Second Generation Biofuels Market Attracts Huge Investment in U.S.

Second-generation biofuels gaining prominence due to its potential to reduce emissions across regions and in effectively managing global energy fuel supply.

Second generation biofuels, also known as advanced biofuels, and are distinctly different from first generation biofuels in terms of raw materials and processing technology. The feedstock used in producing these biofuels are generally not food crops; these are made from non-edible lignocellulosic biomass, including residues of crops or forestry production, and whole plant biomass. Food crops such as waste vegetable oil can be used as raw materials since it is no longer fit for human consumption; however this does not imply that they can be burnt directly as the biomass. Several of these biofuels, such as Switchgrass is preferred in the U.S., are grown particularly to act as direct biomass. These biofuels are considered as more viable energy option of the global energy fuel supply of the world as they are more energy efficient than conventional biofuels and they help in considerably reducing greenhouse gas emission, without significantly displacing cropland used for food production. Other grasses such as Myscanthus, and Indiangrass are preferably grown in different areas, depending on the favourable climate. The demand of these grasses as feedstocks is fast growing as they can usually be harvested a few times per year and have over high net energy yield of over 500%.

Market Trends

Under new rules of the renewable fuel standard, production of corn ethanol can theoretically be reduced as other biofuel production increases, until second generation biofuels reaches 31-billion-gallon total. These biofuels considered as much cleaner than corn ethanol owing to numerous biological features, switching from using 40 % of the corn crop for ethanol production to using the same land to grow biofuel grasses will in essence will greenhouse gas emissions to the atmosphere. Nevertheless, producers of second generation biofuels need to address mounting concerns of critics related to conversion of productive farmlands by farmers to marginal lands for producing feedstocks for these biofuels. This may reduce indirect land use change effect while considerably reducing reduce any savings from greenhouse gas reduction. According to some market experts, giving producers a tax credit, corn ethanol could eventually be phased out; in addition, biofuel producers should ascertain that their policy is expected to stay for long time.

Favourable environmental regulations & government policies, huge incentives provided by the North American and European governments that has boosted R&D into development of biofuel alternatives along with various commercialization activities of market players in commercialization of second generation biofuels, are the factors that would drive the growth of the global market. These factors have been particularly instrumental in the immense growth opportunities in biofuel market in the U.S. The U.S. Environmental Protection Agency's Renewable Fuel Standard has set an annual production goal of 16 billion gallons of these biofuel and 15 billion gallons of ethanol by 2022.

Market Prospects

The market growth prospects are great. As per a recent report by Allied Market Research titled “World Second Generation Biofuels (Advanced Biofuels) Market - Opportunities and Forecasts, 2013 – 2020”, the global market would grow at a CAGR of 49.4% over 2014 - 2020 and it is expected to reach $ 23.9 billion by 2020. Currently, biodiesel holds the largest market share in terms of volume; however, cellulosic ethanol would lead the market segment by the year 2020 owing to its commercial availability.

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