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Low Carbon Fuels Could Disrupt Oil Market Within Five Years, Accenture Report Finds


But transformation in regulator support needed to secure commercial success for fuel alternatives
NEW YORK; Accenture (NYSE: ACN) has identified the technologies that it predicts are most likely to transform the demand and supply of transport fuels and cut emissions within the next five years. In a report comparing advances in combustion engines, biofuels, electrification and other technologies, Accenture warns that their commercial viability will be delayed unless regulators more proactively support the transformation of science into applied technologies.

“Betting on Science – Disruptive Technologies in Transport Fuels” selected 12 innovations in electrification and genetically modified biofuels, as well as existing fuel sources that will have the most immediate impact on emissions and on the gasoline and diesel markets. The study profiled 25 companies that aim to bring these technologies to market in the next five years.

Accenture concludes that, while all 12 technologies are in development today, they may not all be successfully brought to market. To improve the chances of commercialization, policy makers will be required to:

· Underwrite the risk of first plants through mandates, tax incentives or even direct investment.
· Provide clear policy and guidance for key issues such as intellectual property protection, synthetic biology, battery technology and the efficient use of water and energy in producing biofuels.
· Support short term pragmatic solutions, such as improved vehicle engine efficiency and the use of waste as a bridge to longer term innovations.

“Never before have we demanded so much from our regulators and governments,” said Melissa Stark, Senior Executive at Accenture and author of the report. “The science has made enormous progress, but it now requires government leadership to accelerate the commercial viability of these low emission technologies. That means our policy makers need to understand the technologies enough to make the necessary trade-off decisions quickly and to address issues such as genetic modification and intellectual property rights head on. They will also need to provide financial support and consumer incentives.”

The report makes three key findings:

Regulators should not overlook the ‘low hanging fruit’ of existing technologies
· The conventional vehicle engine offers the greatest scope for immediate emissions reductions, thanks to lighter vehicles, fuel injection and powertrain innovations. But higher efficiency standards are required.
· Waste-to-fuel will be an important fuel source, particularly in Northern Europe where land fill capacity is limited. Legislation and financial incentives are needed to kick start this industry.
· Genetic engineering is increasing corn and sugar cane yields, while process innovation and technology are reducing water and energy consumption. These can now be applied in markets where yields are lower.

Support for genetic modification will be critical to next generation biofuels
· Genetic engineering is enabling next generation feedstocks that offer greater energy density, require less water and energy and can be broken down more easily. The Sugar-to-diesel and some of the Butanol pathways in the report use genetic engineering to provide diesel and gasoline substitutes that can be used in existing infrastructure.
· Algae may offer yields 25 times greater than soybeans, but will take 10 years to become commercial. Accenture’s research indicates that the cost is still $8-30/gallon and the diversity of strains, cultivation and harvesting remains a barrier. Accenture believes that genetic modification is a key lever of the production of strains with higher yields and lower cultivation and harvesting costs.

Electrification held back by battery costs and constraints
Plug-in hybrid electric vehicle (PHEV) engines could be the most disruptive of all technologies, but without regulatory incentives, the up-front cost and performance of batteries will hinder broad uptake.
· Public charging infrastructure will be key to significant scaling of electrification, but will require globally agreed technical standards and capable smart grids.
· Vehicle-to-Grid technology allows energy to be fed back to the grid from idle vehicles. However, it will take more than 15 years to fully commercialize as it requires large scale adoption of PHEV/EVs.

“Plug-in hybrid electric vehicle engines could be the most disruptive technology but the advances required in the cost, performance and safety of batteries remain significant,” said Melissa Stark. “Batteries are to electrification what feedstock is to biofuels and we have supply, supply chain and sustainability challenges to overcome. For example, Lithium is expensive, highly combustible, scarce and only produced at scale in a few countries.”

Key implications for business:
Accenture suggests that competitors in the market for new transport fuels must consider key actions:
· Place scientists and engineers in leadership positions, not only to drive technology development, but to support sound regulations and policy by facilitating debate and understanding of the pros, cons and trade-offs between the technologies.
· Improve cooperation between multiple sectors, for instance between the battery, utilities and car industries.
· Accelerate commercial viability by improving project management excellence and supply chain optimization to reduce costs and increase margins.
· Improve risk management to mitigate the volatility of immature markets, for instance the price of new feedstocks or the level of electricity demand for PHEVs.

New technologies will support localized response to climate change
The diversity of new fuel technologies in each local market has the potential to allow governments to better meet energy security and economic development needs than globally traded hydrocarbons do today. Although most technologies will be widely available, local conditions will determine different weightings, with Brazil focusing on sugar cane-based fuels, South Korea and Japan on electrification, and China and the US on all fuel options.

About the report
The report, “Betting on Science, Disruptive Technologies in Transport Fuels”, identified 12 technologies that have the potential to disrupt current supply, demand and GHG forecasts. It profiles 25 companies bringing these technologies to market, assesses the level of private activity in 10 countries and summarizes their local regulatory landscape. The study comprised significant primary and secondary research, including analysis of more than 100 companies and interviews with leading scientists and more than 30 companies. Accenture defined disruptive fuel technologies as those that:
· Reduce hydrocarbon fuel demand by more than 20 percent by 2030
· Save greenhouse gas emissions (GHG) by more than 30 percent relative to the hydrocarbons they replace
· Will be commercial in less than five years
· Will be competitive at an oil price of $45 to $90 at their commercial date

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