Biofuels to follow coal into liquid market - E.ON

PRAGUE, Oct 20 (Reuters) - Biofuels will follow coal and eventually mature into a liquid market with risk management tools as its consumption rises, a senior E.ON (EONGn.DE) Trading official said on Monday.

"Many people accept coal is in many ways following the oil markets. I remember in the 1980s as an oil trader, people saying 'what are all these banks doing here? They don't even know why sweet crude is called sweet', but they soon saw the banks brought liquidity and developed the market," said Edward Sigar, E.ON Trading Director for Coal, Biofuels and Freight.

Speaking at the Coaltrans annual conference in Prague, Sigar said biofuel consumption will more than double over the next decade and as it does the market will develop and biofuels will become more tradeable in a standardised way.

"Whether you like it or not, coal is following the oil market in the way it's developing and biofuels will follow oil, I believe," he said.

"Biofuel volumes will more than double and at the same time all the financial and physical markets for coal, which is co-burned with biofuels, will become more and more linked. It's a no-brainer," he said.

The power generation and coal industries are facing many challenges, he said, but one challenge which is also an opportunity is the co-firing of biofuels with coal.

But coal will remain an extremely important part of the energy mix, he said.

E.ON currently burns around 3 million tonnes a year of biofuels including wood, industrial and agricultural residues and what Sigar described as grey, odd fuels.

E.ON does not use biofuels which are competitive in the human food chain, he said. (Reporting by Jackie Cowhig)