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Bio-Based Fuel Industry Faces Cost and Scale Challenges

biofuelsBio-based fuels are not serious threats to the $250-billion petroleum industry until they can compete in terms of cost, properties and scale, according to a new report from Lux Research. In order to replace the 30 billion barrels of oil consumed annually, today’s bio-based technologies would need to cultivate an area the size of Russia, according to the report.

The report, “Biofuels’ and Biomaterials’ Path to Petroleum Parity,” indicates that cost and scale are major roadblocks to advancing biofuels as viable alternatives to petroleum.

In this research report, Lux Research created a quantitative model of the value chains for petroleum products and their bio-based alternatives. The model begins with feedstock costs and capacity, then follows with technologies and processes and examines end uses.

The study concludes that purposely grown crops will never yield enough biomass while slowly falling cultivation costs will make waste the best option. Of the four main feedstock classes — crops, algae, waste, and CO2 — waste is the near-term winner, says Lux Research.

About 316 million dry tons of waste biomass from forestlands and 534 million dry tons of crop residues and other waste exceed oil equivalents; and at a cost of $40 per barrel of oil equivalent (BOE), the cost of these materials are lower than other feedstocks, according to the report.

Lux Research projects that bio-based alternatives will just reach 5 percent of fuel and chemicals share in 2020. The researcher also expects fuels and materials from food crops will increase by 447 million BOE and non-food crops by 107 million BOE. However, agricultural, forest, and municipal waste will contribute about 1.1 billion BOE, according to the report.

The study also finds that retrofitting existing petroleum, paper and bioethanol plants could significantly cut production costs as well as provide access to transportation and other infrastructure.

Despite existing challenges in terms of supply, some airlines are making deals to transition a portion of their fuel needs over to biofuels. As an example, a group of 14 airlines that service the Seattle-Tacoma International Airport, along with the Air Transport Association, have agreed to purchase up to 750 million gallons of renewable jet fuel and biodiesel.

To help advance biofuel developments, the U.S. Department of Energy and the U.S. Department of Agriculture announced in November $24 million in grants for biofuels, bioenergy and other bio-based products.

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