Britain's Blooming Biodiesel Could Prove Flighty
Date: 25-Feb-05
Country: UK
Author: Karin Strohecker
Spurred by global efforts to curb greenhouse gas emissions, European Union member states are searching for greener ways to quench their thirst for energy.
Transport generates a quarter of UK emissions and -- being almost exclusively fuelled by fossil energy -- would need to play a crucial role in the quest to reduce CO2 output, a British government white paper said in 2003.
Lagging behind leading producers Germany, France and Italy, the UK's output is set to soar this year with a number of projects starting production or construction. Yet analysts say the government needs to strengthen incentives to boost biodiesel.
For the Raffaello Garofalo, general secretary for the European Biodiesel Board (EBB), it is the government that needs to spark new momentum.
"What drives the biodiesel market is not the market itself, but mainly the legislative and financial support framework that is coming from the EU and the member states," said Garofalo.
TAX BOOST
Different member states apply various measures to boost biodiesel, ranging from mandatory mixing obligations to cutting or abolishing taxes. In the UK biodiesel gets a tax break of 20 pence, or just over 40 percent of the duty on fossil fuels.
Although this had been a step in the right direction, analyst Josh Dadd from Britain's Home Grown Cereal Authority (HGCA) said the tax-break was not high enough to make production from rapeseed oil commercially viability.
"Potential investors will tell you that the economics do not work producing biodiesel from virgin rapeoil because at the moment it is more expensive to produce biodiesel even with the 20 pence tax break," said Dadd.
"Investors want another eight pence on top of the 20 pence."
EBB data showed the UK lagging behind and producing only 9,000 tonnes of biodiesel in 2003, compared to Germany's 715,000 tonnes or France's 357,000. Analysts expect 2004 biodiesel production across the EU to rise by 30 percent.
In the UK alone, a number of major projects are set to fuel the green energy sector within the next few months and some of them have found their own solutions to the quest for commercial viability. Switching feedstocks is one.
For Argent Energy, private owner of the first large-scale British project starting output within the next two months, green energy comes out of used cooking oil and animal waste products.
Jim Walker, the company's vice-chairman, is set to turn waste into profitable biodiesel at his plant in Scotland, expected to produce up to 50,000 tonnes per year.
"There is about 100,000 tonnes of used cooking oil...collected in the UK every year," he said. "It is a very useful raw material."
FLEXIBLE FEEDSTOCKS
With cooking oil available between 170 to 190 pounds per tonne -- roughly half the cost of rapeseed oil -- and tallow or animal fat providing back up at a modest premium over the used oil, economic viability is not a problem, said Walker.
"We have a commercial proposition even with only 20 pence tax break."
Other companies, like green start-up Biofuels Corp. are also set to work with feedstock cheaper than European rapeseed. The company will bring its 250,000 tonnes a year plant on stream at Teesside in northeast England in the third quarter of 2005.
Chief executive Sean Sutcliffe thinks international markets could be the key component for biodiesel production.
"The price outlook for palm oil and ultra low sulphur diesel remains positive," he said in a recent statement.
But some experts fear UK policy will drive biodiesel producers to import raw materials and export the end product with little room left to satisfy environmental plans.
The EBB's Garofalo thinks other European markets offering better margins through incentives could prove more profitable to UK producers and leave little green fuel left in UK tanks.
"In a way they hope the regime will change in the UK," he said. "In another way
