Biofuels Comeback Will Give West a Rare Energy Win

by Lisa Jucca Reuters) A global drive to replace combustion engines with electric cars has threatened to undermine biofuels. In 2024, planes and ships will open a new avenue for propellants made from food and plant waste. That could offer a lifeline to fossil-fuel majors such as BP (BP.L), TotalEnergies (TTEF.PA) and Eni (ENI.MI) – and benefit the West.

Biofuels, derived from plant material or animal waste, can help fight global warming. Biodiesel can reduce carbon dioxide emissions by 75% compared to its fossil-fuel equivalent, the U.S. Department of Energy says. Oil players like Finnish pioneer Neste (NESTE.HE) have been focusing on biofuels as a way to put their refining skills to a less polluting use.

That said, biofuels took a blow in March 2023 when European Union states decided not to spare them from a planned 2035 ban on combustion engine cars, amid concerns for the global food supply chain. Buses and commercial vehicles are also taking the e-route, particularly in China, where more than 95% of heavy-duty trucks produced in 2021 were equipped with lithium batteries.

Yet propelling large ships and airplanes requires so much power that electric batteries are impractical. That hands biofuels a new life. Using sustainable aviation fuel (SAF) made from waste and able to withstand extreme low temperatures looks the only clean energy option for aircraft: hydrogen and ammonia are either potentially explosive or poisonous. Using non-edible feedstock such as castor beans, rather than maize or sugar cane, should help alleviate food security concerns.

At about 200 million euros, the market for SAF is currently almost non-existent. Yet global regulation will force a radical uptake. The EU’s ReFuelEU Aviation initiative, approved in October, requires sustainable fuel to constitute 70% of airline propellant by 2050, while the U.S. envisages 100% by then. Hence the global market could hit 50 billion euros by 2030 and 500 billion euros by 2050, SFS Ireland reckons.

This paves the way for an acceleration in biofuel demand that will benefit players with expertise. India, which chaired the G20 in 2023 and aspires to become a sustainable fuel refining hub, has launched a 19-country-strong Global Biofuel Alliance to accelerate the use of low-emission fuels. But Europe looks a more obvious winner: it contributed 60% of global production in 2022. Italy’s Eni, the world’s No. 3 producer, forecasts global demand to grow to 45 million metric tons per year by 2030, from about 10 at the end of 2022. READ MORE