Biofuel demand and consumption hits slump in Australia

12 November 2020 3 min. read

Biofuel consumption in Australia is shrinking, challenging the country’s ambitions to move towards renewables. A new report from APAC Biofuel Consultants suggests that Australians don’t yet trust biofuel in their vehicles.

A joint venture between two Australian consultancies – energy advisory firm EnergyQuest and oil & gas consultancy Ecco Consulting – APAC Biofuel Consultants (ABC) is a biofuel-specialised advisory firm that has been releasing market reports on the segment every year since 2006.

This year’s report threw up the worrying figure that biofuel demand contracted by nearly 4% between 2019 and 2020, shrinking to less than 0.5% of the country’s transport liquid and gaseous fuel consumption. ABC acknowledged the role played here by Covid-19 and all its economic repercussions, but positioned mistrust or inertia among consumers as a notable factor as well.

Australia’s biofuel industry is sustained by two fuel types – ethanol and biodiesel. The latter is a petroleum substitute in itself, and represents a small share of the biofuels market. ABC reports that demand for biodiesel actually increased between 2019 and 2020, marking healthy development in the sub-segment. Dragging the numbers down is ethanol, which in Australia is largely consumed in the form of E10 – a blend of 90% petrol and 10% ethanol.

Some studies suggest that E10 could cause damage to vehicles – largely in older models – and many Australians are simply uncomfortable with the risk. The scenario speaks to the need for further developing E10, as well as the need to bring about a change in consumer attitudes. These changes become all the more urgent when considering Australia’s ambitions when it comes to biofuel, and renewable energy as a whole.

Challenges and recommendations

The country hopes to bring about a 40-fold increase in biofuel consumption to reach 20 gigalitres (GL) by 2060, from current levels of nearly 250 megalitres (ML). All this is part of a broader energy shift in the country, having already realised a 20% share for renewable energy in the total electricity generation volume. Shrinking biofuel demand is distinctly at odds with these efforts.

According to joint chief executive at ABC Michael Cochran, biofuels in Australia and worldwide are suffering from dropping down the energy pecking order. “Overseas, new biofuel investment is now focusing on renewable diesel and aviation jet ‘drop-in’fuel production as a direct substitute for some fossil fuels, with ethanol taking second place.”

“This at a time when biofuels in Australia are facing new technological competition from other forms of renewable and emission reduction investment across such fields as hydrogen, solar and electric vehicles,” he added. According to Cochran, the whole scenario screams out for structural change.

“So, we are at a point the industry needs to regroup and replace outdated current policies with new initiatives delivering a biofuel future for Australia. The current development of the Bioenergy Roadmap offers a unique opportunity for the Federal Government to review Australian biofuel support schemes,” he stated.

Demand is certainly a key issue to address, although ABC’s report reveals issues on the supply-side as well. In June this year, United Petroleum’s Dalby Bio-Refinery in Queensland closed down despite the government’s best efforts to keep it open. According to ABC, this alone wiped out 17% of Australia’s aggregate biofuel production.

On the plus side, there are efforts underway to build capacity as well – an example being Manildra’s recent move to allow for fuel ethanol production at its high capacity refinery. Even Biodiesel production went up significantly this year, although the segment remains too small to significantly affect the national biofuel numbers.