Mexico Sees Attractive Opportunity in Biodiesel Production

Climate change and the rising price of fossil fuels are driving interest in new, more affordable and environmentally friendly sources of energy. This context presents an attractive opportunity to promote the development of biofuels as part of energy transition strategies.

Biofuels are produced from pressed vegetable oils, mainly from used cooking oil. These could help the Mexican public transportation sector shift to cleaner, climate-friendly energy. Moreover, the fuel’s feedstock is readily available.

Biofuels, such as biodiesel, are a clean energy source that contributes to environmental conservation, as many variants were found to cause significantly less emissions. Their more sustainable production positions them as an alternative to fossil fuels, too.

"The main raw material currently used in Mexico to produce biodiesel is used cooking oil. For every liter of recycled oil collected, one liter of biodiesel is produced, which is cheaper than the traditional diesel produced by PEMEX," said Jorge Tenorio, CEO, Renov Biodiesel.

In Mexico, the potential for biodiesel expansion is vast. According to the Advanced Biodiesel Cluster (BDA) of the Mexican Center for Energy Innovation - Bioenergy (CEMIE-BIO), it is possible to obtain up to 360 million liters of used oil in cities with more than 100,000 inhabitants. This oil can then cost-efficiently be transformed into biofuel.

In Mexico, several companies already collect cooking oil to this end. However, most of these companies only produce the fuel for self-consumption, as it is up to 40 percent cheaper than PEMEX-produced diesel.

Despite the benefits and the attractive opportunity to develop biodiesel production in Mexico, the industry faces structural challenges that slow its growth.

The main challenge is the lack of government support and the absence of a clear regulatory framework to allow the industry to grow. The government has a clear pro-fossil fuel agenda and has undertaken different policies and legislation to strengthen state-owned companies and oil and gas-based energy production.

"Since 2018, biodiesel has become a taboo. While some officials are interested in environmentally friendly technologies, others want more taxes in the state coffers, so we are stuck in limbo," concludes Carlos Campos, CEO, Biofuels de Mexico.

Campos explains that biodiesel is only successful in countries where the state sends clear signals in favor of the industry, as in the case of Colombia or the EU. "If we do not get a breakthrough by 2024, we are finished as an industry."

Alongside biodiesel production, new technologies are emerging on the market to compete directly with users of this fuel, such as hydrotreated vegetable oil (HVO), invented by Finnish-company Neste.

This technology injects hydrogen into vegetable oils so it can process highly contaminated or low-quality oil. The technology is still very expensive, demands high levels of energy and requires refineries operated by specialists. If HVO gains international traction before Mexico can strengthen its local biodiesel industry, the opportunity to develop this new industry will not materialize and an important sustainability opportunity will be lost, the experts argue.