Some biofuels are better than others: Thinking strategically about biofuels

The purpose of this report is to take a fresh look at biofuels – to think strategically about how they might lessen our dependence on fossil fuels and thus reduce our greenhouse gas emissions. This fresh look has led me to the following four conclusions.

First, the kinds of biomass currently being used as feedstock for biofuels in New Zealand cannot take us very far. Most biofuel currently produced in New Zealand is made from by-products – ethanol from whey and biodiesel from tallow. Some more whey and tallow could become available, but the potential for growth is not great. A small amount of canola is grown for processing to biodiesel, but the amount of agricultural land available for growth is limited because other land uses are more valuable, certainly in the foreseeable future. Although Henry Ford was right about being able to make fuel out of virtually any plant material, only wood could be grown in sufficient quantities to make biofuel mainstream. Algae could well play a valuable subsidiary role, especially if its use as a biofuel feedstock can provide the added benefit of improving water quality. Other feedstocks, such as switchgrass, could also be minor players.

Second, the biofuels currently being produced in New Zealand can only be used to supplement conventional petrol and diesel. Ethanol can only be used in our cars in a blend of up to 10 percent with petrol, so its potential is limited for the foreseeable future. The same applies to the kind of biodiesel produced now, which cannot be retailed in more than a 5 percent blend with conventional diesel. So if biofuels are to be major players in our energy future, they should be drop-in fuels, so called because they do not need to be blended with petroleum fuels. Hydrogenated renewable diesels, not yet produced in New Zealand, are drop-in fuels. Drop-in biofuels could also be produced using the Fischer–Tropsch process, used to convert coal to liquid fuel in South Africa.

Third, it makes sense to focus on biofuel substitutes for diesel rather than substitutes for petrol. We run our trucks, tractors, and fishing boats on diesel, and, if we are concerned about energy security, diesel is more important than petrol. Most of our cars run on petrol, but, in contrast to the transport of freight and the cultivation of our land, there is much more flexibility in the demand for petrol. Electric cars appear to be coming into their own, and many trips can be made by public transport, cycling, and walking. The decrease in congestion on Auckland’s motorways when the price of a litre of petrol rose above two dollars in 2007 is testament to this flexibility.

Fourth, it makes no environmental sense at all, and indeed is unethical, for us to import “bad” fuels made from feedstocks such as palm oil. The Government has set up a Biodiesel Grants Scheme, under which New Zealand biodiesel manufacturers can obtain subsidies on a per litre basis. Currently, no company is making biodiesel from imported palm oil in New Zealand, but there is nothing to stop this happening. It is ironic that our commitment to free trade could lead to taxpayers subsidising the felling of rainforest in countries like Indonesia and Malaysia.

In light of these conclusions, if biofuels are to play a significant role in our energy future, we should move toward developing drop-in biodiesel made from wood. Some biofuels are good, some are bad, and some are probably downright ugly. The challenge that lies before us is to develop and commercialise biofuels in a practicable way that will significantly reduce our greenhouse gas emissions, improve our energy security, and genuinely make our country cleaner and greener.