Biofuels: the best of times, the worst of times?

Outlook for biofuels in energy transition

Our outlook for biofuels in energy transition will investigates how food and energy shortages will re-shape liquid biofuels? This 11-page note explores four questions. Could the US re-consider its ethanol blending to help world food security? Could rising cash costs of bio-diesel inflate global diesel prices to $6-8/gal? Will renewable diesel expansion ambitions be dialed back? What outlook for each liquid biofuel in the energy transition?


In principle, price spikes for conventional energy should be ‘the best of times’ for diversified energy sources, such as liquid biofuels. But in practice, there is also a possibility of food shortages in 2022. Biofuels are made from agricultural products that are usually in some way fungible with food supplies. And thus could this turn into ‘the worst of times’ for corn ethanol, bio-diesel and renewable diesel? The outcome depends on the numbers, which are explored in this report.

Our outlook for US corn ethanol is laid out on pages 4-5, including typical costs, CO2 intensity, feedstock inflation and possible impacts on the gasoline market. We wonder whether world events, especially 2022-3 food shortages, might motivate the US to re-visit diverting 40% of its corn crop into producing a biofuel, in the name of humanitarian aid?

Out outlook for bio-diesel is laid out on pages 6-7, including typical costs, CO2 intensity, feedstock inflation, and possible impacts on the diesel market. We wonder whether 0.8Mbpd of bio-diesel is now effectively the ‘marginal supply source’ for diesel markets, and if in turn, vegetable oil shortages could push world diesel prices up to $6-8/gallon?

Our outlook for renewable diesel is laid out on pages 8-9, including typical costs, CO2 intensity and the importance of used cooking oil as a feedstock. We wonder whether it is realistic for the US to scale its renewable diesel capacity by 7x, without relying on vast imports of agricultural oils, even palm oil, and whether the expansion will be softened?

Conclusions and some speculations are given on pages 10-11. We think biofuels may have a role in the energy transition, but the best pathway is bio-diesel from used cooking oil, while abatement costs of other options are on the higher side.

To read more about our outlook for biofuels in energy transition, please see our reports here, here and here. We are most excited about opportunity in landfill gas.

Ethanol: hangover cures?

Could new technologies reinvigorate corn-based ethanol? This 12-page  note assesses three options. We are constructive on combining CCS or CO2-EOR with an ethanol plant, which yields a carbon-negative fuel. But costs and CO2 credentials look more challenging for bio-plastics or alcohol-to-jet fuels. 


Challenges for the bio-ethanol industry are re-capped on pages 2-3, building off of our recent research. Hence how could new technologies fix the economics and carbon credentials of corn-based ethanol?

Our constructive outlook on ethanol + CCS is presented on pages 4-6. Ethanol plants have the unique advantage of a nearly pure CO2 stream from fermentation, allowing them to by-pass the costly and energy intensive amine process. The resultant fuel can be considered carbon negative. White Energy and Oxy are pursuing a project.

Our outlook for bio-plastics is presented on pages 7-10. Costs of bio-ethylene will likely be 2x higher than conventional ethylene, mainly due to running ethanol as a feedstock. Although encouragingly, ethanol dehydration could be 70% less energy intensive than ethane cracking.

Our outlook for alcohol-to-jet fuel is presented on pages 11-12. If our numbers are correct, some projects could result in 3-4x higher costs compared to conventional jet, despite minimal CO2 savings. Thus companies in this space are pursuing more novel pathways.

Biofuels: better to bury than burn?

The global bioethanol industry could be disrupted by a carbon price. Between $15-50/ton, it becomes more economical to bury the biofuel crop, rather than convert it into biofuels. This would remove 8x more CO2 per acre, at a lower total cost. More conventional oil could be decarbonized with offsets. Ethanol mills and blenders would be displaced. The numbers and implications are outlined in this 12-page report.


Nature-based solutions to climate change need to double annual CO2 uptake from plants in our models of decarbonization, using forests and fast-growing grasses (pages 2-3).

We profile the bioethanol industry, which is already using fast-growing grasses to offset 2Mbpd of liquid fuels. But our models suggest the economics, efficiency and CO2 intensities are weak (pages 4-6).

A first alternative is to reforest the land used to grow biofuels, which would carbon-offset 1.5x more oil-equivalents than producing biofuels (pages 7-8).

A more novel alternative is to bury the biomass, such as sugarcane or other fast-growing grasses, which could sequester 8x more CO2, with superior economics at $15-50/ton CO2 prices (pages 9-11).

Company implications are summarized, suggesting how the ethanol industry might be displaced, and quantifying the CO2 intensity of incumbents (page 12).

Do refineries become bio-refineries?

What will happen to oil refineries during the energy transition? On our numbers, liquid oil products will be needed past 2100, long after demand plateaus in the 2020s. Cleaner, more efficient technologies are therefore required in the downstream sector. This note considers whether refineries could increasingly be converted to bio-refineries.

Our evidence comes from the patent literature, as we have reviewed 3,000 patents from the leading 25 Energy Majors. 8% are focused on new energies (chart below, full details in our deep-dive note). Eni screens as the leader for converting refineries to bio-refineries, hence this note summarises its relevant patents on the topic.

Historical Context. Use of vegetable oils in diesel engines goes back to Rudolf Diesel, who, in 1900, ran an engine on peanut oil. Palm oil and peanut oil were both used as military diesel in Africa in WWII. However, vegetable fuels were abandoned due to high costs and inconsistent quality, compared with petroleum fuels.

Today’s vegetable oil fuel-blending components primarily contain Fatty Acid Methyl Esters (FAME). However, they cannot be blended beyond c7% without causing problems in auto engines. For example, FAME has a low energy content (38kJ/kg vs diesel at 45kJ/kg), a -5 – 15C cloud point, causes pollution in tanks, polymerises to form rubbers, causes fouling, dirties filters and contaminates lubricants.

Regulation is nevertheless stoking demand for more dio-diesel, going beyond the 7% threshold. Europe Directive 2009/28/C mandates 10% renewable material in diesel by 2020, up from 5% in 2014.

Eni is therefore converting refineries to bio-refineries, to upgrade renewable materials into “green diesel”. A 0.36MTpa facility started up at Porto Marghera, Venice in 2014. A larger, 0.7MTpa facility started at Gela in 2019. Both convert vegetable oils into diesel.

Patents indicate how they work. The starting point is a conventional oil refinery, with two sequential hydro-desulfurization units. For the conversion into a bio-refinery. these units are re-vamped into a hydrodeoxygenation reactor (HDO) and a subsequent hydro-isomerization reactor (ISO), shown in the schematic below.

  • HDO occurs in the presence of hydrogen, a sulfided hydrogenation catalyst from Group VIII or VIB metals, at 25-70 bar and 240-450C.
  • ISO occurs at 250-450C, 25-70bar and a Metal (Pt, Pd, Ni) Acid catalyst on an alumino-silica zeolite framework.
  • Upstream modifications. Pre-treatment processes, surge drums and heat-exchangers are installed upstream of each reactor.
  • Downstream modifications. The output products from the reactors will contain 1-5% H2S, which is removed in an acid gas treatment unit, and then a Claus unit for sulphur recovery; both reached via new connection lines.

The main advantage of this process is cost, which is said to be 80% lower than constructing a new facility. For example, the Porto Marghera project was budgeted at €200M. In its patents, Eni states: “This method is of particular interest within the current economic context which envisages a reduction in the demand for oil products and refinery margins”.

Further advantages are that the produced diesel has excellent properties, including a high octane index, optimum cold properties, high calorific value and a further by-product stream of commercial LPGs. Moreover, the efficiency of the converted facility is seen to be similar to one constructed anew.

The disadvantage is that blending of free fatty acids is limited to c20%. This is why the bio-refineries so far intake 80% palm oil (which contain <0.1% free fatty acids). Eni states: “The reactor used for effecting the HDO step, deriving, through the method of the present invention, from a pre-existing hydrodesulfurization unit, may not have a metallurgy suitable for guaranteeing its use in the presence of high concentrations of free fatty acids in the feedstock consisting of a mixture of vegetable oils. The reactors of the HDO/ISO units specifically constructed for this purpose, are in fact made of stainless steel (316 SS, 317 SS), to allow them to treat contents of free fatty acids of up to 20% by weight of the feedstock”. Processing a broader range of vegetable oils and other waste oils would require a more costly refinery re-vamp.

Further challenges are that the production of hydrogen and other industrial above will be energy intensive. Moreover, Eni’s 1MTpa of green diesel production capacity is only equivalent to c20kbpd of fuel. It will be challenging to source sufficient feedstocks to scale bio-refineries up to meet larger portions of the world’s overall fuel needs.

Our conclusion is therefore that bio-refineries have potential when re-purposing existing downstream facilities, preserving value in the very long-term future of the industry. However, further technological improvements are required before these facilities can scale up or deliver material, and truly decarbonised hydrocarbons. Out of Eni’s other refining patents, we are most positive on Eni Slurry Technology, which is a leading technology for IMO2020 (chart below). For details of other technology leaders in energy, please see our note, Patent Leaders.

Source: Rispoli, G., F. & Prati, C. (2018). Method for Re-Vamping a Conventional Mineral Oils Refinery to a Bio-Refinery. US Patent US2018079967.

Copyright: Thunder Said Energy, 2022.