UK budget to set pace for biofuels growth

Britain's budget statement later this month could set the pace for a rapid expansion of the country's biofuels production over the next few years, the head of a leading biofuels company said in an interview.

Andy Hunter, managing director of Argent Energy, said the budget should outline how Britain plans to move towards meeting its previously announced target that five per cent of all motor fuel sold by 2010 should come from renewable sources.

"I think one has got to wait and see what the budget says," he said, adding that if Britain's Finance Minister Gordon Brown opted for a faster path towards meeting the five percent target then his company would have to revise its construction plans.

"That would in my opinion mean building larger plants rather than smaller plants," Mr Hunter added in an interview last week.

Britain's budget statement will be issued on March 22.

The European Union has encouraged a sharp rise in biofuel production, setting ambitious but non-binding targets for blending output with conventional fuels.

Germany and France have led the expansion in output while some other EU members including the Netherlands and Poland have unveiled aggressive growth plans. Britain has acknowledged it got off to a slow start but says it is now trying to catch up. Britain's target, known as the Renewable Transport Fuels Obligation, was set in November 2005 and required a 20-fold increase in biofuels use. Biofuels companies are expecting Mr Brown to unveil details in the budget.

Biofuels can be made from a wide variety of different crops including grains, sugar cane and oilseeds as well as waste products such as used cooking oil.

The expansion of Britain's biofuels industry has been led by three companies, Argent Energy, Greenergy Biofuels and Biofuels Corp Plc.

Privately-owned Argent has a plant near Motherwell in Scotland which entered commercial production last year and has the capacity to produce 45,000 tonnes of biofuels a year. The plant makes fuel from used cooking oil and tallow.

Hunter said the company was considering building a second plant, probably in northwest England, with a significantly larger capacity.

He added that although no decision had yet been made about the size of the second plant it could be about three times larger than the existing facility. Greenergy Biofuels is building a plant in northeast England with a first phase of 100,000 tonnes, to be completed in late summer or early autumn 2006. A second phase is planned which would double the total capacity.

Late last month, Greenergy announced it was also planning to build a second plant in north-west England with a projected capacity of 100,000 tonnes.

Biofuels Corp Plc announced late last month that the first biodiesel had been produced at a plant in northeast England with a planned capacity of 250,000 tonnes.

"We would anticipate that there will be a significant multiple of capacity increase in the UK over the next three or four years," Mr Hunter said.

Mr Hunter said that initially biofuels imports would help Britain meet its target. He noted, however, that other countries were seeking to rapidly expand biofuels use and it would become increasingly difficult to rely on imports.

Argent Energy is also looking to expand outside Britain.

"We are already considering international opportunities...We are very interested in the potential in New Zealand and that is not the only country we are actively looking at at the moment," Mr Hunter said.