Hydrotreated Vegetable Oil, HVO, is a biofuel derived from waste materials. Its use results in around a 90% reduction in CO2 emissions, and significant reductions in NOx and particulate emissions as well.
HVO does not suffer from the same problems as FAME, or first generation, biodiesel such as diesel bug or limited shelf life. It is a true drop-in replacement for mineral diesel and can be stored for long periods without degradation.
The IWA has undertaken extensive testing of HVO in a range of engines This has raised no concerns regardless of the age of the engine. Their work confirms that HVO is a true drop-in replacement for mineral diesel.
Fuel duty is charged on all fuel used for propulsion, whether red or white. Any fuel put into a tank used solely for propulsion must pay full duty. If a separate tank is used for domestic purposes, the reduced duty rate is payable on fuel put into that tank. If only one tank is used, the boater should declare the % used for propulsion. HMRC accepts a 60-40 propulsion-domestic split and, in practice, this is the split that is applied universally. (Note: in Northern Ireland, the 60-40 split is standard as it is enshrined in the regulations. Also in Northern Ireland, the split can be applied to white diesel provided to leisure craft).
Standard duty is applied at 57.95p per litre, plus VAT at 20% on the total cost. This is the rate applied to diesel for propulsion.
Rebated diesel is entitled to a rebate of 46.81p per litre, giving it an effective duty rate of 11.14p per litre, plus VAT at 5% on the total cost. This is the rate applied to diesel for domestic use.
These rates of duty apply regardless of the location of the vessel – i.e., inland or coastal.
Under the Renewable Transport Fuels Obligation (RTFO) legislation, suppliers must include a minimum percentage of Renewable Transport Fuel (RTF) once their total supply exceeds 450,000l per year. These are Obligated Suppliers. To avoid unsustainable use of land for biofuels, a “crop cap” is set, i.e. there is a maximum % of crop derived fuel within the RTF element of supply.
Suppliers gain Renewable Transport Fuel Certificates (RTFCs) for each litre of RTF supplied. Suppliers that provide pure biofuels, such as HVO, claim RTFCs. In the case of HVO, a double certificate is issued as it is derived from waste. An obligated supplier that doesn’t meet its RTFO obligation pays a buy-out price per litre, currently 50p. This creates a market in RTFCs, which in theory reduces the cost of fuels such as HVO as suppliers can sell their excess certificates.
“Inland waterways vessels that do not normally operate at sea” are classified as “non-road mobile machinery”, NRMM. Thus they fall within the RTFO for propulsion. A further class of vessels that fall under the scheme is defined as “Recreational craft that do not normally operate at sea”.
However, domestic use for inland vessels is not included in the RTFO. As for duty, HMRC allows a typical 60-40 split between propulsion and domestic use.
Fuel used in coastal vessels is not included in the RTFO.
The RYA’s response to the recent consultation on the RTFO supported the use of HVO (and other biofuels) for recreational boating. However, the UK Government decided that biofuels were not to be considered for “the marine sector”, which does not account for the different duty cycles, scale, and longevity of vessels in the recreational sector. Instead, the UK Government’s focus appears to be on ammonia, which is not suited to smaller recreational boats, and hydrogen, which is still some way from commercial viability.
Government policy is clearly attempting to decarbonise, which is strongly supported by boaters.
However, official responses to queries about the issues identified below tend to be technical, along the lines of “these are the rules”. Such responses may be technically correct, but they do not contribute to achieving the policy objectives.
There are contradictions within the regulatory framework, such that inland boats and coastal boats are treated differently:
At present, HVO is more expensive to produce than mineral diesel due to low volumes and the processing required. Cost therefore prevents uptake due to the following:
Longevity of vessels
Low duty cycles, particularly for auxiliary engines which are typically used for only 50-100 hours per year. This leads to exceptionally long life for the propulsion unit, and a high impact of the embodied carbon
Continue to lobby Government emphasising:
Continue to educate and support members:
Potential areas of research: