Graphic of the Week
Long-Term Growth in Today’s 53.2 BGY Biofuel Market will be Led by Novel Fuels and Novel Feedstocks
The 53.2 billion gallon biofuel industry has enjoyed capacity growth of 19.6% annually since 2005, but growth will slow to just 3.2% annually through 2017. Ethanol represents 65.9% of global biofuel capacity in 2013 and increases slightly to 66.0% in 2017. Biodiesel capacity is 17.1 Billion Gallons per Year (BGY) today and will rise to 18.6 BGY in 2017. Corn and sugarcane feed 81.9% of the world’s ethanol production today, while rapeseed, palm, and soy supply vegetable oil to 62.1% of biodiesel.
Stymying biofuel capacity expansion are deep logistical and financial issues with today’s bio-based fuels and feedstocks. Next generation fuels, such as renewable diesel, butanol, biojet, and biocrude, currently make up 1.9% of the global biofuel capacity; however, with an annual growth rate of 18.7% from now through 2017, it will grow its capacity share to 3.3%. The leading next-generation fuel is renewable diesel (reaching 1.1 BGY of capacity in 2017). Additionally, next-generation feedstocks are not tied up in the food supply and could unlock significant economic advantages, assuming novel conversions commercialize. Waste oils and cellulosic biomass dominate the next-generation feedstock capacity growth, contributing to 2.7 BGY and 1.3 BGY of expected capacity in 2017.
A solid dose of pragmatism is still needed to successfully navigate this opportunity. In the over-hyped cellulosic ethanol space, only 384 MGY of the announced 782 MGY will come to fruition, led by companies such as Beta Renewables, POET-DSM, and Abengoa. Meanwhile, renewable diesel from waste will emerge as a key biofuel process, while butanol and biocrude producers have the flexibility to sell into the chemicals market, but their effect on overall biofuel capacity remains minor. Competition from natural gas vehicles (NGVs), electric vehicles (EVs), and fuel-cell vehicles (FCVs) coupled with improving fuel efficiency could decrease the biofuel addressable market. Alternatively, development of cellulosic technologies and higher blends of today’s biofuels could accelerate the market.
Beyond the next few years, in tallying up the difference between long-term biofuel blending targets (ranging from 2015 to 2030) and the expected biofuel production capacity in 2017, highest probability geographic opportunities emerge. There are several countries – such as the U.S., Japan, India, and France – where future capacity falls short of long-term blending targets by more than 1 BGY. Though government biofuel targets may be dropped or downsized, these countries represent leading demand-driven regions to build still more new biofuel capacity.
The vision of what, where and when is readily derived. The path requires a holistic view of feedstock, technology and market to maximize success.
Source: Lux Research report "Emerging Feedstocks and Fuels Spark Biofuel Capacity Expansion through 2017" -- client registration required. To learn more about this graphic and related intelligence from Lux Research, click here or email Carole Jacques.
Analyst Insights on Lux Populi this week
Energy Storage: Samsung SDI is Going to Build China's Largest Lithium-ion Battery Plant
Samsung SDI is going to invest $600 million in China's Shaanxi province to build China's largest manufacturing base of lithium-ion batteries for electric vehicles (EVs). Two Chinese joint venture (JV) partners are involved: the government of Shaanxi Province and Anqing Ring New Group. Anqing is one of China's leading auto parts suppliers, and the company has China's biggest market share of piston rings and cylinder sleeves. Samsung plans to start construction of the plant in April 2014, and the plant is projected to start production at the end of 2014.
The two partners are strategic for Samsung SDI. Partnering with the Chinese government will no doubt help accelerate establishment of the project, and partnering with a leading Chinese auto-part supplier enables Samsung SDI to leverage the partner's massive OEM customer connections, making penetration into the Chinese market easier.
By hiring lower-cost local Chinese employees and possibly procuring less expensive Chinese-made battery materials, Chinese-made Samsung SDI batteries are projected to be less costly than Korean-made products. The company's China plant is not only able to keep supplying to existing foreign-made EVs like Chrysler F500e and BMW i3, but it helps the company to enter into what Lux Research forecasts will be the world's largest EV market (see the report "Seizing the Shifting Opportunity in the $41 Billion Mobile Energy Storage Market" -- client registration required). Though at this point it is hard for foreign-branded batteries to find a strong position in China's EV space, the Chinese government's protectionism over domestic products is projected to be weakened as the EV industry matures.
Already, BAIC – China's top state-owned EV OEM – has started to adopt Toshiba's lithium-titanate (LTO) battery cells. Secondly, the trend has begun of international EV leaders manufacturing their EV models in China's joint venture automotive OEMs. The Nissan Leaf has already been produced in China's Dongfeng-Nissan plant, and dozens of Leafs have already been demonstrated in the cities of Guangzhou, Dalian, and Xiangyang. Chinese-made, foreign-branded EVs are the additional targeted market for Samsung SDI's China plant, and most of the company's existing customers like Chrysler and BMW already have JV plants in China.
Samsung SDI's construction of a China plant will no doubt boost the innovation of leading Chinese battery manufacturers, in reaction to the aggressive move from a strong Korean competitor. As a result, clients with leading battery materials may be sought after by Chinese leading battery suppliers.
To read more insights from Lux Research analysts visit Lux Populi.
Bio-based Materials and Chemicals: Industry Updates From the Next Generation Bio-based and Sustainable Chemicals Conference
Lux Research attended the start of the Next Generation Bio-based and Sustainable Chemicals conference hosted by Infocast in San Diego, CA. Right off the bat, the room was buzzing about the U.S. Congress passing the Federal Agriculture Reform and Risk Management Act of 2013 (commonly known as the Farm Bill), which – if it became law – would expand U.S. Department of Agriculture's (USDA's) current Biorefinery Assistance Program to include bio-based chemical manufacturing. Even though the expansion isn't set in stone, the conference was already speculating about implications. Would this mean the U.S. government would be open to tax credits? What about other types of funding?
We dove into the language of the bill and based on what we saw, we urge caution on becoming too optimistic. While one of the key changes is to change the title of the program to the Biorefinery, Renewable Chemical, and Bio-based Product Manufacturing Assistance Program, the true expansion into the bio-based product realm is somewhat unclear. First, the amount of funding allowed for the promotion of bio-based product manufacturing is limited to no more than 15% of the total funds available in fiscal year 2014 and fiscal year 2015. Additionally, we didn't see any changes that would allow biorefineries producing only bio-based chemicals or materials; the eligible technology definition appears to only include technologies that produce advanced biofuels. If the bill is passed, the law's interpretation will still need to be made by the proper bodies, but so far the expansion of the Biorefinery Assistance Program doesn't seem to be a free and clear green light for bio-based chemicals and materials.
Another key theme of the conference was sustainability. The inclusion of sustainability into the minds and business plans of private sector companies (client registration required) is nothing new, so it was no surprise that Steve Davey, DSM's VP, Bio-based Products and Services, said one of the first questions when making evaluations is, "What's the LCA on that?" However, one resonating theme is that bio-based is commonly assumed to be a synonym for the most sustainable solution, but it may not always be that way. For instance, Kaj Johnson, Green Chef for Method, spoke about reductions in packaging requirements. Other comments included reductions in transportation and fuel costs or products that result in a consumer's reduced energy consumption.
Clearly, the sustainability landscape is a complex matter, which is no surprise once the presentations on Life Cycle Analyses come out, but bio-based products still have a role to play in the sustainability game even as companies diversify into a variety of beneficial solutions. In the nearer term, companies pursing bio-based drop-in replacements – butanol, adipic acid, and acrylic acid, to name a few – will scale up capacity and will bring options to companies looking for sustainable solutions. As the industry continues to mature, the rise of improvement in bio-based material and chemical (BBMC) products offer a whole new element to the sustainability game, as these products are set to bring bio-based products with new properties or new functionalities to the market (see the report "Cultivating Capacity for Bio-based Materials and Chemicals through 2017" -- client registration required). For those companies looking specifically at their packaging, companies like TopChim (client registration required), Xylophane (client registration required), Avantium (client registration required), CelluForce (client registration required), Melodea (client registration required), and more are all targeting solutions with applications for advanced bio-based coatings and plastics. Bio-based products may not be the silver bullet to address all sustainability concerns, but it's certainly a good one to have in your arsenal.
To read more insights from Lux Research analysts visit Lux Populi.
Additional Analyst Insights available exclusively to Lux Research clients
Efficient Building Systems: Target Credit Card Heist Originated in Building Systems
Sustainable Building Materials: Policy Update: Energy Security Concerns Drive Green Buildings Adoption
China Innovation: China Leads in Making Aircraft Structural Parts via 3D Printing
Solar: Regional Solar Capacity Build up to Support Local Project Development Budding Around the Globe
Water: BioteQ Adds 24 Million Shares
Exploration and Production: Glori Energy Goes Public
Agro Innovation: California Drought Emergency: A Flood of Opportunities
BioElectronics: Apple Moving Quickly to Develop Team of Health Wearable Experts
Printed, Flexible, and Organic Electronics: Following Plextronics' Losing Formula, Thin-Film Batteries will be Next to See a Shake-Out
Alternative Fuels: Farm Bill 2014: Cutbacks to the Alternative Fuels Space
Energy Electronics: DOE Allocates $70 Million for Wide Bandgap Power Electronics; Establishing Academic and Commercial Relationships
Advanced Materials: Patent Expirations Open New Paths Forward for 3D Printing, but Numerous Obstacles Remain
Autonomous Systems 2.0: BYD and Singapore's A*STAR Will Jointly Develop Electric Vehicles With Autonomous Sensors