Biofuels denote any energy commodity directly sourced from plants or animals. Examples that have featured in our research include ethanol, bio-diesel from agricultural oils, renewable diesel from waste oils, landfill gas, biogas, woody biomass and BECCS. We can consider 10GTpa of global food production in this category as well as a type of biofuel.
A general finding in our biofuels research is high variability. Capturing waste materials can be most economical and often has the best carbon credentials. Especially when these waste materials would otherwise have degraded; and the processing is simple, with low thermodynamic losses from upgrading and conversion.
Another general finding in our biofuels research is that opportunity costs matter. For example, there are examples of some biofuels crops where the same land could capture or store more carbon, via nature-based CO2 removals.
This data-file provides an overview of the 3.5Mbpd global biofuels industry, across its main components: corn ethanol, sugarcane ethanol, vegetable oils, palm oil, waste oils (renewable diesel), cellulosic biomass, algal biofuels, biogas and landfill gas.
For each biofuel technology, we describe the production process, advantages and drawbacks; plus we quantify the market size, typical costs, CO2 intensities and yields per acre.
While biofuels can be lower carbonthan fossil fuels, they are not zero-carbon, hence continued progress is needed to improve both their economics and their process-efficiencies.
Our long-term estimateis that the total biofuels market could reach 20Mboed (chart below),ย however this would require another 100M acres of land and oil prices would need to rise to $125/bbl to justify this switch.
The data-file also contains an overviewof sustainable aviation fuels, summarizing the opportunity set, then estimating the costs and CO2 intensities of different options.
Costs of biogas upgrading into biomethane are estimated at $7/mcf off of capex cost of $400/ton, in this data-file. The largest contributor to total costs is carbon filtering, to remove siloxanes, VOCs and H2S, which we have modelled from first principles, at $2/mcfe. Underlying data into biogas compositions and impurities are also tabulated for reference.
Biogas is a mixture of 40-75% methane, 20-50% CO2, H2O, nitrogen, oxygen, H2S, ammonia, and other impurities such as siloxanes, mercaptans and other volatile organic compounds. Different assets of biogas compositions from technical papers are aggregated in the data-file, showing the variability by feedstock.
Indeed it is interesting to note that the biogas compositions are not fixed, but vary over time, as the anaerobic digestion progresses in batch reactors, or as different feedstocks are added into continuous digesters (examples charted below). This requires flexibility and advanced planning for biogas upgrading facilities.
It is important to remove the most harmful impurities before combusting biogas, while to make biogas fully fungible with natural gas, and blendable into pipelines, it should be upgraded into biomethane. The Impurities tab of the data-file summarizes each impurity, what it is, why it matters, and how it is removed.
This data-file estimates the costs of upgrading biogas to biomethane. We have a dedicated model for filtering biogas using activated carbon (title charts above), which can remove siloxanes, volatile organics and some H2S.
Total costs of upgrading biogas into biomethane (and then compressing it to pipeline grade, and building a short pipeline connection) are estimated at $7/mcf, of which $3/mcf is biogas treatment, $3/mcf is further upgrading and $1/mcf is midstream-related.
Capex costs are estimated in the range of $200-1,000/Tpa of biogas inputs depending on the lengths of the pipeline interconnection. A breakdown is given in the data-file, including comparisons with other estimates from other industry bodies and technical papers.
These costs can be worthwhile when they will be covered by fiscal incentives, CO2-conscious buyers, or for improving energy security.
Please download the data-file for further details on our numbers, the costs of upgrading biogas into biomethane, costs of activated carbon biogas filtering or for the varying compositions of biogas. We have also modeled the costs of biogas production and tabulated global biogas production by country as part of our biofuels research.
Sugar cane is an amazing energy crop, yielding 70 tons per hectare per year, of which 10-15% is sugar and 20-25% is bagasse. Crushing facilities create value from sugar, sugar-to-ethanol and cogenerated power. This 11-page note argues that more volatile electricity prices could halve ethanol costs or raise cash margins by 2-4x.
This data-file captures the production cost of ethanol from sugar, as a biofuel. A 10% IRR requires $1-4/gallon ethanol, equivalent to $0.25-1/liter, or $60-250/boe, depending on input sugar prices. Net CO2 intensity is at least 50% lower than hydrocarbons.
Global ethanol production runs to 2Mbpd of liquids, or around 28bn gallons per annum. Around two-thirds is ethanol from corn, especially at US ethanol plants; while around one-third is ethanol from sugar, especially in Brazil and elsewhere in the emerging world.
Our base case scenario assumes the key input for ethanol production will be non-edible molasses, priced at $100/ton, generated as a non-crystallizing byproduct from sugar refining. Molasses might comprise c55% sugar by mass.
Molasses can be directly fermented into an alcoholic solution, then distilled to produce ethanol. Modern distilleries use the Melle-Boinot fermentation process, centrifuging and recycling yeasts. Distillation occurs in two stages, first recovering 94% ethanol from the mash, then 99.6% anhydrous ethanol, which can be blended as a fuel.
Feedstock comprises 60-70% of the cost of ethanol production in our base case, hence we have constructed an entire separate model to capture the costs of sugar production. The sensitivity of ethanol prices to input sugar prices is charted below.
Capex costs of ethanol production are estimated from past projects, specifically looking for examples that add a bioethanol unit adjacent to a pre-existing sugar refinery; while opex costs are based on disclosures in technical papers, also noted in the data-file.
Our build-up also captures the CO2 emissions of sugar-ethanol production. The carbon accounting is debatable, but generally shows sugar-based ethanol to be at least 50% lower-carbon than hydrocarbon fuels. Please download the data-file to stress test the cost of ethanol from sugar, or to compare with the cost of ethanol from corn.
The costs of sugar production are estimated at $260/ton for a 10% IRR at a world-scale sugar refinery, in a major sugar-producing region. Higher returns are achievable at recent world sugar prices, and by valorizing waste streams such as molasses for ethanol and bagasse for cogenerated electricity.
Sugar is the crucial feedstock for one-third of the world’s 28bn gallons pa of bioethanol, or around 0.6Mbpd of biofuels; and as a sweetener across the world’s food system, with Western adults typically consuming 60-80 grams of added sugar per day. This data-file captures the costs of sugar production.
A sugar price of $260/ton is needed for a 10% IRR, on a MTpa-scale sugar refinery, while global sugar prices recently ranged from $400-750/ton, enough to unlock 30-60% IRRs at these facilities.
50% of the cost of sugar comes from sugarcane, as a feedstock, which is also built up from first principles in this data-file, averaging $25/ton in our base case. Prior to harvest, sugarcane typically comprises c55% moisture, 12% sugar, 20% fiber and 12% trash (which may be burned off or cut off and left in the field).
Costs of sugarcane are also sensitive to yields, which is a key reason that Brazil leads the world in biofuels production. Yields can average 110 wet tons per hectare, although also tend to vary year-by-year.
Sugar itself only comprises c60% of the revenues of a typical sugar refinery, with the remainder coming from non-edible molasses (useful as an input to ethanol production), bagasse (as a fuel) and cogenerated electricity. The prices of these components can also sway the economics of sugar refining.
Capex costs and opex costs are built up in the data-file, using data from past projects and technical papers. Capex costs of sugar production plants can vary widely, depending on the country, and the specific details of what is actually built.
This data-file captures the costs of sugar production, energy use, CO2 intensity of sugar, plus a breakdown of capex and opex. It is an important input for stress-testing the costs of ethanol from sugar.
Global biogas production has risen at a 10-year CAGR of 3% to reach 4.3bcfed in 2023, equivalent to 1.1% of global gas consumption. Europe accounts for half of global biogas, helped by $4-40/mcfe subsidies. This data-file aggregates global biogas production by country, plus notes into feedstock sources, uses of biogas and biomethane.
Germany has historically been the largest producer in the world, with biogas output rising to 0.8bcfd by 2015, 10% of Germany’s total gas needs, then flat-lining on the phase-back of subsidies, such as 6-25 c/kWh feed-in tariffs for biogas->power.
40-45% of Germany’s biogas feedstock is from the anaerobic digestion of crop residues (70% corn silage), 40-45% is from animal waste (80% cattle), 6% is from wastewater. 85% is produced as biogas and 15% is upgraded to biomethane. 78% is used to produce electricity. Larger listed companies include EnviTec and Verbio.
China has now overtaken Germany to become the world’s largest biogas producer, reaching 0.9bcfed in 2023, although biogas has fallen from 4% of China’s total gas use in 2013 to 2% in 2023.
The US produced 0.6bcfd of biogas in 2023, or 1% of total gas consumption, with 2,400 production sites, of which 70-80% is captured from landfills. BP acquired the US’s largest RNG producer, Archaea Energy, for $4.2bn in 2022.
Brazil arguably has most growth potential, producing 0.1bcfed, across around 1,000 production sites, 65% from agricultural wastes, and c80% is used for electricity generation.
Denmark sources the highest share of its total gas needs from biogas of any country in our database by a wide margin, at c50%. 80% is upgraded and delivered into the gas grid, encouraged by a $6.2/mcfe subsidy program for raw biogas production, and $13/mcfe for upgraded biomethane, which supports the economics in our biogas costs models.
The data-file contains underlying data into global biogas production by country, in TJ terms, in TWH terms, and in bcf of gas equivalent terms (bcfed). Backup tabs contain workings and other input data. For further data, please see our broader biogas research and biofuels research,
Biogas costs are broken down in this economic model, generating a 10% IRR off $180M/kboed capex, via a mixture of $16/mcfe gas sales, $60/ton waste disposal fees and $50/ton CO2 prices. High gas prices and landfill taxes can make biogas economical in select geographies. Although diseconomies of scale reward smaller projects?
Biogas is a mixture of 50-70% methane and 30-50% CO2, produced from the anaerobic digestion of organic matter, such as manure, sewage or crop residues, or other organic waste. Archaea notes that 72% of US renewable natural gas comes from landfills, 20% from livestock, 5% from organic waste and 3% from wastewater.
This economic model captures the costs of biogas production, informed by 20 case studies, covering yields, capex, opex, IRRs and sensitivities.
Biogas yields average around 4 mcf per ton of input material, although smaller plants may find it easier to source high-quality feedstocks, with greater quantities of volatile organic matter, and greater conversion of that matter into biogas (chart below).
The capex costs of biogas plants are also tabulated from the 20 case studies in this data-file. Costs vary. But good rules of thumb might be $200/Tpa of feedstocks. In energy industry terms, this is equivalent to around $180M/kboed, or around 6x the costs of offshore hydrocarbons, or around $2,500/kW-th, which again is around 2x higher than the per kW-e costs of solar or onshore wind.
Biogas production facilities need to earn around $35-40/mcfe of methane-equivalent production in order to generate a 10% IRR on their up-front capex. There are four main revenue streams: gas, waste disposal fees, CO2 prices or incentives, and the value of residual digestate, which can be used as fertilizer or bedding in agriculture.
Our base case biogas cost model sees a 10% IRR from a combination of $16/mcf methane, $60/ton disposal fees and a $50/ton CO2 incentive. However, $120/ton landfill taxes can take the methane-equivalent price down to as little as $2.5/mcf. Hence the economics depend on landfill taxes and gas prices in different countries.
Biogas production in Europe currently comprises around 1-2% of the total gas grid, although some studies have estimated that total biogas production could reach 10-20% of total, or around 50-100bcm pa in Europe, via a “huge scale-up”.
One interesting observation from the charts above is that unlike other economic models in our library, biogas facilities may not benefit from economies of scale. Smaller facilities seem to cost less in capex terms and achieve higher yields. This suggests an opportunity for middle-markets private equity and companies with many small facilities?
Please download the data-file to stress-test biogas production costs. We are also constructive on some of the economic opportunities in landfill gas and biochar.
Verbio is a bio-energy company, founded in 2006, listed in Germany, producing bio-diesel, bioethanol, biogas and fertilizers. The company has stated “we want to be in a position to convert anything that agriculture can deliver to energy”. Our Verbio technology review is based on its patents. We find some fascinating innovations in cold mash ethanol, integrated with biogas production, and making biogas from lignocellulosic feedstock.
50-60% of Verbio’s EBITDA has recently come from its bio-diesel. We think bio-diesel will see increasing competition for feedstocks and possibly also due to food shortages. Numerically, the largest focus in Verbio’s patents was into metathesis catalysts (chart above), which is the rupturing and re-forming of C-C or C=C bonds, to ‘swap’ the hydrocarbon tails, and produce a more varied range of outputs, especially in bio-diesel. But we found these patents to be disjunctive, and hard to de-risk.
40-45% of Verbio’s EBITDA has recently come from bio-ethanol and bio-methane. And we found the patents here particularly interesting and high-quality. Verbio is using a cold-mash process, which results in 80% lower CO2/energy use than gasoline, and perhaps as much as 50% lower than US corn ethanol using hot mash processes. The patents explain how this is being achieved, including by combining bio-ethanol plants and bio-methane plants, then recirculating the stillage. Some nice flow diagrams are copied in our data-file. But most interestingly, halving the heat use on a bio-ethanol facility, and holding all else equal, would uplift its IRR by 3%, or conversely, lower its total production cost by 5%.
Converting lignocellulosic crop wastes into bio-methane is also covered in the patent library and by the company. This is likely to harness a particularly low-value feedstock (straw), and yield what will be, for the foreseeable future in European gas markets, a high-value product. The patents seem to overcome challenges in the breakdown of waxy coatings, ‘floating layers’, and yields. These patents include some clear and simple details.
Overall our Verbio technology review yielded a mixed score, but this was due to a mix effect. Low carbon bio-ethanol production and forming biogas from lignocellulosic feedstocks seemed most interesting, and also appears to be the focus for new investment in the company’s EUR 300M capex plans.
Is there value in bio-energy technology? We see persistent shortages of hydrocarbons in the 2020s (model here). Energy Majors have also been acquiring biofuels companies in 2022, such as Chevron buying Renewable Energy Group ($3.2bn), BP buying Archaea ($3.3bn) and Shell buying Nature Energy ($2bn).
This data-file estimates how much wood can be cut in a day, using back-of-the-envelope calculations, across 500-years of industrial history. In medieval times, a manorial tenant might have gathered 250kg of fallen branches in a good day, containing 1,000 kWh of thermal energy. A modern feller-buncher is 150x more productive. But a modern energy analyst is little better than a medieval peasant. Harvesting wood as a heating fuel is expensive, inconvenient and prone to risks.
Wood as a heating fuel: volume, mass and energy?
Wood fuel quantities are most commonly measured in cords. One cord is defined as 128 cubic feet of wood, which can be visualized as a 4′ tall pile, over an 8′ x 4′ area. Mass and energy content will vary. But as an approximation, 1 cord of wood weighs 1.4 tons, and 1 ton of wood contains 4,000 kWh of thermal energy, which is materially less than other fuels.
500-years: how much wood can be cut in a day?
Wood was the dominant heating fuel of the medieval energy system. We think that a manorial tenant could have gathered 250kg of fallen branches on a good day, limited by the ability to carry only 20-25 kg on a single trip, and secondarily by an absence of comfortable footwear.
Mechanization offered a 2-4x productivity gain by the early industrial era, using handheld saws, axes, and horses to pull felled trees towards water-courses, where they could be floated downstream and processed (painting below from the 1890s).
By the mid-20th century, chainsaws and trucks offered 2-4x further productivity gains, so a professional logging crew could harvest 10,000 kWh of energy per person per day. About the same as 1.5 tons of a typical coal grade. Although debatably, it is less harmful to nature to burn a tree that has already been dead for 400M years than cut down a living one.
Today the logging industry is another 15x more productive again, using slightly terrifying machines such as feller-bunchers to fell, pluck and de-limb entire trees, before cutting them to length, and stacking them for transport. Specialist manufacturers include Tigercat, John Deere, Caterpillar. We are increasingly doing more work on sustainable forestry and screening nature-based CO2 removal projects.
Energy crisis: stocking up on heating fuel?
Somewhere in between the productivity of a medieval peasant and the modern forestry industry, a typical person today can likely collect 0.5-2.5 tons of firewood in an 8-hour day, containing about 2,000-10,000 kWh of useful energy. The precise number depends on the use of modern power tools, the type of wood, and the experience of the person.
Here I am illustrating the point below, after a stint working at a forest plot in Estonia. We cleared out some thicket from this land last year, and have now started the gruelling task of planting proper trees in the gaps. Last weekend, it took about 1.5-hours to gather these thinned branches, drag them across to the road-side, then chop them up using shears and an axe.
Energy metrics: can I do better than a medieval peasant?
(1) Energy quantities. In 1.5 hours, I gathered almost 100kg of wood, which might contain 400kWh of thermal energy. For comparison, a typical bath consumes 4kWh of thermal energy, so this is about “100 baths”. Overall, a typical household consumes 40-60kWh of heat energy per day in the winter. So if I wanted to meet my household’s heating needs by gathering firewood, trips like the one above would need to be a weekly occurrence.
(2) Energy return on energy investment of harvesting this woody debris is actually quite good. My fitness tracking app tells me I burned about 350 kilocalories while doing this back-breaking labor. Which translates into an EROEI of 100x, if the result is 400kWh of wood fuel. Although the EROEI falls to around 10x if we also include the gasoline consumed in driving out to my forest-plot and back (for comparisons, please see our EROEI datafile).
(3) Cost. Unfortunately, if a typical person values their weekend time at $35/hour, and manages to generate 300 kWh of net fuel per hour, then their implied energy cost from gathering firewood comes out to about 12 c/kWh. This is equivalent to paying $35/mcf for natural gas. This is not much cheaper than European natural gas in the 2020s. And debatably, you may also need to add the costs of buying forest land, garden equipment, a woodshed and obligatory Patagonia outdoor wear.
(4) Carbon credentials. The carbon credentials of different wood uses are evaluated in our note here. In this case, I am going to argue that the wood I gathered would simply be decomposing if it were not used up. However, there is clearly a limit to how much fallen debris or thinned material you can collect from a woodland before you are chopping-down older growth trees and contributing to deforestation (the largest single CO2 emissions source on the planet, and more than all the world’s passenger cars).
(5) Other drawbacks. A final conclusion from this exercise is that it is quite inconvenient to have to cut, transport and dry your own fuel; then kindle a fire; then clean up the ashes and air out the smell of smoke from the living room. Out in the forest, there were some slightly hair-raising moments involving the axe, which could have greatly impaired my beloved Excel keyboard shortcuts. And my wife was also quite cross about the state of the car.
Conclusions: better to use modern energy?
How much wood can be cut in a day? The data-file linked below contains our calculations for the tonnage and energy content that can be harvested across different forestry practices over the past 500-years. It is a reminder of the virtues of the modern energy system, if only we could get back to an energy surplus.
How much does fertilizer increase crop yields? To answer this question, we tabulated data from technical papers. Aggregating all of the global data, a good rule of thumb is that up to 200kg of nitrogen can be applied per acre, increasing corn crop yields from 60 bushels per acre (with no fertilizer) to 160 bushels per acre (at 200 kg/acre).
The relationship is almost logarithmic. The first 40 kg/acre of nitrogen application doubles crop yields, from 60 bushels per acre to around 130 kg/bushel. The next 20 kg/acre adds another 5% to crop yields. The next 20kg/acre adds 4%. The next 20kg/acre adds 3%. And so on. Ever greater fertilizer applications have diminishing returns.
In 2022-23, many decision-makers and ESG investors are asking whether energy shortages will translate into fertilizer shortages, which in turn translate into food shortages. The answer depends. A 10kg/acre cut in nitrogen fertilizer may have a negligible 0-2% impact on yields in the most intensive developed world farming. Whereas it may have a disastrous, >10% impact in the developing world, on the “left hand side” of our logarithmic curves.
The scatter is broad, and shows that corn yields are a complex function of climate, weather, crop rotations, soil types, irrigation, other soil nutrients; and the nuances of how/when fertilizers are applied in the growing cycle. Nitrogen that is applied in the form of ammonia, ammonium nitrate, urea or NPK is always prone to denitrification, leaching, volatilization, and being uptaken by non-crop plants.
Moreover, while this data-file evaluates corn, the world’s most important crop by energy output, the relationship may be different for other crops. Corn is particularly demanding of nitrogen in its reproductive stages of growth. This ridiculously prolific crop will have 55% of its entire biomass invested in its ‘ears’ by the time of maturity. These ears contain so much nitrogen than around 70% is sourced by remobilizing nitrogen out of leaves and stems.
How much does fertilizer increase crop yields? For economic reasons. And to minimize the CO2 intensity of crop production. As a rule of thumb, the CO2 intensity of corn crop production is 75kg/boe, of which 50kg/boe is due to nitrogen fertilizer.
A constructive conclusion is that the first c40-80 kg/acre of nitrogen application does not increase CO2 intensity, or may even decrease it due to much greater yields. Best-fit formulae are derived in this data-file, using the data. So are our notes from technical papers, of which our favorite and most helpful was this paper from PennState.
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