Management consulting company Arthur D. Little says it's concerned enough about the economic sustainability of biofuels that it's proposing a new global research study.

The company’s forthcoming study on the Sustainability of Transportation Biofuels is to explore key issues of the dynamic market "to help investors, policy makers and many other stakeholders make informed decisions."

Roger Hill, Head of Arthur D. Little’s Global Energy Practice, told Cleantech.com that there are enough unanswered questions about the viability of biofuels going forward to merit a significant look into the technology sector, the investment sector and all of the associated value chains, including policy and regulation.

"There are many groups that are putting focus into using these fuels, including some of the airlines—they need to be sure that biofuels of the right specification will be found in the areas they fly to, and that regulations in different parts of the world will all be lined up."

Many see transportation biofuels as a way of reducing carbon emissions in the face of climate change and of mitigating the volatility of the world energy markets. But Hill said it's time that what he called "second generation issues" regarding biofuels are questioned.

"The biofuel market is thriving in countries which have the most favorable political incentives and availability of cheap feedstocks. But long term survival of the various biofuel options is far from clear, as virtually all are dependent on government support and/or high oil prices," he said.

Despite the current enthusiasm for biofuels, there are uncertainties regarding the long term sustainability of biofuel technologies and applications.

Areas the company intends to examine include:

• The impact of oil price fluctuation on biofuels; while most biofuels have traditionally only cost competitive only in times of high oil prices, has enough changed to insulate the sector from decisions by OPEC and others?
• The competition between fuel crop and food crop needs and its impact on withdrawal or reduction of government support in the long term.
• Uncertainty regarding who will be the active players in the value chain. For instance, will there continue to be on-off joint ventures supported by private equity, or will the market be dominated by energy majors and others?
• Demand theoretically outstripping supply.

Investors of late have become skeptical about the potential for long-term profits in biofuels.

Hill acknowledged a potential gap forming between the present corn ethanol and soybean biodiesel industries' ability to deliver, and the future promise of cellulosic ethanol, which has not yet been produced in significant quantity. (Just where is the cellulosic ethanol industry at today? Read Cleantech.com's Cellulosic myths busted.)

"I think there is a very difficult decision people have to make. In conventional technologies today, the winner is clearly sugar cane. The ones that are struggling to make money are the wheat, corn and sugar beet-based operations, which is why there's such a focus now on whether this is a sustainable industry. The future must really be about something that competes with conventional fuels at a reasonable price."

While Hill said the firm would not be entering into the research with specific hypothesis to prove or disprove, he told Cleantech.com he thought cellulosic ethanol approaches would eventually form the way forward.

"The gut instinct is that we'll be going to cellulosic-based technologies, where feedstocks will be easier to grow, and on land which is not currently used for food production."

The study is to be a multi-client study (i.e. funded by a number of clients) and the full results may or many not be made public, Hill said.

Arthur D. Little (ADL), founded in 1886, is a global management consulting firm. It has over 30 offices worldwide, employing over 1,000 people.