By Martin Roberts
MADRID, Dec 24 (Reuters) - Spanish producers of plant-based fuel forecast they will easily be able to market bioethanol after new legislation comes into force in the New Year, but will still face a surplus of biodiesel due to U.S. imports.
Spain's government has a mandatory target of 3.4 percent of automotive fuel used in 2009 to be derived from biofuel -- measured by energy content -- a level that will rise to 5.83 percent in 2010.
Renewable energy association APPA estimates the new law will require at most 689,000 tonnes of bioethanol to be blended with petrol, for which demand in Spain has been dwindling for years as car drivers have mostly switched to diesel.
Bioethanol plants -- which use grain as a feedstock -- will have the capacity to produce 456,000 tonnes in 2009.
"Bioethanol doesn't face problems over imports from the U.S. and Argentina," a spokesman for APPA said.
"With the new standards and (European Union) road map to 2020, businesses can decide how much to invest, how much to produce," he added.
The EU last week approved plans to cut carbon dioxide emissions to 20 percent below 1990 levels by 2020 in order to combat climate change.
APPA said Spanish biodiesel makers, on the other hand, would likely have a large overcapacity and were in a "delicate situation" due to hefty imports, which accounted for 61 percent of demand in the first half of 2008.
Earlier this year EU trade officials began to investigate complaints by European producers that U.S. subsidies for "B99" biodiesel -- blended with mineral diesel -- broke World Trade Organisation rules.
APPA estimates demand for biodiesel -- which is made from oilseeds -- will at most be 1.07 million tonnes in 2009 while production capacity will be at least 3.3 million tonnes, leaving a deficit of at least 2.23 million tonnes.
It nonetheless added that biodiesel producers may be able to sell some of their surplus if demand takes off after blending becomes compulsory in the New Year and if exports are stepped up from nominal levels.
"It should be taken into account that mandatory blending will not only not end in 2010, but will continue over the following decade in growing percentages," an APPA report said.
APPA accounts for more than 90 percent of Spanish biofuel producers, including the country's biggest, Abengoa.
Abengoa restarted a 158,000 tonne-per-year bioethanol plant -- Spain's largest -- in northern Salamanca province at the end of August as it expected compulsory blending to revive flagging domestic demand.
"We estimate there will be enough ethanol production capapcity in Spain to meet minimum targets," an Abengoa spokeswoman said, but was unable to provide any production forecasts. (Editing by James Jukwey)