GAIN releases report on Australian ethanol industry

By Ann Bailey | August 25, 2015

Australia will produce 265 MMly (70 MMgy) of ethanol this year, the Global Agricultural Information Network estimates.

The 265 MMly represents about 60 percent of the continent’s annual ethanol production capacity of 440 MMly. There were three ethanol manufacturing plants, each distilling different feed stocks, in Australia in 2014. Manildra, which has a capacity of 300 MMly of ethanol production, accounts for the bulk of Australia’s production of the biofuel, GAIN said.

Ethanol use has declined in recent years in Australia because motorists are concerned that the fuel may cause engine damage, there are fewer E10 pumps available and consumers prefer regular unleaded over E10, the GAIN report said. Meanwhile, a lack of price differential between E10 and unleaded fuel also contributed to the decline in consumption.

 The Australia biofuels industry mainly has been supported by an excise on biofuels levied on local production and imports of ethanol. Local producers, however, received a rebate on the excise, GAIN notes. Changes to assistance for the biofuels industry were announced in the 2014 federal budget and, in June 2015, the Australian government’s ethanol production grants program ended. The program provided a grant of 38.143 cents per liter to Australian ethanol producers on fuel supplied for transport where production inputs were domestically sourced. The grant program reduced the rate of excise to zero for local production. A customs duty of 38.143 cents per liter and a value duty of 5 percent were placed on imported ethanol.

But in June 2015 the Queensland government also announced it would introduce a 2 percent biofuels mandate to develop the biofuels and bio-manufacturing sectors. Second-generation biofuels, including renewable biodiesel, have successfully been demonstrated in Australia, but haven’t met with commercial success, the GAIN report noted. A New South Wales mandate directing the oil industry to include ethanol in the mix of fuels also supports the Australian ethanol industry.

Molasses from Queensland and wheat starch from New South Wales are the primary sources of Australian first-generation biofuels. The New South Wales government has passed a law that requires wholesale companies to have 6 percent of their fuel supply come from ethanol and that retailers with 20 or more outlets to offer ethanol product for sale. Retailers and wholesalers are two percent shy of that goal.

In Queensland, meanwhile, the Government Ethanol Industry Action Plan 2005-2007 included a commitment of 7 million in Australian dollars to fund the conversion of service stations for ethanol blends and for distribution and blending infrastructure. The action plan also committed to requiring ethanol sales at Queensland fuel retailers.

Between 2005 and June 2010 the number of service stations that sell ethanol-blended fuels in Queensland rose from 47 to more than 550. The percentage of Queensland drivers who tried out the ethanol-blended fuels rose from about one in six to two in five between 2005 and 2007, the GAIN report noted. Meanwhile, monthly consumption by the Queensland government fleet rose to 660,000 liters from about 180,000 liters, a 27.3 percent increase, during the period from December 2005 to March 2010.