Biofuels look beyond setbacks
THE Australian biofuels industry has had a rough trot in the past two years. A triple hit has temporarily pulled the rug out from under an industry that a few years ago appeared to be fulfilling its potential as the green- tinged alternative to fossil fuels.
The potential remains, but only more efficient processes can help it recover from the damage caused by three external factors: loss of an important federal tax break, rising cost of feedstock, and appreciation of the dollar.
In 2006 the former Government closed a loophole that had allowed biofuel producers to double- dip: they had been able to claim a rebate on products that had not been taxed. A number of excise rebates exist throughout the industry.
Biofuels are fuels made from agricultural byproducts such as sugars and starches in corn, sugar cane or potatoes that are fermented to produce ethanol; and oil from products such as tallow ( animal fats) and palm nuts. Algae are also processed to make biodiesel.
It is a small industry, contributing less than half of one per cent of Australia’s fuel. But industry leaders plan to cut further into the traditional market. Australian Biofuels Association chief executive officer Bruce Harrison says: ‘‘ Australia uses 19 billion litres of petrol ( a year) and at the end of this year, we will be producing 240 million litres of ethanol.
‘‘ We think that by 2010 there’ll be perhaps 700 million litres ( of ethanol) and then we think it will go up quite a bit after that through the use of lignocellulosic ethanol ( which extracts fuel from the woody parts of plants).’’
But back to the triple whammy. Flinders University chemist and biodiesel expert Stephen Clarke says: ‘‘ First there was a federal Government tax break that all the biodiesel companies could get but — probably due to lobbying from the petrol industry — they lost that last year.
‘‘ Second is that most ( biodiesel) plants in Australia using tallow as a feedstock got funding and started being set up in 2005 but by the time they were operational, the price of tallow had gone up to close to $ 1000 a tonne, from $ 400’’, due to increasing demand from China.
The third hit was the appreciation of the Australian dollar.
‘‘ Even though the price of oil has hit $ US100 a barrel, the price of our dollar’s been going up at the same time. That has kept the price of Australian fuel relatively suppressed. Everyone said biodiesel would become economic when the price of oil hit $ US60 a barrel, but that never happened,’’ Clarke says.
But ethanol, long dogged by motorists’ fears that the fuel would damage their engines, appears to be on the up.
Harrison says: ‘‘ We’ve got two plants producing ethanol: Manildra’s flour mills at Nowra ( on the NSW south coast) and CSR’s at Sarina in Queensland ( using molasses). The capacity of those is 150 million litres a year. And there is a new plant to be commissioned in October this year at Dalby in Queensland and that will produce about 90 million litres a year.’’
Harrison says the Dalby plant will use sorghum grain but assures critics of biofuels, who say the industry takes food from hungry mouths, that it would use less than 10 per cent of the annual crop mainly used for animal feed).
At a conference in London last week, Britain’s chief scientist John Beddington warned that the worldwide biofuels industry threatened food production and the lives of billions of people.
He said: ‘‘ It’s very hard to imagine how we can see the world growing enough crops to produce renewable energy and at the same time meet the enormous demand for food.’’
CSIRO sustainable ecosystems analyst Deborah O’Connell says there ‘‘ is no food versus fuel debate in Australia’’. The scale is too small.
But, ‘‘ if the industry grew then, yes, it could cut into food supplies. That’s a very emotive debate,’’ she says.
It would seem counterintuitive that a product that is a cleaner alternative to fossil fuels ( the CSIRO says waste vegetable oil can emit up to 89.5 per cent less greenhouse gas compared with unleaded petrol) that can use waste byproducts and that might turn wood, grass or paper into fuel would struggle for a foothold. But still, Harrison says, there are hurdles: market access is difficult in the face of the big petrol companies; demand from growing offshore economies has forced up the price of feedstock; and starting a supply chain from scratch won’t ‘‘ happen overnight’’.
The great hope of the industry — at least for the biodiesel side — appears to be microalgae.
‘‘ I can’t see any other way for them to go,’’ says Clarke.
In a new policy initiative, the federal Government has announced it will put up $ 15 million in competitive research and development grants for second generation fuels, such as microalgae.
Clarke says: ‘‘ Using the right strain in the right conditions, about 50 per cent of microalgae can be converted into biodiesel. You can, in theory, get the same amount of oil from about 30 times less land than by growing agricultural crops.’’
Microalgae can grow in saline water and it sequesters carbon dioxide, so it could be grown next to a coal- fired power plant. Production costs about $ 5 a litre, but Clarke believes biodiesel from microalgae would be close to competing on price with regular fuel in two or three years’ time.
Plant power: The CSIRO’s Deborah O’Connell says there is no food versus fuel debate in Australia