Powering ahead in sustainable fuel revolution

Mar 16 2007 By Alastair Gilmour, The Journal

The North-East is about to become the sustainable fuels capital of Britain.

Plans have been given the go-ahead for a plant at Wilton on Teesside to convert 1.2 million tonnes of wheat a year into ethanol, a high-octane substance that can be blended with petrol for use in vehicles. This is the equivalent of around three billion road miles a year for an average car, or put another way, enough to keep 300,000 cars on the road for a year using a sustainable fuel.

The company behind the scheme, Yarm-based Ensus, headed by former ICI executive Alwyn Hughes, expects to see some 800 jobs created in construction and a further 100 permanent jobs becoming available when production begins in 2009.

Ensus also believes the demand for the clear, colourless liquid will sustain up to 1,500 farming jobs.

The plant, the first of its kind in the country, represents part of a £250m investment that will produce 400 million litres of ethanol a year from wheat which, hopefully, will be grown in the region.

Around 150,000 hectares of land will be needed to grow the crops, providing significant stimulation to the rural economy and a new source of financial support for the farming community.

The news was welcomed by business leaders across the North-East. Robin Twizell, managing director of Renewable Energy From Agriculture, said: "Until now there has been a lot of talk about renewable fuels but only a limited amount of action. It is definitely good news and it gives farmers in the region another outlet for their wheat."

Margaret Fay, chairman of One NorthEast, said: "The regional development agency has backed the scheme with a £1.97m Selective Finance For Investment Grant. Ensus' investment at Wilton is further confirmation of Tees Valley as a world-class base for the process industries."

The use of biofuels, such as bioethanol, forms a critical part of the European Union's strategy to reduce greenhouse gas emissions and scale back dependency on fossil fuels such as oil.

The Government has already announced that from April 2008 it will be introducing the Renewable Transport Fuels Obligation (RTFO) which will ensure a significant and stable market for biofuels in the UK, setting a mandatory target of 5% of transport fuels to be made up of biofuels by 2010.

Ensus will provide substantial underpinning to the country meeting these targets and, at full capacity, will be capable of supplying approximately 35% of the bioethanol required to achieve the targeted 5% substitution of the UK petrol market.

And, according to Stan Higgins, chief executive of the North-East Process Industries Cluster (NEPIC), now is a good time to be in the process industries. He said: "Investment is booming across the region. If you want to build a biofuels industry, Teesside is one of the places in the world you would do it because it has such a strong infrastructure for petrochemicals.

"There are more than 50 projects going on at the moment worth £5bn of investment - the Ensus one among them. In the North-East we will see £9bn sales today reach £14bn over the next five or six years. It's great news and we welcome Ensus with open arms."

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Return to glory days for ICI site

The former ICI site on Teesside, where Ensus announced yesterday it will build one of the world's largest bioethanol plants, employed more than 30,000 workers at its height in the 1970s.

It was dealt a series of crippling blows when industrial giants BP, Basel and Ineos Chlor closed plants in 2001 before Enron, which had bought a large chunk of the energy infrastructure ICI had put in place since the 1940s to service the site, collapsed later the same year.

Utilities company Sembcorp has invested £100m in the site since buying it from Enron's administrators in 2003.

Jon Rokk, development manager for Sembcorp, said: "For the first 15 months after Enron we limped along.

"The effect of those three closing down was that the fixed costs for the companies that remained went up."

Mr Rokk said the company's investment had helped to bring those costs down and place the site on an "internationally competitive" footing, which had been reflected by the decision of SABIC last month to invest £200m in a new polypropylene plant.

And in July last year, London-based Ecco Newsprint announced it will build a £275m paper recycling mill on the site.

Mr Rokk said: "There are a number of projects which, if they come off, means there is a danger of a land shortage [for industrial development] occurring ."

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Plugging into massive energy network

Teesside's massive energy infrastructure was key in attracting what will be one of the world's largest bioethanol plants to the North.

Energy will be the single biggest cost for the 400 million-litre-a-year wheat-to-fuel plant Ensus will begin building on the 22-acre site at Wilton in the spring.

The plant will need up to 20MW of electricity to power it - plugging into more than 1,000 miles of pipeline.

The pipe will carry gas and steam between sites at Billingham, Wilton and North Tees, and was put in place by the site's former owner ICI, which employed 30,000 on Teesside at its height in the 1970s.

Nobody knows the site's capabilities better than former ICI executive Alwyn Hughes, who will head up Ensus.

The company, which will begin production from the plant in earnest from early 2009, conducted a Europe-wide search for sites before settling on Wilton as the best location for the facility.

Mr Hughes said: "Teesside, and Wilton in particular, has many advantages. It is a highly integrated site in terms of energy needs and road and rail links to the port. As a centre for process industry it is one of the best in the UK and indeed in Europe."

Mr Hughes said Ensus had considered Grangemouth in Scotland and a site on the Humber for its first plant - and is still considering them for subsequent plants - but neither could offer the same energy infrastructure.

He said: "At Wilton we do not have to put in boilers or combined units which would have been a significant capital cost."

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Teesside becoming Silicon Valley of Europe

Journal Business reporter Nigel Stirling on why the industry is so important to the North-East.

Some 2,000 jobs and £500m of investment is regional development agency One NorthEast's best estimate of the wealth-creating potential of the region's burgeoning biofuels industry.

Industry experts last night estimated that the 400 million tonnes of bioethanol Ensus expects to produce from its Wilton plant alone will account for one third of the UK's requirements for the fuel by 2010.

A string of green fuel producers are lining up to build plants in the Tees Valley, which is rapidly becoming the Silicon Valley of alternative fuel in Europe.

Dr Dermot Roddy, head of Renew Tees Valley, said: "In the last few weeks I have spoken to three companies - including one this afternoon - that are interested in coming and building biodiesel plants in Tees Valley."

However, it has not been all plain sailing for the fledgling sector.

The share prices of the region's two Stock Market-listed biodiesel producers - Billingham's Biofuels Corporation and Middlesbrough's D1 Oils - have been slashed viciously in the last six months as margins have come under pressure from falling biodiesel prices and rising feedstock costs.

Before yesterday's news that Ensus has secured funding from private equity groups Carlyle Group and Riverstone Holdings, the company was reluctant to admit it had pulled a Stock Market flotation due to investor nervousness over the sector's prospects.

Dr Roddy last night said negative investor sentiment towards biofuels stocks around the world had been overdone.

He said: "There is no reason why there should be a connection made between the difficulties that the biodiesel producers are facing and the bioethanol industry's prospects.

"They are completely different industries and hopefully the news that two serious private investors have backed Ensus will see a change of attitude from [Stock Market] investors and will see some of that support coming back."

Ensus boss Alwyn Hughes yesterday said fears the demand from the company's plant and several other bioethanol facilities planned elsewhere in the UK could see prices for wheat rocket and production become uneconomic were unrealistic.

He said: "There is a structural surplus of wheat across Europe of between 15 and 20 million tonnes.

"There is a shortage at the moment because of drought in Australia. But producers will meet the demand and there are signs that production next year will be between 650 and 660 million tonnes, up from a previous high of 630 million tonnes, and that is only going to go up with the expansion of the European Union, where Bulgaria and Romania are traditionally large producers.

"That is going to have an effect on pricing, and an increase of the structural surplus means that there is going to be more than enough feedstock for both the bioethanol and food industries."

Northeast Biofuels, the not-for-profit company which aims to promote the awareness and use of biofuels, says it's important to raise the awareness of bioethanol and its benefits to North-East motorists.

John Reynolds, chairman of Northeast Biofuels, said: "Our region is already established as a major centre for the biofuels industry and there are several companies actively developing plans for bioethanol production in the Tees Valley.

"The North-East has a number of key advantages, including the availability of wheat supplies.

"The interest in bioethanol is growing rapidly - major manufacturers such as Ford and Saab are now selling `flexi fuel' vehicles able to run on either E85 or straight petrol, and several supermarkets have expressed an interest in providing the fuel on their forecourts if there is sufficient demand."