German Biodiesel Industry Peaks, Trouble Ahead

Germany’s biodiesel production capacity is set to rise to a record 5 million tons in 2007, but analysts have warned that the boom in the country’s biodiesel industry is coming to an end after the industry failed to block the government from rolling back a key tax relief scheme in court this July.

Biodiesel industry sources in Germany estimate that only about half the 5 million ton capacity will be used in 2007 following a dramatic slump in demand after taxes on biofuels were introduced. The government made the move in response to a ruling by the European Commission that Germany’s tax relief scheme overcompensated biofuel producers.
“The biodiesel industry has peaked; capacity has grown very quickly and outstripped production and now some companies might even go bankrupt as the industry consolidates,” Norbert Allnoch, director of the International Economic Platform for Renewable Energies (IWR Internationales Wirtschaftsforum Regenerative Energien), an independent research body located in Munster, told RenewableEnergyAccess.com.

The Berlin government is nonetheless continuing to target support to the one biodiesel used in a blend with convention diesel fuel—1.5 million tons in 2006. On January 1, 2007, the government made it legally binding for all fuel companies to add 5 percent biodiesel to conventional diesel sold on their forecourts and so eased the simultaneous imposition of the tax of 47 euro cents on every liter of biodiesel for blends.

As a result of the requirement, Germany is set to meet the European Union’s target for biofuel use of 5.75% in 2010. It is estimated that biofuels saved Germany 12.7 million tons of C02 in 2006. Another 1.3 million tons of pure biodiesel was sold in Germany on the open market in 2006, and it is these sales that have been hammered by the new taxes amounting to 9 euro cents introduced in August last year.

“Pure biodiesel is not competitive when taxes are put on it, especially if the oil price falls,” Karin Retzlaff from the Association of German Biofuel Industry (Verband der Deutschen Biokraftstoffindustrie), told RenewableEnergyAccess.com.

This is a problem since customers of pure biodiesel are mainly transport companies that are looking to reduce the fuel bills of their huge fleets of lorries by tanking with the cheapest fuel wherever they find it.

“The price difference right now is already critical for pure biodiesel but we fear that sales will drop even more next year,” said Retzlaff.

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“The reports we are getting are that the harvest this year has been poor and the rapeseed has a low oil content.” Retzlaff said. “Higher rapeseed prices will make biodiesel producers uncompetitive even if oil prices rise.”

Renewable Energy Access