Bioethanol

 
Locally produced bioethanol offers one of the most cost-effective, sustainable ways for the UK to meet its obligations under the Road Transport Obligation (RTFO).

Specifically:

  • UK wheat is some of the lowest cost feedstock produced (LIFFE feed wheat).
  • The bioethanol produced is demonstrably sustainable with high GHG (greenhouse gas) savings.
  • It will assist with energy security (emerging importance in Europe/UK).
  • The importance of bio-refining wheat in holding onto the protein content of the crop to help address our increasing demand for high protein animal feeds (which are largely imported, often from less sustainable areas of the world).

Overall, in the 2009/10 period, the UK sourced just 17% of its total RTFs domestically.  There will need to be installed capacity of 6.5bn litres of RTF by 2020.  Assuming an even split between biodiesel and bioethanol, this equates to 6-7 large scale ethanol plants (defined as being c.500m litres/pa) by 2015.  One large scale plant is currently operating and another is due to come on-line later in 2011.

European Ethanol Market

The introduction of the EU RED has created a mandated market and at higher levels than in the previous 2003 Directive.  With many imports not complying with the new carbon emissions reduction and sustainability targets, domestic projects are now well placed to take advantage of an EU mandated blending market which will gain momentum from 2012 onwards.

 As there have been no new projects in Europe announced over the last two years, and taking into consideration the time needed to get an ethanol plant on stream from project conception to start up (c.4 years), this means that any new capacity coming on stream by 2012 will have been started before the global economic crises, and that no new major capacity is likely until 2015 and afterwards.

Global Market - US/Brazil

The US have created their own Renewable Fuel Standard (RTF) that will require 136bn litres of RTF by 2022.  Given the scale of demand and the fact that most facilities in the US only have a GHG saving of <10%, they are unlikely to ever penetrate UK/EU market (EU legislation requires all RTFs to meet a minimum 35% GHG saving in 2010 and 50% by 2017).  Only 3 US plants are currently understood to be able to meet this target.

Brazil has been developing an internal ethanol market for 30 years.  As a result (and given sugar cane as the feedstock), it is the cheapest source of RTF in the world.  However, it is in great demand but short supply.  As a result of these economics, Brazil now blends more ethanol in transport fuel than petrol. UNICA (the cane growers association) has provided forecasts that indicate that they aspire to export 16bn litres globally by 2020.  Given the US target of 136bn litres by 2020, it is inevitable that a significant proportion of this will head north to the USA.  In addition, demand is increasing from Japan and the Far East who are less able to grow the feedstocks to make their own RTFs but are nevertheless pushing ahead with very challenging RTF blending targets.  It is likely, therefore, that a significant proportion of Brazilian production will supply other parts of the world and not the EU.  Against a forecast demand for ethanol in the EU of a minimum of 23bn litres by 2020, it is now clear the EU production will need to be the dominant product in meeting EU demand.