Z Energy’s $26 million bio-diesel plant in Wiri, South Auckland began processing tallow based bio-diesel before Christmas, with the first commercial product due to be at the commercial pump by February.
The plant’s commissioning marked a milestone in the country’s chequered history of domestic bio-fuels production.
The industry experienced a start-stop phase from the middle of last decade when the then Labour government aimed to encourage domestic bio-fuels production with the requirement to include bio-fuel in fuel blends and by offering an excise exemption on bio-fuels.
Both were, however, removed when National came to power in 2008, causing a number ventures to close.
The highest profile of those was Solid Energy’s rape seed to bio-diesel project using crops grown in the South Island.
Z Energy spokesman Jonathan Hill acknowledged the bio-fuels industry had a rough start and said Z made no secret the fuel from this plant was more expensive to process than conventional mineral-sourced diesel.
“In a US$50-$60 a barrel oil market it is economically too challenging to be able to make money processing bio-diesel.
“However, this is based on an undertaking by Z Energy to make use of a domestically sourced feedstock to produce a fuel that will go a significant way to helping reduce NZ’s carbon emissions.
“With transport forming 20% of the country’s emissions, steps have to be taken to reduce that.
“By the time the plant is fully operational we will be taking carbon out of the atmosphere that is about half what the electric vehicle programme proposed would do and that is not until 2021 – this will do that in year one.”
Initial production aims were for the plant to process tallow into 20 million litres of diesel to be incorporated as a 5% mix with conventional diesel.
“But we have the capacity to increase processing to 40m litres a year.”
Fonterra was one of five cornerstone clients for the BioD product, with its Edgecumbe fleet being the first to receive the fuel this month.
Hill said Z’s move into bio-diesel was environmentally motivated, with strong interest coming from commercial operators keen to gain greater environmental credit on the problematic area of carbon fuel consumption.
“This represents the first time they have really had a choice over the issue.”
Past bio-diesel operators came and went from the NZ scene, including a proposed bio-diesel tallow plant to be built at Mount Maunganui by United Kingdom company Argent Energy.
Gull Energy chief executive David Bodger acknowledged the difficulty of making money from bio-diesel in today’s market, even from locally sourced tallow feed stock.
His company has been marketing bio-fuels in NZ for the past seven years, with bio-diesel sourced from Queensland, Australia.
“The economics are dead against it.
“From an environmental angle we have found it a simple story to tell with ethanol in petrol.
“Essentially tallow has a value that is greater than diesel. You have to be green to want to pay more for it.”
Hill acknowledged the cost variance and said a 2c a litre premium on the fuel only went some way to recoup the additional cost of processing.
Industry estimates were that based on global tallow prices and distillation costs bio-diesel would have to be sold at the pump for about $1.50 a litre including GST to recover that cost.
Diesel prices in the upper North Island where the bio-diesel was initially to be sold were about $1.10 a litre.
NZ’s tallow production from animal processing was about 160,000 tonnes a year, of which Z would be claiming 12-13%. The product had multiple uses, often being shipped to China or India for candle and soap production.
“So, if we decide to ramp up production, the source is there. Tallow suppliers like having a processor like us there with a regular demand to save them having to store and ship it.”
The company’s processing plant had been fitted with a distillery attachment that ensured particularly high quality diesel, which had been given the tick by all major engine companies, Hill said.
For farmers and contractors wanting to access a “green” fuel Z Energy was happy to discuss supply options.
“And there is a nice circularity there for the agricultural sector, being the source of the feedstock and having Fonterra as one of our major customers also being the first to use it.”
