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This time last year things were looking good for European ethanol with two new major projects coming online within the first half of the year. Ensus had just begun fullscale production at Europe's largest bioethanol refinery in the UK and Abengoa had announced plans to bring on line an even bigger facility in Rotterdam. Unfortunately... things are no longer looking so rosy for the UK producer. Two years after it opened, the £300 million (€343 million) Ensus plant has now halted production for up to four months. This is being blamed on lower than expected demand for ethanol across Europe because of slow implementation of the  Renewable Energy Directive and an influx of ethanol coming in from the US, which is flooding the market. Ensus said delays in member states agreeing sustainability criteria for green fuel had also been a factor. The company says the shutdown is temporary and to prove this is keeping its 100 employees on full pay. The issue surrounding US subsidies is ongoing and European producers such as Germany's CropEnergies and Spain's Abengoa are considering whether to file a legal complaint with the European commission. [read more]

The EU has adopted a regulation that will see anti-dumping duties imposed on Canada, with the same countervailing rules that have been imposed on the US since 2009. The regulation came into force on 5 May 2011 and follows an investigation into the loophole in the previous 2009 ruling which saw the US continue to export to countries in Europe, only via Canada. The legislation also did not prevent... artificially designed blends containing less than 20% biodiesel, such as B19 and B7, so the export of this continued. Dieter Bockey, head of biofuels at UFOP, a German biofuels organisation, explains: ‘The key problem was that the fuel was coming from other routes into the EU because companies were merely changing the label to get it into the region. The previous law did not deter this from happening.’ Prior to the 2009 regulation, cheap imports from the US created tough competition in Europe so many companies in Europe began to give up their production because they just couldn’t compete. In fact, this had been happening since the end of 2006, when the European market started to be affected by imports of B99 biodiesel blends from the US which were sold as ‘pure biodiesel’ for a much cheaper price than European providers were selling it for, at around €120-€180 a tonne. Because of the continuation of this after the 2009 decision, the European Biodiesel Board (EBB) filed a complaint and the EU Commission began an investigation in August 2010, finding that the quality and prices of B19 and lower blended imports, as well as US imports via Canada, affected the quantity and prices in Europe. As a result of these findings, the EU has now imposed new regulations which will place a maximum combined anti-dumping and countervailing duty from biodiesel imports from Canada at €409.20 a tonne. All biodiesel blends below the former 20% threshold exported from the US into Europe will now also have duties of €213.80-€409.20 a tonne, depending on the biodiesel blend. However, although these regulations are a positive move for the industry, there are still problems as the US considers other routes to get its shipments into Europe. In February 2011, the EBB filed a complaint to Sunil Kumar Saxena, director of the Export Inspection Council of India because it was concerned about the latest trends in US biodiesel exports to India. [read more]

Monthly production averaging 67 million gallons is needed to hit the 800 million gallon Renewable Fuels Standard (RFS2) carved out for biodiesel in 2011, with the industry getting off to a slow start in meeting that target. US biodiesel production in January was 30 million gallons, increasing to 36 million gallons in February. While above the 26 million gallon monthly production rate averaged in... 2010, with 18 million gallons of output averaged monthly during the fourth quarter of last year, it would only satisfy half of the mandate. US production is seen moving up from the nearing 40 million gallon average estimated early in the second quarter to 60 million gallons quite quickly. There is plausibility with that forecast for a few factors, including the delayed start producers were afforded in gauging the 2011 market caused by a court challenge to the RFS2 and a December deal on a tax subsidy. The re-extension of the Biodiesel Mixture Excise Tax credit currently through December 31 that pays a $1 (€0.7) gallon subsidy for blending biodiesel into diesel fuel helps to bridge the economic gap between the renewable fuel and petroleum-based diesel fuel. The loss of this credit in 2010, which was reinstated for last year, too, had forced many producers to idle plants, and some went bankrupt. The court challenge by the American Petroleum Institute and the National Petrochemical and Refiners Association also questioned when obligated parties under the RFS2, which include oil refiners and importers, would need to begin buying biodiesel. The RFS2 mandate is critical in driving demand for biodiesel. Chico Matiella, legislative assistant with the National Biodiesel Board, explains that many producers had to gear up for production, including securing credit with banks for feedstock. The process would take a couple of months, in some cases, delaying plant startups. [read more]

The free market, while desirable, is not always efficient in directing capital towards emerging technology and new innovations. A recent study in the journal Environmental Science & Technology1 shows that it could take 131 years for markets to redirect capital to alternative energies rather than oil. Global oil would run out years before needed alternatives are fully developed, according to... the study. Government policy has effectively guided the development and commercialisation of many new technologies in the past. Given the degree of US reliance on imported petroleum, and the potential benefits of producing and using biofuels, government policy to support innovation in the biofuel industry is imperative. The US currently imports about half of the petroleum it uses. And about 74% of the petroleum used in the US goes to liquid transportation fuels – both for vehicles and aviation. The US Energy Information Administration predicts that through 2035, domestic biofuel production and use will contribute to a gradual reduction in US reliance on imported oil, where the US will need to import only 43% of the petroleum it uses. [read more]

The biofuels sector had a slow start in Belgium, but now the industry is starting to pick up. The total production capacities in Belgium are 490 million litres of ethanol and 700,000 tonnes of biodiesel. All this biodiesel is used on the local market whereas only around 20% of ethanol is used domestically. One producer in particular is reaping the benefits of being situated at the Port of Ghent,... as well as its well thought out construction. The AlcoBioFuel 150,000m³ a year bioethanol plant in Ghent, Belgium, has been in operation since June 2008. Thanks to the Belgian bioethanol allocation quota that the company has been granted until 2013, an important volume of its production is intended for the Belgian petrol market, contributing to Belgium’s effort in reducing CO2 emissions. It is one of Belgium’s major major bioethanol plants and is a joint partnership between Brussels-based global ethanol production and trading company, Alcogroup, Vanden Avenne, specialists in trade and distribution of compound feeds raw materials and Aveve and its Walloon division Wal.Agri. [read more]

As soon as July 2011, the ground beneath the ethanol industry could shake across Europe. At the beginning of May, after a two-year investigation, the European Commission (EC) decided the issue of indirect land use change (ILUC) can in fact reduce carbon savings from biofuels. Before the summer is out, the EC may announce moves to punish the least environmentally friendly biofuels by raising an... EU-wide sustainability benchmark. There are now fears that this will render the European biofuel industry no longer viable and that a quick-fix resolution is not an option given the complex nature of the subject. ‘The ILUC debate is a little concerning because at the end the challenge is that we cannot measure the effects of ILUC, we can just model it. This is the problem as the model depends on assumptions. Therefore the results of investigations depend on assumptions,’ Lutz Guderjahn, COO of Germanybased CropEnergies, says. ‘What is clear is that the ongoing debate on ILUC effects does not help us to further explore possibilities to invest into new facilities. So we need a clear view of what the conditions are. The more uncertainty there is, the less the likelihood we can come to a quick decision.’ The overwhelming majority of food-stock-fed facilities face further bad news. A major problem with the current ILUC models is that they do not take into account the food co-products of ethanol production. These co-products are used for cattle feed and are vital to the agricultural sector by helping reduce Europe’s dependence on protein feed imports, such as soya meal from Argentina. For every tonne of sugar beet or cereals used for ethanol production, one-third will reenter the food chain as high protein animal feed or gluten for food and feed applications, UK-based producer Vireol’s CEO David Knibbs says. [read more]

The value of current assets will play an important role in investor financing decisions and in directing financing institutions. The tools of the machinery and equipment appraiser are helpful in spotting trends, including the impact of economic fluctuation - such as the recent downturn. For instance, equipment manufacturers have reported a widespread postponement of new purchases of plant... equipment over the past three years. To the trained appraiser, this has lengthened the replacement cycle and resulted in an aging of the installed base of equipment. This is but one example. [read more]

A broker’s role is to examine and interpret trends, not to make predictions. There is no crystal ball, and in commodities the only certainty is uncertainty. This being said, there are some compelling conclusions that can be drawn from the trends of the last 10-15 years. First, production has risen due to an upward trend in average crop yield and increasing acreage in the first half of the... 20th century. Second, wheat demand has also consistently risen in the past 10 years. Finally, the average price of wheat has increased as well. The task at hand is to look at what these factors mean for wheat and the legitimacy of wheat as a feedstock for biofuel. Supply trends World wheat production numbers have been trending higher, but there have been some disappointing years in the mix. Due to the sensitivity of weather during the growing season, wheat production can vary greatly from year to year. Acreage competition with high priced corn and soyabeans is one of the largest threats to global wheat production outside of weather concerns. In addition to competition from other food grains, government subsidies for biofuel crops in some countries has also been a detractor from wheat acreage. Still, wheat is a viable option for cash crop farmers due to: high yields per acre, a relatively short growing season, and the ability to grow well in temperate climates. [read more]

Between 2001 and 2007, when plant construction was booming, EPC contractors enjoyed using their bargaining power to negotiate favourable contracts. Like many industries, biofuels has gone through a period of rapid growth followed by some serious retrenchment. Many of the early plants were built by entrepreneurs, or by subsidiaries and joint ventures of companies in related industries such as... agriculture, transport, petroleum and chemicals. Now the boom has slowed, contractors need to be able to prove their worth. [read more]