Survey: Future Investments in Biofuels will be in Asia
4:23 AM MST | March 5, 2012 | By NADIM CHAUDHRY
By Nadim Chaudhry, CEO of Green Power Conferences
We polled more than 100 leaders in the industry for their thoughts and predictions about the biofuels and biochemicals industries.
In the past few years, we’ve seen the rise of dedicated green chemicals companies as well as first and second generation biofuels companies begin to develop chemicals platforms or products into their portfolio.
In fact, most of the recently announced biorefineries include both chemicals and biofuels. So, what does the future hold for this approach?
Survey respondents were clear in their belief that the future investments in biofuels companies in the coming decade will be in Asia – with nearly half of recipients identifying this region. Europe (17%) and North America (15%) placed a distant second and third, respectively.
Our take? First, it’s simple math – economic development in Asia is increasing demand for energy and investment typically follows demand. But second, I also have to wonder if the political uncertainty surrounding clean energy development in the U.S. and the environmental concerns about biofuels in Europe are dampening the investment climate in those regions.
We see some evidence of this in the responses to our survey question asking which factor will most influence investments in bio-based chemical and fuels. The global price of oil is seen as the major driver, with 44% of respondents choosing this as the most influential factor, followed by government mandates with about 23%. We’re seeing mandates or policies in Asia spur the development of clean energy, whereas in the U.S. and Europe policies are subject to the forces of political parties that have not yet been able to fully commit to long term clean energy policies. Of course, if oil prices continue their unprecedented rise, it’s possible that supportive alternative fuels policy could follow.
In the renewable chemicals world, it’s clear that government policies – especially those that are pro bio-based, will be the key to moving the industry forward. More than 42% of respondents ranked this as the most critical to the industry’s success.
Beyond that factor, responses were evenly divided between “partnership with traditional chemical company” (18.6%) and “Products being drop in replacements” (19.5%). A close fourth was “Acquisition by existing chemical or oil company” (13.6%).
The second tier responses highlight trends we’ve seen become increasingly prevalent in the past two years – green chemical companies producing bio-based replacement chemicals at competitive prices – usually in concert with a strategic partner. Examples of this strategy include Method partnering with Segetis (cleaning products), Anheuser-Busch and Blue Marble Biomaterials (personal care and cosmetics), and Coca Cola with Gevo, Virent, and Avantium (“PlantBottle” bioplastics).
In fact many start-up green chemical companies are looking to contract manufacturing or tolling agreements to prove the scalability of their technology. Such a strategy allows them to avoid the highly dilutive, and hard to secure, capital needed for facilities. I expect this trend to continue – if not accelerate – in 2012 and beyond.
Interestingly enough, survey respondents were unanimous on one topic – the influence of successful IPOs on the industry: Some 1.7% of those surveyed said successful IPOs would help the bio-based chemicals industry while less than 4% said that IPOs would be critical in driving investments in biofuels.
So – look for both industries to continue to push for stable and supportive policies to “set the table” for demand, while simultaneously working with strategic partners to produce price competitive, drop-in alternatives to petroleum fuels and chemicals in 2012.
Should be quite a year!
Nadim Chaudhry is the Founder and CEO of Green Power Conferences. Official survey results will be released during the World Biofuels Markets and BioBased Chemicals conference, March 13-15 in Rotterdam, Netherlands.