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Spanish policy initiatives and major projects due to be launched or come online in 2023 could lead to a significant shift away from first-generation biofuels, while uncertainty as to whether alternatives will be available in sufficient quantities to comply with mandates remains.
Meanwhile, already ambitious Spanish plans and projects for developing green hydrogen for transport are set to become even more gung-ho in the context of the EU sanctions regime against Russian oil and gas.
In 2022, the consumption of biodiesel fell by 15%-16%, according to data produced by CORES – the official corporation responsible for guaranteeing fuel supply in Spain.
While CORES biofuels data “is not considered very reliable by the sector,” the introduction of double counting “produced a reduction in consumption,” Manuel Bustos, biofuels director at the Spanish renewable energies association APPA told Fastmarkets Agriculture.
Spain’s mandate for sales or consumption of biofuels is set to increase in 2023 from 10% to 10.5%, in line with the requirements of the 2015 biofuel law (RD 1085/2015).
A draft ministerial order put out to public consultation in November and due to be finalized in the next few weeks projects a cut in the limit for food-based biofuels from the existing 7.2% to 2.6% in 2023.
The figure is “completely unjustifiable” and, if finally approved, “will necessitate much more advanced biofuel to comply with the mandate,” Bustos told Fastmarkets Agriculture.
The proposed limit would “entail an increase in costs and it goes against the interests of all the actors involved as well as being out of line with the majority of EU member states,” he added.
Repsol, the Spanish market leader, appears to be taking a lead in switching to advanced biofuels with the completion next year of its C43 plant in Cartagena, which, a company spokesman told us, will produce 250,000 tonnes per year of hydrotreated vegetable oil (HVO) primarily from used cooking oil (UCO).
“The opening of the Cartagena plant will probably affect other producers,” according to Geregas spokesperson Carlos Lopez.
“Repsol has taken a lead in ensuring an improved system of UCO collection, putting them in an advantageous position compared to companies such as BP,” he told Fastmarkets.
Geres predicted that the price of UCO would remain within a €1500-1700 per ton range and that scarcity of domestic supply would result in increased levels of imports which would raise questions about the provenance of the eligibility for double counting.
“During the pandemic, more UCO was collected than normal, generating suspicions of fraud,” he said.
Meanwhile, a spokesperson for Anagrasa – the association of producers of animal fats and grease – told us that its members hope that the price cap on Russian oil will keep the price of diesel at around €100 per megawatt long term with the price of gas pegged to that.
“This balance in the price of gas versus diesel should ensure a positive outlook for the sale and use of animal fats for the production of biofuels”, she said.
The EU fuel quality directive will finally come into force in Spain in 2023, following its late transposition into Spanish law last year, requiring a 6% reduction in emissions from transport fuels.
The extent to which this results in increased demand for biofuels depends on what limits the government puts on oil companies’ use of the Upstream Emissions Reduction mechanism in regulations expected to be published in early 2023.
2023 will also see the transposition into Spanish law of the remaining segments of RED II and its delegated acts and the RefuelEU Aviation, FuelEU Maritime, and Antideforestation regulations which will all have an impact on the biofuels market, Bustos said.
The Spanish government is expected to update its 2020 hydrogen road map, which projects an overall production of 300,000 tons per year of green hydrogen by 2030 and up to 150 hydrogen filling stations, 7500 H2-powered HGVs, and two commercial hydrogen train lines.
Javier Brey, president of the Spanish hydrogen association AeH2, told Fastmarkets he believes a Spanish target of 1 million tonnes per year, which would align Spain with the REPowerEU 10-million-tonne target, “is realistic”.
Work will also begin in 2023 on two 1GW electrolyzers in Huelva and Cádiz to produce green hydrogen for use in the production of e-fuels for buses, HGVs, and aviation in Spain and for export as a maritime fuel, a CEPSA spokesperson confirmed.
A joint venture between Maersk and the Spanish government is scheduled to begin work in the second half of 2023 to produce green hydrogen for conversion into shipping fuel in the form of either methanol or green ammonia.
In the initial phase, up to 2025, the target is to produce 200,000 tonnes.
In late 2022, the first grants were recently awarded under the government’s strategic plan for renewables and hydrogen (PERTE-ERHA) for projects to be launched in 2023, which include €25 million for projects to produce hydrogen for heavy goods vehicles (HGVs) and public service vehicles in Catalonia, Andalucía, and Castilla-La Mancha.