Boom or bust – the future prospects for biofuels and oilseed growers

Boom or bust – the future prospects for biofuels and oilseed growers



This presentation was given by NNFCC’s Policy and Strategy Manager David Turley at the United Oilseeds and HGCA oilseeds update meeting in February 2013.

This presentation was given by NNFCC’s Policy and Strategy Manager David Turley at the United Oilseeds and HGCA oilseeds update meeting in February 2013.



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    Boom or bust – the future prospects for biofuels and oilseed growers Boom or bust – the future prospects for biofuels and oilseed growers Presentation Transcript

    • NNFCC Boom or bust – the future prospects for biofuels and oilseed growers David Turley Policy and Strategy Manager 5 February 2012NNFCC: The Bioeconomy Consultants
    • NNFCC Policy History (1) EU Biofuels Directive 2003 (promotion and use of biofuels) established the first biofuel targets as part of response to 1997 Kyoto Protocol agreements 2% substitution by energy content by 31/12/2005 rising to 5.75% substitution by energy content by 31/12/2010 At the time, the EU stated its longer term aim of increasing this target to 20% by 2020NNFCC: The Bioeconomy Consultants
    • NNFCC Policy History (2) In UK this was transposed into the Renewable Transport Fuels Obligation (RTFO) (introduced 15 April 2008) which set a rising obligation on fuel suppliers to substitute an increasing proportion of their fuels (by volume) with biofuels. However, no target has been set beyond 2013, and currently there is no intention by UK government to increase the targetNNFCC: The Bioeconomy Consultants
    • NNFCC Major UK biofuel facilities This has resulted in development of 1 billion litres of biofuel capacity in the UK, representing £1 billion of investment and at least 3500 jobsNNFCC: The Bioeconomy Consultants
    • NNFCC UK biofuel production under the RTFO 3.6% of UK road transport fuel useNNFCC: The Bioeconomy Consultants
    • NNFCC UK biodiesel feedstock origin RTFO Carbon & Sustainability reportsNNFCC: The Bioeconomy Consultants
    • NNFCC UK biofuel developments • Has been gradual shift from biodiesel towards domination by bioethanol, partly due to import of cheap Brazilian ethanol and more recently ethanol dumping problems (US ethanol) • EU road fuels market is shifting from petrol to diesel dominated, so biofuels trend is moving in wrong direction ! • Over time has been declining use of OSR in UK biofuel use but also fall In palm and soy as use of waste oil has expanded. • In December 2011, the RTFO was ‘RED proofed’ and 2 - RTFO certificates/litre were awarded to waste-derived fuels (including UCO) from 15 December 2011 • In the UK Tallow and UCO had its fuel duty rebates removed from April 2012. Use of UCO is therefore expected to fall - preliminary results suggest this is the case, but there has been no revival in use of virgin oils (results from first 4 months of 2012/13 obligation period) • Biodiesel stagnation is also affecting wider EU MarketNNFCC: The Bioeconomy Consultants
    • NNFCC European biodiesel production Source: European Biodiesel Board Biodiesel production has not increased in recent years for the EU’s major producers (Germany and France) and overall production has fallen recently, for the first time.NNFCC: The Bioeconomy Consultants
    • NNFCC Policy History (3) The Renewable Energy Directive (2007) set out the EU’s Renewable energy policy ambitions (heat, power and fuels) for 2020. This included targets for; • 20% share of energy to come from renewable resources • 20% improvement in energy efficiency • 20% reduction in GHG emissions It also included a sub target that 10% of energy in transport sector should be from renewable resources - but RED now included defined sustainability criteria for any supported biofuels and a commitment to review these In addition to the RED the Fuel Quality Directive (FQD) (2009) called for a 6% saving in life cycle GHG emissions from transport fuels by 2020 - Biofuels were going to have to prove their worth !NNFCC: The Bioeconomy Consultants
    • NNFCC RED sustainability criteria • Restricts sourcing from some land types (high biodiversity or carbon resource) • Imposes minimum GHG savings (well to wheel) • 35% GHG saving, rising to • 50% GHG saving from 1 Jan 2017, and • 60% GHG saving for new plants starting in or after 1 Jan 2018NNFCC: The Bioeconomy Consultants
    • NNFCC ‘Conservative’ RED defaults for GHG emissions (g CO2/MJ) Ethanol BiodieselMeeting the REDdefault values willbe more difficultfor crop-derivedbiodiesel than crop-derived ethanol,especially from 2018and could rule outcrops like oilseedrape as feedstocks NNFCC: The Bioeconomy Consultants
    • NNFCCThe EC has been struggling to deal with the contentious problem of indirect land use change (ILUC) and tointroduce a factor into the RED to account for ILUC impacts. The argument for ILUC is that where production offeedstock for biofuels displaces a food crop, then in a yield constrained system, production of that crop (or analternative) now occurs elsewhere and this may have significant environmental consequences (particularly ifthis results in deforestation). The impacts of this should then be reflected in the environmental footprint of thebiofuel. The arguments reign over how this can be equitably quantified and allocated. Source: Neste Oil NNFCC: The Bioeconomy Consultants
    • NNFCC Recent Commission proposals In October 2012, The European Commission published its proposals to control the potential scale of any ILUC impacts and to account for the GHG impacts of ILUC for biofuels. The stated objectives of the Commission are to: • Transition to biofuels delivering significant greenhouse gas savings even when any ILUC impacts are accounted for • Ensure that biofuels should only be supported if thy deliver substantial GHG savings AND are NOT produced from food or feed cropsNNFCC: The Bioeconomy Consultants
    • NNFCC Key aspects of Commission proposals (Oct 2012) • Limit crop-derived biofuels to max of 5% by energy content of 2020 transport fuel use. • Stated ‘aspiration’ to remove all subsidies for crop-based biofuels post 2020. • To only support biofuels that provide a greenhouse gas saving of >60% for new plants after 1 July 2014 (2 years earlier than current UK RTFO)). • To allow biofuels made from non-land using feedstocks to count four times towards the achievement biofuels inclusion target – MSW, Algae, Residues – Waste cooking oil will still count twice.NNFCC: The Bioeconomy Consultants
    • NNFCC Commission proposals (cont) Proposed ‘ILUC factors’ (to add to well to wheel GHG LCA’s) – sugar-based biofuels: 13 g CO2 eq / MJ – cereals/starch based biofuels: 12 g CO2 eq / MJ – vegetable oils: 55 g CO2 eq / MJ – Waste, residues Zero The Commission will retain the power to amend/extend these and based on the outcomes of further work (Dec 2017), will consider introduction of such values from 1 Jan 2021 The ILUC values were derived from work by the International Food Policy Research Institute and their use has drawn significant industry criticism, in part as the figures have not been subject to peer review and there are a number of limitations in the approach acknowledged by the report authors.NNFCC: The Bioeconomy Consultants
    • NNFCC Impacts of proposed ILUC factors on default life cycle GHG emissions savings (red bars)NNFCC: The Bioeconomy Consultants
    • NNFCC Impacts of proposals • Unlikely that further biodiesel plants will be built based on utilisation of oil crops as feedstocks. • Unlikely that further 1st generation bioethanol plants will be commissioned, due to lack of investor confidence in the sector. • Fuel pool is increasingly diesel dominated and prospects for encouraging further uptake of biofuels (e.g. in aviation sector and shipping) are better for biodiesel fuels, due to better fungibility characteristics, yet this is the resource that will be most constrained going forward. • Cannot rely on increasing use of ethanol to meet 2020 targets due to blend wall limitations of current car fleet (and declining proportion of gasoline-fuelled cars in European fleet).NNFCC: The Bioeconomy Consultants
    • NNFCC Impacts Pressure from imports will increase, further reducing the market opportunity for EU producers Further investment in the biofuels sector will be halted by lack of confidence in an already difficult economic climate There is no guarantee that the significantThe likelihood of investment required tomeeting 2020 commercialise advancedtargets will be processes (using wastesreduced, and non crop biomass) will follow, due to the uncertainty in the sector AER-GAS.deNNFCC: The Bioeconomy Consultants
    • NNFCC Impacts• Fails to recognise the value of crop derived biofuels delivering significant GHG reductions Future prospects ?NNFCC: The Bioeconomy Consultants
    • NNFCC Future UK oilseed rape prospects • Despite all the problems in the biofuel sector, oilseed rape prices have remained buoyant, due climatic issues affecting global vegetable oil supplies. • Only around 1% of the UK oilseed rape crop is currently used as a virgin oil in UK biofuels. • However, the UK has benefitted from the export market opportunities created by the German and French biodiesel markets. 75% of German oilseed rape production is currently destined for biofuel production and other demands are met through import. • Even with a standstill in current biodiesel market development, there will remain a strong demand for oilseed rape in the medium term from the European mainland, this will help to support current UK areas of oilseed rape cropping, though prospects for any further expansion will be tempered.NNFCC: The Bioeconomy Consultants
    • NNFCCThe NNFCC provides high quality, industry leading consultancyfor more information contact us David Turley Policy and Strategy • Bio-based opportunity analysisEmail - • Sustainability+44 (0) 1904 435182 Contact David at us on Twitter @NNFCC• Future Market Analysis • Technology evaluation & associated• Feedstock Logistics Planning due diligence• Sustainability Strategy • Project feasibility assessment Development • Policy and regulatory supportNNFCC: The Bioeconomy Consultants