BIOFUEL PRODUCTION POTENTIAL OF EU- CANDIDATE COUNTRIES · Joint Research Centre (JRC) of the...

BIOFUEL PRODUCTION POTENTIAL OF EU-

CANDIDATE COUNTRIES

Final Report

September 2003

Report EUR 20835 EN

About the IPTS

The Institute for Prospective Technological Studies (IPTS) is one of the eight institutes of the Joint Research Centre (JRC) of the European Commission. It was established in Seville, Spain, in September 1994. The mission of the Institute is to provide techno-economic analysis support to the European decision-makers, by monitoring and analysing science and technology related developments, their cross-sectoral impact, their interrelationship in the socio-economic context and future policy implications, and to present this information in a timely and logical fashion.

Although particular emphasis is placed on key science and technology (S & T) fields, especially those that have a driving role and even the potential to reshape our society, important efforts are devoted to improving the understanding of the complex interactions between technology, economy and society. Indeed, the impact of technology on society and, conversely, the way technological development is driven by societal changes are highly relevant themes within the European decision-making context.

In order to implement this mission, the Institute develops appropriate contacts, awareness and skills for anticipating and following the agenda of the policy decision-makers. In addition to its own resources, the IPTS makes use of external advisory groups and operates a network of European institutes (ESTO) working in similar areas. These networking activities enable the IPTS to draw on a large pool of available expertise, while allowing a continuous process of external peer review of the in-house activities.

The interdisciplinary prospective approach developed by the Institute is intended to provide European decision-makers with a deeper understanding of the emerging S & T issues, and is fully complementary to the activities undertaken by other JRC institutes.

About the ESTO network

The European Science and Technology Observatory (ESTO) was formally constituted by the Institute for Prospective Technological Studies in February 1997 as a “technology watch” network. The ESTO network comprises 43 institutions with experience in the field of scientific and technological assessment at national level, representing the vast majority of European think-tanks.

ESTO members share responsibility for supplying the IPTS with high-quality, up-to-date scientific and technological information drawn from all over the world, facilitated by the network’s broad presence and wide range of contacts. Developments are examined from a socio-economic perspective, identifying breakthroughs and trends which may require action at a European level. Activities are targeted at policy-makers and decision-makers within the European S & T sector, in particular the Commission, but information is also available to a wider audience, such as the Member States, non-governmental organisations (NGOs) and industry.

Currently, ESTO is engaged in the following activities: • contributing to the monthly IPTS Report; • developing specific prospective projects intended to act as a trigger for in-depth studies; • building thematic networks allowing ESTO and the IPTS to provide rapid responses to

specific requests from European decision-makers; • fostering the continuous expansion of the ESTO network and the involvement of new

members in activities.

BIOFUEL PRODUCTION POTENTIAL OF EU-

CANDIDATE COUNTRIES

Final Report

Boyan Kavalov

Peder Jensen

Dimitris Papageorgiou

Carsten Schwensen

Jens Peter Olsson

September 2003

Report EUR 20835 EN

Biofuel production potential of EU-candidate countries Final Report

Research team

IPTS Dr. Boyan Kavalov

Dr. Peder Jensen

ESTO Network Atlantis Consulting S.A., Thessaloniki / Greece

Kvistgaard Consult ApS, Copenhagen / Denmark

Centre for Prospective Studies (CPS), Sofia / Bulgaria

Progress and Business Foundation (PBF), Krakow / Poland

Irish Productivity Centre (IPC), Dublin / Ireland

European Communities, 2003 The views expressed in this study do not necessarily reflect those of the European Commission. The European Commission retains copyright, but reproduction is authorised, except for commercial purposes, provided the source is acknowledged. Neither the European Commission, nor any person, acting on behalf of the European Commission, is responsible for the use, which might be made of the following information. Printed in Spain


PREFACE

The present study has been launched and performed as an integral part of the overall

research activity of IPTS in the field of alternative fuels for transport. This Final Report

presents the key findings and conclusions of the study. Detailed background data and

analyses for the study are given in a complementary Addendum to the Final Report, available

on the IPTS web-site (http://www.jrc.es/pages/f-publications.html).

This Final Report has been written by B. Kavalov and P. Jensen – IPTS. Input to the

preparation of the Final Report has been given by the project’s Operating Agent D.

Papageorgiou (Atlantis Consulting S.A.), C. Schwensen and J.-P. Olsson (Kvistgaard Consult

ApS).


TABLE OF CONTENT

EXECUTIVE SUMMARY .........................................................................................................1 1. INTRODUCTION ..............................................................................................................3 2. PROJECT’S DESCRIPTION ............................................................................................5

2.1. GOAL OF THE STUDY..................................................................................................5 2.2. TASKS OF THE STUDY................................................................................................5 2.3. SCOPES OF THE STUDY .............................................................................................5

2.3.1. Geographical scope ................................................................................................5 2.3.2. Temporal scope ......................................................................................................5 2.3.3. Application field scope ............................................................................................6 2.3.4. Feedstock scope.....................................................................................................6 2.3.5. End-product scope..................................................................................................6 2.3.6. “Feedstock / End-products” co-relation scope.........................................................6

2.4. PRELIMINARY ASSUMPTIONS AND LIMITATIONS ...................................................7 3. QUANTITATIVE ANALYSIS ..........................................................................................10

3.1. KEY METHODOLOGICAL POINTS ............................................................................10 3.2. FINDINGS ...................................................................................................................11

3.2.1. Current breakdown of biofuel crops in CC.............................................................11 3.2.2. Absolute prospective biofuel production potential of CC .......................................12 3.2.3. Biofuel production potential of CC-10....................................................................13 3.2.4. Biofuel production potential of CC-12....................................................................15 3.2.5. Biofuel production potential of CC-13....................................................................17

4. COST ANALYSIS...........................................................................................................19 4.1. EXPLANATORY NOTES.............................................................................................19 4.2. PREVAILING COSTS OF BIOFUEL PRODUCTION IN CC.........................................20 4.3. NATIONAL PROJECTIONS ABOUT BIOFUEL PRODUCTION COSTS IN CC ..........20 4.4. FORECAST OF BIOFUEL PRODUCTION COSTS IN THE OTFP SCENARIO ...........21

4.4.1. Key methodological baselines...............................................................................21 4.4.2. Projections about biodiesel production costs.........................................................22 4.4.3. Projections about bioethanol production costs ......................................................23

4.5. COMPARISON OF BIODIESEL AND BIOETHANOL PRODUCTION COSTS ............24 5. CONCLUSIONS .............................................................................................................25 ANNEXES .............................................................................................................................26


List of used abbreviations

BD – Biodiesel

BE – Bioethanol

BF – Biofuel(s)

CC – Candidate Country(ies)

DG – Directorate-General of the European Commission

EC – European Commission

EU – European Union

EU-15 – Current 15 member states of the European Union

FD – Fossil Diesel

FF – Fossil Fuel(s)

FG – Fossil Gasoline

ha – Hectare

k – Thousand

l – litre

M – Million

MJ – Mega Joule

t – ton (1 ton = 1000 kg.)

PJ – Peta Joule

R&D – Research and Development

S&T – Science and Technology


1

EXECUTIVE SUMMARY

The EC suggests in its Communication from 20011 the use of liquid biofuels as a tool

to secure and diversify the energy supply, as well as to decrease the CO2 emissions from

road transport in the EU. Therefore, target shares for biofuel market penetration are proposed

for the 2005-2010 timeframe. It is, however, considered that the internal potential of the EU-

15 to reach the targets is insufficient under the prevailing regulatory framework.

CC differ from EU-15 by having lower transport energy consumption and lower

population densities. In addition, CC have larger reserves of idle land and labour at lower

cost. Therefore, it is sometimes assumed that CC have relatively large production potential for

biofuels. An exploitation of this potential would contribute towards reaching the proposed

biofuel targets within an enlarged EU.

The goal of this study is to assess the techno-economic potential of CC to contribute

to the automotive fuel supply in 2005-2010 of the enlarged EU via biofuel production. This

includes assessing present national forecasts, the technical potential under optimal conditions

and the costs associated with different levels of production.

The following key conclusions are drawn from the analysis in the study:

• Based on a summary of national forecasts, the potential contribution of CC to the

enlarged EU biofuel production is estimated to be up to around 1% substitution rate

simultaneously for fossil diesel and gasoline consumption as a maximum. This production

is sufficient to meet the internal biofuel targets of CC, but is not sufficient to cover their fair

shares2 of the overall enlarged EU biofuel supply.

• Based on optimal technically feasible estimates, the potential contribution of CC reaches

maximum substitution rates of around 2% of fossil diesel consumption (biodiesel) and

around 3% of gasoline consumption (bioethanol) simultaneously. In most cases this

production is sufficient to meet the CC fair shares in the enlarged EU biofuel supply, but

does not offer significant over-availability, above these fair shares. The key reason for this

observation is that the reserves of free land in CC appear to be quite limited, because the

land, which is standing idle, is doing so predominantly due to poor quality of soil for

agriculture cultivation purposes rather than for economic reasons. Therefore, CC should

be seen more as a positive but small complement to EU-15 biofuel production, rather than

as a large supplier of biofuels for enlarged EU.

• The bioethanol production potential appears larger than the biodiesel potential, due to a

higher biofuel yield per hectare and a larger potential to increase the sown area.

1 COM (2001) 547: Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions on alternative fuels for road transportation and on a set of measures to promote the use of biofuels 2 See section 2.4 for a definition of "fair shares".


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• The production costs of biofuels in CC appear to be similar to the biofuel production costs

in EU-15. This is primarily due to the fact that lower factor costs are balanced by lower

yields. External support to improve yields will bring costs to higher levels. Therefore, CC

do not constitute a large reserve of cheap biofuel supply.

• On energy content comparison basis, biodiesel production costs are generally lower than

bioethanol production costs.

• The final net production costs of biofuels are strongly influenced by the revenue from by-

products. This impact is more pronounced for biodiesel than for bioethanol, because the

value of by-products represents a larger share of gross production value and the market

liquidity of biodiesel by-products is more uncertain.

• Cultivation costs of biofuel crops constitute around 80% of final production cost of biofuels

in CC on average. Therefore, the main strategies to decrease the overall production costs

of biofuels are tied to improving cultivation and increasing yields per hectare.

The above conclusions are drawn based on the following key pre-assumptions and

limitations:

• The study is assessing liquid biofuels for automotive applications only. Other applications

of bioenergy, e.g. for electricity generation, heating purposes, etc., are not considered.

• The study investigates only the two most widespread biofuels, being currently in use for

automotive purposes – biodiesel and bioethanol.

• The study is looking at the agriculture-based production potential of biofuels only. Biofuel

production potentials, based on ligno-cellulose feedstock (wood, wood residues and

waste, fast growing threes and grasses, straw, etc.) and/or all kinds of industrial and

households’ waste – appropriate for biofuel processing, are not assessed.

• The study looks only at the most relevant crops for a European context: rapeseed (colza)

and sunflower (for biodiesel); wheat, sugar beet, maize and potatoes (for bioethanol).

• It is assumed that biodiesel is used as a fossil diesel replacement and that bioethanol is

used as a gasoline replacement. The biofuel target shares therefore are reinterpreted as

meaning equal targets for each fuel type.

• The techno-economic approach, used in the study when assessing the optimal technically

feasible potential, assumes that a biofuel market will exist, e.g. via obligatory minimum

requirements on biofuel content in all fuel. Thus, this part of the study is not constrained

by taxation, agricultural or other framework regulations affecting the area.

• It was possible to assess cost curves as a function of yields of different crops. Cost

curves, as a function of "needed production volumes", could not be assessed due to lack

of data.


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1. INTRODUCTION

The EC Green Paper “Towards a European strategy for the security of energy

supply”3 highlights the need to investigate alternatives for the energy supply of the EU. If no

measures are taken, imports as a share of the total energy consumption, currently at 50%,

are expected to reach 70% in the next 20 years. Enlargement will not reduce this import

dependency, as most of CC are also heavily dependent upon energy imports. The

dependence on imported oil-based products may even increase up to 90% by 2020, due to

the depletion of the EU’s own oil resources.

Transport is one of the main energy consuming sectors. As regards oil, transport is

responsible for about 67% of the final demand in the EU. In addition, it is almost entirely

dependent on oil-based products (98%). With the transport sector expected to grow at an

average rate of 2% per annum until 2010, it is evident that finding alternative energy sources

for transport represents a main challenge for the energy policy of the EU.

As it is stressed in the EC White Paper “European Transport Policy for 2010: time to

decide”4, most passenger and freight transport is road transport. In 1998, road freight

transport accounted for nearly half (44%) of all transported goods. Over the period 1998-

2010, freight transport is expected to grow by 38%, dominated by 50% increase in road

transport. In addition, more than two-thirds of passenger transport (79%) is going by road.

Passenger transport is expected to grow by 24% within 1998-2010, with a 21% rise in road

use. As a result, the promotion of alternatives to the conventional oil-based fossil automotive

fuels – gasoline and diesel – is a main energy issue in EU transport.

Out of numerous possible alternative fuel and engine technologies, three main

options would appear to have potential to reach considerable (up to and above the level of

5%) share of the total automotive fuel consumption by 20205. These alternatives to the

conventional oil-based fossil fuels are biofuels (in the short- and medium-term), natural gas

(in the medium-term) and Hydrogen (in the long-term). The indicative market shares of these

alternative fuels, as proposed by the EC, are shown in Table 1.

Table 1 Shares of alternative fuels compared to the total automotive fuel consumption in EU

Year Biofuels (%) Natural Gas (%) Hydrogen (%) Total (%) 2005 2 - - 2 2010 6 2 - 8 2015 (7) 5 2 14 2020 (8) 10 5 (23)

Source: COM (2001) 547

From a technical point of view, biofuels are considered as a promising short- and

medium-term alternative, because they require no or only little modifications of current fuel

3 COM (2000) 769 4 COM (2001) 370 5 COM (2001) 547


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and engine technologies.6 Thus, the promotion of the use of biofuels in road transport has

become a priority of the EU policies in the field of energy and transport. Target shares of sold

biofuels on year-by-year basis within 2005-2010, have been proposed7 (Table 2).

Table 2 Minimum amount of sold biofuels as a percentage of sold gasoline and diesel

Year Percentage Of which as a minimum in the form of blending, (%)

2005 2.00 - 2006 2.75 - 2007 3.50 - 2008 4.25 - 2009 5.00 1.00 2010 5.75 1.75

Source: 2001/0265 (COD)

Under the prevailing regulatory framework, the potential of EU-15 to increase the

production of biofuels is rather poor, due to a number of impeding factors: international

agreements, limiting agricultural production, such as the Blair-House Agreement; scarcity of

agricultural land, etc. On the other hand, there is an unknown potential for biofuel production

in CC, where transport energy consumption and population densities are lower. It is

sometimes suggested that the potential for large-scale production of biofuels in CC is much

higher than the present volume of biofuel production. The main assumed advantages of CC

are larger resource availability of land and labour at lower cost than in EU-15. Therefore, an

exploitation of this potential could contribute to reaching the proposed biofuel target shares

within an enlarged EU. In addition, the socio-economic impacts might also significantly

improve the overall effectiveness of the local biofuel production, improving its competitiveness

compared to conventional oil-based fossil fuels. In brief, it has been stated that:

“Creating an EU market for biofuels will also offer an opportunity for the Candidate

Countries. On average they have more agricultural land and less diesel and gasoline

consumption per capita than present EU Member States. Growing crops for biofuels

will facilitate the absorption of the agricultural sector of the new Member States in the

Common Agricultural Policy.” 8

In this context, the goal of the study is to make an attempt to investigate and verify

the above suggestion.

6 Detailed information and analysis about the techno-economic aspects of automotive application of biofuels is given in two IPTS publications, available on the IPTS web-site (www.jrc.es/pages/f-publications.html): “Techno-economic analysis of Biodiesel production in the EU: a short summary for decision-makers”, Report EUR 20279 and “Techno-economic analysis of Bioalcohol production in the EU: a short summary for decision-makers”, Report EUR 20280, 2002. 7 2001/0265 (COD): Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of biofuels for transport – included in COM (2001) 547. In the time between the performance of the study and the publication of this report, the biofuel directive has been adopted (Directive 30/2003/EC, May 2003). The final version of the Directive states biofuel targets 2% for 2005 and 5.75% for 2010 only, the intermediate biofuel targets being skipped. However, for the purposes of the study a linear growth between 2005 and 2010 is assumed, i.e. the intermediate steps are still considered. 8 COM (2001) 547, page 6.


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2. PROJECT’S DESCRIPTION

2.1. GOAL OF THE STUDY

The goal of the study is to assess the techno-economic potential of CC to contribute

to the automotive fuel supply in 2005-2010 of the enlarged EU via biofuel production. This

includes assessing present national forecasts, the technical potential under optimal conditions

and the costs associated with different levels of production.

2.2. TASKS OF THE STUDY

The tasks of the study are:

• Quantitative and cost analysis of the current production of biofuels in CC;

• Identification of strengths and weaknesses concerning the production of biofuels in CC;

• Assessment of the feasible potential for increasing the biofuel production in CC under

different pre-assumptions;

2.3. SCOPES OF THE STUDY

2.3.1. Geographical scope

The geographical scope of the survey covers all 13 CC: Bulgaria (BG), Cyprus (CY),

Czech Republic (CZ), Estonia (EE), Hungary (HU), Latvia (LV), Lithuania (LT), Malta (MT),

Poland (PL), Romania (RO), Slovak Republic (SK), Slovenia (SL) and Turkey (TK), assessed

to the extent of data and information availability. Depending on the expected different

cohesion time, the assessment of the 13 CC is divided into three sub-scopes:

• CC-10 (Newly Accessed Countries): Cyprus, Czech Republic, Estonia, Hungary, Latvia,

Lithuania, Malta, Poland, Slovak Republic and Slovenia;

• CC-12: CC-10 plus Bulgaria and Romania;

• CC-13: CC-12 plus Turkey;

2.3.2. Temporal scope

The time frame of the study is 2005-2010, on year-by-year basis. The study’s time

horizon is not extended beyond 2010, due to the high level of uncertainty and variation in the

quantitative and cost projections.


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2.3.3. Application field scope

The study is assessing liquid biofuels for automotive application only. Other

application fields of bioenergy, e.g. for electricity generation, heating purposes, etc., are not

subject of assessment.

2.3.4. Feedstock scope

The study is looking at the agriculture-based production potential of biofuels only.

Taking into account the specifics of the European agriculture sector (climate, typical crops,

etc.), the study investigates rapeseed, sunflower, wheat, sugar beet, maize and potatoes as

the most relevant crops to process into biofuels. Biofuel production, based on ligno-cellulose

material (wood, wood residues and waste, fast growing threes and grasses, straw, etc.)

and/or all kinds of industrial and households waste – appropriate for biofuel processing, is not

assessed.

2.3.5. End-product scope

The study investigates only the two most wide spread biofuels, being currently in use

– biodiesel and bioethanol. Pure plant oil, bio-ETBE (bio-EthylTetrioButylEther), biomethanol,

biogas and bio-DME (bio-DiMethylEther) are not included in the study, for the following

reasons:

• Pure plant oil has got poor market perspectives for large-scale application, because its

use requires engine modifications;9

• BioETBE is produced from bioethanol (included in the study) and isobutylene, the later

being a product of oil refining. BioETBE is used as an Oxygenate additive to gasoline and

is considered in the biofuels directive as a partial biofuel (based on the share of

bioethanol to isobutylene). The bioETBE availability depends on the availability of

isobutylene and bioethanol, and as such the evaluation of production potential is

constrained similar to bioethanol.

• Biomethanol, biogas and bioDME are produced primarily from ligno-cellulose biomass

and/or biodegradable waste, which raw materials are not subject of assessment in the

present study.

2.3.6. “Feedstock / End-products” co-relation scope

The assessment covers biodiesel produced from rapeseed and sunflower oil. For

bioethanol the assessment covers production from wheat, sugar beet, maize and potatoes.

9 For a more complete discussion on pure plant oil as an automotive fuel see IPTS Report Vol. 74 May 2003.


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2.4. PRELIMINARY ASSUMPTIONS AND LIMITATIONS

The following key preliminary assumptions and limitations are considered during the

analysis:

• The study is following a strict techno-economic approach when asking the question of

what the production potential is. The existing policies on fuel taxation, agricultural

subsidies, etc. are therefore not seen as limitations. Exploiting the full potential may entail

changing some policies. The study does not go on to investigate the broader impact of

such changes and should therefore not be seen as blindly advocating changed policies.

• It is assumed that biodiesel is used as a fossil diesel replacement and that bioethanol is

used as a gasoline replacement. The option with the so-called “Oxydiesel” – fossil diesel

with 10-15% ethanol blend – is excluded from the analysis. The reason is that at present

the application of Oxydiesel is at an early experimental stage only.

• COM (2001) 547 looks at the total energy quantity of sold bio- and fossil fuels, but does

not make a distinction between gasoline and diesel consumption (respectively – between

the required bioethanol and biodiesel replacement quantities). The calculations and

scenarios in this study are made on the basis of such a distinction. The reason is that the

different properties of fuels assessed (energy content, type of internal combustion engine

used, etc.), makes it rather difficult to compare simultaneously all of them, e.g. biodiesel

with gasoline. Thus, the biofuel target shares are reinterpreted as meaning equal targets

for each fuel type. The whole assumed “production-substitution” chain of biofuels is

summarised in Figure 1.

Figure 1 Assumed “production-substitution” chain of liquid automotive fuels

• The comparisons “biofuel / fossil fuel share”, all in energy content measurement, are done

based on the fuel properties, given in Table 3.

Fossil diesel FOSSIL FUELS

Biodiesel BIOFUELS Bioethanol

Fossil gasoline

Rapeseed Sunflower Wheat Sugar beet Maize Potatoes


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Table 3 Properties of fuels, used for calculating purposes

Fuel Specific gravity (kg/1000 l.)

Energy Content (MJ/l)10

Replacement ratio11

Bioethanol 79812 21.2 1.472 (BE/FG) Gasoline 74513 31.2 0.679 (FG/BE) Biodiesel 88014 32.8 1.088 (BD/FD) Fossil diesel 837.5 35.7 0.919 (FD/BD)

• Three types of prospective comparisons “biofuel / fossil fuel” shares by sets of CC (CC-

10, CC-12 and CC-13) and respective enlarged EU (EU-25, EU-27 and EU-28) are made:

- The first compares the CC biofuel potential with the biofuel target shares (Table 2) for

the corresponding CC, showing to what extent CC could cover their internal biofuel

targets.

- The second compares the CC biofuel potential with the biofuel target shares (Table 2)

for the corresponding enlarged EU, giving the absolute contribution of CC to the

enlarged EU biofuel supply.

- The third is based on so-called “fair shares” of CC in the enlarged EU biofuel supply,

introduced and applied specifically for the purposes of the study. The core of the “fair

shares” approach is that the volume of the potential biofuel production depends

primarily on the availability of agricultural land. The approach assumes proportionality

between the biofuel contribution of a given region in the EU and that regions share of

agricultural land in proportion to the overall EU agricultural land. Thus a region, which

is home to 10% of EU agricultural land, should produce 10% of the biofuels needed to

meet the target. The Utilised Agricultural Area15 (UAA) is used as a measurement unit

for agricultural land in the analysis. The biofuel “fair shares” by CC groups are given

in Table 4.16

Table 4 Biofuel “fair shares” of CC in the overall biofuel target shares of enlarged EU, as a function of the UAA availability (in %)

Scopes “Fair share” Years Coefficient 2005 2006 2007 2008 2009 2010

EU target shares 1.000 2.00 2.75 3.50 4.25 5.00 5.75CC-10 within EU-25 0.223 0.45 0.61 0.78 0.95 1.12 1.28CC-12 within EU-27 0.307 0.61 0.84 1.07 1.30 1.54 1.77CC-13 within EU-28 0.422 0.84 1.16 1.48 1.79 2.11 2.43

10 Source: “Automotive Fuels for the Future – The Search for Alternatives”, International Energy Agency (IEA), Paris / France, 1999, page 20. 11 The fuel consumption replacement ratio on energy content comparison basis represents the volume of fuel, which is needed to replace 1 litre of another fuel. 12 Source: REPSOL-YPF. 13 Gasoline and fossil diesel densities represent average figures from the corresponding rates of the Word-Wide Fuel Charter. 14 Source: PSA Peugeot-Citroen 15 According to EUROSTAT the Utilised Agricultural Area generally comprises all lands, appropriate for cultivation purposes: arable land, permanent grassland, permanent crops, crops under glass and kitchen gardens. 16 The data and calculations of the UAA in CC by scopes are presented in the complementary Addendum to the Final Report.


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• The preparation of all 13 country reports (one per candidate country) – data & information

collection, analysis and projections – follows a standardised format, agreed upon amongst

project partners.

• The statistical data gathering and retrospective analysis (agricultural balances by crops,

fossil fuel consumption, etc.) covers the period 1996-2000, 2001 being covered subject to

data availability.

• The retrospective data about the fossil fuel consumption by type (gasoline and diesel) in

road transport in EU-15 are taken from the database of ENERDATA S.A., France

(www.enerdata.fr).

• The retrospective data about the fossil fuel consumption by type (gasoline and diesel) in

road transport of CC have been collected by the project partners on a country-by-country

basis. In addition, for comparability and cross checking reasons, a parallel comparison

with the ENERDATA database has been performed. The identified differences have fallen

within reasonable and acceptable variation ranges from the point of view of the project

tasks.

• The projections about the fossil fuel consumption within the period 2005-2010 in CC are

based on the local forecasts on a country-by-country basis, reported by the project

partners. Where such forecasts were not available, the past trends were extrapolated,

using the latest modelling projections of the United States Department of Energy (US

DOE).17 The same modelling tool is also used to build the 2005-2010 fossil fuel

consumption in EU-15. The aggregate forecast of the fossil fuel consumption in CC and in

the enlarged EU is presented in Annex 1.

17 “International Energy Outlook 2002”, US DOE, March 2002 (www.eia.doe.gov/oiaf/ieo/index.html) Appendix E, Tables E2 and E3. This data set was used as it had a disaggregation level, which suited the needs of the project.


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3. QUANTITATIVE ANALYSIS

3.1. KEY METHODOLOGICAL POINTS

As a first step in the study, the recent balances of the relevant crops for processing

into biofuels in CC on a country-by-country and a crop-by-crop basis are identified, to the

extent of data availability and accessibility.18 The sources of data and information include

various publications and works, done by: national statistics offices, agriculture-related state

authorities (Ministries, Agencies, etc.), agricultural universities, departments and faculties,

other agriculture-related S&T and R&D institutes, customs offices, private companies,

expert’s assessments, etc. In addition, a parallel cross checking with foreign and international

sources of data and information (e.g. EC, OECD, etc.) has been performed. The goal of this

gathering process was to collect all the available and accessible data and information about

the agricultural balances of CC by biofuel crops.

In the next step, this retrospective database is used to forecast the future feasible

production potential of feedstock for producing biofuels, respectively – of biofuels.19 The

quantitative forecasts are performed in two alternative variants, depending on different initial

assumptions. These two scenarios are provisionally called “Summary of National Forecasts”

(SNF) and “Optimal Technically Feasible Production” (OTFP).20

The SNF approach reflects the feasible biofuel production, based mainly on a

summary of the countries’ internal projections. Where generally accepted local forecasts were

not available, the forecasts extrapolate the most favourable past trends within 1996-2000, i.e.

land area availability, crop rotation periods, yields, etc. The reason for this approach is that in

most CC some projections or studies for a possible production of biofuels have already been

made. Each study applies a different methodology, but all have one common pre-assumption

– the biofuel production potential is ensuing from a better exploitation of internal resources

(land, labour, technical, financial, know-how) and no external resource contribution in terms of

funding, technical support and know-how is foreseen.

The OTFP approach assumes optimal exploration of all resources (land, labour,

technical and know-how), which potentially could be made available for producing biofuels,

without disturbing (need for imports for food purposes) the national agricultural balances of

the remaining, non-biofuel crops. The OTFP scenario is not taking into account the origin of

this resource (technical, financial and know-how) supply (e.g. support from EU-15) and the

associated costs (the volume of financial resource required).

18 A description of the methodology applied is given in the complementary Addendum to this Final Report. 19 A description of the methodology applied is given in the complementary Addendum to this Final Report. 20 The SNF scenario is built by IPTS. The OTFP scenario is built by Atlantis Consulting S.A. and Kvistgaard Consult ApS.


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3.2. FINDINGS

3.2.1. Current breakdown of biofuel crops in CC The breakdown of the most promising biofuel feedstock crops in CC, according to the

reported internal expectations21, is summarised in Table 5.

Table 5 Prevailing internal expectations about the breakdown of the most promising agriculture feedstock availability for producing biofuels in CC

Country Feedstock for biodiesel Feedstock for bioethanol Country Rapeseed Sunflower Wheat Sugar beet Maize Potatoes Bulgaria O X X X O O Cyprus O O O O O O

Czech Republic X O X O O O Estonia X O O O O O Hungary X O X O O O Latvia X O X O O O

Lithuania X O X O O O Malta O O O O O O

Poland X O O O O X Romania O X X X X O

Slovak Republic X O O O O O Slovenia X O O O O O Turkey O O O O O O

Legend: X – assumed potential availability for biofuel production O – no assumed potential availability for biofuel production

Based on the figures in Table 5, as well as on the country reports22, the following key

conclusions could be drawn:

• Up to the time horizon of the study – 2010 – the agricultural-based biofuel production

potential of CC-12 and CC-13 in both scenarios (SNF and OTFP) is equal, because it is

unlikely that Turkey will have significant excess availability of biofuel crops. The main

reason is that over the period 1996-2000 the food balances of the potential biofuel crops

are negligibly positive (soybean), stable (sugar beet, sunflower) or negative (wheat). In

addition, Turkey has got the highest average annual population growth rate amongst all

CC over 1996-2000 (15 per 1000), which puts an additional pressure on any eventual

internal availability of agriculture-based feedstock for producing biofuels.

• Cyprus and Malta are rather small countries, importing agricultural products to cover their

food demand. No considerable biofuel production potential could be expected there.

21 Internal expectations are partially based on knowledge of crops. It may therefore ignore crops, which for other reasons are not common in a country. As an example sugar beet could be well suited for agriculture in Hungary, Lithuania and Poland, but is presently not seen as a transport fuel crop. Also, at present sunflower in Hungary and Slovak Republic is considered only for food purposes, but is not regarded as a potential feedstock for biodiesel production. 22 A detailed analysis is given in the complementary Addendum to the Final Report.


12

• Rapeseed is the most widespread energy crop in CC for producing biofuels (biodiesel),

due to the specific climate conditions.

• Sugar beet and sunflower are grown predominantly in CC with relatively milder climate

conditions – Bulgaria and Romania.

• The two largest potential bioethanol producers amongst CC (Poland and Romania) do not

rely so much on the two most widespread bioethanol crops in Europe – wheat and sugar

beet. The key feedstock for bioethanol production is Poland is potato and in Romania -

maize, as it is cheaper than bioethanol from wheat and sugar beet.

• From a techno-economic point of view, the four main agricultural feedstock crops for

biofuel processing, have got the following key weaknesses:

- Wheat: Strong competition with the food (local and world) markets;

- Sugar beet: Not competitive to the cheaper import of sugar and molasses from sugar

cane;

- Rapeseed: Long crop rotation period (5 to 8 years); Southern climate conditions are

generally not suitable for rapeseed;

- Sunflower: Lower biodiesel yield per hectare as compared to rapeseed; Northern

climates are generally not suitable for sunflower;

Finally only Czech Republic (biodiesel) and Poland (bioethanol and to a much lesser

extent – biodiesel) have at present any significant experience in producing relatively large

volumes of biofuels. Recently (since 2000), Slovak Republic, Latvia and Hungary have made

efforts to introduce and enhance the application of biodiesel, Czech Republic doing the same

with bioethanol.

3.2.2. Absolute prospective biofuel production potential of CC

The absolute figures for the prospective SNF and OTFP biofuel production potentials

of CC by types of biofuel (biodiesel and bioethanol) are presented in Annex 2. The attention

should be paid to the apparent paradox that within EU-27 in 2005 the absolute biodiesel

OTFP is lower than the SNF one. However, as biodiesel and bioethanol forecasts are

mutually related, the lower biodiesel potential is compensated by a much higher bioethanol

production. Thus, the overall biofuel OTFP is larger than the SNF.

The comparisons of the absolute biofuel production potentials of CC versus the

corresponding internal CC and enlarged EU absolute biofuel targets (Table 2), as well as

versus the respective “fair shares” – are summarised in the following paragraphs (3.2.3),

(3.2.4) and (3.2.5).23

23 The exact figures, detailed explanations and analysis are given in the complementary Addendum to the Final Report.


13

3.2.3. Biofuel production potential of CC-10

3.2.3.1. Comparison “CC-10 biofuel potentials / CC-10 internal biofuel target shares”

The comparison between the SNF and OTFP biofuel potentials of CC-10 and the CC-

10 biofuel targets is shown in Figure 2.

Figure 2 Feasible prospective biodiesel and bioethanol production in CC-10 under the SNF and OTFP scenarios, compared to the biofuel targets (Table 2) for the CC-10, within the period 2005-2010

The following observations might be done based on Figure 2:

• Except for the SNF bioethanol case, CC-10 cover their internal target shares of biofuels.

The OTFP biofuel availability exceeds significantly the internal CC-10 biofuel targets,

especially in the case of bioethanol.

• The SNF biodiesel potential is larger than the SNF bioethanol potential, due to the higher

number of CC-producers of biodiesel (bioethanol production is concentrated in few CC).

• When comparing the SNF and the OTFP scenarios, the unexplored resources to increase

bioethanol production are much larger than the reserves to increase the biodiesel output.

This fact is mainly due to the cultivation specifics of crops-potential bioethanol feedstock.

Under equal conditions, the potential to expand the sown area with bioethanol crops is

larger than the potential to increase the sown area with biodiesel raw material. In addition,

bioethanol feedstock generally gives higher biofuel yield per hectare than biodiesel

crops.24 As a result, in contrast with the SNF scenario, the OTFP bioethanol potential is

larger than the OTFP biodiesel potential.

Within CC-10 Poland is the largest manufacturer of biodiesel and bioethanol in both

SNF and OTFP scenarios.

24 Source: “Techno-economic analysis of Biodiesel production in the EU: a short summary for decision-makers”, IPTS Report, EUR 20279, 2002 and “Techno-economic analysis of Bioalcohol production in the EU: a short summary for decision-makers”, IPTS Report, EUR 20280, 2002.

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009 2010CC

-10

foss

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CC-10 biodiesel SNF

CC-10 biodiesel OTFP

CC-10 bioethanol SNF

CC-10 bioethanol OTFP

CC-10 biofuel target shares


14

3.2.3.2. Comparison “CC-10 biofuel potentials / EU-25 biofuel shares” on an absolute and a

fair share basis.

The comparisons of the SNF and OTFP biofuel potentials of CC-10 with the EU-25

absolute biofuel targets, as well as with the CC-10 fair shares in the EU-25 absolute biofuel

targets, are given in Figure 3.

Figure 3 Feasible prospective biodiesel and bioethanol production in CC-10 under the SNF and OTFP scenarios, compared to the biofuel targets (Table 2) for EU-25 and to the CC-10 fair shares in the EU-25 biofuel targets (in %), within the period 2005-2010


• In the SNF scenario, the CC-10 contribution to the EU-25 biofuel targets is up to around

0.9% for biodiesel as a maximum and about 0.2% for bioethanol. The key reasons for

such a relatively poor contribution are the following:

- The land reserve in CC-10 is quite limited, because the land, which is standing idle, is

doing so mainly due to poor quality of soil for agricultural cultivation purposes rather

than for economic reasons.

- Five CC-10 countries (Cyprus, Estonia, Latvia Malta and Slovenia) have relatively

unfavourable climate conditions for agriculture purposes.

• The SNF biofuel output of CC-10 is not sufficient to reach the CC-10 fair shares in the

EU-25 biofuel targets. Biodiesel availability is closer to these fair shares level than the

bioethanol production.

• In the OTFP scenario, the CC-10 contribution to the EU-25 biofuel target shares reaches

maximum values of up to around 1.5% for biodiesel and up to around 2% for bioethanol.

• The OTFP biofuel output of CC-10 is sufficient to reach the CC-10 fair shares in the EU-

25 biofuel targets. There is a surplus in supply mainly in bioethanol availability.

• The large difference between the SNF and OTFP projections is due to the different pre-

assumption about lack/availability of external resource support. Thus, it is considered that

the present poor quality of some lands can be improved at the expenses of significant

investments and know-how transfers, which are not affordable for CC themselves (the

SNF case), but which could be supplied from outside, e.g. EU-15 (the OTFP scenario).

0.0%0.5%1.0%1.5%2.0%2.5%3.0%

2005 2006 2007 2008 2009 2010

EU-2

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CC-10 biodiesel SNF




CC-10 fair shares


15




12 internal biofuel targets is shown in Figure 4.

Figure 4 Feasible prospective biodiesel and bioethanol production in CC-12 under the SNF and OTFP scenarios, compared to the biofuel targets (Table 2) for the CC-12, within the period 2005-2010

The observations from Figure 4 are similar to the findings for CC-10 (Figure 2), with

the following one distinction only:

• The CC-12 biofuel production covers with excess the target shares of biofuels of CC-12 in

both SNF and OTFP scenarios, in contrast to the CC-10, where the SNF bioethanol

output is insufficient. This means that the two added CC (mainly Romania, but also

Bulgaria) are clear net contributors to the SNF bioethanol availability of CC-12. The

reason is that Romania seems to have the largest, currently unexplored feasible reserves

of land to increase the overall CC biofuel output. For the same reason, a fast growing

biofuel contribution from Bulgaria (especially in biodiesel from sunflower) is likely as well.

It should be stated that within the CC-12 Poland is still the largest biodiesel

manufacturer. However, Romania becomes the second biggest producer of biodiesel. As

regard bioethanol, Romania becomes the absolute leader in the SNF scenario. In the OTFP

case, Romania and Poland are the leaders in bioethanol production. Similar to the SNF

scenario, Bulgaria appears again as a promising biodiesel producer in the OTFP case. In

brief, the analysis indicates that an extension of the production calculation base from CC-10

to CC-12 increases the corresponding enlarged EU overall biofuel supply.

0%5%

10%15%20%25%30%

2005 2006 2007 2008 2009 2010

CC

-12

foss

il fu

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CC-12 biodiesel SNF






16


fair share basis


biofuel targets, as well as with the CC-12 fair shares in the EU-27 biofuel targets, are given in

Figure 5.

Figure 5 Feasible prospective biodiesel and bioethanol production in CC-12 under the SNF and OTFP scenarios, compared to the biofuel shares for EU-27 and to the CC-12 fair shares in the EU-27 biofuel targets (Table 2), within the period 2005-2010


• In the SNF scenario, the CC-12 contribution to the EU-27 biofuel targets is up to around

1% for both biodiesel and bioethanol. The increase in bioethanol, as compared to CC-10,

is due to the availability of free land, suitable to grow bioethanol feedstock, in Romania.

• Similar to CC-10, the SNF biofuel output of CC-12 is not sufficient to meet the CC-12 fair

shares in the EU-27 biofuel targets. However, the gap between biodiesel and bioethanol

for CC-12 is much narrower than for CC-10.

• In the OTFP scenario, the CC-12 contribution to the EU-27 biofuel targets reaches

maximum values of up to around 2% for biodiesel and up to around 3% for bioethanol.

• The OTFP biodiesel output of CC-12 is generally sufficient to reach the CC-12 fair shares

in the EU-27 biodiesel targets. On the other hand, in comparison with CC-10, the lower

surplus in CC-12 biodiesel availability is compensated by a larger surplus in CC-12

bioethanol production. Thus, the aggregate “fair share” contribution of CC-12 to the

enlarged EU-27 biofuel supply is larger than the aggregate “fair share” contribution of CC-

10 to the enlarged EU-25 biofuel supply.

In Summary both CC-10 and CC-12 may in the OTFP scenario meet the "fair shares

target" with CC-12 giving a larger surplus indicating a significant possible contribution from

Romania and Bulgaria to EU meeting its targets.

0.0%0.5%1.0%1.5%2.0%2.5%3.0%

2005 2006 2007 2008 2009 2010

EU-2

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CC-12 biodiesel SNF




CC-12 fair shares


17


As it has been already stated in paragraph (3.2.1), the biofuel production potential of

EU-13 is equal to that one of CC-12 (Annex 2), because it is not likely that Turkey has a

significant internal excess availability of crops-potential biofuel feedstock, for further

processing into biofuels. Therefore, here below the CC-12 biofuel production potential is

directly compared to the target shares, corresponding to CC-13.



13 biofuel targets is shown in Figure 6.

Figure 6 Feasible prospective biodiesel and bioethanol production in CC-12 under the SNF and OTFP scenarios, compared to the biofuel targets (Table 2) for CC-13, within the period 2005-2010

Based on the findings from Figure 6, it can be concluded that the CC-12 biofuel

production covers the target shares of biofuels of CC-13 in both SNF and OTFP scenarios. It

means that the lack of biofuel production from Turkey is compensated by the over-supply

from other countries. Again, the OTFP case is characterised with an excess availability, which

is more pronounced for bioethanol than for biodiesel.


fair share basis


biofuel targets, as well as with the CC-13 fair shares in the EU-28 biofuel targets, are given in

Figure 7.

0%5%

10%15%20%25%30%

2005 2006 2007 2008 2009 2010

CC

-13

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CC-12 biodiesel SNF






18

Figure 7 Feasible prospective biodiesel and bioethanol production in CC-12 under the SNF and OTFP scenarios, compared to the EU-28 fuel consumption and to the CC-13 fair shares in the EU-28 biofuel targets, within the period 2005-2010


• In both SNF and OTFP scenarios, the CC-12 contribution to the EU-28 biofuel targets is

almost the same, as in the comparison CC-12 versus EU-27. This is due to the fact that

the relative increase of fossil fuel consumption when expanding calculation base from EU-

27 to EU-28 is insignificant.

• Unlike the CC-12, where the CC-12 fair shares within EU-27 are met in the OTFP

scenario both for biodiesel and bioethanol, the CC-12 biofuel OTFP output is sufficient to

cover only the bioethanol CC-13 fair share within EU-28. The biodiesel share is not met.

This is primarily caused by a large increase in the fair share due to the large area of

Turkey.

0.0%0.5%1.0%1.5%2.0%2.5%3.0%

2005 2006 2007 2008 2009 2010

EU-2

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nCC-12 biodiesel SNF




CC-13 fair shares


19

4. COST ANALYSIS

4.1. EXPLANATORY NOTES

The goal of this second thematic part of the study is to create projections about the

cost curves for the potential prospective production of biofuels in CC. However, building such

forecasts is constrained by a number a factors, most important of them being the following:

• At present, the projected SNF and OTFP biofuel potentials do not exist. Therefore, any

cost estimations will deal with a significantly different production function, where many

impacting parameters will be unknown or characterised by significant uncertainty. An

eventual large-scale biofuel production in CC will generate secondary impacts on a

number of other markets in CC – fuel, agricultural, labour, etc. Therefore, many other

supply/demand relationships are expected to change both in quantitative and qualitative

terms. Predicting such changes of equilibrium on those related markets cannot be done in

details by the simplistic models based only on known parameters. As at present CC have

rather limited experience with even low-scale production of biofuels, as well as due to the

significant changes estimated, if large-scale biofuel production takes place, the

projections about biofuel production costs will contain significant uncertainty.

• Only few, rather rough assessments of cost breakdowns and curves of biofuel production

are available at the moment, which limits the possibilities for cross-checking the results. In

addition, some of those works do not correspond in terms of methodology and assumption

to the present study.

• In general, the available data in CC allow assessing cost curves as a function of yields

from different biofuel crops. However, these data are not sufficient to project cost curves

as a function of "needed production volumes", i.e. of the extent of land area used for

growing biofuel crops, as compared to the total utilised arable area availability.

• Some past works and studies are used as a base to forecast the production cost curves

of biodiesel production, but based on rapeseed feedstock only. There is a lack of data and

information about any official industrial production of sunflower diesel in CC.

• For bioethanol, the situation is even worse, as no model, dealing with automotive

bioethanol cost has been found. Only some rough data and estimates about breakdown of

bioethanol production in EU-15 have been found. As regard CC, only few aggregate

figures about current total cost of bioethanol production have been available in some CC.

For these reasons the analysis of cost curves presented here should be considered a

rough estimate of cost curves of an eventual, large-scale agriculture-based production of

biofuels in CC.


20

4.2. PREVAILING COSTS OF BIOFUEL PRODUCTION IN CC

The reported on country-by-country basis (where available) prevailing costs of biofuel

production are summarised in Table 6.

Table 6 Current production costs of biofuels (in EUR/litre) in selected CC and EU-15, subject to data availability, the income from biofuel by-products included

Country Biodiesel Bioethanol Remark Bulgaria - 0.36 Average 1996-2000 for non-automotive purposes Latvia 0.42 0.56 Prevailing figures Lithuania 0.41 0.57 Prevailing figures Hungary 0.65 - Prevailing figure Poland 0.75 0.60 BD – cost in 2002, BE – price in 2000 Slovakia 0.70 - Price in 2002 EU-15 0.56 0.36-0.54 Average figures, based on IPTS analyses25

The following key conclusions might be drawn from the findings in Table 6:

• The most important finding is that the range of the reported biofuel production costs in CC

is similar to the range of the biofuel production costs in EU-15. Therefore there does not

seem to be any reason to expect significantly cheaper biofuel production from CC

compared to EU-15.

• The reported production costs of biofuels in CC vary widely from country to country.

Partly, this is due to different calculating and/or accounting methodologies applied.

Additionally the broad variations in cost parameters might be explained by a rather

different from country to country and year-by-year agriculture situation – cultivation, prices

of biofuel feedstock, internal market regulations, etc.

4.3. NATIONAL PROJECTIONS ABOUT BIOFUEL PRODUCTION COSTS IN CC

Similar to the rather scarce and partial data about the prevailing production costs of

biofuels in CC, only few internal forecasts about the prospective costs of biofuel production in

CC have been found, only for Poland and Hungary:

• The results from a simple model, forecasting biodiesel production costs from rapeseed,

as a function of rapeseed yield per hectare, have been reported from Hungary. The

findings of this model show that biodiesel costs gradually decrease from 0.77 EUR/litre for

1.5 t/ha rapeseed yield to 0.38 EUR/litre for 3.5 t/ha rapeseed yield.

25 All cost parameters of biofuel production in EU-15, used for comparative purposes in the present chapter of this Final Report, are pure production costs, without subsidise. They are taken from the two already stated reports of IPTS on biofuels: “Techno-economic analysis of Bio-diesel production in the EU: a short summary for decision-makers”, Report EUR 20279 and “Techno-economic analysis of Bioalcohol production in the EU: a short summary for decision-makers”, Report EUR 20280, 2002.


21

• Some local studies in Poland predict that biodiesel cost might decrease significantly in the

future to levels of about 0.41-0.43 EUR/litre, based on 2001 price levels of feedstock

employed. Thanks to improvements of production process, bioethanol price might also

decrease, but to a much lesser extent – with about 10 %, i.e. to about 0.54 EUR/litre.

Another important conclusion from those studies is that an eventual large-scale biofuel

production is not likely to decrease significantly the total production costs of biofuels. The

explanation is that the key cost-forming factor in total production cost, both for biodiesel

and bioethanol, is the cost of feedstock (80 % and more on average basis). Therefore, the

most promising strategies to decrease biofuel total costs are associated with decreasing

cultivation costs of biofuel feedstock, i.e. increasing yields per hectare and improving the

overall cultivation process.

When comparing the above cost figures from the national forecasts with the projected

biofuel production costs in EU-15 – 0.41 EUR/litre for biodiesel on average and 0.21-0.39

EUR/litre for bioethanol – another important conclusion might be drawn. It is that similar of the

prevailing production of biofuels, CC are not likely to offer cheaper, as compared to EU-15,

biofuels in the future either.

4.4. FORECAST OF BIOFUEL PRODUCTION COSTS IN THE OTFP SCENARIO

4.4.1. Key methodological baselines

An attempt to forecast biofuel production cost curves, as a function of cultivation

costs, is made for the OTFP scenario only. Projections for the SNF case are not performed,

because it is assumed that the prevailing production costs of biofuels in CC (paragraph 4.2)

will not change dramatically in the SNF scenario.

As it has already been stated, the cost of biofuel production is heavily depending on

the cost (price) of biofuel crops, sometimes the later forming about 80% of the total value of

the former. Therefore, the projections about the prospective production costs of biofuels in CC

are constructed as a function of cultivation costs. Another reason for using this approach is

that generally the prevailing cultivation costs could be identified. On the other hand, cultivation

costs can be relatively easy forecasted in rough terms, because generally they depend on the

yield per hectare. Thus, biofuel production costs actually vary with the yields per hectare.

For comparative reasons, the projected biofuel production costs in CC are visualised

not as a function of the absolute crop yields in CC, but in relative terms – as a proportion of

the corresponding forecasted average yields for EU-15.26 In such a way, production costs can

be compared both between CC and EU-15, but also amongst different feedstock employed.

26 The forecast about EU-15 average yields by crops, except for sugar beet, are taken from “Prospects of agricultural markets 2002-2009”, Directorate-General for Agriculture (DG AGRI) – EC, June 2002. For sugar beet, which is not included in this DG AGRI survey, the forecast is built based on figures, taken from “Energy and greenhouse gas balance of biofuels for Europe – an update”, CONCAWE, 2002, (www.concawe.be/Download/Reports/Rpt_02-2.pdf)


22

4.4.2. Projections about biodiesel production costs

The projections about biodiesel production costs in CC are presented in Figure 8.27

Figure 8 Projections about production costs (EUR/litre) of biodiesel in CC, depending on crop yields per hectare, as a proportion (%) of the corresponding EU-15 average yields

The following key conclusions might be drawn from Figure 8:

• Biodiesel production from rapeseed in CC, without crediting the value of by-products, is

not offering cost advantages in comparison with the same production in EU-15.

• The market value of rapeseed by-products (glycerol, rape cake and straw) has a strong

impact on the overall profitability of biodiesel production. This dependence seems much

more pronounced for CC. The reason may, however be that in the more developed

market in EU-15 the value of by-products has decreased due to increased supply. This

has not happened yet in CC. Thus the values may be overestimated, leading to an

artificial low price for biodiesel, which is not sustainable as markets expand.

• On equal terms, production costs of biodiesel from sunflower are significantly lower than

the production costs of biodiesel from rapeseed in CC. CC sunflower biodiesel is also

much cheaper than the EU-15 rapeseed biodiesel, both with and without crediting the

value of rapeseed by-products. The key reason for this fact is that the cost (price) of

sunflower is lower than that one of rapeseed. On the other hand, referring to paragraph

(3.2), from the point of view of the key obstacle to expand biofuel production – scarcity of

free land – the production of biodiesel from rapeseed is a better alternative than that one

from sunflower, because of the higher biodiesel yield per hectare. In addition, biodiesel

production from sunflower is technologically restricted, due to the specific milder

(Southern) climate conditions required.

27 For sunflower, only a curve without credit of by-products is included, because no data about potential income from sunflower by-products have been found.

0

0.1

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0.3

0.4

0.5

0.6

0.7

50% 60% 70% 80% 90% 100%

EU-15 rapeseed biodiesel, valueof by-products credited

EU-15 rapeseed biodiesel, valueof by-products not credited

CC rapeseed biodiesel, value ofby-products credited

CC rapeseed biodiesel, value ofby-products not credited

CC sunflower biodiesel, value ofby-products not credited


23

4.4.3. Projections about bioethanol production costs

The projections about bioethanol production costs in CC are given in Figure 9. The

analysis deals only with bioethanol production from wheat and sugar beet, because no

cultivation or processing costs breakdown of bioethanol production from potatoes or maize

was available. In contrast with biodiesel cost assessment, here all bioethanol costs (both for

CC and EU-15) include the potential income from by-products. The reason is that a market for

the wheat by-product (straw) already exists and its value could be estimated. On the other

hand, the value of the sugar beet by-product is rather small (about 1% of the gross production

costs of bioethanol) and therefore does not affect net production costs.28

Figure 9 Projections about production costs (EUR/litre) of bioethanol in CC, depending on crop yields per hectare, as a proportion (%) of the corresponding EU-15 average yields, the value of by-products being credited


• The first obvious conclusion is that, opposite to EU-15, sugar beet bioethanol in CC is

cheaper than bioethanol from wheat. The key reason for this is the utilisation of straw (the

wheat by-product), for which the market in CC is less developed than in EU-15. On the

other hand, it means that if the application of straw in CC grows, there will be a potential

for significant reduction of net final production costs of bioethanol from wheat.

• As a result from the above observation, wheat bioethanol in CC is more expensive than

wheat bioethanol in EU-15. As regard sugar beet bioethanol, its production costs in EU-15

and CC are similar. Thus, it can be summarised that generally CC appear not to be able

to produce cheaper bioethanol, as compared to EU-15.

28 “Techno-economic analysis of Bioalcohol production in the EU: a short summary for decision-makers”, IPTS Report EUR 20280, 2002.

0

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50% 60% 70% 80% 90% 100%

EU-15 low-cost wheat bioethanol

EU-15 high-cost wheatbioethanolEU-15 low-cost sugar beetbioethanolEU-15 high-cost sugar beetbioethanolCC wheat bioethanol

CC sugar beet bioethanol


24

4.5. COMPARISON OF BIODIESEL AND BIOETHANOL PRODUCTION COSTS

The biofuel production costs found in the above paragraphs (4.4.2) and (4.4.3) as a

proportion of the respective EU-15 average yields by biofuel crops, are presented together for

comparative purposes in Figure 10. The production costs are not given in absolute

measurement (EUR/litre), but are re-calculated on energy content basis (i.e. fossil diesel and

gasoline equivalent), using the corresponding coefficients from Table 3, following the

stipulation of COM (2001) 547. As biodiesel is assumed to replace fossil diesel and

bioethanol – gasoline, the current average production costs of fossil diesel and gasoline in

Europe are also inserted in Figure 10 for an additional comparison.

Figure 10 Production costs of biofuels in CC (EUR/litre fossil fuel equivalent), depending on crop yields per hectare, as a proportion (%) of the corresponding EU-15 average yields and average current (year 2000) production costs of fossil fuels in Europe


• Biodiesel production costs seem to be generally lower than bioethanol production costs.

• The range of cost variation for biodiesel is much wider than for bioethanol. Thus, biodiesel

production is considerably more crop-dependent than bioethanol production, containing

much higher level of uncertainty as regard to the final net production costs, especially in

the case of rapeseed biodiesel.

• Biodiesel from sunflower and from rapeseed with the value of rapeseed by-products

credited, appear to be potentially cheaper than fossil diesel. On the other hand the

production costs of rapeseed biodiesel are strongly dependent on the value of by-

products and thus uncertain. Sunflower biodiesel production is technologically restricted.

• CC bioethanol production costs are higher than gasoline production costs.

0.0

0.1

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50% 60% 70% 80% 90% 100%

Rapeseed biodiesel, value of by-products creditedRapeseed biodiesel, value of by-products not creditedSunflower biodiesel, value of by-products not creditedSugar beet bioethanol, value ofby-products creditedWheat bioethanol, value of by-products creditedFossil diesel production costs

Gasoline production costs


25

5. CONCLUSIONS

Basis on the analysis from the previous paragraphs, the following conclusions about

the potential biofuel contribution of CC to the automotive fuel supply of enlarged EU within

2005-2010 can be formulated:

• Based on a summary of national forecasts, the potential contribution of CC to the

enlarged EU biofuel production is estimated up to around 1% substitution rate

simultaneously for fossil diesel and gasoline consumption as a maximum. This production

is enough to meet the internal biofuel targets of CC, but is not sufficient to cover their fair

shares in the enlarged EU biofuel supply.

• Based on optimal technically feasible estimates, the potential contribution of CC reaches

maximum substitution rates of around 2% of fossil diesel consumption (biodiesel) and

around 3% of gasoline consumption (bioethanol) simultaneously. In most cases this

production is sufficient to meet the CC fair shares in the enlarged EU biofuel supply, but

does not offer significant over-availability, above these fair shares. The key reason for this

observation is that the reserves of free land in CC appear to be quite limited, because the

land, which is standing idle, is doing so predominantly due to poor quality of soil for

agricultural cultivation purposes rather than for economic reasons. Therefore, CC can be

considered a positive complement to EU-15 biofuel production but not a large supplier of

biofuel.

• The bioethanol production potential appears larger than the biodiesel potential, due to a

higher biofuel yield per hectare and a larger potential to increase the sown area.

• The production costs of biofuels in CC appear to be generally similar to the biofuel

production costs in EU-15. Primarily, this is due to the fact that lower factor costs are

balanced by lower yields. An eventual external support to improve yields is consequently

bringing costs to higher levels. Therefore, CC do not constitute a large reserve of cheap

biofuel supply.

• On energy content comparison basis (fossil fuel equivalent), biodiesel production costs

are generally lower than bioethanol production costs.

• The final net production costs of biofuels are strongly influenced by the revenue from by-

products. This impact is more pronounced for biodiesel than for bioethanol, because the

value of by-products represents a larger share of gross production cost and the market

liquidity of biodiesel by-products is more uncertain.

• Cultivation costs of biofuel crops constitute around 80% of final production cost of biofuels

in CC on average. Therefore, the main strategies to decrease the overall production costs

of biofuels are tied to improving cultivation and increasing yields per hectare.

• It is feasible to assess cost curves of biofuel production in CC as a function of yields of

different crops. Assessment of cost curves, as a function of "needed production volumes",

cannot be performed due to lack of appropriate data.


26

ANNEXES

Annex 1 Forecasted consumption of automotive fossil diesel and gasoline in CC and enlarged EU within 2005-2010, (in PJ)

Fuel Scope 2005 2006 2007 2008 2009 2010 CC-10 428.8 440.1 451.7 463.6 475.7 488.3 CC-12 604.9 621.3 637.0 653.9 672.9 692.5

Fossil CC-13 1003.1 1030.3 1056.8 1084.5 1114.2 1144.3Diesel EU-25 6152.2 6220.7 6290.1 6360.4 6431.5 6503.6

EU-27 6328.3 6401.9 6475.4 6550.7 6628.7 6707.8 EU-28 6726.5 6810.9 6895.2 6981.3 7070.0 7159.6 CC-10 401.3 416.9 424.7 432.6 440.7 448.9 CC-12 553.1 565.1 575.3 586.6 599.5 612.3

Fossil CC-13 776.9 800.8 823.5 847.7 874.1 900.8Gasoline EU-25 5464.0 5494.8 5517.8 5541.0 5564.4 5588.0

EU-27 5615.8 5643.0 5668.4 5695.0 5723.2 5751.4 EU-28 5839.6 5878.7 5916.6 5956.1 5997.8 6039.9

Source: Adapted from ENERDATA S.A. / France, country reports by CC and “International Energy Outlook 2002”, US DOE, March 2002.

Annex 2 SNF and OTFP scenario projections about the CC absolute biodiesel and bioethanol production potential within 2005-2010 (in PJ)

Fuel Scenario Scope 2005 2006 2007 2008 2009 2010 SNF CC-10 26.7 31.1 35.7 40.3 44.9 47.1

Bio- CC-12 42.8 48.5 55.2 61.2 67.5 71.1Diesel OTFP CC-10 32.7 43.2 54.8 67.2 80.3 94.1

CC-12 36.0 50.4 67.5 85.6 106.0 127.3 SNF CC-10 10.8 11.0 11.2 11.4 11.6 13.1

Bio CC-12 44.9 45.7 46.5 47.4 48.5 50.9Ethanol OTFP CC-10 56.3 67.2 78.4 89.9 101.6 113.6

CC-12 85.2 101.6 118.7 136.2 154.0 172.3Remark: CC-13 potentials are not given, because as it has been stated in paragraph (3.2.1), they are equal to the CC-12 potentials.

The mission of the JRC is to provide customer-driven scientific and technical support for the conception, development, implementation and monitoring of EU policies. As a service of the European Commission, the JRC functions as a reference centre of science and technology for the Union. Close to the policy-making process, it serves the common interest of the Member States, while being independent of special interests, whether private or national.

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