Conversion of Marine Fishing Vessel Diesel Engines for Use with Straight Vegetable Oil

Straight Vegetable Oil (SVO)

1

Briefing Paper on Conversion of Marine Fishing Vessel Diesel Engines for Use with Straight Vegetable Oil

Background Petroleum is a non-renewable, finite source of fuel. Although scarcity is seen by the International Energy Agency as being very unlikely before 2025, they concede that the peak in oil production is approaching (1). New supply will continue to be available at less than $20/bbl until approximately 2013 (1), but beyond that, the cost of biofuels is anticipated to fall below that benchmark. We are thus facing the almost inevitable prospect of increasing oil costs in the face of peaking supply and increasing global demand. For the fisheries sector, already suffering from poor historical management of stocks, increasing diesel costs are driving a further wedge into fleet profitability. Fishermen have been protesting recently on exactly these lines. Two proposals are raised to the fishing fleet:

A transfer to fishing techniques that are less fuel-consuming (e.g. lines instead of trawls).

Conversion of fishing vessels to use Straight Vegetable Oil (SVO) in place of fossil diesel.

Only the second of these proposals is considered here. The Political Dimension The EU currently imports 50% of its total energy needs. In transport, which relies heavily on oil, 80% of energy is imported. The Commission forecasts that passenger traffic in the EU15 will rise by 19% between 1998 and 2010, and goods transport by 38%; growth in the new Member States will be even faster. Given that transport fuels account for 32% of the total energy consumption in the EU and with road traffic forecast to increase substantially, the use of substitute fuels is vital for the EU to reduce dependence on imports. Vegetable oil has been used to fuel diesel engines for more than 90 years. It can be used immediately in some diesel engines – primarily the older, indirect injection (IDI) engines. Direct injection (DI) engines are not usually compatible for immediate use with SVO, although a conversion process enables them to use the fuel. More detailed information is available on http://journeytoforever.org/biodiesel_svo.html. A demand for vegetable oil can be satisfied by a widespread and decentralised production structure, which could give rise to a more equal distribution of wealth than is provided by current dependence on fossil fuels. Vegetable oil can also be reclaimed from domestic and industrial use. Austria estimates that 18.5% of the total amount of oil/fat is collectible (2). The reclamation of these fats and oils would eliminate the need for dumping and its attendant environmental hazards. Recovery of oils also avoids the cost of drainage and landfill disposal. These uses form part of a sound waste management strategy.


2

A change in policy to allow conversions to take place could have the following benefits:

Major environmental benefits (2.78kg CO2 per litre of diesel replaced with SVO) (3)

Development of a supply chain leading from oil production areas (agricultural) to fishing areas. Since fisheries areas are often peripheral, such a supply chain would be extensive, and would therefore be easier for other users of SVO to tap into.

Provision of a ready market for an agricultural product that is eligible to be grown on set-aside land.

Stimulation of research and development into biofuels generally and SVO in particular, leading to reduced costs and a more prominent position in the global biofuel market.

Development of the skills necessary to convert diesel engines Europe-wide, reducing costs, and thereby increasing the market for conversion of automobile engines.

Leading, eventually, to a decreasing reliance on imported fossil fuels (currently projected to increase from 50% to 70% of EU energy needs by 2025)

The Case 1. Unsubsidised SVO Almost all categories of diesel engines can be converted to enable them to use SVO as a fuel. The costs of conversion vary according to type of engine and local situation (availability of suitably skilled mechanics etc.), but a widely accepted figure is about €1500 per engine. Under anticipated EFF rules, funds can be used to ‘contribute to the financing of equipment and the modernisation of vessels to improve safety on board, working conditions, hygiene and product quality, provided that it does not concern capacity in terms of tonnage or power and that it does not increase the ability of the vessel to catch fish’. The insertion of a phrase indicating support to improved environmental performance of vessels or engines would clear the way for EFF funding to be used for conversion of engines to run on SVO. Engines, once converted, are still able to use fossil diesel as fuel. The major benefits of SVO over fossil diesel are:

All soot and emissions are reduced except NOx, which is the same For a given amount of energy produced, the volume of fuel needed is equal When burned it has high energy output (roughly equivalent to fossil diesel) It is neither harmful nor toxic to humans, animals, soil or water It is neither flammable nor explosive, and does not release toxic gases It is easy to store, transport and handle It does not cause damage if accidentally spilt, which is particularly pertinent in

ecologically sensitive areas and inland fisheries It is produced directly by natural processes and does not have to be

transformed It does not have adverse ecological effects when used


3

It does not contain sulphur, so it does not cause acid rain when used When burned it is neutral in CO2; it makes no net contribution to climate

change.

However, this last point does not take into account the energy involved in harvesting and processing of SVO. Accounting for this, the direct CO2 reduction calculated by the Nordic FolkeCenter for Renewable Energy from the use of rape seed oil as a substitute for fossil diesel is 2.78kg/l (3). The most crucial aspect is the cost of SVO when compared to untaxed fossil diesel. There would obviously be little merit in financing conversions if the fuel is prohibitively expensive. Here we need to make a correction for the distribution, transport, and associated costs of SVO. The import price into Germany of fossil diesel was 32.5c/l (4), but over the 53 months from January 2001, an average of 8.3c/l (4) of the total retail price was comprised of marketing costs and profit (including transport costs, storage, legal stock back-up, administration and sales). The dynamics of SVO distribution will be different from those of fossil diesel. Production is decentralised; some of the product will be closer to fishing ports, and although a formal fuel distribution network is largely undeveloped, large quantities of vegetable oil are shipped throughout the European Community for domestic consumption. In this calculation, we have assumed an identical mark-up to that made in the fossil diesel industry (8.3c/l), despite the reduced costs (e.g marketing and R&D) and (likely) profit associated with SVO production. Indicative Prices of SVO and Untaxed Fossil Diesel in Member States SVO (c/l)* Untaxed Fossil Diesel (c/l) (5) Price Differential (c/l) Austria 56.8 45.2 11.6 Belgium 56.8 41.5 15.3 Czech Republic 56.8 42.3 14,5 Cyprus 56.8 46.0 10.8 Denmark 56.8 40.7 16,1 Estonia 56.8 39.6 17.2 Finland 56.8 45.9 10.9 France 56.8 40.0 16.8 Germany 56.8 42.7 14.1 Greece 56.8 45.6 11.2 Hungary 56.8 42.2 14.6 Ireland 56.8 46.3 10.5 Italy 56.8 46.4 10.4 Latvia 56.8 42.7 14.1 Lithuania 56.8 40.5 16.3 Luxembourg 56.8 40.6 16.2 Malta 56.8 47.9 8.9 Netherlands 56.8 43.0 13.8 Poland 56.8 41.7 15.1 Portugal 56.8 44.2 12.6 Slovakia 56.8 39.7 17.1 Slovenia 56.8 41.7 15.1 Spain 56.8 44.1 12.7 Sweden 56.8 42.7 14.1 UK 56.8 41.7 15.1

*estimated price, including 8.3c/l distribution/profit mark-up, and excluding taxes (6)


4

Furthermore, our calculation (see Annex 1) predicates the price of SVO to be a flat 48.5c/l across most of the EU, however, it is probable that the factors driving up the price of diesel to some parts of the Community (e.g. Malta) will likewise apply to SVO. Additionally, we should consider that rising diesel prices will feed into the cost of production of SVO (through agricultural inputs), although since the energy derived from rape seed oil is 3.35 times the input in diesel (excluding energy derived from rape straw and rape seed cakes) (7), the price of SVO will increase at a rate of roughly 30% as much as diesel from this effect, i.e. for each 10c/l increase in the price of diesel there will be a concomitant increase of 3c/l in the price of SVO. This calculation excludes the possibility of using renewable energy and fuels during the harvesting and processing. In our calculation, the price differential is between 8.9c/l (Malta) and 17.2c/l (Estonia), although the middle of the range is around 14.1c/l. In the unsubsidised scenario, diesel prices will need to rise by around 11.5c/l to start becoming competitive in the Member State with highest prices, and by 18.3c/l to become competitive generally in the European Community. The benefit of SVO has been calculated conservatively (except for assuming a flat cost across the EU):

The calculations in this paper take no account of the reduction in costs that would be achieved by the use of rape straw, rape seed cakes, and any other valuable by-products (primarily protein and gylcerin).

Additional benefits would be achieved by buffering mineral oil prices as a result of marginally reduced demand: “The strength of the oil substitution argument is difficult to quantify but nevertheless significant” (2).

2. Subsidised SVO There may be a means of subsidising fuel for its environmental (non-polluting) benefits. At present, a subsidy of €45 per hectare of biofuel crop is paid to farmers (not applicable on set-aside land), but it is under Council Regulation (EC) No. 1782/2003 and two CAP articles. This subsidy does not prejudice the reduction of taxes on biofuels, and the possibility of application of active subsidies is considered here. In relation to maritime transport, Community guidelines state that “State aid schemes may be introduced in order to support the Community maritime interest, with the aim of… improving a safe, efficient, secure and environment friendly maritime transport”. Investment aid is acceptable “which provides incentives to upgrade Community-registered ships to standards which exceed the mandatory safety and environmental standards laid down in international conventions and anticipating agreed higher standards, thereby enhancing safety and environmental controls” (8). The principle of compensating economic actors for the extra cost of environmentally friendly techniques is well established in Community law, including one case in Denmark of providing a subsidy to rail goods transport over road haulage on account


5

of the environmental benefits. This took the form of environmental grants applied to the conveyance of goods by rail, following the argument that external (environmental) costs of ‘tonnes*kilometres’ are considerably larger for road haulage than for rail freight. The long-term benefit was thus an improvement in the Danish environment, via reduction in CO2 and other emissions, and was in line with EU Directives in this area. Article 87, part 1, of the Treaty of Rome, confirms that such aid, likewise as applied to subsidising vegetable oil, would be State Aid. However, room for manoeuvre may be found in different means, for example, with Article 77 of the Treaty, which states that “Aids shall be compatible with this Treaty if they meet the needs of co-ordination of transport or if they represent reimbursement for the discharge of certain obligations inherent in the concept of a public service”. If such a subsidy can apply, then per tonne of CO2 ‘saved’ by using SVO, roughly 360l (1000/2.78) of fuel will have been burned. The price of one tonne of CO2 on 30 June 2005 was €24.88 (9), suggesting a subsidy of 2488/360 = 6.9c per litre of SVO. The market is not mature at present, but given that prices have increased from roughly €18 to nearly €25 per tonne over the last month or so, it could be surmised that they will become more stable at a higher price than present, affording greater scope for subsidy of fuel. If such a mechanism for subsidising SVO in this manner can be incoporated, then SVO (in this scenario, already almost viable in Malta) will be competitive across the European Community when the 14.1c/l ‘average’ difference in price is reached, e.g:

Diesel rises in price by roughly 10.3c/l AND there is no change in the carbon market

Diesel prices remain static AND the price of CO2 increases to €50.76 per tonne

Or any intermediate combination, based on the equation below:

14.1 = 70 x (increase in diesel price beyond 42.7c/l) + a . 100 360

where ‘a’ is the price in Euro cents for 1tonne of CO2 (42.7c/l is taken as the ‘average’ price of untaxed fossil diesel in the EU market) Given that diesel has increased in price by roughly 9c/l over the past year (4), and the price of CO2 has increased from €16 (end of May 2005) to nearly €25 (end of June) (9), these scenarios cannot be discounted. Certainly, by the time the EFF comes into effect on 1 January 2007, the situation could be much more favourable for SVO.


6

Conclusions Given the circumstances (political, social, environmental and economic) surrounding diesel use and fishing, this proposal should be considered as a very real alternative to continued dependence on fossil diesel, and as a potentially valuable means of making considerable cost savings to fishermen over the coming years. Promotion of the use of biofuels in the EU is politically desirable because of the benefits to sustainable development, CO2 reduction, security of supply, and rural development and employment. It is my belief that this proposal would receive broad support both within the Commission, and among Member States. Gareth Clubb 1. OECD/IEA, 2003. Energy to 2050: Scenarios for a Sustainable Future. OECD/IEA, 2 rue André-Pascal, 75775 Paris Cedex 16, France. http://www.iea.org/textbase/nppdf/free/2000/2050_2003.pdf 2. European Commission, 2002. Proposal for a Directive of the European Parliament and of the Council on the Promotion of the Use of Biofuels for Transport. Available at http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:52001PC0547(01):EN:HTML 3. Jacob Bugge, 1997. ANVENDELIGHED AF RAPPORTEN EMBIO Energistyrelsens Model til økonomisk og miljømæssig vurdering af BIObrændstoffer, Januar 1997, Udarbejdet af COWI. 30 page report in Danish. Available at http://www.folkecenter.dk/plant-oil/publikation/embio2000_rapsolie.pdf 4. http://www.mwv.de/Preiszusammensetzung_Diesel.html 5. DG TREN, 2005. Oil Bulletin 1263. European Commission, Brussels. May 2005. 6. Derived from http://www.oilworld.biz/app.php for Dutch rape oil, ex-mill. June 2005. 7. Jacob Bugge, 2000. Note: Rape Seed Oil for Transport 1: Energy Balance and CO2 Balance. Hurup: Danish Center for Plant Oil Technology. Available at http://www.folkecenter.dk/plant-oil/publications/energy_co2_balance.htm 8. http://europa.eu.int/comm/transport/maritime/legislation/doc/2004_01_17_guidelines.pdf 9. http://www.pointcarbon.com


7

Annex 1 Calculation of rape oil price: Price displayed in US$ per tonne. Density of SVO is 920kg/m3. 1m3 = 1000litres. Therefore 1 tonne = 1000/920 = 1087litres. Price of Dutch rape oil on 27 June 2005 = US$644 Exchange rate on 16 June 2005 €1 = US$1.22087 1 tonne of rape oil = 644/1.22087 = €527.5 1 litre of rape oil = 527.5/1087 = €0.485 = 48.5c/l

Design

Conversion of Marine Fishing Vessel Diesel Engines for Use with Straight Vegetable Oil