BIODIESEL CHAINS CYPRUS NATIONAL REPORT

Transcription

1 July 2006

2 Table f Cntents 1. INTRODUCTION Ttal primary energy cnsumptin Bimass resurce ptential Present status and prspects f the transprt sectr POLICY Laws Gals Incentives Prgrams TAXATION TECHNICAL ISSUES Fuel Quality Existing Plants Future Targets APPENDIX Fuel standardizatin - Cyprus Organizatin fr Standardizatin...22 i

3 1. INTRODUCTION The island f Cyprus is lcated in the Nrth-eastern part f the Mediterranean Sea (33 east f Greenwich and 35 nrth f the Equatr) with an area f 9,251 sq. km (f which sq. km are frested). Cyprus is the third larger island in the Mediterranean Sea. It is the eastern island in the Mediterranean Sea, lcated 105km west f Syria, 75km suth f Turkey and 380km nrth f Egypt. It is 241km lng (East-West) and 97km wide (Nrth Suth). The energy system f Cyprus is an islated energy system withut indigenus surces f energy apart frm renewable ptential and is therefre almst entirely dependent n imprted fuels. Imprted crude il and final il prducts cver mre than 97% f the cuntry's primary energy supply needs. Imprted cal which is used in the cement industry accunts fr anther 1%. Energy cnsumptin has increased by 7% per year in recent years. The new legislatin cncerning the prtectin f the envirnment, the liberatin f the energy market and the prmtin f RES, is expected t have direct implicatins n the develpment f varius sectrs f the Cyprus ecnmy. Given the high dependency f the Cyprus ecnmy n fssil fuels, their substitutin with RES (and cnsequently bienergy) culd result t a certain extent, in ecnmic grwth in sectrs such as agriculture, manufacturing, and cmmerce. In additin, the turism industry (by far the largest cntributr t the GDP ) is expected t be psitively (althugh indirectly) affected due t GDP : Grss Dmestic Prduct AEOLIKI Ltd 1

4 the resulting envirnmental benefits. Finally, it must be nted, that the anticipated psitive implicatins n agriculture (in terms f ecnmic develpment) will be derived frm the reductin f the fuel csts, and are by n means related t energy cultivatins, due t the water shrtage cnditins currently experienced in Cyprus. In Cyprus the ptential fr the use and prductin f Bi-fuels has nt been extensively explited s far, as interest fr investment in this field has been very limited. In the last few years Cyprus has taken measures in rder t prmte the prductin and use f Bi-fuels in transprt, in the cntext f plicy initiatives fr the prmtin f Renewable Energy Surces (RES) and Energy Saving. 1.1 Ttal primary energy cnsumptin The Cyprus energy sectr is heavily dependent n cnventinal fuels, and in particular il. Almst 90% percent f the energy prductin is fssil fuel dependent, a phenmenn that during the last years had a number f negative implicatins n the lcal scial and ecnmic envirnment. In this sense, the prmtin and adptin f new technlgies which substitute and reduce the il dependence will be widely welcme by bth public and private sectr. The energy supply is cmpleted by a small cntributin f RES (4% - mainly frm slar energy used fr water heating and bimass used fr dmestic heating in individual wdstves) and slids (2%) fr industrial applicatins. In Cyprus, renewable energy surces cnstitute the nly indigenus surce f energy and may cntribute significantly t the energy autnmy f the island. 1.2 Bimass resurce ptential Current Bimass explitatin refers t a significant amunt f agricultural residues in cnnectin with the traditinal wd stves and the prspects fr the develpment f energy crps, even thugh, further analysis and n site investigatin, in rder t clarify the attitude f the lcal agricultural assciatins and define pssible difficulties n harvesting agricultural by-prducts fr bi-energy prductin is needed. In additin t the bimass prspects, there is significant bigas ptential. The fllwing map presents the gegraphical distributin f the agricultural uses in Cyprus. The Cyprus bimass ptential (fr 2000) was analysed as fllws: AEOLIKI Ltd 2

5 Livestck Manure Municipal Slid Waste (rganic cmpnent) Fd and Drinks Organic Waste Vine Twigs and ther prunings Sewage Sludge tn tn tn tn tn AEOLIKI Ltd 3

6 1.3 Present status and prspects f the transprt sectr In the fllwing figure the net dmestic cnsumptin per sectr is presented. The largest cnsumer is the transprt sectr (48% - higher than the EU average, which is 32%), while 21% f the energy is cnsumed in industry, 15% in the residential sectr and the rest 18% in the tertiary sectr. Rad transprt is the biggest and fastest grwing energy cnsumer, crrespnding t abut 67% f the ttal transprt energy cnsumptin. The use f diesel (42%) dminates ver kersene (33%) and gasline (25%). tertiary 18% residential 15% aviatin 33% transprt 46% trucks 38% Taking int accunt the verall Eurpean Unin trends f the ttal primary energy supply and final energy demand by sectr (presented in the fllwing diagrams) it is assumed that the il demand and the respective prprtin f RES in Cyprus will be increased in the fllwing years. Additinally, the energy demand fr the transprtatin sectr will als be increased. industry 21% public rad transprt 1% private cars & mtrcucles 28% mte RES Slids Oil mte Transprt Tertiary Residential Industry Ttal primary energy supply and frecast Final energy demand by sectr and frecast AEOLIKI Ltd 4

7 This trend is als cnfirmed via specific prjectins n the Cyprus future fuel demands. The past and the future il prduct demands fr the transprtatin sectr are presented in the fllwing chart kte Diesel H.S. Diesel L.S. Gazline The High Sulphur Diesel was used as a mtr driven vehicle fuel but this use is nw abandned AEOLIKI Ltd 5

8 2. POLICY 2.1 Laws The need fr meeting the bjectives f several Directives f the Cmmissin n Eurpean Cmmunity cncerning the prmtin f use and prductin f Bi-fuels fr transprtatin, led Cyprus Gvernment t issue a number f laws, rders and regulatins. Since the accessin f Cyprus in EU the fllwing legislatin has been intrduced: Law N.33(I)/2003 n the prmtin and exhrtatin f the use f RES and energy cnservatin The Law was intrduced in 2003 in rder t meet the bjectives f the Directive 2001/77/EC n the prmtin f electricity prduced frm RES in the internal electricity market. A special Fund, under a cmmittee cntrl, was established and its resurces may be distributed accrding t apprved (by the cmmittee) schemes fr the : Prductin r purchase f electricity prduced by RES; Develpment and implementatin f prgrams fr the prmtin f RES and prgrams fr raising the awareness f general public The resurces f the Fund are derived frm : A levy impsed n te electricity cnsumptin. The cnsumptin levy was specified t 0.13 CYP-cent/kWh (0.23 Eur-cent/kWh). Every authrized electricity prducer has t impse the levy n its cnsumers, receive and frward it t the Fund. Gvernmental grants Law N.91(I)/2004 Law N.91(I)/2004 n cnsumptin taxatin/ 9 th Part n taxatin f energy prducts and electricity/ 33 rd Article/5 th Paragraph. The Law was issued in 2004 and the abve mentined paragraph was intrduced in rder t meet the bjectives f the 16 th Article f the Directive 2003/96/EC n the applicatin f exemptins r reduced rate f taxatin under fiscal cntrl n taxable prducts as fuels AEOLIKI Ltd 6

9 cntaining cmpnents prduced frm bimass. Accrdingly, the Law states that the Ministerial Cuncil has the authrity t apply exemptins n the special cnsumptin tax n the energy prducts and electric pwer r t issue reduced rate f cnsumptin taxatin n the categries f energy prducts that are mentined in the 16 th Article f the Directive 2003/96/EC, under the cnditins and requirements that may be impsed by the Cuncil Ministerial Order KDP 318/2004 Ministerial Order KDP 318/2004 n the specificatins f il prducts and fuels The Ministerial Order was issued in 2004 under the Law n the specificatins f il prducts and fuels (N.148(I)/2003). Bi-diesel is defined as a bilgically riginated fuel cnsisted f Fatty Acids Methyl Esters (FAME) derived frm vegetable r animal ils and it is pssible t be used as a bi-fuel fr mtr-driven vehicles. Bi-diesel can be used in cmpressin induced ignitin mtrs as an admixture t petrleum diesel under the requirements f the Appendixes V, VI and VII f the Ministerial Order r as a pure fuel (100% cncentratin) under the requirements f the Cyptus standard CYSEN As a pure fuel, Bi Diesel can be used in specially designed mtrs f cmpressin induced ignitin r in mtrs that have been adapted in rder t run n 100% Bi-diesel. A 5% cncentratin (per vlume) f Fatty acid methyl esters in petrleum diesel is intrduced in Appendixes V, VI and VII (with starting dates 01/07/2004, 01/01/2005 and 01/01/2009 respectively) under the requirements f the Cyprus standard CYSEN Law N.66(I)/2005 Law N.66(I)/2005 n the prmtin f the use f Bi-fuels r ther renewable fuels fr transprt purpses The Law was intrduced in 2005 and adpted the prvisins f the Directive 2003/30/EC n the prmtin f the bi-fuels r ther renewable fuels fr transprt. Accrding t this Law : CYSEN : Autmtive fuels fatty acid methyl esters (FAME) fr diesel engines requirements and test methds AEOLIKI Ltd 7

10 The Ministerial Cuncil defines the indicative natinal gals fr the penetratin f Bifuels t the market The frms f Bi-fuels that can be intrduced t the market are the fllwing : As pure Bi-fuels r at high cncentratin in mineral il derivatives, in accrdance with specific quality standards fr transprt applicatins. As Bi-fuels blended in mineral il derivatives, in accrdance with the apprpriate Eurpean nrms describing the technical specificatins fr transprt fuels (EN 228 and EN 590) As liquids derived frm bifuels, such as ETBE (ethyl-terti-butyl-ether) where the percentage f Bi-fuel is as specified in crrespnding appendix (1 st Appendix) The distributin and selling f Bi-fuels prduced frm genetically mdified plants is frbidden. The Minister f Cmmerce, Industry and Turism mnitrs the impacts f the use f Bifuels mixed with petrleum fuels in cncentratins higher than 5% by technically nn - adapted vehicles and may take measures in rder t ensure the cmpliance t the Eurpean Cmmunity s envirnmental legislatin regarding the emissin standards The Minister befre the prpsitin f certain measures shuld cnsider the verall climate and envirnmental balance f the varius types f Bi-fuels and ther renewable fuels and may give pririty t the prmtin f thse fuels shwing a very gd cst-effective envirnmental balance, taking int accunt cmpetitiveness and security f supply. The Minister shall ensure that infrmatin is given t the public n the availability f Bifuels and ther renewable fuels. Fr Bi-fuels, blended in mineral il derivatives, exceeding the limit value f 5% f fatty acid methyl ester (FAME) r f 5% f bimethanl, a specific labeling at the sales pints shall be impsed. The Minister shall elabrate multi-annual prgrammes under the bjective f prmting the use f Bi-fuels and ther renewable fuels. AEOLIKI Ltd 8

11 The Minister shall reprt t the Eurpean Cmmissin, befre 1 July each year, n : The measures taken t prmte the use f Bi-fuels r ther renewable fuels t replace diesel r petrl fr transprt purpses The natinal resurces allcated t the prductin f bimass fr energy uses ther than transprt The ttal sales f transprt fuel and the share f Bi-fuels, pure r blended, and ther renewable fuels placed n the market during the preceding year. Exceptinal cnditins in the supply f crude il r il prducts that have affected the market f Bi-fuels and ther renewable fuels. In the annual reprt cncerning 2006, the Minister pints ut the natinal indicative gals fr the perid until the 31 st f December The Minister may assign t authrized inspectrs the cntrl and the implementatin f the Law. The Law defines that the prducts listed belw shall be cnsidered bifuels: Bi-ethanl : ethanl prduced frm bimass and/r the bidegradable fractin f waste, t be used as bifuel; Bi-diesel : a methyl-ester prduced frm vegetable r animal il, f diesel quality, t be used as bifuel; Bigas : a fuel gas prduced frm bimass and/r frm the bidegradable fractin f waste, that can be purified t natural gas quality, t be used as bifuel, r wdgas; Bimethanl : methanl prduced frm bimass, t be used as bifuel; Bidimethylether : dimethylether prduced frm bimass, t be used as bifuel; Bi-ETBE (ethyl-terti-butyl-ether) : ETBE prduced n the basis f biethanl. The percentage by vlume f bi-etbe that is calculated as bifuel is 47 %; Bi-MTBE (methyl-terti-butyl-ether) : a fuel prduced n the basis f bimethanl. The percentage by vlume f bi- MTBE that is calculated as bifuel is 36 %; Synthetic Bifuels : synthetic hydrcarbns r mixtures f synthetic hydrcarbns, which have been prduced frm bimass; Bihydrgen : hydrgen prduced frm bimass, and/r frm the bidegradable fractin f waste, t be used as bifuel; Pure vegetable il : il prduced frm il plants thrugh pressing, extractin r cmparable prcedures, crude r refined but chemically unmdified, when AEOLIKI Ltd 9

12 cmpatible with the type f engines invlved and the crrespnding emissin requirements Bill f the Law that mdifies the N.66 (I)/2005 Bill f the Law that mdifies the Law N.66(I)/2005 n the prmtin f the use f Bi-fuels r ther renewable fuels fr transprt purpses The Bill will be submitted fr apprval in the near future and it is prepared by the Energy Service f the Ministry f Cmmerce, Industry and Turism. The main mdificatins that are intrduced are the fllwing : The adptin f measures fr the prmtin f the prductin f Bi-fuels. In the Law N.66(I)/2005 there is prvisin fr the prmtin f the use f Bi-fuels. The prpsed measures will represent subsidies n the prductin cst f Bi-fuels under prgrammes that prmte : the dmestic Bi-fuels prductin the implementatin f the mst ecnmically efficient technlgies The Energy Service has created and updates regularly a database f the Bi-fuel s prducers and imprters in Cyprus wh wish t participate in a multi-annual subsidy prgram; During the perid that is prescribed as a multi-annual prgram, special taxatin exemptins and reductins defined in the Law N.91(I)/2004 n cnsumptin taxatin are applied t the quantities f Bi-fuels that are imprted r prduced, by the imprters and prducers respectively that are registered in the abve mentined database; The Ministerial Cuncil may, fr fiscal r ther reasns, impse a maximum limit n the quantities f Bi-fuels under taxatin exemptins r reductins. Τhis limit must nt affect the natinal gals regarding the use and prductin f Bi-fuels; In rder t estimate the verall quantities f transprtatin fuel sales and the respective percenatge f the Bi fuels (pure r mixed) and ther renewable fuels, all Bi-fuels imprters and prducers (including thse that are nt listed in the database) must AEOLIKI Ltd 10

13 infrm the Energy Service f the quantities f Bi-fuels that they imprt, prduce and exprt as well as the primary surces f the Bi-fuels that were used fr the past year. A Cnsulting Cmmittee is intrduced in rder t assist the Minister t intrduce any ther measure that (accrding t the Minister s pinin) cntributes t the effective applicatin f the Law Law N.174(I)/2003 Law N.174(I)/2003 that mdifies the Law N.86(I)/1972 that mdifies and unifies the laws n mtr-driven vehicles Appendix f 5 th Article, 3 rd Paragraph In rder t prmte the use f Flexible Fuel Vehicles in Cyprus the Registratin Fee and the Annual Rad Taxes were set at very lw rates, 50% f the petrl and diesel driven vehicles fees, r CYP 50 (EURO 88) and 10 (EURO 18) respectively. AEOLIKI Ltd 11

14 2.2 Gals Natinal Indicative Targets Cyprus had prpsed an initial indicative target f 1% by the end f With reference t the abve, Cyprus was keen t explit its ptential Bi-mass availability. This is particularly in view f the ttal dependence f the cuntry n imprted fuels as well as the envirnmental benefits f RES including Bi-fuels. The indicative target was based n the fact that the explitatin fr the prductin f Bifuels as well as the interest fr investment in this field until 2003 has been negligible and as a cnsequence t that the experience and expertise gained in this field has been very little. Imprtant barriers fr this lack f interest were and partially still exist: The very limited dmestic bimass resurces fr the prductin f Bi-fuels and the lack f infrastructure; In the case f Energy Crps barriers are the climate cnditins (water shrtage) and the limited land availability; Unfavrable ecnmics/uncmpetitive cst f Bi-fuels (inadequate legislative taxatin adaptatin); Limited public acceptance, stemming frm cncerns abut fuel cmpatibility with existing vehicles and general lack f infrmatin cncerning Bi-fuels. It shuld als be nted that any medium r large-scale prject wuld require significant capital investment. 2.3 Incentives GRANT SCHEME fr Energy Cnservatin and the Prmtin f RES Utilizatin A GRANT SCHEME fr Energy Cnservatin and the Prmtin f RES Utilizatin has been in peratin under Law N.33(I)/2003 since February The aim f this Scheme is t prvide financial incentives in the frm f Gvernmental Grants fr the materializatin f investments in the field f energy cnservatin and prmtin f the RES utilizatin. Mrever, the Scheme prmtes the reginal develpment and encurages investments with psitive reginal and envirnmental effects. The Scheme cvers exclusively investments that take place in case f absence f cmpulsry Eurpean Standards. All investments must be related with mature technlgies which are nt under AEOLIKI Ltd 12

15 research and develpment. The Grant Scheme cvers the csts fr purchase and installatin f equipment and the subsided investment shuld be maintained fr at least 5 years. The wn cntributin shuld be at least 30% f the ttal cst f the investment. Investments cncerning Bi-fuels are classified in CATEGORY B (Renewable Energy Surces). The bimass utilizatin investments that cme under categry B are als categrized in 4 sub-categries. One f thse is sub-categry NB3 - Bi-fuels prductin fr transprtatin. The types f fuels fr transprtatin that can be characterized as Bifuels are mentined in the Directive 2003/30/EC. Each energy investment, regardless its Categry r sub-categry is characterized as Initial r Envirnmental. This differentiatin is imprtant as it defines the maximum amunt f grant as well as the grant percentage t be prvided. Initial Energy Investment is ne that : Establishes new energy system Expands existing energy system Starts up activity in which there is fundamental change in the prduct r in the prductin methd f the existing energy system Starts up activity in which there is fundamental change in the prduct r in the prductin methd f the existing enterprise with imprtant energy imprvements. Investments f replacement f usual upgrade are nt included. Envirnmental Energy Investment is defined as the investment n replacement r installatin f materials, systems and equipment which aim envirnmental prtectin. The public aid frms that applied t this Scheme are : Reginal, which are prvided nly fr Initial Investments; Envirnmental, which include subsidies (kwh subsidizatin); De minimis, prvided fr all types f energy investments. De minimis aid means ne r mre aids which are prvided by ne r mre authrities, where the maximum amunt f grant shuld nt exceed the CYP ( EURO) within 3 years The Scheme cvers investments fr energy cnservatin and prmtin f RES utilizatin as shwn in the Table here under. AEOLIKI Ltd 13

16 INVESTMENT SUBSIDY kwh price Frm f public aid Bimass Utilizatin Fr SME, 30% funding f the eligible cst will be prvided as reginal and additinally de minimis funding under the restrictin f the maximum eligible cst. In any case the sum f the tw aids shuld nt exceed the 40% f the eligible cst. Maximum amunt f grant CYP (appr ) Fr Large enterprises 20% subsidizatin f the eligible csts will be prvided as reginal and additinally de minimis under the restrictin f the maximum eligible cst. In any case the sum f the tw aids shuld nt exceed the 40% f the eligible cst. Maximum amunt f grant CYP (appr ) Reginal and in additin de minimis 3.70 CYcents Reginal and in additin de minimis Fr the evaluatin f the investments the fllwing criteria are applied fr a CATEGORY B investment: Criteria Percentage Discunted payback perid 20% Substitutin f Electricity r ther Cnventinal Fuels by Renewable Energy Surces 35% Reliability f prpsed technlgies 20% Effectiveness f investment implementatin and explitatin plan 10% Envirnmental benefits 10% Third Party Financing (TPF) r technlgy perfrmance financing 5% Ttal 100% Since February 2004, when the Grant Scheme was put int peratin, sme interest has been expressed fr investments in the field f Bi-fuels and particularly fr the prductin f Bi-diesel frm used edible ils. Until nw (July 2006) the Energy Agency f the Ministry f Cmmerce, Industry and Turism has received several applicatins by cmpanies that AEOLIKI Ltd 14

17 intend t participate in the Grant scheme. The estimated ttal prductin f Bi-diesel that will be derived, if all the prpsals are apprved, will be apprximately 8,400 tns/year, which will verride the natinal gal fr the replacement f 1% f transprtatin fuel by Bidiesel (apprximately 6,500 tns/year 650,000 * 1%) Legislatin incentive measures The incentives that were intrduced thrugh the legislatin are f tw types : direci and indirect. The direct legal measures refer t the intrductin f exemptins reductins n the taxatin impsed n the prductin r use f Bi-fuels r any ther related activity. The laws that cntain such prvisins are the fllwing (mentined abve in detail) : N.91(I)/2004 n cnsumptin taxatin This law prvides fr the applicatin f exemptins n the special cnsumptin tax n the energy prducts and the issue f reduced rates f the same tax n prducts as fuels cntaining cmpnents prduced frm bimass. Law N.174(I)/2003 that mdifies the Law N.86(I)/1972 that mdifies and unifies the laws n mtr-driven vehicles In rder t prmte the use f Flexible Fuel Vehicles in Cyprus the Registratin Fee and the Annual Rad Taxes were set at very lw rates, 50% f the petrl and diesel pwer driven vehicles fees, r CYP 50 (EURO 88) and 10 (EURO 18) respectively. The indirect legislatin prvisins refer t the intrductin f specific framewrks fr the prmtin f use and prductin f Bi-fuels. The laws that cntain such prvisins are the fllwing (mentined abve in detail) : Law N.33(I)/2003 n the prmtin and exhrtatin f the use f RES and energy cnservatin. A special Fund is established and its resurces may be distributed accrding t apprved plans t prgrams fr the prmtin f RES and infrming f public. Its resurces are derived frm a fine impsed n every electricity cnsumer and gvernmental grant. AEOLIKI Ltd 15

18 Law N.66(I)/2005 n the prmtin f the use f Bi-fuels r ther renewable fuels fr transprt purpses and its mdificatin Bill. The Minister f Cmmerce, Industry and Turism shall elabrate multi-annual plans under the bjective f prmting the use f Bi-fuels and ther renewable fuels. There are intrduced measures that may represent subsidies n the prductin cst f Bi-fuels under plans that are established. AEOLIKI Ltd 16

19 2.4 Prgrams Energy cultivatins In parallel with the Gvernment s initiatives t stimulate the develpment f a Bi-fuel market in Cyprus, measures t prmte the prductin f Bi-fuels are being undertaken by means f research prgrammes. Specifically, a grant aid f CYP ( Eurs) has been prvided by the Research Prmtin Fundatin f Cyprus fr the preparatin f a study n the evaluatin f energy crp ptentials in Cyprus. The prject was launched in Octber 2004 and it was planed t last 36 mnths. The prject is being cntacted by the Cyprus Institute f Energy, the Agricultural Research Institute and the Natinal Technical University f Athens. This was the first research that was launched n the field f Bi-fuels prductin and that s the reasn why there were n available data regarding the Bi-mass ptential f Cyprus. Within the framewrk f the prject, Bi-ethanl and Bi-diesel will be prduced in rder t evaluate their quality and their energy cntent. The nging prject is aiming at investigating the feasibility f sme crp-species as energy plants n the basis f experimental cultivatins. Initially, the research was fcused n the elabratin f the current energy cultivatin situatin (utilising traditinal and mdern industrial energy plants), the kinds f energy crps that are cultivated in Cyprus but they were nt explited fr energy use and the areas that these plants are currently cultivated. Hereafter, the energy crp ptential f the island wuld be evaluated thrugh the research n the ttal available areas fr the energy crps cultivatin, the kinds f plants that may be cultivated efficiently in accrdance t the climate cnditins f Cyprus and the prjectins abut the cultivated areas in future, the water demands and the energy cntent f the under study plants. An ecnmic feasibility study f the explitatin f energy cultivatins will als be cnducted. The research als aims t determine the mst energy efficient types f plants thrugh experimental cultivatins f varius energy crps. The types f plants that are under study are : Fr Bi-Diesel prductin Rape Sunflwer Fr Bi-Ethanl prductin AEOLIKI Ltd 17

20 Maize Sugar beet Ptat At the current stage f the prgramme few primary results have been derived and the experimental cultivatins cntinue. AEOLIKI Ltd 18

21 3. TAXATION The relevant impsed taxatin framewrk is mainly shrt term and cnsists f the fllwing laws that were mentined abve : Law N.33(I)/2003 n the prmtin and exhrtatin f the use f RES and energy cnservatin. A levy (0.23 Eur-cent/kWh) is impsed n every electricity cnsumer as the main resurce f a special Fund which distributes its resurces accrding t apprved plans t prgrams fr the prmtin f RES and infrming f public. Law N.91(I)/2004 n cnsumptin taxatin In this law there is a prvisin fr the applicatin f exemptins n the special cnsumptin tax n the energy prducts and the issue f reduced rates f the same tax n prducts as fuels cntaining cmpnents prduced frm bimass. Law N.174(I)/2003 that mdifies the Law N.86(I)/1972 that mdifies and unifies the laws n mtr-driven vehicles In rder t prmte the use f Flexible Fuel Vehicles in Cyprus the Registratin Fee and the Annual Rad Taxes were set at very lw rates, 50% f the petrl and diesel pwer driven vehicles fees, r CYP 50 (EURO 88) and 10 (EURO 18) respectively. AEOLIKI Ltd 19

22 4. TECHNICAL ISSUES 4.1 Fuel Quality The specificatins f the Bi-fuels that will be distributed in the Cyprit energy market were mainly intrduced under the Ministerial Order KDP 318/2004 n the specificatins f il prducts and fuels. The Ministerial Order was issued in 2004 under the Law n the specificatins f il prducts and fuels (N.148(I)/2003). Bi-diesel is defined as a bilgically riginated fuel cnsisted f Fatty Acids Methyl Esters (FAME) derived frm vegetable r animal ils and it is pssible t be used as a bi-fuel fr mtr-driven vehicles. Bi-diesel can be used in cmpressin induced ignitin mtrs as an admixture t petrleum diesel under the requirements f the Appendixes V, VI and VII f the Ministerial Order r as a pure fuel (100% cncentratin) under the requirements f the Cyprit standard CYSEN As a pure fuel, Bi Diesel can be used in specially designed mtrs f cmpressin induced ignitin r in mtrs that have been adapted in rder t run n 100% Bi-diesel. A 5% cncentratin (per vlume) f Fatty acid methyl esters in petrleum diesel is intrduced In Appendixes V, VI and VII (with starting dates 01/07/2004, 01/01/2005 and 01/01/2009 respectively) under the requirements f the Cyprian standard CYSEN Existing Plants Until nw (July 2006) there was n installatin f Bi-fuel prductin plant r even distributin f imprted Bi-fuels in Cyprus. 4.3 Future Targets The initial Natinal Indicative Target unfrtunately was nt achieved due t all the abve mentined prblems. The gal f substitutin f 1% f petrleum derived transprtatin fuel by Bi-diesel is still in frce and will be during the fllwing years. Whereas this target is still much lwer than the verall target set by the EU Cmmissin it can nt be cnsidered as insignificant but als nt enugh fr the adaptatin with the relevant Directives gals. Accrding t the prjectin f the transprtatin fuel demands fr the fllwing years, the quantity f petrleum fuel that will be replaced by Bi-diesel (taking int accunt the 1% natinal target) will be increased but still remain inadequate. The Gvernment f Cyprus is bliged t revise its target and prbably it will be alternated t 2% by the end f AEOLIKI Ltd 20

23 A very imprtant aspect f the whle issue is that public fficers f the Ministry f Cmmerce, Industry and Turism believe that the main part f the Bi-Fuel prductin in Cyprus will be derived frm raw material that will be imprted frm abrad and prcessed in dmestic industries. It is bvius that the dmestic Bi-mass ptential is validated as inadequate by the fficers that have t plan the future steps f the crrespnding plicy. These pinins were annunced infrmally but their imprtance is significant since they prbably affect the way that the energy and agricultural market f Cyprus will explit the demands f the Cmmissin s targets abut the use and prductin f Bi-fuels. If the main part f the natinal effrt is dedicated t the final step f fuel prductin (prcess f imprted raw material) then the energy crps cultivatin will be nt expanded at an acceptable rate. AEOLIKI Ltd 21

24 5. APPENDIX 5.1 Fuel standardizatin - Cyprus Organizatin fr Standardizatin ΕΝ : 2003 This Eurpean Standard specifies requirements and test methds fr marketed and delivered fatty acid methyl esters (FAME) t be used either as autmtive fuel fr diesel engines at 100% cncentratin, r as an extender fr autmtive fuel fr diesel engines in accrdance with the requirements f EN 590. At 100% cncentratin it is applicable t fuel fr use in diesel engine vehicles designed r subsequently adapted t run n 100% FAME. NOTE: Fr the purpses f this Eurpean Standard, the term % (m/m) is used t represent the mass fractin ΕΝ : 2003 This Eurpean Standard specifies a test methd fr the determinatin f Fatty Acid Methyl Ester (FAME)cntent in diesel fuel r dmestic heating fuel by mid infrared spectrmetry in the range frm abut 1,7 % (V/V) t 22,7 % (V/V). Other FAME cntents can als be analyzed in principle, hwever, n precisin data fr results utside the specified range are available at this time. The test methd has been verified t be applicable t samples which cntain FAME cnfrming t the Eurpean specificatins EN r EN Reliable quantitative results are btained nly when the samples d nt cntain significant amunts f ther interfering cmpnents, especially esters, which pssess absrptin bands in the spectral regin used fr quantificatin f FAME. When such interfering cmpnents are present, this test methd is expected t prduce higher values NOTE 1: When interfering cmpnents are suspected t be present, it is recmmended fr cases f dubt r dispute t recrd the full infrared spectrum and t cmpare it t spectra f samples with well knwn FAME cntents. NOTE 2: Fr the purpses f this Eurpean Standard, the term "% (V/V)" is used t represent the vlume fractin f a material. NOTE 3: Fr cnversin f g/l t % (V/V), a fixed density f FAME f 880,0 kg/m 3 is adpted. AEOLIKI Ltd 22