Rising capacities, shift to distributed models and policies are top advanced biofuels trends, says E2 report
“The highest capacity since E2 released its first advanced biofuels market report in 2011,” says E2 in its annual advanced biofuels survey — but points to policy instability, feedstock availability, opex, capex, and scale up as key industry challenges.
January has arrived, and with it the annual Biofuels Market Report from Environmental Entrepreneurs — authored primarily by E2’s Mary Solecki. This is the fourth edition of the must-read.
Before we get into the headline metrics from the report, let’s tackle the question of definitions. With advanced biofuels, it is always critical to note what is being counted, and how.
For example, counts can include actual production, or production capacity. It can define an advanced biofuel in different ways based on feedstock or carbon score. It can partially or fully count a plant that may produce chemicals as well as fuels. And so on.
The E2 report is something of a hybrid — for one, it includes actual biodiesel production, but in the case of other fuels, it reports production capacity rather than production, and includes projects which are still under construction or in development. And, it excludes non-food feedstocks used in biodiesel production, and excludes Brazilian sugarcane ethanol, something the US EPA does not do in counting advanced biofuels production.
Download the complete report here.
The Scorecard
The highlight statistic in this report is the count of the gallons. E2 reports that “Capacity in 2014 in 2014, is between 819 and 933 million gallons per year of gasoline gallon equivalents.”
E2 highlights that this is “the highest capacity since E2 released its first advanced biofuels market report in 2011, and it’s more than the 787 million gallons produced in 2013. It’s roughly enough to fill an entire lane of Interstate 5 from Seattle to San Diego with nothing but large tanker trucks filled with advanced biofuel.”
• This year E2 found 181 companies actively working on advanced biofuels in North America. The majority are multi-feedstock biodiesel facilities. Of the facilities focused on advanced fuels other than biodiesel, at least 5 are currently operating at commercial scale or expect to begin production by the end of 2014.
• These companies have at least 167 commercial facilities and 9 demonstration facilities that are either already operating, are under construction, or are in advanced planning stages.
• Capacity in 2017 may reach over 1.7 billion gallons gasoline equivalent
• Nearly $4 billion in private investment into active advanced biofuel producers and value-chain companies since 2007 and
• $200 million in new private investments since our last report
• Over $848 million in grants to advanced biofuel producers since 2007
Overall biodiesel capacity? “Biodiesel capacity for companies within our scope is over 1.5 billion gallons, with an industry-wide total of nearly 2.5 billion gallons.”
The Industry’s Challenges
E2 identified five major challenges in the near-term: regulatory instability, feedstock availability, operating costs, capital costs, and scaling up demonstrated processes.
The authors comment: “Regulatory instability has been a particularly acute challenge since our 2013 report…Consistent, tested and reliable feedstock availability is another key to unlocking commercial success for advanced biofuels.
On costs, they add: “Success in this industry requires that advanced biofuels become cost-competitive with their petroleum-based counterparts, [but] accessing affordable and sufficient project capital is equally as important to future growth as competitive project operating costs.
The New Model: A shift towards distributed models
E2 reports that it has “noticed a trend towards distributed models in recent years, since smaller-scale facilities offer the opportunity for biofuel producers to overcome some of the commercialization challenges associated with larger facilities, and matching production to economically available biomass supply..” They add that “Less capital-intensive projects appear somewhat more resilient to market and regulatory fluctuations,” and note that “distributed models are located at the source of feedstock, reducing transportation costs and some other costs associated with feedstock aggregation.”
The Bolt-on imperative
But it may all come down to risk, E2 warns — and specifically the risks felt by the first-gen biodiesel and ethanol fleet — rather than the costs associated with biomass transit or lowered capital intensity. “Certain distributed technologies may be less risky for current first generation biofuel producers to incorporate into new advanced processes. Rather than building a new plant dedicated to cellulosic feedstocks, current producers can slowly incorporate cellulosic material into their existing production process with bolt-on, smaller-scale technologies. This reduces some of the risk in deploying a new technology.”
Industry consolidation
E2 sees rough waters for many industry participants in this report, stating that “Since E2’s third annual report in 2013, the advanced biofuel industry has had both major developments and some significant setbacks.” The authors report that “Partnerships, mergers and acquisitions are key to information sharing and process optimization.”
The move towards commercial-scale
E2, however, does see steady progress towards commercialization, particularly with cellulosic biofuels. “Some companies have ceased operations or shifted their focus to other markets,” they note, adding that “Many companies, however, continue to move steadily towards commercialization, with a number of firms expecting to begin production at commercial scale in 2014. We see particular progress for cellulosic ethanol facilities.”
Action along the West Coast
E2 in particular highlighted regularotory action along the US West Coast that may expand or encourage the advanced biofuels industry. As E2 notes, “The report comes at a time when various initiatives, especially in the Pacific Northwest and in California, are in the works or are under review.”
Specifically highlighted?
In Oregon, the state’s Environmental Quality Commission meets in Portland Jan. 7-8. DEQ staff will present proposed rules for Phase 2 of the Clean Fuels Program. Later in the year the legislature will decide whether or not to remove the sunset date for the Clean Fuels Program, which is expected to create as many as 29,000 jobs and save Oregon consumers and businesses up to $1.6 billion in fuel costs.
In Washington state, Gov. Jay Inslee has asked the state’s Department of Ecology to recommend a proposed clean-fuel standard that, through executive order, would increase the use of advanced biofuel, creating local jobs and keeping hard-earned money in-state by reducing the billions of dollars Washington spends annually on out-of-state oil.
In California, the Low Carbon Fuel Standard (LCFS) has been in place since 2009 and has lowered carbon emissions since 2011, but last year during a re-adoption period the LCFS was frozen at2013 levels, forcing several promising facilities to delay or idle production. E2 partnered in the release of this report showing how the LCFS is both achievable and growing the state’s economy. E2 also co-authored this report on the biodiesel value chain in California.
The Bottom Line
As we point out, it’s a must-read — the most comprehensive yet accessibly-written report of its kind, since the day it first year it appeared.
We get a little cranky here in Digestville about making so many nuanced calls regarding feedstock, carbon and capacity vs production in the one report. It adds complexity to industry forecasting when E2 includes production capacity for one type of fuel, but not another — so that the 800 million gallons “headline figure” is not all that useful, since it neither measures actual production nor actual or proposed capacity. Plus, the report excludes carbon-advantaged fuels made from soybean oils but does not exclude carbon-advantaged fuels made from algae oils or carbs. It counts edible C6 sugars (glucose) extracted from, say, pine trees, but excludes edible sugars (glucose) extracted from cane. After all, edible sugar is edible sugar — and land is land.
Having pointed out that relatively minor quibble, we always devour the report — not only for a perky look at the issues and potential solutions as contained in the narrative, as the most comprehensive, thoughtfully curated datasets out there for advanced biofuels future capacity that we know of. No student of the sector should be without this one.
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