Advanced Biofuels: What Holds Them Back?
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ADVANCED BIOFUELS What holds them back? November 2019 © IRENA 2019 Unless otherwise stated, this publication and material herein are the property of the International Renewable Energy Agency (IRENA) and are subject to copyright by IRENA. Material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that all such material is clearly attributed to IRENA and bears a notation of copyright (© IRENA) with the year of copyright. Material contained in this publication attributed to third parties may be subject to third-party copyright and separate terms of use and restrictions, including restrictions in relation to any commercial use ISBN 978-92-9260-158-4 Citation: IRENA (2019), Advanced biofuels. What holds them back?, International Renewable Energy Agency, Abu Dhabi. About IRENA The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that serves as the principal platform for co-operation, a centre of excellence, a repository of policy, technology, resource and financial knowledge, and a driver of action on the ground to advance the transformation of the global energy system. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. www.irena.org Acknowledgements This report was prepared by Sakari Oksanen (consultant to IRENA), Dolf Gielen, Seungwoo Kang, Rodrigo Leme and Toshimasa Masuyama (IRENA). Valuable review and feedback were provided by Paul Komor (IRENA). The editor of this report was Stefanie Durbin. IRENA would like to thank all the respondents of survey. IRENA is grateful for support provided by the Government of Japan. For further information or to provide feedback: [email protected] Report available for download: www.irena.org/publications Disclaimer This publication and the material herein are provided “as-is”, for informational purposes. All reasonable precautions have been taken by IRENA to verify the reliability of the material featured in this publication. Neither IRENA nor any of its officials, agents, data or other, third-party content providers or licensors provides any warranty, including as to the accuracy, completeness, or fitness for a particular purpose or use of such material, or regarding the non-infringement of third-party rights, and they accept no responsibility or liability with regard to the use of this publication and the material therein. The material contained herein does not necessarily represent the views of all Members of IRENA, nor is it an endorsement of any project, product or service provider. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area, or their authorities, or concerning the delimitation of frontiers or boundaries. Images are from iStock or Shutterstock unless otherwise indicated. CONTENTS Figures and tables 4 Abbreviations 5 Key messages 7 1. Introduction 11 1.1 Background 11 1.2 Global trend of investment in biofuels 13 1.3 Objective and method of analysis 14 1.4 Report structure 16 2. Barriers to advanced biofuels 17 2.1 The state of the advanced biofuel industry 17 2.2 The complexity of the biofuel value chain 19 2.3 Identified barriers 21 3. Context and relevance of survey questions 28 3.1 Feedstock 28 3.2 Technology and financing 31 3.3 Mandates and targets 37 3.4 Trends in biofuel demand 45 3.5 Environmental and social concerns 52 4. Survey results 57 4.1 Feedstock 57 4.2 Technology and financing 59 4.3 Mandates and targets 61 4.4 Trends in biofuel demand 64 4.5 Environmental and social concerns 66 5. Key findings 68 5.1 Observations 68 5.2 Rating opinions 70 5.3 Ranking barriers 73 References 77 Appendix: Questionnaire for industry feedback 84 WHAT HOLDS THEM BACK? | 3 FIGURES Figure 1. Annual investments in biofuels (USD billion) 13 Figure 2. Stakeholders with competing interests across the value chain 20 Figure 3. Sources of credit under the Low Carbon Fuel Standard, California 41 Figure 4. Annual global light duty vehicle sales 46 Figure 5. Questionnaire responses to statements concerning feedstock 57 Figure 6. Questionnaire responses to statements concerning technology and financing 59 Figure 7. Questionnaire responses to statements concerning mandates and targets 61 Figure 8. Questionnaire responses to statements concerning regulatory environment in different markets 62 Figure 9. Questionnaire responses to statements concerning trends in biofuel demand 64 Figure 10. Questionnaire responses on environmental and social concerns 66 Figure 11. Barriers ranked by the level of importance 74 Figure 12. Ranking of barrier categories in relation to the most important one 75 Figure 13. Rankings by HEFA and cellulosic ethanol groups 75 TABLES Table 1. Barriers to advanced biofuels identified by studies carried out to date 26 Table 2. Differences in business environment for cellulosic ethanol and HEFA producers 69 4 | ADVANCED BIOFUELS ABBREVIATIONS 1G First generation (biofuel) 2G Second generation (biofuel) ASTM American Society for Testing and Materials BCAP Federal Biomass Crop Assistance Program (US) BETO Bioenergy Technology Office (US) BEV Battery electric vehicle BNEF Bloomberg New Energy Finance CAA Clean Air Act (US) CAD Canadian dollar CAPEX Capital expenditure CARB California Air Resources Board CFS FAO Committee for World Food Security CNG Compressed natural gas CO₂ Carbon dioxide CORSIA Carbon Offsetting and Reduction Scheme for International Aviation CWC Cellulosic waiver credit DME Dimethyl ether DOA Department of Agriculture (US) DOE Department of Energy (US) ECA Emission control area ECP Energy and Climate Package (EU) EISA Energy Independence and Security Act (US) EJ Exajoule EPA Environmental Protection Agency (US) EU European Union EU ETS EU Emission Trading Scheme EUR Euro EV Electric vehicle FAME Fatty acids and methyl esters FAO Food and Agriculture Organization of the United Nations FFV Flex-fuel vehicle FSA Farm Service Agency (US) GHG Greenhouse gas Gt Gigatonne HEFA Hydroprocessed esters and fatty acids HVO Hydrotreated vegetable oil ICAO International Civil Aviation Organization ICE Internal combustion engine ICT Information and communication technologies IEA International Energy Agency ILUC Indirect land-use change IMF International Monetary Fund WHAT HOLDS THEM BACK? | 5 IMO International Maritime Organisation IRENA International Renewable Energy Agency ISCC International Sustainability and Carbon Certification LCA Lifecycle assessment LCFS Low-carbon fuel standard LDV Light-duty vehicle LNG Liquefied natural gas LUC Land use change MAD Ministry of Agricultural Development (Brazil) MARPOL International Convention for the Prevention of Pollution from Ships MDF Medium density fibreboard MSW Municipal solid waste NGO Non-governmental organisation NGV Natural gas vehicle NOx Nitrogen oxide NREL National Renewable Energy Laboratory (US) OECD Organisation for Economic Co-operation and Development OEM Original equipment manufacturer OPEX Operational expenditure PHEV Plug-in hybrid electric vehicle PKS Palm kernel shell QAP Quality Assurance Plan R&D Research and development RED Renewable Energy Directive RFS Renewable Fuel Standard RIN Renewable Identification Number RSPO Roundtable on Sustainable Palm Oil RTRS Roundtable on Responsible Soy RVO Renewable Volume Obligation SAF Sustainable aviation fuel SDS Sustainable Development Scenario (of IEA) SFS Social Fuel Seal (Brazil) SOx Sulphur oxide UCO Used cooking oil UK United Kingdom UNEP United Nations Environment Programme US United States USD United States dollar VC Venture capital 6 | ADVANCED BIOFUELS KEY MESSAGES Advanced liquid biofuels play an important role in not limit itself to identifying impediments but also the low-carbon pathway for the transport sector laid explores the levels of importance of the barriers. out by the International Renewable Energy Agency The resulting analysis shows a complex business (IRENA). Liquid biofuels require little change in environment, where barriers to investment include an fuel distribution infrastructure or the transport fleet array of infrastructure-related, environmental, social and can therefore be rapidly deployed, leading to and political issues, but also points towards possible much-needed reductions in greenhouse gas (GHG) means of addressing these issues. emissions. They also provide a practical alternative to fossil fuels for aviation, shipping and heavy freight Regulatory uncertainty stands out as the most trucks. While a variety of renewable energy sources important impediment to investments. must be employed to reach the goals of the Paris Agreement, advanced biofuels address key issues The survey responses strongly reflect the fact that the within the transport sector and will be needed for regulatory framework for transport biofuels has been decades in order to meet long-term climate targets. in flux and investment activity has consequently been stagnant for the last ten years, particularly in Europe. IRENA’s low-carbon pathway to 2050 calls for a fivefold increase in consumption of biofuels, from Since 2009, three major legislative changes have 130 billion litres in 2016 to almost 650 billion litres in taken place with the enactment of the Renewable 2050. This means that new and