Berlin (Platts)--22Jan2013/810 am EST/1310 GMT

Europe needs a stable legal framework if biofuels research and development is to prosper, Neste Oil's Executive Vice President, Oil Products, Matti Lehmus, said at a conference Monday.

A proposal in October by the European Commission to cap the usage of certain types of biofuel feedstocks in the European Union's renewables mandate was not ideal, but if it is applied it must not then be superseded by more changes further down the line, said Lehmus at the Fuels of the Future conference in Berlin.

The EU has set a 2020 target of 10% of the transportation sector's energy use to come from renewable sources.

The type of biofuel feedstock used to meet this target is not specified. However, the use of food-crop feedstocks has been called into question following studies into the real carbon savings obtained using those biofuels after emissions related to the switching of land usage towards feedstock production, known as the Indirect Land Usage Cost (ILUC), is taken into account.

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The EC proposal seeks to address the ILUC by calling for the EU's target to be amended so that only a maximum of half of the overall 10% -- 5% of total fuel in transportation -- would come from first-generation biofuels, or the ones made from grinding and fermenting food crops. The rest would have to come from second-generation biofuels and/or renewable power used in electric vehicles.

"[It's] not the perfect way of responding to ILUC, but it's one of the ways which might be effective," said Lehmus. "If that is the model to be selected it is important that we don't have additional models implemented in future."

SECOND-GENERATION BIOFUELS

Neste Oil currently operate plants producing its proprietary NExBTL renewable diesel in Finland, Rotterdam and Singapore with a total nameplate capacity of just under 1 million mt in Europe and 800,000 mt in Singapore. The NExBTL plants currently use around 54% crude palm oil, 41% waste products and 6% of other feedstocks, including rapeseed, said Lehmus. Lehmus emphasized the flexibility of the plants with regards feedstocks though and the company's intention to use more advanced feedstocks in the future.

Approximately 80% of Neste's research and development budget for biofuels goes toward developing new feedstocks for the company's renewable products, with microbial and algae-based oil the priority for second-generation biofuels, said Lehmus. Neste opened Europe's first pilot plant for producing microbial oil from waste and residues at its Porvoo site in Finland in October, following an investment of Eur8 million ($10.65 million).

The EC's proposal also took steps to incentivize investment into the development of the second-generation fuels needed to meet its revised target, including allowing second-generation fuels to count four times as much toward renewables mandates as first generation biofuels.

However, there is little EU-wide legislation related to second-generation biofuels, with member states able to set their own requirements. This lack of consistency among member states will discourage investment, Lehmus said.

The definition of a second-generation biofuel should also not be too broad, he added.

After Lehmus' talk, Helmut Lamp, Chairman of the Executive Board, German BioEnergy Association (BBE), reiterated that the time required to develop second-generation fuels to a commercial scale meant that they could not be relied upon to meet the EU's entire carbon reduction target and that first-generation biofuels would still be necessary.

"We see that climate protection goals cannot be achieved by these projects [alone], because it's too late."

--Sean Bartlett, sean_bartlett@platts.com
--Edited by Katharine Fraser, katharine_fraser@platts.com

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