by Samantha Wright (Independent Commodity Intelligence Service) As hydrotreated vegetable oil (HVO) use grows in Europe, with more expansions anticipated in the next few years, questions are arising as to its impact on the traditional biodiesel market and the wider oleochemicals industry.
It is likely that the rise of HVO use will lead to a decrease in traditional biodiesel demand and therefore biodiesel production, which would in turn eat into glycerine supply in the region.
HVO is a type of biofuel produced from vegetable oils, using hydrogen as a catalyst. Using hydrogen instead of methanol as part of the process means HVO is widely considered a more environmentally friendly, sustainable biofuel than traditional crop biofuels.
Despite its name, HVO can also be produced using tallow and used cooking oil.
HVO production in Europe is expected to increase, with new plants opening this year and further projects planned for the next four years (see table below).
Company | Location | Capacity (tonne) | Expected completion |
Total | La Mede, France | 500,000 | Opened July 2019 |
ENI | Gela, Italy | 750,000 | Opened August 2019 |
ENI | Porto Marghera, Italy | 240,000 | 2021 |
UPM | Kotka, Finland | 500,000 | Final decision pending |
St1 | Gothenburg, Sweden | 100,000 | 2022 |
Preem | Lysekil and Gothenburg, Sweden | 1,200,000 | Increasing to 1.3m tonnes by 2023 |
PKN Orlen | Plock, Poland and Litvinov, Czech Republic | Not disclosed | Not disclosed |
The jump in production comes amid a push from the EU to move towards second generation biofuels and away from first generation (crop-based) biofuels.
HVO can be used as a substitute for biodiesel when blending biofuels into conventional diesel engines.
The most commonly produced biodiesel in Europe is rapeseed methyl ester (RME), while palm methyl ester (PME) and soybean methyl ester (SME) are also heavily used in the region, particularly in summer.
These grades and others can also be blended together to create fatty acid methyl ester (FAME) blends, which are also commonly used across Europe.
The rising use of HVO brings into question the impact on the biodiesel market.
The EU has already announced that it plans to eventually phase out all crop biofuels and rely on second generation fuels instead.
As such, some biodiesel players expect that HVO and other second generation fuels including used cooking oil methyl ester (UCOME) will, in the long term, completely take over from first generation biodiesel usage.
...
The EU directive states that there will be a phase out of high indirect land use change (ILUC) biofuels with a significant expansion of feedstock production areas into land with a high carbon stock (see table below), starting from 2023.
By 2030, these biofuels will need to be completely removed from the blending pool.
Oil crop | Average annual expansion of production area since 2008 (kha) | Average annual expansion of production area since 2008 (%) | Share of expansion into land referred to in Article 29(4)(b) and (c) of Directive (EU) 2018/2001 | Share of expansion into land referred to in Article 29(4)(a) of Directive (EU) 2018/2001 |
Rapeseed | 301.9 | 1.0 % | 1 % | - |
Palm oil | 702.5 | 4.0 % | 45 % | 23 % |
Soybean | 3,183.5 | 3.0 % | 8 % | - |
Sunflower | 127.3 | 0.5 % | 1 % | - |
Source: European Union
There was also a recent decision by the French parliament to remove tax breaks on palm oil in biofuels, which is throwing the future of the new Total biorefinery in La Mede, France, into question.
The plant was expected to use palm oil as a feedstock to produce HVO.
One market source anticipates that the company will look to export their palm-based material to elsewhere in Europe.
The source said: “The big question is what happens with HVO from Le Mede, where this will flow. I assume this will be [going to] Germany.”
While HVO is unlikely to completely cut conventional biodiesel out of the blending pool in the short-to-mid-term, it is likely to reduce the market share of biodiesel in Europe.
This in itself could cause supply issues in the glycerine market in the region.
While biodiesel production creates glycerine as a by-product, HVO manufacturing does not produce any glycerine by-product.
Glycerine can be produced via fatty acids as well but this is much less common in Europe, with the majority of the material created through biodiesel production.
If biodiesel demand is hit by the rising popularity of HVO, this would lead to production cuts, which in turn would see less glycerine in the European market.
Glycerine is a necessary component in some pharmaceutical applications and is also commonly used in cosmetics, personal care and food applications.
If glycerine availability in Europe tightens, the market will naturally look to imports to fill supply gaps. READ MORE
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