In North Carolina, Raymond James analyst Pavel Molchanov published his most extensive analysis on next-gen biofuels in the past year. Titled “Is the Renewable Fuels Standard Withering on a Vine?,” the report looks at declining U.S. oil demand, surging liquids production from onshore shale plays, and a thesis that the is moving towards oil independence by 2020.
“Whereas there is inherent uncertainty in forecasts for the rig count and well productivity, Gen2 biofuel production – at least in theory – should be set in stone,” Molchanov writes. “This is because of the Renewable Fuels Standard (RFS), passed in 2007 and extending through 2022. However, as we detail today, the RFS has become virtually irrelevant when it comes to providing visibility on scale-up of Gen2 biofuels, particularly cellulosic biofuels. Due to a combination of financing constraints and (to a lesser extent) technical hurdles, the industry is far behind on meeting its targets – and getting further behind by the year.”
“The good news is that there are signs of progress as a wide variety of Gen2 biofuels approach commercialization, and companies start to “graduate” from the pre-revenue stage to commercial operations. Still, it is difficult to avoid the conclusion that the RFS has failed in stimulating the market forces required to bring online the envisioned Gen2 volumes over the next decade.”
The complete Molchanov analysis, which incorporates analysis based on the latest release of the Advanced Biofuels Project Database, is available here.