The market for biofuels is expected to reach $99 billion by 2014. The demand for biofuels is on the rise and will continue to grow rapidly through 2020.
In 2011, global biofuels production was at 1,897,000 barrels per day, up from 1,635,000 barrels per day in 2009, a 16 percent rise in just 2 years. Production levels are expected to reach 2,500,000 barrels per day by 2020.
According to UNEP, 35.7 million ha were used for biofuel production in 2008 and an estimated 80 million ha are to be used by 2020, making a 124 percent increase.
This biofuel demand is changing the dynamics of the food, agricultural and the energy markets. The US, Brazil (Ethanol) and EU (Bio Diesel) are currently driving most of the demand for biofuels.
Government energy policies contribute greatly to this rise in demand and have persuaded producers to find various ways to increase production.
The US has seen a rapid increase in biofuel production in the last decade due to the Energy Policy Act of 2005 that provided tax incentives and loan guarantees. In 2007, ESIA was implemented with the goal of moving the US towards energy security and independence.
In addition, EU renewable energy directive of 2009 and the Federal Law in Brazil had a positive effect on the biofuel markets.
Increasing biofuels production in the current setup has its challenges. The first generation biofuels are made from sugar, starch and edible oils. This has reduced the amount of cultivated land available for growing food for human and livestock consumption.
Brazil, and Indonesia have noticed a considerable decrease in land for food production in a decade.
Second-generation biofuels are produced using inedible plant parts and they do not compete with the use of raw materials as food. The fuel over food issue has been a cause for concern even with second-generation biofuels.
Jatropha is a cost-effective feedstock plant for bio diesel production, but large strips of land used for its cultivation again decreased land for food production in Tanzania and Kenya.
However, the next generation of biofuels is expected to overcome such challenges. Third generation biofuels from algal biomass and fourth generation from specially engineered plants and biomass are undergoing various stages of testing and production.
The key challenge with next-generation biofuel technologies, as seen in the case of KiOR, is one of reaching production economies of scale.
A search for sustainable and economical biofuels is going on. Major companies like ADM, Cargill, Butamax and Abengoa are trying to deliver innovative bio fuels technologies.
The ADM-Virent Energy partnership for better bio refinery solutions, the POET-DSM partnership for producing cellulosic bio-ethanol and the Genesis Biofuel – Abundant Energy Solutions joint venture are some of the efforts placed by private and government players.
At present, striking the right balance between energy freedom and food security, and efficiency and price parity remains a challenge for biofuels.