3. The Cost of Renewable Solutions for Road Transport: An Overview

Conventional biofuels derived from food or animal feed crops dominate the renewable contribution to road transport demand today. Conventional biofuels, both ethanol and biodiesel, have seen their costs increase as food prices have risen, particularly since 2005. The outlook to 2020 is for little change in food prices, and hence in feedstock costs for conventional biofuels.

Although the current climate for renewables in transport is challenging, the analysis in this report highlights that the outlook for the future is increasingly positive. If support policies are expanded and enhanced, advanced biofuel technologies to produce biodiesel and ethanol could be competitive with fossil fuels by 2020, while PHEVs and EVs could provide mobility at comparable overall costs to internal combustion engine (ICE) powered vehicles by 2020 in an increasing range of market segments. Biomethane from biogas expands the renewable options for transport and when produced from wastes can provide a very competitive transport fuel even today.

The key challenges for advanced biofuels, biometh-ane and PHEVs and EVs are to reduce their costs and improve their performance in order to achieve competitiveness with fossil fuels. The opportunities for cost reductions are good, particularly for advanced biofuels and PHEVs and EVs, which are only just beginning to be commercialised at scale. The data emerging from these first commercial advanced biofuel projects and EV offerings from manufacturers are very encouraging, and the cost reductions from R&D efforts, "learning by doing", larger economies of scale and a wider range of technology suppliers could be significant by 2020. However, to unlock this potential will require the expansion of existing support policies and their enhancement in the coming years, to 2020 and beyond.

Figure 3.1: Summary of conventional and advanced biofuel production costs, 2012 and 2020

Sources: See sections Four, Five and Six.

The road ahead for renewables in transport is challenging, but the positive signs from early commercialisation mean that the world may be witnessing the beginning of an era of competitive renewable options for road transport across a range of modes and vehicle technologies.