BIOFUELS

STUDY
Report

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Acknowledgement
This report was undertaken by the Boston Consulting Group (BCG) with support from the
Ministry of Petroleum and Natural Gas, Government of India (MoPNG). We thank all the
participants of 1-on-1 discussions and panel discussions for their valuable contributions
towards the enrichment of the report. We are thankful to Mr. Pankaj Jain (Secretary,
MoPNG) Mr. Sunil Kumar (JS(R), MoPNG), Ms. Esha Srivastava (OSD(IC), MoPNG) and
Mr. George Thomas (US(IC), MoPNG) for their continued support. We would also like to
extend our sincere appreciation to the Boston Consulting Group Team – Mr. Ashish Garg,
Dr. Rahool Panandiker, Mr. Sankash Venkatesh, Mr. Ilshat Kharisov, Mr. Maurice
Jansen, Mr. Ankur Bansal, Mr. Daniel Fernandez, Ms. Lindu Lawrance, Mr. Sarthak Bhatt
and Ms. Smriti Prakash for their contributions to enriching the report. Special thanks to
the design team for editing, design, and production of the report.

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Universal & equitable access to energy is critical to ensuring sustained economic growth
and socio-economic mobility. Yet, lack of access to affordable and stable energy supplies
continues to remain a challenge for many countries across the globe. The Sustainable
Development Goal 7 clearly states "Ensure access to affordable, reliable, sustainable and
modern energy for all". In parallel, countries are working on ushering a stable energy
transition which safeguards their energy needs while reducing the carbon footprint.
In this context, the importance of Biofuels as a sustainable and cleaner choice cannot be
overemphasized. Biofuels are uniquely positioned to help meet growing energy demands
& offer a strategic alternative to traditional fossil fuels, while also effectively repurposing
agricultural and municipal waste and decarbonizing transportation. Biofuels also provide
a relatively mature clean energy technology with minimal change in existing
infrastructure.
In this direction, India has made significant progress in biofuel development, with
programs such as the Ethanol Blended Petrol Program and National Biodiesel Mission.
Several interventions by the Government of India have enabled the following:
• an increase in average ethanol blending from 1.53% - ESY 2013-14 to 10.02% - ESY
2021-22,
• roll out of E20 fuels, commissioning of Asia's first 2G Ethanol bio-refinery at
Panipat, Haryana,
• commissioning of 40 compressed bio-gas plants with a total capacity of ~225 tons
per day,
• launching of M15(petrol blended with 15% Methanol),
• research and testing of 15% Methanol in Diesel etc.

This has resulted in the target of 10% blending being achieved months before the
scheduled date and advancing of the target of 20% blending from 2030 to 2025. Long
term offtake agreements have also been signed with 130 dedicated Ethanol Plants in
deficit states with total offtake assurance of Ethanol quantity of 4.3 billion litres per
annum. 20% Ethanol blending by 2025, will result in forex savings of more than 6.6 billion
US dollar per annum, reduction of GHG emissions of 21.6 million MT per annum and
increase the farmers cumulative income by over 5.1 billion US dollar per annum, while
creating thousands of employment opportunities.
Through this report we showcase India's bioenergy story which has potential to be
replicated in other countries while also highlighting the value biofuels can bring to energy

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security, decarbonization, and circular economy. The report serves as a guide for all
stakeholders in the biofuel value chain to work together towards a low-carbon future and
collaborate across new energy frontiers like Sustainable Aviation Fuel and Renewable
diesel. The report also identifies challenges in the sector and makes a strong case for
greater partnership between countries in complimenting aims to add value for all entities
working towards a more sustainable future.

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Preface - Lead Knowledge Partner
This report is an effort to bring back the conversation around biofuels to the table. As
one of the earlier discovered low carbon sources of energy, biofuels have been around
for more than 15 years. Despite its significant benefits and maturity in terms of
technological advancement, biofuel failed to take off in the way most entities believed it
would. While investigating the root cause of the underwhelming adoption despite
steady interest in biofuels, the true untapped potential of biofuels was unearthed.
As each country charts its course on the decarbonization journey, biofuel has a role to
play in every country’s energy agenda, despite the drastically varying priorities. As a
proven solution in hard to abate sectors, biofuels proved relevant in countries that
focus on other cleaner alternatives of renewables. At the same time, biofuel can play a
major role in reducing greenhouse gas emissions for countries that are heavily reliant
on fossil fuels via its bridge fuel applications. Given the dynamic nature of countries’
energy agendas, biofuel can have a significant impact in the short as well as the long
term in most countries within the G20.
Challenges facing biofuel adoption are multifaceted problems that can only be solved
by collaborative action. While bioenergy collaborations have historically driven
countries to develop policies and fuel biofuel adoption, the most critical challenges it
faces today can only be resolved with on-ground collaborative action by multiple
stakeholders across the biofuel value chain.
This report highlights the ambitious vision for biofuels and the need for a collaboration
to drive this vision to reality. It is expected that this report will provide a strong
rationale and guidance to various stakeholders.

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Content
01 Vision for biofuels
02 Where we are on the journey?
03 Key hurdles to be addressed to achieve the true potential
of the biofuel vision
04 International Biofuel alliance: A blueprint for success
05 Conclusion
06 References

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Figures
Fig 1. Contribution to energy mix by fuel types .................................................................... 13
Fig 2. Role of biofuel in decarbonization ............................................................................... 14
Fig 3: Biofuel to play a critical role across applications both in medium and long term........ 14
Fig 4. Robust demand growth expected for Biofuel across scenarios ................................... 15
Fig 7 Growth will translate into multiple benefits ................................................................. 16
Fig 8. Potential growth vision for Biofuel .............................................................................. 17
Fig 9. Benefits of achieving vision ......................................................................................... 17
Fig 10. Carbon emission reduction by adopting biofuels....................................................... 18
Fig 11. Biofuel demand in advanced versus emerging economies ........................................ 22
Fig 12. Different types of bioenergy ...................................................................................... 23
Fig 13. Adoption of biofuel and mandates globally ............................................................... 24
Fig 14. Biofuel is ‘Off the track’ vis-a-vis global NZE aspirations............................................ 26
Fig 15. Production cost comparison for Biofuel versus Fossil Fuels....................................... 29
Fig 18. Opex and Capex variation with scale ......................................................................... 30
Fig 19. Global collaboration critical to unlock the true potential of Biofuel .......................... 32
Fig 20. Multiple models of multi stakeholder partnership exists, but a Global G20 alliance
best suited for Biofuel ........................................................................................................... 34
Fig 21. Example design basis for International Biofuel Alliance............................................. 36
Fig 22. Example design basis for International Biofuel Alliance............................................. 37
Fig 23. India's Biofuel story ................................................................................................... 37
Fig 24. India’s ethanol and biofuel production and consumption ......................................... 39
Fig 25. India’s ethanol production ......................................................................................... 40
Fig 26. India’s vision for an integrated Bio-refinery model.................................................... 41

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Acronyms and abbreviations
1 ATJ - Alcohol to Jet
2 BPCL - Bharat Petroleum Corporation Limited
3 CAGR - Compound Annual Growth Rate
4 CBG - Compressed Biogas
5 CORSIA - Carbon Offset and Reduction Scheme for International Aviation
6 DFG – Damaged Food Grains
7 DHDS - Diesel Hydro Desulphurisation Unit
8 EBP - Ethanol Blended Petrol
9 ESG - Environmental, Social and Governance
10 ESY – Ethanol Supply Year (1st Dec to 30th November)
11 FAME - Fatty acid methyl ester
12 FCCU - fuel cell control unit
13 FFV - flexible fuel vehicles
14 GFT - Gasification Fischer-Tropsch
15 GHG - Greenhouse Gas
16 HEFA - hydro-processed esters and fatty acids
17 HPCL - Hindustan Petroleum Corporation Limited
18 HVO - Hydrotreated vegetable oil
19 IATA - International Air Transport Association
20 ICAO - International Civil Aviation Organization
21 IEA - International Energy Agency
22 IOCL - Indian Oil Corporation Limited
23 IRENA - International Renewable Energy Agency
24 ISCC - International Sustainability & Carbon Certification
25 MPP - Mission Possible Partnership
26 MSP - Minimum Support Price
27 NOC - National Oil Company
28 NZE - Net Zero Emissions
29 OEM - Original Equipment Manufacturer
30 PtL - Power-to-Liquid
31 PtX - Power-to-X
32 RED III - Renewable Energy Directive III
33 RD - Renewable Diesel
34 SAF - Sustainable Aviation Fuel
35 SCJ – Sugarcane Juice
36 SATAT - Sustainable Alternative Towards Affordable Transportation
37 UCO - Used Cooking Oil
38 WTW - Well-to-wheel

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Executive Summary
As the world embarks on the journey to address the climate change crisis there are
multiple pathways available for this journey and biofuel is a critical spoke across many
of these decarbonization journey. Till date, given the unique nature of each country’s
energy demands and energy goals, each country has paced biofuel adoption in
accordance with its respective agenda. Hence, the percentage contribution of biofuel in
the energy mix of different countries varies from 0% to 7%, hinting at the varying degree
of interest that different countries have in biofuels. Testament to the varying degree of
interest is the penetration of biofuels in the transportation sector. While the adoption of
biofuels in transportation has globally increased from 2% to 4% in the past 10 years,
certain countries have seen significant blend rates which goes to show that adoption has
been primarily driven by government policy targets. Current production levels indicate
that biofuel remains ‘off the track’ vis-à-vis global Net Zero Emissions aspirations - but
there is tremendous headroom for growth.
BCG Analysis shows that there is vast feedstock potential to be unlocked which could
result up-to 5x increase in biofuels produced. The analysis shows that the significant
increase could be achieved majorly using waste sources, without tapping into the food
sources. To unlock this potential advancement on both technology as well as feedstock
management is needed, and funding is not a constraint.
To unlock growth in Biofuel several challenges need to be resolved. While feedstock
challenges continue to be the primary roadblock for producers due to lack of quality
feedstock, competing demand for feedstock and a fragmented and complex waste supply
chain, technology concerns pose a significant challenge to biofuel adoption given the
negligible commercial viability of advanced biofuel production. While significant
investments into biofuel R&D and production could solve some of these challenges,
fundraising has been a major concern due to uncertainty of profit margins. Also, the high
capital expenditure has stemmed biofuel adoption as cost parity with fossil fuels is
difficult to achieve.

However, if these challenges could be addressed, the true potential of biofuels could be
unleashed. Biofuel producers are thus exploring ways to further optimize the costs of
production and improve the commercial viability of biofuels by leveraging synergies with
existing operations and technologies, encouraging technology interventions and
improvements and by enhancing feedstock quality, availability, and affordability.
Unlocking this true benefit will enable complying nations to avail the following benefits:
Biofuels could have a significant impact in five key areas – lowering GHG emissions as
they could result in up to 80% reduction in well-to-wheel emissions as compared to their
fossil fuel counterparts; reducing import dependency and thereby boosting energy
security; enabling circularity by employing waste for wealth creation and delivering wider
socioeconomic benefits. In addition to their energy potential, they also offer downstream
applications in the form of bio-based chemicals and polymers.

To realize this vision, multiple stakeholders need to come together across the entire
value chain including feedstock providers, policy makers, financial institutes, oil
marketing companies, certification agencies, industry associations, members of
academia and end consumers. The coordinated efforts of each of these stakeholders is
critical to realize the untapped potential of biofuels. To achieve the biofuel vision, the

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coordinated focus of all key stakeholders is required across 5 levers - technology,
feedstock, policy, investment, and consumers. While steady progress has been made on
the policy front and in increasing awareness regarding the bioeconomy, the need of the
hour is to propose an alliance that focuses on operational impact and simultaneously
focuses on all 5 levers and brings together all concerned stakeholders.

As we aspire to increase biofuel adoption, it is important to look at the India’s biofuel

journey. Driven by focus across 5 levers (technology, feedstock, policy, investment, and
consumers) India’s average ethanol blending has increased from 1.53% during ESY
2013-14 to 10.02% in ESY 2021-22., creating a blueprint for other developing countries
to follow.

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Chapter 1:
Vision for biofuels

Introduction:

Biofuel to play a pivotal role

in decarbonization
In recent decades, fossil fuels have
dominated energy supplies across the
world, accounting for as much as ~80%
of the global energy mix. While this
dominance is expected to recede
gradually, they will remain relevant in at
least a few decades to come. A recent

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analysis by BP outlook states that oil and commitments towards decarbonization.
gas will contribute to 44% of the energy At the same time, low-carbon pathways
mix by 2050, which would be well below are facing headwinds of grid integration
their erstwhile peak, but still a significant and supply chain issues around critical
share. Demand for fossil fuels remains minerals. This raises the need for
stubborn – according to World Oil alternative pathways – and biofuels
Outlook 2022, gasoline demand will could be one of the most pragmatic ways
increase 10% by 2030, despite global forward.
Fig 1. Contribution to energy mix by fuel types

Total energy supply by fuel by scenario

EJ % Contribution to energy mix

800 100 4% 3% 1%
5% 7% 10% 13%
20
52 12%
8 80
600 27 29%
33 61
213
77 26%
71 51%
60
15% 70%
400 160 109 323
40 23%
146 370 20% 7%
143
200 46
13%
83 20
30% 27% 3%
187 200 14 7%
112 36 18%
40 8%
0 0
2021 STEPS APS 2050 NZE 2021 STEPS APS 2050 NZE

Crude Oil Coal Nuclear

Natural gas Renewables Other

Notes: EJ = exajoule; Gt CO 2 = gigatonnes of carbon dioxide; STEPS = stated polices scenario; APS = Announced pledges scenario; NZE = net zero emissions b y 2050 scenario 1

Biofuels are emerging as a critical alike, to expedite the energy transition

avenue for the decarbonization of fossil and balance energy security with
fuels, and one of the most accessible emissions reduction, even as nascent
routes to climate change mitigation. renewables grapple with the challenges
They offer a compelling proposition for of material availability, intermittency,
developing and developed countries and wider commercial viability.

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Fig 2. Role of biofuel in decarbonization

There is a global need to decarbonize, and biofuels is the most prominent

scaled solution to decarbonizing heavy transportation
… and biofuels offer the most prominent scaled solution
There is global momentum for decarbonization … to decarbonizing the heavy transportation sector

Governments:Large number of developed Types of Illustrative Global annual

nations have committed to climate ambitions and renewable fuel examples production
allocated funding
• E.g., Par is Agr eement, EU r enewable ener gy dir ectives • Biodiesel
• Renewable
Biofuels diesel (RD) ~250M bar r els
Investors: M oving capital toESG-conscious funds, • Ethanol, etc.
with sustainability-guided financial and Most compelling r enewable fuel, with most matur e
operational goals pr oduction technology, to decar bonize tr anspor tation

Corporations:As ESG factors elevate to the board

• e-Methanol ~25K bar r els +
Synthetic fuels • e-Methane small -scale demo
room and strategic-level decisions, corporations • Etc. pr ojects
are making defined decarbonization commitments
Zero emission • Gr een hydr ogen
• e-Ammonia Small -scale demo
Individuals: Growing awareness of climate impact fuels • Etc. pr ojects
drives changes in consumer choices to lower
carbon emission and enable higher sustainability Small -scale
Electric vehicles • EV tr ucks demo pr ojects

Source: Company press releases and earnings calls; Industry reports; BCG renewable fuel opportunity framework; BCG analysis 2

Fig 3: Biofuel to play a critical role across applications both in medium and long term

Growth is supported by critical role across applications,

compared to newly emerging low-carbon fuel technologies
Pr eliminar y

Road-light Road-heavy Aviation M aritime

‘21- ‘30- ‘21- ‘30- ‘21- ‘30- ‘21- ‘30-
‘30 ‘50 ‘30 ‘50 ‘30 ‘50 ‘30 ‘50
Currently best technology;
Biofuels-Next gen Biofuels-mature

Will face competition from To face competition from Likely to remain Too expensive, hence
HV O/HEFA BEV in 2030-2040 electro-based technologies unlikely
competitive until '40
LNG/CHG infra limits Unlikely, due to e.g., Attractive in certain
adoption; beyond '30 BEV LNG/GNG infra limits relatively low energy segments as one of the
Biomethane adoption
infra takes over density cheapest biofuels
Expected to catch-up with Bio-oil and bio methanol
Will face competition from To face competition from
HTL/GFT/ATJ HEFA due to feedstock expected to play significant
BEV in 2030-2040 electro-based technologies advantages rote
Unlikely, due to e.g., Unlikely, due to e.g.,
Commercial feasibility Unlikely, as it cannot be relatively low energy
2G ethanol ? ? relatively low energy
uncertain used as drop-in density density
Technology wise attractive, Relevant for short-haul Not suitable for most
but uncertainty around segment; expected to take Not suitable for most flights shipping due to low energy
BEV due to low energy density
Electro-based fuels

infra buildup speed over as main fuel source density

Generally, will be less Infrastructure requirements Unsuitable for long - haul Suitable for selected
H2 attractive vs BEV and cost level expected to flights due to low energy
segments
limit adoption by 2040 density
Cost expected to decline but Cost expected to decline but Could become competitive Ammonia could become an
E-Fuel not likely to be competitive not likely to be competitive with HVO in the 2030s attractive solution In 2030s
on larger scale by 2040 on larger scale by 2040
Favorable/strong growth Mixed/moderate growth or stagnant Unfavorable/decline

1. There could still be significant volumes, due to time required for building infrastructure of technology with higher funda mental competitiveness
Source: BCG analysis; ATJ; Alcohol to Jet; GFT = Biomass gasification and Fischer -Tropsch Syngas -to-Jet; BEV: Battery Electric V ehicles; HT: Hydrothermal Liquification; HRFA:
Hydrocarbon Fuels; HVO: Renewable Diesel 4

Biofuels could have a significant impact socioeconomic benefits. In addition to

in five key areas – lowering GHG their energy potential, they also offer
emissions; reducing import dependency; downstream applications in the form of
boosting energy security; enabling bio-based chemicals and polymers.
circularity and delivering wider

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Biofuel Potential
The biofuel sector is growing rapidly, and approximately 100 million liters in 2021.
while detailed estimates vary across Meanwhile, global biogas production is
scenarios and assumptions, there is ~778.75 GJ per year. The global biogas
consensus on their growing importance. market stands at USD 39 billion in 2022
Liquid biofuel production today stands at and is projected to cross USD 50 billion
3.901 EJ. Of this, Sustainable Aviation by 2026, with the bulk of this growth in
Fuel (SAF) production stood at the EMEA region.

Fig 4. Robust demand growth expected for Biofuel across scenarios

Across scenarios liquid biofuel demand

expected to increase by 3-5X
Liquid and gaseous biofuel demand
(EJ)
3.4x 5.0x
40
31.5
Biofuel is a 30
19.9 19.1
26.5

critical spoke 20
9.7
16.0

in decar-
10 5.9
0
bonization 2020 2030
Stated
2050 2030 2050
Announced
2030 2050
Net Zero
agenda across Policies Scenario Pledges Scenario Emissions Scenario

scenarios
% liquid
biofuel in 2.28% 3.2% 4.9% 5.6% 13.2% 7% 16.7%
liquid fuels
% biogas in
gaseous 0.8% 1.6% 5.2% 3% 9.5% 5.4% 15%
fuels
% biofuels
in liquid+ 1.6% 2.5% 5% 4.5% 11.5% 6.3% 15.8%
solid fuels
1. Sustainable Development Scenario assuming all new policies proposed by governments take place and the world will comply to COP21 and
hence rise of temperatures will stay within 1.5 ° - 2°C
Source: IEA World Energy Outlook 2021, BCG Analysis 4

BCG analysis shows that, given the right be as much as 5x the current production,
conditions, the true potential of liquid from ~ 3.41 EJ today to ~19.09 EJ.
biofuels for G20 countries could

15
Fig 5. Based on biomass potential and liquid biofuel attractiveness, different growth scenarios can shape up

Different agencies and organizations have different

estimates for both
Sensitivity analysis shows 2.7
-5 x growth

Biomass Potential (in EJ)

100 150 200 250 300

Liquid biofuel role Low 1.6 2.4 3.2 4.1 4.9
will be driven by
Attractiveness1
Liquid Biofuel Low-mid 2.2 3.2 4.3 5.4 6.5
Mid 2.7 4.1 5.4 6.8 8.1
Feedstock
availability Mid-high 3.2 4.9 6.5 8.1 9.7
Competing High 3.8 5.7 7.6 9.5 11.4
Demand

Most likely scenario

1. Shows % increase in liquid biofuels as a

% of Bio energy available BCG analysis shows that it could be anywhere between 3 -5x6

Fig 5 Growth will translate into multiple benefits

estimated to be 5X the current production
Assuming investment/financing not a constraint

This translates to …
450 - 500 MTOE1– equivalent to ~15% of
650-750 total oil demand in transport in 2020
Bn L
1300-1400 Mn Tonnes of CO22
emission reduction

5x ~200Mn3 trips along the equator along

the equator in a light duty vehicle
130-140
Bn L Equivalent to Africa's total energy
consumption4 in 2021
1. TOE / m3 for Ethanol -0.64, Biodiesel – 0.78, 2. Carbon emission reduction through Biofuel : Ethanol 69%, Biodiesel – 83%, Ga soline : 94.8, Diesel : 84 GHG gCO2/MJ, 3. Length of equator :
40075 km, Gasoline mileage: 7.2 L/ 100km, Energy density 46 MJ/kg, 4. BP stats
Source: BCG Analysis, BP stats 3

Realizing full potential of the Biofuel 1) ~15% of total oil demand in

Vision could cut global CO2 emissions by transport in 2020, or around 450-
1,300-1,400 million tons, delivering 500 MTOE
additional energy equivalent to: 2) 200 million trips along the
equator in a light vehicle

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 3) Africa's total energy consumption biofuel, through technology sharing and
in 2021 process improvements for enhancing
Our analysis shows that the majority of feedstock availability
the uplift in potential is driven by 2G

Fig 6. Potential growth vision for Biofuel

Difference between potential growth in biofuels will depend on two factors—

development in feedstock and development in technologicaladvancement

~1.5-2x 2-3x
growth growth
due to due to

Feedstock Technological
availability Advancement
25

Fig 7. Benefits of achieving vision

Achieving the Biofuel vision will unlock significant benefits

​Decarbonization of by product chemicals ​Decarbonization/ lowering emissions

​Decarbonization of
downstream products
Biofuel ​Enabling circularity
Benefits
​Boosting energy security

​Socioeconomic benefits

​Buffer against market shocks

17
 Deep dive into the key
benefits of Biofuel vision
Decarbonization and emission reduction technology. Achieving the vision of 19 EJ
could reduce carbon emissions by up to
Biofuels can deliver up to 80% Well-To-
1,400 million tons. That is equivalent to
Wheel carbon emission reduction, with
3.5% of global CO2 emissions today and
the potential to be even carbon-negative
would significantly accelerate progress
through integration with carbon capture
towards decarbonization.
Fig 8. Carbon emission reduction by adopting biofuels

Upto ~80% WTW GHG emission reduction 3X 5X

with biofuels, especially with 2G Biofuel
WTW GHG (g CO2 eq/MJ)

120
800-850 1300-1400
Mn Tonnes1 Mn Tonnes1
-83%
-69%
90

of CO2 emission
60
reduction possible
30

0
~2.1% ~3.5%
Global CO2
Fossil petr ol Bioethanol Bioethanol Fossil diesel Biodiesel Waste Global CO2 emission2
emission2
(cr op) (waste) (cr op) biodiesel
Petrol/bioethanol Diesel/biodiesel
ILUC¹ Well-to-tank Tank-to-wheel
1. TOE / m3 for Ethanol -0.64, Biodiesel – 0.78, Carbon emission
1. ILUC: Indirect land -use change, i.e., emissions from cropland expansion caused by impact of biofuels on global reduction through Biofuel : Ethanol 69%, Biodiesel – 83%, Gasoline :
agricultural commodity demand 94.8, Diesel : 84 GHG gCO2/MJ 2. Global CO2 emission 40.5GT in 2022
2. No tank -to-wheel emission from biofuel due to the biogenic carbon capture credit of crops as per weforum 4
Source: UK Department for Transport Source: BCG Analysis, BP stats

Biofuels are especially critical in premium vis-à-vis fossil fuel-oil, and the
decarbonizing long-haul transport need for infrastructural modifications.
sectors such as aviation and maritime. E.g. >2x storage capacity required due to
Sustainable Aviation Fuel (SAF) blends biomethanol’s low energy density. HVO
are already technically compatible with can still be used without any retrofitting.
fuel delivery and airport fueling
Circularity and waste management
infrastructure. Adoption is currently
constrained by high production costs, BCG’s analysis shows that 2G biofuels
but long-term trends are encouraging, as can generate as much as 4.5 PWh energy
SAF appears to be the most viable route (equivalent to ~17% of global electricity
to decarbonizing the airline industry, demand) from waste like forest biomass,
which has set ambitious decarbonization agricultural residue, municipal solid
aspirations targets. Maritime biofuel waste etc. This could offer a compelling
should also see an increase in demand, solution to the world’s growing waste
especially to comply with IMO 2020. disposal crisis. The World Bank
However, they still face headwinds in estimates that 2.01 billion tons of
adoption due to their lower value municipal solid waste are generated

18
globally each year, of which at least 33% 20.95 EJ, equivalent to 15% of total oil
is not managed in an environmentally demand in transport in 2020. This could
safe manner. In lower-income countries, be a strategic and economic game-
93% of this waste is dumped, triggering changer for import-dependent nations
health hazards, ecological degradation, like India, China, and the UK. Biofuels
and methane emissions. Global waste could also aid mitigate the impact of
output is projected to grow to 3.40 billion recurrent volatilities in the oil and gas
tons by 2050. Biofuels offer a unique way sector.
to re-purpose energy from various kinds
Long-term energy security
of waste – including MSW, agri residue,
forest residue, used cooking oil and Biofuel supply is expected to increase
industrial waste. The IEA projects that from ~160 billion liters to 240 billion
the share of biofuels produced from liters by 2027 under the IEA’s
wastes and residues will increase from accelerated case scenario. Biofuel is a
8% today to 45% by 2030 in the NZE clean, reliable, sustainable energy
scenario. alternative that could boost the energy
security and self-sufficiency of every
Wider socioeconomic benefits
nation. Adoption could be expedited
Biofuels have the potential to transform further with the support of short-term
energy access and waste management, policy targets like RED III and factors like
which are both critical for developing higher taxation on fossil fuels, reduced
countries with large populations. They price gap and better compatibility with
offer vital new avenues of sustainable existing engines.
economic development, heralding job
Downstream product applications
creation, prosperity, and improved
quality of life. IRENA estimates that Biofuel production also plays a critical
global biofuel-led employment in 2021 role in supporting industries like the
stood at 2.4 million, with the bulk of chemical, pharmaceutical industry, and
these jobs linked to the agriculture the food & beverages industry. For
supply chain, planting and harvesting instance, according to Allied Market
feedstock. Bioenergy remains the biggest Research, the renewable methanol
employer amongst renewables even market was valued at $672.9 million in
among countries with highly 2019, and is projected to reach $959.6
mechanized operations such as the US million by 2027, registering a CAGR of
(322,600 jobs) and the EU (141,600 jobs). 4.5%. Renewable methanol can be used
Going forward, IRENA estimates to produce a wide range of polymers and
bioenergy to continue to be the second- fuels. It is also used in the chemical
largest contributor to employment industry to produce acetic acid and
generation amongst renewables, after formaldehyde, and as a de-staining
solar. agent, often included in the production
of hydrocarbons, olefins, and some
Buffer against market shocks
aromatic compounds. Similarly,
Biofuels could drive a significant bioethanol has seen pharmaceutical
reduction in fossil fuel dependency in the application in the production of medical
transport sector, providing up to 18.85- wipes, antiseptics, pills, extracts, and

19
tinctures. It is frequently used as an with multifarious applications from
ingredient in skincare, pain relief and chemicals to personal and oral care
antidote products. The current output of products. Furfuryl is another by-product
bioethanol in the pharmaceuticals obtained while producing ethanol.
market stands at 3.37 billion liters and is Furfuryl alcohol is the primary use of
expected to grow by 4.32% till 2027, furfuryl, followed by solvent applications
powered by increases in global in lubricating oils and butadiene
healthcare spending. extraction, as well as additional
applications in the chemical and
Valorization of by-products
pharmaceuticals industry. Furfuryl
Biofuel production also generates by- consumption stood is expected to grow
products with widespread industrial to 14,300 metric tons by 2024. Another
applications. Among the most by-product, acetic acid, is used in
prominent by-products is crude glycerin, downstream value chains like the
which is obtained from the production of polyester, polyvinyl acetate, and
biodiesel. Technical-grade (crude) polyvinyl alcohol industries. Global
glycerin is used produce chemicals such consumption of acetic acid stood at 15.5
as epichlorohydrin, propylene glycol and million metric tons in 2021 and is
polyether polyols. Global consumption of expected to grow to 19.1 million metric
refined glycerin stands at $2.5 billion and tons by 2026.
is expected to grow 4.3% from 2020-25,

20
Chapter 2: Tracing biofuel output
and consumption
Where we are on patterns
the journey? Total global biofuel production today
stands at 1,747 thousand barrels of oil
equivalent per day, and growing, with the
US leading the way at 643 thousand
barrels of oil equivalent, followed by
Brazil at 376 thousand barrels and EU at
236 thousand barrels. Other leading
producers include Indonesia at 140
thousand barrels, China at 64 thousand
barrels, and India at 37 thousand barrels
per day. G20 countries contribute to

21
~80% of the global production and US and Europe. Biofuel consumption
consumption of biofuels. patterns differ between developed and
developing economies, usually linked to
Countries around the world have
wider fuel demand. Developing countries
adopted different outlooks to biofuels
such as Brazil, India, and Indonesia, with
and paced adoption accordingly, and
robust gasoline and diesel demand, are
biofuels now accounting for 0 to 7% of
expected to see biofuel growth driven by
G20 country’s energy mix. The precise
ethanol and biodiesel. Conversely, in
trajectory of adoption is often
developed economies such as the EU, a
determined by factors like feedstock
fall in demand for liquid transport fuel
availability, favorable policy incentives,
will restrict growth in ethanol and
overall fuel consumption profile and
biodiesel. Instead, in such geography’s
demand patterns for gasoline vis-à-vis
growth is likely to be driven by renewable
diesel. Renewable Diesel has been the
diesel and biojet fuel driven by the need
largest growth contributor in biofuels in
to reduce GHG emissions.
2021-22 due to attractive policies in the

Fig 9. Biofuel demand in advanced versus emerging economies

Global biofuel demand growth for advanced and emerging

economies as per IEA main case, 2021-2027
Volume (million liters per year)
25,000

20,000
9,598
15,000 3,647

10,000
12,743 11,867
5,000

0 1,395
-2,637
-2,978
-5,000

-10,000
Advanced Economies Emerging Economies

Biodiesel Biojet fuel Ethanol Renewable Diesel

5

Going forward, biofuel demand is key growth driver due to conducive

expected to reach 240 000 MLPY (as per policies in the US (tax credits, renewable
the IEA accelerated case) by 2027. fuel standard etc.) and Europe. Overall,
Among G20 countries, the US, Canada, the biofuel share in transport fuel
Brazil, Indonesia and India are expected consumption is expected to increase
to drive 80% of this demand growth, and from 4.3% to 5.4% by 2027.
Renewable diesel is expected to be the

22
As we are deep diving into the current status, it is
important to evaluate by individual biofuel type
Fig 10. Different types of bioenergy

Liquid Biofuels
• Includes ethanol, FAME, advanced biodiesels
(Renewable diesel, biomass gasified diesels etc.),
Sustainable Aviation Fuels, Bio -methanol etc.
Bioenergy can • Primarily used as transportation fuel

be broadly Biogas
categorized into • Anaerobic digestion and biomass gasification of
3 types organic matter produces biogas
• Primary use is heat & power, but it can be used as
transport fuel in the form of Bio-LNG or Bio-CNG

Solid Biomass
• Used for heat and power (not covered in
this document)

Ethanol and Biodiesel during last year - ethanol prices were

~30% lower than gasoline.
Liquid biofuels have seen moderate
growth in the transport sector, rising Biodiesel prices saw a hike in H2 2022,
from 2% to 4% in the last decade. This driven by higher agricultural commodity
has been driven primarily through policy prices. This was a consequence of
targets for ethanol and biodiesel vegetable oil export losses from regions
blending by various nations. As per IEA affected by geopolitical tensions, as well
report Ethanol demand rose 3% during as supply chain disruptions, rising fuel
2021-22, with India accounting for one- prices, rising fertilizer prices and export
third of the growth, on the back of restrictions. Many countries responded
government support like guaranteed by reducing or freezing their biodiesel/
pricing for ethanol and advancing of FAME blend targets. For instance,
ethanol blend targets. Brazil and US also Brazil’s upcoming 13% biodiesel
continued to be key players. Brazil’s mandate from March 2022 was reduced
large flex-fuel vehicle fleet offers to 10%. Finland lowered its biodiesel
customers the flexibility to switch distribution obligations in recognition of
between ethanol and gasoline high fuel prices, while Sweden froze its
depending on the prices, thereby reaping emission targets for 2023, though the
the benefits of depressed ethanol prices 2030 target remains unchanged. As the

23
market recovers, Indonesia is expected demand, driven by its 30% blend
to account for most of the biodiesel mandate and 4% rise in diesel demand.
Fig 11. Adoption of biofuel and mandates globally

Liquid Biofuel | Biofuel penetration in transport sector driven primarily

through policy targets
Biofuel penetration in transport sector moderately paced, increased from 2 to 4% in last 10 years
Canada India
Final Standards USA (2022)
• Total biofuels: 136 Bl E27.5 B8 E20 B5
– Advanced Biofuels 79 Bl
– Of which Cellulosic Mandate
Biofuels: 60 BL of 2% of HVO

EU
E20 target for 2025
• Cap of 7 % in 2021
B5 target for 2030
for 1G
• 14% renewable
South Korea
energy in
transport by 2030 B3

China
Mexico E10
E10

Indonesia
E3 B20

Brazil Australia
South Africa E7 B2
E27.5 B8
Argentina E2 B5
E12 B5
Ethanol blending mandate Biodiesel blending mandate G20 Countries

1. Depending on the region 2. Countries not included – Japan, Saudi Arabia, Russia, Turkey, UK and countries within EU (France, Germany, Italy)
Note: data as of Feb-2022
Source: REN21, EU commission, EPA, US GAIN reports, Press search BCG Analysis 7

Renewable diesel/ Hydrotreated higher NOx emissions for B20 and >13%
Vegetable Oil (RD/HVO) higher NOx emissions for B100 when
compared to diesel, Cloud point up to -5
RD/ HVO expanded by 3800 MLPY, or deg C, Cetane no. ~51 - low burn
40%, in 2021-2022. The US accounted for efficiency in engines). FAME demand is
most of this growth thanks to favorable already stagnant in developed markets
policies like the Inflation Reduction Act like the EU and is set to decline further
and Renewable Fuel Standard. Growth even as HVO is poised to grow.
in renewable diesel is primarily driven by
advanced economies seeking to reduce Sustainable Aviation Fuel
GHG emissions. RD derives its The aviation industry is responsible for
popularity from its stability in long-term ~2.5% of global emissions. In the BAU
storage as well as extreme operating scenario, the industry’s emissions would
temperature/ pressure conditions, climb a staggering 300% by 2050. In
coupled with its value proposition as a 2021, the member airlines of the
drop-in fuel. Demand for RD has also International Air Transport Association
been boosted by increasing biodiesel (IATA) pledged to achieve net-zero
blending targets, coupled with blending carbon emissions in operations by 2050.
and operational issues surrounding IATA and Mission Possible Partnership
FAME (risk of technical issues above (MPP) also published their independent
20%, deposits, corrosion and industry paths to Net Zero, targeting 65-
degradation in fuel systems given 75% reduction in emissions through SAF
physical/chemical properties, ~2.5%

24
adoption. However, SAF adoption alone compared to A1 jet fuel, HEFA costs 2x,
cannot decarbonize aviation – it will also GFT and ATJ cost 3-5x and PtL costs 7-
take significant process improvements, 10x. Notwithstanding the challenges,
emerging technology, and other HEFA (Hydro processed Esters and Fatty
solutions. In this context, IEA has Acids) has already established itself as a
estimated Biojet fuel demand to grow quality biojet fuel. It has powered over
37x (3,900 ML p.a.) by 2027, accounting 1,000 flights with KLM, Lufthansa and
for 1% of jet-fuel consumption. SAS, and is now available at five airports
– Bergen, Brisbane, Los Angeles, Oslo
Several industry associations and
and Stockholm with Oslo providing
governments have introduced policies
biojet/HEFA through its hydrant system
and incentives to encourage the
rather than a segregated supply.
adoption of biojet fuel. In the US, the
Furthermore, Neste is expanding its
Inflation Reduction Act (IRA) is offering
capacity to produce 1 million tons of
USD 3.3 billion of support for SAF from
HEFA annually in Singapore.
2023-31. The SAF Grand Challenge
Roadmap aims to supply at least 3 Biogas
billion gallons of SAF per annum by
Biogas adoption has been powered by
2030, and enough to meet 100% of
strong energy sector demand, driven by
aviation fuel demand (around 35 billion
carbon neutrality targets. Biogas has
gallons per year) by 2050. In the EU, the
particularly strong prospects for demand
REFuel EU target of 2% by 2025 is
growth given its superior GHG
expected to propel biojet fuel demand.
abatement properties. It enables
Japan has set itself a target of 10%
emission reduction through four key
sustainable aviation fuel by 2030. On the
routes – (1) avoiding methane emissions
industry front, the International Civil
from untreated feedstock; (2) using by-
Aviation Organization (ICAO) set up a
product (digestate) as a fertilizer instead
Carbon Offset and Reduction Scheme
of synthetic fertilizers; (3) replacing fossil
for International Aviation (CORSIA) in
fuels with a cleaner alternative; and (4)
October 2022, and has set a target of net
enabling renewable Ptx through Biogenic
zero by 2050.
CO2, a by-product of the biogas
Despite these measures, SAF adoption is anaerobic digestion process.
held back by high production costs, low
Biogas can also be directly injected into
feedstock availability, limited capacity
the gas distribution networks for easier
and limited regulatory support. Of the 4
adoption. As a result, utilities, gas
main pathways to SAF production
distribution and commercial/industrial
(HEFA, GFT, ATJ and PtL), HEFA is the
applications such as chemicals and steel
most advanced and is already being
manufacturing are expected to drive
produced at a commercial scale.
growth for biogas. Supply remains
However, it has limited dedicated
healthy as biogas has proven to be one of
capacity and is more often co-produced
the most cost-effective biofuel options. It
with HVO. Meanwhile, GFT, ATJ are
also offers the most sustainable
being piloted for commercial production,
technology to meet the demand for
while PtL is in its early pilot phase.
organic waste treatment.
Production costs remain a tall barrier –

25
However, Biofuel is 'Off the track' vis-a-vis global NZE
aspirations
Biofuel remains ‘off the track’ vis-à-vis global NZE aspirations – but there is
tremendous headroom for growth
Fig 12. Biofuel is ‘Off the track’ vis-a-vis global NZE aspirations

However, Biofuel is ‘Off the track’ vis-a-vis global NZE aspirations

Significant capacity increase required in SAF to
Global biofuel and biogases investment achieve Net -Zero by 2050
Bn USD
60 Supply capacity
SAF Pr oduction Capacity1 needed to achieve
M Liter s per year Net -Zero by 2050
20
~520,000 2
Announced 70,000
0 projects
2010 -14 2015 -19 2020 2021 2022E STEPS APS NZE

Annual avg. investment

Biodiesel Biogasoline Biogas 6
needs, 2023 -2030
6,000 450,000
1003
• Investment in low emissions fuels such as biogases,
biofuels remains below the levels required in 2021 2025 2050
any scenario % Total Jet Fuel
<0.01% ~1-2% 65-75%
Demand 2
• Need to rise ~3x from USD 18Bn in 2022 to an USD
50Bn p.a. over the remainder of this decade to be Est. r equir ed
CAPEX investment ~$15B 3 ~$1T 4
in line with NZE Scenario (cumulative of 400 -500Bn (Jet fuel BAU would be
$600B over 30 yrs)5
USD from 2022-2030)
1. Based on announced planned or current production as of Nov 2021 2. Forecast adoption by IATA and MPP in 2050 under their p ath to net zero 3. Based on IATA estimate of 2021 SAF
production 4. Based on 520BL of SAF needed by 2050, assuming 230M L average capacity per SAF facility and $400M- $800M CAPEX cost per facility 5. Based on ICCT 2019, Oil and Gas Journal
2019, Global data 6. Biogas includes Biomethane as well 10
Source: IATA; MPP; CAAFI; BCG analysis

26
Chapter 3: Despite the significant potential of
biofuels, adoption hasn’t quite reached
Key hurdles to be its full potential yet. This is largely
attributable to two key obstacles –
addressed to feedstock supply issues, and
technological limitations and can be
achieve the true unlocked by supportive policy

potential of the framework and investments.

Feedstock supply issues
biofuel vision Global biofuel prices are closely linked to
developments in feedstock prices as well
as crude oil prices, distribution costs and
blending policies. Biofuel feedstock,
especially for 2G biofuel, is quite
fragmented, with a complex supply chain
where availability can be unpredictable.

27
They often must compete with other prepared microorganisms and
commercial applications of feedstock – genetically engineered feedstock (e.g.,
for instance, forest residue is also used cyanobacteria engineered to increase oil
in paper manufacturing. At the same yields).
time, some of the readily available
However, these challenges can be
feedstock, such as sewage, tends to be of
circumvented through a right mix of
low quality, which can lead to higher
policy framework coupled/supported by
production costs. The sector is also
robust investments in the biofuel
resolving concerns around sustainable
ecosystem
land use and ethical feedstock sourcing.
These factors result in high production Policy framework
costs compared to fossil fuels, and hence
Policymakers have a vital role to play in
adoption thus far has been driven
fostering investor confidence and
through policy targets.
reducing uncertainty in the bioenergy
Technological limitations sector. One effective measure for
achieving this is by streamlining permit
1G technologies are already significantly
procedures and reducing setup and
consolidated, but 2G technology is
manufacturing lead times. Furthermore,
steadily maturing. Greater investment
policymakers should also introduce new
could accelerate technological progress,
guidelines for incentivizing sustainable
but several potential technologies are
and ethical feedstock sourcing. An
jostling for limited funding and
example of this is India's Minimum
feedstock, constraining their
Support Price (MSP) for oilseeds.
development, deployment. This is
Additionally, a uniform global
accompanied by high production costs,
certification framework, such as the
especially for advanced biofuels. As for
International Sustainability & Carbon
the more advanced 3G and 4G
Certification (ISCC) system, can be
technologies, the former currently has a
established to recognize and promote
negligible commercial scope and the
sustainability and GHG savings across all
latter is still at the concept stage. 3G
forms of biomass, including feedstocks
biofuel is produced using non-arable
for bioenergy and biofuels production.
land for example by cultivating algae,
Finally, a global framework for policy
which has much higher yields and lower
coordination and dialogue among
resource inputs than traditional energy
nations is crucial to ensuring consistency
crops. Annual production of Algal 3G
and collaboration in sustainable energy
biofuel is a meager 38 million liters
policies.
(0.00253% of the total global
production). While companies such as Biofuel Investments
Synthetic Genomics and ExxonMobil
Investment in the biofuels sector is
have set ambitious targets, with aims to
crucial for overcoming technology
produce 10,000 barrels of algae biofuel
limitations and ensuring a stable supply
per day by 2025, the commercial scale is
of feedstock. Advanced technologies,
still quite negligible. Meanwhile, 4G
such as an 800 ktoe biodiesel plant,
biofuel are the early concept stage,
require significant capital investment,
attempting to combine genomically

28
with costs reaching up to USD 1.3 billion investors. However, according to the
for capex alone. Additionally, International Energy Agency (IEA),
investments in downstream investments of at least USD100-270
infrastructure, such as blending billion in biofuels by 2030 are necessary
terminals and pipelines, are necessary to meet the targets outlined in current
for the expansion of biofuels. Despite the policies. This significant investment will
potential for profit margins in the not only help to overcome current
biofuels industry, variability in feedstock, barriers but also open new opportunities
biofuels, and byproduct prices can create in the biofuel sector, making it an
unpredictability and discourage attractive option for investors.
Fig 13. Production cost comparison for Biofuel versus Fossil Fuels

Higher production costs in comparison to fossil fuels being replaced

a key challenge for production enhancement of biofuel
Illustr ative

Range production costs of bioethanol vs. Range production costs of biodiesel vs. Diesel,
Gasoline, Production cost (US$/L) Production cost (US$/Gallon)
USD/ Gallon USD/ Gallon

1.5 2.5
Oil priceat 90$/bbl
2.0
Oil priceat 90$/bbl
1.0
1.5

1.0
0.5
Oil priceat 40$/bbl
0.5 Oil priceat 40$/bbl

0.0 0.0
Gasoline 1G Ethanol 2G Ethanol Diesel 1G Diesel 2G Diesel (HVO-
RD/Jetfuel)
9

Case in Point: SAF today is between 2-10x per passenger, assuming 100% SAF use
more expensive than conventional jet fuel. (though only 50% blend with A1 Jet fuel is
Aviation fuel contributes to ~25% of the permitted at present). If passed on to the
operating expenses for airlines, which is passenger, this would translate to a 20-190%
equivalent to USD 40 per passenger. SAF increase in the ticket price, at the same
usage would add an additional USD 40-350 margins as today.

Optimizing production costs to transform viability

Opex and capex vary significantly with the scale, feedstock, technology maturity and
range of products being produced.

29
Fig 14. Opex and Capex variation with scale

Back up | Opex and Capex varies with scale, feedstock, technology,

range of products being produced
Non exhaustive examples

Opex: Key cost driver varies with the product Capex: 2G capex 4-10X of 1G process

Capex (M Euros/ 1000T/y)

Sl. Product Key cost driver ​1G Fermentation (Ethanol) 0.6-0.8

• Feedstock (Animal fat, ​2G Gasification & Syngas (Ethanol)

Hydrotreated 2.2-3.2
1 UCO) –contributes to 65-
Vegetable Oil ​2G Cellulosic Fermentation (Ethanol)
80% cost 2.6-4.6

• Feedstock cost–contributes ​1G Transesterification (Biodiesel) 0.3-0.7

25-30% of the cost of ​2G Transesterification (Biodiesel) 1-1.15

Cellulosic production
2
ethanol • Enzymes 15-20% of the cost ​2G Gasification & FT (Biodiesel) 2.8-4.5
of production (reduced by
​1G Hydrogenation (HVO) 0.5-0.9
a factor of 10 since 2000)
​1G Hydrogenation (Jetfuel) 1.4

3 Biomethane • Energy costs

​2G Pyrolysis and upgrading 1-1.4

​0 ​1 ​2 ​3 ​4

15

Biofuel producers are thus exploring the site. However,

ways to further optimize the costs of acceptance of the process
production and improve the commercial depends on regulatory
viability of biofuels: acceptance of the usage of
1) Leveraging synergies with existing genetically modified yeast in
operations and infrastructure can the fermentation process for
help reduce the burden of the manufacture of biofuel,
investment: which is also transferred into
the byproducts (used as
a. Co-processing of biofuels in animal feed).
existing refineries reduces
capital costs and the burden c. Process step integration:
of access to hydrogen. combination of enzymatic
Biofuels can be upgraded hydrolysis and fermentation
within FCCU, using Hydrogen stages in single unit can
from DHDS. However, the boost yields while lowering
blend rate into fossil stream the capex.
is limited to 2-10%. d. Brownfield refineries: these
b. Integration of technologies: units can provide lower
using 1G biofuel co-product capex, especially for high-
as feedstock for a 2G plant capacity plants. An example
can deliver up to 10-25% of this is ENI’s USD 300
capital cost savings through million investment in its Gela
shared processes and facility over four years to set
infrastructure, depending on up a biorefinery of 1 Bn L

30
 capacity. However, there are biofuel plants around the
several hurdles to their world are exploring the
expansion. Firstly, oil & gas replacement of high-cost
decommissioning is not input for enzyme (glucose)
expected to accelerate until with relatively low-cost input
2035. Thus, despite some (biomass).
rationalization, brownfield
c. Technology and process
availability may be limited.
improvements: producers
Secondly, despite the use of
are striving to improve the
existing infrastructure, high
conversion efficiency of liquid
capex may be required to
hydrocarbons which can be
convert a facility to a
used as drop-in fuels (e.g., FT
biorefinery (equivalent to the
gasoline, diesel, and
cost of a smaller, new
kerosene have very low
biofuels facility). Another
conversion rates and high
hurdle is the sheer scale
specific investment costs)
difference - oil & gas facilities
are ~10X the size of typical d. By-product valorization:
biofuels facilities, and local lignin, glycerin and other by-
feedstock access may be products could generate
constrained at this scale. alternative revenue streams.
For instance, biogas
2) Technology interventions and
produces digestate as a by-
improvements can help facilitate
product, which can be used
better cost structures for private
as a fertilizer, further
players.
contributing to
a. Energy efficiency: utilization decarbonization by replacing
of by-products like heat and synthetic fertilizers.
steam through Combined
3) Enhancing feedstock quality,
Heat and Power units can
availability and affordability is a
help reduce operating
key concern for biofuels
expenses.
manufacturers. In a typical
b. Integrated input production: ethanol fermentation unit,
enzymes are a significant feedstock can account for as
cost factor, especially for much as 25-50% of the total cost
fermentation-based ethanol of production, while for HVO
production. Integrated Feedstock (Animal fat, UCO), it
enzyme production and accounts for as much as 65-80% of
increased enzyme activity the cost.
(leading to enhanced
a. Long-term supply contracts:
production yield per ton of
hike in feedstock prices due
feedstock) can lead to
to shortages can affect
improved process efficiencies
profitability of biofuels
and lower costs. Some
plants. Hence, long-term

31
 supply agreements can help is developing energy crop
hedge against supply risks supply chains in South
associated with feedstock. America.
b. Vertical integration: In As an emerging technology, biofuels will
addition to long-term supply inevitably have higher production costs
contracts, some private than fossil fuels for now. Therefore, in
players have integrated this phase, adoption should be driven
backwards to ensure more through policies and on-ground
feedstock access. For support on implementation until the
instance, British bio-power commercial scale and economics
group Drax have invested in become undeniable – and this is where
wood pellet mills in the US; governments, public-private
Neste and other HVO partnerships and academic
companies have acquired collaboration comes into the picture.
UCO collection entities; VPM

A global collaboration driving coordinated efforts of

stakeholders is critical at this juncture to unlock the true
potential of Biofuel
Fig 15. Global collaboration critical to unlock the true potential of Biofuel

Resolving these challenges require coordinated efforts of

various stakeholders across the value chain
Biofuel

1 2 3
Feedstock Technology Consumer
• Feedstock providers • Government • Oil M arketing
• Collection equipment Organizations Companies
manufacturer • Refining players/ NOCs • Automotive companies
• Academia (Research) • Aircraft and ship
• Technology/ solution manufacturers
provider • Chemical
• Infrastructure– fueling manufacturers
stations • End Consumers
• Certification agencies

4 Financing/Investment • Banks/other financial institutes • Private Equity • Governments • Private players/NOCs

5 Policy framework • Governments • Industry associations

16

Realizing the biofuel vision will require concerted effort between stakeholders
significant commitments in technology, across the value chain and across
investment, feedstock supply, policy, and countries. Governments and industry –
demand-side support to achieve cost including feedstock and technology
parity. There is an urgent need for providers, equipment manufacturers,

32
infrastructure providers, oil marketing to step up financing and investment.
companies and certification agencies – This will pave the way for greater R&D by
should join forces to advance biofuel government agencies, academia and
technology deployment and penetration. private players/NOCs, which will in turn
Alongside them, banks and other influence production and delivery
financial institutions as well as private volumes, driving profitability through
equity, public bodies and NOCs will have optimization.

A global template for

unlocking the biofuel vision
Biofuel adoption in India has been successfully accelerated on the back of the National
policy on Biofuel 2018 and its subsequent amendment in 2022 coupled with a
combination of clear mandates and targeted incentives. India’s experience could form a
global template for G20
countries to achieve the biofuel vision. This would require coordinated efforts across five
key levers – technology, feedstock, policy, investment, and consumers:
1) Technological development – countries must promote technological innovation
across all segments of the value chain to improve cost efficiency and conversion
efficiency. There are already inspiring examples of technology-sharing between
nations to share learnings and accelerate time to market, such as the Brazil-
Mozambique bilateral partnership, where Brazil was the technology provider and
Mozambique feedstock provider.
2) Feedstock – countries must expand and secure feedstock sources to help the
sector achieve its full production potential. They should collaborate to develop an
efficient supply chain network for waste and residue feedstock access. They should
ramp up supplies using advanced and cost-effective equipment, processes and
infrastructure for feedstock collection, segregation, and storage. They can draw on
the help of advanced analytics solutions for feedstock tracking and tracing e.g.,
organic cotton tracking using advanced analytics by SAS and BCI.
3) Financing and investment – countries should offer grants and funds to encourage
advanced biofuels research. In addition, they should devise favorable financial
terms for biofuel manufacturers to aid them in securing investment for capacity
building and infrastructure augmentation, along the lines of India’s targeted
financial assistance to enhance ethanol distillation capacity. Given the
unpredictability of profit margins, countries could assure long-term contract
stability to reassure interested players, just as solar players were supported by
government-led power purchase agreements in the US. Countries could also
explore tripartite agreements between biofuels manufacturers, financial
institutions, and oil marketing companies, to ensure favorable terms for debt
funding for biofuels projects. They could also introduce subsidies to build cost
parity, along the lines of Indian government subsidies for organic farming.

33
 4) Policy framework – Policymakers should articulate a clear, strong commitment to
reduce uncertainty and strengthen investor confidence. They could help by
streamlining permit procedures to reduce setup and manufacturing lead times.
For instance, Singapore launched the simplified Credit Treatment Scheme to
enable easier market registration for solar consumers. Countries should also
introduce new policy guidelines for incentivizing sustainable and ethical feedstock
sourcing, like the MSP (Minimum Support Price) for oilseeds in India. At a global
level, there is a growing need for an overarching framework for dialogue and policy
coordination among nations, along the lines of the Global Geothermal Alliance or
the International Solar Alliance.
5) Consumers – this also calls for concerted efforts to encourage end-consumer
adoption by driving technological innovation from the demand side (i.e., OEM
manufacturers).
At present, investment in low-emission fuels such as biogas and liquid biofuels
remains below the levels required under all IEA scenarios. To meet the NZE Scenario
– i.e., cumulative of USD 400-500 billion from 2022-2030 – investment must increase
~3x from USD 18 billion in 2022 to USD 50 billion per annum by 2030. Given the
impetus required, there is an urgent need for coordinated efforts among G20
members, to pool in their knowledge, resources and work towards achieving the
common goal of biofuel vision.

Fig 16. Multiple models of multi stakeholder partnership exists

Multiple models of multi stakeholder partnership exists, but a Global G20

alliance best suited for Biofuel

Sub sector Multi–nation sub G20 alliance

Sector focused alliance
stakeholder alliance sector alliance (Multi-nation, multi -sector)
• Fast and easy to set up • Relatively easy to set up • Dedicated focus on the • Access to the best global
• Drives max efficiency • Drives collaboration specific part(s) of the resources across the
within the part of across the value chain value chain value chain
the value chain, • Limited knowledge • Limited knowledge • Holistic addressal
dedicated focus sharing across nations– sharing across nations– of issues across the
• Limited knowledge siloed optimization siloed optimization value chain
sharing across the • Limited ability to make • Difficult to set up • High visibility and
value chain a global impact depending on #parties recognition due to
• Limited ability to make • Advancement of global participation
a global impact biofuel agenda limited • Difficult to set up
• Limited support from to nations due to #parties
other stakeholders • Intricate governance,
in the value chain delayed decisioning

17

34
Chapter 4: The proposed
International International Biofuel
Alliance:
Biofuel alliance: A The objective of the alliance
blueprint for The proposed alliance would promote
success synergies in biofuel research and
development among developed and
developing countries. It would facilitate
transnational government interaction,
industrial cooperation and academic
engagement, in order to improve the
deployment, marketability, penetration
and profitability of biofuels. This would
give countries a buffer against energy
price volatility and supply shocks, while
achieving environmental goals.
Defining the priorities of the alliance
The alliance would coordinate a global
framework of incentives to expedite
cooperation among member countries to
promote biofuel accessibility and
sustainability. It would define common
technical standards across nations to
promote biofuel R&D and technological
collaboration. It would also support

35
quality standardization, uniform A five-year roadmap
certification and trading across member
Over the next five years, the alliance
countries to further encourage biofuel
would collaborate with stakeholders
uptake.
across the value chain on a series of vital
As the biofuel industry matures, the initiatives. On the supply side, the aim is
alliance would promote greater to double production capacity among key
investment and funding through biofuel suppliers. The alliance would
favorable financing terms for players, as seek to standardize biofuels and
well as voluntary contributions from encourage high-volume commodity
members. It could augment members’ training of biofuels on global trading
capacity and increase adoption further forums. It would also create training
through support for new business programs and standards for a highly
models driven by collaborative research qualified biofuel workforce in the G20.
and process improvements.
To encourage demand, the alliance
The alliance would also nurture the would also have to encourage cost parity
biofuel ecosystem through conferences, for 2G technology and expedite progress
workshops and fundraising efforts to on the commercialization of 3G. These
promote new ideas and best practices. It initiatives would need financial
could even build a central knowledge firepower, with USD 100 billion to be
repository and resource center to raise earmarked for biofuel R&D by 2030 to
awareness and offer training programs. encourage wider adoption. The alliance
would also coordinate biofuel incentives
across G20 nations to pave the way for
future technologies to adapt to the
industry’s needs.
Fig 17. Example design basis for International Biofuel Alliance

Example design basis for International Biofuel Alliance–

for discussion
IBA Core group of G20 members with
Member volume option to include countries outside
G20 as well
Org. structure

2-5 members 100 members

IBA Representation from all

Member types stakeholders across the value chain
(Technical vs Diplomats) to support collaboration
Policy maker Technical & Diplomats

Given different countries at diff

IBA
Resourcing commitment adoption level focus on training &
Minimum resources, reliance on Working groups to conduct on capacity building
external studies for reports ground visits and training

Alliance financial goals IBA

IBA to be a non profit organization
(non-profit vs. for profit)
Non profit Profit
Financials

IBA IBA-encourage voluntary fundraising

Fundraising tragets (public/private players) to expedite
(no target vs defined target) Fundraising encouraged implementation
No fundraising targets & initiated Set fundraising targets

Funding IBA Members can contribute funds

(Contribution from membership voluntarily but will primarily
Members provide existing Members contribute Only members contribute support in solution building
vs. external) resources and financially/provide & no external resourcing
knowledge only resources/share
knowledge on
voluntary basis
IBA on the spectrum
18

36
Fig 18. Example design basis for International Biofuel Alliance

Example design basis for International Biofuel Alliance–

for discussion
IBA Considering Biofuel's sol. maturity–
Nature of work
focus will be on solution building
(advocacy vs. operational) and enhancing upcoming tech
Operating Model

Advocacy +Knowledge sharing +RnD +Solution building +Investment

Scope of IBA–specialist with

Scope of activity IBA focus on driving biofuel
(specialist vs. generalist) production by type & tech.
(Ethanol, SAF etc)
Generalist Specialist

IBA IBA shall have focused initiatives

Volume (Number) of
and supporting groups to drive
initiatives/action groups execution
Limited (1-2) Substantial (15+)

Performance IBA IBA will have well defined KPIs to

Governance

management, KPIs Projects finalized, GHG reduction,

keep value focus
No KPIs defined funds raised cost savings

IBA Timely reviews will help progress

Engagement Frequency the implementation aspect of the
Once a month (with alliance
operational stakeholders) Review every few years

19

Spotlight on India – a trailblazer in biofuels

Fig 19. India's Biofuel story

India’s Biofuel story

Jan 2003 2014 2018-2019 2020 Nov 2020
Launches Ethanol Re-intr oduces Per mits conver sion of B • Fur ther ease of tender • NBCC appr oves usage
Blended Petr ol (EBP) administer ed pr ice heavy molasses, conditions by OMCs of maize for
Pr ogr amme mechanism for ethanol to sugar cane juice and like one time ethanol pr oduction
be pr ocur ed under the damaged food gr ains document submission • Inter est subvention
EBP, dir ects Oil PSEs to to ethanol • NBCC1 appr oves usage scheme extended to
set up bio-r efiner ies Mar ked beginning of of sur plus r ice stock gr ain-based distiller ies
differ entiated ethanol lying with Food
pr icing, based on r aw Cor por ation of India
mater ial utilized for (FCI) for
ethanol pr oduction ethanol pr oduction

2001 2006 2018 2019 2020 Dec 2020

India star ts blending Ministr y of Petr oleum • Intr oduces inter est Extends EBP to the OMCs star ts to pr ovide OMCs incr eases
ethanol in petr ol on a and Natur al Gas Subvention Scheme whole of India except Off-take guar antee ethanol stor age
pilot basis dir ects PSU Oil (Govt. to pr ovide the Island UTs letter and consent to capacity fr om 5.39 Cr .
Mar keting Companies inter est for 5yr s) Publishes “Ethanol sign tr ipar tite L in Nov ‘17 to 16.9 Cr .
(OMCs) to sell 5% EBP • SATAT Scheme on Pr ocur ement Policy on agr eement with L till Dec ‘20,
in 20 states and 4 UTs CBG launched a long -ter m basis ethanol supplier s and facilitating ethanol
• GST on Ethanol under banker s for ethanol stor age over 20 days
lower ed fr om 18% EBP Pr ogr amme” capacity expansion (ongoing pr ocess)
to 5%
• National Policy on
Biofuels defined

1. National Biofuel Coordination Committee 20

37
India has made great strides in unlocking Control Order 1985; inclusion of CBG
the true potential of biofuels, extending projects under ‘White Category’ by
even beyond its original policy targets. Central Pollution Control Board (CPCB)
on case to case basis; inclusion of CBG
India’s ethanol consumption has projects under Priority Sector Lending by
outgrown production due to the RBI; loan products from various Banks
increasing demand, although Biodiesel
demand is still catching up. The for financing of CBG projects; directions
country’s ethanol supplies grew to 433.6 from Department of Fertilizers for
crore liters in ESY 2021-22. mandatory off-take of FOM by Fertilizer
companies etc. have been provided to
To promote SAF, Indian Oil Marketing increase the production of CBG.
companies are setting up plants at three
locations in the state of Karnataka, Further, Ministry of Petroleum and
Maharashtra and Haryana. India is also Natural Gas has issued guidelines for co-
pursuing innovative consortium mingling of domestic gas for supply for
partnerships to promote SAF. Compressed Natural Gas (Transport) &
Piped Natural Gas (Domestic) segments
In addition to liquid biofuel, Sustainable of City Gas Distribution (CGD) Networks
Alternative Towards Affordable for synchronization of CBG with CNG in
Transportation (SATAT)” was launched CGD Network.
on 1st October, 2018 to promote biogas
as well. Oil and Gas Marketing India has already started reaping the
Companies (OGMCs) viz. IOCL, HPCL, benefits of its efforts on biofuels across
BPCL, GAIL and IGL are inviting multiple levers:
expression of interests from potential 1) Decarbonization: India's biofuel
entrepreneurs to procure CBG from their adoption has delivered GHG
projects. Till Dec’22 OGMCs emission reduction to the tune of
participating in SATAT have issued 3826 31.8 Million metric tons by
Letters of Intent to entrepreneurs for November’22 in last 8 years.
procurement of CBG under SATAT
initiative and commissioned 40 CBG 2) Energy security: India reached its
plants with a total capacity of ~225 Tons milestone of 10% ethanol
per day. blending nearly 5 months ahead
of schedule, achieving a forex
Under this initiative various enablers saving of INR ~50,000 crore. By
such as assured price for off-take of CBG 2025, at 20% blending level,
with long term agreements by Oil and ethanol demand will have risen to
Gas Marketing Companies, Central 1,016 crore liters, and the
Financial Assistance to CBG/biogas industry will have grown over
plants under Umbrella Scheme of 500% from ~INR 9,000 crore to
National Bio Energy Programme of ~INR 50,000 crore. This has been
Ministry of New and Renewable Energy; achieved through significant
inclusion of bio manure produced from investment in associated
CBG plants as Fermented Organic infrastructure – India's ethanol
Manure (FOM) and Liquid Fermented distillation capacity has increased
Organic Manure (LFOM) under Fertilizer ~2X in the past 8 years, with a 50%

38
 increase in number of distilleries stage of development – IOCL
in just 6 years. Panipat (30 million liters, BPCL
Bargarh (30 million liters), HPCL
3) Socioeconomic benefits: Ethanol
Bhatinda (30 million liters) and
production has helped expedite
Numaligarh Refinery Limited
payments of ~INR 49,000 crore to
(~55 million liters). IOCL also
farmers as of December 2022.
unveiled Asia's first 2G Ethanol
4) Circularity: Under the Pradhan Bio-Refinery at Panipat Haryana
Mantri JI-VAN (Jaiv Indhan- in August 2022. This project is
Vatavaran Anukoolfasalawashesh expected to reduce Greenhouse
Nivaran) Yojana scheme, Gases equivalent to about 3 lakh
Government of India is providing tonnes of CO2e emissions per
financial support to commercial annum.
projects as well as demonstration
Furthermore, the advancement of the
projects for second generation
20% biofuel blending mandate from
(2G) ethanol projects with a total
2030 to 2025 will have ancillary benefits
financial outlay of approximate
too, freeing up INR 35,000 crore worth of
$300 million US for the period
gasoline for export, and reducing CO2
from 2018-19 to 2023-24. Four 2G
emission by 21.6 MnT.
plants are already at an advanced

How India became a frontrunner in ethanol adoption

Fig 20. India’s ethanol and biofuel production and consumption

India’s Ethanol consumption outgrew production due to the increasing

demand

Historical evolution of Ethanol Supply

Cr Litr es/ESY
Ethanol supply
500
433.6

302.0

173.0

67.4
38.0
0
2013 -14 2014 -15 2019 -20 2020 -21 2021 -22

Ethanol supplies have increased more than 6x over last 7 years

21
Source: PPAC, USDA, BCG analysis

39
Fig 21. India’s ethanol production

India has made significant progress in 1G ethanol

production

2X increase in capacity 4X increase in storage capacity Wide range of feedstock used

​% contribution of feedstock
​1,000 947 ​20 ​150
​+51%
​800 ​15
+141% ​100
​600 519
​10
​400
215 237 ​50
​200 157 ​5

​0 ​0 ​0
​2014-15 ​2020-21 ​2021-22 ​2017 ​2021 ​2017-19 ​2020-21 ​2021-22

​C Heavy Molasses ​DFG/Maize

​#Distilleries ​Distillation capacity (Cr L) ​Ethanol storage(Cr L)
​B Heavy Molasses ​Surplus rice from FCI
​SCJ/Sugar/Syrup

Ethanol distillation capacities of Ethanol storage capacity increased Wide variety of feedstock enabling
molasses-based distilleries grew 2x, 4X over last 4 yrs supply security of feedstock
#distilleries increased by 50% in 6 yrs
22

India’s ethanol supplies have increased ethanol from 18% to 5%, driven by a new
more than 6x over the last 7 years to National Policy on Biofuels. It has since
433.6 crore liters. The country achieved systematically introduced differentiated
the milestone of a 10% ethanol blending ethanol pricing, expanded EBP
rate five months ahead of schedule and programme to the entire country and
it has now advanced its 20% ethanol published a long-term Ethanol
blending target from 2030 to [Link] has Procurement Policy.
also set a target for 5% biodiesel
In 2020, oil marketing companies
blending by 2030.
entered into an agreement with ethanol
Ethanol adoption has been accelerated suppliers and bankers for ethanol
by a combination of clear mandates and capacity expansion. It also permitted the
attractive incentives. India introduced use of surplus rice stocks and maize for
Ethanol Blended Petrol (EBP) in 2003, ethanol production. The Ministry of
and the government initially mandated Environment and Forests simplified
public-sector Oil Marketing Companies environmental clearances to enhance
to sell 5% EBP in 2006. A decade later, it the ease of doing business. The
introduced the administered price government has also made significant
mechanism for ethanol to be procured investments in infrastructure, expanding
under EBP and directed public-sector oil ethanol storage capacity 4X over the last
companies to set up bio-refineries. In 4 years to ~20 crore liters, besides
2018, the government subsidized increasing the number of distilleries by
interest rates and lowered taxes for 1.5x.

40
Driving the future of ethanol in India
Fig 22. India’s vision for an integrated Bio-refinery model

India's vision for an integrated Bio-refinery model

• Setting up both • 2G ethanol plant: • CBG is a critical • Bio chemicals: • Cogeneration

1G, 2G in the With around lever for India as Production of bio- plant: Setting up
same premises to 160MMT of surplus it can be set up at chemicals in the of a Cogen plant
enable better agri. residues a lower capacity Bio-refinery by using Lignin
economics for generated p.a. in (hence lower expected to (generated in 2G
feedstock India, 2G ethanol capex) and can improve its plant) & Biogas
procurement plants offer be decentralized economics (CBG plant) can
• 1G ethanol plant: significant significantly ensure continuous
By-products like opportunity & reliable power
CO2 & Dried • A 100 kl per day supply to the Bio-
Distillers Grains plant can utilize 2 Refinery while
with Solubles L MT p.a. of agri. also improving
(DDGS) can residue to both capex and
Generate generate around opex
additional revenue 3Cr. L of
ethanol p.a.
23

India plans to further increase ethanol vehicles is under progress. Material

distillation capacity by >3x to 17 billion Compatibility tests conducted as part of
liters per annum by 2025. Significant the study indicate the effects of E20 fuel
measures are underway to achieve this on metal samples are comparable with
growth, including a financial assistance those of E10 baseline fuel.
scheme by the Department of Food and To usher in a fleet compatible with its
Public Distribution and long-term offtake vision for biofuels, India is now planning
agreements have been signed for design a phased rollout of high-blend rate
capacity of 745 crore liters per annum for compatible vehicles. The initial rollout of
ethanol production. The government is new E20 material-compliant vehicles will
also updating regulatory standards for begin from February 2023, while oil
vehicles to run on E20 fuel from 2023 marketing companies have been
and flex-fuel vehicles from 2024. directed to make E20 fuel available in
On the demand side, around 17 crore select pumps across 15 cities in 9 states
two-wheelers and 3 crore four-wheelers the same month. Major OEMs are
in India today are already E10-compliant. gearing up to roll out two-wheelers with
A joint study commissioned by Indian flex-fuel engines from mid-2024, and
Oil, the Automotive Research four-wheelers with flex-fuel engines from
Association of India, and the Society of mid-2025.
Indian automobile manufacturers to The Ministry of Heavy Industries has also
assess the impact of E20 fuel on the approved a Production-Linked Incentive
performance and durability of E10 scheme for the automobile and auto

41
component industry, which inter alia industry-led body, which shares
includes auto components of flex-fuel information and policy development
engines. This will expedite demand-side inputs and identifies research and
investment through clear incentives of deployment projects for mutual benefit.
up to 13% for flex-fuel vehicles and their The ambit of this cooperation has also
components. The government has also expanded to include the Sustainable
offered for the component upgrade cost Aviation Fuel and Renewable Diesel
for FFVs to be fully compensated. The Trilateral Cooperation agreement with
government expects this comprehensive Brazil, which will accelerate R&D and
package of mandates and incentives to explore policy options to bring SAF to
help grow the industry from INR 9,000 market.
crore to INR 50,000 crore by 2025.
Meanwhile, India and Brazil have
launched a new Center of Excellence on
Lessons from the Indian Ethanol. They have established a
model of transnational technical exchange initiative focused on
improving the production efficiency of
biofuel collaboration sugarcane/molasses ethanol and
India’s bilateral partnerships with the US introduced higher ethanol blending in
and Brazil offer a template for global the fuel pool. Their Joint Working Group
biofuel collaboration. The US-India on Bioenergy Cooperation is now leading
Strategic Clean Energy Partnership was a bilateral alliance to implement and
designed to promote sustainable biofuel scale up ethanol blends (E20+), flexible
production and facilitate public-private fuel vehicles, biodiesel, biogas/
dialogue on biofuel development and biomethane policies, technology
deployment. It is driven by the US-India development and advanced fuels like
Public-Private Biofuel Task Force, an SAF and ethanol.

42
Conclusion Biofuels can help both developed and
developing countries find a pragmatic
balance between decarbonization and
energy security. Achieving the true
potential of biofuels would give countries
across the world a credible buffer against
market shocks and volatilities, while
curbing emissions and delivering wide-
ranging socioeconomic benefits for
generations to come.
In key sectors like transport, biofuel
blends are already compatible with
existing infrastructure, which could
enable a smoother energy transition.
However, this emerging sector still needs
focused investment in technological
development, feedstock supply and
consumer initiatives to correct decades
of underinvestment and achieve cost
parity. It will also require a strong,
collective policy commitment from
major nations. Through coordinated
operationalization-oriented efforts by all
stakeholders across nations, and global
public-private-academia, we can
expedite biofuel technology deployment,
adoption and profitability.

43
References
[1] BCG Analysis
[2] National Oceanic and Atmospheric Administration (NOAA)
[3] IPCC AR6 Physical Science Report
[4] IEA Renewables 2022
[5] IRENA
[6] World Energy Outlook
[7] World Energy Investment
[8] International Air Transport Authority

44
45