Bioenergy needs help to reach petroleum parity

Dec. 22, 2009, Boston, MA – Biofuels and biomaterials are hotly pursued for
strategic and environmental reasons, but to replace conventional fuels and
materials, they need to reach petroleum parity, i.e., to be competitive with
petroleum-based products in cost, properties, and scale. Whereas parity on cost
and properties may be within reach, a new report from Lux Research finds that
bio-based alternatives won't pose a serious challenge to the $250-billion petroleum
industry until they can compete in terms of scale, which is a much more
challenging task. 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 battle is not lost, however. The report Biofuels' and Biomaterials' Path to
Petroleum Parity provides substantive advice to policymakers, investors, corporations,
and citizens who wish to see biotechnology become a more viable competitor to
petroleum.

"People are interested in bio-based products for two reasons: They want a reliable
source of affordable fuels or materials, or they wish to reduce the amount of
carbon dioxide entering the atmosphere," says Mark Bünger, a research
director for Lux Research and lead author of the report. "If biofuels and
biomaterials can't deliver either of these things, they'll remain little more
than a novelty."

To assess the competitiveness of biofuels and biomaterials with petroleum
products, Lux Research constructed 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. It draws on intelligence gathered from government and
scientific data, primary interviews with chemical and energy companies, and Lux
Research's own database of 150 leading biofuel developers.

Among the report's key conclusions:

– Purpose-grown crops will not yield enough biomass. A hectare of soybeans
roughly translates into 200 kg of plastic or 197 L of diesel, which is a
comparatively low yield.

– Slowly falling cultivation costs position waste biomass as the best option. Of
biotechnology’s four main feedstock classes, i.e., crops, algae, waste, and
carbon dioxide, waste is the near-term winner. Some 316 million dry tons of
waste biomass from forestlands and 534 million dry tons of crop residues and
other waste handily exceed oil equivalents; and at a cost of $40 per barrel of
oil equivalent, the costs of these materials are lower than those of other
feedstocks.

– Retrofitting existing petroleum, paper, and bioethanol plants could slash
production costs. To reduce costs, biofuel manufacturers will need to integrate
with existing facilities in pulp and paper or food processing, many of which use
the same processes applied in petrochemical production. Not only would this
approach lower capital costs for bio-based products, it would also provide
access to transportation and other infrastructure.