Announcement of the closure of the Hull-based Vivergo bioethanol plant at the end of September makes the UK more likely to have to export wheat from harvest 2019 and ups the Brexit risk slightly, according to Jack Watts, NFU chief advisor for combinable crops.
“We could be more reliant on exports because of this loss of domestic demand and if there is imposition of tariffs this could become more of an issue.”
Although wheat prices have been higher recently, it is the Government’s failure to roll out E10 fuel, which has a higher bioethanol blending ratio than petrol currently on sale, that has been the main factor in its closure, according to Mr Watts. “It would have been a real lifeline to the plant. A plant of that scale isn’t going to be deterred by a short term fluctuation in raw material prices.
“It needed confidence in a strategic policy environment that would allow it to flourish and the UK Government hasn’t created that environment.”
The UK’s other major biofuel plant, Ensus, based in Yarm, Teeside, is a different business from Vivergo, says Mr Watts. “Many agree that Ensus has greater short term resilience. It can use wheat and maize [Vivergo just uses wheat] meaning it can switch to a slightly cheaper material. Vivergo is heavily integrated into a supply chain. Ensus is part of the CropEnergies Group, which may give it some resilience.”
The CropEnergies Group is one of the leading European manufacturers of sustainably produced bioethanol for the fuel sector.
With Vivergo bringing in wheat from as far afield as Southampton by coasters when it reopened in April, the closure will have an effect on all UK growers, believes North East NFU crops board member Brett Askew. “We have seen a correction in wheat prices in the last two days. We are in a year when global wheat stocks are diminishing. If it was a year with plenty of stocks, the correction would have been a lot larger.”
Both Ensus and Vivergo produce ethanol and both are having to compete with world ethanol prices, which is a concern, says Mr Askew. “Cars made after the year 2000 are fine with E10. It has lots of benefits for the plants, farms, the wider economy and Paris Agreement on clean air. It is simply a matter of the Government acting on that but it did not come quickly enough for Vivergo.
“There is a concern going forward that if we get back into a more average wheat harvest and those plants were shut it could depress prices by £10-£15/tonne. They are the two largest wheat users in the UK and possibly across Europe.”
On 20 July, the Department for Transport launched a consultation on whether and how it should introduce E10 fuel to the UK market. It ends on September 16.