Biodiesel ‘collapse’ sees UK RTFC price fall as fuel undercuts certificates

5 Jan 2018 | Tim Worledge

Pressure on European biodiesel prices has undermined the values for the UK’s renewable transport fuel certificates (RTFC) as the biofuel’s relatively low price has seen market sources turning to the fuel rather than buying certificates to cover their renewable obligations, market sources said Friday.

“The biodiesel market is collapsing versus gasoil so RTFCs are artificially high, probably 3 or 4p more than they should be,” one market source said.

UK road fuel suppliers are able to buy certificates to meet their biofuel obligations, rather than supply biofuels themselves.

The price of the alternative biofuel – particularly biodiesel from rapeseed – will set the cap for the theoretical value of the RTFC, so as pressure comes to the biofuel, the price of the certificate must fall.

RME, biodiesel from rapeseed, is typically in high demand during the winter months as its superior cold properties make it essential for blending into winter fuel specifications.

However, as the value of mineral diesels have increased in line with resurgent crude values, the differential between diesel and RME has been squeezed and now stands at its tightest level in around three years, according to market sources.

“Over the last six weeks, the differential [between diesel and biodiesel] has fallen by $140/mt,” the source continued, with Energy Census assessing RME at $930/mt on Friday, and ultra low sulphur diesel assessed at $603/mt, a differential of $327/mt.

“It’s almost cheaper to buy the fuel now,” the source said, as the differential expressed on a pence per certificate basis equating to 21.3 p/certificate.

Year 10 certificates, covering the current 2017/18 obligation, were assessed at 21.75 p/certificate on November 3, according to Energy Census data, with offers in the market place heard in the range of 19.6p/certificate up to 20.2p.

Under the UK’s Renewable Transport Fuel Obligation, suppliers of 450,000 litres of fuels into the UK market are obliged to evidence they are delivering a percentage of sustainable biofuels as part of their supply.

This can be attained either by supplying biofuels directly, or paying an opt-out price on the percentage of biofuel they should have been supplying, or they can buy RTFCs from market sources.

RTFCs are typically generated by biofuel producers.