SBI Energy: Market Insights, Opportunities &Trends

Why aren’t alternative fuels taking off more quickly? It’s a valid question given the large quantity of proposals for massive solar and wind turbine installations in the U.S and around the globe this year.  Meanwhile, we hear little news of new alternative fuels projects.  The answer, according to a new market study, Specialty Pipelines for Renewable and Alternative Energy Substances, lies in the transportation logistics.

 

Crude oil, finished fuels, and natural gas pipelines crisscross the United States and the globe. But in many cases, these existing pipelines are not suitable for the transport of sensitive biofuels. The chemical disposition of biofuels is substantially different from conventional fossil fuels.  For example, the corrosiveness and water solubility of ethanol makes it incompatible with most existing pipelines. 

Industry concerns also persist regarding the contamination of jet fuel, which has strict quality control, by residual biodiesel left in the pipeline. Current pipeline deliveries of biodiesel remain limited to B5 blends through pipelines that do not traffic jet fuel. 

An additional inhibiter to immediate alternative fuel success resides in the lack of existing pipelines in remote regions where Biomethane and biogas are produced. As a result, biofuels are largely transport by truck or rail, which drives up costs and limits how effectively biofuels can be brought to market.

In order to support current and future alternative fuels development, producers and investors are looking towards specialty pipelines for their distribution needs. As a result research publisher SBI Energy forecasts that the market for specialty pipelines is expected to increase nearly 4-fold between 2010 and 2015.   Substances carried in specialty pipelines - carbon dioxide, ethanol, biodiesel, and biomethane/biogas - have found market growth due to high petroleum prices, the development of enhanced oil recovery methods using carbon dioxide injection, carbon capture and sequestration system development, the presence or potential for carbon emissions penalties in several world markets.  The fastest growing segment, Ethanol, will expand significantly as construction proceeds on dedicated ethanol pipelines, creating a market in excess of $1,000 million by 2014. The projected 2011-2015 CAGR for this market is 27.2%.

The thermoplastic resin and petrochemical producer Braskem is poised to radically alter the intermediate biorenewable chemical market, with production starting at its new bio-based ethylene plant in Triunfo, Brazil.  After just three years from project announcement, the new facility started production in September 2010. At maximum capacity, the Braskem plant will produce enough bioethylene to manufacture 440 million pounds/year of bio-based polyethylene, one of the most common plastics in the world. 

This amount of production is huge in the bioplastic world but is really only a minor fraction of the total polyethylene (PE) market; in 2009 the U.S. alone produced 36.7 billion pounds of high density and low density polyethylene plastics.  But this is good news for Braskem.  Even if the company was able to ramp up to full production capacity instantaneously, the PE market is large enough to easily absorb the production if Braskem’s product is competitive. 

And Braskem’s product is competitive.  First, the bio-PE that Braskem is producing is priced comparably with petroleum-based PE.  Secondly, the bio-based plastic is mechanically equivalent to what product manufacturers are using now.  This means no retooling on the product manufacturer’s part is required to switch to the biorenewable PE version Braskem is now offering.

In fact, even before the plant had started production Braskem had already signed Toyota and Proctor & Gamble on as customers for its bio-based resins.  And now that production is actually underway, Braskem has received invitations from four other companies in four different countries to implement similar projects around the world.  Braskem itself is also planning to announce a new “green” PE project by the end of the year.

All of these factors point to Braskem quickly gaining a foothold in the bioplastic space and giving the company incentive to expand its biorenewable chemical production.  Production of bioethylene could swamp production of other intermediate biorenewable chemicals such as polylactic acid (PLA) and polyhydroxyalkanoate (PHA) also used to make bio-based plastics.   What First Solar has done for the solar cell industry by providing cheap and plentiful photovoltaic cells and dominating the market, Braskem may now be doing for biobased plastics.