There is an important underlying factor behind the demand for renewable fuels, the distribution obligation of the EU. A new term for many, the distribution obligation was imposed in 2008 when the EU wanted to take action to slow down climate change. Finland's goals are even more ambitious. It is a huge challenge, but there are means to achieve it.
Two obligations regarding traffic were imposed at the EU level in 2008. They are partially overlapping. Firstly, the share of renewable energy from the energy content of fuels must be increased to 10% by the year 2020. Secondly, the Fuel Quality Directive states that the CO2 content of fuels must be decreased by 6% by 2020.
The distribution obligation can be met with the help of electric cars, for example, but not many people are driving electric cars so far. This is why the distribution obligation is being met with the help of biofuels, such as ethanol, renewable diesel, and (to a smaller extent) biogas.
Bar is even higher in Finland
The bar has been lifted even higher in Finland: in fact, it is double as high as in the EU. The Finnish biofuel distribution obligation states that the share of renewable energy from the energy content of fuels must be increased to 20% by 2020.
According to Helena Vänskä, the Managing Director of the Finnish Petroleum Federation, the requirement will be raised in stages in Finland. The share of renewable energy must be 6% this year, 8% next year, and 10%, 12% and 15% the years after that. The full obligation of 20% will enter into force in 2020. The share is calculated from the annual total fuel sales of each distributor.
How will Finland reach its distribution obligation? The situation is not the same for diesel and gasoline
Neste Oil is of the opinion that the strict Finnish distribution obligation is a positive issue. "In order to reduce greenhouse gas emissions, we must set ambitious goals," says Lars-Ove Karlsson, who is in charge of bio-optimization and sustainability at Neste Oil. The distribution obligation also encourages people to use renewable energy and reduce the country's dependence on imported oil.
The Finnish distribution obligation applies to fuel distributors. They must add a specific share of biocomponents into their fuels. How will Neste Oil meet its distribution obligation?
"We are lucky in the sense that we are the world's leading manufacturer of biofuels," says Karlsson. Neste Oil has resolved the mixing problem.
In diesels, Neste Oil has the renewable NEXBTL that can be freely mixed with regular diesel as long as the quality regulations and standards are taken into account. This is important because the demand for diesel is expected to remain quite stable, since heavy traffic is highly dependent on it.
"NEXBTL is very important for us. It is a whole new technology and innovation. Traditional biodiesel is an inferior product when compared to regular fossil diesel, and only around seven percent by volume of it can be mixed with fuel, whereas NEXBTL is a superior product when compared to regular diesel and improves the fuel's properties," Karlsson says.
Different solutions for gasoline
The biofuel blending limitations pose challenges in the case of gasoline. Some vehicles are only able to utilize a gasoline blend that contains 5% or 10% of the most common biocomponent added to gasoline, ethanol.
"When the distribution obligation was laid down in Finland in 2008, we believed that 'Flexifuel' vehicles would quickly become common," says Helena Vänskä, the Managing Director of the Finnish Petroleum Federation. Flexifuel vehicles are cars that can flexibly manage different contents of the biocomponents blended with gasoline, mainly ethanol.
"The development was not as fast as we expected, however: the current number of Flexifuel vehicles in use is only a fraction of the expected number," Vänskä says. "This is why 'drop-in' solutions – meaning biofuels that can be freely added to the current fuels – are important: they can be used by the vehicles currently in operation." Neste Oil NEXBTL is an example of a drop-in fuel.
The "double counting" mechanism is also factor in achieving the distribution oblgation. The amount of biofuels manufactured from waste and residues is doubled when calculating the achievement of the distribution obligation.
"This was one of the reasons why Finland dared to accept the tougher challenge," Vänskä explains.
Meeting the gasoline obligation is also easier because of the lowered demand for gasoline. This trend is expected to continue as the consumption levels of passenger cars continue to decrease.
Waste and residues – one of the solution
One of Neste Oil's solutions to meet the distribution obligation is to use waste and residue-based inputs in renewable fuel production.
From climate perspective, this is a very significant orientation in raw materials. By using, for example, waste animal fat from the food industry in renewable fuel production it is possible to decrease greenhouse gas emissions by approx. 91% compared to fossil fuels. Roughly the same percentage is achieved by using waste fat from fish processing (84–88%) and palm oil fatty acid distillate (89%).