The biofuel saga

The Biofuel Sales Obligation went down a tortuous path last year before coming into effect in October, just before the elections, only to be euthanized two months later by the new Government, but this hasn’t discouraged biofuel investors.  By Alan Titchall.

The short-lived Biofuel Bill obligated companies that sold petrol or diesel (BP, Caltex, Gull, Mobil and Shell) to sell biofuel as a percentage of their sales - 0.53 percent in annual sales, or around 35 million litres, or one petajoule of energy. This obligation was going to increase to 2.5 percent by 2012.

The axing of the obligation was welcomed by the fuel companies and decried by investors hoping to capitalise on local biofuel production, not to say there was any obligation for fuel companies to buy from the domestic market. Most of the fuel companies implied they would have to import cheap biofuels from markets where production is heavily subsidised.

Timing wise, the Kiwi ‘obligation’ incentive couldn’t have been worse – just as the global industry was being accused of environmental crimes against the last of the world big rain forests, and endangering the poverty stricken regions of the world by raising food prices, or simply creating more green problems than it as trying to cure.

Even the parliamentary commissioner for the environment, Jan Wright, during the passage of the bill claimed the obligation would do more harm than good, and threatened our ‘green image’. Production potential of domestic biofuel was also limited, she said, calling for the bill to be tossed out. Labour party energy minister David Parker conceded there could be a problem with imported bioethanol made from sources that competed with food supplies, namely corn supplies (the US), or biodiesel from palm oil (Asia) where it has caused deforestation. While he didn’t single out sugarcane-sourced ethanol, large scale sugarcane production for biofuels in Brazil (that now fuel up to 40 percent of the country’s light fleet fuel) has put pressure on farm lands that has, in turn, put pressure on clearing forest. The cane is also burnt before cropping to get rid of snakes and make it easier to crop, producing huge amounts of greenhouse gases.

On the positive side, sugar cane yields between 2275 and 3000 litres of ethanol per acre every year, or twice as much as corn crop that produces 1150 litres of ethanol a year. An acre of soybeans produces 230 litres of biodiesel. But an acre of algae, which can be harvested daily can theoretically produce 19,000 litres of biofuel in a year – if the technology can be achieved.

Algae the way to go

Scientists generally agree that of all the biofuel feedstocks, algae tops the list in environmental friendliness. Growing easily and quickly in wastewater (even seawater) and needing only sunlight and CO2, some algae make starch that can be converted to ethanol, and others produce droplets of oil that can be brewed into biodiesel and even jet fuel. New Zealand has a good start here through Blenheim-based Aquaflow Bionomic Corporation, a start-up company set up to convert wild algae (that occurs naturally in effluent management systems) into biofuel. It attracted a lot of attention after it was approached by Air New Zealand as a possible contender in supplying biofuel to the airline for tests on a B747 flights last year in association with Boeing and Rolls-Royce.

The company has taken a different approach to other algae biofuel operations around the world that are experimenting with algae mono-cultures that have a high risk of crashing. Aquaflow has derived algae strains that grow in the excess pond discharge from the Marlborough District Council’s sewage treatment works.

“We are dealing with multiple wild strains of between 6000 and 10,000 different algae species provided by nature,” says Aquaflow director, Nick Gerritson (right).

The nutrient-fed algae have a continuous and reliable lifecycle, compared with traditional algae feedstock sources of biofuel, he says.

Since producing the world’s first commercial biodiesel from sewage pond wild algae (outside a laboratory) in May 2006, the company had pulled-off an impressive number of industry milestones. By March 2008, the company had achieved commercial scale continuous harvesting of tonnes of wild algae at the Marlborough oxidation ponds and had commissioned a substantial bio-refinery. By the end of last year, Aquaflow had refined the world’s first sample of synthetic paraffinic kerosene (SPK) from wild algae that can be blended with petroleum-based kerosene to power aircraft. 

The company told its shareholders at its AGM in November last year that it was ‘on track’ to convert algae into ‘green crude’ at prices competitive with fossil crude oil. 

Director Nick Gerritsen says the company has been “overwhelmed” with the dimensions and commercial opportunities that have emerged from the project – not just in producing a crude comparable to fossil crude, but with water mediation, waste management and patented technology.

Kiwi biodiesel industry growth

While there’s plenty of noise about biodiesel investment in New Zealand, there’s only a handful of companies producing commercial quantities of biofuel, and most of this is made from waste vegetable oil collected from the food industry, or tallow from the meat processing industry.

The largest of these companies is Biodiesel New Zealand, a Christchurch-based operation, now owned by Solid Energy, that started off producing biodiesel from waste vegetable oil sourced from hotels, restaurants and other food businesses, which was topped with a little virgin Canola oil. Now the company is also using rapeseed oil from feedstock grown in rotation with other crops by South Island farmers.

Making biodiesel is not a complicated science, the oil is heated and methanol and caustic soda added. It’s a chemical reaction and not a high-energy distillation process like ethanol, but controlling the water content is a very tough call. Consistency in production batches is very difficult, even using top equipment, and making it to high European standards is not easy.

Biodiesel NZ makes top quality biodiesel blends between B60 (blended with 40 percent mineral diesel) and even a B100 grade used by clients such as Ocean

Fisheries (using trawlers with modified motors), transport companies, and a couple of tourism operators operating diesel vehicles in environmentally sensitive areas of the South Island High Country.

Biodiesel NZ is now producing about a million litres of biodiesel a year that, until now, has primarily been made from recycled cooking oil. Last autumn (2008) was the firm’s first commercial-scale harvest of rapeseed and, in future, oil from this energy crop will make up an increasing proportion of its feedstock.

Manager Paul Quinn, who founded the company in 2005 (as Canterbury Biodiesel) and was retained as general manager after it was bought by Solid Energy in May 2007, says there are currently 5000 hectares of rapeseed (also known as rape or oilseed rape) planted around the South Island for future production. It’s a crop with good cold temperature performance, making it particularly suited to the country’s climate, and best grown on dry, marginal land so it doesn’t have to compete with land used for food production. The meal left over after oil extraction can also be used as stock feed.

Last year, the company had plans to build a new plant in Christchurch capable of producing 15 million litres of biofuel a year, and cranking that up to 35 million litres as more farmers were contracted to grow oilseed rape (attracted by the $700 price a tonne).

Those plans have changed. Biodiesel New Zealand now says it will now only increase production at its existing Christchurch facility from one to four million litres a year.

Over the next year the company will complete the first stage of a new facility at Rolleston, near Christchurch, enabling the drying, cleaning and storage of up to 10,000 tonnes of locally grown rapeseed. Expanding production capacity at the existing plant in Christchurch from one to four million litres will allow more time to consider the optimum timing, size and location of any future biodiesel production site.

Andy Matheson, Solid Energy’s general manager renewable energy, describes this as a a short term but “prudent approach” in light of current fuel prices, including conventional diesel.

“Biofuel pricing is tied closely to its conventional equivalent but we believe this recent sharp dip is only temporary. Solid Energy has not changed its outlook that the price of energy, and particularly imported energy such as fuel, will continue to increase in real terms over the long term.”

A fuel company's view