State-sponsored legislation, a competitive market niche, and a good resource base – the biofuel sector seemingly possesses everything for a take-off. And yet the overall results of biodiesel producers remain underwhelming compared to the ever-increasing market share of EVs. How can we explain this contradiction?
Unfortunately, the reason for the industry’s snail-pace growth is prosaic – lack of capital investment. Biofuel production remains rather expensive, and the ROI levels are lower than competitors in the energy sector. Even the leading companies have yet to invest in research & development, which diminishes the chances for a technical breakthrough that would enable cost reduction or an increase in the production output.
Two factors exacerbate the problem. Biodiesel’s competitors in the energy sector are performing better than ever. In 2022, the leading oil companies worldwide achieved record-setting profits due to high prices and recovering consumption after the Covid slump. Simultaneously, wind turbines and solar panels continue to be the preferred field for investment of large-scale capital, looking to diversify in green energy.
None of this bodes well for the biofuel sector. Unless producers find a way to convince “Big Money” that they can achieve better ROI, the “green” alternative to fossil fuels will remain a cash-starved fringe sector that cannot make the next step.