06 December 2012 17:47 [Source: ICIS news]
By Kate Wilcock
LONDON (ICIS)--European first generation biodiesel production has stalled as a lack of clear and long-standing renewable energy policy fails to provide the market with the support it needs to progress.
Participants said the current uncertainty clouding the market is discouraging buying and new project investment, with legislation needed beyond the 2020 targets to prevent the industry and its related markets from becoming stagnant.
The head of biofuels and bioenergy at international consultancy The National Non-Food Crops Centre (NNFCC), Geraint Evans, said policy makers need to deliver a clear, long-term strategy.
“The support can be weak, but industry needs clear, long-term and consistent policy,” Evans said.
He added that while sustainability criteria should be consistent across the EU and UK, blending targets should remain at the discretion of the governing body.
The European Commission is currently investigating the option to limit the use of food, crop-based biofuels to reach the 10% renewable energy in transport target, to 5% and amend the Renewable Energy Directive (RED) to include indirect land use change (ILUC) emissions in its sustainability criteria.
Meanwhile, the UK government has proposed revising the Renewable Transport Fuel Obligation (RTFO) target down to 4.7% for 2013-14 and could amend its sustainability criteria in line with RED, should the proposals go ahead.
European producers of rapeseed methyl ester (RME) and growers of oilseed rape crop are already feeling the impacts of the proposed policies - US-based agribusiness Cargill announced it will close its German joint-venture biodiesel plant near Berlin amid weak demand and oversupply on the European market. Demand for non-RED crop-based biodiesel is limited and farmers are unsure of a market for their oilseed rape crops.
The uncertainty regarding what would count towards RED targets resulted in lower levels of non-RED RME production this year, which trickled down into the European glycerine market.
October prices for refined vegetable glycerine (a by-product of RME production) reached the highest levels since June 2008 as a result of tight RME supply.
The lack of clear policy also saw blenders scramble to secure used cooking oil methyl ester (UCOME) during Europe's summer of 2012 as it counted double to reaching blending mandates, as it is a waste product. However, its rise has come at a cost for other biodiesel grades and there is increasing suspicion of fraud with issues being raised by market participants about UCOME and the certification that the product is made with used cooking oil (UCO) rather than virgin vegetable oil (VVO).
Admittedly it is a gloomy outlook for European RME producers and oilseed rape growers and crushers, however, the industry still has a few punches to pull.
RME has an advantage over UCOME of a low cold filter plugging point (CFPP) which allows the fuel to be safely used in cold temperatures. This seasonal demand could keep afloat biodiesel refineries if they have the capacity to process multiple feedstocks.
Secondly, if an EU investigation upholds claims that Argentina and Indonesia were selling biodiesel in Europe at a below cost price (dumping), RME production could increase as palm methyl ester (PME) carries RED certification.
In addition, at the Future Prospects for Biofuels seminar in London last week, Evans said there are not enough biomass feedstocks to provide all our biofuel needs. The NNFCC reports around 4.5% of transport fuel in the EU comes from crop-based biofuels.
“It is possible that we have reached the maximum amount of used cooking oil (UCO) available. The only area yet to be tapped is oil from private homes, but this is difficult,” Evans said.
Finally, there is also support for RME from trade body the National Farmers Union (NFU) in the UK, which believes the biodiesel production must continue to co-exist with bioethanol production, which is also subject to RED and RTFO policy.
The NFU said in a statement on 4 November, that the two markets continue in order to drive improvements in yields, the environment and on farm efficiencies, and are vital for a sustainable, thriving local market for both wheat and animal feed. Oilseed rape is often used as a cover crop to help farmers maintain healthy soils and is an integral part of a cropping cycle.
NFU combinable crops board member Brett Askew said bioethanol goes hand-in-hand with the biodiesel industry, which, already worth an estimated £600m (€740m) at the farm gate, has seen an increase in production of oil seed rape yields of around 25% over the last 11 years.
(€1 = £0.81)
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