8.1 Outlook to 2020 for liquid biofuels and biogas costs

Conventional liquid biofuel costs are projected to rise to 2020 as the result of increases in feedstock prices. Analysis by OECD-FAO into the outlook for the agricultural sector to 2020 predicts corn price increases of only around 1% between 2012 and 2020, but a 25% increase in the cost of sugar cane in Brazil (OECD-FAO, 2012). Wheat prices are expected to increase by a more modest 11% between 2012 and 2020, while vegetable oil prices are projected to increase by around 10%. This could see grain-based conventional biofuel production costs increase by 1-9%, while production costs for etha-nol from sugar cane in Brazil could increase by 20-22%. The production costs of biodiesel from vegetable oils may increase by around 8% in this scenario by 2020.47

Figure 8.1: Summary of conventional and advanced biofuel production costs, 2012 and 2020

Sources: See sections Four, Five and Six.

If advanced biofuel deployment accelerates, process stability, reliability and availability could be proven, and production costs could fall to very competitive levels. Advanced ethanol production costs from biochemical and thermochemical routes could decline by 29-45% if capital costs are reduced to the fully deployed, debot-tlenecked and upscaled plant designs identified in recent studies (Humbird, 2011 and Dutta, 2011). Advanced biodiesel production costs under the same conditions could fall by 40-50% if the capital costs can be reduced to long-run optimised levels (based on Wright, 2010). Fischer-Tropsch synthesis is yet to be deployed commercially using biomass-based feedstocks. However, if deployment can be accelerated and the syngas production from biomass optimised and proven to be reliable, costs in 2020 might be competitive with fossil fuels.

Biogas production using digesters is a relatively simple and mature technology, with little opportunity for cost reductions. However, the upgrading process is an area where relatively small-scale applications have modest deployment numbers. Although the technology is relatively mature and is based on commercial technologies from the chemical industry, the application for biogas upgrading is not yet extensive.48 A larger market would result in better economies of scale for manufacturers and might also allow increased process integration and off-the-shelf solutions with lower project costs (Nielsen and Oleskowicz-Popiel, 2008). Assuming a 10-20% cost reduction for upgrading units by 2020 would reduce biomethane costs for vehicles by between 1-5% in 2020.

47 No changes in the yields of biofuels per tonne of feedstock are assumed in this analysis, although higher feedstock prices might make some small incremental improvements economic.

48 In 2012 just 221 biogas upgrading plants were operating worldwide (Bauer, 2013).