Biofuels Outlook Market Developments and Policy Challenges Anselm Eisentraut

Transcription

1 Biofuels Outlook Market Developments and Policy Challenges Anselm Eisentraut OECD/IEA 214

2 World biofuels end of rapid expansion? mb/d billion litres/yr Rest of global biofuels OECD EUR biofuels Brazil biofuels US biofuels Global biofuels output reached 12 billion litres in 213 and now provides 3.5% of world transport fuel demand Support policies are major driver behind rapid growth in biofuel produc@on à à Brazil and US first established biofuel programs in 197/8s EU introduced mandate of 5.75% biofuels in transport by 21 in 23 à changed target in 21: 1% renewable energy in 22 More than 5 countries worldwide now have biofuel mandates in place

3 Biofuel support policies worldwide Key drivers for of support policies: l Support for agricultural sector / rural development l Energy security / reduced oil import bills l Climate change mi@ga@on

4 The context for biofuels has changed Oil price rising and increasingly should improve biofuels Monthly real food price indices (22-4 = 1) Europe Brent Spot Price FOB (USD/bbl) 3 However: agricultural commodity prices also rising and increasingly vola@le Jan- 4 Jan- 4 Jul- 4 Jul- 4 Jan- 5 Jan- 5 Jul- 5 Jan- 6 Jul- 6 Jan- 7 Jul- 7 Jan- 8 Jul- 8 Jan- 9 Jul- 9 Jan- 1 Jul- 1 Jan- 11 Jul- 11 Jan- 12 Jul- 12 Jan- 4 Jul- 4 Jan- 5 Jul- 5 Jan- 6 Jul- 6 Jan- 7 Jul- 7 Jan- 8 Jul- 8 Jan- 9 Jul- 9 Jan- 1 Jul- 1 Jan- 11 Jul- 11 Jan- 12 Jul Monthly real food price indices Monthly real food price indices (22-4 = 1) (22-4 = 1) Billion liters Biofuels sustainability increasingly ques@oned: l food vs. fuel l Deforesta@on l (indirect) land- use change Cereals Price Cereals Index Price Index Vegetable Oils Price Vegetable Index Oils Price Biofuel Index production Source: FAO, IEA Source: primatology.net

5 Biofuels to grow 25% to 218 mb/d World biofuels supply (26-18) billion litres/yr mboe/d 1.8 Biofuels share in global road transport (26-18) % 4% 3% 2% 1% % Rest of global biofuels Brazil biofuels OECD EUR biofuels US biofuels Biofuels supply (adj. for energy content) As % of global transport demand Global biofuels output to grow 3.5% per year on average from 11 billion litres in 212 to 135 billion litres in 218 Biofuels provide 4% of global road transport fuel demand in 218 Growing poli@cal uncertainty in the EU and US provides an important downside risk, and might undermine the medium- term growth prospects

6 OECD Americas faces challenges mb/d US gasoline demand vs. ethanol and mandated ethanol use (29-18) MTRMR ethanol supply Net gasoline demand RFS2 mandate (conv. and cellulosic ethanol) Ethanol "blend wall" (1% volumetric) kb/d US Renewable Fuels Standard (RFS) set ambi@ous growth path for biofuels (14 bn L in 222)! Very unlikely that it can be met Jan 12 Feb 12 Mar 12 US biodiesel production and imports Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 US biodiesel production Other origins European Union Indonesia Argentina Jan 13 Preliminary date Source: IEA Medium-Term Renewable Energy Market Report 214, forthcoming Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 EPA proposal for substan@al revision of RFS mandate indicates that blend wall in the US proves challenging to overcome à Growth in US ethanol produc@on will be limited in the future à US cellulosic fuel produc@on far below original RFS 2 target à Biodiesel output above RFS target in 213, due to Blender s Tax Credit that expired in December

7 Brazil s ethanol industry suffers from poor profit margins Real/litre Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 million L Gasoline Hydrous ethanol (adj. for energy content) Hydrous ethanol consumption Brazilian ethanol output increasing again aier some years of decline/no growth, but outlook is cloudy à Financial situa@on of the sugarcane sector prevents new investments into sugarcane planta@ons and sugar/ethanol plants à Regulated gasoline prices limit profits from ethanol sales à Proposed changes to US RFS advanced biofuels quota would significantly limit poten@al for ethanol exports to the US

8 s biodiesel industry challenged by policy developments Argentine biodiesel production costs vs. biodiesel reference price (left) and biodiesel production (right) USD/ L Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 Biodiesel reference price Biodiesel production costs kb/d Biodiesel produc@on took hit from new an@- dumping import tariffs in the EU à Significant decline in produc@on in 213 and 214 New B1 mandate has not s@mulate growth in produc@on so far à Biodiesel reference price does not cover produc@on costs

9 EU policy uncertainty leaves biofuels sector in limbo mb/d.4 billion litres OECD Europe biodiesel OECD Europe ethanol Non-OECD Europe biofuels Note: Projections do not include proposed changes to Renewable Energy Directive Medium- term growth in biofuel output of 4 billion liters à Driven primarily by EU Renewable Energy Direc@ve Proposed cap on conven@onal biofuels (5-7% of transport energy demand) due to sustainability concerns could significantly undermine growth prospects Future for advanced biofuels industry highly uncertain due to lack of post- 22 policy framework for biofuels à First advanced biofuel projects get shelved as they struggle to secure investments (e.g. VAPO s Ajos BtL plant in Finland)

10 Emerging markets set to grow mb/d Asia and Africa biofuel production China Ethanol China Biodiesel SE Asia Biodiesel SE Asia Ethanol Rest of Non-OECD Asia Africa and Middle East Growing number of emerging markets in Asia and Africa with blending mandates à India: E1 finally adopted, but mee<ng the target proves difficult à Indonesia: B1 as of Feb. 214 as result of an<- dumping tariffs in the EU à Thailand: subsidise use of E2; Malaysia (B5) and Philippines (B5, E1) à South Africa: introducing long- awaited E2 and B5 mandate à Zimbabwe: E1 as of Oct. 13, may rise to E2 later in 214

11 Lack of long- term policy framework provides challenge for advanced biofuels industry kb/d 2 billion litres/yr Planned Under construc<on Opera<ng (other technologies) Opera<ng (HVO) Note: HVO=hydrotreated vegetable oil. No plants have yet been announced beyond 216 Industry currently enters large- scale produc@on with first commercial plants coming online Opera@ng capacity at 4.5 billion litres in 212 could grow to 9 billion litres in 218 However: projects con@nue to get cancelled, or companies go bankrupt Perceived investment risk is most important barrier to more rapid deployment à long- term policy framework is needed to spur growth

12 The advanced biofuels industry is expanding, slowly hnp://demoplants.bioenergy22.eu OECD/IEA 214

13 IEA Biofuel Roadmap Advanced biofuels to play a key role in the long- term Note: Figure shows gross land demand, excluding land- use reduc<on poten<al of co- products In a low CO 2 scenario (IEA 2 C Scenario) biofuels share in total transport increases to 27% in 25 Advanced biofuels play key role! only low- carbon fuel alterna@ve for heavy transport modes

14 Biofuels falling behind targets of IEA 2 Degree Scenario Source: Tracking Clean Energy Progress, IEA, 214 In a low CO 2 scenario (IEA 2 C Scenario) biofuels share in total transport increases to 27% in 25 Advanced biofuels play key role! only low- carbon fuel alterna@ve for long- distance, heavy transport modes Without significant improvements of the policy framework for advanced biofuels, targets in the 2DS will not be met!

15 Conclusions and policy Policy framework to determine developments in the biofuel industry Long- term policy framework is key to ensure investor confidence, in par<cular for advanced biofuels Policy support starts with and deployment Sustained funding for RD&D of promising technologies, as well as research on land suitability mapping and biomass poten<al analysis, is crucial Policies should promote sustainable biofuel Interna<onal alignment of sustainability cer<fica<on to avoid trade barriers, and ensure solid sustainability standards globally Support mechanisms should be linked to sustainability requirements for biofuels

16 Thank you for your Medium- Term Renewable Energy Market Report 213 à 214 to be launched 28 August Technology Roadmap - Biofuels for Transport Contact: Anselm.Eisentraut@iea.org

17 Disclaimer This is derived from the analysis published in the IEA's Medium Term Renewable Energy Market Report 213 which is available for download at hnp:// For more on renewable energy at the IEA please visit: hnp:// termrenewableenergymarketreport/. Should you have any or comments about this workbook, please write to IEA- Please note that the IEA s Medium Term Renewable Energy Market Report 213 is subject to restric@ons that limit its use and distribu@on. These terms and condi@ons are available online at hnp:// 213 OECD/IEA