Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A proposed £250mn investment in a green fuels “superhub” will be put on hold unless the government intervenes to shield the UK’s bioethanol industry from risks posed by its trade pact with the US, executives have warned.
The ultimatum was issued as the owners of the UK’s largest bioethanol plant, ABF Sugar, were locked in eleventh hour negotiations with the government over the future of their Vivergo plant in Saltend, Hull.
Vivergo has set a deadline of this Wednesday before it opens redundancy consultations for the 160 staff at the plant if no deal is done to alleviate the impact of the US-UK deal.
The agreement signed on May 8 offered US ethanol producers a 1.4bn litre tariff-free quota, equivalent to the entire UK’s annual demand for bioethanol.
The owners of Vivergo and the UK’s other major bioethanol plant owned by Ensus in Wilton on Teesside have both said that the size of the quota will force them to shut down.
The warnings come at a potentially embarrassing moment for UK prime minister Sir Keir Starmer whose ruling Labour party launched its industrial strategy promising to spur high-quality green growth. Local Labour MPs in England’s north-east have urged the government to step in.
Executives from both companies on Monday said that a plan to explore a tie-up between Vivergo and green hydrogen producer Meld Energy, which is expected to attract an initial investment of £250mn, could become a casualty of the trade deal if ministers failed to intervene.
Meld is part-backed by World Kinect Corporation, a global distributor and reseller of fuels and one of the largest independent traders of sustainable aviation fuel (SAF).
The hub would use green hydrogen from Meld Energy to power grain dryers used in the manufacture of bioethanol, while Vivergo supplies ethanol to Meld for making SAF.
A memorandum of understanding, seen by the Financial Times, was signed between the two sides on Friday 20 June.
Meld Energy CEO Chris Smith said that if ABF Sugar shut down the Vivergo plant it would lead to delays of two to three years in opening the planned hub at the Saltend Chemical Park, in Hull where Vivergo is based.
“The core ingredients from Vivergo are crucial to the development of the clean fuel super hub, which we need for the project to proceed without delay,” Smith said.
Vivergo managing director Ben Hackett said that the proposed deal with Meld Energy would create high-paying jobs and bring up to £1bn in much-needed additional investment to Hull over the next decade.
“It is now well known that a series of governmental decisions, including the recent trade deal with the US, has badly imperilled the bioethanol industry. Surely this agreement with Meld Energy will spur ministers into action to save the sector,” he said.
Before UK-US trade deal, the Vivergo plant had already been making losses of £30mn-£40mn a year which it blamed on pollution permit regulations that it said had handed a de facto double subsidy to US rivals, rendering UK production uneconomic.
Industry bosses are asking for changes to the regulations, an increase in the share of bioethanol used to partially decarbonise UK petrol — from 10 to 15 per cent — and £75mn-a-year in short-term subsidies to cover losses while new regulations take effect.
A Department for Business and Trade spokesperson said: “We are working closely across government and the bioethanol industry to find a way forward.”