In a narrow valley with steep sides near the ancient city of Cartagena, Spain, a team of 150 engineers has just finished building a plant that could be a game changer for Repsol, the Spanish energy company, and a bellwether for the transportation industry.
Emilio Mayoral, who manages the unit, said his colleagues were in the early days of brewing fuels for trucks and airplanes from what was formerly garbage. “It’s quite flexible,” he said. “We are currently using used cooking oil, but we can use other waste.”
Repsol says these alternative fuels will cut emissions by up to 90 percent compared with the petroleum-based products they will replace. The new fuels emit some carbon dioxide when consumed, but they are produced from plants and other organisms that absorbed carbon dioxide during their lifetimes, which is factored into the emissions calculation.
As an added benefit, this new generation of biofuel products performs as well as their fossil fuel counterparts, even in cold Northern European weather that creates problems for some fuels, Mr. Mayoral said.
Repsol, which is based in Madrid, is one of Europe’s largest energy companies, with 26,000 employees and more than 4,500 service stations as well as investments in renewable energy like wind and solar power. Repsol reported income of 1.6 billion euros for the first half of 2024.
Energy companies like Repsol are betting that advanced biofuels like the ones being made at the Cartagena plant will play an important role in transportation well into the future. They figure that airplanes and heavy trucks as well as a significant portion of the passenger car fleet will continue to be powered by liquid fuels like diesel and jet fuel, despite growth in the market for electrical vehicles.
Tightening regulations on emissions, they calculate, will force greater use of fuels that emit less carbon dioxide. Both energy companies and their customers consider biofuels — which can make use of large parts of existing infrastructure like gas station pumps and storage tanks — to be a practical and relatively inexpensive solution for navigating this technological and regulatory gantlet.
Until a cheaper, more convenient clean energy source for transportation emerges, “legislators don’t appear to have much choice but to continue to lean on biofuels,” said Charles Jans, vice president for consulting at Argus Media, a commodities research firm.
The International Energy Agency, the Paris-based policy research group, forecasts that consumption of these fuels will increase 20 percent globally by 2030.
Repsol anticipates that its home market, Spain’s Iberian Peninsula, will prove to be a kind of paradise for biofuels. Some of its rivals have closed traditional oil refineries, but Repsol plans to gradually retrofit its facilities to produce greener fuels from various forms of waste and, eventually, so-called e-fuels from gases like hydrogen and carbon dioxide.
In this way, the company is betting that it can continue to make profits from trading and processing oils, taking advantage of reduced competition and the higher prices that lower carbon fuels may bring.
“We are pushing very much not to close our refineries but to transform them,” said Luis Cabra, the company’s deputy chief executive, who is a point person for Repsol’s energy transition. “We still believe in the internal combustion engine,” he added.
The new plant in Cartagena, a port city built around the ruins of a Roman-era theater, is the first big step in this makeover, which has been aided by research at Repsol’s laboratories outside Madrid.
Repsol spent €250 million grafting the new plant onto what had been a conventional refinery. Making use of existing facilities reduced the costs involved in the switch, Mr. Cabra said.
The overhaul at Repsol and other companies was prompted by European Union regulations intended to tackle climate change. For instance, energy companies like Repsol are required to supply airports with jet fuel that includes a growing proportion of what is known as sustainable aviation fuel — ingredients that did not come from fossils — starting with 2 percent in 2025 and rising to 70 percent by 2050.
A similar set of requirements exists for motor vehicle fuels, and the rules are complicated by other priorities, like protecting the food supply and tropical forests.
As a result, the path to lower emissions faces dizzying complexity in the coming years. “It gives people a headache from the long-term planning and business management perspective,” said Mr. Jans of Argus.
The alternative fuels that companies like Repsol are proposing are a relatively easy way to meet the E.U. requirements because they give customers who purchase them green credentials with little effort. Drivers, for instance, can buy what is described as 100 percent renewable diesel at Repsol gas stations in Spain. The European Union pegs the biodiesel market in the trading bloc at €31 billion.
That solution is particularly welcome in areas of transportation like aviation that, analysts say, will face decades of difficulty in their conversion to new energy sources like electricity or hydrogen.
For airlines, the so-called sustainable aviation fuel that Repsol will be brewing from waste in Cartagena looks like a much easier way to comply with tightening European standards.
“It’s like magic,” said Teresa Parejo Navajas, head of sustainability at the Spanish airline Iberia. “You can use it in the same aircraft with the same engines and the same airport infrastructure.”
But questions about the availability and sourcing of the waste ingredients like cooking oil are potential stumbling blocks for the industry.
Some environmentalists are skeptical about how green the new fuels will be, saying, for instance, that the ingredients will probably need to be transported from around the world, which will create emissions in the process.
“It’s going to be very difficult to get enough oil,” said Javier Andaluz, coordinator of climate and energy at Ecologistas en Acción. “Even if they took used oil from all the restaurants in Spain, it wouldn’t be enough.”
At its refinery in Cartagena, Repsol gives preference to the Spanish market for waste collection, Mr. Mayoral said, but he conceded that some of it could come from elsewhere, including Asia.
With energy companies scouring the globe for material to feed refineries, cooking oil and other waste have become valuable and even scarce commodities. “In essence, there is a limit on the amount of feedstock,” said Alan Gelder, an analyst at the consulting firm Wood Mackenzie, though he added that supply could be expanded by loosening rules on what could go into the mix.
The scarcity has created a search for alternatives. Oleofat, a Spanish company that supplies ingredients for refining into biofuel, says it is working with dozens of sources of waste, including residues from water treatment plants.
Compounding the problem, analysts say, prices in Europe are being depressed by imports of cheap biodiesel from China and worries about oversupply. The price of sustainable aviation fuel has fallen more than 40 percent over the past year to about $1,769 per metric ton, according to Argus, although it is still much higher than the price of ordinary jet fuel, which sells for about $750 a ton.
The challenges have led some energy companies to pull back on biofuels. In July, Shell, Europe’s largest energy company, said it would temporarily suspend the construction of a large biofuel plant at the Dutch city of Rotterdam, partly because of market conditions. Shell said it would take a write-down of nearly $800 million.
In December, the European Union began an investigation into the alleged dumping of Chinese biodiesel, and said in July that it would provisionally impose tariffs of up to 36.4 percent on imports from China.
Mr. Cabra of Repsol said he expected more “scrutiny” of Chinese imports because of concern that they might not be produced “under the same sustainability criteria” as in Europe.
Still, analysts say that the type of fuel Repsol is producing is likely to have a future and that the company is well placed because it started early, likely locking in suppliers. In July, the company said it expected the Cartagena plant to make a profit of as much as €140 million in 2024.
Mr. Cabra said there were still reasons for optimism despite falling prices.
“Definitely there will be more demand of this product in Europe,” he said. “You are obliged every year to increase the volume that you sell.”
Rachel Chaundler contributed reporting from Zaragoza, Spain.