UK Bioethanol Industry Faces Crisis as Vivergo Plant Closes Amidst Government Inaction

In August, Associated British Foods (ABF) announced the closure of Vivergo, one of the UK’s two bioethanol production plants, located in Hull. This decision results from unproductive discussions with the UK government, which failed to yield a path toward profitable operations.

Consequently, the closure leaves only the Ensus plant in Teesside, owned by Germany’s CropEnergies, as the sole significant bioethanol producer in the UK. However, this plant is also under pressure, with warnings that it may shut down if the government does not take immediate action.

The biofuels sector has seen a worrying trend recently, with Greenergy, owned by the oil and metals trading group Trafigura, initiating consultations for the permanent closure of its biodiesel plant in Immingham due to adverse market conditions. Last year, European biodiesel producer Argent Energy had already mothballed its plant in Motherwell, Scotland. The challenges facing these facilities stem from a combination of factors, including fierce competition from imported biodiesel and tariff exemptions for major fuel suppliers, exacerbated by Brexit-related complications in sourcing essential feedstocks.

The most significant blow for the bioethanol sector came in June when Prime Minister Keir Starmer agreed on a tariff-free import quota for US ethanol, a move that potentially undermines the entire UK bioethanol industry. With an import quota equivalent to the UK’s annual demand, industry leaders, including those from ABF and Ensus, expressed fears that the domestic bioethanol industry could completely collapse. Despite these alarms, the UK government opted against a bailout, citing concerns over taxpayer value and longer-term sustainability.

Ensus, which utilizes over a million tonnes of wheat annually to produce up to 400 million litres of bioethanol, is currently in discussions with the government to maintain operations. The Teesside facility not only generates bioethanol but also produces high-protein animal feed and biogenic CO2, both deemed vital for the food and drink sector. The chairman of Ensus emphasized the importance of securing a steady supply of CO2 from the facility, though he acknowledged that negotiations would take time.

The biofuel industry in the UK has expanded over the past two decades, particularly since the introduction of the Renewable Transport Fuel Obligation (RTFO) in 2008. This policy aims to reduce greenhouse gas emissions from transport by mandating increasing quotas for renewable fuels.

However, as pointed out by Patricia Thornley, director of the Energy and Bioproducts Research Institute at Aston University, the RTFO does not specify the origin of the fuels, favoring cost-effectiveness over local production. This has led to increased imports from countries like the US, where production costs are lower due to favorable agricultural conditions.

The recent US-UK trade deal further exacerbates these challenges, as it removes tariffs on US ethanol imports, making it cheaper than domestic production. As Thornley notes, this dynamic undermines the UK's ability to produce biofuels sustainably.

From a climate change perspective, the reliance on foreign biofuels poses additional risks. The UK receives no credit for carbon emissions removed during the production of imported biofuels, since those benefits accrue to the producing nations.

Maintaining domestic biofuel production is not solely an environmental imperative; it also has significant economic implications. The closure of biofuel plants threatens jobs and the livelihoods of farmers reliant on producing feedstocks. Industry leaders attribute these issues to insufficiently ambitious mandates on biofuel usage and a lack of policy support from the government.

Despite the current challenges, Thornley remains optimistic about the potential for biofuels in the UK. She believes that if the government can incentivize homegrown production, there is still a viable pathway forward for the industry. As the biofuel sector grapples with the implications of policy shifts and market conditions, the urgency to support domestic production has never been clearer.