Future of biofuel depends on Government

IRELAND faces a significant challenge to meet our EU Renewable Energy Directive (RED) target of 10% share of renewable energy sources in transport by 2020.

IRELAND faces a significant challenge to meet our EU Renewable Energy Directive (RED) target of 10% share of renewable energy sources in transport by 2020.

That’s according to Geraldine O’Sullivan IFA Forestry & Bioenergy Executive.

In the National Renewable Energy Action Plan (NREAP) submitted to European Commission last summer, the Government outlines a two-pronged strategy to achieve our renewable energy transport target, to accelerate the development and use of electrical cars and to significantly increase the use of biofuels.

The plan aims to source over 8.5% of the overall national target of 10% share of renewable energy sources in transport from biofuels.

The scale of the challenge is substantial when you consider that in 2010 the share of biofuels in transport in energy terms was 3%.

“The Government strategy to achieve this target is to mandate a minimum share of biofuels in transport. The Biofuels Obligation Scheme, which was introduced in July 2010, sets a minimum target of 4% by volume of biofuels inclusion in all transport fuel used in Ireland. The rate of inclusion is expected to increase in the coming years,” said Ms O’Sullivan.

The Biofuels Obligation Scheme is a market-based scheme that requires obligated parties, oil companies, to buy a certificate for each litre of biofuel used, so for every 100 litres of fuel sold the oil company must purchase 4 certificates.

“It would seem that the motivation of the Biofuels Obligation Scheme is solely based on achieving Ireland’s targets in relation to increasing energy consumption from renewable sources in transport and reducing Greenhouse Gas (GHG) emissions with little importance attributed to increasing Ireland’s security of energy supply or rural development,” said Ms O’Sullivan.

The Biofuels Obligation Scheme replaces the Mineral Oil Tax Relief (MOTR) scheme, which gave indigenous biofuel suppliers relief on excise from the sale of biofuels.

Ms O’Sullivan said the transition between the schemes “has been managed badly and has caused uncertainty in the market, forcing indigenous producers to operate in a vacuum, with the price of certificates unknown and the future value difficult to predict.”

Like most countries, Ireland imports most of our 5.5 billion of litres transport fuel requirements, mainly from the UK market. Britain has been operating a similar obligation scheme for over a year now, which requires that 3.5% of all transport fuel come from biofuels.

“This means that the demand for Irish certificates will be minimal, with many oil companies already indicating a preference to pay the penalty of 45 cents per litre for non-compliance with the scheme, rather than entering the marketplace to buy certificates,” she said.

In addition the initial indications from the British scheme show that the price of certificates is only a third of the penalty. Although it is difficult to predict, indigenous biofuel producers can expect to earn approximately 15 cents per litre for a certificate.

Therefore, Government policy rather than supporting indigenous biofuel producers has forced many facilities to close and is jeopardising the future of the entire indigenous biofuels sector.

“This is unacceptable and the priority must be to support the development of a sustainable indigenous biofuels sector, which creates new market outlets for agricultural products and stimulates economic activity in the economy as well as employment in rural areas. Particularly at a time when employment levels are at 14% and even higher in rural areas,” said Ms O’Sullivan.

She added “the Government states in the National Renewable Energy Action Plan (NREAP) that they are working to transform Ireland’s dependence on imported oil, however this is not reflected in their policy, which seems to replace our dependence on import fossil fuels with imported biofuels.”

“If Ireland is to be active in this area we must support indigenous production now, so we can benefit from future reductions in production costs, new technologies (particularly second generation), as well as provide protection from surging energy costs.”

Growing biofuels has the potential to provide new jobs and incomes throughout the supply chain, from rural communities and farmers to biotechnology and engineering companies. Research in Austria has shown that for every one job created in the fossil fuel supply chain 39 are created in biofuels.

A recent report forecasts that the biofuels markets will increase threefold by 2020. The timeframe for tripling of biofuel production is ambitious and provides enormous opportunities.

The IFA are now calling on the new Government to introduce policies that prioritises indigenous production and create confidence in the sector by providing a guaranteed market price for certificates produced in Ireland.