The Spanish bioethanol sector according to the USDA FAS

The Foreign Agricultural Service of the US Department of Agriculture (USDA FAS) published a very interesting report entitled “Spain’s Bioethanol Sector Overview” in the middle of last month. After a careful reading I thought it could be useful to summarize some of the main ideas and share them on the blog (only some minor note and adaptation from my own, they are marked).

As an appetiser, I shall begin at the end. Those are the some of the conclusions and future perspectives:

- Consumption mandates are the sole drivers for the Spanish biofuel market. The overall consumption targets established for the period 2016-2020 set the pace of growth in the coming years.

- Industry sources feared that the specific target phase-out may further reduce marketing opportunities for bioethanol producers. Most of the factors create greater opportunities for biodiesel/HVO than for bioethanol.

- The Spanish biofuel industry fears the negative effects of a switch towards a GHG emission system. This could negatively impact their first generation assets’ use optimization.

- Second generation biofuels at a commercial stage are not sufficiently developed in Spain.

Spanish regulatory framework

- With the hydrocarbon tax exemption phased-out in 2013, biofuel consumption in Spain is solely mandate driven.

- The Royal Decree 1085/2015 eliminated the biodiesel and bioethanol specific targets in 2016 and increased slightly the consumption targets for the 2016-2020 period (see Figure 1).

- The Royal Decree 1597/2011 transposed sustainability criteria and provisions related to double counting (RED) to national law. However, in early 2013 the Government of Spain established a delay sine die in the implementation. Sustainability requirements were fully enforced since January 1, 2016 (Resolution by the Secretary of Energy dated April 29, 2015) entering in a transitory period. During this period, no verification is being carried out under the national scheme. According to the Draft Royal Decree on GHG for transport energy and fuels amending Royal Decree 1597/2011 made available for public consultation, the date for full implementation would be January 1, 2018. Obliged parties will then need to accredit sustainability compliance being verified under the national scheme by the Spanish National Market and Competition Commission (CNMC).

- Resolution by the Secretary of Energy dated April 2, 2014 listed raw material eligible for double counting. This list included used oils of animal or vegetal origin and some animal fats. The Draft Royal Decree on GHG for transport energy and fuels amending Royal Decree 1597/2011 adds a new group including: algae, bacteria, OFMSW, industrial residues, agroforest residues and other cellulosic or lignocellulosic material, renewable liquid and gaseous fuels of non-biological origin…

- On October 5, 2015, Directive 1513/2015 officially introduced a 7% cap (energy basis) on food based biofuels thus limiting consumption first generation or conventional biofuels within the wider ten percent target for biofuels in EU transportation fuel by 2020 set by the RED. Additionally, a non-binding 0.5% national target for advanced (non-food) biofuels was included. According to the Draft Royal Decree on GHG for transport energy and fuels amending Royal Decree 1597/2011, the advanced biofuels target in Spain would be set at 0.1%.

Figure 1. Spain biofuel consumption mandates - percentage in terms of energy (directly extracted from the USDA FAS report)

Bioethanol plants

Until 2016, bioethanol production in Spain lay in hands of two large engineering and renewable energy companies: Abengoa owned three grain-based plants and Acciona owned a wine-alcohol based plant. Abengoa filed an insolvency proceeding on November 25, 2015. The debt restructuring plan presented by the company to avoid bankruptcy included the sale of all non-core assets, such as the first generation biofuels business units. On March 20, 2017 it announced the sale of the Spain-based bioethanol plants to the fund manager Trilantic Europe. The sale of assets was authorized by the CNMC on April 18th, 2017.

Taking into account these recent facts, the table below summarizes the characteristics of the commercial bioethanol plants in Spain (adaptation of the Table 6 of the USDA FAS report).

Plant	Location	Company	Feedstock and processing capacity	Products and production capacity	Start of Operation	Purpose
Ecocarburantes Españoles	Cartagena (Murcia)	Trilantic Europe	Grain: 300,000 metric tons	- Bioethanol: 100 Ml. - DDG: 110,000 tons.	2000	It supplies a fuel refinery with ethanol intended to ETBE production for the domestic market and/or to be exported to other countries.
Bioetanol Galicia	Teixeiro (La Coruña)	Trilantic Europe	Grain: 340,000 metric tons	- Bioethanol: 140 Ml. - DDG: 130,000 tons.	2002	It supplies a fuel refinery with ethanol intended to ETBE production for the domestic market and/or to be exported to other countries.
Biocarburantes Castilla y León	Babilafuente (Salamanca)	Trilantic Europe	Grain: 585,000 metric tons	- Bioethanol: 205 Ml. - DDG: 120,000 tons.	2006	Direct blending. A large share of production of this plant is normally exported to other European Member States, mainly Italy and the UK.
Bioetanol de la Mancha	Alcazar de San Juan (Ciudad Real)	Acciona - Uriel investments	Wine alcohol. Residues from winemaking (wine pomace and lees). Eligible for double counting.	Bioethanol: 45 Ml.	2006	Main costumer used to be the refinery located in Puertollano. Since 2012, a large share goes to other European countries such as Italy, the UK or Portugal where double counting is in place.

Advanced ethanol

At present, experience on advanced bioethanol in Spain is limited to Acciona’s wine alcohol plant and Abengoa’s experimental Waste to Biofuels plant. The experimental plant in Babilafuente (Salamanca) was initially conceived as a barley and wheat straw based plant but in 2013 was adapted to try Waste to Biofuels technology.

Note of BR Blog – PERSEO Bioethanol® should be also taken into account in this section. See “WASTE2BIO project - From the organic fraction of the MSW to bioethanol through the PERSEO process”and “URBIOFIN and PERCAL projects – The urban biorefinery model in action” to know more.

Bioethanol production

The Figure 2 shows the evolution of the production and the production capacity in the last few years according to CNMC, industry sources and FAS estimations. In 2016, as a consequence of the uncertainty resulting from Abengoa’s announcement of the sale of their first generation biofuels business units and the fact that Babilafuente plant has been running idle since March 2016 due to poor margins, Spain’s bioethanol production decreased. Despite the recent acquisition of Abengoa’s plants, somewhat stagnant bioethanol production levels are anticipated for 2017 in Spain, as tight margins would still prevent from resuming production in the in-land plant.

Note of BR Blog - According to news of local media, the Babilafuente plant resumed production in June.

Figure 2. Spain’s bioethanol production, capacity and capacity use (directly extracted from the USDA FAS report)

Consumption and trade

- In the absence of a bioethanol specific target since 2016, consumption of bioethanol depends on its price competitiveness and petrol’s companies need to observe volumetric blending limits. The potential market size is defined by gasoline demand and overall mandate value.

- As in the large majority of EU Member States, diesel is the main transport fuel in Spain. However, while the EU diesel-gasoline average ratio is 2:1, in Spain it is 3:1. Currently, biodiesel is the main biofuel consumed in Spain and represents nearly 65% of the total liquid biofuels consumption in transport, followed by HVO and bioethanol, which account for 20 and 15 percent respectively.

- Industry sources fears that the specific target phase-out may further reduce marketing opportunities for bioethanol producers, as blenders may opt for meeting mandates to a larger extent with biodiesel or HVO.

- According to the CNMC latest statistical release, in 2016, the majority of bioethanol consumed in Spain was produced domestically (90%). Bioethanol exports occur mainly at the EU level.

Figure 3. Spain’s conventional fuel and bioethanol consumption for road transport (directly extracted from the USDA FAS report)