Memorandum submitted by UK Petroleum Industry
Association (UKPIA) (Bio 25)
The UK Petroleum Industry Association (UKPIA)
represents nine companies engaged in oil refining and marketing
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 topic of bio energy—covering bio
fuels and biomass—and welcome the opportunity to respond
to the Committee's consultation on this important issue.
Our more detailed responses are confined to
those questions where we have specific knowledge or expertise,
particularly in relation to bio fuels.
SUMMARY
UKPIA's views can be summarised as follows:
— The oil industry believes that due
to their low cost, availability, and ease of use petrol and diesel
will remain the dominant road transport fuels globally to 2030
and beyond, a view that is shared by the International Energy
Agency in their forecasts of future energy use.
— The industry takes seriously, and
is closely involved in meeting, the challenge of reducing greenhouse
gas emissions. Savings are likely to come from a range of options,
across all sectors, including new technology, bio energy, renewables,
increased energy efficiency and changes in consumer behaviour.
— The oil industry is actively developing
and/or deploying new technology which will reduce emissions of
greenhouse gases such as biofuels, wind, solar, carbon capture
and storage, hydrogen and also fundamental research. Energy efficiency
is also being improved in our operations for example by installing
gas fired CHP in refineries.
— We are currently working towards
meeting the Government's target of replacing 5% of road fuels
by biofuels by 2010 under the Renewable Transport Fuels Obligation
(RTFO). This will require significant investment by the industry
at refineries and in the supply/distribution chain.
— We believe that it is important that
the RTFO should be applied in a way that helps the future introduction
of advanced bio fuels that have the potential for larger greenhouse
gas saving, lower costs for the consumer and open up a range of
new sources of biomass, including waste.
— The Government's targets should be
achieved by deploying the most cost-effective measures first.
This will ensure that the UK remains competitive by meeting its
targets at the least cost and develops the technology that is
most likely to be taken up by other countries, so creating opportunities
for UK business.
— For biomass this would mean extending
its use from transport fuels to heat and power generation where
studies by a number of groups, including the DEFRA Biomass Task
Force lead by Sir Ben Gill, have highlighted the higher potential
and lower cost per tonne of carbon saved. This application may
also be of greater benefit to the UK's security of energy supply
than conversion to liquid road fuels.
— The oil industry believes that biomass
produced in the UK and overseas can contribute to reducing emission
of greenhouse gases and that the use of biomass as a source of
energy will grow in the UK and elsewhere.
— For the medium term the industry
is working with others in the European Standards Organisation,
CEN, to look at changing the current limits on biofuels in the
road fuels standards.
— UKPIA believes that the UK's energy
policy should continue to be based on maintaining a reliable UK
energy system meeting all three pillars of sustainability: economic,
environmental and social—and not dominated by any one of
them. Sound science should be a cornerstone of this policy to
ensure goals are met cost effectively.
RESPONSES TO
QUESTIONS POSED
BY THE
SELECT COMMITTEE
Q1. What is the real scope for biomass and
bio fuels to contribute to tackling climate change? and what proportion
of the UK's energy and transport fuels could they provide?
Energy crops
1.1 The UK can grow a number of different
crops for use as a source of energy. The area of land available
is a determining factor for UK production, with indications that
about two million hectares could be given over to energy crops
without affecting food production. In addition wheat and waste
products currently exported, could supplement production. Beyond
this level, major change in land use—for example grass or
woodland cultivated for energy crops—could change the CO2
balance:
Potential energy crops include.
— 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.
The area of land available to cultivate energy
crops is the primary determining factor, without displacing land
for food/grazing (see 1.11 below).
1.2 Bio-ethanol can be converted into ETBE
(ethyl tertiary butyl ether), a high octane product, which can
be blended into petrol at a refinery without any of the water
pick-up and vapour pressure constraints resulting from blending
ethanol into petrol, especially in the summer.
1.3 Wheat and corn yield in the order of
2.5 tonnes of ethanol per hectare; sugar beet has a much higher
potential, in the region of four tonnes per hectare. The actual
yield will depend on the quality of the land used, amount of fertiliser,
although the latter can be a significant factor in input cost.
Other Sources of Bio-fuels
1.4 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 challenge for waste products remains
one of "chicken and egg". Greater utilisation of potential
UK production from these sources and development of a reliable
supply chain is currently limited because of the lack of end-use
plant, apart from plant converting used cooking oil and tallow.
1.5 In the longer-term woody waste, straw
and other cellulosic material can be converted to bioethanol using
enzyme type technology or diesel by partial oxidation—so
called advanced biofuels. Processes for both these options are
currently under investigation/development, with ethanol plants
likely to be constructed in Germany and Spain. However, they are
not yet available commercially.
1.6 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.
CO2 reduction
1.7 The Government estimates that emission
of about one million tonnes of carbon per year will be avoided
by the RTFO when fully implemented at the 5% level in 2010. The
overall carbon saved very much depends upon the type and source
of material and the production process involved. A joint report
by Concawe, the oil industry's European environmental research
group, European Joint Research Centre and Eucar, surveyed 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 for blending with petrol
| 3.8 te/ha |
| Bio-ethanol from wheat for blending with petrol
| 1.3 te/ha |
| Bio-diesel from rape seed for blending with diesel
| 2.0 te/ha |
| Biomass (SRC or miscanthus) used to raise power
| 16.0/te/ha |
Source: Concawe/JRC/EUcar
1.8 This indicates that producing liquid road fuels is
not the best use of land in terms of reducing CO2 emissions.
1.9 An alternative is to 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.
Meeting energy and transport fuel needs
1.10 Currently UK sales of bio fuels amount to approximately
120 million litres per year, including imported material, particularly
ethanol, equivalent to less than 0.3% of conventional petrol and
diesel use. It is estimated that about 100,000 hectares of land
is given over to biofuel crops.
1.11 Under current European Fuel Standards, the maximum
limit for blending of bio fuels with conventional petrol and diesel
is 5% by volume. EU Directive 2003/30/EC also established an indicative
target for bio fuels of 5.75% by energy by 2010. A European standard
has been developed for bio diesel (EN 14214) to ensure product
quality/stability by requiring vegetable oils be converted to
fatty acid methyl ester (FAME). A similar standard for bioethanol
is under development.
1.12 Meeting the EU Biofuels Directive would create a
UK bio fuel requirement of approximately three million tonnes
per year, requiring in the order of 1.75 million hectares of land
given over to production of biofuel crops. This is close to the
two million hectares of available land indicated in a 2002 report
from DEFRA without affecting food production. The amount of land
required might be reduced if wheat and sugar currently exported
was used to produce bioethanol.
1.13 This indicates that domestic production of bio fuels
could substitute between 5-10% of conventional petrol and diesel,
provided limited land is used to grow crops for power/heat.
Table—UK land area to produce 5.75% (by energy
content) biofuels by 2010
| | |
|
| Crop | Product
| Typical biofuel yield | Land required
|
| |
| |
| Wheat (50%) | Bioethanol |
2.5 tonnes/ha | 0.36 mio/ha |
| Sugar beet (50%) | Bioethanol
| 4.0 tonnes/ha | 0.23 mio/ha
|
| Rape seed | FAME biodiesel |
1.1 tonnes/ha | 1.15 mio/ha |
| | |
Source: Sheffield Hallam University for DEFRA
Q2. How cost-effective are biomass and bio fuels in comparison
with other sources of renewable energy?
2.1 As outlined in the response to Question 1 above,
different energy crops can be used to produce heat, electricity
or road fuels. In a situation where available UK cultivatable
land is limited, optimum use is an issue. 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 from either
an energy or greenhouse gas emissions point of view. The costs
and benefits will therefore vary from case to case.
2.2 In general, alternative fuels (bio-diesel, bio-ethanol,
etc) are more expensive than conventional fuels—up to 2-3
times (Energy Review 2003). However, the rise in crude oil and
refined product prices over the last two years has narrowed this
gap. By way of illustration, the average ex-refinery cost of a
litre of unleaded petrol in the UK last year was 22 p/litre. Comparable
published data (AEA Technology report for DEFRA 2004) for bio
ethanol processed in the UK from Brazilian cane sugar or UK sugar
beet was in the range of 34 to 43p/litre (2002 cost). The cost
of ethanol from Brazil is likely to be on third lower. Generally,
the higher cost of producing renewable fuels has prevented their
widespread use in the past and with the recent rise in price of
petrol and diesel, this could have an additional cost impact for
consumers.
2.3 Currently bio diesel and bio ethanol attract a 20p/litre
lower duty than conventional petrol and diesel (47.1p/litre).
There have been calls for an increased differential but there
are signs that the market is already picking up, stimulating the
construction of new UK biofuel plants (bio diesel and ethanol)
in 2005 and 2006. The RTFO when introduced will boost this demand
further.
Cost of reducing greenhouse gases (GHG)
2.4 Avoidance cost of CO2 emissions from biofuel
depends on the way it is produced. The Table below gives indicative
ranges.
|
| Option | Cost of reducing GHG
£/teC (crude oil $25bbl)
| Cost of reducing GHG
£/teC (crude oil $50bbl)
|
|
| Bioethanol from wheat, sugar beet | 450-900
| 245-605 |
| Bio diesel from rape seed | 400-615
| 230-320 |
|
Source: Concawe/Eucar/JRC
2.5 The Markal model studies carried out for the Government
as part of the 2003 Energy White Paper reached a similar conclusion
as bio fuels 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 bio fuels
whilst they receive a duty subsidy.
Q3. How do bio fuels compare to other renewables, and
with conventional fossil-fuels, in terms of carbon savings over
their full life-cycle?
3.1 So called "well to wheels" analysis is
essential in comparing the carbon savings from different energy
sources from production through to end-use. The table below gives
some comparisons of petrol, diesel, bioethanol and biodiesel (5%
blends) using conventional vehicle technology (ie i/c, spark ignition
or compression ignition, non-hybrid).
Table—Wells to Wheels Greenhouse Gas Emissions
|
| Fuel |
Wells to Wheels Greenhouse Gas Emissions g CO2
equivalent/km |
|
| Petrol |
196 |
| Diesel |
164 |
| Ethanol (95/5) from sugar beet |
193 |
| Ethanol (95/5) sugar cane (Brazil) |
188 |
| Biodiesel (95/5) |
160 |
|
Source: Concawe/JRC/Eucar 2005
3.2 The exact savings are highly dependent upon the source
of the biomass used, the production process and whether by-products
can be incorporated or waste used to produce heat and power.
Q4. Not all biomass is equal—potential carbon savings
depend on farming practice. What can be done to ensure energy
crops are sustainably produced?
4.1 Cost of biofuel feedstocks is an important factor
in the production of bio fuel blends. The AEA Technology Report
for the Department for Transport in 2004 indicated that the lowest
cost bioethanol was produced from Brazilian sugar cane and US
corn. There are signs that increased demand for these products
for export markets is starting to increase domestic prices of
ethanol in producing countries, as well as sugar prices. In Brazil
52% of the sugar cane crop is going into ethanol production compared
with 48% in 2003 (Source: International Sugar Organisation)
4.2 As demand increases there is likely to be pressure
for increased land area to be developed for energy crop production,
with the risk that previously virgin land is cleared for cultivation,
although this is less likely to be a problem in the UK and EU.
However, changing land use either overseas or in the UK to satisfy
demand for energy crops, could change the CO2 balance
either by releasing CO2 by alternative cultivation
or reducing the vegetation available to absorb it.
4.3 The oil industry feels that an accreditation scheme
should be developed to ensure that greenhouse gas savings are
delivered and unacceptable environmental impacts avoided. The
oil industry is participating in the development of an accreditation
scheme by the Low Carbon Vehicles Partnership.
4.4 The RTFO announced in November 2005 recommended that
an environmental assurance scheme be developed and integrated
into the RTFO to ensure that the fuels supplied offer real environmental
benefits. However there will be difficult challenges to overcome
before such a scheme is working effectively. Hence our support
for the Governments decision to initially require only reporting
of greenhouse gas savings, sustainability, etc under the RTFO.
Q5. What impact will UK Government and EU actions have
in increasing demand for and production of biomass and bio fuels?
5.1 The potential impact of the RTFO and EU Directive
2003/30/EC on demand for bio fuels is outlined in response to
Question 1 above.
5.2 In the UK it is likely that interim limits under
the RTFO will be applied before 2010 further boosting the demand
already stimulated by lower rates of duty introduced in 2003 and
2005. Some of this demand is being met by imports, particularly
bioethanol from Brazil, but could be substituted from UK production
once new, competitive, processing plant/ crop supply is established.
Q6. What level of financial and policy support do bioenergy
technologies require in order to achieve the Government's targets
for renewable energy?
6.1 Government policy background in the 2003 Energy White
Paper indicated that renewables had a vital role to play in reducing
carbon dioxide emissions and set a target to generate 10% of the
UK's electricity from this source by 2010. A major focus has been
upon wind energy but as the Biomass task Force report in October
2005 highlighted, there is considerable potential to develop biomass
in power generation. This route holds greater potential for CO2
reduction than conversion of biomass to liquid fuels for road
transport.
6.2 The White Paper also indicated that a 5-10% reduction
in CO2 emissions from road transport will be required
by 2020. This is capable of being achieved from improved fuel
economy from conventionally fuelled vehicles allied to new technology.
This view is supported by the fact that UK road kilometres driven
have risen by 20% since 1990 but overall fuel demand by 8%. The
challenging longer-term aspiration of a 60% reduction by 2050
will likely require a combination of measures, with a move to
lower carbon fuel sources, new technologies such as carbon sequestration,
allied to major change in consumer choices/behaviour.
6.3 On road fuels, the Government has introduced a financial
incentive of a 20p/litre duty reduction which is stimulating demand.
Some of this demand is being met initially by imported material.
As outlined in the response to Question 2, this level of subsidy
would have to be on-going without the RTFO as, generally, experience
shows that consumers have not taken up alternative fuels if the
costs are greater than for conventional ones.
Q7. What impact might an increase in energy crops in the
UK and the EU have on biodiversity, production of food crops and
land use and the environment more generally?
7.1 In the UK, an increase in energy crops to a level
meeting the 5% limit proposed in the RTFO could have an impact
on intensity and diversity of agriculture. It could also have
an effect upon biodiversity as it implies that this level of demand
will be met from land set aside being brought back into production.
It could also have an impact upon food prices if UK land is given
over to producing energy crops and potentially result in more
food requirements being imported with a resultant impact upon
transport miles.
7.2 Meeting demand beyond the limit of 5-10% implies
a combination of UK land currently dedicated to food production
being turned over to energy crops or greater imports of biofuel
feedstocks from other EU or non EU countries.
7.3 In the UK, this could have an effect upon the environment
and biodiversity through greater use of fertilizers/pesticides
and a trend towards monoculture. In overseas countries particularly
outside the EU, it could lead to the destruction of forest to
cultivate crops such as cane sugar and soya.
7.4 For this reason, the industry supports the development
of an accreditation scheme to ensure that the carbon saved from
different types and sources of bio fuels can be measured and that
they are grown from sustainable sources. Such an approach should
not be seen as a barrier to developing a viable bio fuels market
in the UK.
Q8. Does bioenergy production constitute the best use
of UK land for non-food crops? Should UK and EU policy focus on
increasing domestic production of energy crops and biomass, or
are there merits in importing biomass for energy production, or
raw feedstock or refined fuel, from outside the EU?
8.1 The production of rape seed, wheat and sugar beet
is conventional farming. The cultivation of short rotation coppicing
or similar new crops does not pose any significant problems.
8.2 The barriers to UK production are the availability
of good quality set-aside land and sufficient process plants to
convert, say, rape seed into bio-diesel or burn wood from short
rotation coppicing, etc. This situation for bio diesel and bioethanol
is changing as demand increases, stimulating the construction
of new processing plants that are tied in with contracts to supply
raw material.
8.3 Proximity to market is an issue when looking at the
carbon balance and economics. This is especially true with biomass
for heat/power generation, where weight and mass of the raw material
means it is uneconomic to transport it over long distances.
8.4 The Biomass Task Force report indicates that about
one million hectares of land for non-food cultivation is available
over and above that currently cultivated in this way.
8.5 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, established large
scale production and efficient use of waste by-product.
8.6 The new EU Member States may also have the potential
to become significant suppliers from within the EU, benefiting
from available land mass, lower wage costs and a large farming
base.
8.7 There may be merits in importing biomass to augment
UK production and to assist in making bio fuel production more
competitive if imported material comes from sustainable sources
with lower production costs and carbon saved is not outweighed
by transport costs. For example, currently some bioethanol imported
into the EU has no import tariff applied.
Q9. What more can be done to make more efficient use,
as an energy source, of the by-products of agriculture and forestry
(eg wood waste and other organic waste)?
9.1 UKPIA does not have specific expertise in this area
but the Biomass Task Force report indicated, for example, a huge
potential for the use of the 5-6 million tonnes of wood waste
generated in the UK each year.
9.2 At some future point, once the technology is commercialised,
woody wastes,straw and other cellulosic material could also be
applied in the production of advanced bio fuels using enzyme type
technology (bioethanol) or partial oxidation (diesel).
Q10. What lessons can be learned from other countries'
experience in the production and use of bioenergy?
10.1 The Biomass Task Force Report highlights a number
of areas where overseas experience could be applied in the UK,
particularly with the use of biomass to produce heat and power,
and makes a number of recommendations as to how such developments
might be encouraged.
10.2 The oil industry is involved in research into a
number of technologies to derive liquid fuels from waste products
such as ethanol from straw and diesel from woody wastes using
the Fischer-Tropsch process.
10.3 The oil industry has extensive experience in the
supply of bio fuels for road transport in a number of countries.
This expertise will be used to meet the targets set in the RTFO.
Thank you for the opportunity to contribute to this important
debate.
UK Petroleum Industry Association (UKPIA)
February 2006
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