Biodiesel is a clean and renewable fuel which is produced from the waste generated of vegetable oils, animal fats, and recycled restaurant greases. It produces less toxic gases and pollutants compared to petroleum diesels.
Different forms a biodiesel can be used are:
B100: Pure Biodiesel
B20: 20% Biodiesel and 80% Petroleum Diesel
B5: 5% Biodiesel and 95% Petroleum Diesel
B2: 2% Biodiesel and 98% Petroleum Diesel
These different types of forms are helping countries to reduce their dependency on foreign oil (imports). Moreover, biodiesels can be used in the existing diesel engines and fuel systems with little to no modification.
Key benefits of using Biodiesels are:
Lower Greenhouse Gas Emissions
Promote local production
Biodiesels help in reducing dependency on fuel imports as it can be produced from domestic energy crops. Moreover, the Bio refineries exert less toxic chemicals compared to traditional fuel refineries such as benzene and butadiene which are harmful to the environment
The global biodiesel market size was estimated at USD 38.5 billion in 2020 and is expected to register a compound annual growth rate (CAGR) of 7.3% from 2021 to 2027. Key driving factors include: preference towards use of fuel which results in lower emissions and fluctuating prices of petroleum-based products.
Automobile manufacturers such as DaimlerChrysler and Volkswagen are encouraging consumers to use biodiesel by extending warranties on vehicles that run on such fuel. Similarly, in the US – The Department of Defense (the single largest consumer of oil) has decided to use biodiesel blends in most of it on-road fleets.
Europe has been the largest market for the product over the past few years owing to the early adoption of the product in the region coupled with high government focus to replace carbon-emitting sources with bio-based products.
Biodiesels have the potential to become cheaper than gasoline in the near future as the fossil fuel prices keep rising. However, the actual cost benefit comes from fewer emissions while burning, it also has better lubricating properties which reduces maintenance on engines and lower pollution check costs.
The high cost of biodiesel is considered to be the major drawback to its commercialization compared to petroleum-based diesel. It is around 2 times more expensive than fossil diesel. The cost of raw oil makes up for more than 70% of the total cost. Governments implement subsidy as one of the economic incentives but the real effect of the incentive remains uncertain. The investment subsidies reduce the revenue of biodiesel enterprises. This is mainly because after the investment, enterprises have to bear the operational risks especially when there is a serious shortage in the supply of raw materials, which makes it an insufficient incentive.
The key suppliers for biodiesel are Archer Daniels Midland Company, Bunge Ltd., Neste Corp., Renewable Energy Group Inc., Wilmar International Ltd., and Cargill Inc. The supply market for biodiesel is highly fragmented with several local suppliers offering the product. The market is expected to move towards consolidation as suppliers are focusing on expansion and M&A activities.
In October 2020, Renewable Energy Group announced a planned expansion of the Geismar Renewable Diesel Plant to 340 million gallons per year from the previously installed capacity of 90 million gallons.
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