17 November 2022

The Government has published the terms of reference for its landmark New Zealand Energy Strategy, setting out the ambitions and next steps for transitioning the energy system to a high performing, low emissions future.

It’s clear that the strategy will evolve in two key overlapping phases: the first aims to build an understanding of New Zealand’s energy potential and opportunities, with the second phase charting the path for an energy system that moves away from fossil fuels and towards renewable energy.

It’s pleasing to see the Government express this commitment to creating a more sustainable energy system. In 2020, emissions from energy made up 40% of New Zealand’s total gross emissions – greener technologies are needed more than ever. By setting a target that half of our country’s total energy consumption should come from renewable sources by 2035, the Government’s clock is ticking on actions needed to support businesses and the energy sector achieve this goal.

Fortunately, a lot of groundwork has already been done to inform the Government about solutions that will help New Zealand build a renewable low-carbon transport fuels industry. A 2018 report by Crown Research Institute Scion outlined how the country could grow and process feedstock crops into liquid biofuels particularly aimed at the heavy transport, shipping and aviation industries. The study’s aim was to provide robust data, insights and a roadmap for New Zealand to significantly reduce greenhouse gas emissions and improve our energy security.

Since the New Zealand Biofuels Roadmap was prepared, reasons for why we should be accelerating the deployment of biofuels have mounted.

Firstly, a climate crisis has been declared as evidenced by increasingly more devastating weather patterns. It has been shown that catastrophic global weather, including extreme flooding in New Zealand, are likely caused by increased levels of greenhouse gases, including carbon dioxide, from industrial and agricultural activity.

Secondly, with war raging in Europe, energy supplies are under threat and we are seeing escalating fuel prices around the world. Whilst global oil supplies aren’t going to run dry in the near term our fuel, whether it's petrol, diesel, aviation fuel or marine fuel, will remain expensive for some time to come.  New Zealand is exposed to vagaries of global geopolitics.

Thirdly, New Zealand is an export-focussed economy with between 25%-30% of our GDP being derived from export products over the last 10 years, reaching $63.3 billion in 2021. To satisfy the needs of customers in offshore markets, exporters are concerned about the embedded carbon of their products, and their social licence to operate. Most embedded carbon comes from the combustion of fuels in transportation.

Finally, the annual pre-Covid cost of crude and crude products imported into New Zealand was more than $12 billion. With the closure of Marsden Point Oil Refinery, all our fuel products are imported and the number of New Zealand dollars we send overseas will be higher. Having the ability to produce some of our liquid fuels offsets some of this balance of trade, whilst stimulating regional development, employment growth and wellbeing.

What’s happening around the world?

New Zealand is behind the curve on biofuels development and deployment. Many countries have an aggressive set of policies to encourage increased use of biofuels, in particular transport sectors. For example, in the aviation sector, USA will have the capability to produce 11 billion litres of sustainable aviation fuel (SAF) by 2030. Sweden has a target of 27% SAF by 2030, ambitiously scaling up to 100% SAF by 2045. By comparison, New Zealand has recently imported 1.2 million litres of sustainable aviation fuel – less than 0.1% of our current annual demand.

Myths vs Facts

Worryingly, just as we are seeing the Government signal its intention to explore more renewable energy options, misleading commentary about biofuels is muddying the messaging. There’s a need to address certain claims and sort out fact from fiction:

Myth – Biofuels are not sustainable

Paving the way for a sustainable biofuels industry is activity that has seen the appointment of the Climate Change Commission, the development of the Emissions Reduction Plan, and associated planned legislation, such as the Sustainable Biofuels Obligation. All this ensures there will be a controlled assessment of each type of biofuel. Advanced biofuels like those produced from wood by gasification or pyrolysis will be better than corn-based ethanol for their ability to reduce more CO2 emissions. There will also be a set of sustainability criteria that every litre of biofuel will have to meet. Applied to imported and domestically produced biofuels alike, it ensures that biofuels used here don’t adversely affect the environment they are grown in or negatively impact food production or communities.

Myth – There are insufficient feedstocks for biofuels

In New Zealand, most of our flat land is being used for food production. Feedstocks for so-called first- generation biofuels, such as ethanol from starch and biodiesel from oil seeds, would not be sustainable here. Therefore, we need to look at more advanced processing of residues and woody biomass.  We do have enough woody residues or low-value exported wood to kick start a biofuels industry whilst, at the same time, removing coal from the process heat sector and delivering feedstock for the bioeconomy.  At the last count, we have 11 million green tonnes of biomass, including forest harvesting residues and low-grade logs. One million tonnes could produce about 100 million litres of fuel, depending on the technology.

Myth – Technology is not ready yet

Biofuels are being produced from wood commercially in Sweden and the US. This is a recent development, but as technology evolves, we will likely see costs reduce over time. For example, over the first 20 years of its development, Brazil saw a 70% reduction in the cost of bioethanol production for vehicle use. This was achieved through a reduction in both the feedstock production and the technologies to convert that feedstock into useful biofuels.

Myth – Biofuel will negatively affect my engine

Fuel quality, whether it’s for your car, boat or used in aviation, is tightly controlled by internationally agreed standards that protect the short term and long-term performance of the vehicle or vessel.  These specifications have been developed over years of testing to ensure that biofuels and biofuel blends will not reduce performance or damage engines.

We can’t let biofuel misinformation derail the opportunity we have to invest in research and take the next steps to transition New Zealand to a low-carbon transport fuel future.

The Government’s clock on climate change action is ticking louder by the day. We must embrace every opportunity through research and investment to create a renewable biofuels industry. Our future communities, economy and our environment depend on it.

For more information, please contact Scion’s Portfolio Leader for Integrated Bioenergy, Paul Bennett.