The above RTFO targets fails to set out how the RTFO obligation will rise towards the 10%target for renewable transport fuels in 2020 as set out in the EU’s Renewable Energy Directive (RED).
Without a clear policy framework in place, consumption of renewable transport fuels has been relatively stable at c. 3-3.5% by volume from2010-14, with blending rates steady at approximately the 2010/11 obligation period target. Given the stalled progress towards the 2020 targets, the shortfall against 2020 targets is currently c. 5,000mlitres/year.
PwC RENEWABLE ENERGY VIEW 2015
|
Figure 15: Consumption of biofuels (million liters, LHS) and share of total demand (%, RHS) FIGURE 19 CONSUMPTION OF BIOFUELS (MILLION LITERS, LHS) AND SHARE OF TOTAL DEMAND (%, RHS)
State of the Renewable Industry
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
-
32 The RTFO places an obligation on fuel suppliers tomeet their volume targets, irrespective of the source of fuels. This creates the opportunity for fuel suppliers tomeet their obligation using imported fuels. The economics of biofuels are such that it has generally beenmore economical for fuel suppliers tomeet their obligations through imports (e.g. fromBrazil or Ukraine) than through investing in UK production capacity. This is evidenced by themodest share of domestically produced biofuels, 23%in 2014 (2013: 21%)33. Demand for biofuel refining capacity, and therefore investment, is weakened by the availability of low cost imports.
approximately the 2010/11 obligation period target. Given the stalled progress towards the 2020 targets, the shortfall against 2020 targets is currently c. 5,000m litres/year.
This report is solely for the use and benefit of Renewable Energy Association and should not be relied upon by any other party. State of the renewable industry - Investments in renewable electricity, heat and transport PwC
5.2. Investments in biofuels As with other renewable energy, investment in renewable transport fuel capacity is driven by the policy framework. The RTFO places an obligation on fuel
suppliers to meet their volume targets, irrespective of the source of fuels. This creates the opportunity for fuel suppliers to meet their obligation using imported fuels. The economics of biofuels are such that it has generally been more economical for fuel suppliers to meet their obligations through imports (e.g. from Brazil or Ukraine) than through investing in UK production capacity. This is evidenced by the modest share of domestically produced biofuels, 23% in
The dominance of imported biofuels is compounded by the current lack of clarity as to how biofuel targets will increase to 2020, leading to a weak case for investment in UK biofuel capacity. Vireol’s planned Grimsby bioethanol plant offers a good example of a facility ultimately being deployed in the US after Vireol unsuccessfully attempted to secure finance in the UK for two years, as policy uncertainty unsettled investors.34 . Figure
The dominance of imported biofuels is compounded by the current lack of clarity as to how biofuel targets will increase to 2020, leading to a weak case for investment in UK biofuel capacity. Vireol’s planned Grimsby bioethanol plant offers a good example of a facility ultimately being deployed in the US after Vireol unsuccessfully attempted to secure finance in the UK for two years, as policy uncertainty unsettled investors.36 Historical investment in biofuels have to date been limited to a small number of refinery investments. In the period analyzed, investment is limited to three projects37
) with 2014
Historical investment in biofuels have to date been limited to a small number of refinery investments. In the period analyzed, investment is limited to three projects35. The graph below shows the size of the investments during 2010-2014. No Major investments have been identified in 2014.
20 shows the size of the investments during 2010-2014. No Major investments have been identified in 2014.
FIGURE 20 HISTORICAL AND FUTURE ESTIMATED INVESTMENT IN BIOFUELS (£m) Figure 16:Historical and future estimated Investment in biofuels (£m) 450 332 300 300
Bioethanol Biodiesel
150 9 - 0 2010 2011 2012 2013 2014F 92 REview Renewable Energy View 2015
On balance the outlook for investment in biofuels in the UK is not positive. There are no signs that demand will increase towards the 10% EU level target in the near term and supply of low cost bioethanol imports provides an economical solution tomeeting existing regulatory targets.
- - 150
Added capacity [Million litres]
400 450
As with other renewable energy, investment in renewable transport fuel capacity is driven by the policy framework.
5.2. Investments in biofuels 2014 (2013: 21%)35
2010 2011 2012 . Demand for biofuel Ren wable Transport Fuel Obligation, Draft Post-implementation Review, DfT, December 2013
refining capacity, and therefore investment, is weakened by the availability of low cost imports.
On balance the outlook for investment in biofuels in the UK is not positive. There are no signs that demand will increase towards the 10% EU level target in the near term and supply of low cost bioethanol imports provides an economical solution to meeting existing regulatory targets.
APPENDIX A. - METHODOLOGY Installed capacity and additions
28
Capacity figures for the period 2009 to 2014 have been obtained primarily from ‘Chapter 6: Renewable Sources of Energy’ of the ‘Digest of United Kingdom energy statistics’ (DUKES) published by DECC (201438
data from Energy Trends, February 201539. Supporting data has been estimated by applying a number of sources as summarised below. Capacity additions are allocated to the year in which the project is commissioned.
2013 2014 2020
3.3% 1,568
Other Bioethanol Biodiesel % Renewable
Gap towards target:
4,930million liters
3.3% 1,517
3.6% 1,635
3.0% 1,340
3.5% 1,744
10.0% 6,674
Investment in Renewables
0% 2% 4% 6% 8% 10% 12%
www.r-e-a.net
Biofuel consumption (mil. liters) £m
Milion Litres
Share of total demand (%)
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