Biofuel’s Demand and Supply

The biofuel economy is increasing rapidly. Its economic growth is based on agricultural production, and most people live in rural areas. In the most biomass-intensive strategy, modernized biomass energy contributes by 2050 about one-half of the entire energy demand in developing countries.

In 2021, total biofuel demand was expected to surpass that in 2019. In our base model, yearly worldwide demand for biofuels is expected to increase by 28% to 186 billion liters by 2026. Over the projection period, Asia will account for about 30% of new output, surpassing European biofuel production by 2026. 

Strong domestic policy, rising liquid fuel demand, and export-driven production have all contributed to this. The majority of the rise in Asia is due to recent Indian ethanol legislation and biodiesel blending objectives in Indonesia and Malaysia. By 2026, India is expected to be the world’s third-largest ethanol market.

Because of government regulations to encourage bioethanol use and affordable access to feedstock, the United States and Brazil have historically dominated global biofuel demand and production.

As policies in important markets shift, rising prices reduce biofuels growth by more than 3 percentage points in 2021. Biofuel costs have grown between 70% and 150% in the United States, Europe, Brazil, and Indonesia by October 2021, depending on the market and fuel, compared to average 2019 prices before the Covid-19 crisis. 

In our expedited scenario, biofuel consumption might more than treble between 2021 and 2026. Stronger regulations that address cost, sustainability, and technological restrictions are required to increase biofuel demand and supply. India, the European Union, the United States, China, and other nations are all exploring or enacting more vital biofuel legislation. 

In most markets, biofuels’ comparatively higher cost than gasoline or diesel remains a significant problem, limiting governmental ambition and biofuels’ ability to compete with alternative emission reduction solutions. Technical difficulties and uncertainty about the supply of sustainable feedstocks are also significant obstacles.

Global Scenario-Feedstock Economics

Biofuels are intended to minimize reliance on imported petroleum and the political and economic risks that come with it, reduce greenhouse gas emissions and other pollutants, and stimulate the economy by raising demand and prices for agricultural goods.

Due to the commodity nature of ethanol, producers must compete on price, finding the most cost-effective feedstocks, logistic, and conversion technology. Differences in ethanol production costs across feedstocks will determine the quantity of each feedstock allocated to ethanol production or alternative biofuels. There may be some variances in quality amongst biodiesel fuels, which might be reflected in slight market pricing discrepancies.

Similarly, the amount of each feedstock committed to biodiesel synthesis will be influenced by manufacturing costs. Before being employed in biofuel production, feedstocks must meet two profitability criteria: first, profitability for the producer, and second, profitability for biofuel manufacturers.

To achieve a 3-billion-gallon increase in biofuels from baseline to reference (2016), maize output must grow by 3.6 percent, with corn prices rising by 4.6 percent. Other crops’ prices are rising, particularly soybeans, which compete directly with corn for land. Compared to the baseline in 2016, the price of soybeans has increased by 3.2 percent, while the price of other key crops has increased by less than 1%.

In the cellulosic reference scenario for 2022, if solely farmland feedstocks—agricultural residues and energy crops—are utilized to make cellulosic ethanol, costs will reach above $60/dry tonne to manufacture 20 billion gallons of ethanol.

Biofuel’s Economics and Policy

The biofuel strategy intends to encourage the use of biomass-based and other renewable fuels in transportation. People in rural areas in oil-importing and evolving nations can look forward to new economic prospects thanks to biofuels. Biofuel’s fundamental policy includes employment development, increased efficiency in the general economic environment, and environmental preservation.

Roundtable on Sustainable Biomaterials – It is a worldwide project that brings together farmers, businesses, governments, non-governmental groups, and scientists that are concerned about biofuel production and distribution’s long-term viability.

The “RSB Certification System” was introduced in April 2011 as a set of specific sustainability standards. Biofuels producers that achieve these standards can demonstrate to buyers and authorities that their product was produced without damaging the environment or infringing on human rights.

The 2018 Biofuel Policy intends to have a 20 per cent ethanol blend and a 5% biodiesel blend by 2030. THE GOVERNMENT REDUCED the GST on ethanol used in gasoline blends from 18 per cent to 5%. Excess food grains can be utilized to generate ethanol for blending with gasoline if the National Biofuel Coordination Committee agrees. The policy offers an Rs.5000 crore viability gap funding plan for 2G ethanol Bio refineries over 6 years, as well as additional tax incentives and a higher purchase price than 1G biofuels, with a concentration on Advanced Biofuels.

The Ministry of Petroleum and Natural Gas is working hard to make ethanol an alternative for gasoline by making it more widely available. So the future looks positive for the biofuel economy.

Also Read: Biofuels: Overview