Closure of the UK’s largest ethanol plant in the face of government inaction on policies signals the severity of an increasingly competitive ethanol marketplace.
The price of ethanol commodities futures has fallen significantly this year, from $1.603 to $1.356 as of 6 December, a fall of almost 0.25. Vivergo said in a statement that these low prices and the UK government’s failure to implement an E10 blending mandate sooner contributed to the decision to close the plant.
In a comment for the Financial Times, the company’s managing director Mark Chesworth said: "We just keep seeing delay after delay after delay. We have seen quite a lot of announcements about the UK economy 15 to 20 years hence. Let's get on with some governing now."
The plant cost £350 million and was made in anticipation of a growing demand for ethanol. However, the government has not kept pace with these expectations. The gap between these expectations and reality has meant that the plant is inviable in current market conditions, according to Vivergo.
The next largest producer of ethanol in the UK is Ensus. Grant Pearson, commercial director for the company, has urged government to meet its proposal to implement the new 7.5% mandate in April 2018 and increase domestic demand for ethanol.
According to the Renewable Fuels Association, the US led ethanol production in 2016, followed by Brazil. The US Energy Information Administration reported in July that in the first half of 2017 US ethanol production averaged 1.02 million barrels per day, an increase of 5% from the same period in 2016.
Brazil is the leader in ethanol mandates, having implemented 27% with gasoline. Reuters reported in September that China plans an ethanol mandate in 2020 to increase domestic industrial demand for corn and reduce air pollution.