Ethanol is the fuel of the future. Henry Ford, 1925
Ethanol is the fuel of the future.
About RTFs & climate change
1. What exactly is Ethanol, and what are RTFs? 2. Where else are RTFs currently being used? 3. How do RTFs help combat climate change? 4. Do RTFs really deliver savings on greenhouse gas emissions? 5. How does Vireol calculate the greenhouse gas savings given that it uses a lot of energy in its process, wheat requires fertilisers etc and there are big transport costs? 6. Can I be sure that the RTFs used in the UK as a whole will deliver Greenhouse Gas savings? 7. Don't RTFs cause deforestation? 8. Is rainforest destroyed in the making of RTFs? 9. Loss of set-aside is being resisted by NGOs. What are Vireol's views on this? 10. Why wouldn't the UK just import its requirement from established RTF producing countries?
About the project
11. Why is the plant being built? 12. What is the Vireol plant going to produce? 13. Why is Vireol using wheat as the source of its Ethanol? 14. Where will the Vireol wheat be sourced from? 15. What is the advantage of using wheat for RTFs rather than other sources such as maize or sugar cane or sugar beet? 16. What are the oil majors doing? Why aren't they leading the way? 17. Will it always be commercially viable to produce Ethanol from wheat?
Sustainability - food vs. fuel debate
18. Wouldn't it be better to use British and European wheat for food rather than in producing RTFs? 19. Is there a correlation between the price of Ethanol and the price of wheat? 20. Aren't you forcing up the price of food by using crops for RTFs? 21. Ultimately, is there enough land for RTFs and production of food? 22. New RTFs made from agricultural waste materials and non-food crops are forecast to be available soon. Why don't we just wait for those?
1. What exactly is Ethanol, and what are RTFs?
Renewable Transport Fuels (RTFs) are liquid fuels made from plant materials. They can be used in transport fuel instead of conventional fossil fuels. Because the plants they are made from are renewable and absorb carbon dioxide as they grow; RTFs make a contribution to cutting carbon emissions.
Vireol will make ethanol from wheat grown predominantly in the UK. Ethanol is an alcohol, produced in a similar way to that used in spirits. It requires crops such as wheat, maize, sugar beet, and sugar cane that contain starch or sugar which can be converted into alcohol. It is blended with petrol to meet the Road Transport Fuel Obligation (RTFO). This is legislation that requires a certain percentage of RTFs to be blended with conventional fossil fuels.
It differs from Biodiesel which is often made from crops that produce oils such as oilseed rape, palm, and soya. This is generally blended with diesel to be sold at the pump.
2. Where else are RTFs currently being used?
The USA is the world's largest ethanol producer and consumer; 2009 will see the US under the renewable Fuel Standard (RFS) blend 42 billion litres of RTFs. This drive for energy security began in the US in earnest with the original RFS in 2006. This has resulted in the building of well over 100 corn ethanol plants in the USA and a target for 2022 of 136 billion litres.
Brazil is seen by many as the pioneer of RTFs and until very recently was the world's largest producer of ethanol (made from sugar cane), with now over half of all fuel used in cars there being ethanol. Brazil has two fuels - petrol containing 25% Ethanol, and 100% Ethanol. 91% of cars sold in Brazil in 2008 were flex fuel cars that can run on any blend of ethanol or gasoline.
In Europe, Sweden has pioneered development of ethanol blending through legislation to make them independent of fossil fuels by 2020. They have developed infrastructure and policies to enable significant use of high ethanol blends such as E85 and local car manufacturers have responded by making the cars available that can deal with very high blends. France is also now pushing ahead strongly with ethanol blending and expect by 2015 that all fuel will have a minimum RTF blend of 10% (by energy content); this is 5 years ahead of the EU Renewable Energy Directive (RED) target. They already have 20 ethanol plants either built or under construction throughout the country.
Germany and Spain also have large ethanol facilities and relatively well developed blending programmes.
3. How do RTFs help combat climate change?
Climate change is caused by emissions of greenhouse gases, including carbon dioxide. RTFs help to combat climate change because the crops from which they are produced absorb carbon dioxide as they grow. Carbon dioxide is released as they are burned, but absorbed by new crops again, making a complete cycle. This is why they are better than fossil fuels like coal and oil which release stored CO2 without any off-setting effects.
4. Do RTFs really deliver savings on greenhouse gas emissions?
If crops are grown and processed in an environmentally sensitive way, RTFs will deliver substantial savings on greenhouse gas emissions. Published figures suggest there is a wide range of performance in practice, depending on the crop and the process used for RTF production, and whether there are any co-products from the process for which credit can be taken.
The specific process Vireol is using will enable greenhouse gas savings in excess of 60% to be made compared with regular petrol. This figure is considerably better than many quoted figures for ethanol from wheat, for several reasons, namely;
This is just the start. Vireol believes there is considerable potential for further improvement by working with farmers on how they grow wheat and improving the efficiency of the plant operation over time.
In addition there is an important indirect effect. The high protein feed produced by the plant goes into animal feed, reducing imports of soya meal which are often grown on previously carbon-rich land like rainforests or the Cerrado grasslands in South America.
5 . How does Vireol calculate the greenhouse gas savings given that it uses a lot of energy in its process, wheat requires fertilisers etc and there are big transport costs?
Vireol adopts a standard methodology to calculate the greenhouse gas savings. This accounts for all the items listed above along with many other factors. The results are reviewed independently.
6. Can I be sure that the RTFs used in the UK as a whole will deliver Greenhouse Gas savings?
The story is different for different RTFs. Fuel companies, under the RTFO, are required to submit reports to the Government on the RTFs they supply. This includes information on levels of greenhouse gas savings, as well as their environmental and social impacts, and this information is then published. The UK RTF industry is committed to the production of RTF that will deliver genuine greenhouse gas savings.
7. Don't RTFs cause deforestation?
Vireol intends to draw its feedstock entirely from wheat produced in the EU, most of it from the UK. These crops are not grown in tropical areas and have nothing to do with deforestation. Secondly, and more importantly the high protein feed it produces alongside ethanol actually reduces the need for imports of soya meal for animal feed. As soya is often grown on deforested land, this makes a positive contribution.
In addition, the UK RTF industry as a whole recognises the danger of encouraging deforestation and that is why the RTFO is underpinned by sustainability criteria. These cover deforestation, air, water and soil quality as well as social effects like the treatment of workers and respect for the rights of local people. The industry hopes that in this way UK RTFs will provide a major driver for sustainable development in the future.
8. Is rainforest destroyed in the making of RTFs?
Not in the case of wheat based fuel, but it can be with other feedstocks. In particular, soy beans are sometimes grown on cleared rain forest or native grassland, and sugar cane may be. Even more often, palm oil is grown on cleared rainforest in SE Asia. This palm oil can be used in the food industry, or it can be used for sourcing biodiesel production. Of concern is the situation where palm oil is used in place of rape oil, which is grown in Europe, and is also used in biodiesel production as well as in the food industry. Care needs to be taken therefore in the case of biodiesel production that it is not sourced by swapped out oils from rain forest clearance.
Vireol can be confident that wheat sourcing for its ethanol does not involve any rain forest destruction through any supply swap arrangements.
9. Loss of set-aside has been resisted by some NGOs. What are Vireol's views on this?
Set-aside was introduced in order to cut production and reduce surplus grain stocks. It was not done for environmental reasons. Vireol also understands that several agri-environmental schemes have been very successful.
Vireol fully supports total sustainability from its feedstock suppliers, and encourages them to continue the range of agri-environmental schemes and other husbandry practices that have become demonstrably successful in raising awareness and creating wildlife and biodiversity benefits.
10. Why wouldn't the UK just import its requirement from established RTF producing countries?
The biggest challenge Europe is going to have on ethanol is sheer availability. If we consider the two largest ethanol producing countries in the world the limitations for external EU supply can be seen.
Production from the USA entering the EU is constrained in three significant ways. Firstly, the cost to manufacture after import taxes into the EU means it is an uncompetitive source of supply. Secondly, the scale of the US target and its uplift to 2022 will ensure domestic production is consumed locally and thirdly the minimum Carbon & Sustainability criteria set by the EU will exclude a great deal of US corn ethanol production as it will not meet EU standards (The greenhouse gas (GHG) footprint of most US corn ethanol is less than 10% better than fossil fuel, for product to qualify in the EU market under the RED it needs a minimum GHG saving of 35%.
Production from Brazil is heavily biased towards domestic consumption where half of all fuel consumed is ethanol. The Brazilian Sugar Cane Association expects by 2020 that Brazil will be producing substantially more ethanol (up to c.64 billion litres) but the vast majority of this will still be consumed domestically leaving around 15 billion litres to be exported on to the world market. Given competing demand globally for these export quantities (especially from both the USA and Japan) it is unlikely that more than one third of the surplus will reach the EU by 2020. Against a total Renewable Transport Fuel demand of 52-55 billion litres of which ethanol will be a minimum 24 billion litres, Brazil will make an important but small contribution to the EU RED targets. In addition, after import duties, EU production is cost competitive with Brazilian imports.
This will leave the EU needing to supply most of its requirements domestically, given the very competitive nature of UK feedstocks. It therefore makes cost effective sense for the UK to be as self sufficient as possible versus the rest of Europe in Renewable Transport Fuels.
11. Why is the plant being built?
The plant was planned as a result of demands to replace a proportion of fossil fuel use by RTFs in order to reduce global warming. This is actively being promoted by governments around the world. In the UK, the Renewable Transport Fuel Obligation (RTFO) which came into force in April 2008 required all road transport fuel sold to contain 2.5 percent renewable fuel. This will rise to 5 percent by April 2013. Currently the UK is unable to meet this requirement from its own resources. It is anticipated that the Vireol plant will provide for about 20% of the UK's needs in 2013.
12. What is the Vireol plant going to produce?
The Vireol plant will be one of the largest wheat refineries in Europe. It will produce 200 million litres of ethanol a year and about 175 thousand tonnes of high protein wheat derivative for use in animal feed. The CO2 generated by the plant will be captured and used primarily in the food industry and also for plant growing.
The ethanol will be used to blend with petrol, as is now required by law, and will produce green house gas savings.
The high protein feed co-product will go into feed for chickens, pigs and cattle, replacing imported soya meal.
13. Why is Vireol using wheat as the source of its Ethanol?
Wheat is widely available in Europe.
The UK is one of the world's most efficient wheat producers.
It is currently in surplus, with the EU exporting some 15 million tonnes and the UK about three million.
There is significant potential to grow more wheat to meet our food needs as well as achieving the RTF targets by continuing to increase yields and by bringing land, which has been set aside or taken out of production (to prevent over supply), back into use. Additionally, it is expected that European production will increase substantially as Western European farming practices are extended to the new EU members in Eastern Europe.
14. Where will the Vireol wheat be sourced from?
Vireol expects that the majority of wheat used in its plant will be sourced directly from within the UK. There are likely to be some imports from other parts of the EU from time to time. The type of wheat required for the process is a soft, high starch, low protein wheat, widely grown in Northern England. These are not the high protein milling wheats usually associated with food production. These low protein wheats tend to have higher productivity, and to be somewhat easier to grow - they can use less fertile land than top quality bread wheats, and generally use less added nitrogen based fertilisers. Simply, the ability to grow different types of wheat is a function of climate. The UK is surplus in low quality/high starch feedwheat but is a net importer of hard, high-protein bread making wheat.
15. What is the advantage of using wheat for RTFs rather than other sources such as maize or sugar cane or sugar beet?
The advantage of using wheat is very clear. Europe is more suited to growing wheat than anywhere else. Europe consistently produces the world's best wheat yields, and Europe has a regular wheat surplus, which is usually exported. Moreover, bio-refining wheat produces both food and fuel, so does not detract from the global food production capacity, and has such a good carbon footprint that CO2 is actually removed from the atmosphere, overall.
16. What are the oil majors doing? Why aren't they leading the way?
Energy companies are expected to invest £100bn over the next decade in renewable sources.
Royal Dutch Shell, Europe's largest oil company, recently announced that RTFs may account for as much as 10% of global transport fuel in the coming decades. "We believe RTFs could grow from just 1% of the world's transport-fuel mix today to as much as 7-10% over the next few decades," Chief Executive Officer Jeroen van der Veer said at a speech during the Paris International Oil Summit. Shell in the UK were the first to recognise the potential offered by RTF's and signed the only 10 year long term contract for ethanol supply currently in Europe (with Ensus' 400m litre facility in Teesside).
Similarly, oil major BP have said that they will be investing up to US$1 billion in solar, wind and RTF projects in 2009, thus confirming it has no plans to abandon its alternative energy investment programme. BP is still on track to spend US $8 billion on renewables over 10 years - a plan that was announced in 2007. As a result BP are JV partners in building a 400m litre wheat to ethanol facility in the UK have taken a 50% stake in a 400m litre Brazilian Sugar Cane Ethanol JV and are spending $500m with the University of California, Berkeley on research to develop Renewable Transport Fuels.
17. Will it always be commercially viable to produce ethanol from wheat?
The mandates set under the European RED create a substantial market for RTFs that must be blended; failure to comply would result in legal action against a Member State by the Commission. Given that non EU production will only contribute a relatively small percentage towards these mandates (forecast is a maximum of 20%), it is EU produced ethanol that will meet the majority of demand. Given EU ethanol is made from cereals such as wheat, maize and barley, if supply is tight of these feedstocks and prices need to rise, ethanol prices would have to rise so that the mandates are met.
Whilst cereal prices are interlinked, if there were times when maize or barley was a cheaper feedstock than wheat the producers would want to be able to switch between feedstocks to take account of the very best economics. The Project's production process is flexible and can process a variety of feedstocks, ensuring it can compete with the most competitive plants in Europe.
Sustainability
18. Wouldn't it be better to use British and European wheat for food rather than in producing RTFs?
Using wheat in a bio-refinery does use it for food. RTFs made from wheat do not compete with food, rather they enable it to continue to be used. The supply of animal feed, which is the main use for wheat grown in the UK and mainland Europe, is fully maintained by bio-refining wheat, since only the starch component is used, leaving the protein untouched and thus still available for animal feed. Indeed, this process actually makes better use of the wheat, by enabling its protein content to be upgraded, and thus used as a protein concentrate, thereby reducing the amount of soy protein concentrate that has to be imported into Europe.
19. Is there a correlation between the price of ethanol and the price of wheat?
Given that wheat usage in ethanol is a very small percentage of the total wheat crop, there is little to correlate the two currently. If supplies of wheat tightened then, given the mandate, it is likely that there would be a much closer correlation to European ethanol prices. In most cases the closest correlation for ethanol is likely to be gasoline which is the product it is substituting. Given that most Member States have created fiscal incentives to ensure obligated suppliers blend (either tax rebates or penalties for not blending), the combination of these incentives and gasoline prices create the margin to ensure producers can be profitable.
If there was a tightening of this position to the point where it was uneconomic to blend, the UK Government has indicated on several occasions that it would increase the penalty to ensure blending occurred; this in itself would reinforce correlation with the wheat price when feedstock supplies were tight.
20. Aren't you forcing up the price of food by using crops for RTFs?
"To hit 2020 EU RTF blending targets, wheat prices are unlikely to be materially affected. Using oilseed as a feedstock for RTF production, however, could increase prices by as much as 70%" (Gallagher)
Additional demand or reduced supply of any crop can put up prices. Rises in prices of cereals and oilseeds from 2005-2008 were the result of poor weather (like prolonged drought in Australia and flooding in the UK in 2007), poor harvests, and changing diets in emerging economies like China and India.
Much of the UK's cereal crop goes into animal feed where the protein provides an essential part of the diet. The Vireol refinery will only use the starch from the wheat for ethanol production and concentrates the protein up and sells it into the animal feed market. The Vireol refinery will meet food as well as fuel needs - it is wrong to suggest that crops such as wheat for RTFs are in direct competition with food; you need to consider all the products from the refining process.
21. Ultimately, is there enough land for RTFs and production of food?
"There is enough land for food and fuel." Gallagher
We believe that the world is capable of producing substantially more food than it does currently, as well as supplying the energy components for RTF production. There are large land areas still not yet harnessed for food production without the need to touch any sensitive high carbon stock land, as well as a huge potential for increasing the yields of land already in production.
As far as Vireol's own requirements are concerned, by using wheat grown in Northern Europe we can replace some imported soya meal from outside Europe and so free up land. We believe Europe has the capacity to increase its output of wheat by returning set aside land to production, developing better crop varieties and by the considerable improvements already underway in farming productivity in East European countries which have recently joined the EC. This position has been endorsed in a study by the Renewable Energy Association (REA) which has been peer reviewed by Imperial College, London.
To meet the proposed European target of 10% of ethanol in petrol by 2020, we estimate that there could be about a 3% increase in land under cultivation in Europe. However, the soy bean meal displaced from feed diets would release an equivalent amount of land from growing soy. Thus there need be no net increase in land to meet the 10% ethanol obligation.
22. New RTFs made from agricultural waste materials and non-food crops are forecast to be available soon. Why don't we just wait for those?
It is actually likely to be a long time before economic technology for converting waste materials and non-food (cellulosic) crops to ethanol is available commercially. More importantly, the current wheat to ethanol process which Vireol is using is actually more advanced than 'second generation' processes, since it provides food and ethanol (unlike cellulosics), and has a better carbon footprint when indirect effects are considered. There is therefore no need to wait.
In fact, it is more eco-friendly to burn cellulosic crops, for energy, than use them for (expensive) conversion to liquid RTFs.