LONDON, Reuters - Britain can grow enough wheat to supply the needs of food, feed and fuel producers, the head of a UK biofuels company said in an interview.
"UK Agriculture Plc, if it were a factory, has been running at maybe 60 percent of capacity. We've not been saying to our farmers we really want supply, can you bring it to us," said Dave Knibbs, chief executive of biofuels company Vireol.
Vireol is planning to build Britain's third major biorefinery, which will use about 500,000 tonnes of grain a year to produce 200 million litres of bioethanol, 175,000 tonnes of a high-protein animal feed called dried distillers grains with solubles (DDGS) and 130,000 tonnes of carbon dioxide.
The refinery is expected to be up and running in late 2013.
The growing use of food crops such as grains, vegetable oils and sugar cane to produce motor fuel has been blamed by some analysts for contributing to a rise in food prices.
A spike in the prices of food commodities sparked riots in several countries in 2007/08 and has been cited as a factor in the recent wave of unrest sweeping across North Africa.
Knibbs said farmers in the European Union have had little incentive to expand during much of the last 20 years, with the EU's Common Agricultural Policy paying farmers to set land aside.
"We have had a period of relatively low prices until the past three years. There is huge upside for yields," he said.
Bioethanol, a substitute for petroleum, is generally made from grain and sugar crops. Vegetable oils, mainly rapeseed oil in Europe, are used to make biodiesel.
The initial expansion of the EU biofuel industry was driven mainly by biodiesel, but Knibbs said there is more growth potential for bioethanol, which is the main renewable fuel in Brazil and the United States.
For bioethanol, there is also less of a conflict in the food-versus-fuel debate, he said.
MORE FRYING
"(Vegetable) Oils is always going to be an issue for the world today. If you look at global demand for food, we are eating more protein and frying more," he said, adding that it was also much easier to grow starch and sugar crops than oilseeds.
The meal from oilseed crops such as soybeans and rapeseed are an important source of protein for livestock.
Knibbs said the high-protein DDGS produced by bioethanol plants in the UK such as the one planned by Vireol would help to reduce Britain's dependence on imports of oilseeds.
Opponents of biofuels have also expressed concern that changing the use of land, particularly the destruction of rainforest, to expand production would release carbon and accelerate climate change. Much of these concerns centre on crops used to produce biodiesel, particularly palm oil in south-east Asia.
"Some feedstocks are better than others. They are not all created equal," Knibbs said.
Britain's first major wheat biorefinery and the only one currently up and running, the Ensus plant in Teesside in northeast England, raised funds through project finance. Ensus is owned by two U.S. private equity funds, the Carlyle Group and Riverstone.
The second, which should come on line later this year, is being built by Vivergo Fuels, a joint venture of British Sugar, BP and Du Pont Co..
Vireol, like Ensus, will rely on project finance, which is being raised by Future Capital Partners.
Knibbs said the debt portion of the financing had been more challenging than the equity.
"Debt markets have been tough. Banks have looked very carefully at where they think it makes sense to place money," he said, adding that the equity percentage of the financing had been increased and "as a result we do have a bank on board".
All three biorefineries will be on England's east coast, with the Vireol project the most southerly at Grimsby.
"The grain surpluses that exist (in England) tend to be in the south. I think being the furthest south is a benefit," he said.
(c) Copyright Thomson Reuters 2011.
