With growing interest in Australia in the production of liquid biofuels, bio-refining experts Geoff Bell, CEO of Australian company Microbiogen, and Ed de Jong, vice-president of development at Dutch renewable chemicals company Avantium, consider the drivers of biofuels production and what the future could look like.
In the most basic terms Australia has all the right conditions and materials to produce biofuels – definitely Queensland Premier Annastacia Palaszczuk thinks so if the Queensland Government’s interactions with the US Navy is anything to go by – but is its production solely for export or is there an appetite for the use of these biofuels in Australia?
First, let’s look at Europe.
BIOFUEL PRODUCTION AND USE IN THE EU: ED DE JONG
Biofuels serve as a renewable alternative to fossil fuels in the EU’s transport sector, helping to reduce greenhouse gas emissions and improve the EU’s security of supply. By 2020, the EU aims to have 10% of the transport fuel of every EU country come from renewable sources such as biomass. Fuel suppliers are also required to reduce the greenhouse gas intensity of the EU fuel mix by 6% by 2020 in comparison to 2010.
An important characteristic of the EU’s biofuels policy is the attention paid to sustainability aspects. In principle biofuels can reduce greenhouse gas emissions without adversely affecting the environment or social sustainability. This can be accomplished when biofuels are produced in a sustainable way. The EU has therefore set rigorous sustainability criteria for biofuels and bioliquids.
Companies that want the biofuels they grow or use to be eligible for government support or count towards mandatory national renewable energy targets must comply with these sustainability criteria. They can prove their compliance through national systems or so-called voluntary schemes recognised by the European Commission.
Another important point are the indirect land use changes (ILUC). Growing biofuels on existing agricultural land can displace food production to previously non-agricultural land such as forests. Because trees absorb CO2 from the atmosphere, removing them for biofuel production may result in an increase in net greenhouse gases instead of a decrease.
To combat indirect land use change, new rules came into force in 2015 which amend the legislation on biofuels – specifically the Renewable Energy Directive and the Fuel Quality Directive.
Emissions resulting from biofuels cultivation vary greatly depending on the soil and climate of different areas. To determine which areas are best suited for biofuel production, EU countries conducted assessments of all their agricultural land. The European Commission also examined the feasibility of drawing up such reports for countries outside the EU. It found that while such reports were desirable, they were currently not feasible due to the inability to confirm the accuracy of non-EU countries’ emissions calculations.
Aviation is a big focus in EU
Special attention is given to biofuels for aviation. Biofuels can serve as a renewable alternative to jet fuel in airliners but are currently not produced on a large commercial scale for this purpose. To help spur the commercial development of biofuels for aviation, the European Commission and its partners have launched the European Advanced Biofuels Flightpath.
The EU aims to develop and improve the technical quality standards of biofuels and biofuel blends for vehicle engines by working together with the European Committee for Standardisation (CEN). The practical work is carried out by CEN Technical Committee 19, consisting of experts from the automotive and fuel industries, biofuels producers and other stakeholders.
Driven by policy goals
The European Commission is preparing policy goals for renewable energy up to 2030. A European platform named Biofrontiers, managed by the International Council on Clean Transportation and supported by the European Climate Foundation, launched its final report recently.
Environmental NGOs, think-tanks and the advanced biofuel industry have been collaborating on defining policy boundaries for European fuels policy that recognises the need to safeguard sustainability while stimulating investments into a truly sustainable advanced biofuels industry.
This platform states that following the Paris Agreement, it becomes increasingly urgent to tackle emissions from the transport sector, which will imminently become the EU’s largest source of CO2 emissions.
The work demonstrates that sustainable advanced biofuels can be an attractive opportunity to quickly reduce CO2 emissions in transport. More information on EU’s Biofuels policy, national reports, aviation fuels and directives can be found here.
BIOFUEL PRODUCTION AND USE IN AUSTRALIA: GEOFF BELL
The situation in Australia is very different to Europe. Issues relating to the deployment of the current and future biofuels industry is impacted by a number of factors that relate to Australia and its position as a net fossil fuel energy exporter, the size of the country relative to its population and the history of its indigenous oil production and refining capacity.
These factors are impacting the regulatory environment, social acceptance and attitudes towards indirect land use changes and other aspects of biofuel production and distribution.
There are key differences between Australia and Europe.
As recently as 2000 Australia was producing the vast bulk of its oil requirements from local oil fields. However, crude oil production has been declining significantly since then with locally produced fossil oil accounting for about 30% of current supply. This decline has been fast and projections are for this trend to continue.
Australia is the world’s largest exporter of coal and will also soon be the largest gas exporter. Governments tend to see Australia as an “energy exporting superpower” and thus have limited interest in currently smaller scale industries such as biofuels that can be seen as competitors.
Australia is a significant net exporter of food through crops such as wheat and has significant areas of land that are suitable for high intensity agriculture if the capital and infrastructure is implemented or is available.
Most of Australia’s local oil refining capacity has been closed down or will be closed in the near future. Australia is highly exposed to the import of key transport fuels. Unlike most members of the IEA, which keep about 90 days’ fuel in storage, Australia has about half the IEA requirement, which is not unexpected when the apparent view of Australian governments is towards a more relaxed approach to fuels and fuel security.
All the above factors impact the public perception of the need for a biofuels industry and the Australian government’s regulatory framework within which a biofuel industry needs to operate. As a consequence of the above circumstances, the biofuels industry is operating under the following frameworks.
Mandates and incentives
There are no federal mandates for the production or encouragement of biofuel production. Mandates are left to the states to design and implement. Queensland has recently implemented a bioethanol mandate that starts at 3% and increases over time, and a biodiesel mandate of 0.5%. In NSW, a 6% ethanol mandate has been in place for some time, but as it currently provides exemptions only about 2.5% ethanol is blended into the fuel mix. Recently, the NSW government implemented labelling rules that no longer allow fuel retailers to incorrectly label E10 as a low octane fuel. This is a small and positive step in moving towards the encouragement of biofuels into the fuel mix.
Indirect land use change
Indirect land use change is a major issue in Europe but in Australia it is yet to become more than an area of interest. Proposals for new, large-scale operations in Queensland do not need to demonstrate the impact of indirect land use change for approval. They do have to pass the various standard environmental assessment issues that any major project must pass.
Overall, Australia has what could be considered a “free market” approach to the encouragement and deployment of biofuels into the transport fuel mix due to the mix of natural advantages and competing industries.
The country is a fossil fuel energy export superpower. Despite a transport fuel supply chain that is highly exposed to external disruptions it is happy to continue along the free market path of declining self-sufficiency in transport fuels and the significant inherent risk associated with that structural shift in the fuel supply chain.
At the same time, states and entrepreneurs that recognise the competitive advantages Australia enjoys over the rest of the western world for the production and commercialisation of biofuels are looking to kick start the industry.
The Queensland government has announced its Biofutures 10-Year Roadmap and Action plan, which suggests where a state or company has a competitive advantage, steps are being taken to move towards a sustainable future that is both environmentally friendly and profitable. Negotiations with the US Navy are also underway.
At a glance
|Policy drivers||Paris Agreement||Fossil fuel exports|
|Biofuels production scale||Small relative to market||Large relative to market|
|Refining capacity||Significant||Rapidly declining|
|Mandates||Strong but changing||Weak but improving|
Conclusion: the road ahead
As Ed and Geoff take a six-strong group of bioenergy experts north after the Bioenergy Australia Conference to visit biofuel/biorefining developments in Mackay, it’s not unreasonable to claim that Australia definitely has the means to develop a successful industry – both experts agree – but what’s also evident is Australia’s lack of the same drivers as in Europe with respect to growing a national use market.
The decline of refining capacity would seem to confirm that.
But all is not lost.
With the potential to produce the fuels (and additional co-products biochemical and other products), Australia does stand to win. The Queensland government thinks so, too, as it commences a program that encourages investment in biofuels and other bioenergy projects through its Biofutures Action Plan and 10 year Road Map.
Australia has a lot to offer not only in terms of raw materials and space but also in know-how and expertise. Add to this a ramp up in the attention paid by the airlines to the need for cleaner fuel and Australia could well emerge with the biofuels future that matches its potential.
Australia has the potential to become renewable energy superpower with biofuels becoming a major component.
Geoff Bell and Ed de Jong will speak at the Bioenergy Australia Conference in Brisbane on November 14 to 16.