Poland. Biofuels Market Outlook. June 29, 2016 June 29, 2016
In 2016 Poland's total production of biofuels is estimated at 0.8 MMT of biodiesel and 0.2 MMT of bioethanol. There is a significant surplus of current domestic production capacity in both biodiesel and bioethanol markets in Poland and further investments in this area are not expected. In 2016 the National Indicative Target (NIT) for Poland is set at 7.1 percent. It will increase gradually in order to reach 10 percent in 2020.
Poland as an EU member state must follow the Renewable Energy Directive (RED) which sets a general target of 20 percent renewables in all energy used by 2020 and creates a sub-target of 10 percent renewables in the transport sector. As of 2017 the upper limit for renewable energy of the first generation will be set at 7 percent and the remaining part of the target must be fulfilled from other sources of biofuels. Fuel suppliers are also required to reduce the greenhouse gas intensity of the EU fuel mix by 6 percent by 2020 in comparison to 2010. Share of all Renewable Energy Sources (RES) in overall energy supplies amounted to 11.4 percent and it is estimated that in 2015 it increased slightly to 11.5 percent.
For 2016 the National Indicative Target (NIT) for use of biofuels in transport for Poland was set at 7.1 percent. The NIT will grow to 7.8 percent in 2017and to 8.5 percent in 2018. For 2012-2015 a reduction factor of 0.85 was set. Consumption of biofuels in Poland depends mainly on prices of gasoline and diesel as well as the policy to implement EU regulations. Poland meets the NIT through consumption of biofuels sourced from domestic production and from imports, mainly from the European Union. The basic raw material for bioethanol production is domestic corn (80 percent of the feedstock input), and other grains. Biodiesel is produced almost entirely from domestically grown rapeseed supplemented by imported rapeseed oil. Ethanol is blended with gasoline and fatty acid esters are added to diesel.
The sustainable criteria required by the EU were introduced into Poland's legislation with amendments to the act on biofuels (August 26, 2006, Dz.U.2013, pos. 1164) published on April 8, 2014 (Act of March 21, 2014 amending the Act on components and liquid biofuels and other acts -Journal of Laws 2014 pos. 457). They came into force on May 9, 2014, but some of the provisions of the Act took effect from January 1, 2015, because of the time needed to create implementing regulations, and the time needed to market operators to adapt to the new regulations. The amendment completed the process of Poland's EU biofuel directives transposition.
According to the new regulations, biofuels produced from wastes and non-food products will get bonus on the basis of sustainable development. The share of biofuels in transport fuel domestic consumption is expected to reach 10 percent in 2020. The new rules will also cover such products as biogas (methane, propane, butane), alcohols produced from biomass - other than ethanol (methanol, butanol) and other substances. In addition, bio-components from non-food raw materials (mainly cellulose and lignocellulose and waste residues materials) are promoted. Their contribution to the implementation of NIT (National Indicative Target) is double counted over traditional bio-components.
Firms which operate in the biofuel sector and want to be eligible for government support or count towards mandatory national renewable energy targets must comply with sustainability criteria.
It is estimated that in 2015 Poland's production of biodiesel amounted 757,000 MT. It is expected that 2016 production will increase by 3 percent. The NIT in 2015 and 2016 is set at the same level of 7.1 percent, so there is no incentive for an increase of biodiesel production, especially if prices for regular fuels remain at the low level. Almost two thirds of annual production of rapeseed (2 million MT) is used for production of biodiesel and one third for rapeseed oil for human consumption. The VAT tax for rapeseed used for human consumption amounts to 5 percent while when used for production of biodiesel it amounts to 23 percent.
There is a significant surplus of current domestic production capacity in both biodiesel and bioethanol markets in Poland and further investments in this area are not expected. Capacity in biodiesel production is currently at around 70 percent and in bioethanol production it is below 30 percent.
In 2015 there were 10 installations for production of biodiesel with total production capacity amounting to 970,000 MT. Within last few years there is a trend of consolidation in the biodiesel industry leading to reduction of number of biodiesel installations and increase of their production capacity. It is estimated that there is a 30 percent surplus of the production capacity over actual output in 2015. In 2015 Poland's total production exceeded the country's consumer demand by 10 percent.
In Poland there are 11 bioethanol plants with a total production capacity of 511, 000 MT. Over the past years the decreasing tendency in bioethanol capacity production has been observed with a decreasing number of units and diminished total capacity. In 2015 the share of production in total production capacity amounted to less than 30 percent. It is estimated that in 2015 production of bioethanol amounted to 169, 000 MT, an 18 percent increase compared to 2014.
Due to lower prices, imported bioethanol is more competitive than what is produced domestically. As a result domestic capacity for production of bioethanol is not fully used.
In 2015 biogas from agricultural raw material was produced in 78 biogas plants owned by 69 companies. Polish biogas plants are designed to produce both electricity and electrical energy to produce heat. The most common plants in Poland are small electricity or electro-heat biogas plants sourcing from landfill sites.
In order to support the production of energy from renewable sources (implementation of Directive 2001/77/EC of the European Parliament and of the Council of September 27, 2001), Poland has approved so-called green certificates. A green certificate, or certificate of origin, is a document that confirms the origin of renewable energy sources. The system of green certificates has been in force in Poland since October 1, 2005. This mechanism promotes all sources of biogas regardless type of technology. Energy produced from landfills or sewage sludge brings manufacturers the same revenue as energy from agricultural raw materials. Under these conditions agricultural biogas is uncompetitive in relation to almost costless biogas from municipal waste and sewage. The final shape of Poland's regulations, aimed at supporting green energy, was established by the Act on Renewable Energy Sources. According to the Act, the system of green certificates was replaced by the auction system as of January1 2016.
Poland, as a member of the European Union, has implemented EU law on biofuels with a number of regulations. The basic requirements of two EU directives: Renewable Energy Directive (RED) (2009/28/EC) and Fuel Quality Directive (2009/30/EC), were transposed into Polish legislation with two acts:
- The Act of August 25, 2006. Bio-components and liquid biofuels. OJ 2006 No. 169, item. 1199 with further amendments.
- The Act of August 25, 2006. On monitoring and controlling the quality of fuels. OJ 2006 No. 169, item. 1200 with further amendments.
Poland applies preferential treatment to those fuel operators who use at least 70 percent of their biofuels from local manufacturers and when the biofuels are produced predominantly from raw materials originating in certain countries. The EC is of the opinion that this preferential treatment discriminates against biofuels manufacturers and raw material producers in other countries. The EC also points at the inconsistencies in requirements for the marketing of imported hydrotreated vegetable oil.