DfT to back RTFO change with support measures as traders voice fears

2 Mar 2018 |

The UK’s Department for Transport has signalled that it will introduce a raft of measures to improve guidance and support to industry participants affected by changes currently being made to the Renewable Transport Fuel Obligation.

The move comes after some had voiced concerns over the practical impacts that the changes could bring to the way the Renewable Transport Fuel Certificates trade under the new scheme.

The changes, which are currently going through parliament en route to becoming law, should come into effect from April 15, 2018 and will see the UK significantly boosting the contribution of biofuels to the road fuel pool between now and 2032.

Alongside an overall increase, the government is also differentiating between biofuels on the basis of their feedstock, with a two-tier system expected to come into effect in April and a three-tier approach introduced from January 2019.

“There is no precedent here, and the industry is not allowed to get together and discuss what these changes could mean,” one market source said, with the problem exacerbated by the relatively small timeframe between the legislation potentially being passed and its implementation.

The RTFO order has completed the first step of its parliamentary journey, clearing a committee stage in the House of Commons on February 26.

The proposed changes, along with related changes to Greenhouse Gas Emissions Regulations is due to be discussed in the House of Lords on March 6 with the legislative changes likely to be approved.

A spokesperson at the Department for Transport confirmed that, once the legislation had been passed, the department would be kicking off a programme of supportive measures including issuing revised guidance, writing to those contacted during the consultation phase to advise them on changes, and reconvening an expert advisory group.

“In the past [the expert advisory group’s] role was to provide technical advice, input and expertise on sustainability issues including reporting on the social, environmental and economic impacts of the RTFO,” the spokesperson told Energy Census.

The scope and membership of the advisory group is still to be decided, pending final approval of the legislation.

Tiers for fears

Providing the legislation is passed as anticipated, from April, Year 11 RTFCs will be differentiated between crop-based biofuels and waste-based biofuels, with separate mandates governing each.

From 2019, crop and waste based will be joined by an advanced category, with the three tiers regulating the initiatives around reducing crop-based feedstocks in the biofuels mixture, and bolstering investment in advanced biofuels and waste-based biofuels.

As of April, the overall mandate on biofuel use is set to rise from 4.75% to 7.25% – a substantial rise in itself – before moving up to 12.4% by 2032.

From 2019, the proportion of crop-based fuels that can contribute to the mandate is capped at 4%, thereafter declining to 2% by 2032.

That has raised the potential for certificates for the same year to trade at different prices according to the dynamics of the crop, waste and advanced biofuel, but trading sources saw it as unlikely to carry any price difference through the early stages of the RTFO.

“I don’t think it’ll make any difference; crop is a small enough percentage already so it won’t make any difference in price terms,” a second source said.

According to the most recent data available from the Department for Transport, published February 1 2018, 491 million litres of sustainable biofuels were supplied to the UK retail market in the 2017/18 year to date (April 15 2017 through April 14 2018).

Of that volume, 68% came from waste-based or residue feedstocks, with used cooking oil from the US contributing 66 million litres alone, 14% of the total UK fuel supply.

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