Westminster Hall
Tuesday 27 October 2009
[David Taylor in the Chair]
Biofuels
Motion made, and Question proposed, That the sitting be now adjourned.-(Mark Tami.)
9.30 am
Anne Main (St. Albans) (Con): It is a delight to serve under your chairmanship this morning, Mr. Taylor.
This is a niche debate and has been described by some people as chip fat and bonkers anomalies in regulations. I am hoping that we can move on somewhat from that, as the debate concerns a valuable fuel source that we should be considering as a contribution to reducing our carbon footprint and meeting some of our stringent obligations.
There is some dispute about the environmental impact of producing some biofuels, and Friends of the Earth raised some concerns in April, pointing out some worrying information that it had come up with during research on biofuels. Soy crops from the United States, Argentina and Brazil are used in the most common UK biodiesels and all contribute to the deforestation problem. The Friends of the Earth study assumed that 10 per cent. of the food crops displaced by biofuels would be pushed on to land created by clearing forests. The researchers allocated the additional land to various agricultural uses and calculated the resulting extra emissions using established models. For example, clearing 1 hectare of Amazonian rain forest can release up to 1,000 tonnes of carbon dioxide into the atmosphere, according to the United Nations Intergovernmental Panel on Climate Change.
In response to those concerns, a spokesman for the Department for Transport recognised that there was some controversy and, while acknowledging that the biofuels evidence is evolving, said:
"What is not in dispute is the need to develop new, cleaner fuels and break our dependence on oil if we are to tackle climate change.
Some biofuels have the potential to help us achieve this. So whilst there is no case for pushing forward indiscriminately on those that may do more harm than good, it would be foolish to ignore any potential they do have.
We have always been clear that biofuels can only make a useful contribution to mitigating climate change if they are sustainably produced."
That is the crux of today's debate. Are we foolishly ignoring a potential biofuel that is indeed extremely sustainable and sustainably produced?
Few would argue that the production of biodiesel through the recycling of used cooking oil of UK origin is not a sustainable way to produce energy. We have only to look at our high streets to see how many restaurants and fast food premises use large quantities of cooking oils and fats, which then become a waste product-quite a tricky waste product, which is costly to deal with and dispose of. Within the manufacturing industries, the use of fats and oils is also huge. Significant quantities of
waste food oils result from processing. It cannot be stressed too often that those oils have already been produced and used for food, and have become a waste product. In the domestic environment they are often literally poured down the drain, much to the annoyance of plumbers and other people who have to come and unblock those drains.
Mr. Oliver Heald (North-East Hertfordshire) (Con): Is my hon. Friend aware that in Royston, in my constituency, a flood was caused by a build-up of fats, oils and greases, as she describes? It caused misery to many people, and Anglian Water has now started a fats, oils and greases campaign in Royston, to encourage people to recycle their cooking oils exactly as she suggests.
Anne Main: I thank my hon. Friend for that welcome intervention, because I was not going to major on the domestic aspect of cooking oil. If the technology were to take off, waste cooking oils and fats from households could easily be collected. After all, we are all being encouraged to recycle as many as possible of the putrescibles and other products of family living. My hon. Friend is right; pouring the oil down the drain can cause enormous problems, and if we can get the technology to take off and become sustainable, we can end those problems at the same time. That would be a win-win for all.
I am sure that few hon. Members would disagree that simply disposing of the waste oils-I am thinking mostly of the commercial side of things-is not the best use of a valuable recyclable resource. To discuss the issue, I recently met Richard O'Keefe, the director of Green2Go-a company established in 2007 to provide renewable and sustainable heat and power solutions. Green2Go is a key proponent of the method of using recycled cooking oils that I am discussing. It estimates that about 250 million litres of used cooking oil is available from commercial sources, leaving aside the domestic sources that my hon. Friend has referred to, which also produce significant amounts. Green2Go pointed out that the oil could be used to generate about 1 billion kWh of electricity a year. That is a significant amount of energy and would make significant carbon savings, and that potential is mostly wasted at the moment.
I was shocked, when the figures were explained to me, at the sheer volume of cooking oil that appears to be available to us as a resource. We may think of the chip pan fryer at home and say that we do not use it any more; many of us do not, because of oven chips and the like. However, there is no getting away from the fact that commercial production of crisps, biscuits and other products routinely found in supermarkets and in high street takeaways and fast food outlets results in masses of used cooking oil. Under current legislation, that oil is not fully utilised.
Martin Horwood (Cheltenham) (LD): The hon. Lady identifies an important point. Does she agree that a ludicrous aspect of the situation is the fact that not only do we import unsustainable biofuel, but companies such as Green Fuels in Gloucestershire that provide the technology to convert the enormous wealth of surplus cooking oil into a sustainable biofuel, find that their UK market has collapsed, and they are exporting the technology as well?
Anne Main: I thank the hon. Gentleman for pointing that out. I was not going to go too much into the collapse of the biofuel industry, but the point is a valuable one. Germany formerly had full tax exemption on liquid biofuels, and now, because the Government wanted to go back to getting the tax on it and increased it, the technology is starting to collapse. Unless there is a sustainable market, and where something is becoming price-sensitive, things will happen exactly as the hon. Gentleman said. We shall export the technology and oils and will not have a market here. In Germany, since 2009 and the Government's decision to take the retrograde step of imposing high taxation on biofuels, more German biodiesel plants have faced closure. We must be sensitive to the impact on an industry that I am sure the hon. Gentleman would want to grow in his constituency. It would be a great thing for his constituency and the UK as a whole if we were not to export that resource and technology and if we were not to do anything to jeopardise that growing industry. Waste oil is not fully utilised because of current legislation.
Biodiesel manufactured from used cooking oil is a particularly sustainable renewable fuel. It can reduce life cycle carbon emissions by 90 per cent. As used cooking oil is a genuine waste product, which would have to be disposed of by professional collectors, at significant cost, it does not cause any additional deforestation, such as that which caused concern to Friends of the Earth. Neither does it lead to changes of land use in developing countries, away from the crops that they should be growing for their own use and towards fuel crops, which is another effect about which concern has been expressed. Consequently, the fuel is one of the lowest-carbon forms of biodiesel available to us. Converting used cooking oil that might otherwise have gone to landfill to biodiesel is an excellent example of the production of a truly sustainable biofuel. It contributes to reducing carbon emissions and minimising waste and landfill, which I hope we are trying to move away from.
Mr. John Leech (Manchester, Withington) (LD): Does the hon. Lady agree that what she proposes would be a good way to try to reduce the dumping of oils? I am sure that in her area, exactly as in mine, many unscrupulous people dump used oil in the drainage system, polluting the water system, rather than paying for its disposal.
Anne Main: We are somewhat beset by fly-tipping in St. Albans, but thankfully, we do not have that problem. However, it is something that has been brought to my attention. Used oil is not only poured down the drains, but left in cans by the side of the road and dumped in inappropriate areas. That is a big problem. In these hard-pressed economic times, we are likely to see more fly-tipping and-I hate to say it-unscrupulous outlets that use cooking oil may be tempted to do what the hon. Gentleman mentions, instead of paying to have used oil taken away.
As I say, used cooking oil is a waste product; there is no resulting pressure on land use and no impact on food prices, and vital resources are not diverted from a valuable existing use. The Renewable Fuel Agency calculates that the default carbon saving from using it is about 85 per cent. That is much higher than the saving of 46 per cent. realised from using palm oil or American
soy, which are often used as biodiesel in the UK. Ensuring that used cooking oil is collected and used as a biofuel will, as hon. Members have pointed out, do away with the considerable cost to utility companies of clearing drains and sewers that have been blocked with improperly disposed of oil.
Biodiesel production in the UK in 2007 stood at 484 million litres against that year's diesel market of 24 billion litres. Approximately 40 million litres of biodiesel are currently produced from UK cooking oil every year. Methanol is commonly used to produce biodiesel from used cooking oil. However, in March 2009, Ofgem reversed an earlier decision, ruling that using methanol made from natural gas in the production of biodiesel would prevent that fuel from being included in the renewables obligation scheme. That is the rub, and the reason for today's debate. As the hon. Member for Cheltenham (Martin Horwood) pointed out, anything done to jeopardise the making of biodiesel from sustainable fuels, such as cooking oil, will have the same effect as in Germany and biodiesel production will collapse.
Ofgem's 2009 ruling, made following consultation and discussions with the Department of Energy and Climate Change, results from the presence of a small proportion of fossil fuel in some biodiesels derived from methanol. The ruling is based on a literal interpretation of the law, which classes the entirety of biodiesel produced in that way as a fossil fuel, even though the proportion of fossil fuel within the blend is small. Under our interpretation of article 9 of the renewables obligation, it is entirely a fossil fuel, despite the fact that the fossil fuel element is potentially only 11 per cent. by mass: nearly 90 per cent. is a truly sustainable and reclaimed resource.
The UK biofuels industry believes that Ofgem's ruling on biodiesel is likely to have a significant effect on the UK industry and that it will have ramifications for the future domestic supply of renewable energy. That is the crux of today's debate. Are we truly committed to moving away from fossil fuels? If so, why are we standing by? We can see the fuel's potential, but if nothing happens, the industry will collapse.
UK energy production has been set ambitious long-term targets for renewable sources, yet many feel that the renewables obligation, or at least Ofgem's interpretation of it, offers no incentive for using that form of renewable fuel in the generation of electricity and heat. Without incentives, I doubt whether any of us would do anything in life. We cannot expect people to make the investment necessary for making renewable fuels if there is no incentive for people to use them.
The renewables obligation came into effect in April 2002 to support renewable electricity projects. Under the obligation, suppliers are required to meet their obligations by presenting sufficient renewable obligation certificates-ROCs. They are green certificates issued to accredited generators for the eligible renewable electricity that they generate. The 2008 consultation by Ofgem that led to its 2009 decision focused on the detail that the methanol used in the process was normally derived from natural gas-itself a fossil fuel. Ofgem therefore said that it was difficult to view biodiesel made in that way as a renewable fuel. That is where we are now.
Given that Ofgem cannot treat the biofuel as being renewable, as set out under the Electricity Act 1989 and in specific parts of the 2007 renewables obligation order,
the fuel is not eligible for an ROC. Instead, Ofgem argued that biodiesel produced from that reagent would, in turn, fall within the term "fossil fuel" under article 9 of the renewables obligation. It concluded that biodiesel produced in that way should be classed as fossil fuel generation under articles 9 and 18. That is a technical and literal interpretation, but the man in the street would say that it was nonsense. The public would not want such a waste product-something that we pour down the drains, and cannot wait to dump, get rid of or export-suddenly to be turned into what many would regard as something that could have been dug out of the ground or that had cost a lot of money to find.
Ofgem's ruling stated that, if fossil-fuel derived alcohols are used, no renewable obligation certificates will be issued, even for the biomass-derived portion of the biodiesel. That is illogical. We should allow 90 per cent. of the ROC, because 10 per cent. had not been made from reclaimed fuel. To have nothing at all makes a nonsense of the situation. Electricity generators therefore cannot receive renewable obligation certificates on electricity produced from recycled cooking oil, despite the fact that the fossil-fuel element of the fuel produced in that way is comparatively small and that the majority of the fuel is from a recycled waste stream.
There was widespread industry reaction to the Ofgem ruling, based on the fact that exclusion from the scheme would not encourage the generation of renewable energy, and Ofgem concluded that its ruling ran counter to the desires of the majority of respondents to the 2008 consultation. Again, the public will wonder why on earth there should be consultation when what is done runs counter to it; they will ask what the point was of consulting. Ofgem has further admitted that the issues raised by many of the respondents were policy decisions of the Department of Energy and Climate Change and outside Ofgem's remit in its role as administrator of the scheme. I think of the greenhouse gas and societal benefits that biodiesel can claim over fossil fuel.
The Parliamentary Under-Secretary of State for Energy and Climate Change (Mr. David Kidney): I am not a chemist; nevertheless, I know that the methanol on which Ofgem has ruled is not 100 per cent. renewable, as it comes from natural gas, which is at source a fossil fuel. Is there not a renewable source of methanol that the industry could use in place of that produced from natural gas?
Anne Main: I am not a chemist either. However, it has been pointed out to me-this point comes in my brief in about three lines; the Minister anticipates my speech-that there are such bioethanols, but that it costs five times more to use them. There are alternatives, but that takes us back to the German example. If we start making such fuels totally cost-inefficient, it will not happen. The alternatives are costly, which will add pressure to the industry.
Renewable companies have made extensive efforts to address the requirements of the Ofgem ruling with attempts to source recycled methanol-itself a waste product. The use of recycled methanol is encouraged elsewhere in Europe and certified by the European Union as a sustainable second-generation fuel. However, the Ofgem ruling excludes the biodiesel from the renewables
obligation scheme despite contributing to renewables generation and waste re-use. The recycled methanol is not acceptable either.
I raised the matter only 10 days ago at a meeting of the Select Committee on Energy and Climate Change, which was discussing low-carbon technologies in a green economy with Greg Archer of the Low Carbon Vehicle Partnership. Mr. Archer did not hold back, describing the situation as a "bonkers anomaly". He is not the only expert who has misgivings about the situation. The Renewable Energy Association-the industry body for renewables in the UK-agreed that the anomaly could be counter-productive. It stated in its response to the Ofgem consultation that, even if those substances could be interpreted as fossil fuels under the legislation, it
"does not make them fossil fuels. It simply demonstrates that the legislation is poorly drafted."
The association went on to criticise the drafting of the legislation on the matter, pointing out that
"The ceasing of issue of Renewables Obligation Certificates for a fuel that was formerly regarded as renewable (and for which Renewables Obligation Certificates have been issued in the past) undermines investor confidence in the Renewables Obligation... Any continued adherence to poor drafting, when it has been demonstrated to be poor drafting, undermines investor confidence in the Renewables Obligation".
There we have it-poor drafting and the bonkers anomaly have undermined investor confidence. Energy producer E.ON backed that view and stated in its response to the consultation that it is
"considered an anomaly that these fuels should be classified as fossil fuels when they are almost entirely of biomass origin. However, it is accepted that the existing legislation can be interpreted in this way. Excluding these biomass fuels from the Renewables Obligation would reduce their utilisation within industry, and could potentially hinder the advancement of novel technologies... The ultimate aim of the Renewables Obligation is to incentivise C02 emissions reduction, but the exclusion of these fuels could in fact lead to C02 emissions increases, as less fossil fuel would be displaced by biodiesel and/or glycerol.."
EDF Energy's response to the consultation also supported that view. It stated:
"We would support amending the legislation to allow biodiesel to be treated as 100 per cent. biomass within the Renewables Obligation legislation."
The Renewable Energy Association also raises questions about the ability of the ruling to interact with the draft renewable energy directive from the European Commission. It stated:
"It is questionable whether it will be permissible for the RO to exclude biodiesel...after April 2010."
In July, in a response on this very issue to the hon. Member for Lewes (Norman Baker), the Under-Secretary of State for Energy and Climate Change was somewhat evasive when he stated-
Mr. Kidney: Is that me you are talking about?
Mr. Kidney: On a point of order, Mr. Taylor. Is it parliamentary language to describe me as evasive?
David Taylor (in the Chair): If the hon. Lady wishes to withdraw or amend that remark, it might be helpful to the Chamber.
Anne Main: If it helps the Minister, I will amend my remark and say that he was somewhat unclear when he stated:
"In practice the ruling by Ofgem is not expected to alter the production of biofuels from used cooking oils to a great extent."
Therefore, he did not expect it to happen, but the industry is telling us that it did. However, it was at least acknowledged by the Minister, who was being somewhat unclear, that the Government
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