The UK has plans to introduce a gasoline blend using 10% bioethanol into the road transport fuel mix by 2017, market sources said this week.
Government consultations regarding the blend -- known as E10 -- have been ongoing for several months, according to the sources, and provide hope of a fresh uptick in demand for an industry suffering from a structural overcapacity in Europe, particularly within the UK itself.
The discussions led by the Department for Transport are centered around the potential effects that implementing E10 would have on UK consumers.
This includes effects on consumer costs, gasoline station infrastructure and the effect on cars over 10 years old, a source said.
The Department for Transport declined to comment.
While spot margins on ethanol production have reached historic highs in the last year, one of the largest plants in Europe remains offline since February 2015. The Croperngies AG-owned Ensus plant in northeast England, which has a capacity of 400,000 cu m/year, is regarded in the market as being key to the balance of supply and demand.
While it is offline, the market sits in a slightly under-supplied state, increasing prices and boosting profits on the remaining production. However, each time the plant has resumed production, the resulting extra supply has led to plummeting prices, sources have said. Cropenergies said in a January statement that the introduction of higher ethanol blends such as E10 in more EU member states would be key to ongoing profitability in the medium term.
With Belgium recently announcing an increase in ethanol blending to 8.5% from 4%, market participants are now looking at the UK to make a similar decision that could boost EU demand for the biofuel.
The implementation of E10 in other European countries has had mixed results. Consumers in Germany have been hesitant in choosing the blend at the pumps over the E5 grade. One source however, expressed belief that implementing E10 in the UK "would just work," citing the success of the blend in France, Finland and Sweden.
Demand has been the main driver of prices in the T2 ethanol market over recent months, and as the low demand period of the first quarter has seen prices fall, sources have said that fresh impetus by way of increased mandated demand is what will reintroduce new life into the market.
