ON the face of it, the announcement last week that production was to be temporarily halted at one of Europe's largest biofuel plants was another example that establishing the industry in the North-East was a losing battle.

Littlemore than a year after opening its £250m plant at Wilton, near Redcar, Ensus is to stop production for up to four months as costs of raw materials outstrip sales of its core product, ethanol, intended to be added to petrol so producers can hit renewables targets.

Aswell as ethanol, the plant - Europe's biggest wheat biorefinery - produces high-protein animal feed and carbon dioxide, which is liquified for use in products such as fizzy drinks.

All 100 directly-employed workers will be retained on full paywhen the plant ceases production at the end of this month.

But its troubles follow the high-profile closures of the Tees Valley-based D1 Oils refinery, in Middlesbrough, three years ago and the Biofuels Corporation refinery at Seal Sands the following year.

Although on the face of it the omens do not look good, there is cause for optimism.

Although Ensus produces different products from the other two, which were biodiesel producers, one of the reasons all three firms gave for their predicaments was cheap US imports to Europe.

Announcing the closure of its Middlesbrough refinery in April 2008, D1 Oils blamed cheap US imports of biodiesel.

There was growing frustration at these so-called "splash and dash" imports, in which biodiesel is shipped to the US, often from Europe, where normal diesel is added so itwould qualify for subsidies.

It is then "dashed" back to Europe, where it qualifies for another subsidy and is sold at a low price.

The loophole in the law meant US producers could sell their fuel in the UK for 11p a litre, about half the price it costs UK companies to produce it.

These problems were meant to be addressed in March 2009 when EU trade authorities imposed extensive "anti-dumping" measures to stop US importers dumping, in economics terms, huge amounts of cheaper products on the European market.

However, problems continued because of what trade body the European Biodiesel Board believed was a new pattern of shipping US biodiesel to third countries, such as Canada, first and then onto Europe to conceal its US origins.

Last week, following an investigation by the European Commission, the EU decided to impose duties on imports of biodiesel from Canada that had originated in the US.

Closing similar loopholes which allow US producers of ethanol to escape tariffs based on alcohol duties could play a part in helping to address the situation, with the EU reaction to the problems around biodiesel demonstrating a willingness to do so.

Another major problem for Ensus has been the painfully slow implementation of legislation by the EU.

The firm blamed lower than anticipated demand for ethanol across Europe as a result of a delay in European Union member states implementing the Renewable Energy Directive, which requires a certain percentage of ethanol in petrol in a phased introduction up to 2020.

Asa result, demand for the greener form of ethanol is not as anticipated and prices have not risen in line with the cost of wheat, making continued production unprofitable.

However, Ensus expects the regulatory framework for biofuels to catch up with the agreed EU legislation in the coming months.

The firm's chief executive, Peter Sopp, said: "There doesn't appear to be any lack of support for the directive, it is about the pace.

"We are going through these procedures, which we support, but it needs to move more quickly.

"I think biofuel, and bioethanol in particular, has a very good future and Teesside is a great place to have a plant."

In addition, despite the initial target date of 2010 being put back, the UK Government's Renewable Transport Fuels Obligation (RTFO), introduced in 2008, places an obligation on traditional petrol producers to use a certain amount of biofuel annually, until it reaches five per cent of total road transport fuel supplied by volume in April 2013.

John Brady, senior project manager for bio resources at Nepic (the North-East Process Industry Cluster), is another who feels the industry has a positive future.

Hepointed out that, as well as the delay in introducing RTFO targets, problems facing Ensus had been fluctuations in prices for commodities such as wheat, used by Ensus, and vegetable oil, used by biodiesel producers, because of speculators.

He said: "Speculators have gotten hold of that product and this has added to price fluctuations. All of this combined with increased imports creates a changing situation in a short space of time impacting the market, when three years ago everything was rosy in the garden."

Despite these teething problems, Mr Brady pointed out that the long-term future looked good.

He said: "You still have the European directive which commits the UK to having 15 per cent of its energy from renewable resources by 2020.

"You can look at that in a number of ways, if the electricity target was all wind, that would be 15,000 turbines, the heat target if it was to be met by biomass would equate to 20m tonnes and the transport target, if it was totally biofuels, would be 6.5bn litres.

"You can look at this in two ways, either as the size of the challenge or the scale of the opportunity.

"When the UK Government talks about the green economy, here in the North-East we are verymuch at the forefront of it. It is not theory, it is here - we have 20 existing major renewables investments and at least eight more planned, and that is not including electric vehicles.

"There are a number of investments that will bring jobs to the region and help build and grow a low-carbon economy in the North-East, and Ensus is part of those investments."

He also pointed to the case of a biofuels firm on Teesside that was settling into the region and progressing well.

Harvest Energy has become an increasingly recognisable name in the NorthEast, having taken over the former Biofuels Corporation plant at Seal Sands in April last year.

In December, it announced a ten-year deal to remain on Teesside and, in addition, the company - which is the UK's largest independent blender and supplier of road fuels, with customers including Asda and Morrisons - has taken over the supply of fuel and branding for nine Bishop Retail-owned service stations at key locations in County Durham and Darlington.

Mr Brady said: "They are now producing biodiesel and have demonstrated they are here for a long time by signing a ten-year agreement and taking over a string of former BP garages in the region."