Silver lining in Sao Paulo sugarcane: This cane compost gets transformed into biofuel and fertilizer. (© Carlos Cazalis/Corbis) 

The Beauty Of Biomass

Amid rising concerns over oil supplies and climate change, alternative sources of energy are becoming increasingly important. Biomass is one with exciting environmental and commercial potential. Research with our colleagues at McKinsey & Company suggests there are sufficient sustainable sources of biomass—which includes all plant matter—to meet 8 percent of world energy demand by 2020 and create a market worth hundreds of billions of dollars. Biomass could also be a significant sustainable feedstock for producing bulk chemicals and plastics. It won’t solve all our energy and resource problems and challenges lie ahead, but biomass is well positioned to play a major role in the future sustainable world economy.

Biomass for energy and chemicals comes from four main sources. Food/feed crops could be used for bioenergy production. Some food/feed plants—for example corn, sugarcane and wheat—contain fermentable carbohydrates, and other food plants—such as soy and rapeseed—contain vegetable oils. These crops though, often require carbon dioxide–intense fertilizer and can be costly to produce and convert.

Biomass can also come from agricultural residues, which are "leftovers" from normal agricultural production, such as corn stalks and bagasse, the waste from processing sugarcane. Farmers often leave these residues behind, but about 30 percent could be taken from fields without damaging soils. Biomass can also come from energy crops, which are plants—such as switchgrass, miscanthus and fast-growing trees, including poplar—grown specifically to produce energy or chemicals. Finally, forest biomass could also be used because current forest operations produce waste wood and, later, sawdust that can be converted to energy or chemicals.

Based on existing and expected regulatory targets we project that the energy created with biomass will at least triple between 2005 and 2020. These projections for energy from biomass will require supplies of 2 billion tons a year. Given an estimated 3.3 billion tons of sustainable biomass available in 2020 (based on a McKinsey & Company land use and biomass model), the regulatory targets seem to be reasonable from a supply potential point of view, even assuming fairly rapid growth in demand for food and only conservative increases in agricultural productivity.

Biomass Benefits

In most regions regulation is the driving force behind biomass development. Many governments want to depend less on foreign oil and reduce greenhouse-gas emission, and most are also keen to support local farmers. Moreover, regulators in many countries already use subsidies, feed-in tariffs or supply mandates to encourage the use of biopower or biofuels. In Europe, for example, regulations require that 20 percent of energy must come from renewable sources by 2020.

A big advantage of bioenergy plants over other renewables is that biomass, unlike sunshine and wind, is easily stored. This means that biomass provides a constant, predictable supply of energy and needs no backup capacity. For energy producers, using biomass as a feedstock allows them to hedge price risks in their fuel supply and meet increasingly strict limits on carbon emissions. Together these developments make biopower and biofuel production increasingly attractive as investments based on both commercial and environmental thinking.

The variety of biomass sources is balanced by the range of applications. Heat and power, for example, can be produced by burning biomass. It can also be co-fired in existing coal power plants, which is one of the simplest available means of tapping its advantages. Existing coal power plants can be co-fed with as much as 30 percent biomass with no, or little, new investment, as already demonstrated by some European utilities. Companies could also build dedicated biomass power plants, but that requires new investment and related higher-business risks.

Biomass will also be an important source of transportation fuel. McKinsey research indicates that the current annual use of 19 billion gallons of biofuels—14 billion gallons of bioethanol and 5 billion gallons of biodiesel—could grow to 70 billion gallons—10 and 60 billion gallons of biodiesel and bioethanol, respectively—by 2020. Moreover these figures assume a shift from food crops to inedible lignocellulosic biomass as the primary feedstock for bioethanol.

Biomass can also be used as a substitute for fossil-fuel feedstocks in the production of chemicals and plastics. Indeed, some chemicals, such as vitamin B2 and citric acid, are already fermented from sugar and starch. Bioplastics, such as polyhydroxybutyrate (PHB) or polylactic acid (PLA), are already available in large scale. Going forward there will be synergies between biofuel-production technology and biochemicals; since the first step in their fermentation is the same, large-scale investments in developing biofuel also speeds up the commercial expansion of biochemicals from lignocellulosic biomass. Several companies have explored plans to produce ethylene—one of the most common precursor chemicals—from bio-based sources.

Overcoming Obstacles

Although the world has almost twice the biomass it needs to supply 8 percent of our energy requirements in 2020, significant challenges lie ahead. Regional supplies for instance do not always match regional demand, so large amounts of biomass might need to be transported, requiring the development of adequate supply chains. Moreover McKinsey models of the potential for biomass assume that the biomass will come only from sustainable sources. As the value of biomass rises, however, some groups might try to expand supply through deforestation, and changes in land use that would compromise biodiversity or increase greenhouse-gas emissions. Preventing such negative consequences will depend on well-designed and well-enforced regulations. Finally, energy crops still need to be optimized, agricultural practices must be adjusted to the new plants, and biorefineries that use non-food/feed sources yet need to grow out of the pilot phase. In some cases, new harvesting machinery will also have to be built.

Given the advantages of biomass to a world in need of new, sustainable energy sources, we are confident that these challenges can be overcome. Indeed our research shows that biomass is already starting to fulfill its considerable potential to the needs of the world economy without significant cost to the environment.