Energy: Renewables

I am grateful to the noble Lord, Lord Beaumont, for giving us an opportunity to debate this subject. I very much agree with him that there is a dilemma about what is affordable and also renewable. It is a feature of quite a large proportion of the renewable options that they are not easily affordable. I am not going to follow the noble Lord, Lord Berkeley, down the wind avenue. I remind the Committee that quite a lot of people like to find a way to fly below the radar. I will concentrate on the renewable transport fuel obligation as it relates to biodiesel. It also relates to bioethanol, and they both have the same targets. Those targets are set at 2.5 per cent of the total diesel supply from next month, rising to five per cent in 2010. Back in November 2006, a Committee of your Lordships' House stated: "““It seems highly unlikely that the biofuels directive in its current form can provide the necessary impetus for the EU to reach the 2010 target of 5.75 per cent market share””," which is what the target was and still is for quite a lot of members, but there is discretion to set it at a different figure. At that time, an equivalence was worked out of about $80 a barrel as being the price at which biodiesel could reasonably compete with fossil fuel oil. Since then, the fuel oil price has risen and so have the prices of the feedstocks for biodiesel. So it is a moving target—that is very much along the lines of the point made by the noble Lord, Lord Berkeley. Biodiesel has not yet been produced economically; it has always needed subsidy. I go back a long way with biodiesel. I remember, when operating for the Commonwealth Development Corporation, looking at experiments in Malaysia of firing agricultural tractors on 100 per cent palm oil-derived biodiesel. It worked perfectly well. If I remember rightly, at that time the oil price equivalent needed to be $40 a barrel, but in fact was around $15. The first generation of biodiesel has, to date, depended primarily on palm oil, which is a tropical oil; soya oil derived from soya beans, which is a semi-tropical to hot temperate crop and cannot be grown in the UK; and oilseed rape, which can be and is grown here. It is the only crop which might go some way to meeting the aim of the noble Lord, Lord Beaumont. A further small source in the UK is to be found in tallow and spent cooking oil, and indeed it seems that it is being used pretty efficiently. Some buses in Scotland, no doubt having had their engines modified, are running on 100 per cent biodiesel made from tallow and spent cooking oil. However, production is necessarily limited to very small quantities. The problem at the moment is price. Since November 2006 when the House of Lords committee reported on this, the prices of the three chosen feedstocks for biodiesel in the first generation have more than doubled. The price of fossil fuel oil has also gone up, of course, but not by nearly as much. Palm oil and soya bean oil prices have been reaching new highs in the past few weeks. In November 2006 palm oil cost around $500 per tonne, while today it is achieving around $1,300. The point is that these prices are being driven up by the demand for food products, not by the demand for biodiesel, although it has been recognised in recent reports from the Department for Transport that it does add a little to the price pressure. So, given the relative price levels and the very high price of the best feedstock for biodiesel in the first generation, which is undoubtedly palm oil because it provides a much higher yield of oil per hectare than either soya or rapeseed, all three sources are uneconomic under the present UK regime because it allows for only a 20p reduction in the 47p duty. I am not suggesting that we should subsidise biodiesel to any great extent; rather I am pointing out the dilemma here and I do not want to be particularly critical because it is simply a reality. Indeed, the European Union website on the issue of biofuels is remarkably silent at the moment. Not much on it has been produced recently. It could be that someone is saying that unless and until we reach around $150 a barrel for oil, biodiesel is almost hopelessly uncompetitive. There are imports from the United States of American of a blend called B99. However, rather surprisingly, the US subsidises its biodiesel production from soya beans to a much greater extent than we subsidise ours. Where are we going with this? At the moment, we are looking forward to the second generation. We are being promised results from the jatropha plant, which produces an oil-bearing nut. The nut is inedible and the plant grows in India in hot, barren areas on not particularly fertile land. But it will be five years or even more before any major commercial exploitation of jatropha can be made. This leads to questions, which follow up on one of the opening remarks of the noble Lord, Lord Beaumont; namely, that the United Kingdom is very far down the league of producers of renewable energy and far down the league of producers of biodiesel, which again is led by the Germans using, in the main, very large quantities of rapeseed. My first question is: what is the current production of biodiesel in the United Kingdom? Secondly, what percentage of installed capacity is that production? My information is that there are plants working at well under capacity and one plant that perhaps is not working at all. Thirdly, what is the level of imports? Fourthly, what is the best estimate of the percentage of biodiesel use which the UK will achieve in 2008? I think that it will be well below 2.5 per cent. Finally, are we aiming at the right target? If so, what plans do the Government have to meet it?