Introduction
Given the state of the climate, fossil fuel reserves, and air pollution, the shift towards renewable energy sources is inevitable. In this transition, the biofuels industry has an important role to play.
Biofuels are an energy source - usually liquid fuels and blending elements - derived from plant products, animal waste, or algal material. They are obtained from organic materials or biomass and are considered renewable fuels as their feedstocks can be replenished at a rate much faster than conventional fossil fuels. Biofuels like bioethanol, biodiesel, biomethanol, and other fuels derived from organic feedstocks are relatively affordable and feasible to produce, which is what makes them attractive alternatives to petroleum, diesel, and other conventional fuels.
What are biofuels used for?
With renewable and non-renewable fuels having myriad applications, exactly what are biofuels used for? Products of biofuel industries can be used as transportation fuels, including in aviation, for heating, to generate electricity, and in industry. Market reports comprising a biofuel industry analysis usually categorise the biofuels industry based on application in transportation, aviation, energy generation, heating, and others. According to a report by Grand View Research, in 2023, the transportation segment was at the forefront of the biofuels industry, with a maximum revenue share of more than 71%. This is largely because biofuels like biodiesel are fairly energy dense and easy to distribute with only minor modifications to existing infrastructure, including the build of diesel engines.
While the transportation segment is the largest, the aviation segment is predicted to be the fastest-growing in the forecast period of 2024 to 2030. Private celebrity jets notwithstanding, this segment's contribution to the biofuels industry growth rate is attributed to favourable government regulations being rolled out in different countries as well as initiatives like the International Aviation Carbon Offsetting and Reduction Scheme (CORSIA) introduced by the International Civil Aviation Organization (ICAO).
Biofuel industry analysis
Grand View Research estimates that the global biofuels market size was worth USD 99.53 billion in 2023. This analysis predicts that the biofuels industry growth rate will be about 11.3% from 2024 to 2030. In terms of volume, Mordor Intelligence predicts that the biofuels market size will be 1.89 million barrels of oil equivalent per day in 2024, with that quantity shooting up to 2.44 million barrels by 2029. That represents a compound annual growth rate (CAGR) of 5.2% between 2024 and 2029.
This growth will be driven by the increasing demand for clean fuel, governmental regulations for the desulphurisation of petroleum products, limited availability of fossil fuels, and increasing awareness about the impact of fossil fuel combustion on environmental health. Governments have been supporting the biofuels industry because of one, the reduction in greenhouse gas emissions (GHG) that it promises, and two, the ambition of improved domestic energy security. Such support, which has contributed to economic development and employment generation, has been in the form of multiple initiatives. In August 2022, for instance, Canada committed to reducing carbon emissions by 40-45% below 2005 levels by the year 2030; by 2050, the country aims to achieve net-zero emissions.
Key biofuels industry players
Any biofuel industry analysis would be remiss not to mention the market leaders in the global biofuel industries. The market is fragmented, with no clear frontrunner in the global landscape, but Mordor Intelligence names Archer Daniels Midland Company, Abengoa Bioenergy, Renewable Energy Group Inc, Cargill Incorporated, and POET LLC as major biofuels industry players. Grand View Research also notes the presence of key companies like Bunge North America Inc, Butamax Advanced Biofuels LLC, Green Plains Inc, Petrobras, Royal Dutch Shell Plc, Scandinavian Biogas Fuels International AB, Wilmar International Ltd, and LanzaJet Inc.
The fragmented nature of the market shows just how competitive the global landscape is. Nonetheless, the companies that have made a name for themselves at the international level have set themselves apart by involving themselves in R&D. This is not surprising in a global biofuels industry in which constant innovation is necessary to achieve the world's energy transition goals. Biofuel industries are currently also witnessing increasing investments, as investors are attracted by the governmental support these industries are receiving. Many companies are entering the sustainable aviation fuel (SAF) market; the International Energy Agency, or IEA's World Energy Investment report highlights that oil and gas companies spent USD 11 billion in 2022 to acquire transport biofuel and biogas companies. Furthermore, in the same year, refining companies accounted for close to 80% of total renewable diesel production capacity.
Biofuel industry analysis by segment
Feedstock: The biofuels industry is categorised based on biofuel feedstock like corn, sugarcane, jatropha, vegetable oils, rice, wheat, and potatoes. The Grand View Research report showed that in 2023, the category comprising rice, wheat, and potatoes dominated the market with a 47% share. Coming in second was sugarcane, with the production of ethanol from sugarcane encouraging companies to set up biofuel production facilities which use sugarcane feedstock.
Product: While production in biofuel industries can be categorised based on raw materials used, the product type derived is also an important approach to market segmentation. The biofuels industry produces biodiesel, ethanol, wood pellets, biojet, green diesel, biomethane, syngas, green hydrogen, biogasoline, biomethanol, biobutanol, and bioethers. In 2023, ethanol led the market with nearly a quarter of the global market share. This is largely because bioethanol is actively used as a transportation fuel, with the green fuel increasingly being blended with gasoline. Further, biogas demand is also poised to increase to generate electricity and possibly even use as a vehicular fuel.
Form: Liquid biofuels led the market with a revenue share of 43% in 2023, and a projected CAGR of 11.5% between 2024 and 2030. Gaseous biofuel came in second as this form is increasingly being adopted for use as transportation fuel, in electricity generation, and as cooking gas.
Generation: Biofuels are divided into generations based on the feedstock and processing technologies used to obtain them. The most conventional biofuels, first-generation biofuels, accounted for 84% of global market share in 2023. Nonetheless, second-generation biofuels account for a high proportion of R&D spending; this is because biofuel industries are hoping to achieve commercial status for these fuels soon, relying on technologies like alcohol-to-jet, biomass gasification, hydrothermal liquefaction, and pyrolysis to deliver necessary innovations.
A regional analysis
With a revenue share of 33% in 2023, the leading geographic region was… no prizes for guessing… North America. The region has robust supporting infrastructure for biodiesel production and favourable government policies.
The USA, Brazil, China, and the European Union are likely to majorly drive growth in biofuel industries. North America and the EU have leveraged energy policies to instigate this growth, requiring specific rates of incorporation of biofuels in petroleum products; rising fossil oil prices have also helped. China, Brazil, and the USA have also instituted tax rebates to spur investment in the biofuels industry.
The biofuels industry growth rate is also projected to be on an upward trajectory in India, Thailand, the Netherlands, Canada, Indonesia, and Malaysia. Government initiatives in these countries have had an important role to play. India has a mandate to begin 20% ethanol blending by 2025. Indonesia was expected to start a commission of 35% biodiesel blending in 2023. Brazil has an ethanol blending order of 27% and has also withdrawn import tariffs on ethanol to minimise some inflationary pressures.
This is only a brief biofuel industry analysis, exploring the market size, segmentation, and regional distribution of the global biofuels industry. There is much more to be analysed, from the important role played by economies like the USA and India, upcoming trends in terms of next-gen biofuels, and challenges, including the cost of biofuel production and the feedstock crunch. We will assess some of these topics in subsequent articles, providing you with deeper insight into the current trends and opportunities in global biofuel industries.
