New Zealand is in the enviable position of potentially becoming the Saudi Arabia of biofuels in the South Pacific, without the food Vs energy debate over biofuels that has plagued other nations.
New Zealand has the capacity to produce all its transport fuels from indigenous natural resources. As petroleum becomes more expensive over the next decade we can transition to transport fuels from biomass (organic matter) and waste. Technically these are achievable now, but the economics are not quite there. Internationally there are a number of technologies available to convert biomass and organic matter into liquid biofuels. Some of these have been around for decades while others are emerging (including from pioneering New Zealand companies).
Unlike many countries where the focus has been on the production of ethanol from sugar crops and biodiesel from vegetable oil, we can use our cropping land for more valuable products, such as food.
The New Zealand focus for biofuel production is on using our biomass from wood and organic matter from municipal waste. As a result we will not have the food Vs energy problems. Instead, in New Zealand, it's food plus energy.
Transport fuel production from renewable sources is not new to us. Anchor Ethanol has been producing ethanol from whey for a number of years. The ethanol can be blended with petrol as Gull currently does.
The production of biodiesel initially focused on using the feedstocks tallow, used cooking oil or canola oil, with conventional conversion technologies. For a short period biodiesel production was supported by financial assistance from Government which stimulated fleet owners to successfully trial biodiesel. Demand for biodiesel outstripped supply. However, because of the short term of the assistance, investors stayed clear of building new production capacity. Now only Green Fuels NZ, who purchased the biodiesel production business from Solid Energy, produce biodiesel commercially.
The experience of biodiesel showed the significant international marketing benefits that are achievable for NZ Inc when we seriously use biofuels in vehicles. Many tourist businesses, such as in Queenstown where all tourist operators used biodiesel, gained significant market advantage from being able to promote themselves as 'clean and green'. This carries over into our export businesses where sustainable production is becoming more important to customers.
This initial biodiesel and ethanol production was always going to be limited, but its importance with regard to transitioning to greater volumes of production was in the experience vehicle owners gained in the use of biofuels. However, there would have been enough feedstock for conventional technologies to have provided adequate quantities of biofuel until the economics of advanced biofuels occurred.
The emerging biofuel production of greatest relevance to New Zealand uses advanced technologies and feedstocks of biomass or waste organic matter. These are not the most attractive feedstocks as they are low in sugars and starches.
We have a lot of biomass and we are good at growing it, and we have an endless supply of organic matter in municipal waste. In fact, municipal waste costs us money to dispose of. Commercial facilities producing these biofuels are currently starting in many countries. They generally require government subsidies - the level of which gives an indication of just how close the technologies are from operating in an unsubsidised market such as ours.
Taking into account petroleum price projections. I estimate we are only 5-10 years off being fully commercial. We currently waste 10-15% of our forest production through harvesting and processing. This quantity of wood residue would be enough to get biofuel production started using advanced technologies. This would promote larger quantities of biomass from extended forest planting.
The Bioenergy Strategy prepared by the Bioenergy Association indicated that 30% of our transport fuels could come from biomass by 2040. Scion research has shown that, long-term, we could theoretically do 100%. The economics of this sort of production is likely to be carried through by the value of the co-products that are also extracted during the process. Wood and other organic matter is rich in chemicals, only some of which can be used to make biofuels, and these chemicals will become more valuable as petroleum prices soar.
The chemicals from wood can also be used to make bio-plastics which can substitute petroleum-based plastics. Consolidation of the current sector, based around the production of transport biofuels and their co-products, along with our ability to efficiently grow wood, could lead to our working with Asian countries such as Singapore, which does not have enough land to grow wood for production of liquid fuels and bio-based materials.
The demand for liquid fuels for transport and other uses is unlikely to disappear, but the price will escalate. Now is the time to start partnering with Asian countries so that we use their money, and our ability to efficiently grow wood, to produce their liquid biofuels. New Zealand could become the Saudi Arabia of the region in the production of biofuels.
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Brian Cox is the executive officer of the Bioenergy Association of New Zealand. He has over 30 years' experience in identifying, investigating and developing commercial capital investment projects in the energy and infrastructure sectors. The Association represents all commercial, research and academic parties involved with wood fuel, biogas and liquid biofuels. Previously Cox led the development of the New Zealand Bioenergy Strategy (which he now works to implement) which has been recognised within the Government's Energy Strategy.