Biofuel Manufacturing
Description
Companies in this industry produce ethyl alcohol, known as ethanol, and biodiesel fuel. Major biofuel manufacturers include Green Plains, Poet, and Renewable Energy Group (all based in the US), along with Abengoa (Spain), Cosan (Brazil), and Novozymes (Denmark); as well as units of oil and gas producers such as Chevron and Valero, and crop processors such as Archer Daniels Midland and Bunge.
The global biofuels market is forecast to reach about $200 billion by 2030, according to Statista. The Middle East and Africa are among the top countries with expected growth. Factors influencing growth in the industry include government mandates and incentives, which in turn are driven largely by concerns about the environment, fossil fuel dependence, and waste management.
The US biofuel manufacturing industry includes about 200 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $30 billion.
COMPETITIVE LANDSCAPE
Demand is driven by motor vehicle use and government requirements that ethanol be blended into gasoline. The profitability of biofuel production facilities depends on prices of gasoline and diesel, which fluctuate based on world petroleum demand and domestic refinery use. Economies of scale in ethanol production are limited due to the transportation costs associated with gathering feedstocks (corn and other biomasses) and transporting the ethanol to blending sites. Small companies can compete effectively by developing business relations with distributors and by delivering consistently. The US industry is highly concentrated: the 50 largest companies generate more than 85% of revenue.
Ethanol imports account for about 1% of the US market and come mainly from Brazil, the second-largest producer of ethanol after the US. Ethanol exports, mainly to Brazil, Canada, and India, account for about 8% of US production.
New entrants join the biofuel manufacturing field regularly, and new technology breakthroughs are frequent. Federal and state government incentives keep barriers to entry relatively low. The industry is composed of mainly of small producers that operate a single facility. Top producers may have a dozen or more production facilities.
PRODUCTS, OPERATIONS & TECHNOLOGY
Fuel ethanol and other biodiesel fuels account for over 70% of the US industry revenue; other products include distillers' dried grains and dried solubles (10%) and wet process corn byproducts (5%).
Ethanol
Ethanol production requires corn or other high-starch grains, water, chemicals, enzymes and yeast, and denaturants such as unleaded gasoline.
In the dry milling process (used for about 90% of production), corn or other high-starch grains are first ground into meal and then mixed with water and enzymes to form a mash. The mash is processed at a high temperature in cookers to liquefy the mixture and reduce bacteria levels. Next, the mash is cooled; secondary enzymes, yeast, and ammonia are added; and a fermenting process converts the sugar to ethanol and carbon dioxide. The fermented mash, which is about 10% alcohol, is then transferred to distillation, where the ethanol is separated from the residual solids. The resulting ethanol is then blended with about 5% denaturant, usually gasoline, to prevent human consumption, and is then ready for shipment to a blending site. The residual solids are processed and sold as high-protein animal feed.
In the wet milling process (used for about 10% of ethanol production), the grain is first steeped in a dilute sulphuric acid to facilitate separation of the grain into its component parts. The mixture is then ground, the germ separated, and enzymes added to convert the starches to glucose. After fermentation and distillation of the ethanol, the remaining mash is recombined with fiber and sold as corn gluten, an animal feed.
Ethanol cannot be transported through pipelines because it's highly corrosive and readily absorbs water; therefore, transporting it from the production facility to the blending facility is a challenge. Most bulk transportation is by rail in specially equipped tanker cars. While many refineries are located in coastal areas, transporting ethanol by water (barge or tanker) presents a number of problems that make heavy use impractical.
Biodiesel
Biodiesel is a clean-burning alternative fuel derived from vegetable oils or animal fats. Biodiesel contains no petroleum, but can be blended with petroleum diesel to create a biodiesel blend. Diesel engines require no major modifications to burn either biodiesel blends such as B20 (a 20% biodiesel, 80% petroleum diesel blend) or B100 (100% biodiesel).
Biodiesel production is fairly simple and requires no elaborate equipment: fat or oil is mixed with methyl alcohol and a catalyst such as sodium or potassium hydroxide, and heated to produce glycerin and biodiesel (methyl ester). The glycerin is then separated from the biodiesel, purified, and sold as a separate product.
The global biofuels market is forecast to reach about $200 billion by 2030, according to Statista. The Middle East and Africa are among the top countries with expected growth. Factors influencing growth in the industry include government mandates and incentives, which in turn are driven largely by concerns about the environment, fossil fuel dependence, and waste management.
The US biofuel manufacturing industry includes about 200 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $30 billion.
COMPETITIVE LANDSCAPE
Demand is driven by motor vehicle use and government requirements that ethanol be blended into gasoline. The profitability of biofuel production facilities depends on prices of gasoline and diesel, which fluctuate based on world petroleum demand and domestic refinery use. Economies of scale in ethanol production are limited due to the transportation costs associated with gathering feedstocks (corn and other biomasses) and transporting the ethanol to blending sites. Small companies can compete effectively by developing business relations with distributors and by delivering consistently. The US industry is highly concentrated: the 50 largest companies generate more than 85% of revenue.
Ethanol imports account for about 1% of the US market and come mainly from Brazil, the second-largest producer of ethanol after the US. Ethanol exports, mainly to Brazil, Canada, and India, account for about 8% of US production.
New entrants join the biofuel manufacturing field regularly, and new technology breakthroughs are frequent. Federal and state government incentives keep barriers to entry relatively low. The industry is composed of mainly of small producers that operate a single facility. Top producers may have a dozen or more production facilities.
PRODUCTS, OPERATIONS & TECHNOLOGY
Fuel ethanol and other biodiesel fuels account for over 70% of the US industry revenue; other products include distillers' dried grains and dried solubles (10%) and wet process corn byproducts (5%).
Ethanol
Ethanol production requires corn or other high-starch grains, water, chemicals, enzymes and yeast, and denaturants such as unleaded gasoline.
In the dry milling process (used for about 90% of production), corn or other high-starch grains are first ground into meal and then mixed with water and enzymes to form a mash. The mash is processed at a high temperature in cookers to liquefy the mixture and reduce bacteria levels. Next, the mash is cooled; secondary enzymes, yeast, and ammonia are added; and a fermenting process converts the sugar to ethanol and carbon dioxide. The fermented mash, which is about 10% alcohol, is then transferred to distillation, where the ethanol is separated from the residual solids. The resulting ethanol is then blended with about 5% denaturant, usually gasoline, to prevent human consumption, and is then ready for shipment to a blending site. The residual solids are processed and sold as high-protein animal feed.
In the wet milling process (used for about 10% of ethanol production), the grain is first steeped in a dilute sulphuric acid to facilitate separation of the grain into its component parts. The mixture is then ground, the germ separated, and enzymes added to convert the starches to glucose. After fermentation and distillation of the ethanol, the remaining mash is recombined with fiber and sold as corn gluten, an animal feed.
Ethanol cannot be transported through pipelines because it's highly corrosive and readily absorbs water; therefore, transporting it from the production facility to the blending facility is a challenge. Most bulk transportation is by rail in specially equipped tanker cars. While many refineries are located in coastal areas, transporting ethanol by water (barge or tanker) presents a number of problems that make heavy use impractical.
Biodiesel
Biodiesel is a clean-burning alternative fuel derived from vegetable oils or animal fats. Biodiesel contains no petroleum, but can be blended with petroleum diesel to create a biodiesel blend. Diesel engines require no major modifications to burn either biodiesel blends such as B20 (a 20% biodiesel, 80% petroleum diesel blend) or B100 (100% biodiesel).
Biodiesel production is fairly simple and requires no elaborate equipment: fat or oil is mixed with methyl alcohol and a catalyst such as sodium or potassium hydroxide, and heated to produce glycerin and biodiesel (methyl ester). The glycerin is then separated from the biodiesel, purified, and sold as a separate product.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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