Spanish biofuels sector awaits greater policy certainty in the new year: 2022 preview

What do the regulatory developments in Spain mean for the biofuels market in 2022?

fuel pumps lined up at the petrol station


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Spain’s biofuels sector is looking for greater clarity in 2022 on regulations related to feedstocks, while advanced biofuels and hydrogen as the EU’s third-biggest transport market looks to transition away from ethanol and biodiesel based on crop and traditional waste feedstocks.

Intense lobbying this year from the Spanish oil sector has culminated in the inclusion of a requirement for annual targets, presumably from 2022, for the integration in transport of “advanced biofuels and other renewable fuels of non-biological origin” in the final version of Spain’s climate change law.

That was approved in May 2021.

However, subsequently published strategic plans, which set the priorities for the implementation of Spain’s EU-funded €70 billion recovery and resilience package, reserve public sector support and investment for the electrification of mobility and the use of renewable gases including green hydrogen.

Around €1.5 billion has in recent months been earmarked for hydrogen-powered buses and cleaning vehicles and €400 million for hydrogen and biomethane for HGV.

A further €181 million, meanwhile, will be made available for hydrogen and biogas in the aviation, rail and shipping sectors.

Germán Renau, energy spokesman in the Spanish parliament for the governing socialist party (PSOE) told EnergyCensus that “vehicle manufacturers themselves are moving out of combustion engine manufacturing, so biofuels are only going to have a transitional role”.

Regulatory developments

The transposition of REDII, scheduled to be approved in the first quarter of 2022 has disappointed green groups and some policymakers, which say that Spain’s enactment of the directive has neglected the option to phase out soybean-based biofuels blamed for land use change in Latin America.

“We should be following the example set by some EU member states in bringing forward from 2030 the elimination of food crop feedstocks”, said Pablo Muñoz, biofuels spokesman for NGO Ecologistas en Acción.

According to Juantxo López de Uralde, parliamentarian for Unidas Podemos which forms part of Spain’s coalition government, “Podemos will push for the extension of the restriction to include soya given the commitments made with regard to the protection of forests at COP26”.

There are additional curbs on palm oil based feedstock products, however.

From 1 January, 2022, palm oil and fatty acid distillate for biodiesel cannot exceed 3.1% in energy content in transport fuels under a ministerial order issued in September 2021.

Meanwhile, a law is currently going through parliament to require suppliers to cut greenhouse emissions from road fuels by 6% in 2022 in a partial and late transposition on the 2009 fuel quality directive.

The obligation for biofuels for 2022 has been set at 10%, up from 9.5% in 2021.

Other feedstocks

Alternative feedstocks are likely to maintain their current historically high prices, in Spain, with UCO fetching over €1,000 per tonne, Fastmarkets EnergyCensus understands.

“Advanced biofuel feedstocks have shot up in price so POME, brown grease or UCO are not economically viable for distillers like us,” Miquel Vila, director of Ecomotion Biodiesel Spain, told Fastmarkets EnergyCensus.

“The restriction on palm oil will have a further impact on the price of all Annex IX feedstocks,” Vila added.

Yet Carlos López, secretary general of the UCO management industry grouping Geregras, asserted that with double-counting, biodiesel producers are able to make money from UCO.

Regarding factors that could impact prices in the first half of the year, Lopez highlighted the potential for further waves of Covid-19 infections to impact fuel demand, as well as volatility in the price of Brent crude, which has a knock-on impact on biofuels prices.

Lopez added that an improvement in collection rates for domestically-produced UCO is not anticipated “because actors in the sector are not yet prepared to collaborate in developing a national system and in combatting high levels of black-market operation.”

Anagrasa, a trade body representing the Spanish animal fats processing industry, warned in December that rocketing natural gas prices are pushing firms into closure.

That would potentially threaten the supply of animal fat and grease to the biofuels sector in the short and medium term.

This article was originally published to Fastmarkets EnergyCensus on Thursday December 30, 2021.

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