Small-scale biofuel producers are unlikely to benefit from the government’s Road Transport Fuel Obligation (RTFO), according to Rix & Sons director, Rory Clarke, speaking at the Agriculture and Rural Affairs Forum.

The requirement for all road fuels to include 2.5% biofuel came into effect last month and those that fail to do so face a 15p/ litre fine for every litre biofuel not included. The target is set to rise to 5% by 2010, with a 30p/ litre potential fine, but no 20p/litre tax incentive as at present, he said.

“The government’s moving away from tax discounts to putting the onus on fuel companies to comply or face fines. But without the 20p tax derogation, there is no incentive for higher blends of biofuel. That’s potentially a lot more damaging for small-scale producers.”

Paying the penalty

Mr Clarke said there was a danger that major oil companies may choose not to meet the RTFO requirement and pay the fine instead, for fear of incorporating fuels with dubious environmental credentials. That would simply mean consumers end up paying more tax for fuel without the benefit from biofuel, he said.

But he was optimistic that biofuel demand would help underpin markets for arable crops and there may be some niche opportunities for energy crop growers or those producing fuel for their own use.

“Biofuel is a constantly shifting market, with success depending on the price of feedstock and the finished product. At the moment fossil fuels are cheapest, but they’re not going to be here forever, so biofuels can play a part. But they’re not going to develop in this country if there isn’t sufficient support and incentive from government.”

Post 2010

Somerset county Young Farmers chairman John Perrin produces 400-litres biodiesel per week for local hauliers and businesses on his mixed farm near Taunton. He was concerned what would happen post-2010. “We’ve got enough capacity to increase production to 2000-litres/ week, but unless there’s any change, by 2010 we will probably cut back and just produce enough to use on the farm.”

Higher commodity prices meant it was increasingly difficult to make biofuel production stack up, he acknowledged, so making best use of all by-products was essential. The meal was sold for about £190/ tonne for animal feed and glycerol went to a local biogas plant, he said. “It has covered its costs, but to get into biofuel production now is a damn sight more expensive than two years ago.”