U.S. BIOFUELS MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

U.S. biofuels market is expected to be valued at US$ 32.91 billion in 2023, and is expected to reach US$ 56.04 billion by 2030, exhibiting a compound annual growth rate (CAGR) of 7.9% from 2023 to 2030.

Biofuels are fuels that are produced directly or indirectly from organic matter including plant materials and animal waste. The most common types of biofuels are ethanol and biodiesel that are used as alternatives or supplements to petroleum-based transportation fuels. Biofuels help to reduce dependence on imported petroleum, decrease greenhouse gas emissions, and stimulate rural economic development.

The U.S. is the largest producer and consumer of biofuels globally. The production and use of biofuels in the U.S. is driven by the renewable fuel standard (RFS) program and various federal and state policies supporting renewable energy goals and greenhouse gas (GHG) emissions reductions.

U.S. biofuels market segments include ethanol, biodiesel, renewable diesel, biogas, and others. By feedstock, corn and soybean oil are the predominant raw materials used for biofuel production in the U.S. The transportation sector accounts for the majority of biofuel consumption as a gasoline and diesel replacement or additive.

U.S. Biofuels Market- Regional Insights

Northeast Region:

1. Biodiesel Production: The Northeast region has witnessed significant growth in biodiesel production due tostate policies and incentives promoting renewable fuels. Several biodiesel plants are operating in this region, producing biodiesel primarily from soybean oil and waste cooking oil.
2. Ethanol Production: Ethanol production in the Northeast, particularly in states like New York and Pennsylvania, has been steadily increasing. Government initiatives and mandates have encouraged the use of ethanol-blended gasoline.
3. Feedstock: In the Northeast, feedstock for biofuel production primarily comes from agricultural crops such as soybeans, corn, and switchgrass, as well as recycled cooking oil and animal fats

Midwest Region:

1. Corn Ethanol: The Midwest is often referred to as the "Corn Belt" due to its significant corn production. As a result, the region is a major hub for corn ethanol production, with states like Iowa, Illinois, and Nebraska.
2. Cellulosic Ethanol: In addition to corn ethanol, the Midwest has been investing in cellulosic ethanol production, utilizing non-food crops like switchgrass and agricultural residues
3. Biodiesel: Some states in the Midwest also have a substantial biodiesel production industry, using soybean oil and other feedstocks

South Region:

1. Biodiesel and Bioenergy Crops: The South has been a hotspot for bioenergy crop production, such as sugarcane and energy crops like miscanthus. States like Louisiana and Florida have biodiesel production facilities that use various feedstocks including palm oil.
2. Cellulosic Ethanol: The South has also been exploring cellulosic ethanol production, particularly using woody biomass
3. Regulations: The South has diverse state-level regulations and incentives that impact the biofuels market, and it has been influenced by the renewable fuel standard (RFS) at the federal level

Western Region:

1. Biodiesel and Renewable Diesel: The Western region, including California, has been a significant market for biodiesel and renewable diesel due to its focus on reducing carbon emissions and promoting clean transportation fuels
2. Algal Biofuels: Research and development of algal biofuels have been prominent in the Western region, especially in states with favorable climate conditions for algae growth
3. Government Policies: California, in particular, has aggressive policies and targets for renewable fuels, including the low carbon fuel standard (LCFS) that boosts innovation in the biofuels sector

U.S. Biofuels Market- Drivers

• Supportive Government Policies and Incentives: The major driver for U.S. biofuels market growth is supportive federal and state level government policies and incentives. The key policy is the renewable fuel standard (RFS) program that mandates minimum volumes for renewable fuels to replace or reduce petroleum-based transportation fuel consumption. The RFS has spurred significant investment in biofuels production infrastructure and provides long-term market certainty for the industry. Many states have additional biofuel mandates, tax incentives and grant programs, further supporting market expansion. On July 12, 2023, the EPA established the applicable volumes and percentage standards for 2023 through 2025 for cellulosic biofuel, biomass-based diesel, advanced biofuel, and renewable fuel
• Energy Security and Environmental Goals: Another major factor driving biofuels adoption is their ability to enhance U.S. energy security and meet environmental goals. Biofuels reduce reliance on imported petroleum which is a key strategic objective. Domestically produced biofuels also support national energy independence and rural economic development. Most biofuels burn cleaner than gasoline and diesel that assists in meeting federal and state-level emissions reduction and carbon intensity targets. Life cycle assessments show biofuels can significantly lower greenhouse gas emissions as compared to fossil fuels.
• Advances in Biofuels Production Technologies: Ongoing advances in biofuels production technologies and yield improvements are decreasing costs and improving efficiency makes biofuels more competitive. For example, corn ethanol yields per acre have increased around 50% over the last decade through agricultural biotech innovations like drought-tolerant and pest-resistant seeds. Process innovations at biorefineries like corn fractionation, metal catalysts and cogeneration are also reducing energy and water use. For advanced cellulosic biofuels, enzyme and pretreatment innovations are improving conversion yields from lignocellulose biomass feedstocks. Renewable Energy group (REG) is the leading biodiesel producer by production capacity in the U.S. As of January 2023, REG had an annual capacity of 432 million gallons. REG operates eight biodiesel plants, the largest of which is located in Washington State.
• Growth of Renewable Diesel and Sustainable Aviation Fuel: Renewable diesel can serve as a drop-in replacement for petroleum diesel, and is increasingly being used for ground transportation. SAF has the potential to substantially reduce lifecycle greenhouse gas emissions from aviation but requires further technological improvements and policy support to scale up. Major market players are actively investing in SAF.

U.S. Biofuels Market- Opportunities

• Leveraging Advanced Feedstocks: There is significant opportunity to leverage advanced biofuels feedstocks beyond conventional crops like corn and soybean. Cellulosic feedstocks like agricultural residues, forestry materials and energy crops like switchgrass can expand production without impacting food supplies. Waste-based feedstocks like municipal solid waste, plastics, and used cooking oil are another attractive option as these provide additional waste management benefits
• Expanding Availability of Biofuels: While ethanol is widely available at fueling stations nationwide, growth opportunities exist in expanding infrastructure and distribution for biodiesel and newer fuels like renewable diesel and sustainable aviation fuel (SAF). This require further build-out of biofuel storage capacity at transportation hubs and multimodal facilities. Partnerships with petroleum companies and fuel providers will increase availability at retail fueling sites. Broader distribution infrastructure will support increased consumer adoption and fleet utilization. In August 2021, the U.S. Department of Agriculture (USDA) invested US$ 26 million in biofuel infrastructure to expand the availability of higher-blend renewable fuels in 23 states of the U.S.
• Export Markets: Developing export markets for U.S. biofuels, leveraging trade partnerships represent another growth avenue. Countries in South America, Asia, and Europe represent potential target markets with blending mandates and emissions reduction objectives. However market development efforts must ensure appropriate social and environmental sustainability safeguards are in place to avoid unintended consequences. Partnerships with international organizations can help to establish global biofuels sustainability standards. According to the USDA Foreign Agricultural Service, the top 10 markets for U.S. biofuels in 2022 were Canada, South Korea, the European Union, Peru, Brazil, India, the Philippines, Mexico, the U.K., and Singapore
• Aviation and Maritime Sectors: The aviation and maritime sectors represent large addressable markets for renewable jet fuels and biodiesel to h reduce emissions. These industries are exploring biofuels use through pilot studies and demonstration projects. R&D efforts on converting oils and fats into jet fuel are advancing. Biodiesel also has applications as a fuel additive in maritime shipping. Supportive policies boosts demand along with public-private partnerships can help scale adoption in these sectors.

U.S. Biofuels Market- Trends

• Consolidation and Vertical Integration Major industry consolidation has occurred recently as a result of mergers between major food processing, renewable fuel, and agribusiness businesses seeking to achieve vertical integration. Companies are acquiring biofuel producers to secure supply and distribution channels. Consolidation improves economies of scale in production and market share but can also reduce competitiveness between players. This is an important market structural trend as federal policies come up for renewal over the next decade.
• Next-Generation Biofuels: Research, development and commercialization efforts on next-generation biofuels are accelerating. These fuels derived from cellulosic biomass and biological processing aim to further improve sustainability and emissions benefits as compared to first-generation biofuels. Emerging technologies include converting biomass to hydrocarbons through gasification and pyrolysis or using biochemical, fermentation and metabolic engineering approaches The Energy Independence and Security Act (EISA) of 2007 mandates a tripling in U.S. biofuel use to 36 billion gallons by 2022.
• Biofuels Industry Digitization: The biofuels industry is increasingly adopting digital technologies to improve operational efficiency, productivity and profitability. For example, agriculture biotech firms provide digital analytics to farmers to optimize crop yields and land-use for biofuels feedstock cultivation. Biorefineries are leveraging automation, sensors and predictive modeling to improve process controls and reliability. Supply chain management software connects feedstock suppliers, biofuel producers and distribution partners. Overall data utilization along the value chain is increasing. In 2022, with the help of digital transformation initiatives, the biofuel industry is projected to produce 175 billion liters of fuel with a projected annual growth rate of 7%.
• Circular Economy Transition: There is growing focus on integrating biofuels into a broader circular economy transition across agriculture, chemical manufacturing, plastics recycling and the automotive industry. This aims to establish more sustainable production and consumption systems by reusing waste and residue resources. Public-private partnerships are focused on creating regional bioeconomy clusters anchored around biorefineries that can serve as hubs for circular processes. Policy measures also incentivize circular biofuels approaches.

U.S. Biofuels Market- Restraints

• High Production Costs: A key factor hampering further growth of biofuels is their high production costs as compared to petroleum fuels without policy incentives factored in. Corn ethanol and cellulosic ethanol costs are estimated to range from US$ 2.20-US$ 3.00 per gallon as compared to around US$ 2.00 for gasoline. Biodiesel production costs range from US$ 3.00-US$ 4.00 per gallon versus US$ 2.50 for diesel. Achieving cost competitiveness with petroleum through technological and process improvements remains a challenge.
• Lower Energy Density: Another limiting factor is the lower energy density of ethanol and biodiesel compared to gasoline and diesel. Ethanol has around 70% the energy density of gasoline, limiting volumetric fuel economy. Diesel vehicles converted to run on pure biodiesel also show a 10% reduction in fuel economy. The lower energy density requires more frequent refueling. Making engine and fuel system adjustments to fully optimize biofuels utilization remains an R&D need.
• Food Security Concerns: Using food crops like corn, soybean, sugarcane and palm oil as biofuel feedstocks has raised concerns regarding potential impacts on food supplies and prices, especially in developing nations. Biofuels expansion competes for finite agricultural land resources and water. However multiple factors affect food commodity prices, and evidence suggests biofuels have had a relatively small impact. Regardless, food security concerns have impacted policy support in some regions which could restrain the market growth.

Analyst View

• The U.S. biofuel market continues to be driven by the Renewable Fuel Standard which mandates the volumes of biofuels that must be blended into transportation fuels. The policy aims to reduce greenhouse gas emissions and expand the nation's renewable fuels sector. Lower gas prices in recent years have increased demand for biofuels as a cost-effective fuel option. However, market growth could be restrained by limited availability of feedstocks to produce biofuels sustainably and concerns from the oil industry regarding the implementation of the policy.
• The corn ethanol sector will likely remain dominant as corn is the primary feedstock used by existing biorefineries. The Southwest region in particular is well-positioned for expansion in cellulosic biofuels production due to abundance of feedstock supplies and suitable growing conditions. chieving significant volumes from these fuel categories faces challenges around reducing costs to be competitive with corn ethanol.
• Overall, California and other West Coast states are expected to witness stronger market opportunities as compared to other regions since their low-carbon fuel policies create additional demand. Completing infrastructure development allow for higher biofuel blends.

U.S. Biofuels Market- Recent Developments

New Product Launches

• In September 2022, POET announced the launch of its 70 million gallons-per-year biofuels plant Project Liberty in Emmetsburg, Iowa. The plant specializes in converting corn crop residue into cellulosic ethanol.
• In June 2021, REG Danville, a biorefinery owned by Renewable Energy Group, began producing renewable diesel in addition to biodiesel. The plant has capacity to produce 170 million gallons annually.
• In October 2020, Marathon Petroleum’s subsidiary, Marathon Renewables LLC, acquired Pacific Ethanol’s corn ethanol plants. This added 1,100 million gallons per year capacity to Marathon’s biofuels production.

Acquisition and Partnerships

• In February 2022, Darling Ingredients acquired Valley Proteins, a leading U.S. renderer, for US$ 1.1 billion. This expanded Darling's ingredients portfolio and biofuels production capabilities.
• In August 2021, Renewable Energy Group acquired Amber Resources, a producer and marketer of low carbon fuels. This expanded REG's biorefining manufacturing capacity and distribution infrastructure.
• In April 2021, Cargill invested approximately US$ 29 million to double the production capacity of its LaBelle, Florida, biodiesel plant to 150 million gallons per year. This increased Cargill's overall U.S. biodiesel capacity.

Figure 1. U.S. Biofuels Market Share (%), By Application, 2023

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Top companies in U.S. Biofuels Market

• Archer Daniels Midland
• Renewable Energy Group
• Valero Energy Corp.
• Darling Ingredients Inc.
• Cargill Inc.
• POET LLC
• Green Plains Inc.
• Flint Hills Resources
• Marathon Petroleum Corporation

*Definition: U.S. biofuels market refers to the production, distribution and consumption of liquid transportation fuels derived from renewable biological sources within the U.S. The most common biofuels are ethanol and biodiesel that  serve as alternatives or additives to petroleum-based gasoline and diesel fuels. Biofuels help to decrease reliance on fossil fuels, reduce lifecycle carbon emissions, and support rural economies. The U.S. is the top global producer and consumer of biofuels, led by policy incentives like the Renewable Fuel Standard. Key players in the market include agriculture companies, biotechnology firms, oil refiners and renewable fuel producers.

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