Presented by Samantha Read, CEO Biofuels Association of Australia
Speech transcript Monday 25 November 2015
Thank you and good afternoon.
I am delighted to be presenting today and would like to sincerely thank Bioenergy Australia, the organising committee and sponsors for once again bringing this important event to fruition.
I have certainly found today's presentations to be insightful and look forward to discussing perspectives with others over dinner this evening.
In fact, today is my one year anniversary in the role of CEO of the BAA and what an exciting time to be part of this industry.
The only constant is change – or so said the Greek philosopher Heraclitus.
In my first year, change has been a constant – whether it be at the BAA, in our industry or in the external environment.
The industry is at a pivotal stage of its development.
As an emerging industry, we are more susceptible to changes in the external environment and we are constantly battling to maintain a foothold as part of the mainstream fuel landscape in Australia.
We need to be agile in response to change and ready to take advantage of the opportunities and manage the risks.
Today, I will present an overview of where the industry is positioned and the challenges faced. Importantly, I will present the case for an Australian biofuels industry: the opportunities, benefits and ways we might achieve these.
To frame this discussion I will briefly touch on the role of the BAA.
Introduction to the BAA
The BAA's mission is to provide leadership and representation to key stakeholders as the peak industry body.
BAA is charged with facilitating the building of a sustainable, economically viable Australian biofuels industry, consistent with national and community interests, and environmental standards.
The BAA has identified its key areas of focus for members as building knowledge, policy development, advocacy and making connections.
Formed in 2006, the BAA is proud to have major Australian industry participants as members, providing valuable input and insight across the supply chain.
Our remit is indeed large, but so is our resolve and through our key focus areas, BAA is building knowledge, strong networks and partnerships to promote and grow the biofuels industry and encourage widespread, informed debate.
Current Industry Overview
So where are we today?
The industry has been established through the production of ethanol and biodiesel using processing waste and residues as feedstocks – an advantage as we don't have the food vs fuel debate seen in other countries.
As many of you are aware, producers operate right across Australia and while the industry has grown substantially, it remains small by international standards.
Of concern, new capacity built on promised government policy - which has since changed - means that today, supply exceeds demand and some facilities are operating under capacity.
Australian Petroleum Market Deficit
Australia's position regarding imported petroleum products is an ongoing concern.
With a trade deficit of $23 billion dollars for the last financial year, and growing year on year, there is certainly scope for biofuel blending to ease the burden and claw back some of this deficit.
In Australia, ethanol is sold as E10, E85 and a premium "P100", with the largest volume sold in NSW.
Pricing and availability of retail blends are key issues for ethanol and something not entirely within the producer's control.
For ethanol, the price at the pump is a critical factor and we have seen the decreasing price differential between regular unleaded and E10 have a significant impact on consumer demand.
According to the ACCC, in 2011-12 average prices for regular unleaded were only 1.8 cents per litre higher than for E10.
Availability is also a key issue, and in the last two years there has been a decline in the number of retail sites selling E10, and reintroduction of regular at some sites alongside E10.
Additionally, consumers' perceptions and confusion surrounding whether their cars can use biofuel blends are areas that must be addressed in partnership with:
• Our customers, who control the path to market
The reality today is that ethanol sales have flat-lined, with ethanol comprising under 1.5% of the Australian petrol market.
In Queensland, ethanol is just under 0.95% of volume - a decline since discussion of a 5% mandate was abandoned a few years ago.
In NSW, the good news is that the Government has shown leadership by actively encouraging sales of biofuel, with a 6% mandate for ethanol and 2% for biodiesel.
However, despite legislation being in place, the volume of ethanol sold is still well below the mandated level - only 3.6% in the second quarter of this year - and for the month of August, the gap was just over 13 ML
Multiply this throughout the year and you see the magnitude of the issue for the local industry, which has invested to meet anticipated demand.
In NSW we also see a decline in petrol sales overall, driven by a switch to diesel and increasing fuel efficiency.
The story for biodiesel is somewhat more positive with:
• B5 and B20 in the market,
We have seen modest increases as shown in the data from NSW, to some extent driven by increasing demand from transport, construction and mining companies seeking to reduce their carbon footprint.
However, sufficient investment in infrastructure to assist distribution of large volumes of blended fuels is critical.
Millions in investment by government and companies such as Shell and Caltex, in terminal blending facilities and tank upgrades allows mainstream sale of these fuels - a key enabler to the current and future success of our industry.
Australian Biofuels Industry Challenges and Issues
At the macroeconomic level, policy consistency and certainty across all levels of government is a vital issue to manage, impacting investor confidence.
Other factors such as fluctuating feedstock prices and exchange rates, have led to low margins and high production costs for Australian producers – issues which are not necessarily specific to our industry, but which are magnified given where we are in development.
Sustainability is of utmost importance to our industry.
The BAA is the lead participant in Australia's National Mirror Committee working with the International Standards Organisation on the development of a Sustainability Criteria for Bioenergy.
The sustainability of biofuels is an important issue, which governments must consider when considering policy mechanisms to encourage the growth of a local industry and application of incentives.
So it is an area that we must be mindful of as the industry develops.
This is quite a dynamic area and I may not have depicted all projects proposed or underway – but it is positive to see such a range of investments.
Some of these projects have only been possible through government programs such as ARENA, illustrating the importance of future policy settings under the new Coalition Government.
In Australia, policy arrangements governing the excise on biofuels are pivotal in assisting the industry to develop and reach economies of scale.
The Ethanol Producers Grant and Cleaner Fuels Scheme, provide policy certainty to 2021 – imperative for investment decisions that often have long-term horizons to consider.
The BAA played a key role in securing these arrangements, and we need to now determine policy settings that take us to the next level of development, while also supporting research that will build a bridge to the future of advanced biofuels.
Policy arrangements that have supported developments in our industry are underway.
However, at the same time other measures have been identified which may elicit further investment in biofuels and renewables in general.
For example, we see opportunity in the Federal Government's Direct Action approach as biofuels deliver both economic and environmental benefits; not one at the cost of the other.
This is an opportunity for our industry to work with the Federal Government to discuss our vision for growth and requirements for policy settings to achieve our goals.
Of critical importance is the Federal Government's plan to commission a new Energy White Paper, which will include investigating the role of alternative transport fuel sources.
This will form a large part of BAA's work over the coming year and we are formulating our policy positions for the upcoming discussion.
As you are aware, at a national level there is no mandate or target in place for the content of renewable fuel in Australia's liquid fuel mix.
In contrast, biofuels take centre stage internationally with around 60 countries having targets or mandates in place.
Policy support, often accompanied by financial support measures such as tax incentives, has driven the steady pace of growth in world biofuel production over the past decade and enabled it to get to scale.
So, what are we missing??
While NSW is leading the nation in support of the biofuels industry, the BAA believes that Australia needs a national vision for renewable fuel being a part of Australia's fuel mix.
And as part of this discussion, we need to make a strong case for an Australian Biofuels industry.
The Case for an Australian Biofuels Industry
BAA champions increased support for the Australian biofuels industry for many compelling reasons.
The biofuels industry today supports hundreds of direct jobs, and has the potential to become a major, home-grown, sustainable industry, employing thousands, particularly in regional economies.
Biofuels production is a value-adding local industry that can transform communities and provide alternative revenue streams for the agri-sector to strengthen farmers' resilience to changing conditions.
Additionally, opportunities exist to develop new industries on less traditionally productive agricultural lands, where woody shrubs and perennial grasses can grow with less input requirements than needed for food crops.
Globally, biofuels is a growing industry and today, Australia exports biofuels to destinations including the US and Asia.
Overseas investors are also increasingly considering establishing facilities in Australia for future export.
And, the potential future trade growth is not restricted to the fuels alone – there will also be opportunities for Australia to export its significant scientific and research skills, technology developments and human talent.
Technology and Innovation
As anyone attending this conference knows, the biofuels and bioenergy industry are incubators of innovation and new technology.
Our local producers are constantly looking for ways to improve efficiencies within their processes, via research into new enzymes or treatments to improve the yields and quality of the biofuel they produce.
And Australian research is leading the way in developing new feedstocks and processes for the future.
Many leaders of these projects are here today.
Increasing the content of biofuels in the Australian fuel mix could result in benefits to public health.
The AMA has stated health costs associated with vehicle emissions are between $600 million and $1.5 billion dollars in Australia each year.
As biofuels burn cleaner, air quality - particularly in and around major cities, ports, tunnels and airports - could be improved to provide public health and economic benefits.
Work is needed to better understand the possible benefits, but past investigations have shown that ethanol and biodiesel blends can reduce pollutant vehicle emissions, especially fine particles known as PM 2.5 - that can be particularly harmful to health and dubbed 'the new asbestos' by the Australian Asthma Foundation.
And in terms of the environment, the benefits have been widely discussed. Biofuels can reduce our carbon footprint, and are readily biodegradable.
In the mining industry, where 18% of Australian diesel consumption occurs and accounting for 10% of our national energy use, biofuels could reduce carbon emissions while also lowering exposure to harmful exhaust substances, especially for workers in underground environments.
Looking at energy security, Australia now produces less than 30% of its own oil and this is declining.
Biofuel blending could extend Australia's limited fuel reserves and displace imported petroleum, thereby reducing Australia's fuel deficit.
The industry is also aware of Australia's Defence interest in biofuels for possible future use, considering interoperability issues and alignment of supply chains with our allies.
Call to action and close
The case for an Australian biofuels industry is not new. It has been stated and restated across the industry, broader stakeholders and the community.
The issue is that communication is fragmented, ad hoc, and in some cases, conflicting.
With important discussions occurring over the next 12 months as part of the Energy White Paper process, we must discuss policy requirements to support the current and future development needs of our industry.
And to have most influence on consumer perceptions and government policy, we must speak in a united voice to have most effect and influence in order to build the bridge to the future of our industry.
The Biofuels Association is developing policy positions, which call for:
• Long-term policy certainty and consistency at both State and Federal levels. Policy mechanisms must take a strategic approach, thinking beyond electoral cycles and involve setting clear and ambitious goals.
We will consider:
As these areas of policy development impact all biofuel industry players, we must work together to support the development of the market today..... to build the market of tomorrow.
Isolated efforts will not bring about the required outcomes.
Speaking in a united voice will provide a platform for national credibility, strength and influence to engender maximum community awareness and ensure our messages reach policy-makers loud and clear.
One way for us to formally unite is through the BAA and I would be delighted to discuss with each of you the future of this great, home-grown industry.
|Making the Case for an Australian Biofuels Industry|
Thursday, 28 November 2013 11:48