Brakes put on green fuels developments
TEESSIDE’S second bioethanol plant will now not be built until 2013 at the earliest, following the Government’s decision to slow the rate at which green transport fuels are introduced into the UK.
Andrew Hartley, chief executive of Vireol, which is pressing ahead with a 150,000tonnes/year bioethanol plant at Grimsby, said his company had “put the brakes on” further development plans until the market caught up with production capacity. But, despite relocating its head office to Knaresbrough from Stokesley last month, he said Vireol was committed to pursuing its option on land at Teesside when the time was ready. The Teesside plant had originally been scheduled to launch first, in 2010.
“Delaying blending requirements delays the speed at which we deliver plants because we do not want them standing idle,” he said.
If, as now looks likely, the Renewable Fuels Transport Obligation (RFTO) is revised from a target of 5% green fuel in the fuel transport blend by 2010 to 5% by 2013, many producers may find themselves operating below profitability.
“The biofuels industry in the UK doesn’t reach full speed ahead until you get to 4% or 4.5% blends,” said Mr Hartley.
While the revised targets have been blamed for scaring investors away from the sector, Mr Hartley said any certainty was better than none.
The Government is expected to adopt the revised targets before Christmas.
“We could do with absolute certainty, but in a way it doesn’t matter what it is,” said Mr Hartley.
Earlier this year, Bioethanol Partners, the funding vehicle behind Vireol’s two plants, said it aimed to raise £195m from debt and £135m from equity investors through a financing structure that substantially reduced investors’ exposure to risk by tax offsetting.
The project was predicted to return 40% net over five years, assuming average wheat prices of £130/tonne and oil prices of $80/barrel.
But Mr Hartley admitted that funding for green fuel projects was in “some turmoil”.
“We are trying to restructure the funding,” he said.
“We may have more equity and less debt, which makes things easier. It’s been a long process, but we are close.”
Share
