Status Report Biodiesel

Biodiesel Production and Marketing in Germany 2005

Status Report Biodiesel Production and Marketing in Germany 2005

Dieter Bockey, Wienke von Schenck Union zur Frderung von Oel- und Proteinpflanzen e. V. (Union for the Promotion of Oil and Protein Plants)

The biodiesel market in Germany is booming but for how much longer?
In the last ten years production and consumption of biodiesel have increased several-fold. With the introduction of the statutory tax exemption until the end of 2009, the biodiesel market experienced a fresh surge of investment at the start of 2004, which should see the production capacity for 2005 rise

Biological growth
Production capacity of biodiesel in Germany 1998 2006 in tonnes
2 000 000

nes of biodiesel were produced in Germany, a good 45% more than in 2003. In parallel to developing the range of products offered, UFOPs intensive sales promotion activities and marketing work in particular have increased acceptance among the population, among fleet operators and, above all, with politicians, and contributed significantly to an increase in sales. As a result of the amended agricultural diesel ruling, UFOP launched an information campaign in January about the use of biodiesel or rapeseed oil fuel in agriculture. The market potential (B 100) is estimated at around 300,000 tonnes excluding forestry. In the last 10 years, there has been an almost fifty-fold increase in biodiesel sales. In 2004, an estimated 476 million litres were sold at German filling stations, 32 % more than in the previous year. This is enough to satisfy the annual requirement of approximately 300,000 cars. Biodiesel is available at 1,900 filling stations across Germany, which means that it is in some regions no longer an inconvenience to use biodiesel as a pure fuel.

15

00

000

11

11 00 000

00

000

730 000

460 000 200 000

Rape flower

50 000

140 000

1998

1999

2000

2001

2002

2003

2004

2005

2006
Source: UFOP

Biodieselsales at filling stations 2001 2004

to around 1.5 million tonnes. A further 500,000 tonnes are planned for 2006. Already in 2004, around 1.18 million ton-

The green tide is rolling in

Biodiesel sales in Germany, 1991 2005 in tonnes

476,4 mill. liter

1 500 000
(estimated)

360,2 mill. liter

10

00

000

189,6 mill. liter 163,2 mill. liter

700 450 340 100 100 130 0 00 000 000 60 45 25 10 000 000 200 5 000 000 000 000 550 000 000

000

2001

2002

2003

2004
Source: AGQM

Editor:

UNION ZUR FRDERUNG VON OEL- UND PROTEINPFLANZEN E. V. Reinhardtstrae 18 D-10117 Berlin info@ufop.de www.ufop.de

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: UFOP

But many drivers do not know that they are using biodiesel. With the petroleum tax-exempt and non-labelled addition of up to 5 % biodiesel (B5), petroleum companies such as Shell, ARAL/BP, OMV, Total and Orlen dilute their diesel and this is found in almost every diesel pump. Orlen even produces

biodiesel in its own plant in Poland (capacity of 100,000 tonnes).

European biodiesel production capacity 2005/06

total production capacity: 3 700 000 t/a (average yield/ha: 1,4 t Biodiesel > 2,6 Mill. ha)

1 800 1 400 1 200 1 000 800 600 400 200 0

ny ma
production capacity in 1 000 tonnes/year

1 600

2 000

2 000

420

250 140
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100 70

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Source: UFOP

is now also being discussed intensively in agriculture. UFOP and the Deutscher Bauernverband (German Farmers Association) recommend purchasing biodiesel exclusively from the members of the consortium Arbeitsgemeinschaft Qualittsmanagement Biodiesel e.V. (Work Group for Qualityassurance www.agqm-biodiesel.de). In the event of damage, traceability is the necessary basis for settling complaints. UFOP has published appropriate recommendations on its website (www.ufop.de). If a fuel switch is being considered, UFOP provides some helpful planning tips. This allows farmers to work out approximately the cost effectiveness of converting to biodiesel by entering their specific fuel consumption data into the cost calculator at www.ufop.de. In addition, UFOP provides information about the status of approvals issued by the tractor manufacturers for the use of biodiesel as well as about the development status of rapeseed oil as fuel.

ve catalytic reduction) catalytic converter easily meets the current EURO 5 exhaust emission standards, as well as those that will be effective from 2010. Hopefully, other commercial vehicle manufacturers such as MAN or IVECO will follow suit as a result of customer pressure. As far as agriculture is concerned, therefore, it is obvious which vehicle manufacturers and types should be favoured. A corresponding procurement initiative would set the trend.

sel costing strictly on the diesel prices. In contrast, the biodiesel producers costing is largely subject to agricultural market factors. At present, therefore, there is enormous competitive pressure which, despite the attractive price difference, is being intensified by slow demand and the continued expansion and creation of biodiesel plants. At the wholesale level, the top prices have already been reached. Since the beginning of the year, the prices have been continuously falling. Biodiesel supply exceeded demand fairly

600

Attractive biodiesel prices

Costing a conversion would be a worthwhile exercise. Cost management practically dictates a switch, since, with a current price difference of 18 cents per litre between diesel and biodiesel, the latter is a real cost cutter. For the price of diesel at the tank farms of the fuel suppliers was 83.08 cents/litre incl. petroleum tax at the end of April, compared with 65.78 cents/litre for biodiesel. In recent weeks, the price difference between the two fuels sometimes grew to almost 19 cents/litres, the highest figure yet. However, prior to any conversion, one should check where the fuel is being offered and by whom. For, depending on the situation, it is possible to enter into an agreement with the biodieclearly for the first time, leading to a noticeable drop in ex store/refinery prices. A slight price recovery was hoped for with increasing temperatures and therefore greater sales; however, so far, this only seems to be a short-term development, for the supply of biodiesel continues to grow. On the one hand more and more biodiesel is coming onto the market from abroad, while, on the other, the biodiesel quantities in Germany will increase significantly as a result of the announced capacity expansion. Already, at a regional level, the pre-contract prices are coming under great pressure owing to limited demand. At the filling stations, however, biodiesel prices have risen slightly, but steadily, over the last few weeks. With regard to pricing, there are two variants at the filling stations. Whereas some filling stations offer biodiesel at a fixed price for several

Using filling station sales as a basis, an addition of 5% results in a biodiesel requirement of approx. 1.0 million tonnes. According to UFOPs estimates, around 500,000 tonnes of biodiesel will be used for blending in 2005. So there is still market potential here. It should be remembered though that the global petroleum companies can also purchase biodiesel anytime from other regions of Europe. EU-wide biodiesel capacity will rise to approx. 3.7 million tonnes. The Minerallwirtschaftsverband (Petroleum Industry Association) and UFOP are not in favour of the legally prescribed blending requirement, as applied in Austria for example. Forced blending would call into question the retention of the petroleum tax relief and therefore the marketing prospects of biodiesel as a pure fuel (B 100). The marketing of pure fuel will facilitate bigger margins and will have a significant bearing on the sales results and therefore the viability of the biodiesel industry in future. After all at least 50% of biodiesel production not counting imports has to be sold through filling stations and fleet operators.

Approvals ensure sales

A breakdown of biodiesel sales as pure fuel by private or commercial user groups is hardly possible because many of the 1,900 biodiesel filling stations also have fuelling facilities for heavy duty vehicles (hvd). The proportion of thois kind of vehicle fleets will grow significantly in importance. One reason for this is that the Volkswagen Group (VW, Audi, SEAT, Skoda) has stopped issuing serial approval since the introduction of the EURO 4 engines and self-regenerating particle filters as a result, the potential private car customer base will gradually diminish over the next few years. Declining turnover at the filling stations will lead to a reduction in the number of filling stations. Removing biodiesel from the range of products sold at filling stations is best avoided because of problems with the official quality control. Inspections by AGQM at public filling stations have already led to the cancellation of brand licence agreements in connection with the recommendation to remove biodiesel from the product range. Marketing of B 100 will concentrate on the transport industry, with competition for these customers increasing. Fortunately, only DaimlerChrysler has issued an approval for EURO 4 and EURO 5 hvd-engines in commercial vehicles. The SCR (selecti-

Biodiesel in agriculture?
It is not yet foreseeable whether biodiesel will be widely used in agriculture. The subject of biodiesel quality and extraction

sel manufacturer himself or at least with the wholesale trade. At this level, the prices are very different compared with the filling stations. The filling station operators base their biodie-

months, sometimes resulting in big differences with the diesel price which changes almost daily, others vary their biodiesel prices in line with the diesel price trend, so that the difference stays the same. Very often the difference at these filling stations is 10 cents/litre. The average biodiesel price for the whole of Germany is, therefore, relatively static and has recently only reacted very belatedly to the sharply rising diesel price. But then, the downward movements over the period were hardly matched either. Thus since the beginning of the year the price difference between diesel and biodiesel at the pumps has grown from 5 cents/litre to 15.7 cents/litre based on the German average. At individual filling stations this means a price difference of up to 17 cents/litre.

Supply slows price growth

The rapeseed prices, too, are reflecting the current surplus supply of raw materials. As a result of the record harvests worldwide, the final stocks are increasing to record levels while prices are falling. Until the next harvest, our rapeseed prices will be determined by world market developments as well as by the weather conditions and the expected quantities from the 2005 rapeseed harvest. In spite of the enlarged area here in Germany as well in other EU producing regions, it is very unlikely that there will be a repeat of the 2004 EU record harvest of 15.2 million tonnes. In Germany, we have 1.314 million hectares of winter rapeseed and an estimated 20,000 hectares of summer rapesame period the year before. The extensive supply of rapeseed oil is currently exerting a lot of pressure on prices, especially since the momentum from the fuel and lubricant sector, which it was hoped would relieve the pressure on the market, has so far failed to materialise, although already in the first half of 2004/05, over 60% of the rapeseed oil flowed into the technical sphere. In the previous fiscal year, it had still only been about half. As a result of high levels of rapeseed oil production and weak demand, the rapeseed oil stocks in the Rotterdam tank farms tripled to over 70,000 tonnes within a few months. The prices for raw rapeseed oil fob oil mill were around 480 EUR/tonne in mid-April, that is 50 EUR/tonne less than at the beginning of the year and 95 EUR/tonne less than a year ago. seed, which means that the total rapeseed area is just under 4% greater than that of the previous year. With a theoretical average yield of 33.6 dt/ha, the total expected yield for Germany is around 4.4 million tonnes of rapeseed. That would be around 877,000 tonnes less than in the previous year, but still significantly more than the five-year average. By the end of March, crop contracts for 316,999 hectares of rapeseed on uncultivated agricultural land and 121,211 hectares of rapeseed as an energy crop had been submitted to the BLE (Federal Agriculture and Nutrition Agency). The areas in question have thus increased by a good 50%. At the end of April, pre-contract prices for the coming harvest were 174-200 EUR/tonne (previous year: 225257 EUR/tonne) for food rapeseed and 160-185 EUR/tonne (previous year: around 235 EUR/tonne) for non-food rapeseed.

Invest in biodiesel plants?

The EU Commissions action plan for the promotion of biofuels sets out a medium-term increase in consumption and therefore growing EU-wide demand on a more or less voluntary basis (indicative targets). The Directive on the promotion and use of biofuels and other renewable fuels in the transport sector requires each Member State to ensure that biofuel accounts for 2% of total fuel consumption (measured by energy content) by the end of 2005 and at least 5.75% by the end of 2010. Germany heads the league table for biofuel. With a capacity of 1.5 million tonnes in 2005 and 2 million tonnes in 2006, the target quantity relating to the diesel market (total sales of approx. 30 million tonnes) will be achieved 4 years ahead of schedule. It should also be remembered and UFOP has repeatedly referred to this that the mineral oil tax relief will, according to the mineral oil tax law, be checked annually by the Federal Government for any overcompensation and the result will be submitted to the Bundestag (Lower House of German Parliament) in a report on the biofuel sector. The government comes in its report to the result, that there is an overcompensation of 5 Cent/L for B 100 and 10 Cent/l for biodiesel used as B5. It is up to now not clear, whether the government or the parliament will make a proposal to tax biodiesel with 5 or 10 Cent/l this or next year. Against the background of the above-mentioned developments vis--vis approvals and the anticipated limited sales in the petroleum industry, any further decisions on investing in the construction of new biodiesel plants should be postponed until after the report to the Bundestag has been published and approvals by other commercial vehicle manufacturers have been issued. The bankruptcy of the Schwarzheide biodiesel plant in the spring of 2004 should be a warning to all of us. It is not least for this reason that the state of Brandenburg decided to drop biodiesel plants from its list of investments that qualify for support. The price trend confirms how tight and severe competition in the biodiesel market currently is and will remain for the foreseeable future.

Marked increase in rapeseed oil processing

The sales boom in the fuel sector has so far also had a positive effect on demand for rapeseed. The extent to which rapeseed has become a more attractive raw material for the oil mills is shown particularly clearly by the processing figures. Since 1999/2000 more than 4 million tonnes of rapeseed have been processed in Germany annually, and this figure is rising; the latest figure even topped 4.5 million tonnes. In contrast, soya processing is fluctuating around 3.8 million tonnes a year, with a recent downward trend to 3.5 million tonnes. In the first seven months of the current fiscal year, 3.34 (previous year: 2.91) million tonnes of rapeseed were processed in German oil mills, a good 12% up on the same period last year; two-thirds of this was home-produced seed. 2.03 (2.25) million tonnes of soya beans were processed into oil and meal. However, the strong growth in rapeseed processing is ensuring continuously high levels of rapeseed oil production. After all, according to the data of the BLE (Federal Agriculture and Nutrition Agency), German oil mills produced around 1.33 million tonnes of rapeseed oil in the period July/January 2004/05, a remarkable 18% more than in the

Herausgeber:

UNION ZUR FRDERUNG VON OEL- UND PROTEINPFLANZEN E. V. Reinhardtstrae 18 10117 Berlin info@ufop.de www.ufop.de
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Stand: 06/05