A specific mandate for lignocellulose and waste and residue based advanced biofuels was our vision 10 years ago when UPM in February 2012 made the investment decision to build our first biorefinery in Lappeenranta, Finland. We believe the mandate will further boost investments in advanced biofuels.
Looking back at the last 10 years our operating environment has changed tremendously. Let me consider some of those changes: complexity, growth, and the new kid on the block.
1. Policy and complexity and political complexity
The policy drivers for biofuel policy have changed in the past 10 years. Today climate change mitigation is at the core of all industrial policies. We at UPM Biofuels welcome this as it has the potential to give a further boost to advanced biofuels.
What does give cause for concern is the complexity of the regulation we are facing today. While in the past it was easy to explain relevant regulation with RED and FQD, today we need to consider close to 10 directives that are currently on the policy makers' tables.
Last year the European Commission made a comprehensive proposal on the EU’s future climate and energy policies up to 2030 and further. Many proposals are leading to more stringent emission reduction requirements in multiple sectors. While we welcome the increase, for example, in the advanced biofuels mandate, being subject to up to 10 directives does increase policy risks for the biofuels industry. While we call for simplification of the regulatory set up and request for technology neutrality, it seems there is no turning back and the industry needs to cope with the new regulatory environment.
2. Tremendous growth of our industry
During the past year or two we have seen a strong increase in investment announcements, especially in HVO but also in advanced biofuels. UPM also has desire to grow.
Global demand for biofuels is expected to rise substantially by 2030. Advanced biofuels play an important role in UPM's Biofore strategy by offering innovative and sustainable alternatives to fossil-based products. The UPM Lappeenranta Biorefinery, with an annual capacity of 130,000 tonnes, has acted as a model example for creating a successful new business and it highlights the value of UPM's long term investments in R&D and innovations.
In January 2021 UPM moved forward with biofuel growth plans and started the basic engineering phase of a next generation biorefinery. The potential biorefinery would have an annual capacity of 500,000 tonnes of high-quality renewable fuels including sustainable jet fuel. These products would significantly reduce the carbon footprint of road transport and aviation, as well as replace fossil raw materials for chemicals and plastics with renewable alternatives.
The planned biorefinery would improve the long-term competitiveness and sustainability performance of UPM Biofuels by introducing several sustainable feedstocks. Work on the potential investment project continues.
3. New Kid on the Block: RFNBOs
There was little talk of RFNBOs a decade ago! Today they are at the core of the EU’s climate policies. Hydrogen-based fuels are considered an essential tool in reaching the EU’s climate targets. While the expectations on how fast and at what scale RFNBOs will be rolling out may be over optimistic, we consider the strong commitment and associated mandates as a positive signal. UPM is intensively investigating opportunities to utilise our know-how and assets to benefit from the growth of hydrogen-based fuels. We have access to CO2 free electricity, our own biogenic CO2 resources, and strong competences in existing hydrogen production. I trust this cocktail of competences and assets will provide great opportunities in the coming years.
4. Final words
As I will be leaving UPM Biofuels and the biofuels industry for new challenges this Spring, I want to thank all UPM Biofuels stakeholders’ and the whole biofuels industry for their cooperation during the past many years. The industry needs to work together to promote the outstanding opportunities that biofuels have in combatting climate change.
This article by Panu Routasalo, Vice President of UPM Biofuels, was first published in Biofuels International Magazine with the title Looking ahead to a better year - Leading biofuels figures discuss the challenges and opportunities that lay ahead over the next 12 months in January 2022.