Pike expects ethanol production to maintain its dominance and reach 49.5 BGPY by 2021, as compared to biodiesel’s 16.2 BGPY. Pike projects that the Americas will account for 71% of global biofuels production. Despite the growth, production volumes are expected to fall short of an estimated 71.8 BGPY of biofuels demand in 2021.

After healthy growth over the past decade, the global biofuels industry is entering a new era marked by feedstock flexibility, product neutrality, and sustainability, the report notes. Motivated by growing concerns related to energy security, climate change, and economic stagnation, at least 38 national governments throughout the world have enacted blending mandates or targets to accelerate the expansion of biofuels production and consumption in the transportation sector.

Multiple aims include the reduction of dependence on imported oil, mitigation of greenhouse gas (GHG) emissions, and driving economic development.

While in the near-term, biofuels are a proven alternative to petroleum-based fuels, in the long-term they could radically alter the fuel market’s geopolitical landscape by meeting an expanding portion of consumer demand, the report suggests. The emergence of advanced conversion pathways and non-food feedstocks could unlock considerable production potential throughout the world.

Given the scale of development, to date, and the crystallization of interests among a diverse range of stakeholders, widespread biofuels commercialization is no longer a question of “if’’, but “when”. The potential markets are huge. Pike Research estimates that the global gasoline market will reach an estimated 375 billion gallons per year (BGPY) in 2021. Demand for diesel in ground transportation markets will reach at least 427 BGPY.

Meanwhile, aviation and marine fuel demand could add 200 BGPY or more to global transportation fuel demand by 2021. A doubling of current biofuels production (an estimated 29.4 BGPY in 2011) would represent just 7% of the global transportation fuels market in 2021.

—“Biofuels Markets and Technologies”

Despite demand, numerous obstacles remain, and the current decade is shaping up to be on of shakeouts, the report finds, as early bets on cellulosic technologies head to commercial production and significant investments from oil majors and multinationals continue to pour into the industry.

As interests diverge among stakeholders (e.g., conventional versus advanced, ethanol infrastructure versus drop-in compatibility, fuels versus chemicals, etc.), we expect the trend towards flexibility and partnerships with multinationals to continue among emerging biofuels producers. Although the shift towards high-value, low-volume markets as a source of revenue will help advanced fuel ventures finance scale-up efforts, it is unclear whether this trend will accelerate biofuels production by bringing more capacity online or divert production away from biofuels as companies back into lower value, high-volume fuel markets over the next decade. Ultimately, widespread commercialization will depend on whether these ventures can reach price parity with petroleum-based fuels.

—“Biofuels Markets and Technologies”

Disproportionate feedstock access and utilization is expected to lead to increased global trade in biofuels, Pike said, with countries like Brazil emerging as leading suppliers for the world market.

The widespread scale-up of biofuels could radically alter the industrial and geopolitical landscapes by meeting an expanding portion of consumer demand in ground, aviation, and maritime fuel markets. But with conventional biofuels constrained by social and environmental concerns, and price parity and access to financing a persistent obstacle to advanced biofuels scale-up, a number of difficult challenges must be overcome if the industry is to keep pace with emerging mandates.

—Pike Research senior analyst Mackinnon Lawrence

The report identifies a number of key trends, including:

• Oil prices are expected to climb over the next decade, driving increased interest in biofuels.
• Wash-out from “Food versus Fuel” and “Indirect Land Use Change” will linger, shifting investor and policy focus from conventional to advanced biofuel pathways.
• Advanced biofuels seek near-term revenue, continuing the trend towards feedstock and end-product flexibility.
• Commercial airlines and the US military continue to emerge as key drivers of industry growth, signaling growing demand and attracting new investment into the industry.
• Yields incrementally improve for first-generation feedstocks, undergirding continued growth in the global biofuels industry.
• Genetic modification and feedstock optimization will improve outlook for non-food feedstock pathways, enabling new geographic expansion and accelerated commercialization.
• The number of off-take agreements with oil and chemical will increase, confirming the trend towards strategic partnerships.
• Policy and regulatory uncertainty likely to persist, tempering more optimistic growth in the industry.
• Governments are expected to retreat from stimulus investment highs, shifting financing onus onto private capital sources.
• Cellulosic biofuels progress likely to disappoint through 2015/2016, leading to the further scaling-back of production mandates and increased demand for sugarcane.
• Long-term outlook for cellulosic biofuels is expected to hold firm, preventing wide-scale retrenchment among investors.
• Waste-to-fuels shows promise as near-term success story, shoring up confidence in advanced biofuels over the long-term.
• Mandates continue to integrate sustainability measures, setting benchmarks for market access and dictating terms for accessing financing.
• Production is expected to significantly outpace demand in some markets (e.g., Brazil) and fall short in others (e.g., China), increasing opportunities for global trade in ethanol and biodiesel.

Pike Research’s report, “Biofuels Markets and Technologies”, provides an in-depth analysis of global ethanol and biodiesel opportunities as well as an evaluation of key challenges facing the broader biofuels industry. The study includes an examination of market drivers, including policy and regulatory developments as well as emerging mandates, feedstock and production economics, expanding demand in aviation and chemical markets, the commercial readiness of various pathways, and detailed profiles of key industry players across the entire biofuels value chain.

Market forecasts extend through 2021 and include projections for mandated demand, production, feedstock utilization, and market value segmented across geography and fuel.