Waste-based biofuel could be key driver for global energy transition, Wood Mackenzie says

Waste-based biofuels can prove to be a key driver of energy transition efforts and boost the current limited global supply of low-carbon transportation fuels, according to Wood Mackenzie.

As the world transitions to new and sustainable energy sources, the somewhat neglected biofuel sector may have a crucial part to play and help create circular economy, the global research consultancy said in its latest report on Friday.

Biofuels — cleaner replacement for petroleum-based fuels that are produced from renewable sources including new and used vegetable oils and animal fats — currently account for only 3 per cent of the world’s 100 million barrels per day liquid fuel demand.

However, development of new technology can increase biofuel production from municipal waste, agricultural residue and by recycling plastics wastes.

This could add an additional 20 million bpd of liquid biofuel by 2050, about a quarter of all future liquid fuel demand, which is estimated at 95 million bpd in 2050.

“Many governments have understandably pulled away from using food-based biofuels, which has hampered the industry’s growth,” Wood Mackenzie vice president Alan Gelder said.

“However, there still is plenty of opportunity for growth, especially when we look at waste-based alternatives.”

Biofuels are becoming increasingly important to global efforts for energy transition as governments around the world push to meet their carbon neutrality targets by mid-century.

Sustainable fuels are vital for the transport sector, especially the global aviation industry that has set ambitious goals to cut its carbon footprint by 2050.

Airlines across the globe are investing heavily in developing new sources of alternative fuels. They are also increasingly using sustainable aviation fuels to power flights. In 2019, UAE’s Etihad Airways operated the UAE's first commercial flight powered in part by biofuel generated from Abu Dhabi-grown plants.

The UAE’s national flag-carrier has cut its carbon emissions by 56 per cent between 2018 and 2021 as it successfully implemented programmes aimed at establishing a more sustainable business model. In May, it carried out the world’s most intensive sustainable flight-testing programme, completing 42 eco-flights over a five-day period.

In June, Sydney-based Qantas Airways and Airbus said they would jointly invest up to $200 million to kick-start Australia's sustainable aviation fuels industry.

“For some areas of the transport sector, such as air travel, there is little alternative to liquid fuel, making decarbonising difficult,” Mr Gelder said. “This source of biofuel could be tremendously beneficial, providing a cleaner fuel alternative that addresses both future power and environmental needs.”

Wood Mackenzie said using waste material for fuel would result in significant savings on landfill or incineration costs and related emissions. Bio-based diesel and aviation fuels from plant-based feedstock could emit 80 per cent less carbon than the crude oil-based products that dominate market today.

“Waste-based biofuels would curb carbon emissions at a similar rate and solve issues for industries that are hard to electrify,” the consultancy said.

The net-zero pathway demands that nearly half of biofuels consumed in 2030 — 45 per cent — must be produced with waste, it said citing the International Energy Agency.

Various technology to convert solid wastes into liquids is in development stage and will give rise to local circular economies as advanced processes will be conducted at local refineries.

“In turning waste into biofuels, being local is an advantage,” Mr Gelder said. "The biofuels ecosystem would revolve around a hub-and-spoke distribution model, where the initial conversion of waste to biofuels is local, with the liquids produced then aggregated for processing in an existing refining facility.

"Refineries know how to do this and for many, this could be key to their long-term viability. It would have tremendous benefits to local economies and employment, creating a powerful argument for governments to develop incentives.”

Wood Mackenzie said if all fell into place for waste-based biofuels, “the accelerated energy transition projections are dramatic”.

In the consultancy’s accelerated energy transition scenario, the global demand for liquids would fall to only 35 million bpd by 2050, 60 per cent lower than the base case. Biofuels could meet two thirds of liquids demand in hard-to-decarbonise transportation sectors, as well as provide circular feedstocks for petrochemicals.

It said: “If the refining sector begins to process waste for biofuels and governments support the initiative, we could be on a viable pathway to a circular economy, with its many benefits, that is compatible with mitigating climate change. It’s a win-win scenario.”