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Europe’s largest bio-refinery, the £300m Ensus plant on Teesside, is to resume production following a 15-month shutdown.
Ensus said production would restart at the end of this month after market conditions improved thanks to the resolution of regulatory and tariff issues, which had hit demand for European ethanol.
The start-up is welcome news not only for about 100 Ensus employees, who have been kept on full pay throughout the shutdown, but also for a wider UK supply chain that supports 2,000 jobs. These include process and storage companies, hauliers and farmers who produce the wheat processed to make ethanol and use the high protein animal feed that is one of the plant’s by-products.
The Ensus project was founded by former ICI executives and established in 2007 with backing from international banks and private equity groups including £90m from Carlyle and Riverstone Holdings, at a time when optimism about biofuels was high. But the plant, which started operating in February 2010, blamed depressed market conditions for halting production in May last year.
One of the main problems was the import into Europe of US-made ethanol. This benefited from US subsidies and a loophole in the EU tariff system that classed it as a chemical, rather than a biofuel, since it was a blend of 90 per cent ethanol and 10 per cent gasoline. Now, however, the US subsidies have been withdrawn and the EU Customs Code Committee has closed the classification loophole.
Welcoming Tuesday’s news, Ian Swales, Liberal Democrat MP for Redcar, said the UK government’s vote to close this loophole, rather than following a free trade approach, was key to achieving a majority and blocking a market distortion. Other big UK ethanol refinery projects in eastern England will also benefit from this decision.
The gradual phasing in by EU member states of the EU’s Renewable Energy Directive, which requires that a proportion of transport fuel must come from renewable sources, is also helping commercial prospects for European ethanol producers.
The Ensus plant will reach full operation within two months. It was created to process more than 1m tonnes of wheat annually, to produce about 400m litres a year of ethanol, for sale to oil major Royal Dutch Shell for use in petrol; 350,000 tonnes of high protein animal feed for sale to commodities trader Glencore; and 350,000 tonnes of carbon dioxide for food and drink industry use. Ensus declined to discuss the financial costs of the lengthy shutdown.
While the principle of using potential food crops to make biofuels has encountered controversy internationally, Mr Swales said within the EU farmers were still being paid not to produce crops, so displacement arguments would be “fatuous” in this instance.
A key environmental justification for the Ensus plant is that its high-protein animal feed displaces imports of soya, used to enrich other feed. “There’s a big environmental plus in this project,” said Mr Swales.