Published September 29, 2021 | 2 min watch
Key Points
- The impact of regulatory support and differing mechanisms in North America & Europe
- Differing feedstocks and likely availability over time.
- Competitiveness versus traditional oil refining
- The economics of greenfield vs brownfield projects
What role can renewable fuels play to help decarbonise industries such as aviation and reach emissions targets? To answer this question, RBC Capital Markets invited a range of experts including Gene Gebolys, Chief Executive Officer at World Energy, Umberto Carrara, Head of International Business Development and Licensing at Eni, and Paul Bateson, Chief Operating Officer at Greenergy Group.
Three Key Takeaways:
Growing momentum for the renewable fuels industry
2020 was a tipping point, the “perfect storm” with announcements about renewable diesels on both sides of the Atlantic, notes World Energy’s Gene Gebolys. “Ethanol and biodiesels have been around a long time but now it is about capital flows and following the money.” With independent refineries in the States and elsewhere having a challenging year due to the COVID-19 crisis – and with ESG pressures mounting, this could trigger new types of projects in the States and around the world, he thinks. Eni’s Umberto Carrara is also seeing momentum. “This crisis is an opportunity for us to implement even faster what we have set out in our strategy and using the tools we have developed ourselves.” Paul Bateson sees three major themes in UK and Europe in the renewable fuel space: increasing mandates, the introduction of sustainable aviation fuels (SAFs) and the progress of “development” or “advanced” fuels in the UK and EU.
Several success factors required
Eni built two biorefineries in Italy after developing the technology back in the early 2000s. If investing in R&D projects and technology was important, plant location was also key, Umberto Carrara remarks. “They were part of an existing industrial refining complex - to have maximum synergies with existing assets and help minimise capex. This also means we have immediate access to the final product market - it allows us to capture the entire value chain.” Another important component is the security of supply and the type of supply - having the flexibility to treat different feedstocks helps capture the best opportunities to optimise margins. Carrara also points out that the margins provided are crucial to attract newcomers to the market. They could be conventional refiners looking to restore their asset value in a market dominated by an excess of fossil fuel capacity; agricultural and industry players looking to extend their value chain and capture downstream their own products and entering the so-called ‘waste value’; or feedstock collectors. “There is an important risk as the supply and demand balance today is in a delicate phase to find a dynamic equilibrium.”
Traceability of the supply chain & new feedstock in focus
Paul Bateson highlights the importance of building reliable sustainability data in the sector. “Where does the fuel come from, how did it get there, how much water was pulled off to do it?” are questions which need to be answered. He thinks efforts to develop tools for sustainability tracking will increase and cites the example of a Greenergy Group joint initiative to use bio-ledgers based on blockchain. “We need to look at the logistics of being a global collector or aggregator. We have a global procurement team as feedstock has to be handled in all shapes and sizes.” To help large fossil fuel-reliant industries like the aviation sector use more renewables, Bateson reckons emerging feedstock such as carbon from flue gases, solid waste or food waste, algae etc. will need to be added to the mix. “Don’t forget ethanol as it still counts in some market and there are other ways to create ethanol than crops,” he adds. Finally, Gene Gebolys remarks that traditional refining operations may be increasingly tempted to produce renewable fuels and expects to see, over the next few years, a network of partnerships emerge between refineries and suppliers.
