However, a new report from Pike Research forecasts that, despite these significant challenges, the combined biodiesel and ethanol markets will reach $247 billion in sales by 2020, up from just $76 billion in 2010.

"In the near term, the biofuels market looks like a train wreck," says managing director Clint Wheelock.

"The economics of ethanol and biodiesel are not yet competitive with petro fuels, and governments have pulled back some of their support. However, in the 10 to 15 year timeframe, the outlook remains very positive. The long-term commitment of national governments to foster robust biofuels markets remains solid, and technological advances and economies of scale will dramatically improve the economics of biofuels versus petroleum."

Pike Research anticipates three key waves of next generation biodiesel over the next several years. Fuels based on waste greases will hit the market first in 2010. Jatropha-based fuels will begin having a significant impact on the market in 2014.

The third big wave will be algae-based biodiesel, which will achieve commercial availability in 2012 and will have a deeper effect on the market beginning in 2016.

Pike Research's report, "Biofuels Markets and Technologies", analyzes the complexities and paradoxes of biofuels markets. It examines key technologies that will drive the future of the industry to include second and third generation feedstocks and advanced biorefining techniques.

The report also includes profiles of key players and comprehensive forecasts that quantify the potential for biodiesel and ethanol by country and region. An Executive Summary of the report is available for free download on the firm's website.

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