The Top 5 Issues in LCFVs This Week: Advanced Biofuels Critical for Low Carbon Transport

10.27.16 | Blog | By:

Happy Thursday friends! Here’s my weekly take on the five most interesting developments in LCFV trends over the last week.

  • IRENA released an outlook on advanced biofuels noting that they have critical role to play in low carbon transport. Technological innovation and long-term policies that provide regulatory certainty are needed ― along with a carbon price.
  • Fitch said last week an “investor death spiral” in oil could happen as early as 2023 precipitated by “a leap forward” in EV technology. Fitch urged oil companies to “react early” and to consider diversifying.
  • Transport was a focus at the UN’s Habitat III conference in Quito, Ecuador. Stakeholders seemed to agree that motorized transport needs to go, at least in large cities, in favor of walking, bicycling, public transport and ride sharing with electric vehicles.
  • The Global Fuel Economy Initiative has turned its attention to promoting improved fuel economy in heavy-duty vehicles (HDVs) around the world.
  • As if on the same wavelength, the Union of Concerned Scientists and the Greenlining Institute released a report reviewing the technology status of electric HDVs in California. While fleet managers last week seemed dubious about the prospect, UCS says the technology is available now and should be deployed given HDVs’ contribution to air pollution and global warming in the state.

1. International Renewable Energy Agency (IRENA): Innovation Outlook: Advanced Liquid Biofuels

IRENA released a report late last week on the global technology outlook for advanced biofuels between 2015-2045, focusing on fuels for road transport, shipping and aviation. The agency reviewed technical and non-technical barriers to commercial deployment, the role of innovation in overcoming these barriers, strategies to support advanced biofuels in all stages of the chain. IRENA notes that:

“Biofuels have a vital role to play in the global transition to sustainable, renewable energy. Together with electric vehicles and the increase of renewables in the power mix, they can help us move away from petroleum use in passenger transport. They also provide the only practical alternative to fossil fuel for planes, ships and heavy freight trucks…


… Transport accounts for about a third the world’s energy use, half its oil consumption and a fifth of its GHG emissions. There will be around two billion vehicles on the road by 2020. Aviation alone causes nearly 3% of global carbon emissions, a share that is likely to grow. Against this background, further development of sustainable, renewable biofuel options is essential. IRENA’s REmap analysis to double the global share of renewable energy by 2030 shows that advanced biofuels production has the potential to grow more than hundredfold over a 15-year period (IRENA, 2016).”

The figure below compares gasoline/diesel demand scenarios to biofuels demand from different organizations (BP, Exxon, EIA, IEA, IRENA). The fuel scenarios all point to increased fuel demand over the next 30 years with the bulk of the growth coming from Asia (lead by India and China).


According to IRENA (and the estimates above), global biofuel demand is expected to at least increase steadily in 2015-2045 according to most scenarios but these differ very broadly. In 2030, the estimates range from 257 to 500 billion liters per year. For comparison, global production of liquid biofuels was 128 billion liters in 2014 (REN21, 2015).The projected demand depends on assumptions about policies and biofuel availability and cost.

The idea is that if the challenges in attendant to commercializing advanced biofuels can be overcome, there is potential to capture a larger share of that fuel demand. But right now, and as shown in the figure below, only bioethanol (via fermented feedstock) and biomethanol (via gasification) are both ready for commercialization. Other production pathways are at early stages of development, according to IRENA.


According to IRENA (and others in the space, see my recent post on the Biofrontiers project), more targeted policies will be needed to help support the development of the industry and regulatory certainty is a must. A key driver for advanced biofuels is the Paris Agreement and meeting both 1.5°C and 2°C commitments. The underlying assumption of the analysis in my view is that the internal combustion engine (ICE) is going to be around for some time and therefore will need the cleanest, least GHG emitting non-fossil liquid fuels possible.

Other key findings include the following:

  • Innovation may reduce the cost of advanced biofuels production by up to a third over the next three decades. Yet they may not become consistently competitive without a price on carbon emissions. IRENA notes the production cost of advanced biofuels is likely to amount to US$0.60-1.10 per liter by 2045.At oil prices below US$80/bbl, advanced biofuels would have difficulty competing with fossil-based gasoline and diesel. But if oil prices exceed US$100, most advanced biofuels should be able to compete effectively.
  • Along with technological innovation, policies and business models are needed to bridge the way, ensuring that plants continue to be built and production costs continue to decline. Carbon pricing in fuel markets, in IRENA’s view, would promote the emergence of an advanced biofuels industry.
  • A wide range of feedstocks can be used to produce advanced liquid biofuels, but their costs are the greatest contributor to production costs at 40-70% of total production costs (see figure below). Establishing practical, efficient feedstock supply chains at scale, therefore, is crucial for the success of advanced biofuels.


  • A lack of regulatory clarity and stability, combined with externalities like oil price volatility, hinders investment in advanced biofuel production. However, according to IRENA, investments have stagnated over the last few years due to lower oil price expectations and a perceived weakening in policy support (see figure below). Demonstration and commercial plants at present add 1 billion liters per year of advanced biofuels production capacity, which would meet just 0.04% of the current liquid transport fuel demand. Plants planned or under construction would add another 2 billion liters per year of capacity. These include plants producing ethanol, methanol, mixed alcohols, diesel and jet fuel. Most are in Europe and North America. Clearly, the pace will have to increase exponentially, and projects develop further afield, if advanced liquid biofuels are to fulfill their practical and economic potential for displacing fossil fuels.


2. ThinkProgress: Electric Car Revolution May Drive Oil ‘Investor Death Spiral’

The investor death spiral could happen as early as 2023, according to two studies cited in this article. One comes from Fitch Ratings, which released a report last week noting that the leap forward in technology development for electric vehicles, especially for batteries, may precipitate a rapid decline in oil demand – sooner than expected. Fitch noted:

“A leap forward in technology could transform the viability of electric vehicles (EVs) as an alternative to the internal combustion engine. This would be resoundingly credit negative for the oil sector, as transport accounts for 55% of oil consumption. Electric utilities and automotive companies could become polarised between winners and losers. But renewables companies could significantly increase their market share as batteries help solve the problem of intermittent supply.”

But Fitch also cautioned:

“Assessing the chances of a rapid decline in oil demand due to EV growth is key to understanding the oil sector’s prospects. Even if there were swift advances in battery technology, barriers to rapid shifts in demand would remain high. The transition to EVs will be slow due to the need for infrastructure investment and the fact that new vehicles can have a 20-year lifespan. We calculate that with a 32.5% compound annual growth rate in EV sales it would be nearly 20 years before EVs comprised a quarter of the global car fleet. Overall growth in the global fleet due to rising emerging-market sales would also limit the impact on oil demand.


But reduced transport fuel demand could tip the oil market from growth to contraction earlier than anticipated. A market with structurally falling demand will be a lot more risky for all oil companies, with long periods of low prices and investment uncertainty, as demonstrated by the current slump in oil prices.”

Fitch advised oil companies to “react early” and to consider diversifying, noting that some companies are already doing just that.  “Many are already taking initial steps such as diversifying into batteries or renewables or focusing more on natural gas, and many are actively participating in the debate around future energy sources.” Fitch added:

“If nothing else, this diversification will help guard against the risk that the markets turn against them. The narrative of oil’s decline is well rehearsed – and if it starts to play out there is a risk that capital will act long before any transition occurs. This could reduce oil companies’ access to equity and debt capital, increasing funding costs during a crucial period.”

Bloomberg New Energy Finance (BNEF) earlier this year predicted the “oil demand tipping point” would be as early as 2023, which the ThinkProgress article points out.  Then, BNEF pointed out that a global glut of 2 million barrels a day is what triggered the 2014 oil price collapse. Their analysis concluded that if electric vehicles continued their recent growth rate, EVs could displace that much oil demand as early as 2023, shown in the figure below.


Statoil CEO Eldar Saetre said much the same last week at a conference in London, stating that oil demand will peak in the 2020s and then start to shrink.

3. United Nations: Habitat III Outcomes: The New Urban Agenda

Last week thousands of people converged in Quito, Ecuador for the United Nations’ Habitat III conference, known as the UN’s Conference on Housing and Sustainable Urban Development,  held every 20 years since 1976. The conference is dedicated to finding solutions to encourage the sustainable development of cities, including transport. Read more about it here.

4. Global Fuel Economy Initiative (GFEI): New GFEI Report Provides First Estimate for Fuel Efficiency Potential of HDVs

As the global demand for freight transport continues to grow, improving the efficiency of on-road freight vehicles is an increasingly important step to mitigate the resulting climate impacts, according to GFEI. Read more about it here.

5. Union of Concerned Scientists (UCS) and the Greenlining Institute: Trucks and Buses: The Next Frontier in Electric Vehicles

Heavy-duty vehicles (HDVs) are a significant source of local air pollution and global warming emissions in California, however, the deployment of electric HDVs and buses have been slow. (Reference the post I wrote last week highlighting a survey of fleet managers who stated they were not likely to choose options such as electric vehicles because of their cost and availability.) UCS and the Greenlining Institute examined the state of technology for electric HDVs and buses finding that:

  • With recent innovation, these vehicles can meet the requirements of many demanding applications.
  • With the right job-training and equitable hiring policies and programs, California’s emerging electric truck and bus sector can provide opportunities to increase employment in underserved communities.
  • As shown in the figure below, HDVs are a significant source of the state’s global warming emis­sions, accounting for 7% of the total—a proportion estimated to increase over the next 30 years, according to the California Air Resources Board (CARB). They are the single largest source of nitrogen oxides (NOx) in California (emitting 33% of the state’s total) and produce more particulate matter (PM) than all of the state’s power plants combined (23 tons per day versus 7 tons per day, respectively).


  • Battery electric buses have no tailpipe emissions and fuel cell electric buses produce only water vapor, eliminating hazardous exhausts where these vehicles operate. Their emissions depend solely on how the electricity and hy­drogen fuel are produced.
  • Life cycle global warming emissions from fuel cell elec­tric buses are more than 50 percent lower than both compressed natural gas (CNG) or diesel buses (see figure below). Life cycle global warming emissions from battery electric buses are nearly 75% lower than both CNG and diesel buses.


  • Battery and fuel cell electric buses have lower life cycle NOx emissions than diesel and CNG buses (see figure below). This includes CNG buses with soon to be released en­gines certified to meet California’s voluntary low-NOx standards (0.02 g NOx/brake horsepower-hour).


  • Battery and fuel cell electric buses have lower life cycle particulate matter emissions than diesel buses. Electric buses powered by electricity from sources representative of California’s current power mix (e.g., natural gas, solar, wind, hydroelectric) show less dramatic reductions in particulate matter due to electricity generation from coal and biomass power plants.
  • Battery electric and fuel cell electric heavy-duty vehicles meet the specifications of many transit bus and urban truck operations. Today’s electric vehicle (EV) technology includes vehicles with ranges of more than 100 miles per charge and charging and refueling times under 15 minutes (see figure below).


The report makes the following policy recommendations:

  • Continue and expand the use of financial incentives to offset the incremental capital and infrastructure costs associated with clean vehicle technologies.
  • Direct funding for heavy-duty EVs toward communities most affected by pollution from HDVs and to small businesses most burdened by the costs of transi­tioning to clean technologies.
  • Design electricity rates and make investments in charging infrastructure that facilitate a transition to electric trucks and buses.
  • Provide technical assistance to small businesses and fleet managers to facilitate their adoption of EVs, which come with different operating considerations than do traditional vehicles.
  • California’s electric truck and bus manufacturers should support the development of formal training pathways for new workers from underserved communities so they can access employment in this emerging field. Manufacturers can partner with workforce training organizations, work­force development boards, and community colleges to es­tablish pathways for training and certifying workers from these communities and place them in quality jobs.
  • California’s government agencies should invest in skill-development programs aimed at training jobseekers in un­derserved communities to fill the emerging employment needs in the heavy-duty EV industry and related transporta­tion electrification fields.
  • Job training organizations should evaluate the heavy-duty EV sector—and the larger transportation electrification sector—for the potential to establish formal job-training programs, especially if investments supporting this sector continue to grow.
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