Biofuel

The biofuel sector is in its infancy, yet bioethanol production is already equal to one-half of one percent of total petroleum production in the world. Biodiesel lags far behind, only contributing one-twentieth of one percent compared to the world's total petroleum fuel production.

How good biofuels are is highly subjective based on location and feedstock. Most research is either highly proprietary, or just getting underway, or both. Biofuel converts solar energy, at its best, at a rate of only around .15%. So while biofuels such as ethanol from sugar cane in Brazil and diesel from oil palms in West Africa are undoubtedly economically viable, they cannot replace petroleum. There isn't enough land. Genetically engineered algae may change all of that, of course.

The biofuel component of the bioenergy sector is certainly an important one.

The International Energy Agency did an analysis and projection of oil consumption measured in Million tons of oil equivalent (Mtoe) from 1971 to 2030. Whereas in 1971 transport consumption of oil to total oil was roughly 50%, by 2030 transport will account for around two thirds of oil consumption. More concerning, total oil consumption is predicted to increase to 5,000 Mtoe, more than doubling the total consumption of 1971 (1). A significant portion of this increase in consumption is driven by the developing economies and is therefore very difficult to reduce due to their rapid economic growth. Both in terms of reduction of CO2 emissions from this increasing consumption as well as reducing the dependency on oil as the primary product the demand for viable biofuels will increase in the years to come. From the same analysis bioethanol production was estimated at around 30 million tons per year in 2004 and biodiesel at only an estimated 2,5 million tons per year as of 2004.

The demand is thus clearly there for a substitute to oil, and would be even more pronounced if this substitute could be "greener." As regards biofuels however, the key imperative would seemingly remain the economic viability of the substitute. As Nobel prizewinner, Sydney Brenner, once noted "the only 'omics' that really counts in Biotechnology is economics. (2)

How then do you consider the viability of a project, whether it be biodiesel or bioethanol?

It should be noted from the outset, that there is a perplexing myriad of country, location, and project specific data that cannot possibly be covered in a short article such as this. Further, it may be quite possible that a specific project may have other factors specific to that project that completely erode the assumptions of this article. This is exacerbated by the lack of published and scientific data available. That is not in any way whatsoever saying that a huge a mount of scientific research has not been done on biofuels, but simply that a) the biofuel field is in itself a huge field of study, b) new technological advances have presented themselves (or are in the pipeline) that affect current assumptions, c) some advances are driven by economics and these will present themselves by way of company performances in the future.

This article focuses on environmental analysis of the biodiesel and bioethanol industries. Focus is mainly placed on a PEEST analysis (Political, Economic, Environmental, Social, and Technical). The Social and Technical factors are covered briefly. This analysis is not intended to be exhaustive and is intended only to highlight some of the salient points pertinent to such an analysis and reflect on some of the current thinking around these factors. Strategists might argue that there are a number of other environmental analytical techniques which should be applied to an environmental scan of the industry; again such an analysis would be so extensive that it falls outside the scope of this article. Further, the focus of this article is mainly on the external environment as it is far too complex a subject to cover internal environmental factors affecting a project, and even the external environment is only approached from a generic approach so as not to create undue complexity.