Game of fuels

Argentina’s congress recently gave the green light to the government’s biofuels bill, which replaces 2006 legislation that expired in May.

Under the draft legislation, the minimum proportion of bioethanol in the gasoline mix remains at 12% and the minimum proportion of biodiesel in the diesel mix is 5%, down from 10% currently. The framework, which the government says is geared to sector promotion, also opens the door for future cuts.

The government has said the bill is aimed at “providing certainty and conditions that permit the development of a diversified activity and avoid [market] concentration in the sector.” 

Verónica Geese, former energy secretary of Santa Fe province questions the focus of the bill and whether it would indeed spur the sector.

To find out more, BNamericas spoke to Geese, a driving force behind a public-private lobby formed in 2018 to support the industry and draft an associated legislative proposal, the Liga Bioenergética.

Today, Geese works as an energy, sustainability and governance consultant.

Impacted by COVID-19 fallout on consumption and demand as well as high inflation and a price freeze, the biofuels sector was hammered in 2020, forcing plant closures and layoffs. 

Biodiesel production was 1.16Mt in 2020, down from 2.15Mt in 2019, according to energy department data. Bioethanol production was 808,724m3 in 2020, down from 1.073Mm3 (million cubic meters).

The federal government is focused heavily on spurring hydrocarbons development and investment at the Vaca Muerta shale formation.

BNamericas: Congress approved a biofuels bill. The government says it is a framework that is promotional in nature. What is your view, that is to say, what impact could this bill have on the development of the industry? 

Geese: I don’t see it as a project that was put together as a promotional regime. The law it is replacing, law 26,093 [in contrast] was a promotional regime; it created the demand conditions to spur supply.   

When you read the text of the current bill, the writing, the cadence of the phrasing, the choice of words, makes it very clear that biofuels, in politics, are not desired. 

It reflects, shows little ambition, with respect to biofuel utilization percentages, and does not address other biofuels that are not necessarily biodiesel or bioethanol, all the other raw materials, biogas for example. We should have included biogas, giving it the same status, given that it also replaces hydrocarbons. 

It is regulatory in nature, and that is not good for the industry because the signals it gives constitute a backwards step,

The main issue here is not just the fact there is a reduction in the mix or that it opens the door for cuts, but that there was a bill – along with all the other biofuel bills presented over the past 10 years – that increased the proportion [of biofuels in the finished fuel mix].

It [the bill] really is a backwards step when you consider what had been expected, given today’s world, where sustainability is in focus.

What I would just like to make clear is that there were sectors of the industry that supported it. It is not the case that everyone was against it. They supported it, I believe, as it was the only way to ensure their future existence. 

They would have obviously preferred the legislative proposal we developed jointly, but there are many companies that produce just biofuels, that don’t have other products, and without any law would cease to exist. 

BNamericas: Based on your experience as energy secretary of Santa Fe province and founder of Liga Bioenergética, in a nutshell, what type of general measures are needed to support the industry?

Geese: First, there needs to be political consensus regarding the need to promote biofuels, that they are seen as part of the renewable energy sphere. In this regard, today you don’t see political treatment of renewables, in general, either, above all by pro-government political forces. You don’t see them being viewed as a policy priority. 

This heavily impacts investment decisions … you just don’t have the political tailwinds, the support. When deciding where to invest your money, you are acutely aware of not only the macroeconomic scenario, the global geopolitical situation, but also local politics.   

The things that could be worked on [today] to improve the energy matrix, are hindered, and we look to a horizon that is as far away as you could imagine, and that is hydrogen and the transformation of lithium.  Who is going to think of investing in these things when people invested [during the previous administration] in renewables – wind, solar, and in the case of biofuels there was a spike – and then the next administration took a backwards step.

The political image we are projecting is not good and it is not clear why. But much has to do with the government’s openly expressed desire that the energy transition in Argentina is via the natural gas of [shale formation] Vaca Muerta.

BNamericas: Santa Fe has its own law, which tasks the executive with the mission of driving mass usage of biofuels, both liquid and gas, pure or mixed. How innovative is that law and what is the situation regarding its implementation?

Geese: When we were in office – I was energy secretary from 2015 to the end of 19 – we embarked on the road of debunking preconceptions and myths about the technical limits of using higher proportions of biofuels. That is what they were: myths.

We proved this via the [public transport scheme that saw buses running on 100% biodiesel] BioBus project … This spurred development of the law. Santa Fe was the first to have one. About a month and a half after we introduced it, Córdoba [province] introduced theirs, with a similar model but with additional facets covering the likes of biogas, etc. 

It was very innovative, given it was the first province to decide to modify its energy matrix. This was obviously opposed by the oil firms. Imagine if each province started to have its own regulations – which they can, as the constitution allows this; it would create more problems for the oil firms.

Unfortunately, around a year after the law was sanctioned, Santa Fe hasn’t yet published the secondary legislation, it hasn’t advanced. In contrast, in Córdoba, there has been major advances. They have issued some secondary legislation; they have created economic incentives for the installation of plants. And they continue working, developing regulations.

BNamericas: Could the provincial law make up for some of the shortcomings in the federal law?

Geese: Compensate fully? No, as all traffic that is inter-jurisdictional, in this aspect, is subject to federal regulations. Provinces can only use their own biofuel mixes in vehicles that do not go beyond provincial borders. 

For that reason, captive fleets are sought, such as grain transport, which here is almost all within the province. And – an area where Córdoba has advanced in – is self-supply.

BNamericas: Regarding investment in biofuels in Argentina, what’s the situation today? Is there much investment?

Geese: There is no investment planned. Everything froze once it started to emerge that national policy – that is to say the new government – took an unexpected approach to biofuels.

This government arrived in power saying it would support biofuels and that it would improve the situation. But by the first months of the pandemic it was noted, via various facets: above all failure to publish biofuels prices for over a year; they didn’t publish mix ratios, activity was paralyzed, and they didn’t have sector coordinators. When the industry started to realize this, they halted investments. With a law that was in force until May of this year, they didn’t know what would happen, they had to wait. This generated uncertainty… I know cases of investment shifting to Uruguay. 

BNamericas: How much potential does Argentina have in the area of biofuels and what needs to happen to unleash this?

Geese: The potential is enormous. In the case of corn-based bioethanol, for example, just 3-5% of corn grain is processed to make bioethanol for the domestic mix. So, we have the remaining 95% of grain with the potential to be transformed, here in Argentina, for the export of bioethanol or expansion of the local market. The bill we had drafted increased the proportion, even to levels seen in Brazil. 

Today, there is also installed capacity that is being unused.  

In the case of biodiesel, there should have been an increase in the proportion, to not only spur SMEs that produce for the local market but also the larger companies that today, are focused just on the external market. 

The external market has a lot of restrictions, precisely because Argentina is so competitive in terms of biodiesel. 

The capacity that Argentina has today is immense.

BNamericas: Do you see green hydrogen as a potential competitor for biofuels or is there space in the market for both?

Geese: I think there's space for both. I believe it [a green hydrogen industry] is going to take a long time [to develop] in Argentina. From what I can see, in reality, green hydrogen is not among the government’s plans. The hydrogen that is, however, in its plans is grey hydrogen, hydrogen from gas. 

Green hydrogen is a screen to mask the real intentions, to produce hydrogen from natural gas. Green hydrogen is like lithium, as I mentioned earlier. The finish line keeps being pushed back, to expand everything to do with hydrocarbons production, setting almost unachievable goals – or at least unachievable in the short term, given the macroeconomic situation – in order to keep using, for as long as possible, maintaining the status quo, business as usual, the oil and gas sector here in Argentina. 

I don’t think badly of the oil and gas industry, nor am I blaming it. They are companies and do what they have to do. 

I view green hydrogen favorably, but it's a long way off. I think they'll opt to start with grey hydrogen, having done ‘greenwashing’ with green hydrogen.

Here in Santa Fe, we've advanced, and the project continues, with solid oxide fuel cells [SOFC, which convert chemical energy, stored in the likes of biofuels, to electricity and heat without need for combustion.]

It’s not hydrogen but there is a hydrogen reaction to generate electricity in motors. In Brazil, they are advancing apace with Nissan and other manufacturers, via biofuels, whether bioethanol or biogas, or syngas. These motors are almost electric, but use bioethanol, syngas or biogas.

SOFC technology is very interesting in places like Argentina, where we have long journeys, and in Brazil, and where we have biomass available to create bioethanol or biogas.

We [Santa Fe] have bought a [fuel cell] prototype … the idea [here in Argentina] is to analyze how to create a value chain for these cells, for both transport and stationary applications. It’s used a lot in Japan, with gas, for domestic purposes.

Santa Fe’s program involves reverse engineering to see to what extent we can manufacture, here in Argentina. Today there's talk of green hydrogen. We have our own future project involving biofuels for power generation.   

The province contributes funds, obviously, and the technological and scientific aspects are managed by [national research council] Conicet and [public research body] Instituto Balseiro.