Memorandum submitted by United Kingdom
Petroleum Industry Association Limited (UKPIA)
The UK Petroleum Industry Association (UKPIA)
represents the oil refining and marketing activities of the main
oil companies in the UK. Our member companies supply most of the
transport fuels and other oil related products used in the UK.
As such we have a major interest in the biofuels and welcome the
Committee's consultation on this important issue.
SUMMARY
1. UKPIA's views can be summarised as follows:
— The oil industry already markets
biofuels in some European Countries but believes that petrol and
diesel will remain the road transport fuels of choice for decades.
— We believe biomass can be used most
effectively in reducing CO2 emissions by using it to generate
heat and electricity.
— We believe that replacing conventional
diesel and petrol with biofuels:
— is a very expensive way of reducing
emissions of carbon dioxide
— could worsen the position on
local air quality in terms of NOx
— will not increase the security
of supply of transport fuels
— will not necessarily be sourced
from within the EU
— could have an adverse effect
on biodiversity and fertiliser run-off from farms
— will not be popular with hay
fever suffers due to the pollen from rape seed
— will require a significant and
on-going subsidy from the taxpayer.
— UKPIA believes that UK's energy policy
should be based on all three pillars of sustainability (economic,
environmental and social) and not dominated by any one of them.
Protecting the competitiveness of UK industry and avoiding fuel
poverty are important goals along with protecting the environment.
— UKPIA agrees with the views expressed
in the Executive Summary of the Performance and Innovation Unit's
Report—The Energy Review—March 2002 that "it
would make no sense for the UK to incur large abatement costs,
harming its international competitiveness, if other countries
were not doing the same".
Q1 The extent to which alternative crops are
already grown in the United Kingdom.
Potential UK Energy Crop
2. The UK can grow a number of different
crops for use as a source of energy including:
— Rape seed which can be converted
into bio-diesel
— Sugar beet which can be used to produce
ethanol by fermentation
— Wheat which can be used to produce
ethanol by fermentation
— Miscanthus which can be burned to
produce heat and power.
— Wood from short rotation coppicing
which can be burned to produce heat and power
3. Bio-ethanol can be converted into ETBE
(ethyl tertiary butyl ether), a high octane product, which can
be blended into petrol without any of the water pick-up and vapour
pressure constraints resulting from blending ethanol into petrol,
especially in the summer.
4. Wheat and corn yield in the order of
two t of ethanol per hectare sugar beet has a much higher potential,
in the region of five t per hectare. The actual yield will depend
on the quality of the land used, amount of fertiliser, etc.
Table
TYPICAL EUROPEAN YIELDS OF BIO-DIESEL AND
ETHANOL PER HECTARE
| Crop | Product
| Typical yield |
| Rape Seed | Bio-diesel (RME)
| 1.3 te/ha |
| Wheat | Bio-ethanol | 2.1 te/ha
|
| Sugar Beet | Bio-ethanol |
4.5 te/ha |
| |
|
Source: Concawe Report 2/02
Other Sources of Bio-fuels
5. A number of waste products can also be converted into
energy or fuels eg used vegetable oil into bio-diesel, straw and
forestry waste into heat and power, etc. However, like other biomass
fuels, the potential UK production from these sources is limited.
6. In the longer term woody waste, straw and other cellulosic
material can be converted to bio-ethanol using enzyme type technology
or diesel by partial oxidation. Processes for both these options
are currently under investigation/development. However they are
not yet available commercially.
7. The technology to convert woody material and green
waste to bio-ethanol using enzymes as catalysts is at the demonstration
phase with the largest plant believed to produce about eight tonnes
per day of bio-ethanol from about 40 tonnes per day of straw.
However it will be some time yet before the process will be demonstrated
commercially. One developer estimates that the current production
cost of bio-ethanol is about 24 p/litre as opposed to the current
cost of UK petrol, before tax and distribution, of about 15 p/litre
(historically a high figure).
8. The production of diesel (or hydrogen) by partial
oxidation (gasification) of biomass and conversion of the syngas
produced is not at such an advanced stage. The key technology
that has to be developed is the gasification stage. The rest of
the process steps required are well established.
9. The size of advanced plants based on new technology
will be limited by the amount of feed obtainable within a realistic
geographic area. Biomass generally has a low energy density and
contains a lot of water. Various literature sources mention a
collection radius of some 70 km as the maximum beyond which transport
costs become prohibitive.
Barriers for UK Farmers
10. The production of rape seed, wheat and sugar beet
is conventional farming. Short rotation coppicing and miscanthus
are new crops but their production should not pose any significant
problems. The barriers to UK production are the availability of
good quality set-aside land and process plants to convert say
rape seed into bio-diesel, burn wood from short rotation coppicing,
etc. In their absence of production plants there will be no significant
market for the UK farmer's crops.
11. The other barrier for UK farmers is over sea's competition.
In an open market there is no guarantee that the bio-ethanol and
bio-diesel used in UK road fuels will be all sourced from the
UK. Brazilian farmers can produce bio-ethanol from sugar cane
and Malaysia farmers can produce bio-diesel from palm oil. Products
from these counties are potentially cheaper than UK sourced material
due to their more favourable climate and established production.
The new EU Member States may also become potential competitors
as they have potentially lower wage costs and a large farming
base. Hence an expansion in the use of bio-ethanol and bio-diesel
may not necessarily be based on UK production and so may not benefit
UK farmers.
12. However wood from short rotation coppicing and miscanthus
used for generating heat and power will be grown in the UK as
it would be uneconomic to transport these products from overseas.
Q2 What benefits (or costs) would result from expanding
their production, and in particular what contribution the use
of bio-fuels might make to sustainable development
Optimal use of biomass
13. Different energy crops can be used to produce heat,
electricity or road fuels. In a situation where the available
land is limited, optimum use is an issue. The costs and benefits
will therefore vary from case to case.
Road Fuels
14. The current focus is very much on the use of available
land for the production of motor fuels. This may not, however,
represent the optimum use of land from either an energy or greenhouse
gas emissions point of view. Motor fuels are complex products
that need to meet a number of requirements and specifications.
Making such fuels from crops requires extensive processing and
utilises only a part of the available biomass (oil or carbohydrates).
The preferred crops are selected for their ability to produce
such compounds rather than their potential for metabolising CO2.
15. UKPIA member companies are involved with the supply
of bio-fuels in a number of countries and are will use bio-fuels
that are commercial and meet the appropriate European Standards,
current and future. These standards have been developed in conjunction
with the European Commission, the bio-fuels producers, the motor
industry and the oil industry. For diesel these standards would
not allow the use of unprocessed vegetable oil eg rape seed oil
that has not been converted to the methyl ester.
16. Modern diesel engines are built to very high standards
with close tolerances to give the performance, lower emissions
and reliability wanted by vehicle owners. In these engines sticky
deposits from unprocessed vegetable oil may build up and damage
the expensive diesel fuel pump. The deposits may also build up
and cause the fuel shut-off valve to stick so that the engine
will either not start or if running not stop, or foul the injectors
which will increase emissions, or block the fuel filter. These
known problems have all been linked to the use of unprocessed
vegetable oil by analysis of the deposits causing the problem.
Using up to 5% processed vegetable oil, meeting the proposed European
standard, mixed with conventional diesel will avoid these problems.
Hence UKPIA does not support the use of unprocessed vegetable
oil.
Alternative use of biomass to maximise carbon dioxide benefit
17. An alternative is to simply use the biomass as a
fuel to raise steam and produce electricity or combined heat and
power. The processing required is considerably simpler and the
crops can be selected solely on their ability to produce large
amounts of biomass from a given land area. Such crops could include
various grass varieties or fast-growing wood (short rotation coppicing).
Adapted grass varieties can produce some 200 GJ/ha of net biomass
energy (ie after accounting for the production energy), compared
to 30 to 60 in the best scenario for RME or ethanol. When used
for power generation this could displace an equivalent fossil
fuel energy with a CO2 emission factor of say 80 kg CO2/GJ (typical
of heavy fuel oil or intermediate between gas and coal). This
would equate to 16 te CO2 /ha, four to eight times more than could
be achieved through RME or ethanol (see table below).
18. Concawe, the oil industry's European environmental
research group, carried out a survey of published information
to estimate the potential saving in carbon dioxide per hectare
of crops grown for a number of different crops. The greatest saving
was when the crop was used to generate steam for heat and or power.
Table
CARBON DIOXIDE EMISSIONS ABATED BY THE USE OF CURRENT
BIOFUELS
| Crop | Carbon dioxide saved
|
| Bio-ethanol from sugar beet blended with petrol
| 3.8 te/ha |
| Bio-ethanol from wheat blended with petrol |
1.3 te/ha |
| Bio-diesel from rape seed blended with diesel
| 2.0 te/ha |
| Biomass (SRC or miscanthus) used to raise power
| 16.0/te/ha |
Source: Concawe Report 2/02
19. Based on current information producing liquid road
fuels is not the best use of land in terms of reducing CO2 emissions.
The best use of energy crops needs to be established.
20. This gap could be reduced in the longer term when
the new enzyme based process to produce bio-ethanol from cellulosic
biomass and diesel from syngas generated from wood are developed
and become available. The German consultancy LB Systemtechnik
produced a report (GM Wells to Wheels Analysis of Energy Use and
Greenhouse Emissions of Advance Fuel/Vehicle Systems—A European
Study) for General Motors and four major oil companies (BP, ExxonMobil,
Shell and TotalFinaElf) which ranked a number of current and future
options for reducing greenhouse gas emissions. This shows the
potential improvement from advanced bio-ethanol production technology.
Table
WELLS TO WHEELS GREENHOUSE GAS EMISSIONS FOR BIO-ETHANOL
| Wells to Wheels Greenhouse Gas
Emissions g CO2 equivalent/km
| Relative Wells to Wheels
Greenhouse Gas Emissions per
cent of Sugar Beet Case
|
| Ethanol (E100) from straw | 25
| 30% |
| Ethanol (E100) from poplar | 65
| 70% |
| Ethanol (E100) from sugar beet | 91
| 100% |
Source: LBST Report September 2002
Cost
21. In general alternative fuels (bio-diesel, bio-ethanol,
etc) are more expensive than conventional fuels. The higher cost
of producing renewable fuels has prevented their widespread use
in the past and will require a substantial on-going subsidy to
ensure their use in the future, unless there is an unexpected
step change in the technology.
22. Currently bio-diesel attracts a 20p/litre lower duty
than conventional diesel. A similar reduction for bio-ethanol
was proposed by the Chancellor in the 2002 Pre Budget Report.
However the size of both duty reductions have been criticised
by the farmers lobbying groups as being too small to stimulate
the large scale production of biofuels in the UK. British Sugar
recently said that they needed a 26 p/litre subsidy to make UK
production of bio-ethanol economic and there is currently a House
of Commons Early Day Motion calling for a 30 p/litre subsidy.
23. In their draft regulatory impact assessment for the
proposed Biofuels Directive DfT report that "on the basis
of the Commission's own estimates of the extra production costs"
the costs for the UK could range from "£475 million
to £875 million per annum".
24. A similar range can be obtained by calculating the
duty lost by replacing five% of UK petrol and diesel by biofuels
for a range of reductions in fuel duty.
Table
DUTY LOST BY REPLACING FIVE PER CENT OF UK ROAD FUELS
BY BIOFUELS
| Duty Reduction | Current UK Sales of
Petrol and Diesel
| Duty Lost by Replacing
five% of UK Petrol
and Diesel by Biofuels
|
| 20 p/litre | &tild;48 billion litres
| £480 million |
| 25 p/litre | &tild;48 billion litres
| £600 million |
| 30 p/litre | &tild;48 billion litres
| £720 million |
| 35 p/litre | &tild;48 billion litres
| £840 million |
Cost of abating CO2
25. Avoidance of CO2emissions from biofuel depends on
the way it is produced. In their March 2002 draft regulatory impact
assessment for the proposed Biofuels Directive DfT report that
"the proposed directives could reduce 2010 UK emissions of
carbon dioxide from road transport by 0.3-0.7MtC". DfT estimate
that this gives a cost of "£675—£2,900 per
tonne of carbon saved "(or £185 to 790 per tonne of
carbon dioxide saved). This is slightly higher than the figures
quoted by the Commission (COM (2001) 547 final).
26. Both sets of figure are way above the cost of other
ways of reducing emissions of carbon dioxide. This is acknowledged
by the Commission who report (COM (2001) 547 final) that that
their lower abatement costs are "above the range for cost-effective
measures to meet the EU's commitments during the first Kyoto commitment
period." "The use of biofuels at this moment cannot
yet be justified by the benefits alone of CO2 avoidance".
27. The Markal model studies carried out for HMG as part
of the recent Energy White Paper reaches a similar conclusion
as biofuels play a small part in the scenarios to reach a 60%
reduction in emissions of carbon dioxide by 2050. Their use in
the model appears to be largely due to the lower cost of biofuels
whilst they receive a duty subsidy.
28. Analysis by the former DETR, along with that of many
other organizations, shows that bio-fuels continue to be, at best,
a marginal and very costly way of reducing CO2. At most bio-diesel
can contribute about two-four% of the diesel demand, maybe saving
a small fraction of a% of road transport CO2 emissions. However
this would tie up the "spare" land in the UK and so
block other measures which are likely to be more effective at
reducing carbon dioxide and certainly much more cost effective.
Air Quality
28. In terms of air quality there will be no significant
benefit from the use of biofuels. In the Explanatory Memorandum
for the proposed Biofuels Directive (COM(2001) 547 final) the
European Commission report "with conventional gasoline and
diesel becoming virtually sulphur and lead-free and with emission
norms being tightened to more than 90% reduction of most conventional
emissions, biofuels will offer in theory little, if any, emission
advantage over gasoline and diesel in the future."
Security of Supply
29. With current technology, crop yields and land area
available in the UK the argument on bio-fuels contribution to
the UK's security of supply for road fuels should not be overstated.
Biomass would appear to be better used to raise heat and or power
directly rather than converting it to road fuels.
30. Reducing the demand for oil products can be achieved
in more cost effective ways.
Q3 What should be done to encourage production?
30. UKPIA is against the setting of mandatory targets
as it will interfere with the free operation of the market which
is essential if emissions of carbon dioxide are to be reduced
without affecting the competitiveness of the UK economy.
31. Production can only be stimulated by subsidies. HMG
has to decide if it is worth subsiding current biofuels which
are limited in the contribution they can make to reducing carbon
dioxide.
Q4 What examples there are of best practice in other countries
from which we can learn?
32. UKPIA's member companies will use fuels derived from
biomass in transport fuels, as they already do in some countries
provided they meet the quality specified in current/future European
standards and companies are not placed at a commercial disadvantage
by their use.
33. In terms of biofuels quality the European Standards
Organisation, CEN, has already developed a European standard for
bio-diesel to be blended into conventional diesel and is currently
working on a standard for ethanol. The oil industry is contributing
to this process.
34. UKPIA believes in the following approach to reducing
emissions of carbon dioxide:—
— base it on all three pillars of sustainable development
ie environmental objectives should not necessarily take preference
over economic and social objectives.
— aim to meet its objectives in a sustainable manner
and at the least cost to the UK.
— avoid large abatement costs which harm the UK's
international competitiveness, if other countries are not doing
the same.
— keep all realistic options open by an outward
looking, open-minded approach focussed on co-operation and capable
of adjustment to changing circumstances.
— maintain a level playing field between all options
by avoiding the use of long term incentives, protected market
shares, etc.
— create and maintain an environment where companies
are willing to invest in maximising recovery from the North Sea
and in other energy infrastructure projects.
— recognise that for at least the next three decades
conventional hydrocarbon fuels will supply the bulk of the UK's
energy needs, particularly in the transport sector.
— recognise the need to work with other countries
to ensure that the investment climate in all countries encourages
investment in energy infrastructure and supply.
— recognise the large international market for new
technology required by manufacturers.
— emphasise the key importance of improving energy
efficiency in all sectors, where economic.
— reflect that new low carbon approaches such as
carbon sequestration and fuel cell powered vehicles need both
advances in technology and long lead times.
Thank you for the opportunity to contribute to this important
debate.
31 March 2003
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