Biofuels in New Zealand What , When & How? - Prepared for the New Zealand Society for Sustainability Engineering and Science Ian Twomey May 2008
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Biofuels in New Zealand
What , When & How?
Prepared for the New Zealand Society for
Sustainability Engineering and Science
Ian Twomey
May 2008
Hale & Twomey
• Energy consultants with background in the
commercial sector (petroleum industry)
• Specialise in liquid fuels - both petroleum and
biofuels
• Produced advisory reports for the Government
when biofuel policy being developed
• Commercial rather than scientific focus
2
First this: a bright future
a s Re duc er s
e As G re enhouse‐G
ps D oub l
el C r o
Biofu
Biofuel: Ma
jor Net En
From Switc ergy Gain
hgrass-bas
ed Ethanol
Transport fuels from New Zealand biomass a reality
Petrol fr
om pine
nation's s could
car fleet ru n
a lg ae bi o-
, Scion s l d fi rs t wil d
ays W or ve
e l test dr i
dies
3Then this: a disaster
ʹ c ri m i n al
u c t i on is
u el pro d a l f o od
Bi of g to g l o b
ea d in
pathʹ l e x p ert
U N
crisis ‐
Biofuel mania ends days of cheap food
World Fo
od Price
Threaten Crisis - B
s Billions iofuel Pe
rversion
re v o lu ti on will
Biofuel o d p rices
drive u p fo
4Meanwhile: why it’s important
i ng s r is ko f
du ction br
e in o i l p r o
e p d ec l in tudy
Ste a y s n e w s
r a nd u n r e st, s
wa
World oil
supplies a
run out fa re set to
ster than e
warn scien xpected,
tists
o l at $ 3 a litre
et r
Threat of p
5NZSSES Presentation
In a few years biofuels have moved from being hailed as
a saviour to wean us off fossil fuels to being accused
of the primary cause of rising food prices.
We will look at the following questions:
• Is there a middle ground?
• Is New Zealand on a sustainable path with its biofuel
policies?
• What are the options moving forward?
6Outline
• Worldwide biofuel trends & economic drivers
• New Zealand biofuels policy development
• Demand limitations in use of biofuels
• Supply – what biofuels are available?
• Response (to date) of the petroleum
marketers
• Impact of sustainability debate
• Future options
7Global situation
Other
21%
Petrol
31%
Biodiesel
18%
Fuel Oil
12% Ethanol
82%
Biofuels less than 2% of transport
Diesel/Jet fuels market
36% BP World energy Review
However:
Crude oil use split - growing rapidly +30% in 2007
- dominated by ethanol
8Global situation - targets
• Approximately 40 countries with policies encouraging biofuels
• Many countries have significant incentives/subsidies to encourage
biofuels (esp. Europe and the US)
• Many incentives initially agricultural based
Europe targets 5.5% of all transport 10% of all transport
fuels by 2010 fuels by 2020
US targets – set with ~5% of transport ~20% of transport
volume of biofuel fuels by 2012 fuels by 2022
9Ethanol and petrol prices
1,200
1,000 Ethanol - CEPEA EPACT
(Brazil)
800 Singapore Petrol
$US / mt
600
400
200
0
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
May-02
May-03
May-04
May-05
May-06
May-07
Source: H&T, CEPEA
While trend looks similar main influence on ethanol still sugar market
Introduction of US EPACT in 2006 kept ethanol prices high in 2006
Price level at which ethanol economic to use without incentive (2007/8)
10Biodiesel, feedstock and diesel prices
1,500
Tallow 4% FFA Asian biodiesel Singapore diesel
1,200 (FOB NZ) estimate
900
$US / mt
600
300
0
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
May-02
May-03
May-04
May-05
May-06
May-07
Source: MPOB, JACOBSON, H&T
Substantial increase in price in 2007 higher than justified by diesel prices
Food demand more inelastic than energy – growing rapidly
Unless subsidised, biodiesel manufacture currently not economic
11Policy interventions
Policy interventions can result in market
distortion
• Unintended consequences
• Vegetable oils moved around the world
• Subsidies where they are not required – a
wealth transfer to growers and/or processors
• Prices rise more than they need to
In some markets there is a move away from
subsidies to mandatory targets
12NZ Biofuels Policy Development
• EECA led initial voluntary push for biofuels
• Quality and price addressed
• Trials but no market introduction
• Government assessed compulsory options
• Decided to use compulsory obligation – leave the
market to decide what and how
Year 2008 2009 2010 2011 2012
Percentage 0.53% 1.06% 1.67% 3.35%* 3.40%*
* Increased from level proposed following consultation process
13Policy – Key points
• Obligation level is energy based – in volume
terms 3.4% is close to 5% petrol and diesel
• 2011/2012 level means both ethanol and
biodiesel required to meet obligation
• Between 210 and 320 mln litres of biofuels
required depending on mix (ethanol/biodiesel)
• Biofuel Bill includes clause which considers
sustainability impact
14Biofuel Bill: Biofuel definition
“….biofuels meeting specified environmental
standards or specifications (for example,
specifications providing that qualifying
biofuels must be produced from biomass
grown without causing undue environmental
harm and without unduly impinging on food
production):”
15Demand limitations
Vehicle fleet – cars (petrol)
• Many cars can take 10% maximum
ethanol
• However substantial part of New
Zealand fleet is advised not to use
over 3% - too conservative?
• To increase ethanol use
significantly need flex-fuel vehicles
that can take up to 85% ethanol
16Demand limitations
Vehicle fleet -diesel
• Most heavy vehicle manufactures
only recommend up to 5%
biodiesel
• However many successful trials
and actual use at higher blend %
(up to 100%)
A lot of distribution infrastructure
investment required before
biofuels can be rolled out
17Supply – what’s available?
Covers 1st generation biofuels for 2008-2012 period
North Island tallow: potential Anchor Ethanol: 2-4 mln litres
80 mln litres biodiesel ethanol - byproduct of whey
Lanzafuels: Investigated 150
mln litres of ethanol from
maize – now cancelled
South Island tallow: potential
70 mln litres biodiesel Solid Energy: 15 mln litres (possibly up to
70 mln litres) of biodiesel from canola
Waste oil: potential less than
5 mln litres biodiesel
18Supply – what’s available?
Possible 1st generation biofuels – not comprehensive
North American biodiesel
from canola or soy
Palm oil biodiesel
from Asia
Brazil ethanol from
sugar cane
Tallow or Canola biodiesel
from Australia
19Sustainability Framework
UK Sustainability Reporting
• Environmental
– Conservation of carbon stocks
– Conservation of biodiversity
– Sustainable use of water resources
– Maintenance of soil fertility
– Good agricultural practice
– Waste Management
• Social
– Working conditions/labour and human rights practices
– Land rights issues
NZ: without causing undue environmental harm and
without unduly impinging on food production
20How might different biofuels rate on
sustainability using proposed criteria?
North Island tallow: potential Anchor Ethanol: 2-4 mln litres
9
80 mln litres biodiesel ethanol - byproduct of whey
Lanzafuels: Investigated 150
9 mln litres of ethanol from
? maize – now cancelled
South Island tallow: potential
70 mln litres biodiesel Solid Energy: 15 mln litres (possibly up to
70 mln litres) of biodiesel from canola
?
Waste oil: potential less than Assessment is difficult
5 mln litres biodiesel 9 as criteria are relative
21How might different biofuels rate on
sustainability using proposed criteria?
?
North American biodiesel
from canola or soy
X Palm oil biodiesel
from Asia
9
Brazil ethanol from
sugar cane
9? Tallow or canola biodiesel
from Australia
22Supply – Assumptions in Biofuels Bill
Covered in the environmental section of the preamble
Biofuel Volume Proportion of 2012
(mln litres) target
Biodiesel from NZ sources ~ 143 67%
(largely tallow)
Ethanol from whey (NZ) ~3 1%
Ethanol from domestic ~102 32%
maize
23Supply – Current expectations
Based on possible scenario in oil company submission to
the select committee considering biofuel bill
Biofuel Volume Proportion of Comparison
(mln litres) 2012 target
Biodiesel from NZ 34 16% 67%
sources (canola/tallow?)
Ethanol from whey (NZ) 3 1% 1%
Ethanol from domestic 0 0% 32%
maize
Imported Ethanol (Brazil 265 83% 0%
– sugar cane)
24Current retail price estimates
250
200
150
NZ c/litre
100
50
0
Ethanol Petrol Biodiesel Diesel
Import cost Taxes and duties Oil company costs and margins
Source: H&T Fuel Price Monitor
25Summary of oil company response
• Gull successful E10 premium petrol roll out
• BP’s says biofuels yes but targets should ramp up
more slowly to avoid forcing them to sell E10 regular
• Other marketers also appear to be targeting ethanol
for initial roll out
• Although many local biodiesel plant announced major
commitments still to be made. Concerns regarding:
– Subsidised imports (splash and dash)
– Economics
– Difficulty getting offtake agreements
– Quality concerns from majors
26Policy debate – Biofuel Bill
• Focus on sustainability clause
• Some submissions suggest Bill should be shelved (e.g.
Parliamentary Commissioner for Environment)
• Some suggest sustainability issue solved by banning
imports
• Will be some redrafting but how might it be done:
– Pick winners ?
– Ban certain biofuels?
– How to manage unintended consequences?
• Will the target or timetable change?
27Summary of my view on the policy
• Valid argument for slowing rate of target increase
• However in general target level:
– Ensures infrastructure investment which enables biofuels to
compete with fossil fuels
– Not too high given only supply likely to be first generation
(not market distorting as in Europe and the US)
• If biofuels sustainable (including economic) then
volumes can expand rapidly
• Mandatory targets better than incentives/subsidies
(should ethanol have a tax break?)
• Need to define sustainability criteria carefully
• In summary a reasonable middle ground
28The future
The next step is producing liquid fuel that can directly
substitute existing fuels (no quality issues) from a
sustainable feedstock that meets sustainability
criteria
Future Feedstocks Future Process Conversions
• Ligno-cellulosic biomass • using Fischer-Tropsch
• Switchgrass • Enzymatic/microbial conversion
• Jatropha • Biobutanol
• Algae • Thermo-chemical liquefaction
• Solid waste
29You can also read
