The future of second-generation biomass

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Every business needs money, inputs, and processes that work. The second-generation biofuels industry faces challenges on each count—but these can all be addressed.

Reliable, commercial-scale conversion technology

Commercial 2G plants must demonstrate that they can deliver high-yield products at a competitive price, but conversion technology is taking longer than hoped to reach the necessary scale. One problem is that these plants must process the equivalent of up to 400 truckloads¹ of biomass a day. The semisolid nature of (wet) biomass, which is often mixed with dirt and other impurities, complicates the processing. Biomass must be mechanically pretreated—for example, by extrusion, milling, or grinding—and fed continuously in preparation for hydrolysis.

What’s next. The design, reliability, and processes of 2G equipment are all improving. Meanwhile, engineering is rightsizing specifications, increasing levels of process automation, and eliminating costly process aids. The race is on to become the first player to operate a stable, cost-competitive commercial-scale plant. For front-running facilities, the question is not whether their processes work but rather the strength of their operational performance—uptime, throughput, yield, and cost—and how quickly they will cut costs while improving their operations.

Access to affordable feedstock

Second-generation feedstock is abundant, but prices on the biomass cost curve vary. Some forms of feedstock, such as municipal solid waste or cellulosic trimmings from harvests, can be sourced at little or no expense. Other kinds, such as sugarcane residues (known as “bagasse”), have an opportunity cost.

There are also outlays associated with collection and transport, so it is helpful to locate 2G plants near dependable, long-term sources of biomass. The cost of sourcing (the price asked by the producer, plus aggregation and logistics) is another key factor in 2G economics. Like oil, which can cost as little as a handful of dollars to produce but often several times more, biofeedstock should be seen in the light of a cost curve: some supplies will be cheap, others expensive.

What’s next. Bagasse, available mostly in Brazil, China, India, and Thailand, is one of the cheapest sources of biomass: as a by-product of sugarcane processing, it is already aggregated at production plants and often burned to produce electricity. But 2G can be an alternative to drive value. American corn leaves and stalks cost about twice as much as bagasse, in part because this “stover” (as it is called) must be collected. Investors should seek long-term agreements to ensure security of supply in areas where the cost of sourcing is lowest.

Further reading: https://www.mckinsey.com/business-functions/sustainability/our-insights/the-future-of-second-generation-biomass