The owners of the giant Vivergo Fuels plant at Saltend, in Hull, are blaming a combination of high wheat prices, low bioethanol price and Government delays on implementing higher concentrations of the fuel on UK forecourts.
The factory, which opened in 2013, on the back of a Â£400m investment, takes locally grown animal feed wheat, mills it, brews it and then extracts bioethanol, which is then added to petrol.
The Government is currently consulting on increasing the amount of bioethanol added to petrol from five to 10 per cent, known as E10.
Vivergo’s managing director Mark Chesworth, said they had created “a highly skilled and world-class business that had the opportunity to be part of a British sustainable biofuels industry.”
He added: “Sadly, the Government’s lack of pace over the past decade to introduce E10 has further undermined our ability to operate.
“My employees are my number one concern at this time and we have entered into consultation with them”
The plant sources 1.1m tonnes of wheat from 900 farms across Yorkshire and employs workers both in Saltend and at its head office in Hessle.
It is estimated that it supports over 3,000 jobs directly and indirectly, and contributes around Â£600m to the UK economy.
Mike Hookem MEP said the Government was to blame as well as the European Commission for failing to act to curb low-cost bioethanol imports from the US.
He said: “The direct loss of 150 highly-skilled jobs is a massive blow for the Hull area and will be keenly felt by the local economy, as will the potential jobs losses in farming and feedstock supply.”
RAC fuels spokesman Simon Williams said a major factor behind the delay in implementing E10 was the lack of space on smaller forecourts to accommodate new tanks. He said: “The Government was waiting for the fuel industry to do it and the fuel industry was waiting for the Government to tell them to do it. There’s still no hard and fast date (for the introduction of E10).”
The RAC Foundation said last week that 868,000 older cars would not be able to run on E10 without risking damage to the engine.
However bioethanol has been successfully introduced in countries including the US and Canada, and is increasingly popular in Belgium, France and Germany, Vivergo said.
Hull East MP Karl Turner said Labour had been calling on the Government to mandate the use of E10 fuel to tackle climate change and "should be at the forefront of adopting new, environmentally friendly fuels, not hindering domestic producers."
He said: "The proposed closure of Vivergo Fuels tells you all you need to know about how serious the Tories are about boosting the economy of the North and tackling climate change. They simply don’t care.”
The Department of Transport said: “We remain committed to supporting the biofuels industry, and we have already introduced changes to the Renewable Transport Fuels Obligation which will almost double the use of renewable fuels by 2020.
“In addition, we are currently consulting on how we could introduce E10 fuel to UK forecourts, while making sure that drivers are protected if any changes come into effect.
“This demonstrates our commitment to reducing carbon emissions from transport to tackle climate change.”