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Low Oil Price Kills UK Biofuel Plant

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The American Interest

Low oil prices and doubt over future EU policy have forced a massive UK biofuel plant to close its doors.

The FT reports:

The decision is the latest temporary shutdown at Ensus, which has closed in the past because of faltering European demand for bioethanol. […]

“I think the most important factor is the EU decision,” said Marten Keil, chief operating officer of Mannheim-based CropEnergies, which bought Ensus in 2013 and is itself a subsidiary of German sugar producer, Südzucker. Mr Keil said the industry had been waiting for years to see how Brussels would limit the amount of food crop-based biofuels that can count towards the bloc’s aim of deriving at least 10 per cent of its transport fuels from renewable sources by 2020. […]

A sharp fall in biofuel prices, which has mirrored the decline in oil prices, has added to the industry’s woes…The owners of another large UK biofuels company, Vivergo Fuels, said falling prices and a declining euro were also behind their decision this month to take a £98m impairment charge on their investment.

This is hardly the sign of a healthy industry. But for biofuel producers, much like their solar or wind producing counterparts, it’s live by the subsidy, die by the subsidy. Uncertainty over continued government support—along with slack demand for the product they’re selling—has shuttered this UK plant, and the declining price of oil has depressed biofuel prices as well, cutting into margins and making an already shaky venture downright unprofitable.

What’s happening in the UK is to a certain extent also happening here in the U.S. The unfortunate truth is that biofuels fail on virtually every metric you measure them by: they’re not green (at least when produced from corn, as the vast majority of America’s supply are); they aren’t cost-competitive; their use in our nation’s fuel mix is already at an upper limit, called a blend wall, above which they start to harm older engines; they drive up food prices, starving the world’s poor.

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