Biofuels sector planning technology transition

The long-term viability of a biofuels industry in Western Australia hinges on the development and commercialisation of second-generation technologies, with current first-generation technologies acting as a transition to more energy efficient production methods, according to researchers.

With talk of the development of a biofuels industry in WA, following the release last week of the state government’s biofuels taskforce final report, focus has turned on the economic viability and sustainability of biofuels.

While the industry is still in its infancy, proponents say biofuels can play an important role in reducing greenhouse gas emissions from the transport sector, while facilitating the development of new industries and contributing to fuel security.

But detractors say the industry is too heavily reliant on government subsidies to cover high production costs, making it commercially unsustainable and not price competitive with petrol.

Curtin University senior lecturer of chemical engineering and biofuels researcher, Dr Hongwei Wu, says these assumptions are part-fact, part-myth.

Dr Wu believes some grain feedstocks currently used for the production of ethanol, for example wheat, can be costly.

Often, he says, the energy input used to manufacture the biofuel, usually from fossil fuel sources, is equal to its energy output.

But, Dr Wu says, the production of biofuels using first-generation technology feedstocks, such as grains, can be a constructive mechanism in the short term, enabling consumers to make a gradual transition towards the uptake of biofuels.

“Ethanol from wheat etc is ok in the short term, for a transition. But the second-generation technologies are the key,” he said.

“During this transition, it makes perfect sense to make wheat ethanol and introduce biofuels into the market so people get used it, and they won’t feel the sudden change.”

Dr Wu said one of the key challenges surrounding the sustainability of biofuels production in WA was assessing the life cycle emissions profile of different feedstocks, which were best sourced locally to ensure lower upstream emissions.

He believes the best option for WA are the lignocellulosic ethanol technologies, or woody biomass, with the oil mallee presenting the most promising prospect in WA due to the potentially large supply and high energy yields.

“In the case of woody biomass, you input one joule of non-renewable energy and get more than 40 joules out of that as renewable energy,” Dr Wu said.

Dr Wu’s research has indicated that mallee-derived ethanol has the potential to be price competitive with petrol.

Other examples of second-generation biofuel technologies, identified by the biofuels taskforce as viable alternatives in the long term, include distilling ethanol from biomass feedstocks such sugarcane bagasse or fast-growing, deep-rooted perennial grasses, and extracting biodiesel from algae.

The WA branch of the Snowy Mountains Engineering Corporation is currently looking at establishing an algae photo bioreactor, which would absorb carbon emissions from industry to harvest algae crops for the production of biodiesel.

SMEC is currently in negotiations with several industry partners to begin a feasibility study of the technology to show its technical and commercial viability.

SMEC environmental mining services manager and principal environmental engineer, Stephen Bedford Clark, said he was confident the feasibility study would be completed before the end of this year.

Mr Clark said a US company, GreenFuels, started undertaking field trials of APBs late last year in the first power station pilot in the world. 

“SMEC will also use APBs, with local designs, and use the findings of Australian researchers to tackle the problem in Australian conditions,” he said.

The study will be privately funded by business partners, although SMEC may look for government support, such as the state government’s new clean energy development fund, through the pilot phase.

Currently, the biofuels industry receives government support in the form of excise concessions and grants to assist producers and encourage take-up by consumers.

Ethanol and biodiesel blends are effectively excise free as their respective production grants fully offset the excise. But, from July 1 2011, effective excise will be progressively phased in for all alternative fuels until July 2015, when they will receive a discount of 50 per cent on the excise rate.

The main grant currently offered by the federal government is the clean fuels grant, which allocates 38 cents per litre to producers, effectively making them tax neutral by negating the 38 cent excise tax applied at a retail level.

Other schemes, such as the $37.6 million biofuels capital grants program, offered grants to biofuels projects across Australia. No WA projects received grants, however.

As a comparison, government support for fossil fuels industries in the transport sector, in the form of tax concessions, grants and subsidies, was about between six and $7 billion in 2005-06.

Most biofuel grant schemes and the excise concession will be wound up between 2011-2015, so from then on, the ability for biofuels to remain cost competitive with petrol will be highly dependent on both feedstock and crude oil prices.

There is a range of estimates for biofuels’ cost competitiveness post-2015. But figures from the Australian Government Biofuels Taskforce suggest that without government assistance, the long-term world price of oil would need to average between $US42 to $US47 per barrel for new ethanol producers to be viable.

For biodiesel producers, an oil price of $US52 and $US62/barrel without assistance, would make production economically viable.

Perth-based biodiesel producer Natural Fuels believes the 38c/L grant paid to producers who blend their fuel with regular petrol should continue indefinitely.

The ASX-listed company, with a plant in Darwin and two under construction in Singapore and Houston, is Australia’s largest biodiesel producer by market cap.

Treasury and risk manager Dan Wallwork said the federal government should encourage the production and use of cleaner fuel alternatives.

“We feel that since biodiesel is a clean, green alternative to carbon polluting fuels, that government shouldn’t tax it at all,” he said.

Mr Wallwork said if the price of crude oil remained steady at between $US50 and $US60/barrel, the company’s biodiesel, which is produced from vegetable oils, would remain competitive with regular diesel.