Biofuels industry

Industry Snapshot

GENERAL INDUSTRY: Energy

CAREER CLUSTERS: Agriculture, Food, and Natural Resources; Manufacturing

SUBCATEGORY INDUSTRIES: Industrial Organic Gas Manufacturing; Nonpotable Ethanol Manufacturing; Transesterification of Vegetable Oils to Produce Fuels or Fuel Additives

RELATED INDUSTRIES: Automobiles and Personal Vehicles Industry; Coal Mining Industry; Farming Industry; Mass Transportation Vehicles Industry; Natural Resources Management; Petroleum and Natural Gas Industry

ANNUAL DOMESTIC REVENUES: $38.6 billion USD (ethanol; IBISWorld 2023); $45.3 billion USD (biodiesel; Precedence Research, 2023); $4.3 billion USD (biomethane; Transparency Market Research, 2022); $0.3 billion USD (bio-oil; Medium, 2023)

ANNUAL GLOBAL REVENUES:$117.7 billion USD (ethanol; Vantage Market Research, 2022); $117 billion USD (biodiesel; Statista, 2022); $14.4 million USD (ethanol and butanol; Facts & Factors, 2021)

NAICS NUMBERS: 325120, 325193, 325199

Summary

The biofuels industry uses organisms to generate renewable fuels. The major products of this industry are ethanol, biodiesel, and biogas. At present, biofuels are made mainly from plant materials such as corn, sugarcane, or rapeseed. Thus, the industry depends heavily on agriculture. Biofuels are excellent transportation fuels that are used as gasoline and diesel substitutes. Biofuels can also be burned in electrical generators to produce electricity. They are considered by many as a future substitute for fossil fuels such as coal, petroleum, and natural gas.

History of the Industry

People have been using biofuels such as wood or dried manure to heat their houses for thousands of years. The use of biogas was mentioned in ancient Chinese literature two to three thousand years ago. The first biogas plant was built in a leper colony in Bombay, India, in the middle of the nineteenth century. In Europe, the first sewage sludge digester for biogas production was built in Exeter, England, in 1895. Biogas from this digester was used to fuel street lamps in Exeter.

In 1900, Rudolf Diesel, the inventor of the diesel engine, used peanut oil to power his engine during the World Exhibition in Paris, France. Diesel said “the use of vegetable oil for engine fuels may seem insignificant today, but such oils may become, in the course of time, as important as petroleum.” Henry Ford’s first 1908 car, the Model T, was made to run on pure ethanol. In the 1920s, 25 percent of fuels used to power American cars were biofuels. Biogas was used occasionally as a source of energy during World War II.

In the 1940s, the relatively low cost of petroleum led to its wholesale adoption as a fuel. Biofuels and the biofuel industry became virtually nonexistent. Since that time, interest in biofuels has been renewed occasionally when oil supplies become limited and when prices have increased for other reasons. For example, a return to biofuels was considered in the United States during the oil embargo of the 1970s. While the United States did not act upon these plans, Brazil responded to the 1970s oil crisis by beginning large-scale production of ethanol as an automobile fuel. The country had already been using ethanol in cars since the 1920s, and by the 1980s it had built the world’s largest and most successful ethanol fuel program. Most cars in modern Brazil have flexible-fuel engines, which allow them to run on either ethanol or gasoline. As a result of this successful program, Brazil reached complete self-sufficiency in energy supply in 2006.

In the early twenty-first century, concerns over global warming, energy independence, peak oil, and oil prices have all combined to reignite interest in biofuels. A large-scale biofuel industry has begun to develop in many countries. In a short time, a large-scale American bioethanol industry has developed, making the United States the world’s second-largest ethanol producer after Brazil. There are more than 170 ethanol plants in the United States operating in more than twenty-five states. In 2005, Congress passed the Energy Policy Act, which included several sections related to biofuels. In particular, this law required mixing ethanol with gasoline. Nearly all US fuel stations sell a mix of 90 percent gasoline and 10 percent ethanol (known as E10), and a handful sell a mix of 15 percent gasoline and 85 percent ethanol (E85). Congress also enacted tax credits and grants for biofuel companies. In addition, the Energy Policy Act required the country to conduct more research on biofuel generation and to increase production of second- and third-generation biofuels.

The birth and growth of the ethanol industry worldwide was followed by the birth of the biodiesel and biogas industries. Biodiesel is mass-produced in more than twenty countries, and Europe is home to seventy-four biodiesel production plants. Germany is the world’s number one producer of biodiesel, producing 500 million gallons per year, based on canola oil. Over fifteen hundred outlets sell biodiesel in Germany. Several developing countries, such as Thailand, India, and Malaysia, produce biodiesel from palm oil and export it to Europe. In the United States, the first biodiesel pump was opened in 2001 in Sparks, Nevada. In late 2007, the country had more than 1,570 retail biodiesel locations. By 2014, US ethanol and biodiesel production had reached 32 billion gallons per year. Continental Airlines has successfully used a mixture of 50 percent standard fuel and 50 percent biodiesel to power the engines of a Boeing 737-800. The biodiesel used in the jet engines was produced from algae and plants.

In China in the 1990s, millions of small farmers maintained simply constructed underground digesters near their houses for biogas production. As many as ten thousand biogas digesters were operating in food factories, wineries, and other locations. Such companies were able to transfer their biogas to centralized supply stations or to biogas-powered electric power stations. China has become the world leader in biogas production.

The Industry Today

Since the beginning of the twenty-first century, the biofuel industry has undergone unprecedented growth and expansion. As of 2023, the United States was the leading biofuel producing company in the world, with Chevron's Renewable Energy Group being the country's largest producer. The United States was forecast to reach 71 billion liters by 2030.

Support from the US government and constant innovation are largely responsible for the rapid growth of the American ethanol industry. In the United States, most manufactured ethanol (C₂H₅OH) is grain alcohol, which is produced by yeast (fungal) fermentation of sugar from cornstarch. Sugar is extracted using enzymes, and yeast cells convert the sugar into ethanol and carbon dioxide (CO₂). Then, the ethanol is distilled from the fermentation broth. The US starch-based ethanol industry has consistently improved and developed. New technologies, such as low-heat fermentation, have lowered energy use, improved efficiencies, and increased yields.

The industry is rapidly commercializing technologies to utilize new types of feedstocks, in addition to corn, to produce new advanced biofuels. For example, ethanol can be manufactured from cellulosic feedstocks, including woodchips, native grasses, and corn stalks, as well as from municipal solid waste and nonedible plants such as poplar. Cellulosic materials are very attractive as ethanol fuel feedstocks because they are in abundant supply. Earth’s plants produce almost 100 billion tons of cellulose per year, making it the most abundant organic compound on the planet. In addition, cultivation of nonedible plants for ethanol production requires fewer nutrients and less fertilizer, herbicide, and cultivated land. Thus, cellulosic ethanol production requires less energy in general than does corn ethanol production. For that reason, major research and development efforts are under way to reduce the cost of converting cellulose to ethanol. As of 2010, in the United States alone, more than three hundred cellulosic ethanol projects were under development, and more than two dozen advanced biofuel plants were being constructed to achieve a projected production capacity of 170 million gallons of ethanol per year. The first full-scale plants began operating in 2013.

The biodiesel industry is also a site of considerable research and development. According to the US Energy Information Administration, from 2000 to 2012, worldwide biodiesel production increased from 15,000 to 431,000 barrels per day. Biodiesel is a diesel substitute that is currently being derived mainly from vegetable oils, such as soybean oil and restaurant greases. It is produced by the transesterification of oils, a simple chemical reaction with alcohol (ethanol or methanol) that is catalyzed by acids or bases such as sodium or potassium hydroxide. Transesterification produces alkyl esters of fatty acids that can be burned by diesel engines. In the United States, biodiesel is obtained mainly from soybean plants, while in Europe it is obtained from canola oil. Other vegetable oils that have been used in biodiesel production include corn, sunflower, cottonseed, jatropha, palm, and rapeseed oil.

Another potential source for biodiesel production is microscopic algae (microalgae), microorganisms similar to plants. Research conducted by the US Department of Energy Aquatic Species Program from the 1970s through the 1990s demonstrated that many species of algae produce sufficient quantities of oil to become economical feedstock for biodiesel production. Oil productivity of many microalgae greatly exceeds oil productivity of the most productive oil crops. Microalgal oil content can exceed 80 percent per cell dry weight, and oil rates of 20 to 50 percent are quite common.

Algae use oil (lipids) as a storage material. Compared to other crops, algae can grow their mass within hours. In addition, algae can grow everywhere: in oceans, rivers, lakes, the snow of mountaintops, forests, and desert soils, as well as on rocks. Algae do not need many inputs for growth—just solar light, water, carbon dioxide, and small quantities of mineral salts. Moreover, they not only can produce biodiesel but also can remove carbon dioxide from the atmosphere, potentially reducing the greenhouse effect that contributes to global warming. Crop land and potable water are not necessary for microalgae cultivation, since microalgae can grow in wastewater. Development of biodiesel from algae is becoming one of the most popular potential energy alternatives. As a result, more than one hundred algae-to-biodiesel start-up companies were established in the United States between 2005 and 2010.

The biogas industry has also grown to meet the demand for renewable energy sources. Biogas is gas that is produced by the metabolism of communities of microorganisms. There are different types of biogas. The type with the greatest current industrial potential contains a mixture of methane (50-75 percent) and carbon dioxide. Methane is a colorless, odorless gas with the molecular formula CH₄. It is the main chemical component of natural gas (representing 70 to 90 percent of most natural gas), which currently accounts for up to 20 percent of the US energy supply. Thus, biogas is a potential substitute for natural gas.

The greatest growth in the twenty-first century biogas industry has occurred in China. In 2007, more than four thousand biogas plants were operating in China. The Chinese government planned to build 4 million additional plants by 2030 to satisfy the energy needs of 600 million households. The German biogas market increased by 80 percent in 2009. In the United States, several landfill gas facilities generate electricity using biogas. The city of San Francisco extended its recycling program to include the conversion of dog waste into methane to produce electricity and residential heating. With a city dog population of 120,000, this initiative promises to generate a significant amount of fuel and achieve a huge reduction in waste at the same time. Some forty US and Canadian companies operate eighty biogas production plants.

Traditional biofuels such as biomass (wood material), ethanol, and biodiesel produced from crops are sometimes called first-generation biofuels. Second-generation biofuels, such as cellulosic ethanol, can be produced from agricultural and forestry residues and need not compete with food production. Many new second-generation biofuels, such as biohydrogen, are under development. Biohydrogen is an ideal fuel to be used for transportation, since the energy content of hydrogen is three times greater than that of gasoline by mass. Burning hydrogen is also virtually nonpolluting. A growing number of automobile manufacturers around the world are making hydrogen-powered vehicles. A study conducted by the International Energy Agency concluded that the potential of second-generation biofuels is considerable, while first-generation biofuels have only limited potential.

Fuels such as butanol are referred to as third-generation biofuels. Butanol (C₄H₉OH) is an alcohol fuel, but its energy content is roughly 80 percent that of gasoline—higher than that of ethanol. It does not absorb water as ethanol does, is not as corrosive as ethanol, and is more suitable for distribution through existing pipelines developed for gasoline. Butanol is produced as a result of fermentation by the bacterium Clostridium acetobutylicum. Substrates for such fermentation—including starch, molasses, cheese whey, and lignocellulosic materials—are the same as those used for ethanol production. The first butanol production plant was running in Terre Haute, Indiana, before World War II. Significant research and development efforts are needed over a period of at least fifteen years to ensure the successful deployment of second- and third-generation biofuels.

Industry Outlook

Overview

The outlook for the biofuels industry shows it to be on the rise. The production capacity of the biofuels industry is growing exponentially, as biofuel demand is driven by environmental, social, and economic factors and backed by governmental support. The US Energy Independence and Security Act of 2007 set an annual biofuel production goal of 36 billion gallons by 2022, but by January 1, 2022, the United States had reached only 21 billion gallons per year from 275 facilities. However, in 2022, President Biden allotted $700 million for biofuels producers and $100 million for biofuels infrastructure. As a result, the ethanol industry alone was projected to create about at least 500,000 new jobs.

The main reason that the biofuels industry has been on the rise is the ability of biofuels to help mitigate the devastating impacts of oil price increases. Oil prices were about $80 per barrel in 2022 and expected to rise. If biofuels can be produced more cheaply than oil, then replacing oil with biofuels will lower the average price of energy and satisfy an increasing demand that may not be met by oil alone. Moreover, competition from biofuels affects oil prices directly.

Biofuels are considered by many as a future substitute for oil. Pollution from oil use affects public health, and carbon dioxide released by burning fossil fuels contributes to global climate change. Using biofuels as an energy source generates fewer pollutants than using oil, and it produces little or no carbon dioxide—if the feedstocks are not produced with fossil-fuel-based fertilizers and the production process is not powered by fossil fuels. In addition, the utilization of biofuels reduces US dependence on foreign oil. The 2022 US governmental production target of 36 billion gallons of biofuels includes 21 billion gallons from advanced biofuels. If this target is met, US dependence on oil may be reduced by more than 328 million barrels per year. In 2022, as part of the Pandemic Assistance for Producers Program, the Biden-Harris Administration allotted up to $700 million in funding through a new Biofuel Producer Program, which supports agricultural producers that rely on biofuels producers as a market for their agricultural products. The program also allotted $100 million for biofuels infrastructure.

The biofuels industry is also on the rise internationally. This industry promises economic opportunities, environmental benefits, and energy security. World ethanol production in 2014 reached a record volume of 24.5 billion gallons, with the United States producing nearby 14 billion gallons in 2020. As the world market for biofuels expands, opportunities for new jobs in trade and technology development will grow as well.

In the United States, the ethanol industry has lobbied the government to raise the required ethanol content in gasoline from 10 percent to 15 percent. The approval of a mix of 85 percent gasoline and 15 percent ethanol (E15 blend) by the Environmental Protection Agency would open new opportunities for the ethanol industry to increase production and expand production facilities. It would create thousands of new jobs and trigger economic growth. More than 136,000 jobs would be created, and the economy would grow by more than $24 billion. Even greater economic benefits could result from the use of a 20 percent ethanol blend. Some critics, however, argue that higher blends could harm engines, although the ethanol industry disagrees. In addition, advanced biofuel technologies that could enter the market within the next few years would bring more high-quality jobs.

Some 50 percent of US companies are considering options to generate or buy renewable energy sources, including biofuels. These companies include JCPenney, the US Postal Service, Costco, United Parcel Service (UPS), and Keurig Green Mountain Coffee. Some of these companies will generate biofuels on site. BP and Shell, traditional oil companies, plan to invest $8 billion in biofuel technologies over ten years. The growing biofuel industry also provides jobs in satellite industries such as plant construction, particularly in rural communities, and in the agricultural sector.

Employment Advantages

Despite the worldwide economic crisis, the biofuels industry moved forward, creating more, and more varied, jobs. Improvements in efficiency and innovations in production combined with improved farming techniques have allowed the industry to increase productivity with existing crop acreage. The industry’s rapid expansion, broad range of available career paths, and explorative nature present great opportunities for job seekers. Industry employees have excellent chances for advancement. In the past, 75 percent of industry employees received raises from their employers. Employment of scientists in the research areas of the industry is expected to increase by 83 percent. Finally, people working in the biofuels industry may be proud to be part of the biofuel revolution and to make a difference in the world.

Annual Earnings

Like other industries, the biofuels industry was affected by the COVID-19 global pandemic. However, the global biogas plant market is projected to grow from $3.51 billion in 2021 to $6.52 billion in 2028. Researchers have noted a severe increase in COVID-19 cases in areas with high air pollution, which is caused mainly by the burning of fossil fuels. They have concluded that poor air quality leaves people susceptible to infectious diseases, including COVID-19. Implementing biogas would reduce the carbon emissions and air pollution levels.

According to the US Department of Energy, in 2021, more than 12,388 people were employed in the biofuels energy, an increase of 2.9 percent from 2020. These workers included 5,241 in construction, 3,151 in professional services, 1,973 in utilities, 1,064 in manufacturing, 569 in wholesale trade, and 389 in other jobs.

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