This article is taken from the November/December issue of Renewable Energy Focus (REFocus) magazine. For a free subscription, click here.
As we discovered in part one of this article, many countries around the world are banking on Brazil to help meet their biofuels mandates, which require an increasing proportion of transport fuels to come from renewables. However, while the world's oil majors have upped their activities in the field significantly, recent research indicates that policy makers need to have a major rethink - or risk missing their targets altogether.
For European players, sustainability requirements add extra pressure: “Under the RED requirements, sustainability and volumes go hand-in-hand. You can't separate the two,” says Nick Goodall, former ceo of the UK Renewable Fuels Agency (the body responsible for administering the renewable transport fuels obligation, and setting sustainability criteria for biofuels in the UK) and now CEO of certification body, Bonsucro.
Under the EC's sustainability criteria, there are constraints on the types of feedstocks and production processes that can be used. Any sugarcane ethanol or biodiesel used to meet targets, including imports, must be certified as sustainable by meeting the production standards of one of the various EC-approved certification bodies, such as Bonsucro.
Bonsucro's Production Standard, approved by the EC in July, assesses the biodiversity, ecosystem and human rights impacts of sugarcane production and demands legal compliance and continuous improvement throughout the production process. This is assessed against key indicators, such as energy consumption, greenhouse gas emissions and water consumption.
“The Bonsuro standard is very specifically a metric standard. There are absolutes against which it's measured,” says Goodall. “It is the only standard that we're aware of, certainly in sugarcane, that has the environmental, social and economic dimensions of what sustainability really is.”
The standard “has been designed by that broad church”, Goodall continues, explaining that Bonsucro is a multi-stakeholder association comprising oil giants like Shell, sugar mill operators like Cosan, institutions such as the International Finance Corporation and NGOs like the World Wildlife Fund. He stresses: “What we can [now] say with some confidence about biofuels, specifically sugarcane, is that there is now a way of ensuring that the production of it is provably sustainable to the highest standards that can be identified.”
According to Tammy Klein assistant vice president of Hart Energy, while such standards are good, this means there is a greater risk of failing to meet targets. “It's going to be very hard,” she says. “Utilisation right now in Europe for ethanol and biodiesel hovers around 50%, so this is not really great for producers as it is.
They already face competition from imports from Brazil on the ethanol side, and from palm and soy biodiesel from Argentina, Malaysia, and Indonesia. You throw the greenhouse gas target and sustainability criteria into the mix and it's going to be very tough. You could see production go offline because it will not be allowed in the market. For Europe that's a big issue.”
Some will no doubt be pinning hopes on the next generation of biofuels, such as algae or ethanol from grasses (otherwise known as lignocellulosic biofuels), but these are some way off yet, Klein stresses. Much of the legislation, she suggests, was passed on the assumption that such advanced non-food feed stocks and advanced biofuels production processes would be widely and commercially available in the market. “We really don't see that through the study time period [to 2020] and that makes it difficult to meet some of these very strict and progressive targets.”
She continues: “You can't just toss out a mandate and incentive and then say you're done. It really hasn't worked in a lot of instances to create an efficient market. So what Governments need to do is look a little bit more holistically at the whole value chain.” As in other renewable energy sectors, such as wind, this means helping with investment in infrastructure and creating market certainty.
In the U.S., for example, incentives are in place for ethanol and biodiesel, but as with the production tax credit for windpower, these have to be renewed each year. “It means the incentives are in constant danger of not being renewed. It's really put the chill on investment for both first generation and next generation biofuels,” Klein says. “You need to create an environment of regulatory and market certainty. There needs to be a longer time horizon. That's probably one of the most important things Governments can do.”
Likewise in Europe, “policies need to be reviewed”, says Maelle Soares-Pinto, Hart Energy's director for Europe and Africa, Global Biofuels Centre, although simply reducing planned consumption of ethanol in favour of biodiesel to meet targets presents its own issues:
“We have very big question marks on biodiesel availability for imports,” she says. “With biodiesel it's easier to reach targets because you can use it in vehicles and off-road applications, like rail.” But while there are already some advanced biodiesel projects underway in Europe “they already look more expensive even than cellulosic ethanol”.
Critical to driving development of advanced biofuels and biodiesel is “to have the money to take them from demonstration scale to the first commercial plant - and for that they need stable policies,” she stresses. The EC is trying to help by funding pre-commercial demonstration projects, “so maybe in the next four years we'll see if they can make it to commercial”.
The funds required though “are quite substantial and, as we know, Europe is having more fundamental issues with funding than just looking at advanced biofuels, so the funding of those projects is going to be difficult”.
The other key problem is where to find enough feedstock that is economically attractive for use as biodiesel or ethanol. With food prices high, this has become a major concern. “The price of sugar is very high so producers don't want to make ethanol. It becomes uncompetitive with gasoline,” says Soares-Pinto. Similarly, “the price of palm oil is linked to food prices making biodiesel completely uneconomic in Europe”. Indeed, “the whole industry [ethanol and biodiesel] is affected by high feed stock prices”.
And of course, food issues rightly take priority over the need for biofuels, particularly in regions such as Africa, where there is so much potential for biodiesel. “There's been talk of Africa developing its biodiesel industry for years now. Some states in Africa have biofuel mandates, but some are moving backwards,” says Soares-Pinto, citing South Africa as an example:
“South Africa was advancing its biofuels policy then because of the food issue it pulled back. Obviously food issues are much more important in Africa. For Europe the export potential would be great but the caution is necessary to make sure that people are not harmed by another cash crop that doesn't produce and deliver the income expected.”
Part three: BP and Neste looking to biofuels future...
NB: Why not check out our recent webinar which looked at Sustainability in bioenergy and included speakers from E4tech and Neste oil.
About the author: Gail Rajgor is a writer working across the energy & environment sector. She is the former publisher of Sustainable Energy Developments magazine.