Sustainable Biofuels and the Oil Majors, Metrics Begin to Emerge
The international biofuels industry needs oil scarcity to realize its full potential. But before it will get there, it must contend with some difficult sustainability questions in the next couple years. Chief among them is how indirect land use change (ILUC) will be measured. Heavily criticized for deforestation in places like Brazil and Indonesia, the biofuels industry is struggling to get back on its feet.
This week, the UK’s Renewable Fuels Agency (RFA), an independent sustainable fuel regulator that reports to the UK Parliament and the public on the impacts of fuel supplied under the country’s Renewable Transport Fuel Obligation (RTFO), released its highly anticipated first annual impact assessment. The report shows that fossil fuel supplier’s performance is all over the map when it comes to biofuel sustainability.
The RFA’s CEO Nick Goodall:
We have seen many companies meeting the challenge of sourcing their biofuels responsibly. However, too many are lagging behind and dragging overall performance down.
The Gov Monitor reports that winners include ConocoPhillips, Greenergy, and Mabanaft, which met all three Government targets. ConocoPhillips and Mabanaft sourced feedstock certified to the British ‘ACCS’ sustainability standard, Greenergy undertook independent sustainability audits of Brazilian sugar cane, and Mabanaft and Greenergy each supplied much of their fuel from wastes and byproducts.
Morgan Stanley and Topaz were counted among the losers, both missing all three Government performance targets. Chevron, Murco, and Topaz failed to report any fuel meeting the RTFO’s Environmental Qualifying Standard.
Others failed to have their data verified to the RFA’s satisfaction. BP, Murco, and Prax reported meeting at least one target, but because their data was not properly assured the RFA was not able to verify the results.
Meanwhile, 700 miles away, sustainability was clearly off the radar as oil major executives meeting in Davos, Switzerland at the World Economic Forum spent Thursday criticizing energy independence rhetoric coming out of major oil-consuming nations. Adam Lashinsky of FORTUNE reports that among the harshest critics was Khalid Al Falih, CEO of Saudi Aramco (the national oil company of Saudi Arabia). In a not-so-subtle rebuke of President Obama’s calls for energy independence during his State of the Union Address, Al Falih argued that weaning dependence on foreign oil is “unachievable and misleading to the public.” He went on to describe the peak oil debate as “dead,” despite contributing to price increases and volatility in recent years, and claimed that Saudi Arabia had 4 million barrels of oil in idle capacity at the moment.
BP Group’s Chief Executive notes that the company forecasts a 40% increase in energy consumption among non-OECD nations over the next 20 years. Hayward predicted Iraq will be producing 10 million barrels a day in 10 years, which as Lashinsky explains, would be a five-fold increase and a gigantic accomplishment.
Oil supplies will continue to have a major influence on the viability of biofuels projects. Even with generous subsidies, the biofuel industry needs volatility and oil scarcity to compete on price. Where biofuels goes this year is anyone’s guess. What is clear is that government investment in major oil-importing countries will likely continue to flow to alternative energy projects.
Read more about the UK’s sustainability report here.
Read more about the Oil Majors’s Davos session here.
Image: Flickr/theFriendlyFiend
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I just did an interview with Greenergy Chief Executive Officer, Andrew Owens.
Greenergy is the UK’s largest independent oil company with over 15% share of the UK road fuel market and is the largest supplier of biofuels with a 30%+ market share.
What has been the secret to Greenergy’s spectacular growth over the past decade?
Three things – service, cost and biofuel implementation. We have delivered the highest standards of customer service while operating from a very low cost base. By being an early mover on biofuels we benefited from the biofuel duty incentives which helped fund growth. A key driver as we move to the Renewable Energy Directive will be our ability to competitively supply certifiably sustainable biofuels and therefore de-risk the biofuel supply chain for our customers.
Greenergy has been a pioneer and industry leader in the sustainable sourcing of biofuels – what initiatives have you put in place to ensure the integrity of your supply chain?
Our first objective has been to develop full supply chain transparency across all biofuels and all feedstocks. We have taken third party audit action for every one of our biofuel feedstock supply chains – very different from simply obtaining a declaration from our suppliers about origin and sustainability. We have also combined our early understanding of the implications of legislation, whether the UK RTFO or RED, with a desire to do the right thing. That has resulted in a commitment to deliver sustainability programmes from scratch, such as for Brazilian sugar cane.
There is still more that can be done and we will be announcing another new initiative at World Biofuels Markets (http://www.worldbiofuelsmarkets.com).
What does Greenergy think of the current iLUC debate?
The debate is both important and serious – so important that legislators must rely on evidence rather than complex predictive models. They should therefore wait until the tools exist to measure actual emissions from land use change. These are not far off. We’ve already shown that it’s possible to accurately measure direct and indirect LUC emissions at regional levels.
Where do you see the growth opportunities for the biofuels industry?
Biofuels have the potential to displace petroleum on both cost and environmental grounds. To achieve this, the biofuel industry must drive down greenhouse gas emissions, embrace supply chain transparency and demonstrate that it can be properly sustainable.