“When the situation with diesel will stabilise?”, a question that was probably asked by every Ukrainian in the last few weeks. However, while economists and politicians are feeding us forecasts, the cost of fuel at gas stations has crossed the mark of 55 UAH / litre. But not only the price is scary: to get the so much desirable 10 litres of fuel in one hand you need to stand in line for miles. The situation affects not only ordinary motorists, but also strategic industries for Ukraine. What should farmers do? The season of field work is just beginning, and all agricultural machinery runs exclusively on diesel fuel. Some farmers are trying to contract the supply of fuel for the harvest season, some have managed to buy before the shortages, and some are ordering diesel from abroad. However, everyone hopes that there will soon be a panacea that will help with the deficit and “cure” fuel prices.
Is it possible to find an alternative to diesel fuel?
One of the options we will consider is biodiesel. It seemed that there were plenty of raw materials for its production in the country. But for some reason, instead of producing value-added products, at least for our own needs, we export ordinary sunflower seeds or rapeseed. We talked to Anton Zorkin, Head of the Energy Sector of BRDO.
What are the prospects for biodiesel production in Ukraine?
Ukraine has all the necessary conditions for the production of liquid biofuels: developed crop production, animal husbandry, processing industry, the availability of significant land resources, as well as technical and professional potential. If we count all technical oilseeds that Ukraine exports, and which are used in other countries for biodiesel production, it can be about 2 million tons of fuel per year. At the same time, there is enough potential to replace all traditional diesels on the market.
According to our estimates, rapeseed, soybeans, and technical oil exported to Ukraine are equivalent to 1.6-1.9 tons of biodiesel. This amount could replace up to 30% of imported diesel, another 10% of imported gasoline, can also be replaced by adding bioethanol of domestic production.
About 1.2-1.9% of the volume of wheat and corn exported in the 2017-2018 marketing year could be used as raw material for bioethanol production. At the same time its share in gasoline can make up to 7-8%, and such mix is absolutely safe for modern engines without need of their modernization.
The possibilities are certainly impressive, but what is the real figure for biofuel production now? From what cultures can it be produced?
Currently, almost all biodiesel production is carried out from agricultural products. Raw materials for it can be soybeans, sunflowers, rapeseed, residues of oil production, livestock waste and more. Another component of this eco-fuel is alcohol, which can be made from sugar- and starch-containing plants (cereals, sugar beets, sugar production waste, etc.).
Of course, food alcohol can be used to produce such fuel. However, its difference from bioethanol is chemical purity, human safety and consumer properties. Bioethanol production technology is simpler and cheaper than food alcohol production technology.
Currently, the fuel situation is critical. If we throw all the remnants of agricultural products into biodiesel production, how much can we get?
14 large biodiesel plants with a total capacity of 300,000 tons / year have been built in Ukraine. However, these plants are actually idle. There are still about 50 smaller enterprises that can produce up to 25,000 tons of biodiesel annually. The total production capacity of bioethanol in Ukraine is currently 200,000 tons per year. However, according to the State Statistics Service in 2019, Ukraine produced only 70 thousand tons of liquid biofuels. That is, we see that the real figure is 3 times less than possible.
A few more numbers. Potentially, Ukraine is able to replace about 5% of traditional diesel. Instead, the share of RES in the transport sector in 2020 was 2.5%. And these are opportunities only at those capacities that we have without state incentives.
The state should have been interested in the production of alternative fuels. According to BRDO, clear and transparent legislation is needed for the development of the biofuel industry. What steps have already been taken in the country to develop this industry?
The Law “On Amendments to Certain Laws of Ukraine on the Production and Use of Motor Fuels Containing Biocomponents”, adopted in 2013, provided for a “gradual increase in the regulatory share of production and use of biofuels and blended motor fuels”. Thus, the development of the industry was to begin even then.
However, the above-mentioned act was repealed on the basis of the adoption of the Law “On Amendments to Certain Legislative Acts of Ukraine on Simplification of Conditions for Doing Business (Deregulation)” in 2015. “For the development of the biofuel market and its participants, as well as laid the groundwork for increasing Ukraine’s dependence on imported fuel, and as a consequence – rising fuel prices.
Therefore, our organization, in its study “Regulation of production of liquid motor biofuels” stressed the need to implement new legislation to stimulate an increase in market share of biofuels. This study formed the basis of the bill, which was proposed to MPs last year, but still remains irrelevant for MPs.
In particular, the draft law provided for:
- establishment for business entities that sell motor fuel, the mandatory share of liquid biofuels in the total sales, as well as liability in case of non-compliance;
- establishing a schedule for increasing the share of biofuels in total liquid motor fuel;
- introduction of the application of sustainability criteria for motor biofuels (mandatory requirement of EU legislation);
- introduction of control of the content of liquid biofuels (biocomponents) in motor fuel.
In addition to changing the legislation, it would be good to introduce stimulating financial and economic instruments. Such as:
- abolition or significant reduction of excise tax rates on biodiesel and its mixtures and gasoline containing bioethanol;
- elimination of the need to file a tax bill for bioethanol producers;
- formation of guaranteed demand for motor biofuels (for example, setting market quotas and a schedule for increasing the share of biofuels in total fuel), or providing state support (subsidies) to businesses operating in the field.
Do you know any cases in Ukraine when a farmer produces biodiesel from his own products? Are most of them engaged in special productions?
Biodiesel is often produced by individual farms and used for their own needs. That is, yes, there are such producers in Ukraine. It is quite possible for farmers to produce biodiesel on their own, and this is confirmed by practice. As for expediency, I believe that both farm and industrial production are normal and profitable. In this case, for example, the cost of equipment depends on the capacity of production, raw materials and starts from tens of thousands of hryvnia.
What is the cost of biodiesel production? Will it be profitable under the current conditions?
The cost of biofuels depends very much on raw materials and the stability of their income, production volumes, electricity prices, logistics, taxation of petroleum products and more. If the norm is adopted at the legislative level regarding the mandatory share of biofuels in the total volume of liquid motor fuels, there will be a stable demand for such fuels. It will be economically feasible to produce biofuels, not only as a reserve for your farm, but also for sale on the market.
High oil prices, increased fuel requirements and reduced CO2 emissions, in general, make the cost of biofuel production comparable to the cost of traditional fuel production, as evidenced by the growth of world production. In addition, the issue of energy security in terms of fuel supply to the market is currently coming to the fore for Ukraine. But biofuels are always a matter of time.
Published in kurkul.com
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