Annual growth forecast of 25% for biodiesel market

Edited by the Engineeringtalk editorial team Nov 2, 2001

The imminent announcement by the European Commission of its proposals on biofuels will give a huge boost to the European Biodiesel industry, says a new report

The imminent announcement by the European Commission of its proposals for two new directives to ensure that biofuels make an important contribution to the total automotive fuel consumption in the EU will give a huge boost to the European Biodiesel industry.

The directives will make sweeping changes to tax laws to enable EU member states to introduce tax breaks for biofuels, and will stipulate that biofuels must make up a fixed percentage of all automotive fuel sales across Europe.

This firm backing by the Commission will ensure that the biodiesel market has excellent growth prospects.

A new study of the European Biodiesel market by Frost and Sullivan forecasts that these two new initiatives will help increase the biodiesel market from the 2000 value of $504million to $2.4billion by 2007 giving a compound annual growth rate of 25% over the forecast period.

Gordon McManus, Research Analyst with Frost and Sullivan explains: "Biodiesel can cost over twice as much to produce as conventional diesel, so without some form of tax exemption it simply cannot compete at the pumps.

Until now these exemptions have only been available in some countries, leading to huge geographical variations in the biodiesel market and a certain amount of uncertainty for producers.

If adopted, this European wide legislation will provide the market stability producers have hoped for.

The politicians are laying the challenge firmly at the feet of the biodiesel producers to meet the volumes of biodiesel needed, which will require a lot of hard work in terms of raw material procurement, capacity expansion and market development." As part of the Kyoto Agreement, the European Union committed to reducing its emissions of CO2 by 8% between 2008 and 2012.

The life cycle analysis (LCA) approach to the overall atmospheric CO2 contribution of a fuel suggests that biodiesel uses about 50% less CO2 than mineral diesel.

This has provided one of the main incentives in persuading individual governments, and now the European Commission, to support the development of the biodiesel market as an important contribution to meeting their overall emission targets.

However, one of the key restraints in this market will be the availability of raw materials.

Limits on the production of non-food oilseeds, and a decrease in support payments for oilseed producers means there is less incentive for farmers to grow rapeseed ? the main source of oil for the biodiesel industry.

But, whether the price of rapeseed rises high enough to significantly affect the biodiesel market, or whether demand for rapeseed from the biodiesel industry outstrips the possible supply, restraints on the available amount of raw materials is likely to be a major restraining force as the biodiesel market grows.

Perhaps other sources of oil will need to be explored more fully in the future such as the use of animal tallow or even McDonalds spent chip oil.

Modern technologies allow the use of mixed feedstocks, meaning that the most suitable oils in terms of availability, price and quality at any particular time can be used.

This is the first report produced on the European biodiesel market.

It describes a market that is currently dominated by 3 key suppliers: Diester Industrie, Novaol and Oelmuhle Leer Connemann who have built their position on experience and production capacity.

With such large growth projected for this market, we can expect to see several new companies entering the market with large capacity plants in the next few years, whilst existing suppliers will invest in significant capacity expansion.