IHS Chemical Week

CHEM IDEAS

Disruptive Technologies in Transport Fuels

7:06 AM MST | January 6, 2010 | By MELISSA STARK, ACCENTURE

Never before has there been so much uncertainty over the future supply and demand for hydrocarbons, particularly in transport, which accounts for 50% of primary oil consumption. Some argue that biofuels and electric vehicles will not have much short or medium term impact, but there is now evidence that a range of technologies could be commercial within just five years.  But it will take further steps by innovators and regulators to make that happen.

Accenture has undertaken one of the industry’s first studies to compare key technologies and evaluate them against the same criteria. We have identified 12 technologies that could disrupt the hydrocarbon market. The criteria considered if fuels had the potential to impact the demand of the hydrocarbons that they replace by at least 20% by 2030, generate greenhouse gas (GHG) savings of greater than 30% over those hydrocarbons and be cost competitive at an oil price of between $45 and $90/bbl. Finally, Accenture profiled companies who plan to commercialize the technologies by 2014.

Low Hanging Fruit

Perhaps the most surprising disruptive technology is the next-generation internal combustion engine. Fuel injection, power train systems and lighter materials will allow it to offer the most immediate and significant emissions reductions. We believe that the 100 mpg car could be achieved by 2030, beating today’s 40 mpg in Europe and Japan or the 35.5 mpg targeted in the U.S. by 2016.

Another example of ‘low hanging fruit’ that is underestimated is next generation agriculture, where biotechnology continues to enable significant increases in yield, step changes in process and the upgrading of co/by-products.

Genetic engineering critical to biofuels

Next generation biofuels will have an even greater impact on the hydrocarbon market thanks to advances in genetic engineering, impacting feedstock, deconstruction, conversion and by/co-product upgrading. See Figure 1.

Genetic Engineering in Biofuels

 

 

In addition to next generation agriculture, genetic engineering is also playing a key role in three other technologies in our report.

Sugar cane-to-diesel: Synthetic biology can now convert sugar cane to diesel and we expect it to be commercialized before 2014, helped by sugar cane’s availability and its relatively low cost compared to first generation palm, soy and rapeseed feedstocks.

Butanol has similar energy content to gasoline, can be transported through existing pipelines, and can be blended with gasoline at higher ratios than ethanol. Synthetic biology has helped overcome some of the yield and toxicity challenges in the traditional acetone-butanol-ethanol (ABE) process.  We expect butanol to be commercial before 2014.  

Algae: Algae promises yields up to 25 times greater than soybeans and introduces a potentially abundant feedstock. The costs are still high ($8-32/gall), and we believe it will take 10 years to commercialize. But genetic modification is helping to produce higher yield strains that are easier from which to harvest and extract oils. 


Figure 2:  Possible biofuels evolution

Challenges

Biofuels face a range of challenges, most prominently, competition from the internal combustion engine and plug-in hybrid electric vehicles (PHEVs). Other barriers include:

Ethanol blending wall. Today, only flex-fuel vehicles (FFVs) are allowed to use blends of more than 10 percent ethanol, but the American Coalition for Ethanol (ACE) is pushing to raise the blending wall to 15 percent and to increase the allowable corn ethanol share of the Renewable Fuel Standards (RFS). This would buy the industry time to commercialize and roll out cellulosic ethanol. If the blending wall does not change, then the pace of the industry will be constrained by the roll-out of FFVs and the ethanol refueling infrastructure. 

Acceptance of genetic engineering. Genetic engineering is a key lever in using biomass to produce fuel. Many countries restrict the use of genetic engineering. Approval for commercial production is limited by EU legislation, which includes the “Directive on the Deliberate Release into the Environment of Genetically Modified Organisms” (2001) and the “Regulation on Genetically Modified Food and Feed” (2003). However, while cloning of human genetic material remains an ever contentious issue, acceptance of GM for fuel production is slowly growing.

Feedstock logistics. With harvesting and reprocessing accounting for up to 50 percent of feedstock costs, the infrastructure and processes required to effectively harvest and transport these materials to refining plants will be a key focus area.

Implications for innovators

The science has made significant progress, but innovators now have to turn their attention to business strategies that could make the difference between success and failure. 

Leading roles for scientists: Placing scientists in leading roles will be key to ensuring innovators communicate effectively with the public and regulators. For instance, this will help ensure that fuel categories defined in the Renewable Fuel Standards (RFS) would be modified to take into account new technologies such as sugar cane-to-diesel and algae.

Business model flexibility: Although the vertically integrated model has proved resilient to the volatility in feedstock and product prices, it is not available to all companies. Depending on feedstock, storage or distribution challenges, alternative partnership and contract models will have to be considered.

Execution and risk management skills: High performers will be those that invest in skills needed to optimize their supply chains and maximize operating margins to remain commercially competitive against gasoline and diesel, whose prices remain the benchmark.  They will also have to improve their risk mitigation skills to manage the volatility of feedstock and oil prices, a real test for companies that have thus far been focused on innovation.

Despite the commercial and policy moves towards low carbon fuels, many hurdles stand in the way of these potentially disruptive technologies. The innovative pioneers will now have to extend their skills from science to commerce, while governments will have to reinforce their scientific knowledge if they are to regulate effectively. Above all, they will both have to respond to the unprecedented variety of alternative fuel sources which will pose commercial threats as well as opportunities.

 

About the author: Melissa Stark is a senior executive with Accenture’s energy industry group. She leads the clean energy practice with a focus on biofuels.  Melissa is located in London, UK.

 

 

 

 













 
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