Government proposal concerning amendments to the act on biofuels and bioliquids has been published on 14 May 2020. The proposed amendments would expand the current application of the national sustainability system and implement nationally the sustainability criteria regarding solid and gaseous biomass fuels and greenhouse gas (GHG) reduction criteria.
The recast Renewable Energy Directive (EU) 2018/2001 (RED II) will be implemented in national legislation by 30 June 2021 through several pieces of legislation. Below is a brief overview of certain selected matters.
Sustainability criteria under RED II
The purpose of the amendments to the act on biofuels and bioliquids is to ensure that biofuels, bioliquids and biomass fuels consumed in Finland have been produced in sustainable manner. Plants producing power, heating or cooling with total heat output of at least 20 MW in case of solid biomass fuels and at least 2 MW in case of gaseous biomass fuels would be obligated to show that the sustainability criteria and GHG reduction criteria are fulfilled. The duty of other operators to demonstrate the fulfilment of the sustainability criteria regarding each biofuel, bioliquid and biomass batch or raw material batch would be based on other applicable legislation or decision regarding state aid for the investment.
The impacts of the Government proposal on operators would depend on the type of fuel they use:
1. Biofuels and bioliquids
Implementation of the sustainability criteria of RED II in Finland has been estimated to not result in significant changes to costs or business models of operators in biofuels and bioliquids sectors. However, they will need to update their current sustainability systems to cover their use of solid biomass fuels in energy production. The tightened GHG reduction criteria may encourage R&D operations. The regulation is expected to remove uncertainty and thus encourage investments. Larger impact to competition between biofuel operators may be caused by the increased EU wide objective for renewable energy use in transport, 14 % biofuels in all member states by 2030, which includes a separate sub-objective for advanced biofuels.
2. Gaseous biomass fuels
Expanding the sustainability criteria has been estimated to increase the costs of operators in the biogas sector. Several businesses in the biogas sector or entering it do not have previous experience of the sustainability criteria, verification or quality systems and thus complying with obligations regarding proving sustainability would require human resources and possible IT system investments. The costs depend on the nature and extent of the operations and amount and origin of raw materials.
In energy production, sustainability criteria and GHG emissions reduction criteria are applied to plants using gaseous biomass fuels generating electricity, heat and cooling with total heat output of at least 2 MW. The scope of application may direct investment size and procurement of raw material and encourage investments to plants under the 2 MW limit to minimize administrative burden.
The 2 MW limit does not apply to gaseous biomass fuels in the transport sector. The costs of establishing the sustainability system and maintaining it may be too economically strenuous to small transport biogas plants. Thus, it is possible that refining and distributing biogas for transport use may lead to concentration of the market.
The regulation and operating environment of biogas business is in transition and therefore the impact is difficult to estimate. At the same time, the production of biogas has been estimated to increase significantly. Opening of the Finnish gas market and differences in national legislations have impact on competitiveness of domestic biogas production and sales and it also enables export of Finnish biogas.
3. Solid biomass fuels
Under RED II, compliance with sustainability criteria and GHG emissions reduction criteria are prerequisites for receiving subsidies to solid biomass fuels. For example, if an installation covered in the EU emissions trading scheme (ETS) could not demonstrate that the solid biomass fuel it uses is sustainable and thus could not report the emissions factor of the biomass fuel used for energy production to be zero, it would lead to significant additional costs for burning biomass, depending on the price of emissions allowance.
Expanding the sustainability criteria has impact on the costs of energy producers using solid biomass fuels through verification and proofing, systems and contracts relating to it as well as other businesses in the production and supply chain. The collection and management of origin information needed to demonstrate sustainability may require new investments and changes in practices from forest biomass supply chain companies. This kind of information is likely to be contractually required from the companies in the forest biomass production and supply chain that supply forest biomass to operators under the act on biofuels and bioliquids.
In production of electricity, heating and cooling, sustainability criteria and GHG emissions reduction criteria concerning solid biomass fuels are applied to plants with total heat output of at least 20 MW. Small energy producers are outside the scope of application. It has been estimated that if energy producers set strict and detailed requirements for documentation and systems to demonstrate the origin of raw material, at least small and mid-size suppliers of solid biomass fuel may incur considerable costs and market may concentrate.On the other hand, GHG emissions reduction criteria and sustainability criteria may encourage development of new solutions and innovations in reducing GHG emissions and verifying the origin in fuel production and supply chain.
Permit-granting processes for renewable energy production plants
Despite efforts, the environmental permit-granting processes in Finland are not very streamlined. RED II requires EU member states to establish a contact point to guide and facilitate applicants for renewable energy projects through permit-granting processes and provides time limits of permit-granting processes. RED II is applied to production of electricity, heating and cooling, refining biomass to biofuels used in transport, to bio liquids for other energy use, gaseous or solid biomass fuels and other energy products as well as to production of liquid or gaseous transport fuels of non-biological origin, such as hydrogen. Under RED II, permit-granting process would not be allowed to take more than two years, including all permit-granting processes. Applications concerning plants with power production capacity of less than 150 kW and repowering of current power plants producing renewable energy should be solved within one year. The time limits include all permits required for realisation of the project. Particular challenges relate to time limits of permitting and projects that need several permissions with different competent authorities.
However, appeal processes do not impact the time limits and they can be extended due to appeal process. Same would apply to complying with EU legislation, most requirements of which have been implemented in national legislation. For example, the environmental impact assessment (EIA), which can take over two years in a wind power project, is not a permitting procedure and not included in the time limit. There are also exemptions from the time limits.
Government proposal is expected during October 2020.
Guarantees of origin
RED II includes regulation concerning guarantees of origin (GoOs) for all renewable energy sources. The current legislation concerning GoOs would be expanded from electricity production to cover also production of gas, heating and cooling. GoO legislation would also concern hydrogen. Government proposal is expected during September 2020.
Promotion of use of biofuels in transport
In addition to implementing the regulations of RED II concerning the biofuels, bio liquids and biomass fuels consumed in the transport sector, the Government proposal is expected to include measures to promote the transition of heavy transport and air transport to the use of sustainable biofuels. Furthermore, the Government wants to review the possibility to include sustainably produced biogas into the biofuels distribution obligation. Government proposal is expected during November 2020.