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Mixed views on biodiesel grants scheme

A biodiesel lobby group has responded warmly to news of relaxed criteria for the government's biodiesel grants scheme - but one major producer is less than impressed.Energy and Resources Minister Gerry Brownlee announced yesterday that the scheme will be

Nina Fowler
Tue, 06 Jul 2010

A biodiesel lobby group has responded warmly to news of relaxed criteria for the government’s biodiesel grants scheme - but one major producer is less than impressed.

Energy and Resources Minister Gerry Brownlee announced yesterday that the scheme will be extended to include sales of biodiesel blends higher than 20%.

Speaking to NBR last month, Andre Hamman, head of the Bioenergy Association of NZ (BANZ) biodiesels group, said the scheme’s restrictive criteria was partially to blame for its low uptake – with just over $200,000 claimed from last year’s possible funding pool of $12m.

He welcomed Mr Brownlee’s announcement.

“We’re very excited about this development ... I’ve received several phone calls already from our customers who have read today’s announcement and now want to increase their biodiesel blend for the next delivery.”

The scheme, which grants up to 42.5c a litre to biodiesel producers, previously applied only to biodiesel sold as a 20% blend with regular diesel.

According to Mr Hamman, most biodiesel producers either already produce higher-than-B20 blends or are able to increase the blend they provide to existing customers, enabling an instant increase in sales.

He was hopeful that the new criteria could boost uptake under the grants scheme to 4-5 million litres per year - up from current levels of between 700,000 – 840,000 litres a year, but still well short of the scheme’s overall funding capacity.

Not far enough

Not all biodiesel producers are thrilled at the change to the scheme.

Lindsay Fergusson, chairman of major domestic biodiesel producer Ecodiesel, told NBR that the change to the grant criteria would have little impact on the wider success of the industry.

“You’re talking about fringe producers producing very small volumes using cooking oil ... it will put a few dollars in a few small operators’ pockets but these people are not the future of the biodiesel industry in New Zealand. They don’t have scale.”

Ecodiesel aims to construct a multi-million dollar plant at Onehunga with the capacity to produce 20-40 million litres of biodiesel a year from tallow, a by-product of the meat-processing industry.

A $4.5 million capital-raising bid through a convertible notes issue failed in January this year, and the company is now seeking private investment to fund the remainder of the project.

Mr Fergusson said the process was moving slowly.

“We’ve got a number of [private investors] that we’ve engaged with, and trying to work through how we put a complete package together with several investors, but it takes time.”

The lifting of the 20% blend criterion would have little to no impact on the viability of the Onehunga plant, Mr Fergusson said.

BANZ biodiesel group head Andre Hamman agreed on the importance of moving towards large-scale commercial biodiesel production.
 
He repeated comments made to NBR last month that the current three-year grant scheme provides little long-term certainty to help get larger projects like the Onehunga plant off the ground.

That said, he felt that the industry needs to concentrate on responding to current government stimulus and proving its viability.

“You don’t want to see this as a hand-out,” Mr Hamman said.

Nina Fowler
Tue, 06 Jul 2010
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Mixed views on biodiesel grants scheme
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