European biofuel industry declines due to overcapacities

Recent analysis of the biofuels industry by ecoprog GmbH has suggested a probable 40 new production plants will be constructed in Europe in the next 5 years, regardless of the existing import pressure and national overcapacities.

In early 2012, approximately 380 biofuel plants with a production capacity of 1,050 petajoules were operational in the European Economic Area due an unprecedented construction boom.

This boom happened against the backdrop of the EU Renewable Energies Directive. With this directive, 10% of energy in the transport sector will theoretically come from renewable energy sources by 2020. The majority of EU states have subsequently introduced biofuel quotas.

However, many EU countries exaggerated the development of their biofuels industry, especially within the realms of biodiesel, which was originally planned to help the agricultural sector reverse its critical situation. Now in countries such as Germany, the Netherlands and Hungary, production capacities dramatically exceed domestic demand. Overall, the European capacities exceed the demand by about 60 % and it is very difficult to sell expensive European biofuels on the global market.

Increasing competition also causes problems, particularly for small, decentralised plants. For example, as new large-scale plants were commissioned in the Netherlands, almost 20 small, biodiesel plants had to be shut down in Spain.

There is also increasing import pressure caused primarily by Argentinean and Indonesian biodiesel. This adds to the situation as both countries are allowed to import their biodiesel into the EU without paying any duties.

However, the industry has hopes for a positive development despite all these difficulties. EU sustainability criteria for biofuels introduced in early 2012 is expected to make biofuel production more ecological whilst also making it more difficult for non-European producers to enter the EU market. Currently, however, it is completely unclear whether these targets will be reached or not.

Regardless of the uncertainties resulting from this situation, about 40 new biofuel plants are currently being planned. They have a total capacity of about 100 petajoules and will primarily produce bioethanol and second generation biofuels. If the import pressure actually decreases, already existing biodiesel projects could be realised as well.