Overview of Bioenergy in Australia

RIRDC new ideas for rural Australia

 © 2010 Rural Industries Research and Development
Corporation.

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ISBN 978 1 74254 049 8

ISSN 1440-6845

Publication No. 10/078

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Researcher Contact Details

Colin Stucley
Enecon Pty Ltd
PO Box 175
SURREY HILLS VIC 3127

Phone: 03 98951250
Fax: 03 98951299
Email: cstucley@eneocn.com.au

RIRDC Contact Details

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BARTON ACT 2600

PO Box 4776
KINGSTON ACT 2604

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Electronically published by RIRDC in June 2010

Print-on-demand by Union Offset Printing, Canberra at
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Published in June 2010

2
 Overview of
Bioenergy in Australia
by Colin Stucley
Enecon Pty Ltd

Publication Number 10/078

3
 Foreword Acknowledgements

Australia’s bioenergy industry produces renewable electricity, heat and liquid

This report has benefited from
fuels. With revenues in excess of $400 million per year, bioenergy is already
the involvement of a great many
a valued contributor to businesses in cities and rural locations across the
people during its preparation
country.
and review. Preliminary
Australia is actively seeking ways seek to reduce its greenhouse gas emissions collaborators included Dr
and dependence on fossil fuels, and bioenergy could play a more significant Stephen Schuck and Mr John
role in coming years. Potential exists for greater use of existing and new Simpson. The draft report
feedstocks and technologies, leading to an increased contribution from was reviewed by personnel
bioenergy across industry, transport and domestic energy sectors. Such from a number of government
use will allow bioenergy to make a valuable contribution to Australia’s low organisations at state and federal
carbon future. levels, as well as individuals in
academia and industry. The
Research, Development & Extension (RD&E) is a key factor for increasing input of all these reviewers is
the use of bioenergy, by ensuring that it is competitive, sustainable, and fully gratefully acknowledged, as is
understood and appreciated. the coordination and inputs
provided by Dr Roslyn Prinsley
This report provides an overview of the Biofuels and Bioenergy industry.
and Ms Julie Bird at RIRDC.
This overview includes basic statistical information for the biofuels and
bioenergy industries. It will also be a useful basis for those contemplating
investment or formulating policy and will help to inform RIRDC as it plans
its research and development priorities into the future. The report was co-funded by
Bioenergy Australia, an alliance
This report is an addition to RIRDC’s diverse range of over 2000 research of 86 member organisations
publications and forms part of our Bioenergy, Bioproducts and Energy fostering the development
R&D program, which aims to meet Australia’s research and development of biomass for heat, power,
needs for the development of sustainable and profitable bionergy and transportation fuels and other
bioproducts industries, and to develop an energy cross sectoral R&D plan. value-added biobased products. 
RIRDC is Bioenergy Australia’s
Most of RIRDC’s publications are available for viewing, free downloading
lead organisation. 
or purchasing online at www.rirdc.gov.au. Purchases can also be made by
phoning 1300 634 313. See www.bioenergyaustralia.org

Tony Byrne
Acting Managing Director
Rural Industries Research and Development Corporation

4
Contents

Foreword....................................................................................................................................................................4
1. Executive Summary.............................................................................................................................................6
1.1 Background and purpose..............................................................................................................................6
1.2 The industry today.......................................................................................................................................7
1.3 The potential of the industry........................................................................................................................7
1.4 What will help bioenergy reach its potential? . .............................................................................................8
1.5 How can RD&E assist?.................................................................................................................................8
2. Current Australian Bioenergy............................................................................................................................9
2.1 Markets . ......................................................................................................................................................9
2.2 Feedstocks...................................................................................................................................................11
3. Industry Structure in Australia....................................................................................................................... 13
3.1 Feedstock....................................................................................................................................................13
3.2 Processors....................................................................................................................................................14
3.3 Industry and related bodies.........................................................................................................................15
4. Status of Technologies..................................................................................................................................... 16
4.1 Mature........................................................................................................................................................16
4.2 New............................................................................................................................................................16
4.3 Biorefineries................................................................................................................................................17
4.4 Scale . .........................................................................................................................................................17
5. Research, Development and Extension Activities...................................................................................... 19
5.1 Australia......................................................................................................................................................19
5.2 Overseas......................................................................................................................................................20
6. Sustainability and Life Cycle Assessment..................................................................................................... 22
6.1 Sustainability...............................................................................................................................................22
6.2 Life cycle assessments for bioenergy ...........................................................................................................23
7. Discussion – Risks and Challenges................................................................................................................. 25
7.1 The “food versus fuel” debate.....................................................................................................................25
7.2 Competition...............................................................................................................................................25
7.3 Liquid fuels.................................................................................................................................................26
8. Potential Scale of Industry.............................................................................................................................. 28
8.1 Future Markets...........................................................................................................................................28
8.2 Future feedstocks .......................................................................................................................................29
8.3 Scope for investment...................................................................................................................................30
9. Discussion........................................................................................................................................................... 31
9.1 Timeline for change....................................................................................................................................31
9.2 RD&E over next five years.........................................................................................................................32
9.3 “From planting to power” – recognising the full supply chain....................................................................34
Endnotes................................................................................................................................................................. 35

5
 Bioenergy is a complex topic, it encompasses multiple feedstocks from agriculture, forestry, and urban sources
1. Executive Summary
1.1 Background and purpose
Bioenergy – for heat, power and liquid fuels – is the
subject of considerable interest and activity world-wide.
Drivers for bioenergy include:
• The reduction of CO2 emissions via the substitution
of bioenergy for fossil fuels.
• Security of energy supplies.
• Regional development, especially through new rural
industries.
• Potential health benefits such as reduced particulate
emissions.
Bioenergy may potentially have a significant role in a
low-carbon energy future:
• Biofuels feature as a source of both electricity and
liquid fuels in carbon reduction scenarios modelled
in 2008 by the CSIRO1.
• Referring to electricity production to 2020 and
beyond, the Clean Energy Council of Australia
states: “Bioenergy has a vital role to play as part of
Australia’s clean energy future”2.
• After studying the role for biofuels as a future
transport fuel in Australia, the Australian Academy
6
of Technological Sciences and Engineering (ATSE)
stated: “The key finding of this report .. is that
biofuels…have useful roles to play as Australian
transport fuels and can contribute to greenhouse gas
mitigation and energy security.”3
• Overseas, the US Government’s Roadmap for
Bioenergy and Biobased Products4 states: “Biomass
resources are a sustainable and environmentally friendly
feedstock that can contribute significantly to a diverse
energy portfolio.”
• The European Union’s position is similar: “In the face
of Europe's increasing dependency on fossil fuels, using
biomass is one of the key ways of ensuring the security of
supply and sustainable energy in Europe.”5
But bioenergy is a complex topic:
• It encompasses multiple feedstocks from agriculture,
forestry, and urban sources.
• It includes many different technologies: some widely
used for decades, others only recently or yet to be
commercialised.
• Energy products include electricity, heat and liquid
fuels. In the future it is possible that co-products will
also feature in many bioenergy projects.
• As with most other forms of renewable energy,
it often involves the use of fossil fuels for its
production, however the emissions resulting are often
minor compared to the net GHG benefits derived
over the entire lifecycle of bioenergy.
• It is the subject of active R&D world-wide, with a
number of new technologies and feedstocks expected
to be commercialised over the next decade.
• In some situations bioenergy may compete for
feedstocks and land that would otherwise be used for
food production.
• In other situations, new tree crops for bioenergy may
enhance agricultural activities, and the environment
through salinity mitigation, soil protection and
increased biodiversity.
• There are high associated costs to commercialise new
technologies and market barriers to the introduction
and use of new fuels.
1.2 The industry today
Bioenergy contributes approximately one quarter
(approximately 1800 GWh per annum) of the new
renewable electricity generated in Australia under the
Mandatory Renewable Energy Target (MRET)6, which
was in force from 2001 until 2010, and was designed
to provide 2% of Australia’s total electricity generation
in 2010. An average selling price of 8 cents per kWh
(allowing for the value of the electricity and a typical
value for a REC) corresponds to $80,000/GWh. The
value for electricity from bioenergy under MRET in
2007 was therefore approximately $144 million per year.
Bioenergy generation under MRET was primarily from
land fill gas and bagasse-fired power stations at sugar
mills. The expanded Renewable Energy Target (RET)
came into force on 1 January 2010 and mandates that
20% of Australia’s projected electricity supply is to come
from renewable sources by 2020. Modelling of the RET
scheme suggests that bioenergy technologies are likely to
benefit from the scheme, particularly bagasse, municipal
solid waste, and wood/wood waste7.
Ethanol and biodiesel are both produced commercially
in Australia. According to figures compiled by the
Department of Resources, Energy and Tourism,
production in 2009 was estimated to be in excess of
330 ML. Assuming an average selling price of 80 cents
per litre, revenues from Australian biofuel production
are currently valued at some $260 M per year. This
production represents less than 1% of the estimated
37 billion litres of petrol and diesel used in Australia in
20098.
1.3 The potential of the industry
The bioenergy industry in Australia has the potential to
grow significantly2,9. This may be driven by:
• Increased demand for renewable energy for
stationary power and transport fuels, as Australia
seeks to reduce its CO2 emissions.
• A market response to a sustained increase in oil prices
in the longer term, as demand increases and supply is
constrained.
• The development of a variety of new and existing
feedstocks that optimise sustainable use of existing
farmland and create new opportunities for marginal
lands.
• A variety of new technologies, principally those
for production of liquid fuels from woody biomass
(currently being commercialised overseas) and also
from algae.
Power and heat – The Australian Bioenergy Roadmap2
notes that bioenergy currently provides some 0.9% of
Australia’s electricity generation. The Roadmap reports
that bioenergy could potentially provide from 19.8% to
as much as 30.7% of Australia’s electricity requirements
by 2050.
Biofuels - As a variety of new biofuel technologies are
commercialised, biofuels could potentially make up an
important part of Australia’s future fuels for road, sea
and air transport. This could include ethanol, biodiesel
and synthetic diesel for use in blends and as fuels in
their own right. In addition to current production via
sugar, grains, tallow, used cooking oil and vegetable oils,
additional fuel production could come from woody
residues, new tree crops (for oil and for biomass) and
algae. New tree crops could be integrated with current
agricultural systems and/or be developed as separate
crops. CSIRO has reported that there is potential for
second generation biofuels to replace between 10%
and 140% of current petrol only usage over time10. The
variability in this prediction is attributed to the lack of
knowledge on ecological sustainability and economic
feasibility of products from the range of lignocellulosic
feedstocks.
The potential for production of biofuels from algae
could also be considered. Algae production has the
potential to be linked to broader rural aquaculture
initiatives. It should also be noted that biofuels are just
one of the options available in Australia for alternative
future fuels11. Future energy for transport may also see
the increased use of natural gas and the development
of liquid fuels from coal and gas, as well as movement
towards electrical modes of transport.
The longer term opportunities for bioenergy production
will in part be determined by future policy direction
7
 and the best use of land resource for energy production.
Bioenergy will also need to compete with other forms of
renewable energy such as wind and solar, as well as other
new sources of transport fuels such as coal and natural gas.
1.4 What will help bioenergy reach its
potential?
A number of factors could be considered to help
bioenergy meet its potential. These include:
• A secure demand for bioenergy products, which will
underpin investment for feed supply and bioenergy
processing.
• A regime that places costs on carbon emissions across
each of the areas in which bioenergy can contribute
(e.g. heat, power, transport fuels, chemicals).
• Further understanding of the environmental and
social costs and benefits of using different types of
bioenergy in Australia.
• Local feedstocks with technical characteristics and
costs that are well understood.
• Mapping of potential feedstock volumes and thus
actual supply (fuel and electricity) that Australia can
expect from biomass.
• Mapping of current industry and technologies being
utilised, to provide a baseline against which growth
may be measured.
• ‘Buy in’ from market drivers such as oil majors and
car manufacturers.
• Greater understanding that some new tree crops can
be integrated into current agricultural production
systems to maintain or increase agricultural
production, produce biomass and provide benefits
such as soil protection.
• Integration of bioenergy production with production
of co-products such as foodstuffs, chemicals and
biochar.
8
1.5 How can RD&E assist?
Technology – With strong worldwide interest in
bioenergy, a variety of new technologies for electricity
generation and biofuel production are already being
developed and commercialised overseas, with significant
industry investment and government support. Most
of these technologies could be utilised in Australian
conditions. Australian RD&E could adapt these
technologies to suit local conditions and feedstocks,
and assist with pilot, demonstration and commercial
prototypes.
In situations where Australian researchers can
demonstrate a strong competitive business case based
on unique Intellectual Property or world leading
capabilities, RD&E support has been shown to enhance
the opportunities to create new local industries and
technologies that complement developments made
overseas and can reach international markets.
Feedstock – Whereas bioenergy technologies
developed overseas may be utilised in Australia, local
RD&E may result in a greater understanding of the
optimal production, harvest, delivery and processing
characteristics of Australian feedstocks. Such work
will help to provide prospective businesses with a clear
understanding of the cost, availability, benefits and
limitations of feedstocks for heat and power and liquid
fuels, as well as opportunities for integration with
existing industry.
Sustainability – Local feedstocks will ideally be
produced in ways that enhance the sustainability of rural
enterprises and maximise the reduction of greenhouse
gases. RD&E could be of benefit to both these areas.
Where Australian conditions are different to those
experienced overseas, local RD&E will assist with a
thorough and balanced evaluation of these feedstocks.
Prototype oil mallee harvester
2. Current Australian Bioenergy
Bioenergy is the term used to describe the recovery of
useful energy from biomass feedstocks. Thus electricity,
heat or liquid fuels for transport can be derived from:
• Wood and wood waste, including:
–– Plantations and plantation residues.
–– Other forestry residues.
–– Residual wood from processing activities such as
saw mills.
–– New, dedicated energy crops (such as short
rotation mallees or purpose-grown grasses).
–– Biomass from weed species and regenerative
vegetation.
• Agricultural products and their wastes, including:
–– Sugar cane and bagasse.
–– Grains, waste starch and crop stubble.
–– Oil seeds and tallow.
–– Other organic wastes suitable for anaerobic
digestion to produce methane.
• Post consumer waste, including:
–– Municipal Solid Waste (MSW) - directly as
collected or indirectly via land fill gas.
–– Sewage.
–– Wood waste from industry, and from
construction and demolition activities.
–– Used cooking oil.
• Algae.
2.1 Markets
2.1.1. Electricity
Renewable electricity from bioenergy in Australia is
supported under the expanded national Renewable
Energy Target (RET), designed to ensure that 20 per
cent of Australia’s electricity supply is from renewable
sources by 2020. Legislation to implement the expanded
national RET scheme was passed by the Commonwealth
Parliament on 20 August 2009, and the new target
commenced on 1 January 2010. The RET increases
the previous Mandatory Renewable Energy Target
(MRET) by over four times, from 9,500 gigawatt-hours
in 2010 to 45,000 gigawatt-hours in 2020. A range of
biomass sources have been eligible under the MRET
and will continue to be eligible under the RET scheme.
These include biomass-based components of municipal
soil waste (MSW), plantation wood, a range of food,
agricultural and wood processing wastes, landfill gas and
sewage gas, and some native forest harvesting wastes.
Data regarding the energy produced under the RET
are available from the Office of Renewable Energy
Regulator (ORER).
9
 Renewable Energy Number of Feed supply ones were in operation, producing an estimated 100
Source accredited as % of total ML of biodiesel principally from tallow and used
power stations MRET cooking oil14, 8.
(at Oct 2007) (at Jan 2007)
Landfill gas 46 7.8 Some state governments have recently developed, or are
Bagasse & bagasse /wood 27 9.1 considering, policies to promote the use of biofuels:
Wood waste & wood 13 3.2 • The NSW government already has a mandate for
waste/MSW 4% of ethanol in unleaded petrol in NSW which
Sewage gas 10 1.0 came into place on 1 January 2010 and was an
Food and Ag wet waste 6 0.3 increase from the previous 2% mandate. Further
Black liquor and BL/wood 2 2.9 increases in the mandates have been legislated, with
waste an increase in the percentage of ethanol to 6% in
MSW 1 0.0 January 2011. All regular grade unleaded petrol sold
Crop waste 1 0.0 in the state must be E10 from July 2011 (a total of
Total 106 24.3 up to 500 ML of ethanol per year).
• The NSW Government also has a Biodiesel mandate
of 2% introduced in January 2010 and rising to
In 2007, Australia’s total ORER-accredited renewable
5% from January 2012, subject to the availability of
generation capacity was capable of producing
feedstocks.
approximately 7,400 GWh per year. As shown in the
• Queensland has indicated that it will introduce
above table12, bioenergy contributed a total of 24% of
a mandated target of 5% ethanol in petrol from
this capacity, suggesting that bioenergy contributed
December 201015.
approximately 1,800 GWh per year in 2007. This is
• Victoria has developed a Biofuels Road Map and
equivalent to continuous generation at approximately
Action Plan16. No mandate is currently planned
200 MW.
however this is scheduled for review before 2013.
Renewable energy generation capacity via MRET is • Western Australia has also examined the biofuels
in addition to the generating capacity that pre-dated industry and a 2007 Biofuels Taskforce report17 is
MRET. Such previous capacity is largely based on under consideration. In 2008 a life cycle assessment
hydro-electricity such as the schemes in the Snowy (LCA) report was prepared by CSIRO18 to consider
mountains and Tasmania. biofuels production and use in WA.

2.1.2 Heat
Whereas electricity generation in Australia is well
documented under RET there is no equivalent program
in place to monitor the generation of renewable heat
from biomass. Current uses of biomass for heat include:
• steam in sugar mills.
• kiln drying at saw mills.
• steam and drying at pulp and paper facilities.
• steam at food processors.
• fires for domestic heating.
2.1.3 Biofuels
The Department of Resources, Energy and Tourism
and the Biofuels Association of Australia estimate the
installed annual capacity for biofuels in Australia as
follows:
• At the end of 2009 ethanol capacity was 400 ML
nationally, from two plants in Queensland and one
in NSW (reflecting an increase over the figure of 280
ML for January 2009)13.
• At the start of 2010 biodiesel capacity was at 273
ML nationally, based on seven plants around the
country and designed to process a variety of feeds. At
that time only three large facilities and some smaller
Excise rates for alternative fuels were considered as part
of the review of Australia’s Future Tax System Review,
which was submitted to the Australian Government in
late 2009.
2.1.4 Co-products
A number of industries around the country produce
bioenergy and co-products. At present most of the
operational plant is based on industries that have waste
fibre and a need for heat or power:
• Most sugar mills burn waste bagasse to produce
bioenergy as heat for their own use. An increasing
number also generate electricity for internal use and
for export to the grid.
• Many saw mills and wood processors produce
bioenergy as heat for their own use, however very few
produce electricity.
Recent initiatives for bioenergy and co-products include:
• A facility in Sydney that treats urban organic wastes
to make methane for electricity generation, plus
fertilisers as co-products.
• The Integrated Wood Processing (IWP) Plant
near Narrogin in Western Australia. In 2006 this
demonstration facility successfully trialled integrated

10
 technology to make electricity, activated carbon
and eucalyptus oil from whole mallee trees. These
coppicing trees were harvested from alleys grown
across a number of wheat belt farms.
2.2 Feedstocks
2.2.1 Heat and Power
Current biomass feedstocks for heat and power
generation in Australia are, without exception, by-
products or residues. These come from a diverse range
of industries around the country. Feedstocks include the
following:
Sugar cane bagasse – the cane fibre left over from
sugar extraction is known as bagasse and is used
throughout the sugar industry as a source of fuel for
heat or combined heat and power (co-generation).
Recent projects have added new cogeneration facilities
to a number of mills, both to upgrade old plant and to
provide capacity for export of electricity to the grid.
Forestry wastes – during harvest of trees from
plantations and native forests a considerable amount of
residual woody material is generated. This is mainly the
tops of the trees and large branches and it is generally
burnt or left to rot. Several groups are looking at
recovery of this material for power generation, most
notably in Western Australia where two projects for large
power plants (each approximately 30 - 40 MW electrical
output) are at advanced planning stages19. These plants
will mainly utilise residues from softwood and hardwood
plantations.
Another group in Western Australia is collecting
plantation residues and has recently started
manufacturing wood pellets, which will be used in
power stations in Europe20.
Wood processing wastes – saw mills and plants
for engineered wood products and pulp and paper
manufacture all generate residues. Some of these residues
are used for heat (and occasionally power) generation
on site. In other cases the residues may be sold to third
parties, for example kilns or coal-fired power stations
that will use them for co-firing.
Urban green waste – There is limited use of green
waste for heat and power. A notable example is the
cogeneration plant at the Rocky Point Sugar Mill in
southern Queensland, which uses green waste as part of
its feed at times when bagasse is not available.
Urban wood waste – This material ranges from wooden
packaging and broken pallets from industry through
to construction and demolition wood waste. Limited
quantities of this material are being used for co-firing in
kilns and power stations. Small, dedicated power plants
are under consideration (and in one case construction)
in Melbourne and Sydney.
Landfill – The breakdown of organic matter in landfills
generates methane gas. This may be collected and used
as fuel for engines and generators. There are many
examples of this at landfill sites around the country.
Agricultural wastes - Australia has examples of
agricultural residues used as fuel. These include:
• Gasification of rice hulls for heat in NSW.
• Combustion of macadamia nut shells for electricity
in NSW and possibly soon in Queensland.
While there is use of straw and crop stubble as fuel
overseas, there are no examples of this in Australia to our
knowledge.
Wet organics – Some organic material that is too wet
to use via combustion can still produce energy via
anaerobic digestion. This process produces a methane
gas similar to that produced from landfills, which may
be used to generate heat and power. A variety of plants
are already in operation around Australia using feed such
as:
• Human effluent at sewage treatment works.
• Piggery wastes.
• Food processing wastes.
• Organic material collected in Sydney.
At present there are no dedicated biomass feedstocks
used commercially in Australia, although considerable
R&D has been completed to examine a number of
possible materials. Mallee eucalypts have received
particular attention, and specific programs (including
“Search” and “Florasearch”) have assessed a variety of
native species for different agricultural and climatic
regions.
2.2.2 Biofuels
(a) Biodiesel
Biodiesel can be manufactured from a wide variety of
existing feedstocks, including the following:
• Oilseeds (such as canola, soy, sunflower) - This feed
offers the benefits of using existing commodity crops
and commercially demonstrated technology. As such
it is an important entry option for a new industry.
• Waste Oils & Grease – Supply is constrained by the
availability of used cooking oil. Prices for this feed
have increased in recent years, and this material often
requires more expensive processing.
• Tallow – This is subject to significant price variations
as it is an international traded commodity. As a by-
product of another industry it will ultimately have
limitations on supply.
11
 • Palm Oil – This feedstock is produced from oil
palm plantations in Asia, particularly Indonesia
& Malaysia. It can be sourced in large quantities
however its price can fluctuate, which affects
its commercial suitability for use as a biodiesel
feedstock. Currently, palm oil is not used as a
biofuels feedstock in Australia.
Algae is a possible feedstock for biodiesel, however it is
not currently used commercially in this way anywhere
in the world. Its potential is discussed in section 8.1.2
below. Other potential feedstocks include pongamia and
other woody perennial oil seed crops.
(b) Ethanol from sugar and grains
Current ethanol production is from first generation
feedstocks, comprising grains, cereals and sugar cane:
• Sugar cane – Some ethanol in Australia is currently
made from C-molasses, which is the final molasses
left after all commercially viable sugar has been
extracted from the cane juice at a sugar mill. The
C-molasses still contains sugar, which may be
fermented to produce ethanol. In addition to its use
for ethanol manufacture, molasses can be utilised as a
feed supplement for cattle.
• Some existing ethanol production in Australia
uses waste starch from grain processing. The starch
is broken down into its component sugars with
enzymes (a process known as “hydrolysis”). The
sugars may then be fermented to produce ethanol.
• Wheat and grain sorghum are also used as feed
for ethanol production. Starch is extracted from the
grain or cereal, hydrolysed to sugars and fermented.
(c) Ethanol from cellulosic feedstocks
Cellulosic feedstocks are the source of feed for “second
generation” ethanol production. These feedstocks are
also termed “biomass” and may include:
• Wood wastes from forestry and wood processing
activities.
• Sugar cane bagasse.
• Dedicated tree crops such as mallees.
• Agricultural residues and dedicated crops such as
grasses (e.g. miscanthus and switchgrass).
• Post consumer wood waste.
Second generation ethanol production has been the
subject of extensive research and demonstration in
Australia and overseas for many years. As yet there are
no commercial scale facilities anywhere in the world,
however a number of commercial prototypes are under
construction in the USA, with major funding support
from the US government in 200721 and 200922.
12
A number of pilot scale plants for second generation
ethanol have been built and operated in the USA,
Europe and Japan over the past ten years. In Australia,
pilot scale work is currently being conducted by Ethtec
Pty Ltd23.
(d) DiMethyl Ether
DiMethyl Ether (DME) is currently made from
hydrocarbon feedstocks for the chemicals industry. It
has been recognised as a viable additive to transport fuels
and technology has been identified that can produce
DME from biomass feedstocks. There currently are no
commercial operations making DME from biomass.
(e) Syn-Diesel
• It is feasible to produce biofuels via the
hydrogenation of fats and vegetable oils, followed
by blending with fossil fuel feedstock at existing oil
refineries. This is a variation on setting up dedicated
biodiesel production facilities as described above. BP
has built a facility at its oil refinery at Bulwer Island
in Queensland.
• A second route to synthetic diesel from biomass is
gasification followed by conversion to liquid fuels via
the Fischer Tropsch process (originally developed in
Germany in the 1920s and used in several countries
during WW2 for the production of transport fuels
from coal). As yet there are no commercial facilities
to process biomass with this technology anywhere
in the world. Demonstration scale plants have been
built recently24 or are under construction25, and there
is also interest in using Fischer Tropsch technology
with other feedstocks such as natural gas26.
• Fast pyrolysis also offers a route to renewable
hydrocarbon fuels. Crude pyrolysis oil is not
generally suitable for use with existing transport
fuels, however a number of groups around the world
are investigating the upgrading of pyrolysis oil into
hydrocarbon liquids. Dynamotive has recently
announced successful upgrading at the laboratory
scale, and independent testing of the upgraded oil
has shown it to contain a mix of transport fuels and
gas oil27.
(f) Biocrude and refinery feedstocks
There is work underway in Australia and overseas to
develop refinery feedstocks from the processing of
biomass with water:
• In a supercritical state28.
• Via aqueous phase reforming29, 30
The forestry, sugar and grains industries are all capable of providing cellulosic feedstock for production of electricity

3. Industry Structure in Australia

3.1 Feedstock
Australia has a number of well established industries
capable of providing feedstock for bioenergy:
• Sugar and grains already provide feedstock for the
production of ethanol and biodiesel.
• The forestry, sugar and grains industries are all
capable of providing cellulosic feedstock for
production of electricity. They can also provide
feedstock for production of second generation
biofuels once processing technologies are
commercially available.
• Australia is one of the few countries in the world
that already has commercial production of algae
(currently used for chemicals, not for fuels)31, 32.
3.1.1 Sugar cane
Around 4,000 business enterprises around Australia
supply more than 35 million tonne of cane each year
to 25 sugar mills33.  Most mills can crush on average
10,000 tonnes of cane daily and employ around 150
people during the season, which may run for 20-25
weeks each year. Cane is transported to the mills on
cane railway and road systems.  Millers, growers and
harvesters determine harvesting and transport schedules
that ensure cane is crushed as soon as possible after
harvest.  Average cut to crush time is less than 12 hours.
Most Australian sugar mills have been established for
more than 100 years. The total value of sugar produced
by these mills for domestic use and export is $1.5-2.5
billion per year34.
Raw sugar is extracted from the cane in a series of
processing steps. The residual product is known as
C-molasses, which is the final components of the cane
sugar juice once all of the commercially extractable sugar
has been removed. C-molasses still contains sugar and
is a low cost feedstock for the production of ethanol.
In the Australian sugar industry C-molasses is currently
the only material used for ethanol production. All raw
sugar produced by the industry is used for food, either
domestically or via export.

13
 3.1.2 Grains
Average production over the past five years for major
grains may be summarised in the table below35:
Crop type Five year Average Production (000 tonne)
Wheat 18,828
Barley 7,145
Oats 1,339
Sorghum 1,739
Maize 345
Canola 1,222
Lupins 920
The bulk of these grains are grown on approximately
28,500 farms across the country that planted 100
hectares or more to grains during the previous decade36.
At present up to 200,000 tonnes per year of sorghum is
used for ethanol production in Queensland37. Ethanol is
also manufactured on the south coast of NSW, utilising
the by-products of a starch processing plant that uses
grain as its feedstock.
3.1.3 Woody biomass (also see table below)
Bioenergy production currently utilises waste wood from
the forestry industry in a variety of ways:
• Individual processing sites (saw and pulp mills, wood
products factories) use residues for generation of heat
and power.
• A number of coal-fired power stations in NSW and
WA have used forestry and saw mill residues as fuel
to be “co-fired” alongside coal.
• Some cogeneration plants at sugar mills can use
wood wastes as feed when bagasse is not available.
3.1.4 Algae
Australia is one of the few countries in the world that
currently produces algae commercially. Production
facilities in Western Australia and South Australia grow
algae for the high value chemical beta-carotene31, 40.
A separate facility operates in the Northern Territory
to grow spirulina (a type of algae)32. None of these
facilities have been set up to grow algae for biofuels.
However, research to develop algae as a biofuel is
underway at a number of institutes around Australia and
demonstration plants are planned for construction and
commissioning during 201041, 42.
Interest in microalgae is in part due to the potential
yields of biofuels per unit of land, which may, in theory,
be significantly greater than for equivalent land areas
used for crops to produce other biofuels43.. Algal ponds
may utilise saline water and be located on marginal
land that is unsuitable for food production. However
it should also be noted that analysis of overall costs for
algal biofuel production point to capital and operating
costs being the major cost factors, not land43.
3.2 Processors
3.2.1 Heat and power
In Australia most electricity from bioenergy is generated
at large-scale facilities; particularly sugar mills and coal-
fired power stations using wood as a co-fuel. In these
cases the bioenergy is produced either at the location of
the feed or the location of existing capital equipment for
power generation.

The following table summarises the Australian forestry industry for the year 2008–0938, 39.

Parameter Unit 2008-0­9 % change in past 10 years

Plantation area
Broadleaved 000 ha 991 155
Coniferous 000 ha 1,020 8
Total 000 ha 2,020 51
Log production
Total harvested 000 m3 26,480 27
Gross Value $ million 1,747 55
Volume of production
Sawn wood [2007-08] 000 m3 5,371 39
Wood based panels 000 m3 1,778 14
Paper and cardboard 000 tonne 3,312 29
Total value of forest industry
exports $ million 2,343 74
imports $ million 4,459 37

14
There are also many sites around the country that use
methane (from landfills or organic waste processing) as
a fuel to drive engines and generators. Such plants are
typically much smaller than sugar mill bioenergy plants
due to relative quantities of feed available.

3.2.2 Liquid fuels

The majority of biofuels in Australia are also produced
in large-scale, centralised facilities, which may offer:
• Proximity to feedstock if it is a waste from a
processing plant.
• Economy of scale.
• The ability to control product quality.

3.3 Industry and related bodies

Bioenergy Australia44 is a bioenergy forum made up of
86 member organisations from government, industry
and academia around the country. Its interests include
R&D and commercial projects for electricity, heat and
biofuels. Bioenergy Australia is the vehicle for Australia’s
participation in a number of Tasks of the International
Energy gency’s Bioenergy program.
The Biofuels Association of Australia45 is the main
industry body that represents ethanol and biodiesel
producers.
The Clean Energy Council46 (CEC) is an industry
body with more than 400 members. It focuses on low
emission generation and energy efficiency within the
Australian electricity industry. This includes an interest
in electricity generation via bioenergy, and also via wind,
solar, hydro and natural gas-based sources.

15
 Biogas engine and generator at A.J. Bush and Sons, Bromelton, Queensland
4. Status of Technologies
4.1 Mature
4.1.1 Heat and power
A number of bioenergy technologies for heat and power
generation have been used commercially for decades. In
particular, plants to generate heat via combustion, and
power via steam raising and steam turbines, have been in
widespread use around the world for many decades. The
fundamentals of this technology are well understood,
however significant improvements are still possible,
such as the development over the past 15 years or so
of fluidised beds for combustion that increase overall
efficiency by as much as 30%.
The vast majority of heat and power generation from
biomass fuels uses combustion processes. Equipment for
combustion of biomass is very similar to the equipment
used worldwide for coal-fired power stations, simply at a
different scale due to the relative quantities of feedstock
available at a given site.
Gasification has long been considered for production
of heat and power from biomass, however it has never
reached the same level of use as combustion. In Australia
16
there are several gasifiers that are used to produce heat
from agricultural or woody wastes and several others that
are coupled to engines and generators to demonstrate
small scale power generation (under 100kWe).
4.1.2 Liquid fuels
Ethanol – technology to manufacture ethanol from
grains and sugar is mature, and is fundamentally
the same as the processes for production of potable
alcohol that have been in use for thousands of years.
Improvements are still occurring however, such as
continuous fermentation and the use of molecular sieves
for ethanol concentration following fermentation.
Biodiesel – technology is in common use world-wide to
convert a variety of fats and oils into fatty acid methyl
esters that can be used on their own or in blends with
diesel as transport fuel.
4.2 New
Most activity to develop new bioenergy technologies
is focused on the production of liquid fuels from
biomass derived from forestry, perennial grasses and
crop residues. The main technologies being developed
internationally are:
• Hydrolysis of biomass to release sugars, followed by
fermentation of the sugars to produce ethanol.
• Gasification of biomass to produce “synthesis gas”
followed by reforming to produce ethanol, syn-diesel
or other liquid fuels24, 47.
• Pyrolysis of biomass to break it down into gaseous,
liquid and solid streams.
A number of research programs are underway in
Australia to examine aspects of new biofuels, including:
• A photobioreactor facility for algae production,
operated by the South Australian Research and
Development Institute (SARDI) and supported by
the National Collaborative Research Infrastructure
Strategy (NCRIS)48.
• Other NCRIS-funded biofuels facilities for
lignocellulosic research or small scale production49.
• Research to examine the use of bagasse as a feedstock
for ethanol production50.
• A second generation biofuels research
and development program funded by the
Commonwealth Government51. Under this program,
funding totalling $14 million has been announced
for seven projects across Australia in areas including
development of algae for fuel, the development
of suitable yeast and sugar strains and pyrolysis
processes.
• A pilot scale facility for examination of various
aspects of ethanol production from cellulosic feeds52.
• Pilot scale work to investigate open ponds with saline
water for large scale algae production42.
4.3 Biorefineries
A biorefinery is a processing plant that manufactures
products in addition to renewable energy. Feed to
the biorefinery may be from agriculture or forestry;
alternatively it may be a waste stream from food or
wood processing. Normally some energy is produced
and normally the non-energy products have greater unit
value than the energy products.
• Sugar mills are an example of a biorefinery, with food
(sugar) as the main product and energy from bagasse
as a major co-product.
• In the USA corn is used extensively for co-
production of food and energy, with the energy in
this case being fuel ethanol.
• Also in the USA, two large-scale biorefineries
have been developed recently by joint ventures
between large agricultural companies and large
chemical companies. (Cargill/Dow and Tate & Lyle/
DuPont)53, 54. These two plants use corn as feed to
make biodegradable plastics, typically used for high
quality packaging of food.In Australia the Integrated
Wood Processing plant at Narrogin in WA is another
example of a biorefinery. In this demonstration
plant energy is produced in parallel with activated
carbon and eucalyptus oil and the combined product
revenues are estimated to be several times the revenue
from energy alone55.
4.4 Scale
4.4.1 Power generation
The scale of a bioenergy plant is extremely important
to its viability, with small plants and large plants both
presenting strengths and weaknesses to developers and
operators:
• Capital costs and operating costs for conventional
combustion plants vary significantly with plant size.
A large (40 Megawatt gross) biomass power station
may have a capital cost equivalent to A$2.5 million
per megawatt of installed capacity56. A biomass
power plant of less than 1 MW may cost A$8
million or more per MW. Thus the capital recovery
costs for a large plant may be less than one third of
the small plant.
• Operating costs also favour the larger plants.
• However, feedstock collection and supply favours
small plants:
–– A 1MW biomass power plant will typically
require less than 15,000 tonnes of wood feed per
year. A 40 MW power plant may require as much
as 400,000 tonnes per year. Feed supplies must
be reliable for many years to allow the plant to
operate profitably.
–– The larger feed supply may involve greater risk
of supply. Also, greater transport distances are
required for large quantities of feed, adding to
the average cost of biomass supply at the power
plant. A large power plant may require a variety
of different biomass feeds, which can affect
the design and operation of feed handling and
combustion equipment.
–– In some situations additional feed (at greater
delivery cost) will be available to build a larger
power plant (that will offer cost efficiencies due
to scale). It is important to examine both these
factors in any exercise to optimise project size.
• Power generation from methane uses different
technology to combustion systems. Capital cost for
methane generation and capture may be significant,
and these costs may vary from project to project
according to the nature of the feed material. Once
the methane is captured and cleaned (if required),
power generation is often based on relatively low cost
engines.
17
 4.4.2 Biofuels
Large scale:
• Suited to mature markets with single feedstock type
– plant stoppages to switch feedstocks can be a major
cause of production loss.
• Beyond a certain size, additional scale ups can be
completed at a lower incremental cost due to the
ability to take advantage of required redundancies
built into the smaller plant.
• Some challenges are logistical and include the cost of
handling large volumes of feedstock remote from the
processing plants.
Small scale:
• Suited to emerging markets – feedstock flexibility
may provide a cost advantage over large plants
(production down time due to feedstock change has
lower tonnage loss).
• Challenges are related to product quality and security
of feedstock supply.
• Economies of scale may be offset by lower feedstock
price and potential for production flexibility.
18
There is interest from Australian researchers and rural
groups in farm or town-based plants that offer direct
fuel supply to local users. Such an approach may provide
cost savings via reduced transport of feedstock and
product. There is the potential for more effective plant
operation through reduced down time, and reduced
exposure to commodity price and logistics risk. Negative
factors include:
• Higher unit capital and operating costs.
• Product quality issues and thus consumer risk
– Product certification will assist in addressing this –
Australia has had a standard on biodiesel since 2003,
the Fuel Standard (Biodiesel) Determination 2003.
Blends of up to 5% biodiesel are covered in this
determination. There is also a standard specifically
for ethanol which may be blended up to 10% with
petrol, the Fuel Standard (Petrol) Determination
200157.
• Reliance on a significant penetration of the local
fuels market and meeting the long-term expectations
of that market for quality, reliability and pricing.
The US biofuel industry developed in part on this small
scale model but had quality control issues and failed to
achieve mainstream retail status. Significant investment
is now underway in the USA to provide blending and
terminal facilities that allow supply into the retail market
– this may be adequate for B2 (2% biodiesel in diesel)
market participation but uptake by the major retailers
will be required to achieve 5% and above market share.
Several groups are investigating the potential for pongamia trees as a source of oil for biofuels. Researchers include the University of Queensland
and the Queensland-based private company Phytofuel
5. Research, Development and Extension Activities
5.1 Australia
A number of initiatives and programs are underway
to conduct Australian R&D into various aspects of
bioenergy. The following examples are by no means all
of the R&D underway, however they do indicate the
diverse nature of work in progress.
NCRIS - The National Collaborative Research
Infrastructure Strategy (NCRIS) has established strategic
research and pilot scale manufacturing facilities that are
available to researchers58. These facilities focus on R&D
for second generation ethanol and biofuels from algae.
RIRDC – The Rural Industries R&D Corporation59
has, for the past ten years, initiated and co-sponsored a
wide variety of research into various aspects of bioenergy.
Numerous reports are available at the RIRDC website.
RIRDC has a research and development program –
Bioenergy, Bioproducts and Energy, within which
it manages Bioenergy Australia and also Methane to
Markets.
CSIRO – CSIRO’s bioenergy activities have included
technology development (controlled carbonisation,
small scale gasifiers), sustainability investigations, plant
and microbial genetics, and appraisals of biomass for use
as bioenergy feedstocks.
Commonwealth Government funding – In
recognition of the need to develop a sustainable biofuels
industry and to move away from any impacts on food
supply and prices, the Government has established
the $15 million Second Generation Biofuels Research
and Development Program (Gen 2) which supports
the research, development and demonstration of new
biofuel technologies60. On 5 August 2009, the Minister
for Energy, Resources and Tourism announced funding
for seven projects.
Bioenergy projects are also being considered under the
$5 million Forest Industries Climate Change Research
Fund, which will be administered by the Department of
Agriculture, Fisheries and Forestry (DAFF). This fund
aims to address major knowledge gaps about the impact
of climate change on forestry and Australian forest
industries.
19
 WA State Government – The state government in
WA has supported bioenergy as part of its long-term
initiative to establish commercially viable tree crops in
wheat belt areas prone to salinity. Additional support
for bioenergy comes from state-based targets for
renewable electricity that are likely to provide a base
for several large-scale bioenergy plants in coming years
that will utilise either mallees or residues from the state’s
softwood and hardwood plantation industries.
NSW Department of Industry and Investment (DII)
– NSW DII has developed carbon accounting tools for
forestry, that it uses under the NSW Greenhouse Gas
Reduction Scheme, through which carbon sequestered
in eligible plantations earns NSW Greenhouse Gas
Abatement Certificates.
One of the principal researchers at NSW DII is co-
task leader of the IEA Bioenergy collaborative research
group on greenhouse gas balances of biomass and
bioenergy systems. This group has developed standard
methodology for the calculation of life-cycle climate
change impacts of bioenergy projects. NSW DII has
undertaken studies on the mitigation benefit of utilising
forest residues for electricity generation, the impact
of soil carbon stock change on mitigation benefits of
bioenergy, and mitigation through utilisation of biochar
as a soil amendment.
NSW DII, through the Primary Industries Innovation
Centre (PIIC) with the University of New England
(UNE) is completing a Climate Action Grant project.
This project investigates some of the key characteristics
of lignocellulosic feedstocks for second generation
production of biofuels.
NCAS – The federal government has developed
Australia’s National Carbon Accounting System
(NCAS), a world-leading system that accounts for
greenhouse gas emissions and removals (sequestration)
from land-based sectors61. The NCAS accounts for land
sector emissions and removals through an integrated,
spatially explicit system that combines satellite imagery
to monitor land use and land use change, climate and
site information, species information, land management
regimes and spatial and temporal ecosystem modelling.
A derivative of the NCAS - the National Carbon
Accounting Toolbox (NCAT) – allows carbon
accounting from land based activities at the project level.
Ethtec – Ethtec is a private company that combines
long-term research by the Apace group with funding
support from Willmott Forests. It has commenced pilot
plant work that will seek to demonstrate a variety of
technologies pertinent to cost effective production of
ethanol from woody feedstocks.
20
Pongamia – Several groups are investigating the
potential for pongamia trees as a source of oil for
biofuels. Researchers include the University of
Queensland and the Queensland-based private company
Phytofuel.
Integrated Wood Processing (IWP) – The IWP
demonstration plant built recently by Verve Energy
at Narrogin in WA represents the combination of
R&D from a variety of sources. It was a full scale
demonstration of the integrated production of
electricity, activated carbon and eucalyptus oil, to create
a commercially attractive use for coppicing mallee
eucalypts grown for salinity control in the WA wheat
belt. Work is now underway to interpret the operating
data from the demonstration plant as part of detailed
feasibility assessments for larger, fully commercial plants.
Slow Pyrolysis – A large-scale demonstration plant for
slow pyrolysis has been built and operated in NSW. This
plant can process a variety of biomass, producing mainly
charcoal and gas. The gas can be used in the process and
potentially for generation of electricity. The charcoal can
be used as a fuel or as a soil amendment.
Biochar - The NSW DII has a number of trials
underway to asses the benefits of charcoal (“biochar”)
as a soil additive. Charcoal or biochar can be produced
from a wide range of bioenergy processes including
combustion, gasification and slow or fast pyrolysis. Its
addition to soil is seen as a potential double benefit;
combining carbon sequestration with soil improvement.
Similar trials are underway in many other countries.
DAFF is also investing $1.4 million into biochar
research under the Climate Change Research Program
(which is a part of Australia’s Farming Future, the
Australian Government’s major climate change research
program for Australia’s primary industries). This research
project will help understand this emerging technology
and address uncertainties about its use. It will draw
together Australian and international experts in areas
of biochar, soil science and emissions management
and complement research already done by partner
organisations.
5.2 Overseas
Most of the Australian R&D described above has
parallels overseas, in particular, work in North
America and Europe, albeit with the emphasis on local
feedstocks. Bioenergy R&D is also underway in South
America and Asia.
5.2.1 North America
Of particular interest and importance in the United
States of America is recent support for scale up of
technologies for production of ethanol and chemicals
from woody biomass. Recent US Government
funding initiatives combined with matching funds
from industry are expected to result in well over US$
1 billion in expenditure on commercial prototypes
for several different second generation ethanol
technologies over the next few years. There is also
considerable government funding support for R&D
into biorefineries that can produce plastics and other
value added chemicals, often in parallel with energy
production. Biomass R&D is jointly co-ordinated by
the US Department of Energy (DOE) and Department
of Agriculture (USDA)62. The following examples are
indicative of work that receives government financial
support:
• Funding of up to US$6.3 million towards
fundamental genomics-enabled research leading
to the improved use of plant feedstocks for biofuel
production63.
• Funding of up to US$85 million from the American
Recovery and Reinvestment Act for the development
of algae-based biofuels and advanced, infrastructure-
compatible biofuels64.
• Funding of up to US$480 million for pilot and
demonstration-scale “integrated” biorefineries, which
produce advanced biofuels, biobased products, and
heat and power in a single integrated system. DOE
anticipates making 10 to 20 awards for refineries at
various scales and designs, all to be operational in the
next three years65.
In 200721 and 200922 the US Government offered
some hundreds of $million in support of commercial
demonstration plants for lignocellulosic ethanol
production. Grants will cover fermentation and thermo-
chemical pathways.
In addition to funding support as per the examples
above, the US Government has prepared:
• a road map for bioenergy and biobased products66.
• a national biofuels action plan67.
• a draft algal biofuels technology roadmap68.
5.2.2 Europe
Use of bioenergy in many European countries is already
far greater than its use in Australia and is expected to
grow further with strong government support5. R&D
initiatives support the proposed expansion. The work of
the International Energy Agency under IEA Bioenergy69.
indicates the range of R&D underway.
IEA Bioenergy has participants from around the world,
including Australia, but generally the majority of its
active personnel are in Europe. A number of R&D
topics have already been investigated; grouped into tasks
as follows:
Task 29: Socio-Economic Drivers in Implementing
Bioenergy Projects
Task 32: Biomass Combustion and Co-firing
Task 33: Thermal Gasification of Biomass
Task 34: Pyrolysis of Biomass
Task 36: Integrating Energy Recovery into Solid Waste
Management
Task 37: Energy from Biogas and Landfill Gas
Task 38: Greenhouse Gas Balances of Biomass and
Bioenergy Systems
Task 39: Commercialising Liquid Biofuels from
Biomass
Task 40: Sustainable International Bioenergy Trade -
Securing Supply and Demand
Task 41: Bioenergy Systems Analysis
Task 42: Biorefineries: Co-production of Fuels,
Chemicals, Power and Materials from Biomass
Task 43: Biomass Feedstocks for Energy Markets
The European Biofuels Technology Platform70. is
another significant non-government organisation
within Europe steering research and development into
biofuels. It is developing a Strategic Research Agenda to
identify key research elements for the next decades. Its
membership is heavily research focused and university
based.
A variety of industrial developments are underway in
Europe to examine new processes for electricity and
liquid fuels. Examples include:
• Choren – a German company that uses gasification
and Fischer Tropsch synthesis to convert cellulosic
material into a diesel type fuel. Choren has
recently built a production facility in Germany
that is expected to produce 18 million litres of 2nd
generation biofuel per year starting in 2010. Choren
hopes to build a larger scale plant (fifteen times the
size of the current plant71) in several years.
• BTG – a European company that has developed
fast pyrolysis technology to manufacture liquid fuels
from cellulosic material. BTG built a commercial
scale prototype several years ago.
• Norwegian paper manufacturer Norske Skog is
majority owner of Xynergo, a company established
to trial pyrolysis and gasification technologies for
production of liquid fuels from wood.
• Several companies are testing commercial prototypes
for electricity generation via gasification, gas cleaning
and engines/generators.
21
 Covered lagoon capturing biogas at the AJ Bush rendering plant, Bromelton, Queensland
6. Sustainability and Life Cycle Assessment
6.1 Sustainability
Discussions of sustainability generally consider three
separate and important elements:
• Environmental
• Social
• Economic
A fully sustainable industry must accommodate
prerequisites in each of these areas.
6.1.1 Environmental sustainability
In theory it could be argued that bioenergy, as a
renewable alternative to fossil fuels, achieves improved
environmental sustainability by replacing a non-
renewable resource with one that comes from renewable
materials.
In practice, some forms of bioenergy also have
environmental weaknesses. These will vary by country,
feedstock and technology. Legitimate concerns for some
forms of bioenergy include:
The recognition that fossil fuels are currently used in
22
the production of feedstock and the manufacture of
biofuels, leading to renewable fuels that generate less
greenhouse gas emissions than fossil fuels but are not
fully greenhouse neutral (an issue common to most
forms of renewable energy, see section 6.2.2 below).
• The destruction of old growth forest and non-forest
native vegetation such as grasslands, (and resultant
loss of native habitat and biodiversity) to allow the
planting of new crops and trees for bioenergy use.
(While this may occur overseas and be a factor to
consider for some imported biofuels, Australia’s
Regional Forest Agreements and Renewable
Energy Target, in conjunction with state-based
native vegetation legislation, provide guidance and
regulation on sustainable use of forest materials.)
• The potential for biomass feedstocks to compete for
natural resources including land and water that may
be in limited supply. (Conversely, in some parts of
Australia bioenergy could catalyse tree planting that
would reduce salinity problems caused by excess
water72 and soil loss caused by erosion).
• The potential for impacts on long-term sustainable
production due to progressive reduction of carbon,
moisture and nutrient levels in soils (although the
 bioenergy co-product biochar offers the potential
to improve soil carbon levels when used as a soil
additive).
Fortunately many environmental aspects of bioenergy
feedstock preparation and plant operation are covered by
existing legislation and procedures around Australia. For
example:
• The Regional Forest Agreements in place around
Australia provide for the conservation and sustainable
management of Australia’s native forests.
• Environmental Impact Statements or Plans can be
sought for particular projects within well established
planning frameworks.
6.1.2 Social sustainability
Construction and operation of a bioenergy plant will
include:
• Design, fabrication and erection of plant and
equipment, with the majority of equipment supply
and labour requirements being sourced within
Australia.
• Provision of biomass feedstock on a continuous
basis, potentially involving nurseries, planting, crop
management, harvest and transport.
• Plant operation on a continuous basis with
professional, skilled and unskilled personnel.
• Plant maintenance activities, with direct labour and
indirect employment for provision of new equipment
and consumables as required.
In an Australian study that examined employment in the
energy industry73 it was found that across six case studies
renewable energy generally provided more employment
per unit of energy than coal and gas-fired power
generation, and bioenergy generally provided more
employment than wind energy. (Solar energy and hydro
case studies did not form part of the study.)
New bioenergy industries will focus on rural sites,
for proximity to feedstock. Most of the long-term
employment for each plant will occur in and around
country towns. Bioenergy thus offers the potential for
social sustainability in parts of country Australia.
As with all industries that rely on agriculture and
forestry for feedstock, determination of the overall
social sustainability of bioenergy businesses will include
consideration of their impact on land ownership and
rights, labour conditions and equitable access to food,
land and energy.
Bioenergy has attracted some criticism for negative
social impacts. Competition for crops traditionally used
for food, and the adverse impact of some government
polices, has led to the belief that bioenergy has been
a major factor in rising food costs over the past few
years. In contrast, the US government has reported that
the impact of rapid growth in US ethanol production
contributed only 3% to the increase in world food prices
during 2007–0874.
6.1.3 Economic sustainability
The construction and operation of multiple new
bioenergy plants will be driven by private industry,
with funding raised under commercial conditions.
Bioenergy plants are capital intensive and have long
payback periods (as with fossil fuel based production
of electricity and liquid fuels). The industry will be
economically sustainable if it is cost competitive with
other forms of energy. The ability of bioenergy to
compete may be assisted by clear, stable policies to
reduce carbon pollution such as the expanded national
Renewable Energy Target (RET) and the proposed
Carbon Pollution Reduction Scheme (CPRS) or a
similar scheme.
Consideration of economic sustainability may also
include review and analysis of industry development,
diversification of the local economy and resource
availability.
6.2 Life cycle assessments for
bioenergy
As with all forms of renewable energy, bioenergy can
replace fossil fuels and thereby potentially reduce carbon
emissions associated with electricity generation and
transport. The reduction of carbon emissions is not
100% however, because the production of bioenergy
also requires the consumption of energy and that energy
generally comes from fossil fuels or involves fossil fuels
in its production.
Analysis of the relative benefits of renewable energy over
energy from fossil fuels is generally achieved via Life
Cycle Assessments (LCA).
6.2.1 Biofuels
The most common form of LCA for fuels is on an
energy basis, where all energy inputs to produce the fuel
are compared with the energy value of the fuel and any
co-products. As an example, to assess wheat for biofuel
in Australia, the following could be included75:
• Fossil fuels used by the farmer for land preparation,
crop maintenance and harvest.
• Fossil fuel used in manufacture and transport of
fertilisers and herbicides used for the wheat.
• Grain transport to the fuel facility.
• Energy used at the ethanol facility and for other
23
 inputs such as enzymes and chemicals. Technology g/kWh CO2
• Energy used in distribution of the ethanol. Brown Coal: Current Practice 1100-1300
• Emissions created when the ethanol releases its Bituminous Coal: Best Practice 955
energy in a vehicle engine. Gas: Combined cycle 446
Diesel: Embedded 772
An LCA can also consider impacts that are not related
Onshore wind 9
directly or indirectly to fossil fuel energy use, such as the Hydro - existing large 32
potential impact of land use change. Hydro - small-scale 5
The LCA would also quantify avoided emissions, Decentralised photovoltaic (PV)- retrofit 160
when the biofuel is used instead of fossil fuel in vehicle Decentralised PV - new houses 178
engines, as well as the avoided emissions produced Decentralised PV - new commercial 154
during recovery of crude oil (including any CO2 venting Bioenergy Technologies
and gas flaring), processing to make the fuel, and Bioenergy - poultry litter - gasification 8
transport of that fuel to the user. In this way the LCA Bioenergy - poultry litter - steam cycle 10
Bioenergy - straw - steam cycle 13
may demonstrate any net GHG emission reductions
Bioenergy - straw - pyrolysis 11
achieved by using biofuels instead of fossil fuels.
Bioenergy - energy crops - gasification 14
It can be seen from the list above that the LCAs for Bioenergy - Forestry residues - steam cycle 29
projects may vary considerably depending on the Bioenergy - Forestry residues - gasification 24
interpretation of the respective boundary conditions Bioenergy - animal slurry - anaerobic digestion 31
and according to agricultural practices and the relative Landfill gas 49
locations of feedstocks, processing facilities and markets. Sewage gas 4
It is important to be careful in any use of an LCA
developed for one project to make a truly equivalent 6.2.3 Relative energy balances for annual
comparison with an LCA for a different project. In all crops and perennials
LCAs, the definition of the boundary limits and the
It has been noted above that the life cycle assessment for
factors applied for energy inputs and outputs must be
bioenergy typically includes all of the energy inputs to
carefully correlated to ensure objective and consistent
produce and collect the biomass and all of the outputs
appraisals.
from its utilisation. This figure may be shown as an
The CSIRO, BTRE and ABARE have already energy ratio (total renewable energy outputs divided by
investigated and reported a number of biofuel LCAs76 the total non-renewable energy inputs).
and further work is planned. LCAs are included in
These ratios will be influenced by farming practices and
ongoing work organised by the IEA77. There is an
location factors. For example:
international standard for Life Cycle Assessment (ISO
• USDA energy balances show ethanol from corn
14040).
having an energy ratio of 1.3 and biodiesel from soy
LCAs are a useful tool to compare the energy benefits beans having a ratio of 3.2.
of different biofuels, if the boundaries and assumptions • Mustard use for biodiesel in Europe is reported as
are clearly articulated, but they should not be the sole having a ratio of approximately 7.
parameter for assessment of a fuel’s sustainability. • In contrast to this, preliminary work on mallee
eucalypts as energy crops in Western Australia shows
6.2.2 Electricity an energy ratio of 41.779.

A life cycle assessment for electricity from biomass
would generally follow the format described above for
biofuels.
The table below shows the results from a study by
the UK Department of Trade and Industry study78,
comparing the life cycle emissions of carbon dioxide for
various conventional and renewable energy technologies.
This review focused on electricity generation. On a
life cycle basis, greenhouse gas emissions of bioenergy
systems are project specific, but typically in the range
4-50 grams CO2 equivalent/kWh, which is greater than
wind and lower than solar PV.
The high ratio for mallees relative to the annual crops
highlights the ability of some forms of forestry material
to be made available for bioenergy production with
much lower embodied energy per unit of feed than
material from agriculture. It suggests that the net
greenhouse gas reductions to be achieved by substitution
of second generation biofuels (made from forestry
feedstocks) for fossil fuels may be greater than the
reductions achieved by first generation biofuels derived
from annual crops.

24
Production of first generation biofuels in Australia is at a much smaller scale than in the United States, and there is no evidence to suggest that
biofuels in Australia have contributed to higher feedstock prices
7. Discussion – Risks and Challenges
7.1 The “food versus fuel” debate
At present much of the ethanol and biodiesel around the
world is produced from sugar, grains, corn and oilseed
crops that could also be used for food production.
Over the past few years in particular the popular
media has linked the increasing production of these
first generation fuels to the concurrent increases in
food prices around the world. The US Departments of
Energy and Agriculture80 and others81 have stated that,
while renewable fuel production is a contributing factor,
so are:
• Higher fuel and input prices.
• Increased demand.
• Adverse climatic conditions, particularly drought.
• Export food restrictions.
As stated previously in this overview, the US government
has reported that the impact of rapid growth in US
ethanol production contributed only 3% to the increase
in world food prices during 2007–0874.
Production of first generation biofuels in Australia is
at a much smaller scale than in the United States, and
there is no evidence to suggest that biofuels in Australia
have contributed to higher feedstock prices. Indeed the
reverse appears to be the case, with recent price increases
in grains in Australia contributing to the cancellation of
proposed grain to ethanol projects.
Increases to pricing for biodiesel feedstocks has
contributed to the difficulties and reduced production
in Australia’s fledgling biodiesel industry. It would
appear that there are arguments in favour of biofuels
contributing to increased prices and also arguments that
increased prices contribute to difficulties in the biofuels
industry.
7.2 Competition
The search for renewable energies and ways to combat
climate change have created a complex environment
where multiple solutions seek attention and support.
There is strong competition for a place in the mix of
technologies and industries that will help Australia to
address these issues. RD&E for bioenergy should assist
with its fair and full consideration as one of several
means of reducing the country’s CO2 emissions.
25
 7.2.1 Land and water
The recent “food versus fuel” debate shows that:
• Some bioenergy can use feedstocks that would
otherwise be used as food or as stock feed.
• Bioenergy feedstocks that are not suitable for human
consumption may still be grown on land that could
also be used for food production.
A separate issue that has been widely reported in the
media and also debated in academic circles is the
shortage of water in many parts of rural Australia,
coupled with the fact that woody perennials typically use
more water for growth than annual crops.
These issues raise a number of important topics for
bioenergy R&D, including:
• Understanding the co-production of crops and
biomass, so that farmers can grow biomass as a
commercial venture alongside other activities such
as grains and livestock. Much of the mallee eucalypt
R&D underway in Western Australia considers this
issue.
• Understanding water balances on a regional basis –
some parts of Australia have major water shortages,
however other parts have excess water that creates
environmental problems via salinity.
• Considering new biomass crops for land that is
unsuitable for other agriculture – for example
the potential for oil-seed producing trees such as
pongamia in parts of Queensland.
• Developing policies that encourage the production
of biofuels that provide environmental and social
benefits and allow first generation biofuels to utilise
grains and sugars but with care exercised to ensure
that industry support measures (such as mandatory
targets) do not create undue pricing volatility across
the fuel or food sectors.
• The direct and indirect land use changes associated
with the growth of the bioenergy industry.
7.2.2 Feedstock
It is likely that there will be competition for feedstock
between different bioenergy businesses (heat, power,
liquid fuels), particularly as woody biomass might be
a viable feed for a range of different power and fuel
applications over time. Such competition may have a
number of benefits, including:
• Development of a healthy feedstock supply
industry. Multiple customers will create larger scale
within the feedstock supply industry and potentially
achieve economies for all concerned. It will also help
to ensure that growers are paid a competitive price
for their biomass.
26
• Risk reduction for growers and processors - if a
potential grower sees only one potential customer
for biomass they may be reluctant to plant trees.
However, if several alternative processing options
are likely in a five to ten year period, a grower is
more likely to commit to planting trees and help to
provide a biomass resource for any processors that set
up in the region.
In contrast to these potential benefits, if a bioenergy
industry grows faster than acceptable for the supply
of local feedstocks, there may be pressure to import
feedstocks that are produced with less regard to
sustainable agriculture or forestry than occurs in
Australia.
7.2.3 Investment
Bioenergy projects are capital intensive and must
compete with other renewable energy projects and
other business for this capital. As such the risk profile
associated with the investment must be quantifiable and
capable of being understood by investors that may not
be familiar with either the technology or the product
marketplace.
Bioenergy through power generation has been supported
by two favourable aspects:
• The MRET and RET legislation that underpins
renewable energy certificates is long-term and is
relatively stable.
• The power purchase agreements that can be secured
are also long-term, and assist with favourable debt
raising.
Bioenergy in the form of liquid fuels has not had a
scheme such as MRET or RET to support industry
development.
Technology maturity also impacts on ability to secure
investors. New technologies that are either not widely
demonstrated or have not been used with Australian
biomass feeds both present a greater risk to investors
than well established technologies with well defined
feedstocks.
7.3 Liquid fuels
Australia’s biofuels industry has experienced considerable
volatility in recent years, and could also change in the
coming decade as second and third generation biofuel
technologies become commercially available.
Until recently the production of liquid biofuels
in Australia was associated with low value sugars
(particularly C molasses in Qld) and starch (e.g. the
Manildra plant in NSW).
When the previous federal government announced
incentives to meet a renewable fuels target of 350ML
annual production, there was significant interest in the
industry, but only one additional ethanol facility was
constructed and two existing operators expanded their
operations. A number of biodiesel projects were built,
however these proved to be financially unviable for three
principal reasons:
• An underestimation by the industry surrounding the
difficulties of moving large amounts of biodiesel into
the market in a relatively short time period.
• Reduced incentives due to changes in fuel tax for
biodiesel introduced in the 2006 Fuel Tax Act.
• The increases in prices for grain, tallow and other
feedstocks.
Success factors for a viable bio-fuels industry in Australia
include:
• Certainty of returns on investment – largely driven
by certainty of market demand.
• Sustainable feedstock resource with proven growing,
harvesting & storage/handling systems and relatively
stable pricing.
• Access to commercial technology for conversion
of feedstocks to energy (including adaptation to
Australian feedstocks if required).
• Support from primary industry (Regulators &
Growers) to plant economically viable quantities of
feedstock within cost effective delivery to efficient
production facilities.
• Determining the most economic scale to meet
Australian industry objectives, recognising that this
may change with location and feedstock.
• Determining appropriate land use plans &
sustainable crop types to meet Australian industry
and environmental objectives.
• Dispelling misconceptions within the Australian
market relating to the performance of biofuels in
current automotive engines.
Strategic planning for biofuels could consider
technology maturity and pathways to increasing
production to grow the industry now, while supporting
the development and commercialisation of emerging
feedstocks and technologies that better meet
environmental criteria and industry needs.
The technologies and feedstocks that are already capable
of integration within the existing market are:
• Cereals and sugar cane to ethanol.
• Fats and oils to biodiesel.
The technologies and feedstocks that are potentially
deliverable within a 5 – 10 year window include:
• New biodiesel feedstocks – such as pongamia
and algae, suitable for more marginal lands or
other underutilised areas and requiring R&D on
agronomy, harvesting & handling, and by-product
utilisation.
• New technologies – conversion of wood and crop
feedstocks via hydrolysis, thermo-chemical and
subcritical or supercritical water technologies.
• Improved availability of feedstocks that may already
exist (e.g., lignocellulosics, such as forest residues)
and that can be adapted or specifically grown.
• New cellulosic crops such as mallee eucalypts and
other farm forestry products, native and imported
grasses, and woody weeds.
Waste materials can offer better economics as feed
because they are often available at low or even negative
cost. Municipal Solid Waste (MSW) and other urban
wastes may be useful feeds to support prototype
commercial facilities that may subsequently be replicated
using rural locations and feeds.
Existing or new first generation ethanol and biodiesel
facilities may assist in any transition to second
generation facilities. This may involve adding
equipment to existing ethanol facilities that can break
down cellulosic material into sugars for fermentation.
Alternatively it may involve modifications to a biodiesel
plant to allow satisfactory processing of oil from tree
crops such as pongamia.
Australia’s sugar industry provides many elements that
could support successful first and second generation
fuels:
• The industry is well established with a high level of
infrastructure, participants at all levels of the supply
chain and considerable R&D experience for feed
supply and processing.
• Molasses-to-ethanol technology is already mature
and in use. In future, bagasse (cane fibre) to ethanol
technology could be added to molasses-based
facilities.
• Sugar provides a useful feedstock for fermentations
to new plastics and other chemicals, leading to
possibilities for biorefineries.
High fibre cane varieties (grown as much for cellulose
content as sugar content) may provide a useful feed to
future processing plants.
27
 Rows of oil mallee eucalypts within a wheat field
8. Potential Scale of Industry
8.1 Future Markets
8.1.1. Electricity
The Australian Clean Energy Council has led an
appraisal of the potential for bioenergy to contribute to
stationary energy generation in 2020 and 20502. This
appraisal suggests that by 2020 the contribution from
biomass for electricity generation could be 10,624 GWh
per year or some six times the current generation.
It further identifies the long-term potential for electricity
from biomass in 2050 to be as much as 72,629 GWh/
year, which is 40 times the current levels. Such a
generation capacity would require constant industry
growth at almost 10% per year for the next four decades.
As another indication of the significant potential for
electricity from bioenergy, the Australian Business
Roundtable on Climate Change has stated that
bioenergy could supply between 19.8 and 30.7% of
Australian electricity needs by 205082.
28
8.1.2 Biofuels
(a) First generation fuels
Overall potential for ethanol and biodiesel based
on full utilisation of currently available sugar, wheat
and other grains, and waste oils, is almost 17 GL per
year9. Likely production with current plantings and
crops is expected to be considerably less than this
however, due to an inability to offer pricing for fuel
use that matches pricing for food or chemical use.
Potential may exist for adaptation of current crops
to biofuel production using land not currently used
for food production – this would achieve lower
yields but with lower input costs to compensate.
There is need for a variety of trials to better define
farm economics and agronomy. Any proposals for
large-scale land use change will need to consider
environmental and community issues.
(b) Second generation (biomass derived fuels)
The potential for these fuels is estimated at between
10% and 140% of current petrol usage9. The wide
range reflects a variety of assumptions about use of
 existing biomass wastes, diversion of existing biomass
streams from other end uses (for example export
wood chips) and the planting of new biomass crops
such as mallee eucalypts in association with wheat
belt farms in southern Australia. Uptake anywhere
within this range will require significant changes to
fuel distribution and retail industry, with possible
changes to fuel specifications in parallel with R&D
efforts into agronomy and forestry. Capacity will be
affected by land use and the uptake of biofuels would
benefit from the introduction of a carbon trading
price which would increase the financial viability of
production and increase the competitiveness of the
industry. Significant changes in growing practices
and the use of crop residues will both need R&D.
Large-scale uptake also has a time factor, as growers
will require certainty in long-term offtake before
changing farming practices.
(c) Algae
Algae also offers potential for replacement of fossil
fuels, in stand alone processing ventures or in synergy
with water reclamation and aquaculture projects.
Application to rural or primary industry needs to
allow for use of water (for example brackish water).
There is also considerable interest in growing algae
on the CO2 emitted from coal-fired power stations.
Use of exotic (i.e. imported) algae may be restricted
due to issues of biosecurity.
8.1.3 Co-products
Increased production and sale of co-products may
enhance the profitability and growth of a biofuels
industry. Current and/or long-term markets for co-
products may include:
Biodiesel:
• Glycerine – industrial chemical for paint, glycol,
reformation into chemical feedstock.
• Meal and soluble proteins from integrated refineries
– animal feed.
• Free fatty acid (FFA) and lipid-based nutrients from
integrated refineries – human dietary supplements.
Grain based ethanol:
• Meal and soluble proteins from integrated refineries
– animal feed – Wet and dried distillers grains are
being used as animal feed in the United States of
America and also in Australia.
Cellulosic ethanol (fermentation):
• Lignocellulosic sugar compounds for chemical
industry – plastic feedstock.
• Non-sugar residues from enzymatic hydrolysis –
energy conversion.
Other cellulosic liquid fuels (gasification & synthesis,
fast pyrolysis):
• Electricity from synthesis gas.
• Lignocellulosic monomer compounds for chemical
industry – plastic feedstock.
• Carbon char beneficial uses – nutrient carrier into
soils, filter material, industrial use.
• Extraction of phenolic material from pyrolysis oil for
use in industrial resins.
Algae:
• Feed supplements.
• Biomass for power generation or pyrolysis.
• Methane, via anaerobic digestion of the algae
following oil extraction.
8.2 Future feedstocks
There are several annual and perennial crops that show
promise as large-scale feedstocks for bioenergy in the
future.
8.2.1 Native trees
Over the past fifteen years some sixteen million mallee
trees83 have been planted on farms in WA, largely for
mitigation and control of dryland salinity but with
additional benefits as windbreaks and for increased
biodiversity on farms. Harvest and use of these trees to
date has been limited – primarily for trials of the IWP
plant at Narrogin and for small scale eucalyptus oil
production around Kalannie in WA.
In parallel with the on-farm planting, various research
groups have conducted detailed examination of all
aspects of a large-scale mallee industry, from seedling
selection through to harvest and transport to processing
plants. There is thus a considerable body of information
and research expertise to facilitate any major expansion
to mallee planting over time.
Some of this research has considered the potential
for large-scale planting of mallees on dryland farms
in parallel with other, pre-existing farming activities.
Particular emphasis has been placed on complementary
water use, so that other crops are not adversely affected
by tree planting. Estimates of sustainable planting with
minimal water competition show potential for as much
as 39 million tonnes of biomass per year (measured on
a dry basis) across the southern Australian wheatbelt
zone72.
While mallee eucalypts have received considerable
attention, there are hundreds of other Australian
natives that may also offer opportunities for large-scale
production of biomass for energy and co-products. A
number of species have already been investigated and
these are summarised in a recent RIRDC report84.
29
 8.2.2 Oil seed trees
Pongamia is a large deciduous tree that grows well in a
variety of climatic conditions in Australia and Asia. It is
able to grow in marginal areas that may be unsuited to
conventional agriculture, thus offering the potential for
large-scale rural enterprise that is additional to and not
competitive with food production.
Once established, pongamia trees produce seeds that
contain significant quantities of oil. The oil is suitable
for modification and use as biodiesel. Further work is
required to identify optimal varieties, quantify yield per
hectare for a variety of conditions, optimise harvesting
and processing steps and costs, and test processed
pongamia seed oils as blends and as dedicated fuels.
Jatropha curcas is another large tree that bears oil seeds.
It has been declared a noxious weed in the Northern
Territory and Western Australia. Legislation prohibits
the movement of this species into and within these
jurisdictions and requires all detections to be eradicated.
As there is active on-ground eradication/control, this
species is deemed to be under ‘official control’ and
therefore importation of this species into Australia is
currently prohibited.
8.2.3 Algae
Algae offers a high theoretical yield of oil suitable for
biodiesel, However, as yet there are no commercial
facilities in the world producing biofuel from algae. In
the absence of any current commercial use as a source of
fuel, more details of growth, harvesting, processing, and
markets for biomass residues need to be determined.
8.2.4 Other
Non-food oil seeds such as Dry Land Juncea (mustard)
offer potential for biodiesel production.
High fibre sugar cane is sugar cane bred for a mix
of fibre and sugar yield rather than maximum sugar
yield only. It may be a suitable biomass feed to
increase cogeneration or provide additional scope for
ethanol manufacture when second generation ethanol
technologies become available commercially.
A number of grasses are being considered overseas as
crops grown specifically for bioenergy. These include:
• Switchgrass – a perennial grass native to North
America85.
• Miscanthus – a perennial grass native to Asia that is
the subject of considerable research as a bioenergy
crop in Europe86.
Work is also underway to study the potential for some
native grasses to act as bioenergy crops in Australia87.
30
Australia has a number of woody weeds (including A.
nilotica in Queensland88 and M. pigra in the Northern
Territory89) that could potentially be utilised as feedstock
for bioenergy.
8.3 Scope for investment
8.3.1 Power plants
The figure of 72,629 GWh/year was provided by the
Australian Bioenergy Roadmap2 as the potential for
electricity generation from biomass in 2050. Biomass
power stations will typically operate as continuous base
load generators (as compared with wind and solar which
are intermittent). This figure represents new capacity
totalling approximately 9 GW by 2050 to fully realise
the potential of biomass. For comparison, Australia’s
current generation capacity totals just over 51 GW90, the
majority of which is fuelled by black and brown coal.
The capital cost per MW of generating capacity will
vary considerably across these alternatives. This increase
in biomass-fired generation would be achieved via a
mixture of new plant and equipment, including:
• Small, standalone power stations.
• Large (20 MW and above) standalone power
stations.
• Cogeneration plants, such as those already being
installed in sugar mills.
• Co-firing facilities, where biomass is fired alongside
coal in existing power stations.
If the current cost of a large, stand alone power
plant56 is taken as the average capital cost for this
power generation, it is expected that the total capital
investment to 2050 for new capacity of approximately 9
GW could be more than A$20 billion.
Co-firing of biomass provides bioenergy at a lower
capital cost than the alternative listed above. In this
case the biomass is used as feed in an existing coal-
fired power station instead of building a new dedicated
biomass power station. However, limits do apply. The
maximum quantity of wood that may be co-fired in pre-
existing plants is typically 10 % of the total feed, with
the balance of the feed remaining as coal.
8.3.2 Biofuels
Market size in Australia for petrol and diesel as transport
fuels in 2007–08 is reported as being 37 billion litres8.
A 20% biofuels market share of this fuel use represents
7,400 ML per year. Existing capacity for ethanol and
biodiesel is not fully utilised at present and totals
approximately 500 ML91.
Biogas generator sets at Melbourne Water Eastern Treatment Plant, Bangholme, Victoria
9. Discussion
9.1 Timeline for change
The data in section 8 highlights the scale that the
bioenergy industry may achieve as it provides renewable
power and fuels across Australia in coming decades.
The preceding sections also show that a number of
feedstocks and technologies already exist and that
others are under active development in Australia and
overseas. The environment in which bioenergy is being
considered is also changing, particularly with regard
to government initiatives such as the RET legislation
(passed in 2009) and the proposed CPRS, which seek to
address climate change and industry development issues.
Such developments suggest that the Australian bioenergy
industry will see gradual but continuous change over an
extended period.
9.1.1 The current situation
Combustion plants to generate electricity from wood
and other cellulosic feedstocks are available now and use
mature technology.
First generation transport fuels (primarily using
agricultural crops as feed - sugar, starches and vegetable
oils, plus limited use of waste animal fats) are technically
feasible now. They are used widely in many overseas
countries and with commercial success in Australia.
Two commercial-scale first generation biorefineries are
also in operation in the USA, making a range of plastics
from corn feedstock 53,54.
A number of demonstration and prototype commercial
second generation biofuels plants using cellulosic
feedstocks are under construction.
9.1.2 Five to ten years
Second generation transport fuels:
• These will use woody biomass and agricultural
cellulosic residues as feed.
• Based on work already underway overseas21, the
commercially demonstrated technologies available
overseas in five years may include:
–– Ethanol from the fermentation of hydrolysed
wood and crop residues21.
–– Ethanol, syn-diesel and other liquid fuels from
the gasification of wood and crop residues,
followed by reforming 47.
31
 Refinery feedstock from fast pyrolysis of wood (already
commercial) and hydro-reforming (successful R&D
carried out overseas)92, 93.
In five to ten years commercial prototypes for second
generation biorefineries may also be in operation
overseas, particularly if success with second generation
transport fuels establishes the commercial feasibility
of technologies to convert wood and other cellulosic
biomass into biorefinery feedstocks.
Relative to technologies for production of ethanol and
syn-diesel from biomass, feedstocks and technologies
for producing large volumes of transport fuels from
algae have received significant attention only recently. It
is therefore difficult to determine whether commercial
scale production of fuels from algae will be achieved in
the next five to ten years.
9.1.3 Beyond ten years
Once commercial prototypes are in operation the
various elements of the bioenergy industry may enter a
series of rapid growth phases94. This can be expected to
include:
• Progressive cost reductions through the learning
curves on commercial plants.
• A better understanding of economies of scale
through plant operation and feedstock development.
• Integration of activities, particularly the addition
of biorefining capability to fuel plants and the
construction of national, supporting infrastructure.
• Algae-based biofuel production.
• Effects of government policies such as the proposed
CPRS.
9.2 RD&E over next five years
This report is a preliminary stage in the development
of a National Research, Development and Extension
Strategy for Bioenergy. As this strategy is developed,
topics for further discussion could include the following:
9.2.1 Feedstock – supply and delivery
Fundamental to any new bioenergy plant is access to
suitable biomass feed with consistent and appropriate:
• Quality.
• Quantity.
• Delivery schedule or seasonality (bioenergy plants
typically operate continuously year round).
• Price.
These variables must all be understood with some
certainty over the life of the bioenergy plant (typically
15 years for initial financial modelling, and as much as
double or triple this in practice).
32
The price of most interest to any bioenergy plant is not
the cost of feedstock production, but the cost of that
feedstock delivered to the bioenergy plant. Previous
Australian work95 has highlighted uncertainty and
variability for costs associated with different harvest and
delivery systems, and it is important to consider this
aspect of biomass supply.
• In some situations existing delivery systems may be
adapted for use with bioenergy feedstock.
• In other cases, delivery systems being developed
overseas may be applicable in Australia.
• Finally, there are situations where new equipment or
systems are necessary and are unique to an Australian
opportunity (such as the harvest of mallee eucalypts
proposed for dryland regions).
Some feedstocks that could be used in Australia are also
the subject of use or research overseas, and negotiation
for use of overseas intellectual property may be a
part of their use here. Other feedstocks are unique to
Australia. In all cases however the conditions specific to
various parts of Australia may warrant local research to
clearly establish preferred species or cultivars and likely
yield and delivery costs now and into the future. Such
research may include review of:
• Climate and climate change.
• Soil conditions.
• Water use.
• Farming techniques.
• Roads and other infrastructure.
• Compatibility with existing practices and potential
for appropriate levels of grower uptake.
9.2.2 New technology
The funds being put toward technology R&D and
commercial prototypes in North America and Europe
in particular are many times greater than funds available
for equivalent work in Australia. It is to be expected
that a variety of second and third generation bioenergy
technologies will become available commercially
overseas in the next five to ten years. Importantly they
could become available to Australian businesses having
already been proven overseas, a valuable prerequisite
for successful project funding from Australian banks
and investors. It is generally quite feasible to use
bioenergy technology developed overseas in Australian
applications, subject perhaps to any modifications that
will optimise operation on local sources of biomass.
Australia will need suitably trained personnel to
build and operate plants built with local or overseas
technology. Construction and operation will require an
engineering resource and also personnel with relevant
scientific skills. It may be possible to include specific
training of operators and professional staff via placement
in similar overseas plants prior to operation of new
Australian facilities.
Technology transfer works both ways, and any bioenergy
technology developed in Australia will be able to seek
potentially huge markets around the world. However:
• It may also be competing with other work underway
overseas.
• Even after successful R&D, such work needs to be
sufficiently attractive to achieve funding needed for
commercial prototypes and trials that then allow
warranties to be offered to subsequent users.
A strong business case is therefore important to justify
any major R&D funding for technology development.
The business case should address markets, competitive
advantage and commercialisation pathways. However
such RD&D may also be considered from the
perspective of general industry development in Australia.
9.2.3 Technology scale up and demonstration
Once technology has been demonstrated successfully at
the laboratory stage it must be scaled up progressively
and carefully to full (commercial) scale. This generally
includes a pilot plant, a demonstration plant and a
commercial-scale prototype.
• For the pilot and demonstration scale, issues may
include:
–– Significant financial commitment for capital and
operating costs.
–– No short term commercial return.
–– Considerable technical risk.
• For the commercial prototype, issues may include:
–– Much greater financial commitment than for
pilot and demonstration plants.
–– Risks associated with final scale up, and
potentially with feed supply and characteristics,
and product offtake.
–– A major investment that may take one or two
decades to pay off, once it is operational and
selling product.
This is a new industry, as opposed to one that is well
established. Support for showcase projects and other
actions could facilitate capital raising, particularly given
the recent difficulties in the Australian biofuels industry
and current financial liquidity problems around the
world. These issues may apply to Australian plants
regardless of the source of technology (local or overseas).
9.2.4 Markets
The market for renewable electricity from bioenergy
in Australia is already well established, with more than
100 accredited bioenergy plants supplying 24% of the
renewable electricity under MRET in 200712.
The markets for bio-based products (such as renewable
plastics) are generally industrial, international and at
an early stage of development. These are expected to
be the subject of market-specific research during the
development of business cases for the implementation
of new technologies. For such materials it is worth
remembering Australia’s proximity to large potential
markets in Japan and other Asian countries.
The sale of bio-based transport fuels (such as ethanol,
biodiesel, synthetic diesel) in Australia requires RD&E.
Marketing includes direct and indirect interaction with
the following customers in Australia (and potentially in
Asia):
• International oil companies.
• Independent fuel distributors.
• Major industrial fuel users.
• Individual consumers.
Each biofuel purchase decision is based on a complex
mix of cost, quality, availability and convenience, and
environmental benefits (real and perceived). Until such
fuels are well established, each purchase decision is also a
conscious step by the customer away from a routine, low
risk buying pattern.
9.2.5 Environmental and social benefits
In almost all situations where bioenergy is utilised
to replace a fossil fuel it is expected to provide an
environmental benefit via reduced CO2 emissions. In
many situations, particularly in the formative years of
a new industry, the bioenergy comes at a higher cost ($
per unit of energy) than the fossil fuel based energy it
seeks to replace.
For industry investment in bioenergy (particularly at
the scale that is possible and desirable for significant
greenhouse gas mitigation) the environmental benefits
should be valued in the overall commercial transactions
that accompany energy sales to a variety of customers.
Government policy (such as the proposed CPRS) that
allows incorporation of environmental costs and benefits
into commercial transactions may encourage investment
in the bioenergy sector.
R&D to understand the environmental and social
benefits of bioenergy may assist government in the
establishment of practical, long-term policies. Policy
stability will have flow on benefits to industry.
Production of many bioenergy feedstocks is intimately
linked to agriculture and forestry. Some knowledge of
environmental and social issues can be gained from
overseas experience but most of these issues may benefit
from consideration in an Australian context and in
relation to Australian farming and forestry practices:
33
 • A good example of this is the relative water and the markets for these products. In some cases the
consumption of annual crops and perennials. While proposed production quantities may far exceed the
it is generally understood that perennial crops available markets and depress prices.
typically use more water than annual crops and
that this may be inappropriate in some regions, In order to best determine whether or not a particular
other parts of the Australian farming landscape are bioenergy R&D project is of value it may be reviewed
suffering from excess water that manifests as dryland in the context of an overall SWOT analysis (Strengths,
salinity. Weaknesses, Opportunities, Threats) for the proposed
• A second example is the jatropha tree, which offers bioenergy business. It is suggested that for each major
the potential for large-scale biodiesel production in bioenergy opportunity for Australia, a SWOT analysis
marginal areas but grows so prolifically that in some is undertaken to help set priorities for R&D that will
parts of Australia it is classified as a noxious weed. maximise the chance of a successful industry being
developed.
Both examples relate to areas of significant potential
for bioenergy and environmental and social benefits, Also, when selecting bioenergy R&D for funding in
if managed properly on a regional basis and with a Australia, it should be remembered that:
national consensus. • The budget for bioenergy R&D in Australia is quite
limited in comparison to the budgets in Europe and
the USA.
9.3 “From planting to power” – • Much of the technology R&D already underway
recognising the full supply chain overseas is relevant to Australian opportunities.
• If commercially-tested technology is being brought
The overall success of any bioenergy business requires in from overseas it may not need an Australian R&D
success with each of the components that make up that resource for its local introduction.
business. These components may be summarised as • An Australian bioenergy R&D community is
follows: a resource to be developed over years and even
• Feedstock supply. decades. A proactive approach may be of benefit to
• Feedstock delivery to the bioenergy facility. identify areas of particular relevance to the long-term
• The bioenergy process. bioenergy industry in Australia, and then seek and
• Bioenergy distribution networks. develop skills and R&D resources in these areas.
• Customers for the bioenergy.
• Co-products, including carbon credits.
Success for bioenergy is also dependent on its ability
to compete within a well established market place (e.g.
biofuels need to compete within a fossil fuel dominated
market)
Progress with any single component should be viewed
in the context of whether such progress will make
a significant difference to the overall viability of a
bioenergy business.
R&D to help establish a new bioenergy business
may therefore be quite different to R&D for an
established, operating agricultural enterprise. For the
latter, the R&D may improve one component with the
understanding that the other components in place will
accommodate the improvement. For a new bioenergy
industry the situation is not as secure. For example:
• R&D to improve the cost of production of a
certain feedstock may not be of benefit if there is no
economically viable harvest and transport chain for
that feedstock because of its physical characteristics
or location.
• R&D to develop high value co-products should take
into account the quantities that may be produced

34
Endnotes

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biomass/

35
 28. http://www.ret.gov.au/resources/resources_programs/alternative_fuels_programs/second_generation_biofuels_
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58. http://www.ncrisbiofuels.org/facilities

36
59. http://www.rirdc.gov.au
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37
 87. http://www.rirdc.gov.au/programs/new-rural-industries/bioenergy-bioproducts-and-energy/rirdc-projects-and-
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Publication no. 04/031

38
39
 Overview of Bioenergy in Australia
by Colin Stucley
Pub. No. 10/078

Australia’s bioenergy industry produces renewable electricity,
heat and liquid fuels. With revenues in excess of $400 million
per year, bioenergy is already a valued contributor to businesses
in cities and rural locations across the country.
Australia is actively seeking ways seek to reduce its greenhouse
gas emissions and dependence on fossil fuels, and bioenergy
could play a more significant role in coming years. Potential
exists for greater use of existing and new feedstocks and
technologies, leading to an increased contribution from
bioenergy across industry, transport and domestic energy
sectors. Such use will allow bioenergy to make a valuable
contribution to Australia’s low carbon future.
Research, Development & Extension (RD&E) is a key
factor for increasing the use of bioenergy, by ensuring that
it is competitive, sustainable, and fully understood and
appreciated.
This report provides an overview of the Biofuels and Bioenergy
industry. This overview includes basic statistical information
for the biofuels and bioenergy industries. It will also be a
useful basis for those contemplating investment or formulating
policy and will help to inform RIRDC as it plans its research
and development priorities into the future.
This report is an addition to RIRDC’s diverse range of over
2000 research publications and forms part of our Bioenergy,
Bioproducts and Energy R&D program, which aims to
meet Australia’s research and development needs for the
development of sustainable and profitable bionergy and
bioproducts industries, and to develop an energy cross sectoral
R&D plan.
Most of RIRDC’s publications are available for viewing,
free downloading or purchasing online at www.rirdc.gov.au.
Purchases can also be made by phoning 1300 634 313.

Rural Industries Research & Level 2,

Development Corporation 15 National Circuit
PO Box 4776 BARTON ACT 2600
KINGSTON ACT 2600
Phone: 02 6271 4100
Fax: 02 6271 4199

rirdc.gov.au
Email: rirdc@rirdc.gov.au
Web: www.rirdc.gov.au
Bookshop: www.rirdc.gov.au
or phone 1300 634 313