HVO 100, also known as Hydrotreated Vegetable Oil, is gaining increased foothold as a sustainable fuel in transport. Several truck manufacturers have approved it for their engines, and more suppliers are looking into production schemes. With strong growth and an estimated of up to 80 - 90% reduction in emissions compared to traditional fossil fuels, NLA gives its view on the prospects of what we can expect in the future.
HVO 100, also known as Hydrotreated Vegetable Oil, is the new buzzword in road transport. In late February 2016, Mercedes-Benz was the latest in line to approve HVO for a number of their engines, following Volvo, MAN and Scania. HVO 100 is already deemed superior to traditional fossil fuels with a reported 80-90% in CO2 reduction compared to traditional diesel, according to NLF, the Norwegian Road Hauliers Association (Lastebil, 2015). Based on these numbers, it could be assumed that should road transport broadly utilize HVO 100, the industry could silence the ongoing discussion of providing CO2 standards for trucks in the EU.
However, the challenge for biofuels has often been the supply. In 2016, the Finnish company Neste Oil is by far the largest actor with an estimated production capacity of 3 million cubic meters per year, a large number considering Norway’s current annual consumption of diesel (levied) is estimated to 1.8 million cubic meters (Teknisk Ukeblad, 2015). With its four state-of-the-art plants: two in Finland, one in Holland and one in Singapore, Neste Oil represents 69% of the market, also spending 80% of their R&D budget (more than 30 million euros) on research for new materials for production of HVO (Greenea, 2015). As for competitors to Neste Oil, Honeywell/UOP together with Eni is currently developing refineries in Italy, while petroleum giant Petrixo Oil & Gas will develop a HVO production plant in the United Arab Emirates. Others have also developed their proprietary technologies for HVO, including Nippon Oil, ConocoPhillips, Total, BP, Petrobras and Haldor Topsoe. HVO 100 has undoubtedly triggered the attention from key companies in the sector.
The sources for HVO vary from animal fats, waste, residuals, used cooking oil, PFAD (Palm Fatty Acid Distillate) to crude palm oil. A major advantage of HVO is that most materials used to produce it, including palm oil with methane, all fully comply with EU’s Fuel Quality Directive stating that biofuels must have at least 35% lower emissions than the fossil fuels they replace, a percentage that will be even more ambitious and increase to 50% in 2017.
Today, Neste Oil consume much PFAD and palm oil in their HVO making, a production process that has raised discussions. EN 590, the European Commission standards for physical properties that all automotive diesel must meet, does not take any position if the type of feedstock is fossil or renewable in the making of HVO or on the way such materials are blended and processed (Neste Oil, 2014). The only requirement is for the fuel to meet defined technical standards, in which HVO is largely exempt given that HVO belongs to the group of hydrocarbons which are blended together with a hydrocarbon matrix of a fuel blend (Neste Oil, 2014). Furthermore, the Fuel Quality Directive of 98/70/EC as last amended by Directive 2009/30/EC states that biofuels is defined on the basis of their feedstock path and is not obliged to any requirements as to how the final fuel has been produced or its chemical composition (Neste Oil, 2014).
PFAD has recently been center of controversy when it was accepted by the Norwegian Environment Agency as a waste eligible for HVO production. Stakeholders concerned with the environment fear that the acceptance of PFAD in the HVO production process will increase the global demand for palm oil, a potential link to deforestation from the areas they are found in abundance. These areas are generally from South-East Asia where deforestation in countries such as Indonesia and Malaysia is already prevalent (NRK, 2016). In early march 2016, Norwegian Minister of Climate and Environment, Vidar Helgesen requested the Norwegian Environment Agency to make a new assessment of the demands for biofuels materials (NRK, 2016). On the other side, ZERO, one of Norway’s most prominent environmental NGO’s and strong advocator for HVO stated that they would prefer PFAD before any type of fossil fuel, but given its contribution to deforestation that an alternative to PFAD must be implemented quickly to prevent long-term harms to the environment (Lastebil, 2016).
On EU level, a report published in early 2016 from Directorate-General for Internal Policies of the European Parliament highlighted that biofuels was deemed a limited resource. This is a statement that could only be reinforced if PFAD will be banned from HVO production in Scandinavia, without a viable alternative to replace it in abundance and quality standards.
Looking at external effects, the availability of HVO could see early stages of unfair competition. For example, in Norway where major actors in road transport including Posten Bring and Tine is favoring use of HVO for many of their vehicles, a possible market demand from other smaller actors to live up to equal CO2 emission standards could create an uneven playing field if the availability is not yet there. Another aspect relates to control. There needs to be regulatory bodies ensuring the production of HVO is right, suppliers deliver the correct feedstock, and that transport buyers control that the transporter are actually utilizing HVO. Fortunately, EU legislation is already in place with the sustainable certification according to the Renewable Energy Directive. In contrast to fossil fuels, HVO comes out on top given that high emission sources such as diesel must not certify their fuels, making the origin of many fossil fuels uncertain compared to what should be the case for HVO. The broad range of HVO feedstock must be more thoroughly tested however, with a long list of materials such as chloride content, polymers and metals that could run the potential risk of damaging the production plant. More research is still needed.
Despite some initial concerns HVO 100 is promising for the road transport sector. NLF has initiated a real-life test of the product to see what the benefits are from using HVO 100 in real road transport operations. In addition, NLF has also signed a 5 year agreement with Norwegian petroleum giant, Statoil, to provide an annual volume of 180 million liters of fuel. The agreement has the ambition of reducing CO2 emissions in heavy road transport of at least 75% (Klikk, 2016).
Overall, while HVO 100 is still in the developing phase, it’s difficult not to argue that the biofuel has come to stay, and will have a strong presence in the conceivable future.