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

1. Straight Vegetable Oil (SVO)
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.
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2. Straight Vegetable Oil (SVO)
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
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3. Straight Vegetable Oil (SVO)
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
(5)
SVO (c/l)* Untaxed Fossil Diesel (c/l) 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)
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4. Straight Vegetable Oil (SVO)
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
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5. Straight Vegetable Oil (SVO)
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.
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6. Straight Vegetable Oil (SVO)
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
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7. Straight Vegetable Oil (SVO)
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
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