March 02, 2020

Coronavirus Could Pave the Way for Increased EU Consumption of Palm Waste-Based FAME and HVO

Stratas Advisors

UCO’s status as a waste feedstock has made it eligible for double counting (DC) in many EU member states, giving rise to an industry where collectors, renderers and biodiesel producers all take a share of sizeable profits.


The incentive has been so successful that the EU has even started to import UCO, with 505 KT of UCO finding its way from China to the EU in 2019. The recent outbreak of COVID-19 in China has put a strain on UCO generation and collection, and will likely have a protracted, negative effect on UCO availability. In combination with rising mandates in the EU, this is expected to have a tightening effect on the EU DC market, and may trigger industry players to look for other eligible DC feedstocks.


The EU market for DC biofuels has been dominated by cat. 1 & 2 tallow and UCO-based HVO and FAME. Other types of biofuels such as cellulosic ethanol and fast pyrolysis oil could also have some potential in the future, but have failed to achieve significant production volumes to date.


Annex IX-A of the EU’s Renewable Energy Directive (RED II), provides an overview of feedstocks that are eligible for DC. Among these palm oil mill effluent (POME) stands out as one that has potential to achieve considerable demand growth in the short- and medium-term, owing to its low costs and compatibility with commercial production technologies.


If EU member states will indeed proceed to include POME in their list of advanced feedstocks, the value of POME will grow significantly – likely leading to additional supply in the medium term. The inclusion in this Annex means that POME will be eligible for double-counting, but also for counting toward the 2030 1.75% submandate for advanced biofuels.


POME is a wastewater that is generated during the palm oil milling and refining process. During this process, around 0.65 tonne of POME is generated for each tonne of fresh fruit bunches (FFB) processed. An estimated 180 MMT of POME is annually generated around the world, but in practice, only a small part of POME is suitable for use as a biodiesel feedstock.


SPO seems to be a suitable feedstock for HVO production, where high FFA content does not inhibit the production process, leading to less need for pretreatment. SPO’s suitability as an HVO feedstock is reflected in British and Dutch biomass-based diesel (BBD) consumption statistics.


One potential pitfall going forward could be that chemically speaking, SPO is difficult to distinguish from other waste palm oil products such as palm acid oil (PAO) and high acid crude palm oil (HACPO), which are essentially off-spec versions of crude palm oil.


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