LONDON; Sept. 8, 2008 – Despite the emerging biofuels market, the creation of a global biofuels industry will be much more difficult to achieve than originally thought, according to findings of an Accenture (NYSE: ACN) study released today.
Titled “Biofuels’ Time of Transition: Achieving high performance in a world of increasing fuel diversity,” the study reports that although biofuels could make up 10-15 percent of the future fuels mix in the next 10-20 years, getting to that level will be more difficult than previously thought, reflecting the challenges involved in creating full-scale markets in biofuels feedstock, production, transport and distribution.
The study also identifies challenges in three areas that need to be overcome in order for the biofuels market to become a truly global industry:
- Environmental. The growth of biofuels is dependant on making a compelling case to motorists and businesses for the environmental benefits of biofuels. The food-versus-fuel debate might slow demand, but demand will exist as long as governments manage the sustainability issues.
- Distribution. There are distribution challenges related to integrating biofuels into the established fuels value chain, with tough decisions to be made around storing, blending and accommodating different grades of biofuels.
- Infrastructure investment. While it’s clear that the development of an efficient
biofuels market requires investment in the infrastructure needed to facilitate and support large-scale biofuels operations and trading, it is difficult to justify the up-front investment when the ultimate returns and size of the market are uncertain.
“Although the ultimate scale of the biofuels industry is yet unknown, we believe that biofuels will be part of the future fuel mix and also herald the evolution of a fuels marketplace,” said Melissa Stark, a senior executive in Accenture’s Energy industry group. “Our research shows that government policy and technology developments are the biggest uncertainties. Technology will continue to improve the economics of biofuels development, but the industry will also have to deal with competing technologies such as plug-in hybrid. And regulatory policies — including those that encourage cleaner fuel versus selecting a type of a fuel — will continue to grow."
Among the study’s other findings:
· First-generation biofuel technologies such as ethanol from sugar cane will be joined over the next few years by second-generation technologies, such as cellulosic ethanol and those that use the waste from first-generation technologies, as well as by new biofuels pathways under development, such as butanol. These first- and second-generation biofuels will be used in tandem for a number of years.
· The biofuels market will need to become as global and efficient as possible within the next 10 years, before competing technologies such as plug-in hybrid vehicles or non-agriculture alternatives like algae or biotechnology become mainstream.
· The advent of biofuels heralds the advent of a far more diverse transport fuels marketplace, characterized by new products, new players and a different competitive landscape. While this will clearly involve a shift away from gasoline and diesel, ultimately there will also be a much wider range of non-fossil fuel providers and products, both in biofuels and new competing technologies.
· The fragmented “patchwork” of local-market regulations across the world is helping to drive a shift away from a global and super-efficient petroleum market -- with essentially two products gasoline and diesel -- to a fuels market with fragmented pools of supply and demand and varying mixes of fuels.
“Amid the ongoing debate and controversy over biofuels, one thing seems clear: they will be here for the foreseeable future,” Stark said. “The growing number of privately funded independents and agribusinesses — and even international and national oil companies — now developing and investing in biofuels and other alternative fuel strategies is testament to the significant momentum behind biofuels.”
About the Study
“Biofuels’ Time of Transition: Achieving high performance in a world of increasing fuel diversity” examines many elements of the biofuels industry — including consumers, original equipment manufacturers, distribution and infrastructure, financial markets, and technology — and aims to pinpoint the future timescales, dynamics and demand drivers behind the market. It is Accenture’s second study on the biofuels industry, following one in September 2007 that compared the bioethanol and biodiesel markets of 20 countries. The new study is based on interviews with consumers, professionals from the automotive and airline industries, infrastructure/transport providers, and policy-makers developing some of the most innovative legislation
Accenture is a global management consulting, technology services and outsourcing company. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. With more than 180,000 people in 49 countries, the company generated net revenues of US$19.70 billion for the fiscal year ended Aug. 31, 2007. Its home page is www.accenture.com.
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