Advanced Biofuel Market

Market Overview

The global advanced biofuel market size was valued at USD 64.3 billion in 2022 and is projected to reach a value of USD 1,499.8 billion by 2031, registering a CAGR of 41.9 % during the forecast period (2023-2031). The global advanced biofuel market share is expected to expand as more people become aware of the importance of energy conservation in various countries worldwide.

Advanced biofuels are a type of renewable fuel made from non-food feedstocks and manufactured using advanced technologies. These biofuels are considered more environmentally friendly and sustainable alternatives to fossil fuels. They can be employed in existing combustion engines, power plants, and other infrastructure without requiring significant modifications.

Advanced biofuels are more environmentally friendly and have a higher energy efficiency output than conventional fossil fuels, driving the growth of the advanced biofuel market. The main impediment to expanding the advanced biofuels market is the cost competitiveness of advanced biofuels compared to conventional fossil fuels. Favorable environmental rules and policies and increased government investment in advanced biofuel R&D are driving the expansion of the advanced biofuels industry.

Market Dynamics

Global Advanced Biofuel Market Drivers:

Government Regulations and Policies

Governments worldwide enact stringent restrictions and policies to minimize carbon emissions and promote renewable energy sources. Renewable Fuel Standards (RFS), carbon pricing mechanisms, and biofuel blending regulations provide a favorable regulatory environment for developing and using advanced biofuels. Government incentives and subsidies boost market growth even further. The Renewable Fuel Standard (RFS) was implemented by the United States Environmental Protection Agency (EPA) to promote the use of renewable fuels in the transportation sector. The Renewable Fuel Standard (RFS) establishes yearly volume targets for incorporating renewable fuels, including advanced biofuels, into the nation's transportation fuel supply. The RFS has been a significant motivator of biofuel production and consumption in the United States. According to EPA publications, the RFS program intends to significantly reduce greenhouse gas emissions by requiring increasing amounts of advanced biofuels each year.

Similarly, as part of its efforts to enhance the share of renewable energy in the EU's final energy consumption, the European Union has introduced the Renewable Energy Directive (RED II). RED II defines renewable energy targets for the transportation sector, including using advanced biofuels. RED II targets a target of 14% renewable energy in the transportation industry by 2030. It also includes a sub-target for advanced biofuels, encouraging using fuels emitting fewer greenhouse gases. Further, The Indian government passed the "National Policy on Biofuels" in 2018. By encouraging domestic biofuel generation, the strategy attempts to reduce petroleum imports. The government altered its objective of 20% ethanol blending in gasoline by 2030 to 2025 in June 2022. The Asian Research Bank (ADB) authorized USD 2.5 million in technical assistance for advanced biofuel research in India in 2020. As a result, government laws and policies are crucial in determining the worldwide advanced biofuel market trend.

Global Advanced Biofuel Market Restraints:

Economic Competitiveness with Conventional Fuels

Advanced biofuels' cost competitiveness with traditional fossil fuels remains a hurdle. Advanced biofuels have more significant production costs in some circumstances. Biodiesel is typically 1.5 times more expensive than petroleum-based diesel. According to a 2022 study, biodiesel is 70-130% more costly on the wholesale market than diesel and gasoline. Biodiesel production costs USD 5.53-USD 6.38 per gallon, which is more expensive than regular diesel. However, when the value of the seed meal produced is considered, the cost of making biodiesel drops significantly to roughly USD 2.50-USD 3.35 per gallon. Establishing advanced biofuel manufacturing plants frequently necessitates sizeable upfront capital commitments. Obtaining financing for these capital-intensive projects can take time and effort.

Additionally, according to a paper titled "Renewable Power Generation Costs in 2019," the cost of creating advanced biofuels varies greatly. The global weighted average levelized cost of electricity (LCOE) for advanced bioenergy (containing both electricity and biofuels) at the time of the publication was between USD 0.05 and USD 0.28 per kilowatt-hour (kWh). The economic competitiveness of advanced biofuels is a critical factor driving market acceptance. Advanced biofuels will only be able to compete if the production costs are much greater than conventional fuels. As a result, industries and consumers are price-sensitive, and if advanced biofuels are not cost-competitive, the market may need more time to adopt these alternatives on a wide scale. This can limit the expansion of the advanced biofuel business and impede the move away from traditional fuels.

Global Advanced Biofuel Market Opportunity:

Increasing Renewable Energy Targets

Many governments and areas worldwide are setting aggressive renewable energy objectives to cut carbon emissions and combat climate change. As a renewable energy source, advanced biofuels are ideally positioned to contribute to attaining these commitments. According to the IEA Net Zero report, renewables must grow their share of global power generation from 30% in 2022 to 60% in 2030. Over 110 countries have pledged carbon neutrality by 2050 as of 2020. The EU has set a target of 35% renewable energy by 2030, up from its prior objective of 20% by 2020. The EU agreed in April 2023 to raise its objective to 42.5% by 2030. The EU directive sets a specific sub-target for renewable energy use in the transportation sector. As a sustainable and low-carbon solution, advanced biofuels help accomplish these goals.

Additionally, in the United States, the Renewable Fuel Standard (RFS) requires incorporating renewable fuels, including advanced biofuels, into the nation's fuel supply. The RFS establishes volume targets to boost the gradual usage of renewable fuels. Furthermore, the Biden administration has set a goal of generating 80% renewable energy by 2030 and 100% carbon-free electricity by 2035. Moreover, Brazil's Proálcool Program began in the 1970s and has a long history of pushing biofuels. The program promotes using ethanol as a renewable fuel, mainly obtained from sugarcane. Also, Biofuels are included in Brazil's National Energy Plan, which directs the country's energy supply and demand. Brazil has a 27% ethanol requirement and a 12% biodiesel mandate, which will rise to 15% by 2026. The necessary blend was raised to 12% in April 2023. On December 19, 2023, CNPE established a 14% biodiesel mandate beginning in March 2024, up to 15% in 2025.

Regional Analysis

The global advanced biofuel market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America Dominates the Global Market

North America is the most significant global advanced biofuel market shareholder and is estimated to grow at a CAGR of 41.8% over the forecast period. The United States is North America's most significant producer of advanced biofuels, with major R&D spending and many biofuel patents to their credit. According to the BP Statistical Review of World Energy 2022, the United States produced 643 thousand barrels of oil equivalent of biofuel per day in 2021, a 7.1% rise over the previous year's total (602 thousand barrels of oil equivalent per day). Strong mandates are driving the advanced biofuel sector in the country. Policies like California's low carbon fuel standard require fuel life-cycle carbon intensity decreases. These measures may increase demand for biofuel and encourage the use of novel and advanced biofuels.

Additionally, the new US Renewable Fuels Standard (RFS), recently signed as part of the amended Energy Bill, establishes lofty targets for the country's biofuel industry. It set an annual production target of 36 billion gallons of biofuels, primarily ethanol and biodiesel, with 21 billion gallons coming from "advanced biofuels," which can be produced utilizing a variety of feedstocks and technology. The RFS also established a production target of around 16 billion gallons of "cellulosic biofuels," generated from plant sources such as trees and grasses. Cellulosic ethanol has enormous potential, with the Department of Energy identifying 1.3 billion tons of harvestable cellulosic biomass in the United States alone. This can meet more than one-third of domestic transportation fuel needs. North America mainly produces advanced biofuels such as cellulosic ethanol and HVO, accounting for 94% of global output. 

Europe is anticipated to exhibit a CAGR of 42.0% over the forecast period. According to Advanced Biofuel Market insights, Europe is the world's second-largest advanced biofuel market. The advanced biofuel market in Europe is driven by significant R&D&D (research, development, and demonstration) activities, showing the potential expansion of the market for marine, shipping, and air transport applications. The market in the United Kingdom is expected to proliferate. The United Kingdom is the world's second-largest market.

Furthermore, in Europe, substantial levels of research, technology, and demonstration activities are driving the use of advanced biofuels. This points to future market expansion for sea, air, and marine transportation applications. Repsol will also begin constructing a biofuel facility in Spain in March 2022. The firm intends to invest around USD 210.33 million in the project. If finished, the facility will be capable of producing 250,000 tonnes of advanced biofuels per year, including bio naphtha, biodiesel, bio jet, and propane. The brand-new plant is expected to open in 2023.

Asia-Pacific is the fastest expanding region in the worldwide advanced biofuel industry. This is due to the growing manufacturing industry and increased awareness of advanced biofuel use in emerging economies such as India, China, and Indonesia. The Australian Renewable Energy Agency (ARENA) supports the advanced biofuel sector in Australia. The Indian government and petroleum marketing companies are actively pushing the blending of 10% ethanol in motor fuel to gradually increase the blending ratio to 20% by 2028.

In addition, China has made significant progress in commercializing advanced biofuels. Several demonstrations and commercial-scale biofuel programs have been established across the country. Cellulosic ethanol, for example, is being manufactured using agricultural waste as a feedstock. Businesses also invest in technology that transforms waste into fuel and uses algae to make biofuels. Japan is also growing increasingly important in the global economy. Japan has established biofuel blending targets, with ethanol in gasoline being a primary objective. The government intends to increase the ethanol blending ratio to reduce carbon emissions and boost fuel economy.

Segmental Analysis

The global advanced biofuel market is segmented based on Process, advanced biofuel type, raw material, and region.

The market is further segmented by Process into biochemical and thermochemical processes.

Biochemical Process holds a significant advanced biofuel market share, Biochemical procedures employ biological creatures such as microorganisms (e.g., bacteria, yeast) or enzymes to degrade complex organic matter into biofuels. Fermentation is a standard biochemical process in which microorganisms such as yeast digest sugars from feedstocks (for example, crops or wastes) to produce biofuels such as ethanol. Without oxygen, microorganisms degrade organic matter, producing biogas that can be converted into biofuels. The biochemical method is used in the manufacturing of cellulosic ethanol. Enzymes convert cellulose from non-food biomass sources such as agricultural leftovers or energy crops into sugars, then ferment them into ethanol.

Heat and chemical reactions are used in thermochemical processes to transform biomass or other feedstocks into biofuels. These activities are frequently carried out at high temperatures and may or may not involve living creatures. Biomass is cooked in a controlled amount of oxygen during gasification, creating syngas (synthetic gas) comprising hydrogen and carbon monoxide. Syngas can be used to make liquid biofuels. Furthermore, it can handle more feedstocks, such as lignocellulosic materials and waste.

The market is fragmented into Cellulosic Advanced Biofuels, biodiesel, Biogas, and Biobutanol based on advanced biofuel types.

Biodiesel generates the most revenue, Biodiesel is a renewable fuel that can be used instead of or blended with conventional diesel. It is typically made by transesterifying fats or oils, such as vegetable oil or animal fat, with alcohol. Biodiesels are predicted to have the highest revenue share because of the increased usage of biofuels as engine fuel. This is due to the use of high-yielding algal raw materials and the enormous potential of biodiesels to reduce greenhouse gas emissions. Transesterification, for example, can transform waste cooking oil or soybean oil into biodiesel. Biodiesel can be combined with regular diesel and utilized in diesel engines.

Cellulosic advanced biofuels are made from cellulose-rich feedstocks like agricultural waste, dedicated energy crops, and forestry waste. By exploiting non-food biomass, these biofuels aim to overcome some of the limitations of first-generation biofuels. One such example is cellulosic ethanol. Enzymatic or chemical procedures convert feedstock cellulose and hemicellulose into sugars, fermented to make ethanol.

The advanced biofuel market can be further bifurcated by raw material into Lignocellulose, Jatropha, Camelina, and Algae.

Algae is the most common raw material, Algae are photosynthetic microorganisms that use sunlight to make lipids (oils). Algal biomass is a promising biofuel production feedstock because of its high lipid content and quick growth. Over the projection period, the algal raw material sector is expected to dominate in revenue. The rise is ascribed to its higher oil content and ability to be grown using ocean or wastewater. Algae can produce 300 times more oil than conventional crops and has a harvest period of up to 10 days because it grows about 30 times quicker than other feedstocks. Algal oil, for example, can be extracted and converted into biodiesel or other advanced biofuels. Anaerobic digestion of algae can also be employed to produce biogas.

Lignocellulosic feedstocks are generated from plant cell wall structural components such as cellulose, hemicellulose, and lignin. Non-food biomass, such as agricultural wastes (corn stover, wheat straw), forestry residues, and dedicated energy crops (miscanthus, switchgrass), are frequently used as feedstocks. Cellulosic ethanol is commonly produced using lignocellulosic feedstocks. The cellulose and hemicellulose components are fermented to produce ethanol after being broken down into sugars.

Recent Developments

• December 2023- Clariant, a specialty chemical company focused on sustainability, announced today the closure of its sunliquid® bioethanol production in Podari, Romania, and the reduction of associated activities in the business line Biofuels and Derivatives in Germany.
• November 2023- DuPont, Chemours, and Corteva agreed on natural resource restoration with the State of Ohio.