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Biofuels: Ethanol (ethyl alcohol) and biodiesel

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Biofuels, once seen as a useful way of combating climate change, could actually increase greenhouse gas emissions, say two major new studies. See New Scientist.



The current batch of technologies being used in Australia can be described as “transition” technologies that are viable only by public subsidies that in the end, are subsidies for the rural sector. The practice of cloaked subsidies also occurs in the US where ethanol is consuming about 20 per cent of their corn crop in an environment where biofuels is growing at 30 per cent year and projected to increase. In this context, the EU has set a target for 5.75 per cent of its fuel being derived from biosources by 2010.  Currently 85 per cent of diesel is made from canola.

Basically using food for energy with often as much, if not more, energy being employed (taking into account all resources used) than actually produced. While the ethanol has an energy density of 65 per cent of petrol (gasoline).

New technologies are however being developed overseas that don’t use foodstuffs but non-crop biomass, ie. waste, converted into fuel and even butanol from ethanol (avoiding the problems of an inherently difficult liquid that absorbs moisture from the air).

 New biofuels technologies.

bulletBiodiesel production by reacting wasted CO2  from biomass production with hydrogen, creating more diesel fuel. The hydrogen for this part of the reaction could be gleaned from water molecules using energy from non-fossil energy sources such as solar or nuclear power. The gains in efficiency are so great that the same volume of biomass, previously predicted to satisfy only 30 per cent of yearly U.S. transport needs (1.239 billion tonnes), might now be enough to satisfy the entire industry. That amount of biofuel could be produced on an area covering 10 per cent of the U.S. landmass, they said. See

Biomass conversion by bacteria and enzymes to bioethanol. The biomass is of cellulosic material, including stalks, leaves and corn kernels by companies such as Novozymes and Dupont who claim to be able to produce about 25 per cent more ethanol and in production plants that will supply some 85 per cent of their fuel requirement.
bulletAn alternative energy company called SunEthanol based in Massachusetts, US,  claims to have found a naturally occurring organism called "Microbe Q" that could convert waste biomass such as corn stalks, sawdust and grass cuttings into ethanol. They say this naturally occurring anaerobic microbe can produce ethanol in a composting tank, in which biomass is fermented in the presence of the microbe. The process works without the need for enzymes of any kind, making it potentially cheaper than other approaches.


Dupont and BP are working to produce butanol from ethanol avoids the infrastructure issues of hygroscopic (water-absorbing) ethanol.


Biomass conversion is being explored by Shell (with German company, Choren) to use a Fisher-Tropsch technology (ie as originally developed to use coal) to use woodchips as a feedstock to produce hydrocarbons.


 Woodchips are also being employed by US Mascoma to produce ethanol using bacteria with a current demonstration plant.  The bacteria are genetically engineered to break down the lignin and wood into cellulose and then its engineered enzymes convert the resultant cellulose into sugars (that can be fermented to ethanol).


 Algae is the exciting new resource for biofuels and GreenFuel Technologies in the US are using CO2 emissions from gas-fueled power stations to feed algae that can be converted to diesel and ethanol while the University of Berkley are conducting experiments to generate hydrogen as a by-product of photosynthesis. See for example

The cost of biofuels are less tangible, remote and paid by others making it attractive for governments to support the rural sector and so most of the biofuels may be regarded as low energy dense fossil fuels.

They require a lot of resources from fuel, fertilisers and land and between 1500 and 4500 litres of water are required to produce just one litre of ethanol derived from sugar cane, wheat or corn.

The International Energy Agency estimates 43 per cent of all US crop land would be needed to supply just 10 per cent of its automotive and diesel requirements by 2020. So about 20 per cent of the 2006 US corn crop was diverted to make ethanol, sending corn prices skyrocketing and pushing up related food prices.

As the biofuels industry expands it pushes up the price of raw materials. Being effectively a fossil fuel means it is no more competitive against fossil fuels with oil prices at about $US100 a barrel than at half the price. Not surprisingly therefore, four biodiesel plants in Australia have suspended production in the past year and ethanol producer AgriEnergy has decided not to proceed with a new plant in Victoria.

Given biofuels are posed as a solution to climate change, the extra demand they place on water and arable land is also counter-intuitive, because these resources will only become more scarce in a warming climate. There are already reports of accelerated land clearing in the high energy yielding rainforests of Brazil and Indonesia to feed this growing demand for fuel crops such as sugar and palm oil.

Biofuels policy in the US and Australia is still playing into domestic farm politics. Australia risks missing out on exploiting the improved potential of second-generation technology that is under development which promises to diminish many problems by using non-food biomass such as wood wastes, pulps and grain stalks.

Ethanol has long been touted in the US as an environmentally friendly alternative to petroleum. In practice, however, it has proved to be anything but. The reason is that in the US ethanol for fuel is currently produced from corn - a crop that requires intensive farming, chemical fertilisers and plenty of water. Critics argue that growing corn for ethanol simply trades one environmental crisis for another while driving up the price of an international staple.

Ethanol in Australia

By waiving the excise of A$0.38 per litre, on current production capacity, the industry receives assistance of A$65 million per year with declared aims to increase production to 350 million litres per year by 2011 representing a subsidy of A$133 million per year!  The sugar industry has been in receipt of extensive subsidies to promote an economically inefficient industry that has been identified as contributing to the destruction and growth on the corals of the Great Barrier Reef.

The use of alcohol in an energy rich country like Australia is a politically expedient initiative representing a concentrated benefit (the marginal seats represented by the cane growers) and a distributed cost to the Australian public. It is worth noting that Australia exports around 10 million tonnes pa of natural gas (LNG). Australia is well placed to produce GTL which can be valuable source of sulphur free diesel and represent a valuable export opportunity. GTL is not supported as the employment potential is low, with the benefits distributed, ie. politically invisible. Ethanol's "claim to fame" as an environmentally friendly and sustainable fuel is dubious. Investigations by CSIRO, Environment Australia and other respected institutions concluded that, when the production/consumption life cycle is considered, E10 does not yield discernible overall environmental benefits.

An ecologist at Cornel University ( ) concluded.....

In terms of energy output compared with energy input for ethanol production, the study found that:

bulletcorn requires 29 percent more fossil energy than the fuel produced;
bulletswitch grass requires 45 percent more fossil energy than the fuel produced; and
bulletwood biomass requires 57 percent more fossil energy than the fuel produced.

In terms of energy output compared with the energy input for biodiesel production, the study found that:

bulletsoybean plants requires 27 percent more fossil energy than the fuel produced, and
bulletsunflower plants requires 118 percent more fossil energy than the fuel produced.

Ethanol is produced in Australia by the fermentation of molasses and wheat by-products. The production capacity is 170 million litres.


A CSR Sarina mill in Qld produces has a production capacity of 60 million litres per annum from molasses


Manildra at Nowra New South Wales capable of producing 90 million out of a capacity of 100 million litres pa.

Since the 1990s, Manildra has been using wheat flour from its plant at Gunnedah to produce a range of wheat by-products with the balance of starch production fermented into ethanol.

Some  90 per cent of ethanol is used as an additive for gasoline (petrol). (Australia's market is 19 billion litres pa.)

In November 2005 it was announced that a A$54 million ethanol plant is to be built in southeast Queensland at Dalby.

And June 2006 it was announced that Primary Energy will invest A$100 million produce 80 million litres pa of ethanol from some 200 000 tonnes of wheat at Kwinana WA.

The companies are the Queensland Fuel Group and Petro Fuels and Lubricants to begin construction in mid-2006 to be the state's first dry mill ethanol plant, initially producing 40 million litres of ethanol annually from mid-2007. It is expected to eventually produce a minimum of 80 million litres a year.

The plant will use sorghum and wheat  as the primary feed stocks.


Australian Biofuels has two joint proposed ventures to produce ethanol


Mossman Queensland based on sugar to produce 40 megalitres


Coeambally near Griffiths in NSW based on rice aiming to produce 80 megalitres.

In December 2002, Multiplex Constructions Pty Ltd agreed to sell its ethanol fuel company Australian Biofuels Pty Ltd to Perth minerals explorer, Indcor Ltd, for $3.5 million in cash and scrip. The deal includes 50 per cent of two ethanol development projects together with technical agreements, supply contracts with sugar cane and grain producers and a bankable feasibility study making it the only listed dedicated ethanol play on the Australian stock market.

Australian Biofuels owned by Indcor (that begain as a potential magnesium producer in Tasmania, owns one half of the Mossman Central Mill's sugar cane ethanol project in north Queensland and is working jointly on a grain ethanol project in Coleambally near Griffith, NSW (and Kwinana WA).  The company will be based in Brisbane and has plans to partner with another four sugar cane mills and grain grower co-operatives in West Australia, Victoria and New South Wales.  Multiplex Constructions would contribute a minimum of $1.5 million to Indcor to support the capital raising for the development of the ethanol production plants.

September 2003, Indcor announced it has plans for a A$22 million first stage ethanol plant at Swan Hill to produce 45 million litres of ethanol using corn, wheat and barley grown in the local area.  The project is contingent on of Federal government incentives.  Indcor also expects to earn carbon credits through hardwood plantations around Swan Hill.

Global Ethanol is a newly formed company that has no previous experience working with ethanol. In March 2006, Midwest Grain Processors, Lakota, Iowa, has signed an agreement with Global Ethanol, Brisbane, Australia, to sell it a 60 percent share of its firm for US$100 million. Mr. Ehlert said the US $80 million plant, expected to be completed Dec. 1, will employ 37.

Midwest Grain has operated a ethanol plant in Lakota for three years. It produces 100 million gallons annually. The Riga plant will produce 57 million gallons a year.


In July 2003, the federal government allocated A$47m including $10m subsidy (for excisable ethanol and hence an allowance of an advance subsidy to be paid before the payment of excise on fuel sales) to the Manildra group with the balance of $37m aimed at new entrants like the Australian Biofuels group. 

bulletAustralia’s sugar industry is located marginal voting electorates and by world standards while technically efficient, by reasons of the size of production (family owned farms typically just 80 hectares), economically inefficient.  The industry has been subject to on-going subsidies and assistance packages. The federal government is promoting ethanol as an additive for gasoline to reduce oil consumption and reduce pollution. The economic cost to the Australian community is substantial and in our opinion vastly greater than the emotive benefits of a renewable energy. The sugar industry is economically inefficient and by its use of fertilisers, contributes to Great Barrier Reef damage a source of tourist income of multiple value to the sugar industry.
bulletThe federal subsidies will be spread among nine projects currently planned, three of which are slated for Gunnedah, Quirindi and Parkes - all National Party electorates. The fourth NSW plant is intended for Maitland, held by Labor.The subsidies were approved despite what business and government sources said has been ferocious opposition within cabinet and several key departments.
bullet Summary of criticisms It takes more energy to produce ethanol than the energy content.
bulletEthanol is 20 per cent less efficient than gasoline. Containing 15 per cent ethanol, ethanol reduced fuel efficiency by 7 per cent.)
bulletLegislation in Australia limits ethanol use to 10 per cent of gasoline. It is called E10 with two majors, Caltex and BP with intentions from Shell.
bulletThe Australian car manufacturing industry is in receipt of government assistance by tariffs. After meetings with government, it has dropped its opposition to ethanol.
bullet Read this review.



Not surprisingly, in November 5 2007, Australian Renewable Fuels chairman Max Ger yesterday scathingly attacked Canberra's "pathetic" attitude towards the local biofuels sector after announcing the closure of its Perth and Adelaide operations at the cost of 33 jobs. We say, biofuels do NOT have competitive advantage in Australia and their support under current technologies, represents a cost to the taxpayer. See eg. Australian Business

 Biodiesel is produced by reacting methanol with natural fats notably tallow or vegetable oils such as canola or imported palm oil by a process of transesterification. This involves replacing the trialcohol glycerol component of the oil/fat with methanol leaving a more mobile ester which has characteristics of petroleum diesel. The high price of petroleum combined with exemptions from federal excise has promoted a new industry with the first plants coming into operation during 2005 through 2006/07.

 With some variation depending on the choice of oil or fats, including tallow, the production of biodiesel requires one litre of methanol per ten litres (ie about 8 per cent of mass of biodiesel produced.)

 By end of 2006-07, biodiesel production in Australia is anticipated to be 523 million litres per year, requiring therefore requires some 41,000 tonnes of methanol per year. Refer for example,


Biodiesel deduced methanol requirements




Biodiesel Industries Australia,

Rutherford NSW

1 200

1 200

Australian Biodiesel

Group Berkley Vale NSW

3 000

3 500

Biodiesel Producers Australia

Albury Wadonga


4 700

Australian Renewable Fuels

Adelaide SA

3 500

3 500

Riverina Biofuels

Deniliquin SA


3 500

Australian Renewable Fuels

Picton WA


3 500

AJ Bush



4 700

Australian Biodiesel Group

Narangba SE Queensland


3 000

Natural Fuels

Darwin NT

13 000



SE Queensland


1 000

Natural Fuels

Botany NSW


13 000

Total methanol per year


21 000

42 000

Biodiesel manufacture represents a market by end 2007 of some 40 000 tonnes per year for methanol.

Industry specialists consider that by 2011, the demand for methanol could increase to 75 000 tonnes per year (Eg Phillip Hardey, Australian Biodiesel Group).


Biodiesel production is enabled by a federal production grant, (Cleaner Fuels Grants Scheme) which effectively nullifies the excise payable on fuel which will apply until 2011 after which it will be progressively phased out to 2015. At present, the grant is $0.38 per litre of fuel (say a 39 per cent level of assistance at the retail value of diesel).

See also

While the production of ethanol requires six units of energy to produce just one (see also for example), biodiesel is considerably better than ethanol, (and probably the best of the biofuels) but with an energy returned on energy invested (EROEI) of three, it still doesn't compare to oil, which has had an EROEI of about 30. See for example.

In our opinion, Biodiesel production in Australia has no net economic value added. The subsidies and waivers from excise represents a form of assistance to the rural sector. Some like Natural Fuels use imported palm oil and so with the methanol at international prices there is little to justify the plethora of small plants being commissioned around Australia.

One hectare of canola crops produces typically just 400 litres of biodiesel. (The litres of diesel required to clear, manage, harvest etc) and produce the equipment, transport and refine and distribute are not bought to account and so the low figure of 400 is gross).

"By promoting biodiesel as a substitute, we have missed the fact that it is worse than the fossil-fuel burning it replaces" (The Guardian).

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