Recently, Dutch biofuel developer and supplier GoodFuels was interviewed by S&P Global Commodity Insights on the topic of biofuels.
01 Changes in legislative policy may lead to a reduction in the capacity of the Rotterdam biofuel bank
From January 2024, the Dutch government is reducing the marine biofuel incentive (herneuwbare brandstoenheden or HBE) multiplier from 0.8 to 0.4, which means that marine biofuels will be more costly and have a lower reservoir capacity than before.
Johannes Schurmann, head of GoodFuels, believes that the multiplier for the aviation industry will stabilize at 1.2, and that the multiplier for a company producing sustainable aviation fuel (SAF) is three times higher than for biofuels compared to marine biofuels.
02 Increasing biofuel prices
In Schurmann's view, the price of biofuels could rise by as much as $250 per metric ton in the future, based on current values and the influence of Bio-tickets. The main reason for this is that over the past few years they have supplied shipping companies with large quantities of biofuels at prices almost equal to those of fossil fuels, yet continuing to sell them at these prices in the future will be only marginally profitable.
Biofuel tank B30 Rotterdam FAME prices were around $693.25 per metric ton and 0.5% sulfur fuel oil was around $516.75 per metric ton, according to data from Platts, a division of S&P Global Commodity Insights.
"The inclusion of shipping in the EU Emissions Trading System (EU ETS) from January 2024 may in the future narrow the price gap and thus help protect biofuel interests." So says Schurmann.
Meanwhile, in order to achieve the climate target as soon as possible, Brussels, Belgium, has requested the operators of ships of 5,000 gross tons or above to pay for 100 per cent of greenhouse gas emissions during intra-EU voyages and 50 per cent of emissions during trips to and from non-EU countries. In this regard, the EU side has agreed that it will be implemented in a phased approach. For example, the EU Emissions Trading System (EU ETS) will cover 40% of emissions by 2024, 70% by 2025 and 100% from 2026.
"In this scenario, the premium for biofuels would be reduced from $250/metric ton to $90/metric ton. This significantly reduces the price gap. At the same time, more and more existing shipping companies are launching the 'Scope 3 emissions to cargo owners' program, which is conducive to boosting the biofuels market in the following year." He added.
"At the same time, the International Maritime Organization's (IMO) Carbon Intensity Regulator (CIR) is set to be the biggest driver for biofuels in the coming years. The IMO has now approved the publication of interim guidance on biofuels to meet the requirements of the CII, which came into force on October 1st. In its guidance, the IMO states that biofuels need to reduce good tailpipe GHG emissions by at least 65% compared to marine natural gas, i.e. an emission intensity of up to 33 g CO2 eq/MJ." Schurmann admits.
03 Newly developed feedstock - lignocellulose
The production of liquid biofuels from lignocellulosic biomass could be a completely new way of producing them, according to shipping sources, suggesting that shipping can withstand larger sizes of fuel than aviation, solidifying its potential biofuel feedstock base.
However, the technology for producing liquid biofuels from lignocellulosic biomass is not mature. Therefore, Schurmann suggests that there are two options for improvement, one is to improve the process and the other is that the bio-oil can be upgraded by hydrotreating.
The Biofuels Market Outlook published by S&P Global Commodity Insights also forecasts that global biomass diesel production will rise from approximately 1.1 million bpd in 2023 to approximately 1.3 million bpd in 2025.Swati Mathur, Associate Director of Global Consulting at S&P Global Commodity Insights, suggests that although the majority of lignocellulosic feedstocks have not yet been developed, there is significant potential for lignocellulosic production. Swati Mathur, Associate Director of Global Consulting at S&P Global Commodity Insights, suggests that although the majority of lignocellulosic feedstocks have yet to be developed, the forecasts show that lignocellulosic has significant production potential.
