Ethanol Fuel Market Set for a Major Take-off as IEA Predicts 19% CAGR Growth During 2019-2024 Period

March 24, 2021, New York, USA – The ethanol fuel market is likely to witness tremendous growth as the International Energy Agency (IEA) has predicted growth in output to 19% during the 2019-2024 period. The energy estimates that the renewable energy met nearly 3.7% of transport fuel demand in 2018, which accounted for a total of 4 extra joules (EJ) of consumption. Among this, biofuels accounted for close to 93% of all renewable energy, while the rest being renewable electricity. The energy estimates that the biofuel output will expand at 24% CAGR during the 2019-2024 period, while demand for renewable energy in transport will increase by 70%, as demand for renewable energy in electrified rail, electric vehicle, and greater increase in share of biofuel in production of electricity.  

The Impact of Covid-19 on the Ethanol Fuel Market

Despite a robust, and promising forecast, the players in the ethanol fuel market have not been shielded from the impact of covid-19 like many other industries. According to the IEA, the global transport biofuel production in 2020 will likely reach 144 billion litres, or equivalent of 2480 thousand barrels per day. This was a 11.6% drop from the previous year, while 2019 remained a record year for production in two decades. The greatest impact of Covid-19 was visible on players in the US, Europe, and Brazil region. Despite the negative impact, the IEA remains optimistic about the future of biofuels in the near future. The agency attributed the fall in demand to lower gasoline prices, and lower international travel, due to worldwide restrictions. The impact of worldwide restrictions remained a major driver of reduction in personal travel, leading to lower demand for gasoline, and the IEA predicts that with the crisis under control, the biofuel industry will likely bounce back in the near future.

According to the IEA estimates, if the crisis is brought under control, the demand for biofuels in transport arena can reach 162 billion L in 2021, revisiting the glory of 2019 record levels. Furthermore, the IEA predicts that the biofuel output will likely increase at 4% y-o-y, thanks to growing demand for fuel, and increased favorable regulatory environment in Asia Pacific, and South America. These two regions are witnessing an emergence of ambitious goals, and subsequent policy support for fueling growth for nationally important agricultural commodities. The IEA estimates that the global output for biofuel will reach 182 billion L, with majority production of ethanol occupying the demand, and output. This is largely thanks to growing production increases for Ethanol in key countries like China, and Brazil. The IEA further expects that the biofuels will meet 5.4% of the road transport energy demand in 2025, rising from 4.8% in 2019. Despite the pandemic woes during the 2019-2020 period, renewable fuel reimbursement program softened the impact with USD 0.12/L to eligible producers for output during January 1, and May 1 2020.

Increased Demand for SAF in Aviation to Drive Notable Growth

According to the IEA, the demand for ethanol in gasoline remains steady, with blended varieties of 10% remaining most popular. This is a major improvement in accordance with sustainability goals set worldwide. According to the International Air Transport Association (IATA), fuels like SAF or Sustainable Aviation Fuel, can reduce carbon emissions by 80%. Moreover, the agency also estimates that over 300,000 flights depending on SAF fuel have taken to the skies since 2016. Furthermore, over 100 million litres of fuel will be produced in 2021, with around 7 billion litres of SAF are in forward purchase agreement. The demand for SAF will also remain sustainable as agencies like NASA have published studies in prestigious journals like Nature certifying that 50% aviation biofuel can cut particulate emissions by 50-70%. Furthermore, today five airports around the world including Stockholm, Oslo, Brisbane, Bergen, and Los Angeles offer regular biofuel distribution, with others offering occasional supply. The IATA aims to achieve a 2% penetration, nearing 1.8 billion US gallons by 2025.  Some airlines like Quantas have already adapted a 50/50 blend of biofuel to support the growing renewable initiatives. Biofuel manufacturers like Finland’s Neste plans on expanding its biofuel capacity from 1.3 million in its Singapore facility to reach 4.5 million by 2022. The company plans to invest €1.4 billion to achieve this ambitious target. Furthermore, growing innovation due to increased research and development in the ethanol fuel market also promises to create new venues for opportunities. For example, LanzaTech has successfully demonstrated that ethanol can be de-oxygenated, and processed into jet fuels. This enables the production of ethanol in the flue gases using microbes. This will likely solve a major challenge associated in the ethanol fuel market. The growing competitive rates of global gasoline makes it difficult to switch to alternative fuels, as the high-costs of production as an agricultural commodity still remain a major challenge for growth.

The players in the ethanol fuel market can benefit from strong innovation in areas like high-ethanol blends. Currently, despite the strong incentive program such as Higher Blends Infrastructure Incentive Program, these blends have failed to take off like the 10% ethanol blend. Hence, scaling these high-blends, and making them available remains the key need of the hour for future growth of the ethanol fuel market. Despite the promise these hold, the IEA forecast is a promising sign for players in the ethanol fuel market to invest in innovation, and growth during the 2021-2028 period. Some key players in the ethanol fuel market are Aventine Renewable Energy, AB Miller, Kirin, United Breweries, and Archer Daniels Midland Company.

The Ethanol Fuel Market Report is Segmented as Follows:

Product Outlook 

• Starch-based
• Sugar-based
• Cellulosic

Application Outlook 

• Conventional Fuel Vehicles
• Flexible Fuel Vehicles
• Others

Regional Outlook

• North America
  • The U.S.
• Europe
  • Germany
  • UK
• Asia Pacific
  • China
  • India
• Central & South America
  • Brazil
• Middle East & Africa