Unlocking Australia’s bioenergy potential requires a national approach

Daniel Hamel, Associate Director
Deals Advisory
Infrastructure & Projects Group

Bioenergy and bioproducts could be a significant growth sector for the Australian economy, with most benefits accruing in regional areas. A recent report by KPMG for Bioenergy Australia highlights current bioenergy activity within Australia and potential opportunities from growing the sector.

In the European Union, policies driving the bioenergy sector are expected to generate €58.7 billion (AUD $90 billion)[1] in economic activity per annum supporting 550,000 direct and indirect jobs.[2] A focus by policy makers on the bioenergy sector could help unlock similar opportunities, including $3.5 billion to $5 billion in bioenergy investment for Australia.[3]

The benefits of bio energy are diverse and include:

  • Energy security: through domestic production of biofuels and diversification of dispatchable electricity and heat fuel sources.
  • Regional jobs and growth: the feedstock used for bioenergy often stems from rural and agricultural activities and can be associated with existing or new manufacturing processes.
  • Greater utilisation of waste: through higher recycling and re-usage of waste from agricultural, industrial, commercial and domestic activities.
  • Reduction in emissions: sustainable sourced biomass is carbon neutral, and may improve air quality by offsetting the use of petroleum-based products.

What is bioenergy?

The figure below shows the biomass to bioenergy process, where feedstock is converted to a wide range of products using different conversion technologies, such as combustion, anaerobic digestion and gasification.

What makes up the bio-economy?

The bio-economy encompasses the following end use market categories:

  • Electricity: to directly supply businesses or exported into the grid as a dispatchable form of electricity.
  • Direct heat: used for residential and industrial heating purposes.
  • Transport fuels: for use in the transportation sector such as passenger vehicles, medium and long haul trucks, rail, off road, aviation and maritime; and
  • Bioproducts: chemicals for use in polyester fibres for clothing, detergents, oils and other products.

Snapshot of current bioenergy activity

There are around 220 operating bioenergy plants in Australia, with an additional 55 projects under construction or at the feasibility stage of development, based on a recent survey undertaken by Bioenergy Australia.

Of the commissioned projects that responded to the survey, we found:

  • Most projects produce electricity as an output;
  • Combustion was the predominant form of technology; and
  • The most common feedstock was municipal and industrial waste.

Policy levers to drive growth

Different policy levers can be used to support the development of the bioenergy sector. These range from explicit targets on the use of bioenergy, such as the E10 biofuel mandate in Queensland and New South Wales, gate-fees for the disposal of waste, government grants to reduce project capital costs, and contracts‑for‑difference which guarantee a price for electricity sold to grid.

Understanding the available levers is an important step towards identifying strategies for supporting the development of the bioenergy sector in Australia, as each will have different impacts not only on the bioenergy industry, but related industries as well.

International comparison

In Australia, biomass for energy purposes makes up around four per cent of energy consumption. This stands in contrast to the European Union where 10 per cent of energy consumption is derived from biomass.[4] Within the EU sustainable bioenergy is playing a key role in helping to meet ambitious climate and energy targets for 2030.

Growing Australia’s bio-economy

Bioenergy and bioproducts have the potential to be a significant growth sector for the Australian economy, in conjunction with growing the agricultural sector and regional communities. As with any emerging sector, government support can play an important role in removing barriers and accelerating the development of new projects.

The Australian Government, in conjunction with the states and territories, can help grow the Australian bio‑economy through:

  • Establishing a national vision for the bio sector in Australia, with a corresponding set of policy objectives and targets informed by cost benefit analyses;
  • Developing a national roadmap to achieve the vision, including recommended policy levers for all levels of government to implement; and
  • Monitoring performance of achieving the roadmap through regular reporting.

KPMG’s State of the Nation Report can be read here

[1] Based on a 1.54 EUR/AUD exchange rate.

[2] European Commission, Sustainable and optimal use of biomass for energy in the EU beyond 2020 — May 2017, page 87-88.

[3] Clean Energy Finance Corporation, The Australian bioenergy and energy from waste market, November 2015, p. 6.

[4] European Commission, Sustainable and optimal use of biomass for energy in the EU beyond 2020 — May 2017, page 13.

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