Significant Changes in the Use of Red Diesel and Rebated Fuels

Legislative changes have been introduced in April 2022 for the use of ‘Red Diesel’ in a number of key industry sectors. 

In this article, we’ll look at the upcoming changes, the industries that will be impacted, and suggestions for managing the subsequent measures, many of which may raise prices for businesses and individuals.

What is ‘Red Diesel’ and the “Reform of red diesel and other rebated fuels entitlement” legislation?

Firstly, ‘Red Diesel’ is traditionally referred to as the gas/oil which is intended for use in applications other than the fuel for road vehicles and transportation. 
‘White Diesel’, otherwise known as road diesel, is what we use for commuting, recreation, and business in our cars nowadays.

The only real distinction between red and white diesel is made up of two factors; red dye and cost. Dye is added to the red diesel to change the visible colour, and red diesel is considerably cheaper to purchase due to a reduced fuel duty rate (tax). 

The Bill 

The objective of the legislation is relatively straightforward; to promote the reduction in red fuel consumption and air pollution in line with the net-zero greenhouse gas emissions 2050 target.
The measures of the legislation, as part of the Finance Bill 2021, will limit the use of red diesel and rebated biofuels to only a few sectors, uses, and applications in the future.

Who is exempt from the new Red Diesel legislation?

The use of red diesel and rebated biofuels is restricted to the following: 

• Machinery / Vehicles used in the agriculture, horticulture, fish farming and forestry industries. 
• To propel passenger, freight or maintenance vehicles designed to run on rail tracks 
• For heating and electricity generation in non-commercial premises – this includes the heating of homes and buildings such as places of worship, hospitals and townhalls; off-grid power generation; and non-propulsion uses on permanently-moored houseboats
• For maintaining community amateur sports clubs as well as golf courses (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc.)
• As fuel for all marine craft refuelling and operating in the UK (including fishing and water freight industries), except for propelling private pleasure craft in Northern Ireland
• For powering the machinery (including caravans) of travelling fairs and circuses

Who will be most affected by the red diesel changes? 
The construction industry, which mainly relies on the usage of Red Diesel as a fuel for powering its generators to generate electricity for multiple site operations, is one of the industries to be hardest hit by the new legislation.

In addition, other heavy industries such as the Quarrying and Mining sector will feel the pressure with these changes, as all three industries use red diesel for the following:

• On-site diesel generators
• On-site cabins used for welfare facilities, offices, canteen and dry rooms
• On-site portable power units used for tooling and local monitoring devices (noise/dust etc.)
• Machinery e.g. digging machines/crushers and other mining machineries
• Heating
• Heat pumps used in conjunction with existing oil boilers used as backup for winter periods 
• Off-grid power generation 
• Specifically for non-commercial premises
• General
• All other diesel users out with the exemption list shown above

What are the alternatives to using Red Diesel once the purchase price (added fuel duty) and consumption increases? 

Of course, businesses can switch to white diesel at a higher cost, but there are a variety of ‘Green Fuel’ solutions that offer significant OPEX / O&M cost savings as well as environmental benefits.

Some of these technologies include:

• Fuel Cells and Hydrogen (H2) systems 
• Battery systems that are efficient for powering welfare cabins, offices, canteens and dry rooms, generally due to the low energy demand 
• Hybrid Power Systems 

How can JCE Energy support this? 

JCE Energy have over 25+ years’ experience in the design, manufacture, supply, installation and commissioning of renewable off-grid power systems, built with the clients bespoke requirements in mind and intended for the heavy industries including construction, mining, oil & gas, marine and quarrying. 
Our systems have supported clients in the following areas: 

• Up to 70% in fuel savings
• Reduced diesel use and maintenance requirements 
• Reduction in noise levels and vibrations 
• Integrated renewable solutions into existing infrastructure 
• Installed transportable and plug-and-play systems on site

We typically engage the client with an initial energy analysis and work together to identify and understand the power consumption of site activities and processes. We can then effectively propose a unique or standard package to best fit the load requirements, with use of the following: 

• Solar systems 
• Small wind systems 
• Hybrid Power Systems (solar, wind, battery) 
• Methanol or Hydrogen (H2) fuel cell solutions 
• Hydrogen (H2) Generators (approx. 50kW) 

With a robust electrical background and in-house engineering & manufacturing capabilities, we are a one-stop-shop for the complete lifecycle of an off-grid power system. In addition, our solutions are certified for use within Hazardous Areas, a requirement often seen in the mining, construction & quarrying industries due to a large presence of dust or gas during operations. 

Please get in contact today to find out how we can support your project needs, whether you are looking for an initial survey, new system build or an upgrade to existing facilities.