Biofuels $11.4b boon for Australian farmers but mandate needed

The Bioenergy Australia and Queensland University of Technology study was released at Parliament House in Canberra last week, by Northern Australia and Resources Minister Matt Canavan.

The high level discussion paper, ‘Biofuels to bioproducts: A growth industry for Australia’ outlines a five-point strategic plan for an “enabling environment” to expand the production of biofuels and bio-products, while lowering greenhouse gas emissions.

“With a technologically advanced agriculture sector and a large amount of biomass available, the bio-economy represents a significant economic growth opportunity for Australia,” it says.

The report suggests the potential additional farm revenue from bio-mass based industries would be between $3.9b and $7.8b per year right now and $5.7b to $11.4b per year in 2050.

One of its five strategic points calls for the implementation of a national biofuels mandate to support the introduction of higher quality fuels.

Unlike other leading bio-industry nations like the US that have legislated mandates and supporting policies on ethanol production, Australia is lagging behind.

In looking at the current policy environment, the report says Australia is yet to have a national mandate supporting the inclusion of biofuels in petrol or diesel products sold in Australia.

“The limited growth in Australian biofuels production over the past two decades highlights that the policy environment in Australia has been inadequate and that a better enabling environment with more effective policy implementation is required,” it said.

“Conversely, Australian government regulations cap the proportion of ethanol that can be added to petrol at 10 per cent, on the basis that petrol containing higher ethanol blends may cause engine problems in some older vehicles.”

In the absence of a national biofuels mandate the NSW government introduced a 2pc ethanol mandate in 2007, which was increased to 4pc in 2010 and to 6pc in 2011.

Currently, the proportion of ethanol use in petrol in NSW is about 2.5pc the report says.

The Queensland government also introduced a biofuel mandate from January 1, 2017, which requires that 3pc of the total volume of regular unleaded petrol sales and ethanol-enhanced fuel sales must be ethanol.

“Biofuel blending mandates are in effect in more than 64 countries around the world, including the US, Canada, Europe, India, China, the Philippines, and Thailand,” the report says.

“Many of these countries have benefited greatly from the development and growth of biofuels and, in particular, the bioethanol industry.

“One effect of a biofuels policy is to build a foundation for a bioeconomy - infrastructure that supports the production and up-take of biofuels will promote cost reductions through the supply chain that enable further value-adding to produce bio-based chemicals, plastics and biomaterials.

“In every jurisdiction where biofuels policy has been successfully implemented, the key policy framework has included a biofuels mandate for bioethanol and bio-based diesel (including biodiesel).”

The report said as of 2015-16, average nation-wide ethanol blending in petrol stood at 1.1pc of the total volume of petrol sold in Australia.

The discussion paper’s central proposal considers ethanol-blended petrol (E10) being 10 per cent of Australia’s total fuel needs; an issue that’s also discussed in terms of trying to address fuel insecurity.

It says producing ethanol at 10pc of Australia’s total domestic gasoline consumption would require up to 13 additional bioethanol plants of 100 million litres capacity – compared to three plants that exist currently and five proposed, at varying stages of development.

“Assuming that each bioethanol plant would create 160 new jobs, this growth would create 2080 direct jobs and up to 6570 indirect jobs, require $1.56 billion of investment and create more than $1.1 billion of revenue per year in regional communities,” it says.

The discussion paper says Australian agriculture is “well-positioned” to benefit from the growth of the bio-based fuel due to the large amount of biomass available here.

“According to a recent CSIRO study, the total annual amount of biomass potentially available from all feedstocks in Australia is 78 million tonnes, increasing to almost 100 million tonnes in 2030 and 114 million tonnes in 2050,” it says.

“Assuming an average biomass price of between $50 per tonne and $100 per tonne, the potential additional revenue available for biomass is currently between $3.9 billion and $7.8 billion, rising to between $5.7 billion and $11.4 billion in 2050.

“Potential sources of biomass for future biofuels production include low-grade and surplus crop products, such as low-grade wheat and sorghum, molasses and low-grade vegetable oils from oilseed crops.

“Crop residues including stover, sugarcane bagasse and cane trash, forestry residues, grape marc, and horticultural residues can be used to produce second-generation biofuels such as bioethanol.”

Senator Canavan said there was widespread interest in the bioenergy sector as demonstrated in the report and such an industry was also important for future economic growth.

“But we sometimes forget that oils don’t just drive our cars, they do create many modern products, like plastics and like rubber products as well and there’s no reason, as this report outlines, that biofuels can also substitute for traditional oils in the production of those materials as well,” he said.

“I congratulate the people behind this report and recognise the five point plan put forward in this report, including a proposal for a national mandate, which is something I’m willing to continue to talk to the industry about.

“And I’m particularly interested about their proposals to expand the use of biofuels, for bio-products, and modern forms of bioenergy.

“This is a great platform to do more work to support biofuels and the bio-energy sector.”

Senator Canavan said the federal government was already “very supportive” of the biofuels industry with various investments and programs in place; including a fuel excise on ethanol of 5.3 cents per litre and 2.7 cents per litre on biodiesel, compared to one for petrol and diesel of 40.3 cents per litre.

He said there was also a $3m investment program to develop crop trials looking at methods for making strategic ethanol, while other work is occurring with airlines to reduce emissions, through biofuels.

Independent Queensland MP Bob Katter has long championed the need for government support like mandates to bolster biofuels production and spoke at the report’s launch, along with Senator Canavan and Shadow Environment Minister Mark Butler.

Mr Katter said he saw ethanol/biofuels as a “great boon” for the grains and sugar industries - but it needed government backing, like other industries had received in the past, to established, like coal.

“Read your history books, see the names of the great men of your country and they were the men who did not stand around giving us a lecture on economic rationalism – but they got out there and built the damn thing,” he said.

“If you sell it to farmers later on, that’s not as important as getting it built.

“We sit in a parliament that couldn’t care a less that 90pc of our oil comes from overseas - I would plead with my parliamentarians on the need for action.”

Mr Butler congratulated the report’s authors and the work that’s already being done to increase understanding and awareness of the “enormous opportunities” for bioenergy.

But he said other countries that Australia regarded as our peers were, “more deeply embedded in the bioenergy economy”.

“More than 10pc of the world’s energy is sourced from bioenergy but just really a tiny fraction of that here in Australia,” he said.

“I think every Australian understands how rich we are in traditional energy resources like coal and gas and uranium and in renewable energy sources like solar and wind but don’t have the same understanding of the richness of our resource in bioenergy and there are enormous opportunities.”

Mr Butler said NSW and Queensland had ethanol or low carbon mandates in place but those jurisdictions were “by and large” exceptions to the rule “which is one of real underperformance and a lack of awareness and focus in this area”.

“We know there are enormous opportunities to expand bioenergy,” he said.

“There are enormous investment and job opportunities, overwhelmingly in rural and regional Australia which is so important.

“We also know there are great opportunities to reduce carbon pollution – and not to be underestimated to increase our fuel security.

“We’re very excited about these discussions – we’re very committed to try to make sure that we’re able to at the next election, to take a much more developed bioenergy policy, as part of our energy policy suite, than you’ve seen in the past.”

Australia’s largest ethanol producer is the Manildra Group which manufactures it from starch, a by-product of their wheat milling process, the report says, while the two others are based in Queensland - the United Petroleum Dalby Bio-Refinery and Wilmar’s Sarina Distillery.

The report said there were several new agricultural crops that offered “significant potential” for biofuel production from lower-quality agricultural land, including crops like Agave tequilana (blue agave), sweet sorghum, energy grasses, and short-rotation forestry crops.

“Increasingly, organic wastes such as municipal solid wastes and food wastes are also emerging as feedstocks for the production of biofuels and bioproducts,” it said.

“These sources of biomass are waste residues or by-products of farming in the northern, southern and western grain regions of the states of Queensland, Victoria, New South Wales, South Australia and Western Australia, and in the western, eastern and southern high-rainfall regions in Western Australia, South Australia, Queensland, New South Wales, Victoria and Tasmania.

“Establishing biorefineries to produce biofuels and bioproducts will create new income streams for farming communities in these areas.”

The study also said in 2014, the global market for biobased products was worth US$438 billion and is expected to reach US$1128 billion by 2022.

“Biorefineries convert biomass and organic wastes into biofuels, bioenergy, biochemicals and other bio-based products using a range of technologies and processes,” it says.

“Biorefineries are typically located near areas of feedstock production (e.g. agricultural crops) and therefore boost regional economies, create jobs in rural communities, and provide additional income streams for farmers.

“The development of second generation technologies is improving process economics by utilising biomass residues, from agriculture and forestry and organic wastes, as lower cost feedstocks.”