David Evans

Turning biomass from municipal waste and non-food crops into biofuels may be a viable technology in Britain, but bigger tax breaks are needed to cover high start-up costs, a report said

LONDON, UK; June 22, 2007.- As pressures from climate change and high oil prices force governments to set ambitious targets for biofuel use, concerns are growing that the food-versus-fuel battle may deplete natural resources and drive up shopping bills.

Scientists are now looking for other fuel sources — so-called second generation biofuels that use wood, straw and garden waste to meet the targets without threatening food supply.

“There is a market opportunity for the development of second generation biofuels in the UK,” said the report commissioned by the National Non-Food Crops Centre (NNFCC), a government-funded researcher.

The report, drawn up by Nexant ChemSystems, looked at turning biomass such as wood, fast-growing elephant grass and straw into biodiesel that can be blended with conventional fuel.

British law requires 5 percent incorporation in all road transport fuels by 2010 and the recent UK energy review has suggested an indicative target of 10 percent by 2015.

Jeremy Tomkinson, chief executive of the NNFCC, said there was enough surplus wheat and rapeseed in Britain to meet the biodiesel and ethanol needs for the 2010 target, but the 10 percent level would need imported biofuels such as ethanol from Brazil or palm oil from Malaysia.

START UP COSTS

Nexant chief Mark Morgan told a press conference that biodiesel using rapeseed or soy cost around 700 to 800 euros per tonne, whereas the biomass to liquids (BTL) process could make the fuel alternative for around 450 to 500 euros per tonne.

The main drawback for second generation fuels was the current high start-up costs, the report said.

A first generation biofuel plant requires around 50 million euros of capital investment to become operational. Second generation production can involve an outlay of five to 10 times that figure and takes around five years to reach full production.

Under Nexant’s economic models, it said an oil price of around US$45 a barrel needed improved government incentives, whereas prices at US$65 supported a viable financial performance.

“Financial performance is best supported in a high oil price environment with strong fiscal incentives,” it said.

“UK government policies need to be tailored to second generation biodiesel by increasing the biofuel tax break to at least 35 pence per litre,” the report said.

Britain currently offers 20 pence per litre.
“The tax break will need to be in place for a period greater than five years,” the report said.

(Reuters)

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