Agriculture to reap benefits of bio-fuel

By CHRIS DANIELS energy writer

The agricultural sector could be one of the big winners from a change to permit ethanol-blended petrol in New Zealand cars.

The Environmental Risk Management Authority has decided that ethanol - an alcohol made from fermenting plant material - can now be mixed into petrol supplies, up to a maximum of 10 per cent.

Commonplace in countries including the United States, Brazil and Australia, ethanol-blended petrol is promoted as an environmentally friendly way of reducing emissions and reliance on imported fossil fuels.

Energy Efficiency Conservation Authority chief executive Heather Staley said the blended petrol could go on sale this year, but it was up to the individual oil companies.

Dr Jim Watson, chief executive of New Zealand's largest biotechnology company, Genesis Research & Development, said he was delighted to hear of the decision approving ethanol.

His dream is the development of new plants to create fuels such as ethanol. New Zealand was perfectly placed to do this.

"We're a country that has grown our economy through land-based industries. Now if we look for true growth in New Zealand for our economy, we have to invent a new land-based industry," he said.

"We have got to start producing energy crops - plants that produce cellulose that you can ferment to ethanol."

This meant meeting expectations of the Kyoto Protocol, reducing dependency on fossil fuels and producing a fuel that is environmentally clean.

"Ethanol is going to drive fuel cells, so why shouldn't a country like New Zealand think about how we are going to be part of the hydrogen economy, which is coming?

"We understand agriculture ... we understand fermentation, we have a climate, we have soil, this is the new land-based industry and if we were going to transform the economy I really believe it is going to be through energy crops and the production of fuels like ethanol."

Fonterra, New Zealand's only industrial ethanol manufacturer, produces about 15 million litres annually at its Tirau, Edgecumbe and Reporoa plants.

Half of it is sold domestically - where it is used in alcoholic drinks like gin and vodka and for industrial use, such as methylated spirits, food colourings, deodorants and pharmaceuticals.

Manager of Anchor Ethanol, Tim Mackle, said Erma's decision was positive, but he would not elaborate on how much extra income it might mean for the dairy giant.

"This decision is potentially providing Fonterra with another market opportunity within New Zealand for our ethanol business."

More ethanol could now be sold locally rather than exported, he said.

Shell retail manager Mark Nobilo said the company welcomed the authority's announcement, but more work was needed before ethanol would be used in New Zealand.

Shell and Fonterra made the application with the support of the conservation authority.

When, and how much ethanol is mixed into New Zealand petrol will depend on its local availability and how much excise tax would be imposed.

Cabinet will decide early next month how to tax any ethanol-blended petrol sold at local pumps.

What is ethanol?

* Ethanol is an alcohol made from sugar or starches and products containing sugars or starches, through a process of fermentation and distillation.

* In NZ, it is a by-product of milk processing, made by fermenting lactose with a special yeast that converts the sugar into alcohol. Ethanol is then distilled off and processed further to remove water.

* Half of the ethanol currently produced by Fonterra is used locally for industrial purposes and in beverages. The rest is exported.

* Ethanol is also made overseas, from grain and sugarcane in Australia, beet in Europe and corn in the US.

* Ethanol-blended fuel has been used in the US for nearly 20 years and it now accounts for about 18 per cent of all petrol sold in that country.