A number of factors drive the need and opportunity for alternative fuels:
- Fossil fuel prices are experiencing long-term upward price pressure.
- In recent years, fossil fuel prices have been characterized by extreme volatility making forecasting difficult and fuel hedging expensive.
- Airlines, utilities, and other large end-users of fuel seek supply diversification and reduced environmental impacts.
- Governments around the world are pursuing energy solutions that create jobs and improve the environment.
- Carbon markets and government regulations are rewarding the use of low carbon energy sources.
- Policy makers and advocacy groups are creating market standards and criteria for sustainability in energy production.
Alternative fuels constitute a growing share of total global energy production and consumption. Advanced biofuels represent a compelling alternative fuel solution and are poised to become a large and critical source of sustainable energy supplies. Despite its promise, the emerging advanced biofuel industry is currently limited by high production costs. In the near term the following factors will influence and determine the economic viability of advanced biofuels:
- Increases and volatility in the price of petroleum, against which advanced biofuels will compete in the marketplace; advanced biofuels can act as a fuel hedge and potentially provide cost savings over the long term depending on market prices for petroleum.
- The establishment of a price on carbon emissions through taxes and cap-and-trade policies.
- Governments enact policies for advanced biofuels including production subsidies and consumption mandates.
Reductions in the production costs of advanced biofuels, the development of scalable production systems and the availability of refining and distribution capacity are the key to the long-term viability of this promising industry. These will be achieved through technological improvements, investments in demonstration-scale testing and optimization, systems integration, and production scale.