Fuel-grade ethanol failing to hold rapid growth leading to last year’s peak as mandates weaken
A major biofuels industry report shows strong recent growth in biodiesel and renewable diesel consumption taking something of a breather.
Though the report is focused mainly on motorists’ consumption, the findings of Australian Biofuels 2015-16 will have resonance with commercial demand.
Total annual consumption of fuel-grade ethanol in 2014-15 dropped to its lowest level in four years at 249 ML – more than 70 megalitres (ML) down from its peak of 319 ML in 2010-11.
The report prepared by APAC Biofuel Consultants is the 10th annual client study on the Australian biofuel sector.
Against that, the report identified that biofuels demand increased significantly again in 2014-15 to 688 ML, a 38 per cent increase on the previous year.
This was driven for the second year in a row by record imports of subsidised bio-based diesel – that is, biodiesel and renewable diesel.
This high level of aggregate demand will be short lived, according to the report.
“Demand for ethanol blended fuel in Australia needs to be consumer driven,” Australian Biofuels 2015-16 co-author and APAC Biofuel Consultants joint CEO Mike Cochran says.
“One factor impacting demand is that the price differential between ethanol blended and regular grade petrol at the bowser is not sufficient to attract motorists to switch to the latter.
“More generally, importers of biodiesel and renewable diesel took advantage of the federal government’s excise equivalent cleaner fuels grant before its closure in June 2015.
“From then, biodiesel imports became subject to the standard diesel excise.
“And already there are signs that biodiesel imports have reduced to a trickle since the mid-2015 end of the excise incentive.”
Another wrinkle is that, supported by the Federal Government’s Australian Renewable Energy Agency (ARENA), advanced biofuels continue to make progress with four projects at demonstration stages developing algae and cellulosic technologies to produce transport fuels, the report notes.
However, interest in aviation biofuels in Australia has waned.
The authors lament that, despite state-based use mandates, policy generally is marked by inconsistency, the fuel’s use lacks consumer acceptance and domestic production has failed to grow.
“The sad thing for Australia and the industry is that since the extension of the biofuels grants schemes in 2011 – amounting to $910 million – the domestic biofuel sector has not grown,” Cochran says.
“Even with Australia’s three fuel ethanol producers receiving $541 million in grants, plus the NSW 6 per cent ethanol mandate, the industry has not convinced more motorists to switch to ethanol blended fuels,” he said.
“In the case of biodiesel, with import and producer grants amounting to $369 million among about 32 entities, domestic production of biodiesel remains unchanged at around 70ML.
“Within the past five years – despite all the support mechanisms in place [such as grants, mandates, direct support and import and the like] – domestic biodiesel producers have failed to produce cost competitive diesel and failed to expand cost competitive capacity.
“Also, ethanol producers have failed to increase consumer acceptance.
“If biofuels are to successfully integrate into the Australian fuel market without increased government assistance, it is then up to the industry to ensure that production is cost competitive and demand is consumer driven.
“Based on its record to date, these remain giant challenges for the Australian biofuel industry.”
APAC Biofuel Consultants is a joint venture between EnergyQuest and Ecco Consulting.