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© OECD/IEA 2014
Biofuels Outlook Market Developments and Policy Challenges Anselm Eisentraut
© OECD/IEA 2014
World biofuels produc@on – end of rapid expansion?
n Global biofuels output reached 120 billion litres in 2013 and now provides 3.5% of world transport fuel demand
n Support policies are major driver behind rapid growth in biofuel produc@on à Brazil and US first established biofuel programs in 1970/80s à EU introduced mandate of 5.75% biofuels in transport by 2010 in 2003
à changed target in 2010: 10% renewable energy in 2020
n More than 50 countries worldwide now have biofuel mandates in place
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Rest of global biofuels OECD EUR biofuels Brazil biofuels US biofuels
© OECD/IEA 2014
Biofuel support policies worldwide
n Key drivers for introduc@on of support policies: l Support for agricultural sector / rural development l Energy security / reduced oil import bills l Climate change mi@ga@on
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The context for biofuels has changed
n Oil price rising and increasingly vola@le – should improve biofuels compe@@ve posi@on
n However: agricultural commodity prices also
rising and increasingly vola@le
n Biofuels sustainability increasingly ques@oned: l “food vs. fuel” l Deforesta@on l (indirect) land-‐use change
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Cereals Price Index Vegetable Oils Price Index Biofuel productionSource: FAO, IEA
Source: primatology.net
© OECD/IEA 2014
Biofuels produc@on to grow 25% to 2018
n Global biofuels output to grow 3.5% per year on average from 110 billion litres in 2012 to 135 billion litres in 2018
n Biofuels provide 4% of global road transport fuel demand in 2018
n Growing poli@cal uncertainty in the EU and US provides an important downside risk, and might undermine the medium-‐term growth prospects
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mboe/d Biofuels share in global road transport (2006-18)
Biofuels supply (adj. for energy content) As % of global transport demand
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OECD Americas produc@on faces challenges
n US Renewable Fuels Standard (RFS) set ambi@ous growth path for biofuels (140 bn L in 2022) ! Very unlikely that it can be met
n EPA proposal for substan@al revision of RFS mandate indicates that “blend wall” in the US proves challenging to overcome à Growth in US ethanol produc@on will be limited in the future à US cellulosic fuel produc@on far below original RFS 2 target à Biodiesel output above RFS target in 2013, due to Blender’s Tax Credit that expired in December
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mb/d US gasoline demand vs. ethanol produc@on and mandated ethanol use (2009-‐18)
MTRMR ethanol supply Net gasoline demand RFS2 mandate (conv. and cellulosic ethanol) Ethanol "blend wall" (10% volumetric)
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US biodiesel production Other origins European Union Indonesia Argentina
US biodiesel production and imports
Preliminary date Source: IEA Medium-Term Renewable Energy Market Report 2014, forthcoming
© OECD/IEA 2014
Brazil’s ethanol industry suffers from poor profit margins
n Brazilian ethanol output increasing again aier some years of decline/no growth, but outlook is cloudy à Financial situa@on of the sugarcane sector prevents new investments into sugarcane
planta@ons and sugar/ethanol plants à Regulated gasoline prices limit profits from ethanol sales à Proposed changes to US RFS “advanced biofuels” quota would significantly limit poten@al
for ethanol exports to the US
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GasolineHydrous ethanol (adj. for energy content)Hydrous ethanol consumption
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Argen@na’s biodiesel industry challenged by policy developments
n Biodiesel produc@on took hit from new an@-‐dumping import tariffs in the EU à Significant decline in produc@on in 2013 and 2014
n New B10 mandate has not s@mulate growth in produc@on so far à Biodiesel reference price does not cover produc@on costs
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Argentine biodiesel production costs vs. biodiesel reference price (left) and biodiesel production 2016-18 (right)
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EU policy uncertainty leaves biofuels sector in limbo
n Medium-‐term growth in biofuel output of 4 billion liters 2012-‐18 à Driven primarily by EU Renewable Energy Direc@ve
n Proposed cap on conven@onal biofuels (5-‐7% of transport energy demand) due to sustainability concerns could significantly undermine growth prospects
n Future for advanced biofuels industry highly uncertain due to lack of post-‐2020 policy framework for biofuels à First advanced biofuel projects get shelved as they struggle to secure investments (e.g. VAPO’s
Ajos BtL plant in Finland)
Note: Projections do not include proposed changes to Renewable Energy Directive
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OECD Europe biodiesel OECD Europe ethanol Non-OECD Europe biofuels
© OECD/IEA 2014
Emerging markets set to grow
n Growing number of emerging markets in Asia and Africa with blending mandates à India: E10 finally adopted, but mee<ng the target proves difficult à Indonesia: B10 as of Feb. 2014 as result of an<-‐dumping tariffs in the EU à Thailand: subsidise use of E20; Malaysia (B5) and Philippines (B5, E10) à South Africa: introducing long-‐awaited E2 and B5 mandate à Zimbabwe: E10 as of Oct. 13, may rise to E20 later in 2014
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China Ethanol China Biodiesel SE Asia Biodiesel
SE Asia Ethanol Rest of Non-OECD Asia Africa and Middle East
Asia and Africa biofuel production 2012-18
© OECD/IEA 2014
Lack of long-‐term policy framework provides challenge for advanced biofuels industry
n Industry currently enters large-‐scale produc@on with first commercial plants coming online
n Opera@ng capacity at 4.5 billion litres in 2012 could grow to 9 billion litres in 2018
n However: projects con@nue to get cancelled, or companies go bankrupt
n Perceived investment risk is most important barrier to more rapid deployment à long-‐term policy framework is needed to spur growth
Note: HVO=hydrotreated vegetable oil. No plants have yet been announced beyond 2016
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Planned Under construc<on Opera<ng (other technologies) Opera<ng (HVO)
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The advanced biofuels industry is expanding, slowly
hnp://demoplants.bioenergy2020.eu
© OECD/IEA 2014
IEA Biofuel Roadmap Advanced biofuels to play a key role in the long-‐term
n In a low CO2 scenario (IEA 2°C Scenario) biofuels’ share in total transport increases to 27% in 2050 n Advanced biofuels play key role ! only low-‐carbon fuel alterna@ve for heavy transport modes
Note: Figure shows gross land demand, excluding land-‐use reduc<on poten<al of co-‐products
© OECD/IEA 2014
Biofuels produc@on falling behind targets of IEA 2 Degree Scenario
n In a low CO2 scenario (IEA 2°C Scenario) biofuels’ share in total transport increases to 27% in 2050 n Advanced biofuels play key role ! only low-‐carbon fuel alterna@ve for long-‐distance, heavy
transport modes
n Without significant improvements of the policy framework for advanced biofuels, targets in the 2DS will not be met!
Source: Tracking Clean Energy Progress, IEA, 2014
© OECD/IEA 2014
Conclusions and policy considera@ons
n Policy framework con@nues to determine developments in the biofuel industry n Long-‐term policy framework is key to ensure investor confidence, in par<cular for advanced
biofuels
n Policy support starts with innova@on and deployment n Sustained funding for RD&D of promising technologies, as well as research on land suitability
mapping and biomass poten<al analysis, is crucial
n Policies should promote sustainable biofuel produc@on n Interna<onal alignment of sustainability cer<fica<on to avoid trade barriers, and ensure solid
sustainability standards globally n Support mechanisms should be linked to sustainability requirements for biofuels
© OECD/IEA 2014
Thank you for your anen@on!
n Medium-‐Term Renewable Energy Market Report 2013 à 2014 edi@on to be launched 28 August 2014
www.iea.org/topics/renewables
n Technology Roadmap -‐ Biofuels for Transport www.iea.org/roadmaps
n Contact: [email protected]
© OECD/IEA 2014
Disclaimer
This presenta@on is derived from the analysis published in the IEA's Medium Term Renewable Energy Market Report 2013 which is available for download at hnp://www.iea.org/w/bookshop/add.aspx?id=453. For more informa@on on renewable energy at the IEA please visit: hnp://www.iea.org/topics/renewables/medium-‐termrenewableenergymarketreport/. Should you have any ques@ons or comments about this workbook, please write to IEA-‐[email protected] Please note that the IEA’s Medium Term Renewable Energy Market Report 2013 is subject to restric@ons that limit its use and distribu@on. These terms and condi@ons are available online at hnp://www.iea.org/termsandcondi@onsuseandcopyright/. © 2013 OECD/IEA
