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Z Energy to build a biodiesel plant (hopefully)

As announced in the Herald, Z Energy is planning to build a biodiesel plant. The company has been looking at this option for quite some time, but they’re now at the stage where it’s looking pretty likely. As per the statement they released to the NZX:

While Z has publicly discussed the potential for this project in the past, the Z Board has approved the project, subject to the completion of regulatory and resource consenting – including approvals from competitor companies to construct a blending facility at the Wiri fuel terminal – and the finalisation of key contracts.

The company intends to build the plant over the next year or so, and it will produce 20 million litres of biodiesel a year, using tallow as a feedstock. Tallow is a waste product from meat processing, so it avoids one of the common concerns around biofuels – that they’re made from crops which would otherwise be used as food.According to the MBIE, New Zealand produces 7 million litres of biofuels a year – a drop in the bucket as far as transport energy is concerned, and with biodiesel production at just 1.4 million litres. The MBIE go on to note:

In New Zealand, biodiesel is currently produced from tallow, oilseed rape and used cooking oil, resulting in life-cycle greenhouse gas emissions 40 to 50% lower than those from fossil diesel. As tallow and used cooking oil are by-products of other industries and oilseed rape is grown as a break crop on grain fields to increase soil quality, current New Zealand biodiesel does not compete with food production or compromise biodiversity or soil quality.

We produce plenty of tallow in New Zealand, with one presentation suggesting that we could use it to produce around 150 million litres of biodiesel a year. At the moment, though, no one is really producing biodiesel on a major scale in New Zealand.

New Zealand uses about 4 billion litres of diesel a year, so 20 million litres is less than 1% of that supply – even a full 150 million litres would be less than 4%. No doubt there’ll be a lot of people watching to see how the Z plant turns out, or whether oil prices (or Emissions Trading Scheme charges) rise just that little bit extra to make biofuels more viable, but it seems unlikely that they’ll play more than a niche role given current technology and feedstocks. Of course, that’s not to say we shouldn’t be investing in it, and it’s good to see Z willing to make the first move.

Diesel consumption

The main reasons that biodiesel hasn’t taken off so far come down to dollars and cents. The short-lived Biodiesel Grants Scheme ran from 2009 to 2012, but hasn’t been renewed. Carbon charges under the Emissions Trading Scheme have fallen to the point where they’re pretty much negligible, so there’s not really much incentive to produce lower-emissions fuels. Biodiesel is a bit more expensive to produce than regular diesel – although Z reckon the difference is only a couple of cents a litre, given current oil prices. They hope to recover the higher costs through charging a slightly higher price to the customers who choose to use it. That would mainly be large-scale commercial clients who want to make it part of their sustainability story, although a 5% biodiesel blend is likely to be offered at Upper North Island petrol stations as well.

22 comments to Z Energy to build a biodiesel plant (hopefully)

  • Ari

    I think it is a great idea, as long as they are just using waste by-products. I recall Gull was getting ethanol from waste whey by-product from the dairy processing industry. Any time we reduce our exporting of our money for oil from overseas and keep the money going around inside NZ, the better.

  • Loraxus

    Hate to have to add another caution to this – but in Europe, the biofuels industry is already doing large-scale damage due to agriculture becoming even more monocultural (large fields of very, very few high-energy crops, not much else). The temptation of greater financial yields displaces old, more varied crop rotation.

  • TheBigWheel

    Dissenting voice coming.. “Don’t do it! Biofuels = disaster!”

    Worse in terms of food costs and GHG emissions can be higher than conventional fuels when you add in the land use / energy requirements just to make the stuff.

  • Harvey Specter

    Great idea but a shame it isn’t really financially viable. That extra 1c per litre is for a 5% blend!

    It is a shame that it is cheaper to drill a deep sea drill than to manufacture it in this manner but that is the facts. I wonder if there are economies of scale if they increased the size of the plant.

    Does anyone know what Tallow is used for now and whetehr there are any constraints on supply – I assume it isn’t currently dumped.

    • From the Meat Indusrty annual report in 2013

      “Exports of tallow increased in volume in 2012/13, by nearly18,000 tonnes to 151,951 tonnes, but decreased in value, by$10 million to $159 million.
      There was a significant change in the destination for tallow exports compared to the previous year. While in 2011/12 68% of tallow exports by volume went to China, this decreased to 42% (or 64,434 tonnes) in 2012/13, while exports to Singapore increased from 14% to 44% (70,976 tonnes). MIA understands the majority of tallow exports to Singapore were for biodiesel manufacturing.”

      Most of the Stuff sent to china was used in Candle and Soap Manufacturing

  • Draco T Bastard

    This is the type of stuff where the government needs to be stepping in with a plan rather than leaving it to the market. In this case a plan to reduce and, eventually, to eliminate the use of fossil fuels.

    First step to reduce use of fossil fuels by shifting more freight onto trains.
    Second step would be to electrify all trains
    Third step would be to build up electrical generation capacity through renewable generation projects such as offshore wind and getting solar panels on as many roofs as possible.

    Although I’ve listed those as steps obviously they’d need to be done concurrently.

    From here we could determine how much actual bio-diesel we’re going to need and plan for that as well in regards to our present waste feed.

    • mfwic

      Crikey, your plan has government control, rail electrification, renewable energy (like the Clyde high dam) and synthetic fuel production, why not throw in a smelter at Aramoana and call your proposal ‘Think Big’ Step 4 declare bankrupcy.

      • Draco T Bastard

        It was government direction that built NZ, the US, the UK and pretty much every developed country. Even the IT revolution that came out of the US was backed by government direction and funding (Marianna Mazzucato, The Entrepreneurial State). The only reason why Think Big failed was because the government borrowed the money rather than simply printing it. We certainly wouldn’t be capable of what we are today if Muldoon hadn’t pushed Think Big through. the government, because it works to long time scales, can do such direction/planning and funding that short term profit driven private enterprise can’t.

        Think Big failed because it was badly financed and not because it was a bad idea.

        • Draco, that is heresy against the neo-liberal religion that ahs taken over NZ. Watch out or the neoliberal Inquisition will find you.

          You can hear the cries of the villagers in Orakei (and let’s face it, they are): “He built something without involving the private sector! Burn him, he’s a witch!”. Think Monty Python’s Holy Grail.

          Have you read “23 Things They Dont Tell You About Capitalism” (http://www.huffingtonpost.com/ian-fletcher/a-review-of-ha-joon-chang_b_840417.html)? If not, you should.

          • Draco T Bastard

            Have you read “23 Things They Dont Tell You About Capitalism”

            Yep, just finished reading it. The real interesting read is Marianna Mazzucato, The Entrepreneurial State (http://www.amazon.com/The-Entrepreneurial-State-Debunking-Economics/dp/0857282522)

            Debunking the myth of a laggard State at odds with a dynamic private sector, Mazzucato reveals in case study after case study that in fact the opposite situation is true, with the private sector only finding the courage to invest after the entrepreneurial State has made the high-risk investments.

        • mfwic

          “The only reason why Think Big failed was because the government borrowed the money rather than simply printing it.” That has made my day! Perhaps you could expand your theory and say the only reason the Weimar Republic failed was because they didn’t print enough money. Same for Argentina in 1990 or Zimbabwe in the 2000’s. Yep the government has a printing press and they need to pay for stuff so just print it. I am sure that might work. http://en.wikipedia.org/wiki/Hyperinflation

        • mfwic

          “The only reason why Think Big failed was because the government borrowed the money rather than simply printing it.” Sorry my apologies I thought you were being serious until I read that. Funniest thing I have read all day.

          • I was being serious – The government should never borrow money and we need to get rid of the myth that the private sector built up the country.

          • mfwic

            OK my mistake. So you were serious about printing money? I mean look how well that turns out each time a Government has tried it. I think it was Philippe II Duke of Orleans who first tried it (shortly after fiat money was invented) and he invented hyper-inflation. Idiots and despots have tried it many times since like the Weimar Republic in 1923, Argentina in the early 2000’s and Zimbabwe. Money is a normal good. If you double the amount of it then its price in terms of what it can be swapped for halves. ie the $ price of every good in the economy goes up. Money printing is the last resort of a Government that has run out of ideas and run out of time. http://en.wikipedia.org/wiki/Hyperinflation The only cause of hyper-inflation is the government printing money. There are really interesting stories of how it affects society, stories of teachers in 1923 being paid daily and running to the shops to spend all their salary before the next twice daily official revaluations are released. As for the Think Big stuff being a good idea it was if petrol prices had continued to climb at the rate they had. But of course they didn’t. We ended up with a rail line they almost didnt switch on, steel being produced at more than the world price, a dam that is at risk of major rock falls, a synthetic petrol plant that wasted the Maui gas resource making petrol at a cost higher than the world price and Marsden B which was abandoned before it got used. The private sector is into short termism but governments are not even that good.

  • John Polkinghorne

    Post updated… I thought I’d read that there was 800 million litres of potential biodiesel production from tallow, but now I’ve found the presentation again it turns out it was actually 150 million (whoops!). Unless someone else can point me to some data which says differently, we’ll leave it at 150.

  • Ari

    Biofuels are fine as long as it is the right solution for the right situation and is not subsidized. US Corn biodiesel = Bad. European ethanol = Bad. Brazilan ethanol = good. Brazil’s industry is very profitable without subsidies, only uses a fraction of their arable land and doesnt really contribute to the destruction of the rainforest (blame McDonalds for that). There is a net energy gain from the process, unlike in US/Europe where they almost put in more energy than they get out. Most of their(Brazil) cars run on 100% ethanol, but they still use diesel for other things. NZ can’t grow sugar but we can grow trees, or hemp or some other such biomass to get ethanol. Personally I support a bigger move to electric vehicles and short term ethanol fuel. Long term you can use it to run steam turbines for electricity generation. It just depends on what is profitable. I think the government should just keep increasing petrol taxes in order to make biodiesel a good option for the NZ, but not viable for export. We still need land for food.

  • This crowd say tallow to diesel is about 894 litres per tonne of Tallow,
    http://www.progreen.com.au/index-3.html

    So 150 million litres soudns about right given Tallow production is circa 150 K Tonne +/- 10-20%

  • Maybe if we actually had an effective price on carbon these sort of projects would be more viable? Incentive is important.

  • mfwic

    An interesting article in todays Herald saying broadband connectivity has a bigger impact on fuel sales than price. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11233957

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