Third and Fourth Generation Biofuels: Technologies, Markets and Economics Through 2015

by Joshua Kagan

First- and second-generation biofuels like ethanol and biodiesel have a number of inherent limitations that make them less than ideal as a long-term replacement for petroleum. The primary feedstocks for first-gen ethanol (corn and sugarcane) and biodiesel (rapeseed, soybeans, and palm) are all food-based crops that compete for scarce cropland, fresh water, and fertilizers. These fuels cannot be used in unmodified engines above small blends and are not applicable to the jet fuel market.

While first- and second-generation biofuels account for more than 99% of current global biofuel production — and the U.S. already appropriates 30% of its corn supply to displace about 6% of its gasoline consumption — a number of important technologies are on the brink of commercialization that produce "drop-in" fuels with the same chemical characteristics of petroleum.

In this report, we focus on "third-generation" algae biofuels and "fourth-generation" biofuels that are either created using petroleum-like hydroprocessing, advanced bio-chemistry, or revolutionary processes like Joule’s "solar-to-fuel" method that defies any other category of biofuels. The opportunities that "advanced biofuels" present are greatly misunderstood by both policy-makers and financiers. While corn, sugar, and cellulosic ethanol and biodiesel are what most people think about when they hear the term "biofuel," none of these fuels are suitable candidates to ever wean society off of its "addiction to oil."

Given that 2 billion people in "Chindia" are currently undergoing their industrial revolutions, combined with global population increases of 80M per year and increases in standards of living for non-OECD populations, we forecast global petroleum consumption to more than offset gains in corporate mileage efficiency and electrification of a portion of the transportation fleet. Combined with the fact that supplies of easily accessible "light sweet" crude are declining and oil prices are back above $70/bbl, the national security, environmental, and economic consequences of global dependence upon petroleum as a primary energy source is again at the forefront of policy discussions. The question of whether third- and fourth-generation biofuels are potential solutions is the basis of this inquiry. Some of the questions that this report attempts to answer include:

  • What are the different types of advanced biofuels and which of them are relevant?
  • What are the key technological pathways and what are their scale-up trajectories?
  • Will advanced biofuels be price-competitive with petroleum without subsidies? If so, when?
  • What are the short-, medium-, and long-term economics of algae, metabolically enhanced biofuel, and synthetic biofuels? Will any of these technologies ever displace significant volumes of liquid petroleum products?

This 150-page report provides a thorough examination of the key companies, market segments, technologies, economics, and regions for the commercialization of third- and fourth-generation biofuels. Through understanding the key supply and demand side drivers for petroleum, we created oil price scenarios through 2022. Since biofuels are attempting to replace petroleum, any discussion about the future of biofuels must be grounded within the context of the economics of petroleum.

We conclude that by 2022, biofuels will account for almost 8% of global oil volumes used for transportation, representing a multi-hundred billion dollar market.


Key Elements of the Report:

  • Regional and global petroleum and biofuel market dynamics
  • Established and experimental third- and fourth-generation technology pathways
  • Growth, harvesting, de-watering, drying, extraction, and refinement of algae
  • Recent and future biofuel policies and their market implications
  • The current and future cost and price structure of third- and fourth-generation of biofuel
  • Forecast volumes, prices, and demand for each generation of biofuel

Companies profiled include:

A2BE Carbon Capture • Air New Zealand • Algae Venture Systems • Algenol • Altair • Amyris • Annellotech • Aquaflow Bionomics • Aurora Biofuels • BARD • Bell Bio-Energy • Biofuel Systems • Biofuels HK • Bionavitas • BioTfuel • Blue Marble • BlueFire Energy • Boeing BP • Butalco • Butamax • Caitlin • Carbon Capture Corp. • Cellena • Chemrec • Choren • ClearFuels • Cobalt • ConocoPhillips • Continental Airlines • Coskata • Cyanotech • Diversified Energy • DuPont • Dynamic Fuels LLC • Dynamotive Energy • Elevance Renewable Sciences • Eni S.p.A • Ensyn • Envergent • Exxon/Mobile • Flambeau River Biofuels • Galp • Gas Technology Institute • General Atomics • Gevo • Green Biologics • Haldor Topsoe • ICM • Inventure • Japan Airlines • Joule Biotechnologies • Kai Bioenergy • Kelco • Kent BioEnergy • KL Energy • KLM • Kumho Petrochemical • • Live Fuels • LS9 • Martek • Mascoma • Neste Oil • NSE Biofuels • OPX • OriginOil • PetroAlgae • Petrobras • Petrosun • Phyco Biosciences • Poet Energy • Qteros • Range Fuels • REII • Rentech • SAIC • Sapphire • Seambiotic • Shell • Solazyme • Solena Group • Solix • Stora Enso • Swift Fuel • Synthetic Genomics • Syntroleum • Terrabon • Texas Clean Fuels • Tyson Foods • UOP • Valcent • Valero • Vercipia • XL Renewables • Zeachem

Joshua Kagan Analyst at Large

Joshua Kagan is a Fellow with the Prometheus Institute for Sustainable Development where he researches the transportation sector and is an advisor to the Carbon War Room. Joshua is also an analyst with Atlas Capital Investments – a cleantech hedge fund/VC. Joshua has a Masters degree from the London School of Economics and a Bachelors degree from Wesleyan University in Middletown, Conn.

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