Cover story: Time to get serious about biofuels

In the Australian outback, the sun beats down on a series of open ponds. The water is green because it’s full of algae – microscopic plants that grow in sunlight while devouring carbon dioxide.

Beside these miniature lakes, a cluster of buildings house units where the algae are harvested and oil extracted suitable for biofuels production. It is then transported to processing plants across the state. Eventually, the finished product is sold through Caltex terminals and service stations.

This is no figment of scientific imagination. In a $3.3-million project led by Murdoch University in Perth and involving the University of Adelaide, scientists are using sunlight, carbon dioxide and non-potable water to test a new generation of biofuels based on algae.

This project claims to lead the world in algae biofuel research after more than 12 months of consistent results at both universities. The fuel they’re creating is renewable, environmentally friendly and can easily substitute for fuels refined from crude oil, they say.

“It was previously believed impossible to grow large quantities of algae for biofuel in open ponds consistently and without contamination, but we’ve proven it can be done,” says Project Leader Professor Michael Borowitzka of Murdoch University.

Construction of a multi-million dollar pilot plant to test the whole process on a larger scale is said to be planned next year for Karratha in Australia’s north-west.

It’s yet more evidence that biofuels, while currently accounting for only a tiny fraction of transport fuel use (less than one percent in Australia), are here to stay and can grow significantly if the right government policies are put in place.

In Australia, ethanol and biodiesel are already firmly part of the alternative fuels landscape. Europe has a target of 10 percent biofuels in the fuel mix by 2020 and the US has mandated 164 billion litres per year of ethanol in petrol blends by 2022. (By comparison, Australia‘s annual petrol consumption is about 19 billion litres.)

Caltex is already Australia’s leading supplier of biofuels blends to retail and commercial customers but believes there is substantial growth potential.

“In addition to complying with some states’ requirements to include biofuels in the transport fuels we sell, we must have sensible strategies in place to maximise commercial opportunities from them,” explains Caltex Managing Director and CEO Julian Segal. “Biofuels need to make money for investors all along the supply chain.”

But although biofuels are produced and sold in Australia, a vision and strategic policy framework are lacking.

Caltex’s vision is that biofuels can be a significant part of Australia’s future supply of liquid fuels (partially substituting for petrol, diesel and jet fuel) and help address the challenges of climate change and energy security.

To help create a viable industry to fulfil this vision, Caltex proposes that federal and state governments, together with industry and other stakeholders implement a ten-point policy:

1. Provide more information for consumers, promote products.
   
   There’s still a lack of accessible information for motorists on the benefits of biofuels. Many are uncertain about whether ethanol blends are okay for their vehicles.


The government should develop a public information campaign jointly with the biofuels industry to provide clear consumer information.

2. Ensure manufacturers make vehicles so they can run on at least E10 blend and ensure warranties include this fuel.
   
   Most new vehicles sold in Australia can use petrol with an ethanol content of up to 10 percent. But some vehicles are not warranted to run on E10 and consumers may be concerned about warranty cover.
   
3. Ensure biofuels meet all fuel quality requirements including national fuel quality standards.
   
   Australia needs to ensure national fuel quality standards for biofuels meet the requirements of vehicle manufacturers, so they can provide the necessary warranties. In addition there are some fuel characteristics that are not formally regulated (like the ability of biodiesel blends to flow properly in very cold weather) but must be managed by fuel suppliers. Quality control in manufacturing is critical to ensure good performance of biofuels blends in modern engines.
   
4. Ensure sustainability criteria take into account lifecycle greenhouse gas emission reductions and ecological impacts – and link this to the provision of financial assistance.
   
   The move to environmentally friendly transport use can’t focus solely on tailpipe emissions because the lifecycle impacts of any fuel can be extensive. Full lifecycle analysis takes account of the greenhouse gas emissions and other impacts of manufacturing biofuels blends from raw materials as well as the emissions when they are burned.
   
5. Targeted financial assistance to new Australian biofuels producers for a limited period.
   
   New biofuels producers may be squeezed next decade between increasing taxes (starting in July 2011) and oil prices and carbon prices that have not yet risen to their expected long-term levels.
   
   In these circumstances, there may be a case for financial assistance to new Australian biofuels producers for a limited period. This assistance would be allocated on a competitive basis and should focus on the development of second generation biofuels, like ethanol from cellulose and biodiesel from algae or oil-rich plants. In the US, for example, the government has announced the granting of US$385 million for the construction of six pilot cellulosic ethanol plants.
   
6. Financial assistance for developing the biofuels supply chain – including distributors, wholesalers and retailers – and for developing end-use technology including vehicles.
   Caltex is diversifying its fuels portfolio with investments in terminals and service stations to sell biofuels blends. It’s the only major Australian supplier of biodiesel blends and is working to increase commercial uptake.
   
   As the chemical composition of biofuels differs from that of traditional fuels, their storage and distribution require additional or converted infrastructure. Financial assistance, such as grants for converting service stations, can help accelerate market development.
   
   The Australian Government’s $6-billion Green Car Plan is investing in innovation in car manufacturing to produce environmentally friendly vehicles. Funding should also be available for the infrastructure to supply low-carbon fuel to these vehicles during their introductory phase.
   
7.  Optimisation of crops and conversion processes for biofuels production in Australia.
   
   First-generation feedstocks based on sugar, wheat and sorghum are already grown in Australia for ethanol, and oilseeds and tallow for biodiesel.
   
   While lignocellulosic sources for second generation feedstocks – like sugar cane bagasse and plant stubble – are available, research on the most cost-effective way to produce ethanol from these and other sources is continuing. Australian needs more comprehensive research into the best crops and conversion processes for Australia’s land uses and climate.
   
8. Implement the proposed 50 percent discount on new excise taxes to be introduced over five years starting in July 2011.
   
   Current legislation provides for excise on biofuels to phase in to full petrol and diesel excise rates over five years from July 2011, which will have a very damaging effect on the biofuels industry if implemented.
   
   The 2004 energy white paper proposed a 50 percent discount of excise rates based on the energy content of biofuels. Under this proposal, the rate of excise on ethanol in 2015 would be 12.5 cents per litre, not 38.14 cents per litre, and on biodiesel 19.1 cents per litre instead of 38.14 cents per litre. This discounted excise regime needs to be implemented.
   
9. Avoid effective removal of tax concessions for 20 percent biodiesel blends as a result of making a biodiesel blend standard for these blends.
   
   Biodiesel blends above five percent are currently taxed as diesel if they meet the national fuel quality standard for diesel. This means that many large users such as farmers and miners pay no excise as they receive a full “fuel tax credit”. Once a biodiesel blend standard is regulated, this credit would be reduced by 20 percent for a B20 blend, which could make the blend commercially unattractive to large diesel users. The solution is to make the blend standard but retain the full fuel tax credit so biodiesel blends above five percent remain competitively priced.
   
10. Ensure a level playing field for taxation of domestic and imported biofuels from July 2011.
    
    The Australian biofuels industry must be internationally competitive. Although developing the industry requires the support of government policies and may require some transitional funding, the aim of any assistance measures must be to ensure its long-term competitiveness.
    
    Biofuels are already being traded internationally, and Australian consumers should have access to the competitively priced fuels.
    
    
    

    New fuels: what’s happening?
    
    In October 2009, the federal government set up a $560-million Centre for Renewable Energy to promote commercial opportunities for biofuels, solar, wind and geothermal energy. Research work is already underway into new generation biofuels production, with Australian experts and scientists playing a role.

Here’s a quick look at some of the initiatives in Australia and overseas:

CSIRO

The Australian Commonwealth Scientific and Research Organization is assessing current technology for developing second-generation biofuels from lignocellulose (biomass from plant material). Its research has shown that under ideal conditions algal biodiesel can be produced at lower cost than fossil diesel, says CSIRO’s stream leader for its transport biofuels division Tom Beer. “In a perfect world,” says Dr Beer, “an algal lake 100km by 100km would meet all of Australia’s transport fuel requirements.”

Algal Fuels consortium

Australia’s Algal Fuels Consortium is developing a “pilot-scale” second-generation biorefinery for production of biodiesel from algae on South Australia’s Torrens Island.  The work has been boosted by a $2.724 million Department of Resources, Energy and Tourism research grant to the consortium which includes the South Australian Research and Development Institute and Flinders University.

University of Melbourne

The University of Melbourne Energy Research Institute has assembled a multidisciplinary team to examine the production and fermentation of lignocellulosic biomass and downstream processing of fuels from this and algae. It also aims to develop engines that can work at high efficiency regardless of fuel composition.

Coskata

Coskata is an American renewable energy company whose technology enables low-cost production of ethanol from a variety of sources like municipal solid waste, agricultural and forest waste, bagasse and many other materials. Its “flex ethanol” facility in Madison, Pennsylvania, already runs 24 hours a day to turn wood chips into ethanol.

Compared with standard petrol, Coskata says its cellulosic ethanol reduces greenhouse gases by about 96 percent and uses half as much water.


Synthetic Genomics

The California-based firm is using synthetically produced microorganisms to produce ethanol and hydrogen. It was founded in part by J Craig Venter, who earlier had been a driving force in the race to sequence the human genome. Currently the company says it’s working to produce biofuels on an industrial scale using recombinant algae and other micro-organisms.

Sapphire Energy

This California-based company, whose seed investors include Bill Gates and the Rockefeller family, have held preliminary talks with Austrade about establishing algae cultivation in Australia. Chevron is also involved in examining algal fuels production, as are many other new companies.

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