Editor's Note

Will 2 billion gallons be a floor or a ceiling?
By Tom Bryan | March 15, 2007
The biodiesel industry's new target is 5x'15.

The National Biodiesel Board (NBB) has unveiled the association's new vision for achieving a 5 percent share of the U.S. on-road diesel market by 2015. That means we're looking to snag a 2 billion-gallon chunk of a 40 billion-gallon market in less than eight years. The NBB's latest plan doubles the growth strategy the association set for the U.S. biodiesel industry in 2005 when it unveiled a vision for growing a 1 billion-gallon industry within the same timeframe.

It's not often that an industry is compelled to flat out double its production and market penetration goals, but then again, this is no ordinary industry. The U.S. biodiesel industry knows how to grow fast-very fast. In fact, since this magazine was launched in 2004, the industry's production capacity (which should be differentiated from its market penetration) has increased approximately 10-fold.
In fact, the sheer speed of this industry's growth begs the question: Is 2 billion gallons by 2015 enough? It's hard to say wheather a plan that includes a 100 percent increase over previous targets is weak or uninspired. But ardent biodiesel advocates might ask why a 5 percent market share is acceptable when the ethanol industry's share of the U.S. gasoline market is on track to hit 10 percent in just a few short years.

The easy and obvious answer is that the United States is a gasoline-powered nation. The country uses over 150 billion gallons of gasoline per year. That creates a relatively massive potential market for E10-roughly 15 billion gallons, in fact. An astonishing 10.3 billion gallons of annual ethanol production capacity is now represented by U.S. ethanol plants in production, under construction or expansion. At this rate, it is my opinion that the ethanol industry should hit the 15 billion-gallon mark-the supposed limit for U.S. corn ethanol-between 2009 and 2011. As many of our readers know, the ethanol industry is then expected to shift over to cellulosic ethanol and set its sights on the 35 billion-gallon goal that President George W. Bush recently proposed, or perhaps the 60 billion-gallon proposal Sens. Barack Obama and Dick Lugar served up last year, or even the 100 billion-gallon vision the National Resources Defense Council has envisioned.

In the least, the ethanol industry is going to achieve 10 percent market penetration in three to five years, and some say 25 percent to 40 percent penetration in the next two decades. There's no shortage of very smart and powerful Americans who back that assertion.

So is the idea of biodiesel achieving a 10 percent market share by 2010 or 2015 such a crazy idea? Would it be foolish to suggest that a 20 percent market share-an 8 billion-gallon U.S. biodiesel market-could be achieved by 2020?

Some might say it is foolish because the industry is too young, and faces too many challenges, to pursue that type of growth. In my opinion, the industry is not as much hindered by its ability to penetrate the diesel market-and win over consumers and original equipment manufacturers-as it is limited by production costs, feedstock limitations and fuel quality issues that leave even the most die-hard biodiesel supporters quietly apprehensive about the year-round use of B5 to B20 blends on a national scale.

While fuel quality challenges must be overcome immediately, feedstock issues might prove to be an even greater hindrance to the industry in the years ahead. Improving yields, developing alternative feedstocks and bringing down production costs must occur simultaneously. Whether the industry chooses to strive for 5 percent market penetration or 25 percent market penetration, the same hurdles must be cleared. It's simply a matter of how high we want to jump.

Tom Bryan
Editorial Director
tbryan@bbibiofuels.com
 
 
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