Australia’s Biofuel Dreams Are Fading Before They Even Get Going

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(Bloomberg) — Dozens of fuel storage tanks and distillation units towering over an Australian beach risk becoming a rusting metaphor for the progress of the country’s energy transition. 

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BP Plc had envisioned turning the old Kwinana refinery near Perth — which shut in 2021 after almost seven decades of operation — into a biofuels hub that showed its commitment to cleaner energy. But it called off the plan in February, in a blow to Australia’s plan to cut emissions from sectors like transport and mining. 

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Kwinana is the country’s sixth biofuel plant to be put on ice or canceled over the last decade.

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Green fuel is made mainly from vegetable oil, grains, sugar and waste, and unlike most other major agricultural producers, such as the US and Brazil, Australia produces very little of it. Instead, it exports about A$6 billion ($3.9 billion) a year of feedstocks including tallow and canola to be processed overseas.

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“Australia has the chance to act decisively and capture this opportunity, making use of our comparative advantages such as our varied and significant feedstock sources,” said Alex Grant, a director at the Australian Renewable Energy Agency. “If we don’t take steps to invest in domestic capability, we could lose that opportunity.”

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BP declined to comment on whether the Kwinana plan would be resumed, but said it would continue to develop projects that show significant capital efficiencies. The oil major has trimmed investment in low-carbon energy as part of a strategic reset amid investor pressure — scaling back biofuel plants in Germany and the US and pausing an expansion in Spain. 

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The failure of the biofuels industry to get off the ground in Australia comes as global investment starts to recover following a slump last decade. Global oil majors are expected to increase capacity to produce the green fuels by 41% over the rest of this decade, according to Wood Mackenzie. While biofuels reduce the need to burn fossil fuels, they also come with environmental costs including deforestation, loss of biodiversity and water scarcity. 

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A lack of political clarity is holding the Australian biofuels sector back, according to several speakers at the Renewable Fuels Week in Sydney last month. Biodiesel and ethanol output is unlikely to rise without effective government policy, Bioenergy Australia said in a report released at the conference. 

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“The window is getting very close to being closed and locked,” Stephen Forshaw, Airbus SE’s chief representative for Australia, New Zealand and the Pacific, said at the gathering in Sydney. The aircraft manufacturer and Qantas Airways Ltd. pledged in 2022 to invest as much as $200 million to boost Australia’s sustainable aviation fuel industry. A spokesperson for Qantas said government support was critical for the industry to grow in Australia.