulations imposed within states like California are expected to boost the growth associated with this sector. The demand for Biofuels is expected to reach 2 billion gallons per year by the year 2025 from a year of 21.4 million gallons per year.
Currently, there are 8 ongoing projects which are expected to add to the biofuel economy within the US. The completion of these projects is to increase the biofuel production capacity within the US by 1.1 billion gallons per year. Refiners like Phillips 66 and HollyFrontier Corp have mentioned their expansion plans. The current gap between supply and demand for the US biofuels market would potentially drive the country to import this product.
With the growing demand for biofuels, feedstock prices are expected to increase between 2021-2030. The growing demand for biofuels is poised to erode the profit margins associated with the production of the same.