Executive Summary
What the report is about
This report outlines the opportunities and the place within the market for an Australian biodiesel industry. The report proposes a Regional Sustainable Model where biodiesel feedstock is grown locally and converted cooperatively to biodiesel in a Local Community Enterprise Hub and used on farm to fuel the farm.

This report demonstrates that a sustainable biodiesel industry based on good economics can be developed as presented by a Regional Sustainable Model. The model requires start up capital grants that are currently available through Government assistance packages.

 Who is the report targeted at?

This report is a discussion paper initially targeted at workshop participants in the “Biodiesel for Agriculture Workshop”. However, it contains useful material for all those interested in biodiesel production by farmers for farmers.

Background
Australia has abundant coal reserves but very little liquid fuel reserves. The tyranny of large distances in Australia presents additional issues that are different from other parts of the world. This means that the emerging Australian biofuels industry may not be able to emulate the fledging biofuels industries in other parts of the world.

Experience shows that strong, long government support has been integral in enabling infant biofuel industries to become established elsewhere. Additionally the availability of cheap and plentiful feedstock is a significant factor impacting on the competitiveness of the biofuels industry. Low price feedstocks and off take agreements that more than cover the costs of production will be essential elements of an Australian biofuel industry that is viable in the long term.

Methods used
This study provides an analysis of the Australian biodiesel industry, including its relative strengths and weaknesses, and offers a summary of conclusions and, most importantly, an ACTION PLAN to activate the biodiesel industry within rural Australia. The study provides a snapshot of the current biodiesel producers, explaining how they could fit into the action plan, as well as a set of grower groups currently showing an interesting biodiesel and feedstock production. This is combined with a consideration of involvement from the relevant government and research agencies.

Business models were canvassed, developed and applied to a system using primarily brassica mustard as a mainstream feedstock for biodiesel production. Recommendations for investigation of several other feedstock options were also suggested.

The business models are work-in-progress for a number of reasons. Firstly, substantial research is required to develop specialised seed cultivars for different climates and soil types. Secondly, research is required at the processing stage, particularly in relation to valuable by-products such as glycerol, biopesticides, fungicides and cattle feed. Thirdly, sound and equitable financing arrangements need to be formulated and negotiated.

Results
The Regional Sustainable Model presents an approach involving local ownership of renewable energy.

This underlying concept involves farmers growing an industrial oil crop (mustard) as part of a regional grower group. The crop is then converted to biodiesel at a central location and then used to fuel the farm. In addition to on-farm benfits, there will be substantial benefits filtering throughout the region as economic returns are kept locally. This in turn develops ownership, loyalty and valuing of the biodiesel industry.

The model has been formulated by a consortium comprising:
 

• Australian Agricultural Crop Technologies Pty. Ltd. - a company based in Wee Waa, New South Wales, with an interest in developing cultivars to deliver sustainability within rotational systems.
• University of Sydney (US Plant Breeding Institute)
• Randall Jitts Consultant for Australian Biodiesel Group Pty. Ltd. - Australia’s largest biodiesel producer, with Sydney headquarters and plants at Narangba (Queensland) and Berkley Vale (New South Wales).

The program proposes to use state-of-art plant breeding to rapidly improve the grain yield and oil content of Indian mustard (Brassica juncea) for biodiesel production. Early research and development work has shown that Brassica juncea has the capacity to add value within a rotation system and give an economic production return per hectare. The development model will enhance yield and content traits through cultivar development, will provide pesticide and feed meal by-products. In addition to this, significant rotational advantages of growing mustard within existing cropping systems will be gained.

The program also has scope over time to investigate and adopt other annual and perennial crops within the model’s research and development program.

Recommendations
It is proposed that a network of Regional Grower Groups be coordinated by a Regional Sustainable Model Management Company. These groups would share the technology, produce the feedstock, and invest in the manufacture of biodiesel and downstream products within their local region. These Groups are seen as important future partners of the consortium.

The key elements of this proposal are:

• Biodiesel is an efficient, biodegradable and renewable fuel, with potentially outstanding benefits for regional Australia.
• Australian agriculture has a responsibility to reduce its greenhouse emissions. Agriculture contributes 16 % of total emissions. Biodiesel use and utilisation of by-products for fertiliser will make significant contributions to reduce this level.
• Worldwide the supply of feedstock is the single biggest constraint to the biodiesel industry’s development. It also represents 80 per cent of the cost of biodiesel production.
• Brassica mustard has been identified as having the potential to address this in the short term, and has the ability to be quickly adopted across large areas of the low rainfall areas of Australia’s wheat belt.
• The subsequent rotational advantages and cumulative gross margin value for the grower increases the sustainability of grain grower’s operations.
• Take-all and crown rot infections in wheat crops reduce productivity by $58 million per annum. Mustards have the ability to reduce crown infection by 50% when used in rotation with susceptible crops.
• In the longer term, tree crops such as Pongamia may be the answer as they have very low ongoing costs. This warrants further research.
• Regional Australia is in serious decline, and the energy industry will provide the key to develop new opportunities. A model has been formulated to realise this opportunity to develop regional enterprise.
• This report identifies the need to place key emphasis on the agricultural sector ‘producing and consuming’ its own fuel requirements as the starting block for a truly sustainable biodiesel industry which may be fully integrated with other cropping.
• Investment in a research and development program that encompasses a full profile of plant breeding, by-product uses and new product development is critical to the overall success of creating an industry based on biodiesel.
• Economic models show the ability to reduce diesel costs to the farm gate to under 0.50cents per litre.
• The Regional Sustainable Model shows return of capital of over 30 per cent, subject to crop adoption.
• The Local Community Enterprise Hubs through economic modelling show returns on investment of over 30 per cent
• Brassica mustards provide a key to open the door to further research and development opportunities with other crop types and product development.
• This program is founded on Regional Sustainable Models that deliver opportunities for a regional industry resurgence and an agricultural revival. This opportunity has matured with the advent of dwindling mineral oil supplies.

The authors of this report hope to share ideas, generate debate and fine-tune the concepts outlined in this report. They welcome your views.

Daryl Young
CEO, Australian Agricultural Crop Technologies Pty. Ltd.
421 Boolcarrol Road
Wee Waa NSW 2388
Phone 02 - 67953050 or 0427 954932 dyoung@namoirural.com.au

Richard Trethowan
Prof. Plant breeding
University of Sydney
PMB 11 Camden
Sydney, NSW 2570
rtrethowan@camden.usyd.edu.au Phone.(02) 9351-8860

Randall Jitts
General Manager –
Australian Biodiesel Group Limited
Berkeley Vale,
Phone (0421371827) jitts@bigpond.com

Rod Brown
APD Consulting Ltd., Canberra
Phone 02 – 62317261 or apd@orac.net.au