Potential new demand for biofuel

• Biofuel production is well developed in Europe (predominately biodiesel from oilseed crops, but now also boioethanol in France), USA (bioethanol from corn and biodiesel from oilseeds e.g. soybean) and Brazil (bioethanol from sugar cane) and recently China (worlds largest bioethanol plant).
• It is early days for biofuels in Australia and particularly South Australia with only a few plants established, a number in planning or evaluation stages. Sugarcane based bioethanol fuel is being produced and marketed as E10 in Queensland and NSW.
• Demand for biofuels is created by government policy in US and EU countries, driven by environmental (green house gas emission and health) and fuel security agendas. Australia has only recently begun adopting policies around use of biofuels e.g. mandating a percentage of biofuel in fossil fuels.
• South Australia has a biodiesel plant (Australian Renewable Fuels Ltd) using tallow as its primary feedstock supplemented with waste oils, some vegetable (canola) and other oil stocks.
• There is interest in establishing a bioethanol plant using barley and wheat as feed stocks.
• Demand for biofuels and profit margin depends on the relative margin between retail fuel prices, determined by Crude oil prices, and cost of feedstocks.
• Canola meal (or low toxin Mustard) from oil for biodiesel can substitute imported protein meals (e.g. soybean) for the livestock industry.
• Dried Distillers Grains and Solids (DDGS) is a by-product from grain bioethanol production also suitable for use as a stock feed, with higher protein content, but lower digestible energy. The wet form can be used similarly to brewery grains (grain residues from malt used in the beer brewing process) in cattle (e.g. dairy), but is uneconomic to transport long distances.

Feedstock supplies

• Feed barley and wheat are in sufficient supply to support a growing domestic demand from both an expanding intensive livestock industry (poultry and pigs) and emerging biofuel manufacture.
• Canola (and other vegetable food oils) are not viable economically as a major feedstock source for biodiesel due to high cost, but specific fuel purpose mustard is being developed for the low rainfall areas where canola production is less profitable.
• SARDI biofuel group (external site) has an active research program in biofuels and feedstocks, including a program exploring novel applications such as micro-algal based biodiesel.
• Other technologies based on biomass are under development in a number of countries, exploring cellulolistic conversion of any vegetable material biomass including e.g. straw, wood chips.
• Another less well developed technology is the pyrolitic conversion of biomass to "bio-oil", which can be used for standing power generation or further distilled to kerosene like fractions for heating and potentially jet aviation fuel.

Challenges and Opportunities

• Critical factor is the input costs for the feedstock. The 2006 drought increased the costs of grain, and the recent under supply of livestock for slaughter due to restocking following the drought - increasing price of tallow are both critical to profitability of biofuel operation with current crude oil price.
• New investment in biofuels needs to explore grain storage or other means to manage risk and price of feedstocks.
• While crude oil price at or around $US60 viability of the industry will depend on a politically favoured environment e.g. using mandates, and compulsory supply e.g. biofuel powered government vehicles and public transport. Higher crude oil prices will increase viability, provided new demand on feedstocks only minimally increases input costs.
• Encourage car manufacturers to market biofuel compatible vehicles to create demand, and allow the fuel supply industry to respond to the new biofuel demand.