Despite the emerging biofuels market, the creation of a global biofuels industry will be much more difficult to achieve than originally thought, according to findings of an Accenture study.

"Although the ultimate scale of the biofuels industry is yet unknown, we believe that biofuels will be part of the future fuel mix and also herald the evolution of a fuels marketplace," said Melissa Stark, a senior executive in Accenture’s Energy industry group. "Our research shows that government policy and technology developments are the biggest uncertainties. Technology will continue to improve the economics of biofuels development, but the industry will also have to deal with competing technologies such as plug-in hybrid. And regulatory policies — including those that encourage cleaner fuel versus selecting a type of a fuel — will continue to grow."

First-generation biofuel technologies such as ethanol from sugar cane will be joined over the next few years by second-generation technologies, such as cellulosic ethanol and those that use the waste from first-generation technologies, as well as by new biofuels pathways under development, such as butanol. These first- and second-generation biofuels will be used in tandem for a number of years.

The biofuels market will need to become as global and efficient as possible within the next 10 years, before competing technologies such as plug-in hybrid vehicles or non-agriculture alternatives like algae or biotechnology become mainstream.

The advent of biofuels heralds the advent of a far more diverse transport fuels marketplace, characterized by new products, new players and a different competitive landscape. While this will clearly involve a shift away from gasoline and diesel, ultimately there will also be a much wider range of non-fossil fuel providers and products, both in biofuels and new competing technologies.

The fragmented "patchwork" of local-market regulations across the world is helping to drive a shift away from a global and super-efficient petroleum market - with essentially two products gasoline and diesel - to a fuels market with fragmented pools of supply and demand and varying mixes of fuels.

"Amid the ongoing debate and controversy over biofuels, one thing seems clear: they will be here for the foreseeable future," Stark said. "The growing number of privately funded independents and agribusinesses — and even international and national oil companies — now developing and investing in biofuels and other alternative fuel strategies is testament to the significant momentum behind biofuels."