The Roles of Alternative & Bio-Fuels in a New Market ...The Roles of Alternative & Bio-Fuels in a...

The Roles of Alternative & Bio-Fuels in a New Market Equilibrium

Gil RodgersSenior Director – Global Energy Group

Copyright © 2006 Global Insight, Inc. 2

Conclusions

Key Drivers of bio-fuelsHigh Oil and Gas PricesGHG Emission GoalsGovernment Directives (EU and US)

Technology1st Generation 2nd Generation

Neste NExTL ProcessLignocellulosic Process

Alternative Pathways to MarketOutlook

Europe – 5.75% transport fuels by 2010 ??U.S. – 7.5 Billion Gallons per Year by 2007/2008


The Three Policy Legs


Three Major Policy Drivers…

Environment

Reduce criteria emissions at local, urban, metro, and national levelsReduce greenhouse gas emissions

Agriculture

Create new markets for agricultural cropsReduce subsidies

Energy

Energy securityReduce dependency on petroleum-based energy sourcesDiversify energy sources

…ARE THEY COMPATIBLE?


Will the Consumer Accept Bio-fuel Vehicles?

If dedicated bio-fuel vehicles are needed, what will be the acceptance?

COST

MOBILITY

CONVIENIENCE

CHOICE

ENVIRONMENT


Advantages & Disadvantages of Alternative Fuels

•Toxicity•Corrosive

Legacy Fuels

ConsPros

• High gas prices• Vehicle range

• Relatively good GHGMethanol

• Vehicle range• Relatively good GHGLPG

• Very limited vehicle range• Few fueling stations

• Lower GHG• Low criteria emissions

CNG

• Higher cost• Corrosive• Available land for crops

• Low GHG• Low tailpipe emissions• Positive energy balance

Bio-diesel

• 20- 30% reduction in vehicle range at high ethanol %

• Available land for crops• Corrosive at high %

• Low GHG• Low tailpipe emissions• Convenience at low ethanol %• Positive energy balance

Bio-ethanolFuture Fuels


Bio-fuels Technologies

What is the technology?

AlgaeOthers?

Future

CornMolassesSugar BeetsOthers?

Modified energy cropsOthers?

CellulosicSwitch GrassWood ChipsEnergy CaneModified energy cropsCrop ResiduesFarm/Municipal Waste

Next Generation

Oil ExtractionRapeseedJatrophaPalmSoybeansVegetable Oils

Gasification/ Fischer-Tropes

FermentationCornSugar CaneWheat & BarleySugar BeetsSorghum

Conventional Bio-butanolBio-dieselBio-ethanolTechnology


Global Bio-fuel Initiatives

In 2005, bio-fuels were to account for 2 percent of total auto fuel consumption.By end-2010, EU directive promotes the contribution by bio-fuels to reach 5.75

percent of total fuel consumption

European Union

Government mandates the use of 5 percent ethanol in gasoline in nine statesIndia

In conjunction with the Tenth Five-Year Plan, 10% ethanol fuel blend (E10) schemes were launched in five cities located close to the major ethanol production centers of the northeast beginning in 2002.

China

In September 2001, the Colombian government approved a law which will make mandatory from 2006 the use of 10% ethanol in fuel in cities with populations larger than 500,000 inhabitants

Colombia

In addition to requiring 25% ethanol in their gasoline, the government asked fuel distribution companies to start voluntary use of B-2 beginning January 2005. Legislation further proposed that by 2008, use of B-2 will be mandatory, while use of B-5 will be optional. By 2013, the Brazilian government would make it mandatory to use the B-5 fuel across the country

Brazil

Fuel Excise Tax exemption for bio-fuels. Mandated levels of consumption.

U.S.

INITIATIVES TAKENREGIONS

Source: New York Board of Trade


1.3

1.4

1.6

1.7

1.7

3.0

4.6

6.6

8.3

0 2 4 6 8 10

Corn Study #1

Corn Study #4

Corn Study #5

Corn Study #2

Corn Study #3

Sugar Beets

Cellulosic Study #2

Cellulosic Study #1

Brazil Sugar Cane

Energy Efficiency Ratio (rE)

Feedstocks Result in Wide Range of Energy Efficiency

Sources: “Ethanol’s Energy Return on Investment: A survey of the Literature 1990 – Present”, Environmental Science & Technology, Vol. 40, No. 6, 2006. Internet sources for Brazil sugar cane. Sugar beets from discussions with industry.

rE = E output/E in,nonrenewablerE = E output/E in,nonrenewable

Energy Efficiency of Bio-fuel TechnologiesEnergy Efficiency of Bio-fuel Technologies


World Bio-fuels: Possible Requirements

• Volumes required globally under two plausible scenarios: 5% and 10% of motor fuel pool.

• Projections are based on assumed 1.7% growth in motor fuel demand.

• IEA projects 4% and 6% shares in its reference and alternative cases.

Source: Global Insight

933

<2%2004

Billion gallonsBillion liters

Bio-fuels:% of road fuel

83316

10%

42158

5%2020

9749369185

10%5%2030


Global Bio-fuel Consumption

0

10

20

30

40

50

60

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Bill

ions

of G

allo

ns

Rest of WorldEuropean UnionUnited States


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028

Bill

ions

of G

allo

ns

Ethanol

Bio-diesel

Our Forecast of U.S. Ethanol & Bio-Diesel Production

GOAL:7.5 Billion

Gallons per Year

GOAL:7.5 Billion

Gallons per Year


Different Approaches with Competitive Implications

ETBE 42% RenewableGood blending qualitiesNot allowed in the US

EthanolEthanol


Different Approaches with Competitive Implications

Bio-DieselBio-Diesel


Changes in Trade Barriers

Policy Issues

Agriculture Support vs. Energy Security


Policy Issues

Alternative Pathways to Market

New Market Equilibrium

Alternatives to hydrocarbons as a major transportation fuel

Thank you!

Gil RodgersSenior Director – Energy [email protected]

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