World demand for energy could triple this century and the pressure on governments to find new energy sources is intense.
While biomass accounts for just one percent of Australia's electricity generation now, it may become a more valuable source of renewable energy in the future. If that happens, Australia's agribusiness sector, with its vast biomass resources derived from agricultural by-products, could benefit from a new suite of opportunities.
Several companies in Australia have already proven that converting agricultural waste to energy can be used to offset soaring fossil fuel costs. And while bioenergy projects have particular hurdles, there is potential for other agribusiness operators to find similar savings in operational costs.
HOW CAN BIOMASS BE USED IN THE AGRIBUSINESS SECTOR?
Biomass is any organic matter, including wood, agricultural residues and organic waste, that can produce bioenergy – a carbon neutral and renewable energy form. Biomass can be converted into a variety of bioenergies including electricity, heat and fuel.
Australian agribusiness offers a rich source of biomass production. Biomass materials include agricultural by-products such as stalks, husks, nut shells, logging and mill residues, marc (the residue of grapes that have been pressed for winemaking) and bagasse (the residue of sugar cane left after the extraction of juice). 1 This can ascribe a value to materials which may otherwise go to waste.
If the biomass 2 is used to produce electricity, a farmer may be eligible to participate in the Renewable Energy Target scheme. Under the scheme, a farmer creates a Large-scale Generation Certificate (LGC) for each MWh produced at the power station. These LGCs can then be sold to entities which have an obligation to surrender them under the Renewable Energy Target scheme.
A farmer may also obtain funding under trade programs such as the Clean Technology Food and Foundries Investment Program. 3 Grants range from $25,000 to $10 million and are offered on a co-investment basis. Another program is the Emerging Renewables Program 4 which has provided financial support to conduct studies into biomass feasibility. 5 Other funding and grants may also be available from State governments. 6
There are several Australian examples where individual companies have successfully implemented a biomass solution to increasing energy costs.
- Australian Tartaric Products (ATP) is constructing a 0.6MWe biomass boiler. It will use 90,000 tonnes of grape marc and other onsite waste streams as the feedstock. ATP decided to install the biomass boiler due to large and increasing power bills and increased competition from China. It is estimated ATP's annual energy costs will drop by $1.52m. ATP also received funding from Regional Development Victoria ($1.8m), Clean Technology Food and Foundries Investment Program ($1.71m) and Australian Industry Group ($40,000). 7
- Morton Seed and Grain (MSG) is constructing two biomass boilers. The boilers will use oat husks to generate both steam and electricity to run oatmill operations. The project is estimated to save MSG $900,000 per year in energy costs. MSG received funding from Clean Technology Food and Foundries Investment Program ($917,500). 8
- Sucrogen currently has seven cogeneration plants which have a total capacity of 198MW . The largest two plants are located in the Burdekin region and provide 68MW and 49MW of electricity. The plants use bagasse as feedstock. Excess electricity of around 123MW is exported back to the grid, which can meet the annual power needs of almost 30,000 homes. 9
- Reid Bros Sawmill (RBS) constructed a 1MWt bioenergy plant at their sawmill. The plant burns 70-80 tonnes of wood milling waste each week. This has saved RBS $300,000 per year compared to the LPG they previously used. They have also now installed an organic rankin cycle system to convert waste heat into electricity. 10
If bioenergy production is not viable for an individual farm, plantation or vineyard, it may be that an agricultural cooperative could invest in the technology for the benefit of members' surrounding landholdings. Those members of the cooperative could receive the additional benefit of being able to sell their biomass to the power plant as feedstock.
WHAT'S HAMPERING BIOENERGY EXPANSION?
Bioenergy in Australia is facing several challenges that are additional to the usual issues associated with greenfield power projects.
- High capital and maintenance costs. A basic bioenergy plant which produces 8MWt and 0.6MWe can cost $7.5m. There are also material costs involved in operating and maintaining a bioenergy plant. If a bioenergy plant is going to be co-located on a farm, plantation or vineyard, it is unlikely to have a huge installed capacity yet there will need to be substantial savings on energy costs and waste disposal costs in order to offset the capital and maintenance costs.
- Production of feedstock may be seasonal. Biomass from agricultural by-products will logically be collected during the harvesting period, and is impacted by issues of agricultural yield. Therefore, biomass from agricultural by-products will not be a year-round source of feedstock. This may require farms, plantations or vineyards to have dual sources of energy in place; one from biomass production and the other through more traditional means. The seasonality of feedstock production could be mitigated by storing excess feedstock for use throughout non-harvesting periods. 11
- Transportation costs. Biomass is typically dispersed over various locations and there is a need to transport the biomass to the power station efficiently. This can be expensive – especially for larger power plants. However, high transportation costs can be mitigated by optimising the logistics surrounding crop harvest and also waste management practices.
Further, to date, it hasn't been possible to produce utility scale electricity from biomass. The required spot price for a 500kWe biomass plant to be commercially viable is around $310/MWh. 12 This is compared to the wholesale electrical cost which, for the purposes of discussion, is around $60/MWh. Expanding a biomass plant to utility scale (20MWe) would only bring down the required spot price to about $160/MWh. 13
However, there are examples in Queensland where large cogeneration plants running on residue biomass produce enough electricity to power 30,000 homes for a year.14
What is clear is that biomass can be used to generate energy in the right circumstances:
- where the regulatory environment is stable and supportive of the technology;
- where feedstock is cheaply and readily available;
- where transmission distances are relatively low; and
- where the cost of alternative sources of power are high.
While there is a great deal of negativity around Australia's green energy sector, and the difficulties facing Australia's agricultural sector (in terms of raising finance, international competitiveness and productivity), bioenergy offers new opportunities that could produce positive outcomes for energy security without compromising on food security.
1 Biomass materials can also be intentionally grown to produce energy (so called 'energy crops', such as sorghum) but energy crops are not the focus of this article.
2 Eligible biomass under section 17 of the Renewable Energy (Electricity) Act 2000 (Cth) includes energy crops, wood waste, agricultural waste, waste from processing agricultural products, bagasse and black liquor.
3 This program is overseen by Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education http://www.ausindustry.gov.au/programs/CleanTechnology/CTFFIP
4 This program is overseen by the Australian Renewable Energy Agency (ARENA) http://www.arena.gov.au/programs/initiatives/erp/erp.html
5 For instance, the Almond Board of Australia recently received $32,000 worth of Federal Government funding from the Australian Renewable Energy Agency to conduct a $60,000 study into ways to reduce the almond industry's energy use by using almond waste products as fuel to generate energy.
6 For example, Regional Development Victoria has a Regional Growth Fund which may fund major regional projects including energy projects.
11 Sucrogen stockpiles surplus bagasse from four of its Burdekin mills during crushing season so the cogeneration facilities can operate outside of crushing season.
12 Bioenergy in Australia Report 2012 (pg 263). This is based on fresh wood feed, and an IRR of 15% after tax.
13 Bioenergy in Australia Report 2012 (pg 263)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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