Within in the next year, government incentives, local mandates and investors in countries like Brazil, Argentina, Indonesia, Thailand and Malaysia will enable some of them to participate in the bourgeoning global biodiesel sector, according to a report released in mid-October by the Nelson Institute’s Center for Sustainability and the Global Environment at the University of Wisconsin-Madison. SAGE doctoral candidates Matt Johnston and Tracey Halloway ranked 226 countries according to their potential to produce large volumes of biodiesel, while maintaining low production costs. The doctoral students conducted the report to find out if developing countries that grow and export significant amounts of vegetable oil have considered or have the ability to refine it into biodiesel. Johnston was encouraged to conduct the study after he and his wife visited the remote island of Fiji about three years ago. The locals there rely primarily on imported petroleum diesel to run their generators. The fuel is transported by boat at a cost of more than $20 per gallon. At the same time, the Fijians were processing coconut oil on the island and exporting the raw oil to the mainland. Johnston wondered why they couldn’t produce their own fuel using the raw coconut oil, and what other countries possess this kind of potential.
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Overall, the study ranked Malaysia, Thailand, Colombia, Uruguay and Ghana as the countries most likely to attractbiodiesel investments, not only because of their strong agricultural industries, but also their relative safety and stability, lack of debt, and availability of biodiesel feedstocks such as soy, palm or jatropha oil. “[The report] is a global study from a national perspective,” Johnston tells Biodiesel Magazine. “My focus was originally on the development aspects, and to address if biofuels could be used as a development resource for these countries. I think it’s a very realistic assessment in terms of a country looking at itself.”
Biodiesel Capacity Production, Europe vs. U.S
Johnston and Halloway’s findings also included the usual suspects. The United States and Brazil, both top soybean producers, and several European nations including Belgium, Germany, the Netherlands and Spain were in the top 10 for volume potential.
In late 2007, the National Biodiesel Board pegged U.S. production capacity at 1.85 billion gallons with 80 projects being constructed and scheduled for completion within the next 18 months. Although Europe currently dominates the biodiesel market, the industry is plagued by high oil prices(as are U.S. producers) and government policies that aren’t supportive. Producers there also contend that subsidized U.S. imports are undercutting their prices. Biodiesel Magazine took a closer look at the situation in Europe and the United Kingdom.
Europe
A report released by the European Biodiesel Board, an organization committed to promoting the production and use of biodiesel, pegged total capacity in 2007 in Europe at 11.2 million metric tons (3.3 billion gallons) with 185 facilities in full operation and another 58 under construction. The increase in capacity is intended to help meet the European Commission’s target of blending 5.75 percent biofuels by 2010.
The European biodiesel industry could be stalled, however, as producers are reeling from high feedstock prices. They also claim subsidized U.S. imports have devalued domestically produced biodiesel and eroded their operating margins. The EBB, which represents European biodiesel producers, is considering legal action along with intervention from the EU and the World Trade Organization. “The subsidized B99 exports from the U.S. are not only damaging the European biodiesel industry, but it’s an issue that’s damaging biodiesel worldwide exiting the U.S.,” EBB Secretary General Raffaello Garofalo says. “A number of plants have slowed down production and a lot of those plants are suffering because of the effects of the subsidized B99 imports from the U.S. If nothing changes in the U.S., the conclusion will be that legal action must be undertaken.”
European Biodiesel Capacity
The extent of damage, if any, caused by U.S. imports is yet to be determined. In the meantime, there are other issues causing tighter production margins. For example, Germany’s largest biodiesel producer, Petrotec, temporarily suspended production until the end of this year citing poor market conditions. The company says the German government’s decision to start taxing biodiesel in August 2007 is a prime factor. Germany’s renewable fuels trade association estimates that plants in the country are operating at only 40 percent to 50 percent production capacity because of the tax and subsidized B99 imports. Germany is the largest biodiesel producer in Europe with capacity expected to increase to a record 5 million metric tons (1.5 billion gallons) at the end of this year. “The market is going to develop, but the question is if small-scale producers will be able to participate, and clearly it will be difficult for them to do so,” says Uwe Fritsche, coordinator for the Energy and Climate Division at Oeko-Institute for Applied Ecology in Darmstadt, Germany. “It’s more or less that consolidation will be inevitable and take out the smaller scale producers.”
Subsidized biodiesel imports are also being blamed for poor market conditions in the United Kingdom. Middlesbrough, England-based biodiesel producer D1 Oils PLC scrapped its plan to increase refining capacity in the United Kingdom from 142,000 metric tons (157,000 tons) to 320,000 (353,000) by the end of 2008 due to the “asymmetrical trading regime” being practiced by the United States, according to D1 spokesman Graham Prince. “The market is pretty challenging here,” Prince says, noting that other producers like Biofuels Corp. saw its production plummet as a result of the unfair trade and was delisted from the London Stock Exchange earlier this year. “We think this is something that needs to be sorted out by the EU and the U.S. in terms of getting a level playing field on subsidies. We want to see subsidized B99 [imports] stopped and get us back to a level where we can be competitive again.”
D1 has a biodiesel plant in Middlesbrough with a capacity to produce 42,000 metric tons (46,000 tons) of biodiesel and a second site in Bromborough, England, which, when fully operational, would produce 100,000 metric tons (110,000 tons). However, D1 slowed the timetable for commissioning the first 50,000 metric tons (55,000 tons) of capacity at its Bromborough site from the end of 2007 to the first half of 2008. “If you’re a refiner [in the UK] you’re in a difficult situation particularly if you’re sitting on 200,000 to 250,000 metric tons (220,000 to 276,000 tons) per year capacity,” Graham says. “We’ve built out capacity very cautiously. I wouldn’t say we’re typical of the industry. We face the same challenges, but we’re always starting at a different place and aiming for a different place.”
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