“Elements” – Bio-Fool’s Paradise-II: Technology vs Economics – The graveyard of biofuel technologies is filled with good intentions and even great technologies. As discussed in Part I, the major cause of the high mortality rate is that biofuels cannot economically compete against the fossil fuel it is designed to replace.
Technology developers often think big…usually too big. A common mistake is that a biofuel breakthrough can replace the targeted fossil fuel in the largest, which often translates into lowest priced, market. For solids biofuels, for example, coal is a favorite target. If the economics of the new process cannot compete in the coal-firing sector, then project developers might look at coking coal, which has higher prices, or instead of fuels, higher-value specialty chemicals could be investigated.
A related mistake is attempting to replace fossil fuels in low-cost electricity regions, such as Canada. Europe is a more popular target because of generally higher costs and greater incentives to reduce carbon emissions. A biofuel may also be more competitive in island and remote communities, especially those that are off-grid.
Another feature that affects the cost competitiveness of biofuels is the delivered cost of biomass and the quality of the biomass. Residual biomass is often less expensive. Biomass from invasive species control and waste treatment can have tipping fees associated with it.
The bottom line is that a market must be identified where the biofuel is cost competitive with the fossil fuel that it replaces. Energy/fuel costs, biomass costs, and carbon incentives are important factors to take into consideration. If the biofuel needs a $100/te carbon tax, then you must find a jurisdiction that has it or wait until one does.