Biofuels in Troubles

Food versus Fuel
The European biofuel market is setting the agenda for the world of biofuels. Biofuels has come under severe attack from many sides again lately. This is nothing new, as we have previously discussed here on this blog. Last time around was back in 2008 when oil prices as well as most agricultural commodities rallied until they collapsed in the summer of 2008. This time around it was the drought in the US and the consequently high prices of corn/maize that started the debate. The debate was started by authoritative UN food agency that called for a suspension of US bioethanol scheme. As roughly 40% of the US corn production is used for ethanol biofuel production, the usual players started the fuel versus food debate. Nestle, Swiss multinational food company issued a statement already back in 2011, but were happy to repeat the message in 2012. European politicians already under financial pressure have already scaled back their support for biofuel. With the introduction of the Renewable Energy Directive in 2009 and introduction of the double counting for waste based biofuels (a programme which makes it easier to meet blend in targets) are now again under pressure to repair the biofuel policy. So it was really no big surprise when on September 10 Reuters could rumour a EU document that spoke about limiting crop based biofuels to 5% of transport fuels by 2020.

Biofuel already under pressure to improve
This EU initiative really should not come as a surprise. It is clear that current 1st generation biofuel will not solve the fuel issue, and biofuel that is either unsustainable or comes at the cost of human starvation is not a long time option. Already the Renewable Energy Directive has some quite ambitious targets, as the green house gas savings requirements rise from 35% over 50% in 2017 to 60% in 2018. Ongoing discussions over the so-called ILUC (Indirect land use changes) have been ongoing for years, and it boils down to the fact that no matter how you look at it, if you grow crops for use as biofuel they will inevitably end up having replaced a food crop and thus potentially contributing to reduction in food supply.

Silence from the industry?
So who is actually standing up for the biofuel industry. Well nobody really. The European Biodiesel Board, the European biodiesel manufacturer's association seeems to so be busy fighting their colleagues in the US, Argentina and Indonesia that they have not had the time to go in and defend the industry.

The future for the biofuel industry
So clearly production of biodiesel from virgin oils and bioethanol from corn and other food crops is not the final solution. However it is an important stepping stone in the search for better and more sustainable technologies. Already in Europe the biodiesel industry is under so much economic pressure that the majority of biodiesel plants are idle, and a large part of the remaining plants are running on used cooking oil, waste animal fats and other low quality non-edible by-product oils. A number of new technologies are under development, where the greatest hopes are tied to the cellulosic ethanol, which as a 2nd generation biofuel with no food versus fuel dilemmas is seen as very green. The hope is that you can really turn low value wood and agricultural by-products into valuable biofuel with clever technology. We are still waiting for the technology improvements that will allow profitable commercial scale production. In the meantime it is important that politicians do not rock the boat so much that all the commercial players will drown. Who is going to invest - next time the politicians want us to be more green?

A future for the Biodiesel Industry?

A Crisis for the Biodiesel Industry

Just back from participation in the Bursa Malaysia Palm Oil Conference Price Outlook 2011 it is clear that it is not possible to dedicate more vegetable oil for biodiesel production. The biodiesel industry in Europe has for years been in a deep crisis. Expensive plants have gone from hugely profitable to bankruptcy. At the same time as plants overseas in Indonesia, Argentina and Brazil are profiting from national export tax regimes to stay in business. The whole industry strongly depending on the goodwill of politicians as they try to find an appropriate answer to the strategic and environmental problem: crude oil. The Fuel versus Food dilemma, isn't really a dilemma, as it is clear that good quality biological oil (vegetable or animal origin) must be used for human (or animal) consumption, as the global population continues to grow.

Is there a Future for the Biodiesel Industry?

Well, frankly it is difficult to see in the longer term. Worldwide biodiesel plants are scrambling to turn to by-product based feedstock like used cooking oil and tallow. This however will not save the industry, as the relevant by-products is very limited in volume world wide. The rise in demand has already driven up prices for these feedstock to levels where plants are hardly profitable. It seems like nobody took the time to do the math. At the current stage the biodiesel industry is consuming close to 12% of world wide production of biological oils, and it is still only a drop in the ocean in terms of the demand for transportation fuels.

By-product based Feedstock is the new Cool Aid

For many biodiesel manufacturers producing biodiesel from by-products seems to be the way to go. With a better environmental profile, support from NGOs and lower raw material cost this seems to many manufacturers to be the way forward. While we wait for a better solution to our need for carbon dioxide neutral transportation fuels, we in MBP Group are ready to assist biodiesel manufacturers with access to by-product based feedstock from all over the world. MBP Group is ready with a Renewable Energy Directive (RED) compliant supply chain solution for the German marked already from 2011. Germany is the first European market to fully implement the EU RED and we are ready with a solution for this market starting now.

World Biofuels Markets 2011 in Rotterdam

MBP Group is the proud silver sponsor of the World Biofuels Markets 2011 conference in Rotterdam from 22nd to 24th of March. Here it will be exiting to hear the industry's interest in working with MBP on securing suitable by-products for feedstock. At the WBM MBP will also be promoting our own biofuel production in Scandinavia where we produce and distribute by-product based, RED compliant biofuels as an alternative to mineral oil based heating oils.

It will be interesting to hear where the experts think the biofuel industry is going. Is Neste Oil actually going to be able to turn their investments in two biodiesel plants in Rotterdam and Singapore into profitable operations? When will cellulosic bioethanol become a commercial and competitive product? No doubt the World Biofuels Markets will be an interesting event.

If you are going to WBM, drop me a line so we can meet up.