Select Committee on Environment, Food and Rural Affairs Written Evidence


Supplementary memorandum submitted by Greenergy

INTRODUCTION

  Greenergy welcomes the opportunity to respond to the Environment, Food and Rural Affairs Committee on Alternative Uses for Crops. As a potential producer of biofuels, Greenergy welcomes the Government's objective to increase the use of biofuels as an alternative transport fuel and its recognition of the role of UK agriculture in delivering this objective.

  In the early 1990s, Greenergy was the first UK oil company to introduce low emission fuels to the UK market. To date most of Greenergy's experience has been in the sales and marketing of biodiesel blends. In 2002 Greenergy developed GlobalDiesel, a blend of ultra low sulphur diesel and biodiesel, and more recently Greenergy launched GlobalPetrol, a blend of ultra low sulphur petrol and bioethanol.

  GlobalDiesel is a blend of 95% ordinary diesel and 5% biodiesel. The biodiesel is a rapeseed methyl ester and is imported from the EU. Greenergy is also planning to build a biodiesel production plant in the UK and the feedstock materials for this plant will be virgin oils produced from oilseed rape and other oilseed crops, as well as waste cooking oils. However, at present no biodiesel is produced in the UK from crops because the current Government economic incentive does not support biodiesel production either from domestic oilseed rape or other feedstocks. Most UK oilseed rape is sold into the food industry or exported. Greenergy is of the view that in order to kick-start a UK market in crops for biofuels, and provide a valuable alternative revenue stream for UK agriculture through diversification of farmers' source of income, the Government will need to review current economic incentives for all fuels.

ALTERNATIVE USES FOR CROPS—BIODIESEL PRODUCTION

  Much of the debate and discussion on biofuels has focussed on the use of oilseed crops for biodiesel production. This is because the potential here is more immediate, and potentially more significant, than crops for bioethanol production where the feasibility and desirability is less clear. For example, in the case of crops for bioethanol production there are concerns over environmental additionality and whether UK produced bioethanol reduces greenhouse gas emissions or can be justified on the grounds of fuel security of supply benefits. Our submission therefore focuses on the benefits of oilseed rape and the contribution it can make to a UK biodiesel industry.

  With an efficient farming sector and a climate ideally suited for growing high oil content oilseed rape, the UK could utilise a significant proportion of its oilseed rape for biodiesel production. However, as yet, there are no major biodiesel production plants in the UK. Most production plants are small-scale, producing biodiesel from waste cooking oils as the Government duty incentive does not support biodiesel production solely from virgin oils.

  Greenergy has been investigating the development of a 100,000 tonnes per annum biodiesel production plant. Our analysis has demonstrated that a plant of this size will only be economic if it has the ability to produce biodiesel from a range of feedstocks, in this case both virgin oils and waste cooking oils, and an increase in the biodiesel duty incentive. Securing the feedstock supply through long-term contractual arrangements are also key to the viability of the plant.

THE GREENERGY FIELD-TO-FORECOURT CONTRACT

  The presence of alternative markets for crops is not well known by the agricultural community in the UK. The traditional market from oilseed crops has been the food oil and rape-cake market, and most oilseed is sold to the two main rapeseed crushing plants, ADM and Cargill. Working with the oilseed rape production chain, farmers, seed merchants and crushers, Greenergy developed a Field to Forecourt contract. The Field to Forecourt contract, launched at Cereals 2003, links the ultimate receiver (Greenergy) directly with the producer of the feedstock crop (the farmer) through a partnership with grain merchants. The merchant offers contracts to farmers, and Greenergy contracts to purchase the crop from the merchant at either the current market price for oilseed rape, or a minimum floor price based on the prevailing diesel price if the oilseed market price is low, for biodiesel production.

  The benefits of the Field to Forecourt contract are several. Primarily, the contract can support the development and expansion of the UK biodiesel oilseed feedstock resource base by bringing farmers directly into the supply chain. With the confidence that the oilseed crop will have a buyer, and perhaps more importantly, a guaranteed return, more farmers will cultivate oilseed rape and thus expand their market opportunity. An example of a Field to Forecourt contract is given at Appendix One together with the biodiversity guidelines developed by Greenergy in conjunction with the RSPB and Greenergy's requirements on Carbon-Certification(r).

  Working with a number of oilseed merchants and crushers, Greenergy has secured 2004 oilseed contracts with farmers which could deliver approximately 240,000 tonnes of biodiesel. In 2003, less than 250 tonnes of UK grown oilseed rape was used to produce biodiesel.

  The Greenergy Field to Forecourt contract has been successful in engaging farmers and others within the agricultural supply chain alternative uses for crops. Others within the agricultural supply chain are now developing similar contracts.

MEASURES TO PROMOTE BIOFUELS PRODUCTION AS AN ALTERNATIVE USE FOR CROPS

  There has been much debate and discussion on what economic incentives the Government should provide in order to stimulate UK biofuels, both a biodiesel and bioethanol industry. However, what must be recognised is that the needs of a bioethanol industry are different to that of the biodiesel industry. For example, in the case of bioethanol production, the requirement may not only be economic support in the form of duty incentives, but also capital grant support.

  For oilseed crops the main alternative use is biodiesel production where the biodiesel can be used for both transport and biomass. In the case of biodiesel for transport, the Government's current economic incentives does not enable the production of biodiesel from oilseed rape that can be sold at a competitive price at the pump.

  Greenergy is of the view that in order to stimulate the right conditions for biodiesel production from oilseed rape and other feedstocks, the Government should consider:

    —  differential rates of duty for all fuels based on their well-to-wheel greenhouse gas emissions. This would help to distinguish and reward lower carbon forms of fuels and send a long-term commitment to the biofuels industry, in particular the biodiesel production sector;

    —  increasing the biodiesel duty incentive and restricting it to blends. This would not only increase participation in the biodiesel industry by the major oil companies, there would also be wider availability of biodiesel blends through their forecourts of a quality controlled product.

CONCLUSION

  A domestic biodiesel industry will be an important alternative market for UK grown crops, in particular oilseeds. However, this will depend on the development of a successful UK biodiesel industry which is in turn dependent on the Government providing the right economic incentives, as well as recognising that the most effective route to significant market penetration of biofuels, in particular biodiesel, is to restrict the economic incentive to biodiesel blends.

September 2003


 
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