Delivered under the Framework for Transport-Related Technical and Engineering Advice and Research – Lot 2 Road Sustainability assessment of Annex IX feedstocks Richard Taylor UK Department for Transport stakeholder workshop 29 th November 2013 | Strategic thinking in sustainable energy
E4tech: Strategic thinking in sustainable energy • International consulting firm, offices in UK and Switzerland • Focus on sustainable energy • Established 1997, always independent • Deep expertise in technology, business and strategy, market assessment, techno-economic modelling, policy support… • A spectrum of clients from start-ups to global corporations
Policy context Background and study objectives | Strategic thinking in sustainable energy
What is Annex IX and where did it come from? • Continued debate surrounding ILUC, stalled biofuel uptake • Recognition that non-food feedstocks and novel conversion technology will have a role in providing biofuels, but commercialisation has been slow • Implementation of double counting in the current Renewable Energy Directive (RED) has been inconsistent , with poorly defined “wastes & residues” • Therefore, Commission moved to inclusive list approach , to try and support low ILUC risk feedstocks by multiple counting in the RED proposals • REFUREC working group classifications in 2010/2011, Annex IX list then created by Commission in 2012 and many edits since then… • Opaque process, lists and proposed mechanisms still changing, and definitions yet to be ironed out 4
Which feedstocks are in scope? • Bio-fraction of MSW • Bark, branches & leaves (e.g. forest residues) • Bio-fraction of C&I waste • Saw dust & cutter shavings • Animal manure • Black & brown liquor • Sewage sludge • Tall oil pitch • Palm oil mill effluent • Used cooking oil (UCO) • Empty palm fruit bunches • Animal fats categories I & II • Crude glycerine • Non-food cellulosic material (e.g. miscanthus) • Bagasse • Ligno-cellulosic material except saw logs and veneer logs (e.g. short rotation coppice & forestry, small round-wood) • Grape marcs • Micro-algae • Wine lees • Macro-algae • Straw • Renewable liquids & gases of non-biological origin (e.g. • Cobs hydrogen via renewable electrolysis) • Husks • Carbon capture and utilisation (e.g. steel mill waste gases) • Nut shells • Bacteria 5
Summary of Commission, Parliament & Council positions • Commission proposal (Oct 2012): • 2x UCO & animal fats, energy crops. 4x rest of Annex IX • 5% food cap • No sub-target • Parliament vote (Sep 2013): • 2x UCO & animal fats, 4x algae, bacteria, RE liquids/gases, carbon capture. 1x rest • 6% food cap to include energy crops • 2.5% sub-target for 1x and 4x feedstocks • Council responses (Oct 2013 ongoing): • 2x all, but no bacteria or carbon capture. 2x towards RES for non-UCO & animal fats • 7% food cap • Discretionary (was 1%) sub-target for non-UCO & animal fats 6
Study objectives • Summarise recent European biofuels policy developments • Conduct stakeholder interviews on the efficiency of multiple counting • Assess and compare each Annex IX feedstock on: • Supply potentials • Technologies • Economics • Competing uses • Greenhouse gas emissions and sustainability • Develop a framework criteria and rationale for support 7
What will the study be used for? • To the best of our knowledge, this study provides for the first time : • a holistic analysis of the whole Annex IX list • a defined rationale for including feedstocks within Annex IX • Evidence for DfT in their Member State negotiations within Europe • Inform longer-term UK biofuels strategy • Input to eligibility criteria for the UK advanced biofuel demo competition • Study started 17 th September, findings delivered 5 th November, and review comments received last week. Finalised report being delivered 12 th December • We will take any significant feedback from this workshop into consideration 8
Assessment of multiple counting Synthesis of stakeholder interviews | Strategic thinking in sustainable energy
Effectiveness of multiple counting • Series of interviews conducted to gather industry opinions – asking: • Impact of double-counting to date: investment, uptake and GHGs? • Lessons learnt: fraud, inconsistency and price impacts? • Will proposed multiple counting stimulate deployment and use in EU? • Is there support for 4x counting? • Effectiveness of sub-target for new conversion technologies – what is achievable? • How important is multiple counting vs. targets and framework for 2030? • We encourage you to provide further input regarding these questions in the forthcoming Call for Evidence 10
UCO and animal fat biodiesel have seen strong EU uptake • 2x counting under current RED has seen EU a large rise in the collection & conversion of UCO & animal fats into biodiesel • A key compliance option for national mandates, and high GHG savings • UK largest market for UCO. Duty Share of EU biodiesel demand from animal fats & UCO (USDA, 2013) differential has also played a role • Sharp price rises for UCO and animal UK fats, e.g. UCO was at 25-50% discount to virgin veg oils, now at 5-20% premium. Animal fat users also impacted • Fraud has presented problems, chain of custody certification is improving Animal fat & UCO biodiesel reported under the UK RTFO (DfT, as of 7 th Nov 2013) 11
But slow uptake of novel conversion technologies • To date, little evidence of double counting triggering investment in more novel conversion technologies (e.g. LC ethanol, BTL) that are trying to bridge the ‘valley of death’ towards commercialisation • Pricing at 2x the price difference between conventional biofuels and fossil fuels means that 2x counting amplifies product price volatility • Only applies to 2020, and full-scale plants will take several years to construct and will be operating for 20+ years • Cannot be valued or reliably factored in when making high capital cost investment decisions • Lack of technical progress and tough financing environment are also contributing factors • Many interviewees stated multiple counting is not an effective mechanism to achieve uptake of novel conversion technologies 12
Objectives of multiple counting are not clear • Opinions on the efficacy of double counting vary due to a lack of defined or quantified objectives • Commission wanted to stimulate the uptake of more sustainable feedstocks (diversify the feedstock base), leading to greater market penetration of low ILUC risk biofuels • Multiple counting will continue to support UCO and animal fat biodiesel • Energy targets are effectively lowered and realised GHG savings are reduced by multiple counting – for these reasons, plus heightened risks of fraud and market distortions, there is very little support for 4x counting within Europe 13
Alternative mechanisms • Sub-targets seen as a better mechanism for securing the deployment of novel conversion technologies, as provides a more certain market demand • Targets of 0.5 - 1.5% of EU transport energy cited as being achievable by 2020, but 2.5% seen as too high • Stakeholders have said only novel conversion technologies ought to be included within a sub-target - i.e. UCO & animal fat biodiesel should not qualify as ‘advanced’ biofuels. However, we note this could neglect conventional technologies processing novel feedstocks (e.g. algal routes) • Policy uncertainty in the EU is a major concern for industry stakeholders, and will continue to stifle investment unless a clear and stable framework is set out. Interviewees stated that biofuel, or renewable (or GHG) transport targets to at least 2030 are imperative for novel routes to develop: a sub-target for only 2020 will not be enough 14
Feedstock analysis Supply, technology, economics, competing uses and sustainability | Strategic thinking in sustainable energy
Data gathering on 28 feedstocks • Based on best evidence publically available that could be gathered within the short duration of the study • For a more detailed picture, or regional focus, market analyses for individual feedstocks will be required • The full report highlights where the evidence is most uncertain and additional information or research is needed • Please note – the following slides contain important information on all 28 feedstocks, presented together for comparison purposes. We have made the slides as legible as possible! 16
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