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16 Mar 2011 04:03:08

The soaring global biofuels demand



The world's thirst for biofuels grows like switchgrass on the Texas prairie – a projected 133% increase by 2020 – but keeping up with that demand is a challenge that will bedevil producers and policymakers over the course of this decade. Hart Energy's analysts crunched the numbers of this phenomenon and came up with this result: 32 billion liters. That's the gap, the equivalent of about 8.5 billion gallons of biofuels, between what the world wants and what it can expect to get between 2010 and 2020.

Explained in detail in Hart Energy's "Global Biofuels Outlook, 2010-2020: projecting market demand by country, region and globally", an in-depth study of supply and demand covering 35 countries in four key global regions, the picture is one of many countries increasingly turning to biofuels and beginning to feel a squeeze for inventory around 2015.

"This deficit is worse for ethanol than for biodiesel," said Tammy Klein, Hart Energy's assistant vice president and leader of the annual study. The shortfall breaks down to 19 billion liters (5 billion gallons) for ethanol and 13 billion liters (3.4 billion gallons) for biodiesel by 2020 Brazil and the United States lead the world in projected increased demand for ethanol. China, Japan, the United Kingdom and Germany plan to expand their use, too. "With its favorable GHG (greenhouse gas) profile, these countries will primarily look to Brazilian advanced sugarcane bioethanol for supply, especially given the global context of tightening GHG limits – and limited commercial volumes of cellulosic ethanol," said Frederick L. Potter, Hart Energy's executive vice president. "We expect this to lead to continued price appreciation for sugarcane ethanol over the 2011–2020 period."

Brazil, the world's second-largest biofuels producer behind the United States, is expected to continue to reign as the top exporter through 2020. "Our projections show that Thailand will run second behind Brazil with several Latin American countries such as Colombia and Peru also contributing," Klein said.

A ranking of the world's top biofuels producers in "Global Biofuels Outlook" estimates annual U.S. ethanol output at more than 51 billion liters (13.47 gallons), almost double that of Brazil, number 2 on the list with production of 27 billion liters (7.1 billion gallons). The two countries combined represent about 82% of global ethanol production capacity in operation. China was a distant third with 2.7 billion liters (713 million gallons) of production followed by France and Canada.

In the United States, the number of operating ethanol plants rose from 170 in 2009 to 187 by the end of 2010. "Many producers rushed to complete projects that had been under construction in advance of the Environmental Protection Agency's deadline to "grandfather" plants under Renewable Fuels Standard 2," said Michael Marshall, research analyst for Hart Energy's Global Biofuels Center (GBC).

The U.S. leads the way in biodiesel production as well, with 5.9 billion liters (1.56 billion gallons) in production, followed closely by Germany, Spain, Indonesia and Brazil. "It should be noted that only 10% of existing biodiesel capacity in the U.S. is currently producing," Klein said. "The primary reason behind the 10% utilization rate has been high feedstock prices and the federal biodiesel tax credit was not renewed until December 17, 2010."

Back in early 2010, GBC's staff forecast the desire for advanced biofuels projects and the funding necessary to build plants coming to a crossroads. Globally, there were more than 200 next-generation projects in play – including cellulosic ethanol, hydrogenated vegetable oil, renewable diesel and renewable diesel obtained through gasification and the Fischer-Tropsch process, biomethanol, renewable gasoline and bio-dimethyl ether – but the number of plants under construction was dropping quickly.
"This only underscores the key issue of obtaining funding for moving forward with building commercial-scale facilities," Klein said, adding that now is a crucial time for the industry to determine whether promised volumes of advanced biofuels will make it to the market. U.S. energy policy requirements make it the country with the most demand for next-generation biofuels, but Asian countries have built a greater production capacity.


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