Market Overview and Growth Drivers
Renewable diesel, particularly hydrotreated vegetable oil (HVO), is gaining significant traction in the UK and Europe as a sustainable alternative to fossil diesel. This shift is driven by stringent environmental regulations, advancements in production technologies, and a collective commitment to reducing greenhouse gas (GHG) emissions.
The European renewable diesel sector is poised for substantial growth, with consumption projected to increase by approximately 26% in 2025 compared to 2024, reaching 4.28 million metric tons. Production is expected to grow by around 16% to 4.35 million metric tons, driven by regulatory support and increased production capacities.
Several key factors contribute to this growth:
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Regulatory Support:
The European Union’s Renewable Energy Directive II (RED II) mandates increased use of renewable fuels, setting ambitious targets for the transport sector.
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Environmental Concerns:
HVO can reduce net carbon emissions by up to 90% compared to standard diesel, making it a viable solution for decarbonisation.
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Technological Advancements:
Innovations in biofuel production, including advanced feedstocks and improved refining processes, are enhancing efficiency and sustainability.
RED II-Compliant Biomass Feedstocks and Producers
RED II establishes strict criteria for sustainable biomass feedstocks. Key compliant feedstocks include:
Advanced Biofuels Feedstocks
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Algae:
Cultivated in controlled environments such as ponds or photobioreactors.
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Biodegradable Waste:
Includes industrial and municipal waste not fit for food or feed.
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Ligno-cellulosic Materials:
Derived from forestry residues.
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Non-food Cellulosic Materials:
Agricultural residues like straw and husks.
Waste and Residues
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Used Cooking Oil (UCO):
A widely used and sustainable feedstock.
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Animal Fats:
By-products from the food industry, contributing to waste reduction.
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Agricultural Residues:
Such as straw and husks.
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Industrial Waste:
Including residues from pulp and paper industries.
Forest Biomass
Forest-derived biomass must comply with sustainability criteria to qualify under RED II. Certification schemes such as the Programme for the Endorsement of Forest Certification (PEFC) ensure compliance.
Key Biomass Feedstock Producers
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Arigna Group (Ireland):
Produces biofuels from biochar derived from agricultural residues such as olive pits.
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PEFC-Certified Forest Biomass Producers:
Ensure sustainable forest management and compliance with RED II.
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Waste Oil Collectors:
Specialize in UCO and animal fats processing, supporting circular economy initiatives.
Market Dynamics
The renewable diesel market is shaped by various factors:
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Anti-Dumping Measures:
The EU has imposed duties on biodiesel imports from China to protect domestic production, which may increase prices but encourage local investment.
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Feedstock Competition:
The growing demand for sustainable aviation fuel (SAF) is creating competition for UCO and other key feedstocks.
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Policy Uncertainty:
National policy variations impact investment stability. For example, Germany has adjusted its fuel quota policies, influencing market expectations.
The UK Diesel Market
In the UK, renewable diesel adoption is accelerating:
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Government Initiatives:
The Renewable Transport Fuel Obligation (RTFO) encourages suppliers to blend renewable fuels.
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Industry Adoption:
Fleet operators, such as the London Borough of Hackney, are switching to HVO to reduce emissions.
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Infrastructure Expansion:
Companies like Green Biofuels are increasing HVO availability across the UK.
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EN 590:
EN 590 is the current standard for diesel fuel sold in the European Union member states and other European countries. This grade of fuel is also called ultra-low sulphur diesel (ULSD).
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All road diesel (DERV)
that is now sold in the UK meets the EN 590 standards and has a compulsory 7% by volume biodiesel component blended into it, usually EN 14214 FAME biodiesel
HVO vs. Traditional Biodiesel
Understanding the differences between HVO and conventional biodiesel (FAME) is crucial:
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Production Process:
HVO is produced via hydrotreatment, yielding a high-quality paraffinic diesel, while biodiesel is made through transesterification.
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Fuel Quality
HVO has superior oxidation stability, a higher cetane number, and better cold-weather performance.
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Emissions:
HVO reduces particulate matter and NOx emissions more effectively than FAME.
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Blending and Compatibility:
HVO can be used as a drop-in fuel without engine modifications, whereas FAME blends are limited to avoid filter clogging and material compatibility issues.
Key Industry Players
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Neste Corporation:
A global leader in renewable diesel, marketing its product under the Neste MY Renewable Diesel brand.
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Renewable Energy Group (REG):
Expanding its feedstock processing capacities to enhance biodiesel production.
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Green Biofuels (UK):
A key supplier of HVO in the UK, providing renewable diesel to fleet operators.
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Archer Daniels Midland (ADM):
A significant producer of biofuels from agricultural feedstocks.
Renewable diesel, particularly HVO, is a key player in Europe’s energy transition. With increasing regulatory support, advanced feedstocks, and expanding production capacities, the market is poised for continued growth. The UK, in particular, is witnessing increased adoption, driven by government initiatives and industry commitment to sustainability. As feedstock availability and policy landscapes evolve, industry players must adapt to ensure a stable and sustainable supply of renewable diesel.
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