The production of liquid biofuels from biomass requires large capital expenditure on setting up processing facilities as well as continued operating expenses. The biomass feedstock itself has a higher cost than fossil fuels like crude oil or natural gas. Producing biofuels also involves multi-step processing of the biomass which includes pre-treatment, enzymatic/chemical hydrolysis of cellulose and hemicellulose into fermentable sugars, fermentation of sugars into alcohols and separation and purification. All these steps are energy intensive and add to the overall costs. Furthermore, the yields of biofuels obtained from biomass are generally lower than from fossil fuels. For example, it takes several kilograms of corn to produce just one gallon of corn ethanol compared to just one barrel of crude oil producing 19 gallons of gasoline. The lower yields effectively translate to higher biofuel production costs per unit of energy content. These costs have made liquid biofuels less competitive against conventional gasoline and diesel on an energy equivalent basis, thereby limiting their widespread adoption. For instance, in the U.S., corn ethanol typically costs USD 1-USD 2 more to produce per gasoline gallon equivalent than gasoline from crude oil, according to data from the U.S. Department of Energy's Bioenergy Technologies Office.
Market Opportunity: Second generation biofuels from non-food biomass
Second generation biofuels from non-food biomass have the potential to be a major opportunity in the liquid biofuels market going forward. Unlike first generation biofuels which use corn, sugarcane, or vegetable oils for fuel production, second generation biofuels are produced from non-edible plant matter such as agricultural residue, municipal solid waste, or purpose grown energy crops. These are more sustainable and environment friendly compared to the first generation biofuels which were often criticized for diversions of agricultural lands for fuel crops. This is impacting the global food supply and inflation in food prices. The use of lignocellulosic biomass which includes crop residues, wood wastes, and purpose grown energy crops like switchgrass for fuel production offers multiple advantages. It does not compromise on food security as non-edible plant parts are used. According to the U.S. Department of Energy, nearly a billion tons of renewable biomass is potentially available annually in the U.S. from agricultural and forest residues alone without impacting food, feed, and traditional product demands. Conversion technologies are also improving to efficiently break down the lignocellulose components of plant cell walls into simple sugars for fermentation into alcohols like ethanol. Several companies are actively working to commercialize these technologies through demonstration plants.
Liquid Biofuels Market Report Snapshots
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