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Introduction
Hydrotreated Vegetable Oil (HVO) is a renewable fuel that is transforming the energy landscape. It is increasingly being adopted by businesses to reduce their carbon footprint and meet Environmental, Social, and Governance (ESG) targets.
HVO’s environmental benefits, include lower greenhouse gas emissions and cleaner burning. This makes it a key player in the journey to sustainability.
However, the purchasing process for HVO isn’t as straightforward as choosing a pump at a forecourt. There are two different categories HVO use can fall into, resulting in four different buying routes. This, coupled with the need for proper documentation to secure environmental certification, means it’s easy to make costly mistakes.
To help you navigate these complexities, this article aims to simplify what you need to know so you can make the right decisions to meet your sustainability goals.
Why Buying the Correctly Graded HVO Can Feel Complicated
HVO is not a one-size-fits-all solution. The fuel grade and its declared use determine everything – from compliance with the Department of Transport's Renewable Transport Fuel Obligation (RTFO) to eligibility for carbon credits.
Not buying the correctly graded HVO for your intended use or failing to document this accurately can jeopardise your sustainability certifications and ESG compliance.
The RTFO mandates renewable energy use in transport to reduce emissions and this has resulted in four distinct categories of HVO. The challenge is understanding the different buying routes needed for the different categories of fuel.
Only by selecting and documenting the correct grading for your HVO according to its use, can your business achieve its environmental goals without risking unnecessary costs further down the line.
Two Categories of HVO Use: Obligated and Non-Obligated
Understanding the different HVO buying routes starts with getting to grips with ‘obligated’ and ‘non-obligated’ use of HVO.
Obligated HVO
When supplied as an alternative to fossil diesel for use in road and permitted off-road applications (generally vehicles and mobile generators), HVO benefits from RTFCs (Renewable Transport Fuel Certificates), which are issued by the Department for Transport. This translates into discounted fuel – obligated HVO – for the end user. It is a scheme designed to accelerate the de-carbonisation of the UK’s transport and off-road sectors.
Non-Obligated HVO
If HVO is to be used for non-obligated applications, such as marine, heating and stationary generators, it does not qualify for RTFCs and will be more expensive.
Watson Fuels have an obligation under the RTFO (Renewable Transport Fuel Obligation) to check the end use of the fuel and provide the correct grade. We have to make sure we provide obligated HVO which has had RTFC benefit, only for qualifying end uses.
Four HVO Grading Purchase Routes
To secure the appropriate environmental certification for your HVO use, you need to declare the correct usage and document it accordingly. Similar to diesel, HVO can also be purchased as red (marked, duty-rebated) or white (unmarked, full-duty) fuel. Layering this with obligated and non-obligated uses, four distinct HVO buying routes are created:
1. Red Obligated HVO
Obligated HVO can only be used in very specific applications. If a farm purchased HVO for an obligated use (such as tractors) this would be red, obligated HVO.
2. Red Non-Obligated HVO
If a farm purchased HVO for a non-obligated use (such as grain drying/heating) this would be red, non-obligated HVO.
3. White Obligated HVO
If a business purchased HVO for an obligated use (such as to fuel trucks) this would be white, obligated HVO. This is not suitable for heating, static generators, or many marine applications.
4. White Non-Obligated HVO
If a business purchased HVO for a non-obligated use (such as stationary generators or heating) this would be white, non-obligated HVO.
The Importance of Declaring Use at the Initial Point of Purchase
When buying HVO, transparency is everything to make sure it is graded and documented correctly. Informing your supplier of your intended application at the point of purchase ensures:
- Accurate pricing: Obligated HVO qualifies for RTFC discounts (Renewable Transport Fuel Certificates).
- Compliance with certification requirements: Correct documentation validates your carbon credits and sustainability claims. As members of the Renewable Fuels Assurance Scheme (RFAS)1 and certified as a ‘trader with storage’ through ISCC, we are able to provide appropriate Proof of Sustainability (POS) documentation for all four grades of HVO. But we can only provide POS documents if the correctly graded fuel has been ordered and supplied.
If you opt for the cheapest grading option without considering the intended use and the certification you will want, it could lead to:
- Loss of environmental certification.
- Ineligibility for carbon credits and offsetting benefits.
- Financial and reputational risks that negate initial cost savings.
Providing Traceability and Certification: ISCC and RFAS
Certification bodies like the International Sustainability and Carbon Certification (ISCC) and membership schemes such as the Renewable Fuels Assurance Scheme (RFAS) play crucial roles in verifying HVO usage and grading compliance, ensuring that businesses can confidently claim their environmental achievements.
International Sustainability and Carbon Certification (ISCC)
The ISCC focuses on sustainable, traceable, and deforestation-free supply chains. It provides Proof of Sustainability (POS) certification, which is critical for your business to prove its renewable fuel use and carbon reductions.
The Renewable Fuels Assurance Scheme (RFAS)
The RFAS is an initiative designed and managed by Zemo Partnership who support the UK’s transition to net-zero transport. Working with RFAS-certified suppliers ensures your fuel aligns with the highest environmental standards. Choosing certified suppliers like Watson Fuels1 simplifies compliance and strengthens your sustainability claims.
Still Not Sure Which HVO Grade You Need to Choose?
Let Watson Fuels help you. At Watson Fuels, we’re committed to helping businesses make the right decisions and declarations when buying HVO. Our expertise helps you to:
- Select the correct HVO grading for your application.
- Document purchases accurately so you can secure the certifications you need.
- Align your fuel usage with ESG and sustainability goals.
Beyond fuel supply, Watson Fuels can provide tailored, expert advice to help your business reach your emissions targets. So, whether it’s choosing the right certification or ensuring compliance with RTFO regulations, we’re here to guide you every step of the way.
To find out more about HVO Renewable Diesel or to get a quote, contact us here.
[1] Watson Fuels follows the RFAS requirement to supply renewable and/or low carbon fuels. Our RFAS reference number is WF-P20/23.
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