Bringing biofuels on the market Options to increase EU biofuels volumes beyond the current blending limits Report Delft, July 2013 Author(s): Bettina Kampman (CE Delft) Ruud Verbeek (TNO) Anouk van Grinsven (CE Delft) Pim van Mensch (TNO) Harry Croezen (CE Delft) Artur Patuleia (TNO) Publication Data Bibliographical data: Bettina Kampman (CE Delft), Ruud Verbeek (TNO), Anouk van Grinsven (CE Delft), Pim van Mensch (TNO), Harry Croezen (CE Delft), Artur Patuleia (TNO) Bringing biofuels on the market Options to increase EU biofuels volumes beyond the current blending limits Delft, CE Delft, July 2013 Fuels / Renewable / Blends / Increase / Market / Scenarios / Policy / Technical / Measures / Standards FT: Biofuels Publication code: 13.4567.46 CE Delft publications are available from www.cedelft.eu Commissioned by: The European Commission, DG Energy. Further information on this study can be obtained from the contact person, Bettina Kampman. Disclaimer: This study Bringing biofuels on the market. Options to increase EU biofuels volumes beyond the current blending limits was produced for the European Commission by the consortium of CE Delft and TNO. The views represented in the report are those of its authors and do not represent the views or official position of the European Commission. The European Commission does not guarantee the accuracy of the data included in this report, nor does it accept responsibility for any use made thereof. © copyright, CE Delft, Delft CE Delft Committed to the Environment CE Delft is an independent research and consultancy organisation specialised in developing structural and innovative solutions to environmental problems. CE Delft’s solutions are characterised in being politically feasible, technologically sound, economically prudent and socially equitable. 2 July 2013 4.567.1 – Bringing biofuels on the market Contents Management summary 7 Summary 9 1 Introduction 17 1.1 Introduction 17 1.2 Aim and scope of this study 18 1.3 Relevant EU policies 19 2 Approach, assessment criteria and biofuel scenarios 27 2.1 Introduction 27 2.2 Are current policies sufficient? 27 2.3 Issues to consider in the assessment of marketing options 28 2.4 Combining blending options 32 2.5 Dealing with uncertainties: two biofuels demand scenarios 33 3 Biofuels implementation: plans and uncertainties 35 3.1 Introduction 35 3.2 Types of biofuels 35 3.3 Member States’ plans and goals 37 3.4 Uncertainties in future biofuel developments 45 3.5 Long-term outlook 46 3.6 Conclusions 47 4 Biofuels blending and vehicle technology 49 4.1 Introduction 49 4.2 Blending of biofuels in base fuels 49 4.3 High blends of biofuels 55 4.4 Co-processing in refineries 64 4.5 Biofuels in non-road transport 67 4.6 Effect of biofuels on engine efficiency 72 4.7 Conclusions 80 5 Current blending potential 83 5.1 Introduction 83 5.2 EU wide 83 5.3 Differences between Member States 86 5.4 Conclusions 90 3 July 2013 4.567.1 – Bringing biofuels on the market 6 Options to market biofuels beyond current limits 93 6.1 Introduction 93 6.2 List of options to market larger volumes of biofuels 94 6.3 Increase blending limits for diesel and/or petrol 95 6.4 High blends of non-fungible biofuels (FAME, ethanol) 96 6.5 FAME and bioethanol availability 100 6.6 Fungible biofuels: HVO, BTL and co-processing in refineries 103 6.7 Biomethane 107 6.8 Non-road transport: potential to increase biofuels blending 110 7 Assessing the options: marketing scenarios for 2020 111 7.1 Introduction 111 7.2 Assessment of the individual options 111 7.3 Combining and selecting options 116 7.4 Biofuels marketing in the NREAP scenario: most promising options 118 7.5 Biofuels marketing in the 50/50 scenario: focus on ethanol and biomethane 122 7.6 Differences between Member States with examples: Germany and Sweden 125 7.7 Conclusions and recommendations 128 8 Practical issues to resolve 131 8.1 Introduction 131 8.2 The various marketing options 131 8.3 Risks and uncertainties 136 9 The way forward 139 9.1 Introduction 139 9.2 Realising the scenarios: overview of necessary steps 140 9.3 Step 1: Design a robust biofuels marketing strategy 140 9.4 Step 2: Ensure timely implementation of key policies 142 9.5 Step 3: Define vehicle and fuel standards for higher blends 143 9.6 Step 4: Encourage consumers to buy these vehicles 144 9.7 Step 5: Encourage consumers to buy the fuels 146 9.8 Step 6: Increase biofuels R&D and production of sustainable biofuels 146 9.9 Step 7: Increase biofuels use in non-road modes 147 9.10 Timeline 148 10 Conclusions and recommendations 149 10.1 Main conclusions 149 10.2 Biofuels marketing in the coming years 150 10.3 Recommendations 151 References 155 4 July 2013 4.567.1 – Bringing biofuels on the market Annex A Stakeholder consultations 165 Annex B EU Member State overview of biofuels policies 167 B.1 Biofuels policies and strategies in the Member States 167 B.2 Mandates 168 B.3 Tax exemptions and reductions 172 B.4 Subsidies 177 B.5 Dedicated marketing strategies of higher blends 179 Annex C Factsheet: FAME 181 Annex D Factsheet: Ethanol 185 Annex E Factsheet: ETBE 191 Annex F Factsheet: HVO 193 Annex G Factsheet: Biomethane (bio-CNG and bio-LNG) 195 Annex H Factsheet: Co-processing in refineries 199 Annex I Factsheet: Bio-methanol 201 Annex J Factsheet: Bio-DME 205 Annex K Factsheet: BTL 207 Annex L The REST model 209 L.1 Introduction 209 L.2 Input 209 L.3 Outcome 210 5 July 2013 4.567.1 – Bringing biofuels on the market 6 July 2013 4.567.1 – Bringing biofuels on the market Management summary Introduction In 2009, the European Parliament and Council adopted the ‘Renewable Energy Directive’ (RED), which includes an ambitious policy target for the transport sector: a 10% overall target for the share of energy from renewable sources in 2020. Member States have since then submitted national renewable energy action plans (NREAPs) which outline how they intend to meet this target. A significant share of these biofuels, but not all, can be brought onto the market by low level blending of biodiesel in diesel and of bioethanol in petrol. Current fuel standards allow up to 7 volume% FAME (the most common type of biodiesel, B7) and 10 vol% ethanol (E10). Other marketing options may then be used to sell the remaining volumes, using higher blends in compatible vehicles, fungible fuels such as HVO or biofuels in non-road transport modes. Large scale implementation of these options may, however, require new, targeted policy measures, in many cases complemented by new fuel and vehicle standards, adaptation of engines and fuel distribution, etc. In this report, the issue of bringing the desired amounts of biofuels onto the market is assessed in detail. The study was commissioned by DG Energy of the European Commission and carried out by CE Delft and TNO1. Current policies and plans First of all, an overview of Member States’ plans and policies regarding biofuel deployment in the coming years was developed, based on information provided in the NREAPs, progress reports and a questionnaire. About 6.6% of road transport energy is expected to be biodiesel in 2020, 2.2% to be bioethanol. Other biofuels and renewable electricity have much lower shares. To reach these targets, Member States choose to stimulate biofuel consumption by mandates, tax exemptions and subsidies – with a trend towards the first, and away from the latter. Many of the plans do not yet address the more technical issues of bringing biofuels on the market beyond the blending limits. Furthermore, many of the current biofuel policies have only been defined for the coming years, creating uncertainty in the market regarding the longer term policies until 2020 and beyond. Technical options for biofuels marketing An inventory was made of potential means to market biofuels in the transport sector in 2020. A range of biofuel types and blend percentages was identified, addressing the various transport modes. In 2020, about 95% of the passenger cars and vans will be compatible with E10, and all diesel vehicles are compatible with B7. In addition, up to 30% of HVO or BTL can be added. The current fuel standards also allow ethanol to be (partly) replaced by biomethanol, bio-MTBE and bio-ETBE. Increasing the maximum blend ratios to B10/B15 for diesel and E20 for petrol is technically feasible, and fuel standards for these blends are under development. 1 Note that the current RED methodology was applied in this study. Any potential future modifications, for example as proposed in the Commission's ILUC proposal (EC, 2012) were not taken into account. 7 July 2013 4.567.1 – Bringing biofuels on the market Ethanol can also be added to diesel fuel, but this is outside the diesel specification and would create substantial issues with fuel distribution. Higher blends or pure biofuels could also contribute significantly to the 2020 RED target, if the right conditions are met. Existing options are E85, biomethane and B30 for heavy-duty vehicles. Other options which are technically feasible, but cannot significantly contribute to the RED target are ED95 (ethanol with ignition improver, for diesel engines), biomethanol (M15 or M85) and dimethyl-ether (DME). Scenarios for biofuels marketing in 2020 Two biofuels demand scenarios were investigated, both on EU-level and for each individual Member State: the NREAP scenario, where biofuels demand is in line with expectations of Member States as outlined in their NREAPs; the 50/50 scenario, where total biofuel demand is the same as in the NREAP scenario, but biodiesel and bioethanol have equal shares.