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  • Writer's pictureDevandran Karunakaran

The commercial viability of POME as a biofuel feedstock

This article introduces the reader to POME and serves to highlight certain key risks and considerations which will need to be factored into any strategy for the commercialization of POME as a commodity. While there are, of course, other energy markets in which POME is relevant, for example in Asia, the focus in this article is on POME as a commodity destined for the European energy market.


What is it and why is it relevant?

Palm Oil Mill Effluent (POME) is a waste by-product resulting from the crude palm oil (CPO) milling process. This process involves using large quantities of steam and hot water to clean the palm fruit and separate the shell and cake from the fruit. The resulting wastewater is directed to waste ponds. This wastewater (POME) consists of roughly 1-2% oil and 98% water and solids. If left untreated, POME ponds pose harmful environmental risks including methane gas emission and pollution of waterways.

POME has been designated as an advanced biofuel feedstock under European legislation, specifically, The Renewable Energy Directive 2018/2001 (REDII). Advanced biofuels are derived from waste feedstock (e.g. POME) while first generation biofuels are derived from crops (e.g. palm). REDII promotes the use of advanced biofuels while at the same time curbing, and gradually banning in the case of biofuel derived from palm, crop-based biofuels. The REDII list of advanced biofuel feedstock is enshrined until 2030.

In essence, REDII sets renewable fuel mix targets for European Union (EU) member states and there are incentives for the use of biofuel derived from waste, such as POME. Waste feedstocks qualify for double counting – this means that each unit of waste-based biofuel counts as two units for the purpose of calculating adherence to the renewable fuel mix targets. Furthermore, there is no cap on the usage of certain waste feedstocks such as POME.

Such incentives are in line with the EU’s policy of establishing a circular economy as part of its decarbonization strategy - in short, a promotion of the usage of waste-based advanced biofuels ahead of crop-based first-generation ones – with further restrictions on palm oil (see the section on Anti-palm sentiment below).

RED II therefore set the scene for POME as a tradeable commodity in its own right. This is evidenced by the increase in POME prices since 2018 when REDII came into force. However, there are a number of potential obstacles to the commercialization of POME.

The Challenges

At its most basic, POME is a waste by-product. This leads to connected issues around sustainability, quality and quantity of product.

Sustainability issues

Always a concern when dealing with waste-based feedstock and a particular sensitivity for investment grade off-takers who have a number of concerns around sustainability to contend with, including the reputational risk of supplying non-sustainable product. Simply put, the question a buyer always has in mind: is what is being supplied really a waste by-product?

As demand for waste-based biofuels increases as part of a decarbonization strategy, so to the potential for fraudulent practices such as mixing CPO with POME to increase supposed POME volumes. This risk becomes greater in a free-market where the price of the waste by-product (POME) could go higher than the local price of the primary product (CPO).

The EU’s solution to ensure sustainability requires that all POME imported into Europe be certified – International Sustainability & Carbon Certification (ISCC) or Italian National Scheme (INS) certification. The latter is required for import into Italy. For POME aggregators with ambitions of exporting to Europe where POME fetches a higher price, the certification and audit process is itself a barrier to entry from a cost and timing perspective. Furthermore, the audit process meant to ensure sustainability of product may not be full proof.

Quality issues

Conversely, untreated POME contains a significant level of moisture & impurities and metals and free fatty acid content which is to be expected from a waste by-product. Such characteristics can result in damage to the machinery and plants the feedstock is run through as well as the quality of the biodiesel produced. The solution is pre-treatment of POME but this in itself requires substantial capital outlay for a POME aggregator and exporter. The solution is an investment partner with deep pockets.

The issue of moisture content in POME has a sub-set of concerns which parties must contend with. Firstly, as a non-homogenous liquid, accurate sampling/testing of POME to determine moisture levels of a shipment of POME is not straightforward. Different testing methods may well lead to different results for the same shipment of POME. Secondly and regardless of sampling and testing method used, a high amount of free-standing water on discharge of the POME shipment at destination is a major headache for the buyer, not least the additional costs associated with disposal of the water and quality claims.

Quantity issues

As a waste by-product largely consisting of water, a single POME pond can provide only minimal amounts of POME oil each time it is extracted. The pond then has to be left for some time to be “filled up” again before any further POME extractions can be carried out from that pond.

As such, in order for an aggregator to supply consistent quantities of 1-2,000 MT and above of POME per month for export, that aggregator needs to have an extensive internal supply chain to be able to extract POME from numerous waste ponds in numerous CPO mills, repeat the process and store the POME in intermediate hubs and then transport and aggregate the POME at its export facility. All the while ensuring that any delays in the supply chain are catered for by ensuring that sufficient POME buffer stock is already at the export facility to avoid demurrage costs resulting from those delays.

A further complication is that the cloud point of POME is relatively low which means that heating systems need to be in place in order to transport the POME and this of course adds to the cost of establishing such a supply chain.

Establishing such a supply chain is a challenge at the best of times but is especially the case in a country such as Indonesia, the largest exporter of CPO and consequentially, the country with the highest amount of available POME. The supply chain needs to be able to access rural areas across the archipelago as well as having local storage capabilities and an extensive local human network, all the while ensuring that sustainability standards are met.

Not only does it take time to develop such a robust supply chain, but ultimately, it requires a substantial capital outlay from the start and this in itself is a barrier to entry.

Anti-palm sentiment

RED II imposed a gradual ban on palm oil into Europe. This anti-palm sentiment is driven by a number of environmental and social concerns. Generally, that the demand for palm oil leads to deforestation and specifically that the demand for palm-based biofuels leads to a change of land usage (i.e., palm destined for biofuel manufacture is grown on previously non-agricultural land or that because the crop is used for biofuels and not food or animal feed, further land has to be cultivated to grow palm for those latter purposes). It is argued that these changes in land usage increase greenhouse gas emissions. There are also further food security arguments.

An analysis of the justifications of such reasoning and any counter arguments are not the point of this article. Rather, what is important is that Europe does have an anti-palm sentient. This leads to two potential risks that any party involved in the European bound POME trade should take into account.

Firstly, while REDII clearly distinguishes between palm oil (crop) and POME (waste) with the latter enjoying the incentives afforded to advanced, circular economy biofuels, the anti-palm sentiment has created uncertainty as to how Europe will view POME after 2030. Conversely, it can be argued that banning POME imports would be counter to the circular economy strategy and more importantly, would make it difficult to meet the targets for renewable energy fuel mix from advanced biofuels.

Secondly, even if POME remains on the list of advanced biofuel feedstock, European energy suppliers may shy away from it due to reputational and public pressure considerations.

In any event, even if POME were to eventually fall out of favour in Europe, there is likely to remain a demand for POME-based biofuels in other parts of the world though it would of course be prudent to conduct a similar analysis on the drivers, risks and economics.


There are clear policy drivers for the promotion of POME as a biofuel feedstock, and these are based around the key urgent issue which the world is facing and trying to tackle, i.e. decarbonization.

A clearly thought-out strategy, which identifies and plans for potential risks associated with the POME trade, is key to the monetization of this waste by-product which if successfully implemented, will do its part in the decarbonization drive.

This article is by no means an exhaustive analysis – there are many related issues which require detailed discussion and advice and which an introductory article could not do justice. For example, certain inherent country risks and POME pricing mechanics.

If this article has piqued your interest and if you want to learn more, do get in touch through the DKC website contact page, LinkedIn or by sending us an email at

January 2024

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