Biofuel Developers Can Thrive Despite Cheap Oil

Renewable diesel producers Neste Oil and Diamond Green Diesel, gasification specialist Red Rock Biofuels, and Edeniq, which makes cellulosic ethanol, were among 13 producers of alternative fuels best positioned to compete with cheap oil, according a report from Lux Research.

How Alternative Fuel Companies Will Compete with $50 Oil evaluated 25 alternative fuel producers from seven technology families, four feedstock types and three stages of development and found that many developers have planned for low oil prices and some will still be able to achieve cost reductions needed to thrive.

“Many companies have technology roadmaps for cheaper alternative fuels,” says Yuan-Shend Yu, lead author of the report. “Not all of them will actually achieve that benchmark, but some will – while others will find alternate markets or, ironically, use support from oil majors to survive until prices rise again.”

The report includes the following findings:

• Due to lowered production costs achieved through feedstock diversification, renewable diesel producers Neste Oil and Diamond Green Diesel were the clear leaders in Lux’s model. On the other hand, Solena Biofuels and Joule Unlimited were among the laggards due to delayed production and commercialization.
• Amid low oil prices, high-profile companies such as Solazyme, Amyris and Gevo have shifted toward specialty chemicals and nutraceuticals this year. Sapphire Energy also has shifted away from fuels and now targets nutraceuticals, producing Omega-3 EPA from its algae.
• Believing cheap oil to be a short-term phenomenon, oil majors have remained prominent supporters of alternative fuel developers across various technology platforms. For example, Total has added to its existing portfolio in biofuels and bio-based chemical companies by investing in Renmatix, a biomass-to-sugars company.

In its earlier analysis of 156 alternative fuel companies, Lux said 2013 would be a make or break year.