On 5 November 2020, the portal 15min.lt posted and further other mass media reposted an article by Martynas Nagevičius, the President of Lithuanian Confederation of Renewable Resources (hereinafter - Author), where it is alleged that fuel suppliers do not observe the Law on Renewable Resources and are related to additional costs arising from underachievement of targets prescribed by EU Renewable Energy Directive.
The Author of this article who, by the way, represents Lithuanian biofuel industry, tries to picture fuel suppliers as the ones who are responsible to long-standing national policy in the area of biofuels. According to M.Nagevičius, 'tricks of fuel suppliers have led to a situation that entails tens of millions of euros in additional costs for Lithuania for failing to meet the targets of the EU Renewable Energy Directive’. Such statements reflect gloomy reality of public discourse of these days when both depth and complexity are ripped from expert and complex discussion, when the causes are taken and turned into the roots of effects selectively.
To the Author of article public procurement by Lithuanian Energy Agency concerning replacement of state reserve of petroleum products 'has become clear recently'. This activity is namely under responsibility of Lithuanian Energy Agency – the Agency executes it after receipt of required approvals and permits from the Ministry of Energy and in compliance with legal acts. We stress out that M. Nagevičius is the member of the board of Lithuanian Energy Agency. For this activity to become clear additional effort is not required, it is completely public and is framed by legal regulations.
Surprisingly biased article misinterprets requirements applied to storage, replacement and quality of the so-called special stocks which are exclusively owned by the state and commercial stocks.
Legal regulations concerning the readiness of the state for energy emergencies are intended to ensure maximum fluency in the functioning of the state in such cases when supply of crude oil and petroleum products experience massive interruptions. In such cases stocks would be used under procedure specially designed for this purpose ensuring availability for extremely sensitive and significant functions of the state (ambulance, firefighters, rescuers, police, etc.) and private sector.
For this reason the state accumulates such quantity of crude oil and petroleum products which satisfies domestic demand of at least 90 days. Part of this quantity must be accumulated by fuel suppliers but more than third is accumulated as owned by the state. And namely Lithuanian Energy Agency does it on behalf of the state.
These stocks are accumulated and kept for several years therefore their proper quality must be ensured at any moment of potential use. This process does not and cannot have any 'tricks' mentioned by the Author. Only the state, as the owner of special stocks, decides on the quality of stored stocks and assesses whether: (i) the stocks are of proper quality; or (ii) they already need to be replaced; and (iii) whether fuel stocks stored for several years can be still blended in quality manner with biofuel or in order to comply with quality requirements should be sold in the market without them . These decisions in the name of the state are made by Lithuanian Energy Agency and Ministry of Energy, not by fuel suppliers. Conditions for both replacement and sale of stocks in the market (whether to be blended with biofuels or not) are also established by state authorities in accordance with legal regulations, not by fuel suppliers. Fuel suppliers simply participate in public stock replacement service tenders and render services under established conditions.
It should be noted that over a year ago ORLEN Lietuva has informed state authorities responsible for accumulation of state stocks that replacement of state stocks in 2020 may have negative impact on the achievement of national target share of renewable energy supply in the transport sector. Furthermore, these targets are not the only for the state to aim for. Energy security and readiness for emergencies is among them too.
Concerning renewable energy targets in transport sector
In the article prepared by M.Nagevičius fuel suppliers are accused of attempts to degrade the progress of Lithuania in de-carbonization of transport sector. We utterly disagree with this.
The author forgot to mention that namely active engagement by fuel suppliers contributed significantly to the increase of the norms of biofuel to be blended to gasoline. Namely fuel suppliers participated actively and supported proposals of institutions to increase the portion of biofuel in diesel in transitional period. Furthermore, fuel suppliers actively support transport de-carbonization initiatives which do not compromise the quality of fuel and are in line with EU policy in this area. It is natural that fuel suppliers as those who supply fuel to end use are interested in the competitiveness of Lithuanian transport sector.
ORLEN Lietuva (OL), in support of the progress of Lithuania in the achievement of national renewable energy targets in transport sector, in 2018 addressed responsible authorities. OL encouraged to initiate discussions, to inform what targets are in EU, what fundamental barriers do not allow to pursue them, how it would be possible to ensure fluent functioning of transport sector and fuel market in compliance with EU directives. Such discussions were held not only in Lithuania but also in Latvia and Estonia as well. Some of measures discussed were put into reality, but due to different reasons which the Author avoids to name Lithuania will be far behind the pursued 10 percent share of renewable resources in transport.
EU policy and measures widely used in other countries to achieve the targets of this policy are quite different from what is pursued by organization represented by the author. For instance, EU limits the use of biofuels produced from nutritional and fodder plants and at the same time encourages the use of biofuel produced from waste and scrap. At the same time, EU targets in transport sector are in terms of annual quantity of energy placed on the market and not in terms of mandatory blending of biofuel into each liter. To the contrary, EU Court of Justice in its judgement of the year 2013 in case C-26/11 expressed a doubt whether mandatory blending of biofuel into each liter of fuel would be in line with the requirements of fuel quality directive.
Lithuania applies mandatory norms of biofuel to be blended into each liter of fuel. These are actually maximum norms allowed by EU but in Lithuania established as minimum requirement for blending. Surely not all EU member states apply such ambitious requirements in terms of biofuel to be blended into each liter as Lithuania because they, possibly, are in contradiction to EU law. However the results of these states in the pursuit of EU targets are significantly better than of Lithuania. Therefore it is obvious that the quantity of biofuel blended into fuel should not be treated as the main obstacle which does not allow achieving EU targets.
Causes are different and multiple. Lithuania has low level of electrification of railways and road transport. This is one of the reasons, though not main, if compared with other EU member states. Regretfully, Lithuania is significantly lagging behind other EU member states in consumption of biofuel produced from waste and scrap. If in entire EU such biofuel makes 24 %, in Lithuania it is equal to 0 %.
The author mentions several states which more successfully than Lithuania are pursuing EU targets in transport sector. Let's check what quantities of more advanced biofuels were in some of these countries (according to the data of Eurostat for 2018, before application of multipliers):
Croatia – 100 %; Malta – 99 %; Netherlands – 70 %; Portugal – 59 %; Finland – 53 %; Germany – 29 %. It is obvious that in countries which are most successful in the achievement of targets the portion of biofuel produced from waste and scraps is quite big. And this is natural because energy value of such biofuel is counted as double when calculating final results of the states. Lithuania, even with maximum norm established for biofuel blending, will remain far behind the final EU target.
As mentioned before, there are multiple reasons for this but among the undisputable ones is the fact that existing national legal regulations are advantageous to first generation biofuels which are the cheapest method to comply with requirements in terms of mandatory quantity of biofuel to be blended into each liter. And fuel suppliers execute these requirements without any tricks.
Concerning proposal of ORLEN Lietuva not to blend biofuel into diesel in winter
M.Nagevičius takes the statements from the letter of ORLEN Lietuva without any context and tries to show them as some evil intent. We point out that ORLEN Lietuva has repeatedly addressed the members of Parliament in writing before concerning risks arising from hasty change of legal regulations which were in effect for entire decade (possibility not to blend biofuel into arctic diesel) without providing conditions to market participants to prepare properly. Impact on prices was not even mentioned in the latter M. Nagevičius refers to though this is actually one of reasons among others which are related to quality and decrease of state budget inflows from excise duty.
In previous letters and open discussions OL has informed both the members of Parliament and other authorities, market players that OL is ready to use quality biofuel but not produced in Lithuania for blending during winter. However, if the members of Parliament thought that the risks are too high, possible method to counteract these risks was proposed. As blending of biofuel into arctic diesel has much bigger impact than cent parts mentioned by M. Nagevičius, in the opinion of OL the impact of state budget inflows from the collection of excise duty may be highly significant should transit transport opt to refuel in the neighboring countries where fuel will be cheaper though they pursue EU targets not less successfully than Lithuania. Thus statements that OL ignors the interests of tax payers and the states are void.