The growing world demand for ethanol is changing the face of the global grains market, but a question mark still hangs over Australia's capacity to join the biofuels rush

By Alec Nicol

The increasing thirst for biofuels is speeding the development of 'second-generation' cellulosic refineries that can use a wide range of plant material to produce ethanol.

Delegates at the Ethanol 2007 Australia conference held in Melbourne in April predicted commercial production from cellulosic refineries in three to seven years.

[Illustration (left) by Justin Garnsworthy ]

Overall, the global biofuels industry is forming into two parallel paths - grain-to-ethanol and cellulosic ethanol, using sources such as crop stubble and household waste.

The choice of crops used for ethanol will depend on where the production is concentrated. For example, the preferred crop in the US is corn, in Thailand cassava and in Australia sugar cane.

The conference was told that the next generation of refineries will deliver much more efficient grain-to-ethanol production and be able to use both the oil from the plant and its cellulose (for the starch).

One plant recently built by the Delta-T Corporation in China claims substantial reductions in the energy required to make ethanol, with half the amount of fresh water required. The corporation's chief executive, Bibb Swain, told conference delegates that the aim was to be able to extract oil from corn and also use the lower-value components (the cellulose) to get all the possible energy from a crop.

The managing director of Enzyme Solutions Pty Ltd, Geoff Bearzatto, said the enzymes needed to 'process' this cellulose were now available. He said the main question was feedstock quality consistency and collection. Even so, he put commercial production at just three to four years away and said existing feedstocks would not meet expected demand.

Mr Swain said that while cellulosic plants cost three times more than grain-fed plants to establish, it was still possible to make money from their ethanol: "It's just that the return on capital isn't as good."

Also, the ethanol numbers overall are growing. The US is now the world's largest producer but its production of six billion gallons (27 billion litres) a year drowns in the targets being set for the future. Already mandated is the production of 7.5 billion gallons by 2012 - but production is already set to reach seven billion gallons next year. If the US is to meet its Department of Energy's target, it will be turning out 60 billion gallons (272 billion litres) a year by 2030. Currently that ethanol is derived entirely from corn, each bushel producing 11.4 litres.

Gene Fynboth, from the Minnesota Corn Growers Association, expects that by 2015 the US will be producing 15 billion bushels of corn a year. President Bush's target would swallow almost all of that, and farmers will need to sow about 39 million hectares. Spurred on by high prices (July contracts at $3.70) they are doing their utmost. It is estimated that 36 million hectares will be sown this year, up from 31 million last year.

Mr Fynboth acknowledged the emergence of the food-for-fuel debate triggered by this new player in the corn market, but said the current ethanol demand was no more than soaking up production generated by increased yields over the past 10 to 12 years. He also believed new technologies would deliver more efficient use of feedstock, plus the generation of ethanol from cellulose.

In short, he described an industry able to produce anything that petroleum does, and play a role in global carbon trading.

Ethanol's role in addressing climate change loomed large at the conference, with international delegates focused not on the 10 per cent ethanol blends now available but on E85 (85 per cent ethanol and 15 per cent petrol).

Saab had the 'biopower' version of its 9-5 model on display. Capable of running on E85, petrol or any combination of the two, it is one of a range of flexifuel vehicles (FFV) now becoming popular in Europe. In Sweden, sales of FFV doubled between 2005 and 2006 with the government providing some practical sweeteners, including free parking. But it is the 80 per cent reduction in CO2 emissions that is attracting the environmentally conscious.

Biodiesel is seen as the fuel of the future in Europe, but E85 is now commercially available in Sweden, Germany, Spain, the UK and Ireland.

However, Grain Corp's business manager for biofuels, Charles Coventry, offered something of a reality check to Australian growers and potential ethanol producers in the audience. "We don't have a significant corn crop and our largest grain crops, wheat and barley, are lower in starch than corn or sorghum and are higher-priced - and feedstock accounts for 70 per cent of the cost of ethanol production."

Further, his snapshot of recent history also illustrated some local realities. Twice since 1999 Grain Corp has been required to buy grain from WA for its needs in the eastern states, and historically Victoria and Queensland are actually net grain importers.

Therefore, he said, an Australian ethanol industry would have to adjust to a range of feedstocks. Plant location would be critical for security of supply, with the prospect also of declining grain exports.

A viable Australian ethanol industry was also seen as dependent on Australian Government support in the form of mandated use.

The executive director of the Australian Biofuels Association, Bob Gordon, said time was running out for the limited support now offered by the Government. The industry would be open to taxation and imports in 2011.

Mr Gordon noted that Australia currently had the capacity to manufacture 700 million litres of ethanol a year but 2006 sales were just 120 million litres, and 80 per cent of this was through independent service stations.

Against this, oil imports accounted for 70 per cent of Australia's balance of payments deficit and this was expected to rise, with only seven years of known domestic supply left.

Mr Gordon said a mandated E10 blend had the capacity to reduce Australia's greenhouse-gas emissions by 8.75 million tonnes a year.

Ethanol offers A clean, green rail alternative

Built with modular components and equipped with 'intelligent' power-management controls, ethanol-fuelled locomotives were among the more ambitious projects aired at Ethanol 2007.Designed by the US company AHL-TECH, the 1000 to 2000-horsepower locomotives represent what managing director Tom Mack described as a new paradigm for railways.

With an eye on new US Environmental Protection Agency regulations, the AHL-TECH locos are aimed at the short-distance workhorse market. Regulations released in March require a massive three-phase clean-up of the US rail system. Soot emissions must be cut by 90 per cent and nitrogen-oxide emissions by 80 per cent.

The regulations will be phased in until 2015 but will have a particular impact on rebuilt locomotives, usually 20 to 30-year-old machines retired from long-haul operations to be used around major cities. The cleaner, greener machines being designed by AHL-TECH have this market in their sights.

The new breed of engines features a generator and the capacity to store energy in batteries when the engine is producing more power than is needed to drive the locomotive. Add this to a 'predictive power-management control', a system using GPS to read stored data about the state of the track ahead, and you have what Mr Mack describes as a "cleaner-burning, fuel-saving, longer-life locomotive".

And the engine has been designed to run on 100 per cent ethanol, not a blend.

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