Paul Wightman, CME Group
AT A GLANCE
- For the first time, waste oils are being blended into the energy mix for use in road transport, marine fuels and other diesel applications.
- Europe imports around 1.4 million tons per year of used cooking oils with China as the largest supplier
Did you ever imagine that eating in a restaurant or takeaway could help to reduce the impact from climate change? Changes are occurring in the energy markets that are making this a growing reality. Waste oils from the hospitality sector are being seen by governments as a replacement for traditional fossil fuel-based products.
Restaurants have realized that the vegetable oils they use to cook are commanding high prices in international markets, and some are working with regional collectors and traders who have contracts with the energy industry for the oil. The energy industry, especially in Europe, is one of the key players thanks to changes in regulation that means these used oils have plenty of residual value.
For the first time, waste oils are being blended into the energy mix for use in road transport, marine fuels and other diesel applications. Used cooking oil (UCO) is one of the big winners to emerge. These changes that are prioritising the repurposing of waste products as energy feedstocks is the key pillar of Europe’s new “Green Deal” commitment to funding post-coronavirus recovery.
Market Appetite for Used Cooking Oil
Europe imports around 1.4 million tons per year of used cooking oils from Asia, the Middle East and the Americas. China is the largest supplier, due to its vast array of takeaway and restaurant outlets. The Renewable Energy Directive (RED), the legislation that sets the rules for EU to achieve its renewables target, could see demand soar to around 11 million tons per year by 2030, a 10-fold increase from current levels as governments push to comply with tightening regulations.
Unlike other animal fat or crop-based products, used cooking oils are high in greenhouse gas (GHG) savings which make them attractive as an energy feedstock. Many European countries measure GHG savings as a way of recording compliance with renewable targets. Used cooking oil has a greenhouse gas saving level of 87% compared to around 60% for other related products.
China Fueling Growth in Waste Oils
Used cooking oils and other advanced feedstocks look set to compete head on with the more traditional crop and animal fat-based products that have dominated the European energy market. Evolving Renewable Energy legislation is forcing the hand of governments to use more waste-based products as they aim to reduce their carbon footprint.
Increasing Green Credentials
Hydrotreated Vegetable Oils or HVO are another segment where used cooking oils are expected to play a more significant role. HVO can be produced from any vegetable oil, animal fat or used cooking oil but crucially it can be fully substituted for petroleum products such as kerosene or diesel. Transport companies have been looking at HVO as a way of increasing their green credentials since it produces very low carbon. Uncertainty over future supply is expected to lead to increased price volatility and therefore further underlying the need to manage the risk appropriately.
Source: PRIMA Markets
Waste Oils Support Drive to Net Zero Carbon
Waste oils have a bright future in the energy sector with governments seeing them as a way of tackling the issue of climate change. Waste oil collectors must continue to work with the restaurants and takeaway outlets to ensure a continuous supply of feedstocks into the energy market. This will become particularly important in the 2021 to 2030 period as the energy markets continue to decarbonize. There are many environmental benefits to UCO, and they are quickly becoming a large- scale energy source.So the next time you dine out you will be doing your part to reduce the impact from climate change.