Q&A: Introduce E10 by mandate, UK's Vivergo says
London, 21 September (Argus) — UK-based biofuels joint venture Vivergo managing director Mark Chesworth spoke to Argus about Department of Transport proposals for the Renewable Transport Fuel Obligation (RTFO), announced 14 September and incorporating an increase in the national blending obligation level towards 2032, as well as a cap on crop-based biofuels. Vivergo is UK's biggest ethanol producer.
What is the room for growth in the UK ethanol industry in the short term and should a 4pc crop cap be imposed in 2018?
A 4pc cap should enable the introduction and high uptake of E10 fuel — gasoline blended with 10pc bioethanol. This is necessary for an increase in volume of bioethanol and to make the market more sustainable for the industry, and its partners.
Equally important is ensuring that the legislation passes through Parliament and comes into force by April 2018, because increasing the blending obligation is a precursor to market growth.
What incentives are there to pursue growth in the transport fuel market, given such a cap will reduce in equal increments annually from 2021 to reach 3pc in 2026 and 2pc in 2032?
Before making any significant investment decisions, companies will want to see evidence of a stable market, at least in the short term, which requires the legislation to come into force quickly and E10 to be introduced shortly thereafter.
The declining crop cap is the largest question mark within the proposals and the main area we believe to be flawed. The assumptions on the UK's future fuel demand are all based on outdated data and pre-date the diesel emissions scandal, the heightened concern and willingness to act on the UK's poor air quality, and the increased sales of gasoline and gasoline-hybrid vehicles as a result.
If the government's predictions are incorrect and the take-up of electric vehicles does not occur as rapidly as some predict, the crop cap could impact on its ability to meet its own Carbon Budget 4 targets while hindering future investment, jobs in the north of England and the farming supply chain.
How might UK ethanol producers mitigate restrictions on first generation biofuels, and is there enough incentive to produce advanced biofuels domestically?
There are a number of challenges facing the introduction of second generation bioethanol and investors would need to weigh up the risks. Currently, most of the plants being developed are only at around 20mn-30mn litre capacity, whereas the requirement would be for a commercial scale in excess of 200mn litres.
There are time and cost implications to modifying existing plants, which will only be taken if investors are confident of returns. Similarly, the recent announcement from the Department for Environment, Food and Rural Affairs (Defra) regarding banning the sale of gasoline and diesel cars from 2040 could be a potential deterrent.
Any potential investors will certainly be looking at the speed of the RTFO legislation and introduction of E10 as evidence of the government's commitment to providing a sustainable market for the sector.
Given RTFO proposals, how feasible is the introduction of E10 in the UK and when might this happen?
E10 is recognised as the quickest, easiest and most cost-effective way for the UK to reduce its transport emissions.
Within the foreword of the publication, transport minister Jesse Norman said that E10 made "achieving our targets easier and potentially more cost effective, as well as providing an economic boost to domestic producers". Yet we are lagging behind many other countries in Europe, North America and Australasia in its introduction.
The experience of other countries has showed that the best way to introduce E10 is via a Government mandate and with a well-co-ordinated information campaign.
We believe this is the best approach for the UK and while we are disappointed not to see a mandate recommended, we are ready to work with the Government and other stakeholders to introduce E10 swiftly and smoothly next year.
What is the likelihood of UK hitting its 2020 and 2032 targets for renewable fuels in transport and how is this supported or restricted by new RTFO proposals?
Without E10 we believe it is unlikely that the UK will reach its targets. It remains to be seen if there is an adequate supply of true double-count waste feedstock sources to supplement it.
Beyond that, the investor community will need to believe that a policy looking ahead for 14 years is more stable and likely to deliver a return than the one that was introduced nine years ago, and the way in which the RTFO is implemented will influence that thinking.
Do you expect proposals to pass into legislation unaltered and do you see continuing political support for the domestic biofuels industry?
We understand the process through Parliament does not allow amendments to the existing proposal. It is a straight yes or no vote and further delays to the blending obligation increasing would be a terrible outcome for the environment, air quality and of course the industry and the jobs it supports.
There is a lot of support across government for the bioethanol industry, recognising the role it plays in support of environmental ambitions, the Industrial Strategy, the Northern Powerhouse and of course the farming industry.
This was evidences by the recent launch of an All-Party Parliamentary Group for British Bioethanol, which comprises members of parliament and peers who want to protect and advance the sector's interests.
It is important that policy makers keep this front of mind when making their decisions.
What impact might the UK leaving the EU have on domestic biofuels policy beyond 2020?
Like all sectors, this remains to be seen. What is clear is that through its own Climate Change Act and Carbon Budgets 3, 4 and 5, the UK has rightly set itself challenging targets to ensure our that actions today do not adversely affect the quality of life of future generations.
With this in mind, the UK needs to remain ambitious in its environmental goals, whatever our future relationship with the EU.