Biofuels Market Predicted to Garner a Revenue of US$ 201.21 Bn By 2030

Asia-Pacific region is the fastest growing region in the biofuels market. The introduction and increased adoption of biofuel-friendly laws and regulations in emerging countries of Asia-Pacific region, is expected to increase demand for biofuels, particularly in the transportation sector, where they will be blended with conventional fossil fuels. Although the biofuels business in Asia Pacific is still in its infancy, there is significant potential for growth, as seen by companies like NESTE spending $1.4 billion in a bio refinery in Singapore in 2019.

Several governments in the region have shown their support for the industry by establishing a favorable regulatory environment. India and China are currently leading the pack in terms of manufacturing, research, and innovation investments. The need to minimize its reliance on oil and energy exports is one of the most important market factors. Currently, ethanol is the most extensively manufactured biofuel in the region, owing to the ease with which fuel companies can generate it from sugarcane waste, which is abundant in the country.

Report Highlights

Based on fuel type, the bioethanol segment accounted largest market share 71.3% in the global biofuels market in 2020. As bioethanol is made entirely of biological sources, it produces cleaner emissions when it is burned (carbon dioxide, steam, and heat). Plants take carbon dioxide and use it to help them grow by processing it through photosynthesis. Because of this creation and energy combustion cycle, bioethanol has the potential to be a carbon-neutral fuel. It also helps to enhance air quality by reducing carbon monoxide emissions from aging automobile engines.

Another significant advantage of bioethanol is the ease with which it can be integrated into the existing road transportation fuel system – bioethanol may be blended with conventional fuels (up to 15%) without requiring engine modifications. Bioethanol can be used as a substitute for gasoline in gasoline engines. It can be combined with gasoline in almost any proportion. The majority of existing petrol engines run on bioethanol-petroleum mixtures of up to 15%.

Based on feedstock, the coarse grains segment accounted largest market share 28.1% in the global biofuels market in 2020. Cereal grains other than wheat and rice, as well as those used primarily for animal feed or brewing, are referred to as coarse grains. These grains are warm-season cereals that are used for food, feed, and fodder in different parts of the world. These are primarily farmed in Asia and Africa’s semi-arid tropical regions, under rain-fed farming techniques with few external inputs and low grain yields (typically less than 1 tonne/ha).

Biofuel Market Share, By Feedstock, 2020

Coarse grains are the main feedstock for producing bioethanol. The decline in road transport due to strict lockdowns during the COVID-19 pandemic has resulted in affecting the demand for coarse grains in biofuels. The market witnessed a significant drop in 2020 and the market is expected to regain as the lockdown on transport is lifted.

Post-2020, the global demand for biofuels is expected to increase. The growing demand for ethanol as a fuel blend to reduce GHG emissions and adhere to the UNCCC to control climate change is expected to drive market growth. Furthermore, the price of coarse grains has a steady year-on-year variation as compared to other feedstock. Thus, the demand for coarse grains is expected to remain steady over the forecast period.

Covid 19 Impact

Since the emergence of COVID-19 in late 2019 in China and its rapid spread around the world, demand for crude oil has fallen precipitously due to a drop in economic activity, resulting in a significant drop in crude oil prices. Furthermore, rivalry among big oil producers has pushed crude oil prices even lower.

As shown below, Brent crude oil fell from USD 59.27 per barrel in January 2019 to USD 23.34 per barrel in April 2020. On the other hand, Dubai Fateh crude oil dropped from USD 58.96 per barrel in January 2019 to USD 23.27 per barrel in April 2020. Similarly, West Texas Intermediate crude oil prices declined from USD 51.52 per barrel in January 2019 to USD 16.52 per barrel in April 2020.

The significant drop in ethanol prices decreased ethanol producers’ profit margins. The average return above variable expenses for Iowa ethanol producers fell from nearly 35 cents per gallon in late November 2019 to -7 cents per gallon on March 27, 2020, according to daily statistics from Iowa State University’s Center for Agricultural and Rural Development (CARD). COVID-19 has several negative consequences for ethanol producers, not the least of which is a decrease in profitability per gallon of ethanol produced.

Due to the 10% mix regulation, reductions in economic activity due to social distancing and required shelter in place rules have had a detrimental impact on demand for gasoline and thus ethanol. Currently, around 96 percent of the US population is subjected to various mandatory restrictions to prevent the spread of COVID-19.

As a result of the lack of profitability in ethanol production combined with lower gasoline demand, ethanol producers are likely to reduce output levels or, in some circumstances, shut down their operations. Because ethanol (and DDGS) accounts for a big amount of maize produced in the United States (approximately 38%), a lack of ethanol demand will result in a significant drop in corn demand.

Due to the slowdown in economic activity induced by the spread of COVID-19, demand for distillate fuel oil (diesel fuels and fuel oils) has also decreased in recent months. According to data released by the EIA, usage of these fuels decreased by 11.3% in the first two months of 2020 compared to the same period in 2019. Diesel fuel costs have fallen as a result of lower crude oil prices and lower demand for diesel fuel. For example, in the last week of March 2020, the retail diesel price fell from around USD 3.05 per gallon in January 2020 to USD 2.56 per gallon.

As a result, the price of biodiesel dropped dramatically from over USD 1,050 per metric tonne in early January 2020 to USD 735 per metric tonne by the end of March 2020. Weaker demand for diesel may result in lower demand for biodiesel, which will diminish demand for biodiesel feedstock. Soybean oil has the biggest market share in the United States of these feedstocks. As a result, any significant drop in biodiesel demand will also affect demand for soybeans.

Biofuels Market Dynamics

Drivers – Reduces greenhouse gases

According to some research studies, biofuels can reduce greenhouse gas emissions by up to 65%. When fossil fuels are burned, enormous volumes of greenhouse gases, such as carbon dioxide, are released into the atmosphere. These greenhouse gases trap sunlight, causing global warming. Furthermore, burning coal and oil raises the temperature and contributes to global warming. Biofuels are being used by people all around the world to lessen the impact of greenhouse gases. As a result, the reduction of greenhouse gases is fueling the growth of the biofuels market during the forecast period.

Read Also: Automated Guided Vehicle Market is Likely to Cross $ 6.23 Billion by 2030 

Restraints – High cost of production

Despite all of the disadvantages of biofuels, they are currently relatively costly to produce. Biofuel production currently has a low level of interest and capital investment, but it can meet demand in the future. If demand rises, boosting supply will be a lengthy and costly process. Biofuels are still being held back by this disadvantage. As a result, the high cost of production is hindering the growth of the biofuels market during the forecast period.

Opportunities – Use of biofuels in vehicles’ engine

Biofuels can easily be adapted to conventional engine designs and function under most adverse situations. It has a high cetane number and improved lubrication. The engine’s durability improves when biodiesel is utilized as a highly flammable fuel. There is no need to convert the engine.

This allows the engine to function for longer periods of time, requiring less maintenance and lowering overall pollution check expenses. Biofuel-powered engines emit fewer pollutants than conventional diesel engines. Thus, the use of biofuels in vehicles’ engine is creating lucrative opportunities for the growth of the biofuels market during the forecast period.

Challenges – Industrial pollution

When burned, biofuels have a lower carbon footprint than traditional fuels. However, the method through which they are made compensates for this. A lot of water and oil are required for production. Substantial-scale biofuel manufacturing plants are known to produce large amounts of pollution and cause small-scale water pollution.

Unless more efficient production methods are implemented, overall carbon emissions will not be significantly reduced. It also increases nitrogen oxides levels in the atmosphere. This also leads to global warming in the environment. As a result, the industrial production caused by production of biofuels is a major challenge for the growth of the biofuels market during the forecast period.

Top Players contending in the Market:

The companies focusing on research and development are expected to lead the global biofuels market. Leading competitors contending in global biofuels market are as follows:

• BTG International Ltd
• Renewable Energy Group, Inc.
• Abengoa Bioenergy S.A.
• Cargill
• DowDuPont, Inc.
• Wilmar International Ltd
• POET, LLC
• Archer Daniels Midland Company
• VERBIO Vereinigte BioEnergie AG
• My Eco Energy
• China Clean Energy Inc.

Major Market Segments Covered:

By Fuel Type

• Biodiesel
• Ethanol

By Feedstock

• Coarse Grain
• Non-agri Feedstock
• Biomass
• Vegetable Oil
• Sugar Crop
• Jatropha
• Others

By Geography

• • North America
    • U.S.
    • Canada
  • Europe
    • Germany
    • France
    • United Kingdom
    • Rest of Europe
  • Asia Pacific
    • China
    • Japan
    • India
    • Southeast Asia
    • Rest of Asia Pacific
  • Latin America
    • Brazil
    • Rest of Latin America
  • Middle East & Africa (MEA)
    • GCC
    • North Africa
    • South Africa
    • Rest of Middle East & Africa