UCO IN THE EU
Even though core players of the UCO market (restaurants and fast food chains) have been lately decreasing their output due to better efficiency, a great potential still lies in households and small – scale restaurants. However, due to the fragmentation of these actors, collection costs are significantly higher. Currently, 35% of the resource is collected in the EU, of which 90% is used for biodiesel production.

LEGISLATION
Following the enforcement of the Renewable Energy Directive (RED), an increasing number of EU Member States are implementing the double counting scheme into their national laws. Designed to boost the market share of biofuels made from waste and residues, which enjoy significantly better GHG savings performances, double-counting schemes strongly impact the biodiesel market in the EU. When the current transitive period will be over, by the end of 2012, UCOME and TME markets will be more defined and demand for associated raw material will stabilize.

UCOME and TME
Although limited and fragmented in terms of producers and country involvement, the market for UCOME and TME is slowly growing thanks to higher quantities of waste being used for fuel, as well as favorable legislation. The UCOME + TME consumption in Europe is relatively small, representing approximately 5%, and only 3% for the double counting market.

Overview of used cooking oil market

The waste cooking oil (UCO) collection plays a vital role in the move towards sustainable production of biodiesel. The sector in Europe has an estimated turnover of 580 million euros and encompasses over 600 companies.

Despite significant market potential, barriers to market development remain. Uncertainty on the product properties, higher efficiency of fryer and weak market transparency in this highly fragmented market are crucial factors. In the ever more consolidated industry, 25% of the collectors control around 80% of the collection – with others being small companies, collecting no more than 25 tons of used cooking oil per month and annual turnover around 200k€. As demand for UCO is growing, one can observe numerous mergers & acquisitions undergone by smaller collectors. Despite room for potential growth of UCO collection, the food industry and fast-food restaurants – the biggest and easiest resource of UCO - are learning to manage their oils better and are thus moving towards lower oil usage.

The market of UCOME and TME

The market of UCOME and TME, even though gaining pace as more end users become comfortable with the regulations and plants get certified, is still limited. It is encouraging for the industry that more focus is being placed on waste material and that subsidies and tax breaks are enticing more participants into this particular market.

Markets for biofuels across Europe are extensively different, with 6% share in France, while holding a level of 2.5% in the core UK market. The number of producers is typically 2-3 per country. In total, EU biodiesel production share rose by 11% thanks to favorable legislation.

To avoid excess amount of crops being dedicated to biofuel production, European Commission encourages the use of waste material such as UCOME and TME to be under the double counting scheme and thus count for twice their real energy value.

Driven by the implementation of the double-counting schemes in the Netherlands (2009) and France (2010), the demand for waste based biodiesel in the EU has considerably increased in the recent years. Today, the driver for TME and UCOME demand is exclusively the double-counting schemes’ implementation. Although official data do not exist for these special qualitites, it is possible to quantify the demand in countries that have implemented doublecounting schemes or strong incentive measures, such as UK. The demand for UCOME in the UK is likely to be negatively impacted by the replacement of the tax break as less UCOME will be needed by each fuel distributor to fulfill its blending obligation.

Through its Renewable Energy Directive, the EU set a target for year 2020 to implement at least 10% of renewable energy in the transportation system and thus introduced the double counting scheme on 2nd generation biofuels from waste and residues. It makes biofuel produced from waste count for double its actual energy worth. This scheme has already been implemented in countries like France, Germany and the Netherlands, while it is still waiting for implementation in other member states of the EU.

In Germany, traceability issues prevented so far to implement the scheme in practice for UCOME but chances are great to see the problem resolved by the end of the year. However, TME will be excluded from the scheme. In this case UK, Italy and Spain would follow this direction, the consequences on UCO prices would be dramatic.

The double counting scheme application to both UCO & Tallow would provide wider resources of feedstock, which in turn would help stabilize the raw material price levels. In addition, the price of such feedstock exceeding the local veg-oils market would be prevented.

The consumption of biofuels is predicted to grow an an annual rate of 12.8% for the 2010-15 period. However, compared to 29% between 2006-10. Inside this market, in 2011, the UCOME + TME consumption is relatively small representing approximately 5%, and only 3% for the double counting market.

Next year, even if the doublecounting schemes are implemented in Italy, Spain and Germany, the UCOME + TME demand for double counting will remain modest with around 6% of the total biodiesel only, but with a more significant impact at the country level.