France’s national low-carbon strategy published in December 2018 confirms liquid biofuels as a sector with a future: they should cover around 25 % of transport energy demand in 2050, close to 50 TWh. Near-complete decarbonisation of the sector by then also implies direct use in engines, rather than blending into fossil products.
Yet French consumption already exceeded 35 TWh in 2017, 70 % of the 2050 target. That figure might suggest a mature market with no room to grow. It in fact masks a generational shift that has not happened.
A second-generation sector that does not exist
The strategy relies on advanced biofuels, second and third generation. These represent today under 10 % of French consumption. More importantly, those volumes come mainly from crop residues or used oils, not from lignocellulosic biomass, wood, straw, green waste, non-food energy crops. They therefore use no processes different from first-generation ones.
A genuine lignocellulosic sector does not exist in France, and no investment decision had been taken at the time. That is the central bottleneck.
Six disruptions reshaping the market in the short term
Our interviews with around fifteen players across the value chain identify six simultaneous shifts.
- Falling demand for liquid fuels. On the road segment it could drop from around 500 TWh in 2018 to 275 TWh in 2030, almost by half, driven by vehicle efficiency gains, a target of 4 L/100 km for new combustion vehicles, and the rise of gas and electric, at around 60 TWh combined in 2030 against 2 TWh in 2018.
- Import competition. Bioethanol and biodiesel imported around 25 % of their needs in 2017, from Europe but also from countries with export-friendly taxation such as Argentina and Indonesia. Bioethanol had been a net exporter until 2014.
- The petrol-diesel rebalancing. Diesel’s share of new car registrations fell from 72 % in 2012 to 39 % in 2018, driven by taxation, the Dieselgate scandal and announced urban restrictions. Fleet rebalancing is expected around 2030.
- Higher blending targets. The RED II directive sets 14 % renewable energy in transport by 2030, against around 9 % in France in 2018. The 2019 finance act raised the corresponding tax-based blending rates.
- Exclusion of palm oil from the biofuel list, creating uncertainty around products representing around 14 % of French biodiesel consumption in 2016.
- Potential commissioning of the La Mède biorefinery, capable of bringing 500,000 tonnes of HVO or HEFA to market from 2019.
The 7 % cap closes the door on first generation
This is the most structurally significant point for incumbent producers. RED II sets a 7 % cap on first-generation biofuels and a 3.5 % floor for advanced ones.
The cap was initially seen as a win, since the directive had originally planned a decline to 3.8 % by 2030. But it is already reached in France. Combined with the expected fall in total liquid fuel consumption, it sharply limits any growth prospect for the incumbent sector.
Symmetrically, the 3.5 % floor for advanced biofuels looks ambitious given the absence of actual lignocellulosic production. The French market is therefore caught between a saturated sector and one that has not started.
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