IEA reports global biofuels production set to rise, short-term obstacles persist

Global biofuels production is expected to rise, but short-term challenges persist, according to the International Energy Agency (IEA) renewables report released June 26.
Global biofuels output should hit 2.36 million barrels per day (bpd) by 2018, an increase of more than 25% from 2012, the agency said in its medium-term Renewable Energy Market Report.
“Biofuels output, adjusted for energy content, should account for 3.9% of global oil demand for road transport in 2018, up from an estimated 3.4% in 2012 and 1.5% in 2006,” the IEA said.
The agency cited biofuel production obstacles such as “slow development of advanced biofuels, sluggish oil demand growth in some areas and policy uncertainty.”
The U.S is expected to remain the biggest biofuels producer in absolute terms, but its share of global biofuel production will decrease to 45% in 2018 from 50% in 2012, the agency said.
U.S. ethanol output continues to be depressed due to a combination of last year’s drought that raised corn prices and challenges related to the so-called “blend wall.”
The U.S. blend wall has been created as renewables targets rise and gasoline demand has flattened out, with most cars only taking a 10% ethanol-gasoline blend called E10.
U.S. biodiesel producers will reap the benefits of, “a reintroduction of a US$1/gallon blender’s tax credit that should push production to the mandated volume under the Renewable Fuel Standard 2 (RFS2), at which it is expected to stay through 2018,” said the IEA.
In Canada, ethanol production should grow 18% by 2015, the IEA said. But then it will decrease to 26,000 bpd in 2018, “as a result of the scheduled phase-out of biofuel subsidies under the ecoEnergy for Biofuels Program in 2017,” the agency said.
In Brazil, ethanol production should rise due to, “an expected banner sugar cane harvest, a re-increase in the domestic ethanol mandate from 20% to 25% and improved competitiveness of ethanol production over sugar,” said the IEA.
Brazil’s ethanol production “should increase until 2018, with more rapid growth limited by the sector’s financial difficulties,” the agency said.
Argentina’s biodiesel production is expected to drop due to anti-dumping duties on imports to the European Union.
Overall, biofuels production in the Americas should grow by 135,000 bpd to 1.1 million bpd in 2018, “driven mainly by the U.S. blending mandate,” said the IEA.
“However, as a result of continued discussions on the sustainability of biofuels, the European Commission has launched a proposal to reduce the share of conventional biofuels allowed to count towards the 2020 renewable energy target, which could substantially undermine these projections if adopted,” the report said.
In Asia, China is the biggest regional ethanol producer, with blending mandates in several provinces driving demand, the IEA said. But, “government preventing the use of food crops as feedstock in new-build plants limits the growth potential for conventional ethanol production,” it said.
“Overall, the policy framework for advanced biofuels in many countries seems to be insufficient to fully address the investment risks associated with first-of-their-kind commercial scale production plants,” the agency said.
(June 27, 2013)